Form 20-F Avricore Health Inc. For: Dec 31

June 23, 2021 5:02 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

 

 

 

(Mark One)

 

oREGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

OR

 

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the fiscal year ended December 31, 2020

 

OR

 

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

oSHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 

 

Date of Event requiring this shell company report _____________

 

For the transition period from ___________________ to ______________________

 

Commission file number:  000-51848

 

AVRICORE HEALTH INC.

(Exact name of Registrant as specified in its charter)

 

Not applicable

(Translation of Company’s name into English)

 

British Columbia, Canada

(Jurisdiction of incorporation or organization)

 

3500 – 1055 Dunsmuir Street, PO Box 49114, Vancouver British Columbia, V7X 1H7

Contact person: Hector Bremner, Phone: (604) 773-8943 Email hector.bremner@avricorehealth.com

(Address of principal executive offices)

 

Securities registered or to be registered pursuant to Section 12(b) of the Act.

 

Title of each class

Name of each exchange on which registered

Not Applicable

Not Applicable

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares Without Par Value

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

None

(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.  December 31, 2020    69,795,584

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o     No x

 

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934  Yes  o     No x

 

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

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer  o      Accelerated filer o      Non-Accelerated filer  x    Emerging growth company o

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or an emerging growth company. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one):

Large accelerated filer  o      Accelerated filer o      Non-Accelerated filer  x    Emerging growth company o

 

If an emerging growth company that prepares its financial statements in accordance with U.S.GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

 

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP     o

International Financial Reporting Standards as issued

Other o

 

by the International Accounting Standards Board          x

 

 

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

                                                                                                                                                                                                                  Item 17 o    Item 18 o

 

If this is an annual report, indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  o     No x

 

(APPLICABLE ONLY TO ISSUES INVOLVED IN BANKRUPTCY PROCEEDING DURING THE PAST FIVE YEARS)

Indicate by check mark whether the Company has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes  o     No o

 

The information set forth in this Annual Report on Form 20-F is as at December 31, 2020 unless an earlier or later date is indicated.


 

 

 

FORM 20-F ANNUAL REPORT 

TABLE OF CONTENTS 

 

 

 

PART I4 

ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS4 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE4 

ITEM 3. KEY INFORMATION4 

ITEM 4. INFORMATION ON THE COMPANY11 

ITEM 4A UNRESOLVED STAFF COMMENTS15 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS15 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES23 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS32 

ITEM 8. FINANCIAL INFORMATION34 

ITEM 9. THE OFFER AND LISTING34 

ITEM 10. ADDITIONAL INFORMATION37 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK45 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES45 

PART II46 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES46 

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS46 

ITEM 15. CONTROLS AND PROCEDURES46 

ITEM 16. RESERVED47 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT47 

ITEM 16B. CODE OF ETHICS47 

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES48 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES49 

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS49 

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT49 

ITEM 16G. CORPORATE GOVERNANCE49 

ITEM 16H.  MINE SAFETY DISCLOSURE49 

PART III50 

ITEM 17. FINANCIAL STATEMENTS50 

ITEM 18. FINANCIAL STATEMENTS50 

ITEM 19. EXHIBITS50 

SIGNATURES28 


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INTRODUCTION

Nomenclature

In this Annual Report on Form 20-F, which we refer to as the “Annual Report”, except as otherwise indicated or as the context otherwise requires, the terms “Company”, “Avricore”, “we”, “our” or “us” refers to Avricore Heatlh Inc. and its subsidiaries.

You should rely only on the information contained in this Annual Report. We have not authorized anyone to provide you with information that is different. The information in this Annual Report may only be accurate on the date of this Annual Report or on or as at any other date provided with respect to specific information.

The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name “Duft Biotech Capital Ltd.”

On November 13, 2003, the Company acquired the assets of ALDA Pharmaceuticals Inc. (“API”), a private company founded in 1996.

On November 26, 2003 the Company changed its name to ALDA Pharmaceuticals Corp. (“the Company”). The Company is still a British Columbia, Canada, company.

Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value. There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.

On July 24, 2013 the Company changed its name to NUVA Pharmaceuticals Inc. (“the Company”). The Company is still a British Columbia, Canada, company.

On July 28, 2014 the Company changed its name to VANC Pharmaceuticals Inc. (“the Company”). The Company is still a British Columbia, Canada, company.

On November 5, 2018 the Company changed its name to Avricore Health Inc. (the “Company”). The Company is still a British Columbia, Canada, company.

On December 28, 2018, the Company acquired HealthTab Inc. (“HealthTab”), a private company.

 

BUSINESS OF AVRICORE HEALTH INC.

Avricore is a total health innovator capitalizing on technological advancements and consumer health trends by offering consumers and health providers pharmagenomic point-of-care technologies (POCT).

 

FINANCIAL AND OTHER INFORMATION

The Company’s reporting currency and domestic currency is Canadian Dollars. In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (“CDN$” or “$”). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$). Comparisons of historic exchange rates between the US$ and the CDN$ are contained in Section 3.A.3.

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review of Prospects”. These statements may be identified by the use of words like “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial


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performance, events or trends. In particular, these include statements about the Company’s strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.

Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors” and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.

Although we believe that the expectations conveyed by the forward-looking statements are reasonable based on information available to us on the date such forward-looking statements were made, no assurances can be given as to future results, levels of activity, achievements or financial condition.

 

MEASUREMENT INFORMATION

Canada uses the metric measurement system and all of the measures used by the Company adhere to the standards of the metric system.

PART I

ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

3.A.1. Selected Financial Data

The selected financial data should be read in conjunction with the financial statements and other financial information included elsewhere in the Annual Report.

The Company has not declared any dividends since incorporation and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain all available funds for use in its operations and the expansion of its business.

The Company’s year end is December 31, 2020.

Table No. 3 is derived from the audited financial statements of the Company, which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board (“IASB”) and Interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”). IFRS represents standards and interpretations approved by the International Accounting Standards Board (“IASB”), and are comprised of IFRS, International Accounting Standards (“IASs”), and interpretations issued by the International Financial Reporting Interpretations Committee (“IFRICs”) or the former Standing Interpretations Committee (“SICs”) and effective for the Company’s reporting period ended December 31, 2020.


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Table No. 3

Selected Financial Data

(CDN$)

 

 

 

Year Ended Dec 31, 2020

 

Year Ended Dec 31, 2019

*

Year Ended Dec 31, 2018

*

Year Ended Dec 31, 2017

*

Year Ended Dec 31, 2016

IFRS

 

 

 

 

 

Revenue from continuing operations

33,030

33,000

15,295

-

-

Net loss from continuing operations

(1,173,966)

(1,916,252)

(3,458,141)

(1,297,576)

(1,645,214)

Net loss from discontinued operations

-

(189,356)

(678,661)

(1,439,141)

(968,690)

Basic and diluted loss per share

Continuing operations

Discontinued operations

 

(0.02)

-

 

(0.04)

(0.00)

 

(0.10)

(0.02)

 

(0.07)

(0.08)

 

(0.11)

(0.07)

Dividends Per Share

-

-

-

-

-

Weighted Average Shares

60,449,165

47,292,091

33,869,642

18,393,169

14,907,103

Period-end Shares

69,795,584

52,472,619

40,103,665

27,860,623

15,001,297

 

 

 

 

 

 

Working capital (deficit)

(714,044)

(465,454)

439,228

1,272,259

1,886,976

Sponsorship liability

-

-

-

-

-

Long-term debt

-

-

-

-

-

Share capital

22,286,852

21,400,106

20,783,372

18,340,491

16,320,006

Shareholders’ equity (deficit)

(714,041)

(465,451)

885,966

2,498,097

1,917,993

Total Assets

440,090

208,399

1,200,205

2,900,186

2,275,335

 

 

 

 

 

 

US GAAP

 

 

 

 

 

Net Loss from continuing operations

(1,173,966)

(1,916,252)

(3,458,141)

(1,297,576)

(1,645,214)

Net Loss from discontinued operations

-

(189,356)

(678,661)

(1,439,142)

(968,690)

Loss per share

Continuing operations

Discontinued operations

 

(0.02)

-

 

(0.04)

(0.00)

 

(0.10)

(0.02)

 

(0.07)

(0.08)

 

(0.11)

(0.07)

Shareholders’ Equity (Deficit)

(714,041)

(465,451)

885,966

2,498,097

1,917,993

Total Assets

440,090

208,399

1,200,205

2,900,186

2,275,335

 

* During the year ended December 31, 2019, the Company discontinued operations of its OTC pharmaceuticals products business division business segment. Therefore, certain reclassifications have been made to the prior periods’ consolidated financial statements to confirm to the current period’s presentation on the consolidated statements of financial position, comprehensive loss and changes in equity.

3.A.3. Exchange Rates

In this Annual Report, unless otherwise specified, all dollar amounts are expressed in Canadian Dollars (CDN$). The Government of Canada permits a floating exchange rate to determine the value of the Canadian Dollar against the U.S. Dollar (US$).

Table No. 4 sets forth the exchange rates for the Canadian Dollar at the end of year ended December 31, 2020 and four most recent fiscal years, December 31, 2019, December 31, 2018, December 31, 2017, and December 31, 2016, the average rates for the period and the range of high and low rates for the period. The data for each month during the most recent five months is also provided.

For purposes of this table, the rate of exchange means the noon buying rate in New York City for cable transfers in foreign currencies as certified for customs purposes by the Federal Reserve Bank of New York.


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Table No. 4

U.S. Dollar/Canadian Dollar

 

Period

Average

   High

    Low

  Close

 

 

 

 

 

Year Ended 12/31/20

$  1.34

$  1.45

$  1.27

$  1.27

Year Ended 12/31/19

1.33

1.36

1.30

1.30

Year Ended 12/31/18

1.30

1.37

1.23

1.36

Year Ended 12/31/17

1.30

1.37

1.21

1.25

Year Ended 12/31/16

1.13

1.17

1.10

1.17

 

 

 

 

 

Three Months Ended 12/31/20

$  1.30

$  1.33

$  1.27

$  1.27

Three Months Ended   9/30/20

1.33

1.36

1.30

1.33

Three Months Ended   6/30/20

1.38

1.42

1.34

1.36

Three Months Ended   3/31/20

1.34

1.45

1.30

1.42

Three Months Ended 12/31/19

$  1.32

$  1.33

$  1.30

$  1.30

Three Months Ended   9/30/19

1.32

1.33

1.30

1.32

Three Months Ended   6/30/19

1.34

1.35

1.31

1.31

Three Months Ended   3/31/19

1.32

1.36

1.31

1.34

Three Months Ended 12/31/18

$  1.33

$  1.37

$  1.32

$  1.36

Three Months Ended   9/30/18

1.30

1.33

1.29

1.29

Three Months Ended   6/30/18

1.30

1.33

1.25

1.31

Three Months Ended   3/31/18

1.27

1.31

1.23

1.29

Three Months Ended 12/31/17

$  1.28

$  1.29

$  1.25

$  1.25

Three Months Ended   9/30/17

1.25

1.30

1.21

1.25

Three Months Ended   6/30/17

1.34

1.37

1.30

1.30

Three Months Ended   3/31/17

1.32

1.35

1.30

1.33

Three Months Ended 12/31/16

$  1.14

$  1.17

$  1.12

$  1.17

Three Months Ended   9/30/16

1.12

1.14

1.11

1.12

Three Months Ended   6/30/16

1.12

1.17

1.10

1.12

 

 

 

 

 

May 2021

 

1.23

1.21

1.21

April 2021

 

1.26

1.23

1.23

March 2021

 

1.27

1.25

1.26

February 2021

 

1.28

1.25

1.27

January 2021

 

1.28

1.26

1.28

 

3.B. Capitalization and Indebtedness

Not applicable.

 

3.C.  Reasons for the Offer and Use of Proceeds

Not applicable.


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3.D. Risk Factors

Risks pertaining to the Company:

The Company's limited operating history makes it difficult to evaluate the Company’s current business and forecast future results.

Since its inception, the Company has had limited revenues and has experienced significant operating losses each year. These losses are due to substantial expenditures on intellectual property protection, product development and product testing of commercial and consumer infection control product and pre-clinical testing for registration of a number of therapeutic products and over-the-counter (OTC) pharmaceutical products with Health Canada and the FDA. Sales of T36® Antiseptic Hand Sanitizer products were discontinued in the year ended December 31, 2012. During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business. The Company has changed its direction, and its current operations consist of developing its pharmagenomic point-of-care technologies (POCT). As a result, future sales of the Company’s products are difficult to predict.

The Company has no significant source of operating cash flow and failure to generate revenues in the future could cause the Company to go out of business.

Based upon current plans to introduce its products into new markets in Canada and internationally, develop new products, maintain the Company’s public listing on the TSX-Venture Exchange (the “Exchange”) and support the continued registration of its securities in the US, the Company expects to incur operating losses in future periods. These losses will occur because there are continuing expenses associated with the marketing and production of the Company’s products, legal and accounting fees, the maintenance of its public listing and other expenses associated with running an operating business. Even if the Company becomes operationally profitable from the introduction and sale of new products, the Company will need to raise significant amounts of new funding to expand these activities. Also, the Company may not be successful in generating significant revenues in the future. At the time of this report, the Company has sufficient funds to continue the sales of its products but it will be unable to do so without securing further financing.

If the Company raises further funds through equity issuances, the price of its securities could decrease due to the dilution caused by the sale of additional shares.

Additional funds raised by the Company through the issuance of equity or convertible debt securities will cause the Company’s current shareholders to experience dilution and possibly lower the trading price of its shares. Such securities may grant rights, preferences or privileges senior to those of the Company’s common shareholders.

The Company has issued a limited number of shares out of its authorized capital of an unlimited number of common shares, which could be dilutive and negatively affect the share price.

Having an unlimited number of authorized but unissued common shares could allow the Company’s Directors and Officers to issue a large number of shares without shareholder approval, leading to significant dilution of current shareholders and possible lowering of the share price.

The Company could enter into debt obligations and not have the funds to repay these obligations.

The Company does not have any contractual restrictions on its ability to incur debt and, accordingly, the Company could incur significant amounts of indebtedness to finance its operations. Any such indebtedness could contain covenants, which would restrict the Company’s operations. The Company might not be able to repay indebtedness.

The Company could enter into contractual obligations and not have the funds to pay for these obligations.

The Company does not have any contractual restrictions on its ability to enter into binding agreements and, accordingly, the Company could incur significant obligations to third parties including financial obligations. Any such obligations could restrict the Company’s operations and the Company might not be able to pay for its commitments. If the Company cannot meet its commitments, legal action could be taken against the Company. Any such actions could further restrict the Company’s ability to conduct its business or could cause the Company to go out of business.


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The Company has a history of generating limited revenues and the continuing failure to generate further revenues could cause the Company to cease operations.

The Company has no history of pre-tax profit and in the previous four years has had only limited annual revenues for each of the years it has been operating. The Company sustained operating losses for each of its fiscal years and has sustained significant accumulated operating losses. The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. The Company may not be successful in generating revenues or raising capital in the future. Failure to generate revenues or raise capital could cause the Company to cease operations.

The Company’s information technology systems are susceptible to certain risks, including cyber security breaches, which could adversely impact the Company’s operations and financial condition.

The Company’s operations involve information technology systems that process, transmit and store information about our suppliers, customers, employees, and financial information. These systems face threats including telecommunication failures, natural disasters, and cyber security threats, including computer viruses, unauthorized access to our systems, and other security issues. While the Company has implemented security measures to protect these systems, such threats change and evolve almost daily. There is no guarantee these actions will secure the information systems against all threats and vulnerabilities. The compromise or failure of these information systems could have a negative effect on the Company’s operations and financial condition.

As the Company is a Canadian company, it may be difficult for U.S. shareholders of the Company to effect service on the Company or to realize on judgments obtained in the United States.

The Company is a Canadian corporation. All of its directors and officers are residents of Canada and a significant part of its assets are, or will be, located outside of the United States. As a result, it may be difficult for shareholders resident in the United States to effect service within the United States upon the Company, directors, officers or experts who are not residents of the United States, or to realize in the United States judgments of courts of the United States predicated upon civil liability of any of the Company, directors or officers under the United States federal securities laws. If a judgment is obtained in the U.S. courts based on civil liability provisions of the U.S. federal securities laws against the Company or its directors or officers, it will be difficult to enforce the judgment in the Canadian courts against the Company and any of the Company’s non-U.S. resident executive officers or directors. Accordingly, United States shareholders may be forced to bring actions against the Company and its respective directors and officers under Canadian law and in Canadian courts in order to enforce any claims that they may have against the Company or its directors and officers. Nevertheless, it may be difficult for United States shareholders to bring an original action in the Canadian courts to enforce liabilities based on the U.S. federal securities laws against the Company and any of the Company’s non-U.S. resident executive officers or directors.

The Company’s future performance is dependent on key personnel. The loss of the services of any of the Company’s executives or Board of Directors could have a material adverse effect on the Company.

The Company’s performance is substantially dependent on the performance and continued efforts of the Company’s executives and its Board of Directors. The loss of the services of any of the Company’s executives or Board of Directors could have a material adverse effect on the Company’s business, results of operations and financial condition. There is no assurance that key personnel can be replaced with people with similar qualifications within a reasonable period of time. If any or all Directors resign, there is no assurance that new Directors can be found to replace any directors who resign.

The Company has not declared any dividends since its inception in 2000 and has no present intention of paying any cash dividends on its common shares in the foreseeable future.

The Company has not declared any dividends since its inception in 2000, and has no present intention of paying any cash dividends on its common shares in the foreseeable future. The payment by the Company of dividends, if any, in the future, rests in the discretion of the Company's Board of Directors and will depend, among other things, upon the Company's earnings, its capital requirements and financial condition, as well as other relevant factors.


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There is no assurance that the Company will be able to secure the funds needed for future development, and failure to secure such funds could lead to a lack of opportunities for growth.

A lack of funds would also impair the Company’s ability to establish marketing and sales plans. If adequate financing is not available when required, the Company may be required to delay, scale back or eliminate various activities and may be unable to continue in operation. The Company may seek such additional financing through debt or equity offerings, but there can be no assurance that such financing will be available on terms acceptable to the Company or at all. Any equity offering will result in dilution to the ownership interests of the Company’s shareholders and may result in dilution to the value of such interests.

The Company and the Company’s products have limited brand awareness which limits the ability of the Company to gain credibility from prospective customers and to sell its products into new markets.

Market knowledge of the Company’s name is limited. The Company will need to devote considerable resources to educate new markets about the products the Company offers. In establishing new markets, the Company will be competing with companies that are potentially already entrenched in such markets or may be better funded than the Company. The ability of the Company to raise brand awareness will depend on its ability to raise the money required to undertake such an intensive marketing effort. As noted elsewhere, there is no assurance that the Company can raise funds required for such an investment in marketing.

The Company has limited sales and marketing experience and can provide no assurance that the Company can keep its current customers or gain new ones.

The Company has limited experience in marketing and selling its products and the Company has no sales or marketing staff. The Company will have to expend substantial funds to promote and develop its products. The Company’s success in this regard will depend on the quality of its products and its ability to develop and implement an effective sales and marketing strategy. Failure to achieve the marketing objectives will have a material adverse effect on the Company and on its results of operations and financial condition.

Conflicts of interest may exist for Directors and Officers which may inhibit their ability to act in the best interests of the Company and its shareholders leading to possible impairment of the Company’s ability to achieve its business objectives.

The directors and officers of the Company will not be devoting all of their time to the affairs of the Company. Some of the directors and officers of the Company are directors and officers of other companies. The directors and officers of the Company will be required by law to act in the best interests of the Company. They will have the same obligations to the other companies in respect of which they act as directors and officers. Discharge by the directors and officers of their obligations to the Company may result in a breach of their obligations to the other companies and, in certain circumstances, this could expose the Company to liability to those companies. Similarly, discharge by the directors and officers of their obligations to the other companies could result in a breach of their obligation to act in the best interests of the Company. Such conflicting legal obligations may expose the Company to liability to others and impair its ability to achieve its business objectives.

Management of the Company can, through their stock ownership in the Company, influence all matters requiring approval by the Company’s shareholders.

Management of the Company at the time of this report, collectively own approximately 13.5% of the Company's issued and outstanding common shares at that date. These shareholders, if acting together, could significantly influence all matters requiring approval by the Company's shareholders, including the election of directors and the approval of mergers or other business combination transactions. Management may not make decisions that will maximize shareholder value and may make decisions that will contribute to or cause the entrenchment of management.

The value and transferability of the Company shares may be adversely impacted by the limited trading market for the Company’s common shares.

No assurance can be given that a market for the Company’s common shares will be quoted on an exchange in the U.S. or on the Over the Counter Bulletin Board. The Company’s common shares may be subject to illiquidity and investors may not be able to sell their shares in a timely manner.


9



The value and transferability of the Company shares may be adversely impacted by the penny stock rules.

The sale or transfer of the Company common shares by shareholders in the United States may be subject to the so-called "penny stock rules." Under Rule 15g-9 of the Exchange Act, a broker or dealer may not sell a "penny stock" (as defined in Rule 3a51-1) or effect the purchase of a penny stock by any person unless:

(a)Such sale or purchase is exempt from Rule 15g-9; 

(b)Prior to the transaction the broker or dealer has (1) approved the person's account for transaction in penny stocks in accordance with Rule 15g-9, and (2) received from the person a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and 

(c)The purchaser has been provided an appropriate disclosure statement as to penny stock investment. 

The SEC adopted regulations generally define a penny stock to be any equity security other than a security excluded from such definition by Rule 3a51-1. Such exemptions include, but are not limited to (1) an equity security issued by an issuer that has (i) net tangible assets of at least $2,000,000, if such issuer has been in continuous operations for at least three years, (ii) net tangible assets of at least $5,000,000, if such issuer has been in continuous operation for less than three years, or (iii) average revenue of at least $6,000,000 for the preceding three years; (2) except for purposes of Section 7(b) of the Exchange Act and Rule 419, any security that has a price of $5.00 or more; and (3) a security that is authorized or approved for authorization upon notice of issuance for quotation on the NASDAQ Stock Market, Inc.'s Automated Quotation System. It is likely that the Company’s common shares, assuming a market were to develop in the US, will be subject to the regulations on penny stocks. Consequently, the market liquidity for the common shares may be adversely affected by such regulations limiting the ability of broker/dealers to sell the Company’s common shares and the ability of shareholders to sell their securities in the secondary market in the US Moreover, the Company shares may only be sold or transferred by the Company shareholders in those jurisdictions in the US in which an exemption for such "secondary trading" exists or in which the shares may have been registered.

There is no guarantee that there is a market for the Company’s common shares in the United States.

Although the Company’s common shares were added to the OTC Bulletin Board System on April 20, 2009 under the symbol “APCSF”, trading of the company’s shares is very limited. The Company cannot guarantee that there will be a market for the Company’s common shares in the United States or that there will any significant amount trading in the company’s shares for the foreseeable future The Company cannot guarantee that it will continue to maintain a listing in the United States or that it will not be found in default of existing regulations or new regulations and be suspended from trading or delisted.

Risks Pertaining to the Industry

Registration of products may not occur in a timely manner which could lead to delays in product introductions, reduced revenue expectations and extra costs to conduct further tests to satisfy regulatory agencies.

Government agencies, such as the EPA and the Food and Drug Administration (“FDA”) in the United States and Health Products and Food Branch in Canada, need to provide approvals of the Company’s products prior to any sales of these products. To obtain such approvals, the Company must submit extensive amounts of information on the efficacy, toxicology, carcinogenicity, mutagenicity and other testing of the products that it is trying to register. After all of the information is provided, the agencies can request supplemental information and further testing. Once all of the requirements for documentation are satisfied, the agencies can take an indeterminate amount of time to provide approvals for the Company to market its products. Significant delays could lead to slower revenue growth than anticipated. In addition, regulatory delays can allow time for competitors to devise strategies to prevent or reduce market penetration. There is no assurance that government agencies will accept for registration any of the Company’s products.

The Company is very dependent on the registration and sale of its commercial, retail and pharmaceutical products.

If the Company is not successful in achieving regulatory approval of its products, its ability to generate revenues will be impaired. Even if registrations are successful, there is no guarantee that the Company will be able to


10



maintain the registrations or be able to pass inspections by the regulatory authorities that permit the sale of the Company’s products. In the event of a failed inspection, it is possible that the Company may be ordered to stop the sale of its products or undertake a recall of products that the regulatory authorities deem to be non-compliant with existing regulations. If the Company is ordered to recall or stop the sale of any of its products, the ability of the Company to generate revenues will be impaired. If such a recall or suspension of sales occurs, there is no guarantee that the Company will, at any future date, be able to resume the sale of the suspended or recalled products.

There is a risk that the Company’s intellectual property infringes upon the rights of other companies, which could lead to reduced revenues, reduced margins due to sanctions against the Company, outright withdrawal or prohibition of products or trademarks from the market and significant costs for legal defense against infringement claims, re-branding of products and revised marketing materials.

The Company is unaware of any infringement claims being made against the Company or its products or processes at the time of writing. In the future, there can be no assurances that third parties will not assert infringement claims in the future or require the Company to obtain a license for the intellectual property rights of such third parties. There can be no assurance that such a license, if required, will be available on reasonable terms or at all. If the Company does not obtain such a license, it could encounter delays in the introduction of products or could find that the development, manufacture or sale of products requiring such a license could be prohibited.

There may be limited ability to defend the patents if and when they are issued, leading to loss of sales that might otherwise be realized if the Company was in a position to defend its patents.

Litigation among pharmaceutical companies can be intense and costly. The Company might not have the financial ability to defend its patents, if issued, against larger industry players. Litigation may be necessary to enforce patents issued or assigned to the Company, or to determine the scope and validity of a third party's proprietary rights. Additionally, there can be no assurances that the Company would prevail in any such action. An adverse outcome in litigation or as part of an interference or other proceeding in a court or patent office could subject the Company to significant liabilities, require disputed rights to be licensed from other parties or require the Company to cease using certain technology or products, any of which could have a material adverse effect on the Company’s business.

ITEM 4. INFORMATION ON THE COMPANY

4.A.  History and Development of the Company

Capital Pool Company

The Company was incorporated by registration of its Memorandum and Articles under the BC Companies Act on May 30, 2000 under the name “Duft Biotech Capital Ltd.” and was classified as a Capital Pool Company (“CPC”) on the TSX Venture Exchange. Under the policies of the TSX Venture Exchange, the principal business of a CPC is to identify and evaluate opportunities for acquisition. The completion of such an acquisition is referred to as a Qualifying Transaction. A CPC does not carry on any business other than the identification and evaluation of assets or businesses in connection with potential Qualifying Transactions, does not have business operations or assets other than seed capital and has no written or oral agreements for the acquisition of an asset or business at the time of formation.

 

A “Qualifying Transaction”, pursuant to the policies of the TSX Venture Exchange, is a transaction whereby a capital pool company:

(a) Issues or proposes to issue, in consideration for the acquisition of significant assets or businesses, common shares or securities convertible, exchangeable or exercisable into common shares, which, if fully converted, exchanged or exercised would represent more than 25 percent of its common shares issued and outstanding immediately prior to the issuance; 

(b) Enters into an arrangement, amalgamation, merger or reorganization with another issuer with significant assets, whereby the ratio of securities which are distributed to the security holders of the capital pool company  


11



and the other issuer results in the security holders of the other issuer acquiring control of the resulting entity; or

(c) Otherwise acquires significant assets other than cash. 

On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTab. HealthTab’s primary asset is intellectual property and certain trademarks and web domains related to the design of the HealthTab system, being a lab-accurate, point of care testing platform.

Financings

The Company has financed its operations since inception through funds raised in a series of private placements of common shares:

Fiscal Year Ended

Nature of Share Issuance

Number of Shares

Amount ($)

30-Jun-2001

Private Placement @

$0.34

294,119

$100,000

30-Jun-2002

Canadian Prospectus Offering (IPO) @

$0.68

300,000

$204,000

30-Jun-2003

Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @

$0.68

37,500

$25,500

30-Jun-2004

Private Placement @

$0.60

86,667

$52,000

 

Private Placement @

$0.80

1,550,000

$1,240,000

30-Jun-2005

Private Placement @

$0.40

750,000

$300,000

30-Jun-2006

Private Placement @

$0.20

979,000

$195,800

 

Private Placement @

$0.20

275,000

$55,000

30-Jun-2007

Private Placement @

$0.20

357,500

$71,500

 

Private Placement @

$0.40

2,000,000

$800,000

30-Jun-2008

Private Placement @

$0.48

500,000

$240,000

 

Private Placement @

$0.60

875,000

$525,000

30-Jun-2009

N/A

 

 

N/A

30-Jun-2010

Private Placement @

$1.00

1,500,000

$1,500,000

30-Jun-2011

Private Placement @

$0.40

818,750

$327,500

 

Private Placement @

$0.40

500,000

$200,000

30-Jun-2012

Private Placement @

$0.40

140,000

$56,000

30-Jun-2013

Private Placement @

$0.40

2,000,000

$800,000

30-Jun-2014

Private Placement @

$0.40

937,500

$375,000

30-Jun-2015

Private Placement @

$0.60

1,901,833

$1,141,100

Stub period ended 31-Dec-2015

N/A

 

 

N/A

31-Dec-2016

N/A

 

 

N/A

31-Dec-2017

Private Placement @

$0.15

10,585,326

$1,587,799

31-Dec-2018

Private Placement @

$0.15

5,327,335

$799,100

31-Dec-2019

Private Placement @

$0.05

6,852,400

$342,620

31-Dec-2019

Private Placement @

$0.07

4,206,435

$294,450

31-Dec-2020

Private Placement @

$0.10

6,260,000

$626,000

31-Dec-2021

Private Placement @

$0.10

8,740,000

$874,000

31-Dec-2021

Private Placement @

$0.22

7,000,000

$1,540,000


12



4.B. Business Overview

Operations & Principal Activities

Avricore Health Inc. is a total health innovator capitalizing on technological advancements and consumer health trends, offering consumers and health providers the ability to take control of spending and health outcomes.

The company had delivered an effective range of generic pharmaceuticals in the past as VANC Pharmaceuticals Inc.  Since it’s repositioning in late 2017 and official rebranding in late 2018 the company’s new focus is now on health innovations in revolutionary point-of-care-technologies (POCT) for targeted health therapies.  

Avricore sees the community pharmacy as underutilized and has identified an opportunity as a healthcare centre and is committed to supporting their ability to deliver innovation to the modern healthcare consumers.  Our company hopes to improve health outcomes for patients and lower overall healthcare system costs in this way, bridging traditional healthcare platforms with disruptive innovations and eventually achieving the healthcare cost savings government and private payors are seeking to achieve

This is all possible thanks to our HealthTab™ technology, which provides lab-accurate results for specific blood work within 12 minutes. Installed at the pharmacy and administered by the attending pharmacist, the patient can quickly access up to 21 bio-markers.  The advantage of this innovation is that a consumer can quickly access data on their health with simple patient assisted finger prick to share with their physician and healthcare team, track their health overtime, measure the impacts of therapies they are under taking and screen for potential health risks.

HealthTab™ allows for these innovations to be accessed in a low barrier manner at the community pharmacy level for a balanced cost. The pharmacist also is able to benefit from this new revenue stream, build a deeper relationship with clientele and fully realize their ability to deliver lower cost healthcare support.

Currently, the company has been engaged in pilot programs across the county to optimize this offering. Pharmacist and patient feedback has been gathered from these programs to support a broader launch into several pharmacy chains. Currently there are late stage discussions with major pharmacy chains, as well as a strong prospect list for future expansion.  

The Company has ceased production and sales of all generic and over-the-counter pharmaceuticals including Hemafer, CortiVera 0.5% creams and ointments, and SennAce.

Avricore is focused on expanding and further deploying its HealthTab to best meet the current community pharmacy sector’s needs. Community pharmacy is expected to focus increasingly on cognitive services with attendant point of care testing in the future. These offer the pharmacy new ways to generate revenue as their margins are being reduced by changes in generic drug reimbursement with the Pan-Canadian Select Molecule Price Initiative for Generic Drugs that has come into effect on the 1st April 2018.

Management has laid the foundations and positioned the Company to capitalize on the changing community pharmacy environment. Over the next several months Avricore will embark on, and announce, several initiatives that will result in growth of its core business - point of care testing.  

HealthTab Point of Care Tests

·Pharmacies continue to face severely reduced revenues as a result of pricing changes by the Government of Canada, as well as regional government actions against rebates.  As a result, pharmacy owners are actively looking for innovations in service and value-added services, like HealthTab, to support their businesses growth beyond the traditional dispensing model. 

·Since being acquired by Avricore Health Inc., HealthTab has focused on streamlining operations to reduce the time and costs associated with new deployments.  

·Key developments in the later quarters of the year have included: 


13



·Signing of a Letter of Intent (LOI) with Abbott Rapid Diagnostics, to integrate multiple devices into Avricore’s HealthTab™ real-time data reporting system.  

·Expanding partnership with Ontario Pharmacists Association (OPA) to promote HealthTab™ to pharmacies conducting COVID-19 testing and government for real-time reporting of test results. 

·Developing new pharmacy partner locations with Shoppers Drug Mart 

·Developing new pilot programs with national pharmacy chains, 

·Advancing discussions with lab service providers,  

·Continuing to negotiate new POC service integrations to expand the HealthTab™ testing menu. 

·Refining the Rapid Access Safety Test Response (RASTR) Network to monetize de-identified data associated with high-value Real-World Evaluation (RWE) clinical trials.  

·Moving forward with negotiations across several target demographics, domestically and internationally, with life-science companies, host-locations and Clinical Research Organizations (CRO). 

Key developments subsequent to December 31, 2020 have included:

·Signing of a Distribution Agreement with Abbott Rapid Diagnostics, to integrate new devices into Avricore’s HealthTab™ to expand its real-time data reporting system capabilities.  

·Signing of a master agreement to pilot healthtab™ platform for diabetes management in select shoppers drug mart® pharmacies 

Non-Prescription and Generic Products

Hema-Fer

·The Company has discontinued Hema-Fer in 2019. In line with this decision, existing inventory was rolled out but no further production was initiated. 

Industry Trends

According to PWC Canada’s most recent consumer survey(1), Canadians consumers have been utilizing technology to take better control of their health and 75% of them have as many as three health related apps installed on their mobile device.

They also state: “Many Canadians are willing to share their personal information to facilitate ease of access to personal health information through digital channels. Think of accessing lab or diagnostic test results online days after getting the test, instead of having to wait for results and visiting the doctor, or waiting for a phone call.”

The internet of things has hit healthcare consumer trends in a large way and consumers are benefitting from faster, lower cost analysis direct to their device. The Global Consumer Insights Survey (GCIS) demonstrated the rapid shift with more than two-thirds of those surveyed stating they trusted tech companies - not known to be in healthcare, but in hardware, software and online shopping - to access healthcare services. 

67% of consumers stated they were either “somewhat comfortable or very comfortable” with accessing healthcare products and services from a company with all their information collated in one place.  This means companies offering health insurance, over-the-counter medications, or digital diagnostics. 

_______________

(1)   https://www.pwc.com/ca/en/industries/retail-consumer/consumer-insights-2019/bringing-health-care-online.html?icid=cnsmr-mrkts-feature-ct-lp-bringing-health-care-online-en


14



Healthcare data, its capture, analysis and delivery to the consumer is a top market priority as consumers are looking to take greater control, however; those same consumers are looking to companies to manage the security of that data well and use it ethically. 

The MIT Technology Review has looked at consumer pay genomic services, largely offered online, and have found that 26 Million(1)  people have taken one of these tests.   “You may discover unexpected facts about yourself or your family when using our services,” warns the most popular company’s privacy statement(2). “Once discoveries are made, we can’t undo them.”

In addition to the shift in direct access healthcare technology is offering, policy changes toward healthcare policy is also creating dynamics within the market. 

The Ontario Pharmacy Evidence Network’s most recent paper(3) looked at a wide ranging of policy changes affecting Ontario alone.  They found an industry going through “significant changes” thanks to the Patients First Action Plan and the Proposal to Strengthen Patient-Centered Health Care in Ontario are driving a more date-driven and patient centered approach. 

It has also meant that pharmacy has had to contend with offering greater service innovation with less revenues, as controls placed on generic drug pricing and limits on certain revenue streams, like manufacture rebates, have come into effect. 

“As pharmacies develop their own technology,” the authors state “the integration of health care provider records and the emergence of patient-controlled or viewable health records are important areas of health care transformation.”

This means consumers want better data control about their health and the market will need to deliver. 

Manufacturing - The Company has discontinued the manufacturing of OTC and generic drugs

 

4.C. Organization structure

The Company is not part of a group and has two wholly-owned subsidiaries, VANC Marine Pharmaceuticals Inc. and HealthTab Inc., each of which are incorporated in British Columbia. VANC Marine Pharmaceuticals Inc. is currently inactive.

4.D. Property, Plant and Equipment

The Company has no facilities.

The Company uses outside manufacturers for its production needs.

ITEM 4A UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

The following discussion and analysis of the financial condition and operational performance should be read in conjunction with the audited consolidated financial statements of the Company and the notes thereto prepared in accordance with IFRS.

_______________

 

(1)   https://www.technologyreview.com/s/612880/more-than-26-million-people-have-taken-an-at-home-ancestry-test/

(2)   https://www.ancestry.com/cs/legal/privacystatement

(3)   https://www.open-pharmacy-research.ca/wp-content/uploads/Future-of-Pharmacy-White-Paper-REVISED-for-posting-Jan-2019.pdf


15



5. A. Operating Results of the Company

Overview

In December 2015, the Company commercialized its first OTC product: Cortiveraä and Cortivera Plusä for a wide range of minor skin irritations, allergic reactions and eczema. In March 2016, the Company launched Hema-Fer™, a premium natural iron supplement. In May 2016, the Company launched Cortivera-H, a 1% hydrocortisone cream sold in large format jars for pharmacy dispensary use. In February 2017, the Company launched SennAce, a vegetable sourced laxative also targeted for pharmacy dispensary use. In May 2017, the Company entered into an agreement with bioLytical to be the exclusive distributor to Canadian pharmacies of the INSTI HIV 1/HIV 2 Rapid Antibody Test. The Company made the decision at the end of 2017 to strategically wind down the generic products portfolio and focus on the growth of Hema-Fer™.

The Company acquired Corozon platform in 2018, however, as the full launch of the Corozon platform was postponed, the value of the Corozon platform was written down to $1 as at December 31, 2018.

During 2019, the Company discontinued Hema-Fer™, thereby, exiting the OTC business completely to focus on the development and growth of its POCT segment, HealthTab. 

Results of Operations for the years ended December 31, 2020, 2019 and 2018

Revenue from the continuing operations was $33,030 for the year ended December 31, 2020 (2019 - $33,000; 2018 - $15,295). This represents the revenue earned by the POTC HealthTab™ business segment acquired in 2018.

Gross revenue from the discontinued operations, OTC product line, was $nil for the year ended December 31, 2020 (2019 - $129,776; 2018 - $812,666). Net sales were $nil (2019 - $101,934; 2018 - $494,737) after the cost of customer marketing and promotional incentives of $nil (2019 - $27,842; 2018 - $317,929).  The decrease in gross revenues is due to transition from OTC product segment to POCT business.

Manufacturing – The Company has discontinued the manufacturing of OTC and generic drugs.

Marketing and Communication expenses

 

 

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2018

 

$

$

$

Marketing

2,279

44,693

164,420

Shareholder communications

28,972

202,550

119,167

 

31,251

247,243

283,587


16



General and Administrative expenses

 

Year ended

Year ended

Year ended

 

December 31,

2020

December 31,

2019

December 31,

2018

 

$

$

$

Bad debt

2,977

-

-

Bank service charges

5,910

5,916

3,969

Filing and registration fees

37,715

72,076

94,029

Foreign exchange

6,350

150

692

Insurance

38,283

33,557

18,147

Investor relations

1,265

1,990

9,974

Office maintenance

17,550

49,713

86,700

Payroll

-

-

68,417

Rent

5,268

15

50,336

Travel

5,259

35,420

45,426

 

120,577

198,837

377,690

 

Share-based compensation

Share-based compensation for the year ended December 31, 2020 of $130,219 (2019: $86,420; 2018: $372,137) is a non-cash item that represents the allocation of the fair value of options over the vesting period.

Write-down of Intangible Assets:

During the year ended December 31, 2019 the Company performed an assessment and determined that the carrying value of the intangible asset exceeded the recoverable amount and accordingly recognized impairment of the intangible asset related to Emerald acquisition in the amount of $313,514. The impairment can be reversed in future periods when there is a change in circumstances and the estimates used to determine the asset's recoverable amount.

 

During the year ended December 31, 2018, the Company performed an assessment and determined that the carrying value of the intangible assets exceeded the recoverable amount and accordingly recognized impairment of the intangible assets related to HealthTab acquisition and Corozon Platform acquisition in the amount of $964,173.

 

Discontinued Operations

During the year ended December 31, 2020, 2019 and 2018, the loss attributable to the discontinued operations are as follows:


17



 

Year ended December 31, 2020

Year ended December 31, 2019

Year ended December 31, 2018

 

$

$

$

Sales

-

129,776

812,666

Marketing, promotional activities

-

(27,842)

(317,929)

Net Revenue

-

101,934

494,737

 

 

 

 

Cost of Sales

-

33,481

172,136

Gross profit (loss)

-

68,453

322,601

 

 

 

 

Expenses

 

 

 

Amortization

-

6,301

9,266

Product registration and development

-

5,458

251,508

General and administrative

-

-

40,967

Selling and marketing

-

121,405

472,496

 

-

133,164

774,237

Other income (expense)

 

 

 

Write-down of inventories

-

(109,941)

(227,025)

Write-down of equipment

-

(14,704)

-

 

 

 

 

Net loss from discontinued operations

-

(189,356)

(678,661)

 

Product Registration and Development cost consists of the product registration, in-licensing, renewal of licenses, other regulatory fees and regulatory personal salaries and consulting fees to support the OTC and generic product lines.

The decrease in the Marketing and Promotional expense compared to prior periods is due to restructuring of the Sales department.

5. B. Liquidity and capital resources

Liquidity

The Company’s operations have been financed through the issuance of common shares. Management anticipates that additional financings or capital requirements to fund the current commercial operations and working capital will be required to grow the business to the sustainable level.

Cash flows

Sources and Uses of Cash:

 

Year ended

Year ended

Year ended

 

December 31, 2020

December 31, 2019

December 31, 2018

 

$

$

$

Cash used in operating activities

(1,223,396)

(862,334)

(1,410,890)

Cash provided by (used in) operating activities of discontinued operations

-

175,927

(314,157)

 

 

 

 

Cash used in investing activities

-

-

(150,000)

Cash used in investing activities of discontinued operations

-

-

(5,000)

 

 

 

 

Cash provided by financing activities

1,512,312

615,764

1,404,756

 

 

 

 

Net change in cash and cash equivalents

288,916

(70,643)

(475,291)

 

 

 

 

Cash and Cash Equivalents

302,715

13,799

84,442

 

 

 

 


18



Capital resources

Management devotes financial resources to the Company’s operations, sales and commercialization efforts, and business development. The Company will require cash to support working capital.  

At December 31, 2020, the Company had a working capital deficit of $714,044, compared to working capital of $465,454 at December 31, 2019. The Company believes that its cash on hand, the expected future cash inflows from the sale of its products, net proceeds from the closing of private placements and proceeds from loans, stock options and warrants exercised, if any, will be sufficient to finance the Company’s working capital and operational needs for at least the next 6 months. If the Company’s existing cash resources together with the cash the Company generates from the sales of its products are insufficient to fund its working capital and operational needs, the Company may need to sell additional equity or debt securities or seek additional financing through other arrangements.

During the year ended year December 31, 2020, the Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000. The Loan 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. Subsequent to the year ended year December 31, 2020, the Company repaid the $1,000,000 loan at its maturity.

Critical Accounting Policies

The consolidated financial statements of the Company present the reporting period from January 1, 2020 to December 31, 2020. They have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

These accounting principles require the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised. Actual results may differ from these estimates under different assumptions or conditions. Significant areas requiring management estimates include accounting for amounts recorded in connection recoverability of inventory valuation, reporting of revenue recognition, useful lives of depreciable assets, intellectual property, income taxes and accounting for share-based compensation expense.

The significant accounting policies that the Company believes are the most critical in fully understanding and evaluating the Company’s reported financial results include revenue recognition and stock-based compensation and fair value measurements of financial instruments. These and other significant accounting policies are described more fully in Note 2 and 3 of the Company’s annual consolidated financial statements for the year ended December 31, 2020.

Revenue recognition

The Company’s revenues are generated from operating leases of the POC system and sale of testing panels. Revenue comprises the fair value of the consideration received or receivable and it is shown net of tax and discounts. The Company also earned revenue from the sale of over-the-counter pharmaceuticals (“OTC”), however, the Company discontinued this segment during the year ended December 31, 2019.

The Company recognizes revenue to depict the transfer of goods and services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services by applying the following steps:


19



Identify the contract with a client; 

Identify the performance obligations in the contract; 

Determine the transaction price; 

Allocate the transaction price to the performance obligations; and 

Recognize revenue when, or as, the Company satisfies a performance obligation. 

Revenue may be earned over time as the performance obligations are satisfied or at a point in time which is when the entity has earned a right to payment, the customer has possession of the asset and the related significant risks and rewards of ownership, and the customer has accepted the asset.

The Company's arrangements with clients can include multiple performance obligations. When contracts involve various performance obligations, the Company evaluates whether each performance obligation is distinct and should be accounted for as a separate unit of accounting under IFRS 15, Revenue from Contracts with Customers.

The Company determines the standalone selling price by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include discounting practices, the size and volume of our transactions, our marketing strategy, historical sales and contract prices. The determination of standalone selling prices is made through consultation with and approval by management, taking into consideration our go-to-market strategy. As the Company's go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in relative standalone selling prices.

The Company generally receives payment from its clients after invoicing within the normal 28-day commercial terms. If a client is specifically identified as a credit risk, recognition of revenue is stopped except to the extent of fees that have already been collected.

Share-based payments

The Company operates an incentive share purchase option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share- based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes option pricing model, which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

Significant estimates and judgments

Estimates

Significant estimates used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

Inventory valuation

The Company estimates the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by regulatory changes or other market-driven changes that may reduce future selling prices. In determining net realizable value, the Company considers such factors as turnover, historical experience, expiry dates and shelf life of the products. A change to these assumptions could impact the Company’s inventory valuation and gross margin. The Company attempts to sell products with short shelf life with significant rebates. Any unsold products with short shelf life and expired products are written-off.


20



Share-based payments

The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.

The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield. Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.

Judgements

Significant judgments used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

Revenue recognition

Revenue is recognized when the revenue recognition criteria expressed in the accounting policy stated above for Revenue Recognition have been met. Judgment may be required when allocating revenue or discounts on sales amongst the various elements in a sale involving multiple deliverables.

Deferred tax assets

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full.

Going concern

The Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future.  The factors considered by management are disclosed in Note 1 of the consolidated financial statements for the year ended December 31, 2020.

Changes in Significant Accounting Policies

In October 2018, the IASB issued amendments to IFRS 3, Business Combinations that narrowed and clarified the definition of a business. The amendments permit a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business. The amendments are effective January 1, 2020 with earlier adoption permitted. The amendments apply to business combinations after the date of adoption. At January 1, 2020, the Company adopted this standard and there was no material impact on the Company's consolidated financial statements.

In October 2018, the IASB issued amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The amendments make minor changes to the definition of the term "material" and align the definition across all IFRS Standards. Materiality is used in making judgments related to the preparation of consolidated financial statements. The amendments are effective January


21



1, 2020 with earlier adoption permitted. At January 1, 2020, the Company adopted this standard and there was no material impact on the Company's consolidated financial statements.

There are no accounting pronouncements with future effective dates that are applicable or are expected to have a material impact on the Company’s consolidated financial statements.

5.C. Research and development, patents and licenses etc.

The Company will not be devoting resources to research, development and patents going forward. The Company is now focused on the growth of POTC segment HealthTab.

5.D. Trend information

There is a significant trend toward consumer point of care testing. Healthcare data, its capture, analysis and delivery to the consumer is a top market priority as consumers are looking to take greater control, however; those same consumers are looking to companies to manage the security of that data well and use it ethically.

5.E. Off-balance sheet arrangements

The Company does not have any off-balance sheet arrangements.

5.F. Tabular disclosure of contractual obligations

Subsequent to the year ended year December 31, 2020, the Company repaid a secured loan from third party in the amount of $1,000,000. The Loan was for a term of one year from the date of receipt of the funds, bore interest at a rate of 10% per annum and was secured with all of the present and after-acquired property of the Company. The loan was subject to an interest reserve of $100,000 held back from the loan advance. As at December 31, 2020, the total future payments under the loan agreement were as follows:

 

December 31, 2020

 

$

Within 1 year

1,000,000

2 years

-

 

1,000,000

 

5.G. Safe Harbor

This Annual Report on Form 20-F contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, principally in ITEM #4, “Information on the Company” and ITEM #5, “Operating and Financial Review and Prospects”. These statements may be identified by the use of words like “plan,” “expect,” “aim,” “believe,” “project,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could” and similar expressions in connection with any discussion, expectation, or projection of future operating or financial performance, events or trends. In particular, these include statements about the Company’s strategy for growth, future performance or results of current sales and production, interest rates, foreign exchange rates, and the outcome of contingencies, such as acquisitions and/or legal proceedings and intellectual property issues.

Forward-looking statements are based on certain assumptions and expectations of future events that are subject to risks and uncertainties. Actual future results and trends may differ materially from historical results or those projected in any such forward-looking statements depending on a variety of factors, including, among other things, the factors discussed in this Annual Report under ITEM #3, “Key Information, Risk Factors” and factors described in documents that the Company may furnish from time to time to the Securities and Exchange Commission. The Company undertakes no obligation to update publicly or revise any forward-looking statements because of new information.


22



ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A. Directors and Senior Management

The following table sets forth certain information as of December 31, 2020 and as of the date of this report about the Company’s current directors and senior management. There have been no subsequent changes to the Company’s current directors and senior management, except as footnoted below:

Table No. 6:

Directors and Senior Management:

 

Name

Age

Position

Other Reporting Companies in Canada
or the United States

Company

Position

Hector Bremner

39

CEO, Director

N/A

N/A

Kiki Smith

54

CFO & Corporate Secretary

A.I.S. Resources Limited

Ultra Resources Inc.

Goldex Resources Corp.

Director

Senior Officer

Senior Officer

Rodger Seccombe

40

CTO, Director

N/A

N/A

David Hall

66

Director

RepliCel Life Sciences Inc.

Director

Alan Arnstein

52

Director

N/A

N/A

Robert Sindelar  

67

Director

N/A

N/A

David Farnfield

57

Director

N/A

N/A

 

Mr. Bremner, CEO and Director, has an extensive branding and business development experience. He joined Avricore in January 2019 as an advisor, and then as Executive Vice- President in June, providing strategic guidance on product offering, market development and communications. In April 2020, he was appointed Director of the Company. Mr. Bremner founded Vancouver based TOUCH Marketing in 2007, whose innovative marketing, communications and project management strategies earned him a strong reputation for delivering results. He previously served as a key advisor in the offices of BC’s Minister of International Trade, the Minister of Tourism and Small Business, as well as the Ministry of Natural Gas Development and Deputy Premier. After leaving the BC Government, Mr. Bremner joined Vancouver based communications firm Pace Group as Vice President of Public Affairs. In 2017, Mr. Bremner was elected to Vancouver City Council in a rare by-election, having a dramatic impact on the city’s political culture and policy approaches related to the ongoing housing crisis.

Ms. Kiki Smith, CFO and Corporate Secretary, has over 20 years’ experience as an operations oriented financial executive with sector focuses of mining, oil and gas, real estate, advanced technology, food production and investment fund management. She assists private and public companies in a variety of financial team roles that bring unique strengths to the Company, such as; mergers and acquisitions, financial reporting and regulatory compliance. Ms. Smith is a member of the Chartered Professional Accountants of British Columbia with the designations of Certified Professional Accountant and Certified General Accountant and holds a Bachelor’s Degree in Economics from University of British Columbia.

 

Mr. Rodger Seccombe, Chief Technology Officer and Director, is a co-founder of HealthTab Inc. He has over 20 years of experience launching and running companies in software, healthcare technology, and clean energy. Mr. Seccombe earned a B.Com (hons) from UBC’s Sauder School of Business and is a Chartered Professional Accountant (CPA-CMA). Prior to HealthTab, he designed and developed cloud-based informatics system currently in use by world’s leading medical laboratories and instrument manufacturers. In 2006, he joined the


23



start-up team at Canadian Bioenergy Corporation and helped pioneer the development of the renewable fuel industry in Canada.

Mr. David Hall, Director is currently Chairman of RepliCel Life Sciences (“RepliCel”) and a consultant to the life sciences industry. Mr. Hall served as CEO and President of RepliCel from 2012 through 2015. Prior to RepliCel, Mr. Hall acted as a consultant to the government, pharma industry, biotech, eHealth and NGO’s for two years. For the prior 15 years, Mr. Hall was a business founder, CFO, CCO, Treasurer and Secretary of Angiotech Pharmaceuticals Inc. Mr. Hall is a Past Chair and board member of Life Sciences BC and current Chairman of Providence Health Care Research Institute. He is the author of Life Sciences BC’s position papers for the Premier’s Competition Council Report and Conversation on Health. Mr. Hall was also a member of the BC Task Force on PharmaCare and serves on the board of directors of the Advantage BC. Mr. Hall holds an Honours degree in Economics and an Honours degree in Finance from the University of Manitoba.

Mr. Alan Arnstein, Director previously worked for the Katz Group Canada where he oversaw the development of the Medicine Shoppe from 28 stores to 175 stores (corporate and franchised) before the successful sale to McKesson Canada. Mr. Arnstein also was very involved in expanding the Rexall pharmacy brand across Canada including responsibility for acquiring and consolidating independent pharmacies under the Rexall banner.  Mr. Arnstein has played and continues to play an active role in real estate projects including the leasing of the Ice District next to Rogers Place in downtown Edmonton, an estimated $5.5B project.

Mr. Robert Sindelar, Director is a Professor in the Faculty of Pharmaceutical Sciences at the University of British Columbia (UBC) and an Advisor, External Relations to the Centre for Health Evaluation & Outcomes Sciences, Providence Health Care Research Institute and UBC. Dr. Sindelar is also an elected fellow International Pharmaceutical Federation, Chair of the Global Pharmacy Observatory Advisory Board of the International Pharmaceutical Federation,  Member of the External Advisory Board, Trinity College Dublin, School of Pharmacy and Pharmaceutical Sciences. Dr. Sindelar is also a past Dean of the Faculty of Pharmaceutical Sciences, UBC, President Providence Health Care Research Institute and VP Research and Academic Affairs, Providence Health Care. Dr. Sindelar earned a B.A., Chemistry from Millikin University, a M.S. and Ph.D. in Medicinal Chemistry and Natural Products from the University of Iowa, College of Pharmacy.

Mr. David Farnfield, Director, is a Yale School of Economics graduate who brings 35 years of experience in commodity, currency and financial futures markets. While serving as Vice President at George Weston Limited, a large food manufacturer and distributor, David oversaw $1B+ in commodity and currency risk while overseeing their commodity division. He has led key negotiations between industry stakeholders on commodity supply agreements and is intimately familiar with product supply agreements. Mr. Farnfield is also a Board member of the Canadian Oilseed Industry Association (Oilseed Innovation Partners) – a non-government agency.

The Directors have served in their respective capacities since their election and/or appointment and will serve until the next Annual General Meeting or until a successor is duly elected, unless the office is vacated in accordance with the Articles of the Company.

No Director and/or member of senior management had been the subject of any order, judgment, or decree of any governmental agency or administrator or of any court or competent jurisdiction, revoking or suspending for cause any license, permit or other authority of such person or of any corporation of which he is a Director and/or member of senior management, to engage in the securities business or in the sale of a particular security or temporarily or permanently restraining or enjoining any such person or any corporation of which he is an officer or director from engaging in or continuing any conduct/practice/employment in connection with the purchase or sale of securities, or convicting such person of any felony or misdemeanor involving a security or any aspect of the securities business or of theft or of any felony.

There are no family relationships between any two or more Directors or members of senior management.


24



There are no arrangements or understandings with major shareholders, customers, suppliers or others, pursuant to which any person referred to above was selected as a Director or member of senior management.

6.B. Compensation

Cash Compensation

Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended December 31, 2020 and two previous years are detailed in Table No. 7 below:

 

Table No. 7

Annual Compensation of Senior Management

 

 

 

Annual Compensation

Long Term Compensation

 

 

 

 

 

Awards

 

Name and
Principal Position

Year

Salary
($)

Bonus
($)

Other
Annual
Compen-
sation ($)

Securities Under
Option/
SAR's Granted
(#)

FMV (2) Options
($)

 

 

 

 

 

 

 

Hector Bremner

Chief Executive Officer

(Former VP Business Development)

2020

2019

2018

Nil

Nil

Nil

Nil

Nil

Nil

150,000

76,250

Nil

500,000

290,000

Nil

34,857

10,378

Nil

 

 

 

 

 

 

 

 

Kiki Smith

Chief Financial Officer

and Corporate Secretary (1)

2020

2019

2018

Nil

Nil

Nil

Nil

Nil

Nil

120,000

75,000

Nil

210,000

105,000

Nil

14,640

1,422

Nil

 

 

 

 

 

 

 

Rodger Seccombe

Chief Technology Officer

2020

2019

2018

Nil

Nil

Nil

Nil

Nil

Nil

120,000

126,667

Nil

Nil

650,000

150,000

Nil

8,802

29,670

 

 

 

 

 

 

 

Sukhwinder (Bob) Rai

(Former President and Chief Executive Officer)

2020

2019

2018

Nil

Nil

Nil

Nil

Nil

Nil

120,000

143,750

150,000

Nil

550,000

Nil

Nil

23,224

Nil

 

 

 

 

 

 

 

Kevin Strong

Former Chief Financial Officer

2020

2019

2018

Nil

Nil

Nil

Nil

Nil

Nil

Nil

61,270

Nil

Nil

Nil

Nil

Nil

Nil

Nil

 

 

 

 

 

 

 

Dong Shim

Former Chief Financial Officer

2020

2019

2018

Nil

Nil

5,400

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

150,000

Nil

Nil

47,100

 

 

 

 

 

 

 

Mark Kunzli

Former Executive Vice President

2020

2019

2018

Nil

Nil

95,760

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil


25



 

 

Annual Compensation

Long Term Compensation

 

 

 

 

 

Awards

 

Name and
Principal Position

Year

Salary
($)

Bonus
($)

Other
Annual
Compen-
sation ($)

Securities Under
Option/
SAR's Granted
(#)

FMV (2) Options
($)

 

 

 

 

 

 

 

Leanne Ratzlaff

Former Corporate Secretary

2020

2019

2018

Nil

Nil

18,500

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

25,000

Nil

Nil

4,945

 

 

 

 

 

 

 

Rajshkumar Padhiyar

Former Chief Financial Officer

2020

2019

2018

Nil

Nil

37,833

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

 

 

 

 

 

 

 

Zula Kropivnitski

Former Chief Financial Officer

2020

2019

2018

Nil

14,000

37,440

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

Nil

 

 

 

 

 

 

 

(1) Consulting/management fees were paid to a consulting company owned by senior management; 

(2) Share-based payments for options granted were measured using the Black-Sholes option pricing model. 

 


26



Table No. 8

Director Stock Option at December 31, 2020

 

 

Grant date

FMV(1) - $

Issued

Vested

Expiry Date

 

Hector Bremner, Director

 

Dec 8, 2020

Oct 15, 2019

Jan 24, 2019

34,857

2,031

8,347

500,000 @ 0.08

150,000 @ $0.05

140,000 @ $0.075

500,000

150,000

140,000

Dec 8, 2025

Oct 15, 2024

Jan 24, 2024

 

Rodger Seccombe, Director

Oct 15, 2019

Apr 11, 2018

8,802

30,223

650,000 @ $0.05

150,000 @ $0.10

650,000

(2)150,000

Oct 15, 2024

Apr 11, 2023

 

Alan Arnstein, Director

Oct 15, 2019

Apr 1, 2019

135

1,854

10,000 @ $0.05

35,000 @ $0.06

10,000

35,000

Oct 15, 2024

Apr 1, 2024

 

David Farnfield, Director

Oct 15, 2019

4,062

300,000 @ $0.05

300,000

Oct 15, 2024

 

David Hall, Director

 

Oct 15, 2019

Apr 1, 2019

812

2,914

60,000 @ $0.05

55,000 @ $0.06

60,000

55,000

Oct 15, 2024

Apr 1, 2024

 

Dr. Robert Sindelar,

Director

 

Oct 15, 2019

Apr 1, 2019

Mar 27, 2018

1,219

1,854

18,332

90,000 @ $0.05

35,000 @ $0.06

200,000 @ $0.10

90,000

35,000

(2) 200,000

Oct 15, 2024

Apr 1, 2024

Mar 27, 2023

 

Bob Rai,

Former Director

Oct 15, 2019

Apr 1, 2019

2,031

21,193

150,000 @ $0.05

400,000 @ $0.06

150,000

400,000

Oct 15, 2024

Apr 1, 2024

 

Sherif Gourgui, Former Director

 

Oct 15, 2019

Apr 1, 2019

68

1,854

5,000 @ $0.05

35,000 @ $0.06

5,000

35,000

Oct 15, 2024

Apr 1, 2024

 

John Papastergiou, Former Director

 

Oct 15, 2019

Apr 1, 2019

 

135

2,648

 

10,000 @ $0.05

50,000 @ $0.06

 

10,000

50,000

 

Oct 15, 2024

Apr 1, 2024

 

(1) Share-based payments for options granted were measured using the Black-Sholes option pricing model.

(2) Options repriced to $0.10 during the year ended December 31, 2020.

 

The following table gives certain information concerning stock option exercises during Fiscal 2020 by the Company’s Senior Management and Directors. It also gives information concerning stock option values.


27



 

Table No. 9

Aggregated Stock Options Exercises in the year ended December 31, 2020

Fiscal Year-end Unexercised Stock Options

Fiscal Year-end Stock Option Values

Senior Management/Directors

 

Name

Number of Shares Acquired on Exercise

Aggregate Value Realized

Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Un-exercisable

Total

105,000

$5,250

$0

 

Director Compensation:  The Company has no formal plan for compensating its Directors for their service in their capacity as Directors. Directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of the Board of Directors. The Board of Directors may award special remuneration to any Director undertaking any special services on behalf of the Company other than services ordinarily required of a Director. Other than indicated below no Director received any compensation for his services as a Director, including committee participation and/or special assignments.

Stock Options:  The Company may grant stock options to Directors, Senior Management and employees. Refer to ITEM #6.E., "Share Ownership" and Table No. 8 for information about stock option grants.

Other Compensation:  No Senior Manager or Director received “other compensation” in excess of the lesser of US$25,000 or 10% of such officer's cash compensation, and all Senior Managers or Directors as a group did not receive other compensation which exceeded US$25,000 times the number of persons in the group or 10% of the compensation.

Bonus/Profit Sharing/Non-Cash Compensation:  Except for the stock option program discussed in ITEM #6.E., the Company had no material bonus or profit sharing plans pursuant to which cash or non-cash compensation is or may be paid to the Company's Directors or Senior Management.

Pension/Retirement Benefits:  No funds were set aside or accrued by the Company during the year ended December 31, 2019 to provide pension, retirement or similar benefits for Directors or Senior Management.

6.C. Board Practices

6.C.1. Terms of Office.

At every Annual General Meeting of the Company, the Directors are elected by the shareholders and serve as Directors until the next Annual General Meeting is held.

6.C.2. Directors’ Service Contracts.

The Company retains its Officers as independent consultants. The Company will not be required to make contributions for employment insurance, Canada Pension, workers’ compensation or other similar levies in respect of the fee for services to be paid to the Officers. Each Officer agrees to pay all required contributions and deductions for income taxes, workers’ compensation and employment insurance and shall indemnify and save the Company harmless from and against all claims, actions, losses, expenses, costs or damages which the Company or its officers, employees or agents may suffer as a result of the Officer’s non-compliance with this requirement.

Each Officer agrees to provide sufficient time and attention to the business and affairs of the Company, to adviSe and counsel the Board of Directors of the Company and to channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Company. All information communicated to the Company will be the property of the Company. The Officers acknowledge that each is a “person in a special relationship”, as that expression is defined in the securities laws of various provinces


28



of Canada, and may receive material information concerning the business and affairs of the Company that has not been generally disclosed, and covenant and agree that they will not purchase or sell any securities of the Company until such information has been generally disclosed. The Company is aware that the Officers may provide services to certain other companies from time to time as disclosed above. The Officers agree that they will not provide services to any other companies without the written approval of the Company.

The Company will pay a consulting fee in the amount of (Cdn) $12,500 per month to Hector Bremner for CEO services through a consulting agreement.

The Company will pay a consulting fee in the amount of (Cdn) $10,000 per month to a company controlled by Kiki Smith for CFO and Corporate Secretarial services through a consulting agreement.

The Company will pay a consulting fee in the amount of (Cdn) $10,000 per month to Rodger Seccombe for CTO services through a consulting agreement.

The fees payable will be reviewed annually, and may be adjusted by the Company in consultation with the Officers to reflect general economic conditions, changes in the duties provided under this Agreement or performance by the Officers. The Officers are entitled to participate in the Company’s incentive stock option plan (Exhibit 4.m). The Company will reimburse the Officers for all reasonable travelling and other out-of-pocket expenses incurred in connection with services provided to the Company. The Officers will be entitled to participate in any benefit programs established by the Company. To date, no such plans are in place.

Inventions of any type made by the Officers become the sole property of the Company which will hold all intellectual property rights for such inventions. If the Company chooses to patent, copyright, trademark or otherwise protect the inventions, the Officers will assign their rights to the Company. The Officers will treat all information of the company as confidential except any information that is presently in the public domain, any information that subsequently becomes part of the public domain, any information obtained by the Officers from a third party with a valid right to disclose it or any information that was independently developed by the Officers or was in their possession prior to receipt from the Company.

The Officers agree that they shall not engage in any activity that is contrary to or detracts from the performance of the business of the Company, will not receive any personal benefit from any party having business with the Company without the approval of the Board of Directors of the Company and, during the term of the agreement and for a period of one year afterwards, will not compete with the Company or solicit customers or employees of the Company.

The Officers may terminate their respective agreements with the Company by giving thirty (30) days written notice to the Company. The Company may waive such notice and, if it does so, such agreements will cease on the date the Company waives such notice. The Company may terminate the agreements without notice or payment in lieu of notice for breach of the agreement. The Company may terminate any agreement at its sole discretion and for any reason upon giving the Officer written notice of termination provided that the Company pays, in lieu of notice, three (3) months fee severance. The Company may terminate any agreement without notice or payment in lieu of notice upon a change of control of the holding company of the Officer or the death or permanent disability of the Officer. Upon termination of an agreement, the Officer will promptly return all property. Each agreement may be subject to the acceptance by TSX Venture Exchange and a refusal to do so shall not constitute a default of the Company.

6.C.3. Board of Director Committees.

The Company has an Audit Committee, which is governed by an Audit Committee Charter (filed as Exhibit hereto) and recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are: David Hall (Chairman), Robert Sindelar (Director) and Alan Arnstein (Director). The Audit Committee met once during the year ended December 31, 2020 to discuss and


29



recommend approval by the Board of the Company’s audited financial statements. The interim financial statements and related Management Discussion and Analysis were approved by joint consent resolution.

6.D. Employees

As of December 31, 2020, the Company employed no employees. The Company engaged the services of President, Chief Executive Officer, Chief Financial Officer and Corporate Secretary, and Head of HealthTab Division through consulting service contracts.

6.E. Share Ownership

Table No. 10 lists, as of the date of this report, Directors and Senior Management who beneficially own the Company's voting securities, consisting solely of common shares, and the amount of the Company's voting securities owned by the Directors and Senior Management as a group.

Table No. 10

Shareholdings of Directors and Senior Management

 

Title of Class

Name of Beneficial Owner

Number of Shares

Options and

Warrants

 

 

Percent of

Class *

Common

Hector Bremner

1,100,000

600,000 warrants

1,115,000   options

1.16%

Common

Kiki Smith

860,000

740,000 warrants

435,000 options

0.91%

Common

Rodger Seccombe

4,311,111

450,000 warrants

1,125,000   options

4.56%

Common

Robert Sindelar

280,000

280,000 warrants

400,000   options

0.30%

Common

Alan Arnstein

45,000

250,000   options

0.05%

Common

David Farnfield

300,000

500,000 warrants

375,000   options

0.32%

Common

David Hall

747,618

533,333 warrants

790,000   options

0.79%

 

Total Directors/Management

7,643,729

3,103,333 warrants

4,490,000 options

8.09%

 

* Based on 94,537,816 shares outstanding as at June 23, 2021

 

Stock Options:  The terms of incentive options grantable by the Company are done in accordance with the rules and policies of the TSX Venture Exchange and the British Columbia Securities Commission, including the number of common shares under option, the exercise price and expiry date of such options and any amendments thereto. The Company adopted a formal written stock option plan (the "Plan") on December 13, 2005. At each Annual General Meeting of the Company, the Plan is presented to and voted on by the shareholders of the Company. If approved, the terms and conditions of the Plan remain in force for the subsequent year. The Stock Option Plan was amended and passed by a majority of shareholders at the Annual General Meeting held on September 15, 2017 and most recently reapproved on April 16, 2021. A copy of the Stock Option Plan is provided as Exhibit 15(b) attached hereto. It will remain in effect until the next Annual General Meeting of Shareholders.


30



Such “terms and conditions”, including the pricing of the options, expiry and the eligibility of personnel for such stock options, are described below. The terms of the original Stock Option Plan and the major changes in the Stock Option Plan (the “Plan”) are described below and provided as Exhibit 15(b) attached hereto.

The principal purposes of the Company’s stock option program are to (a) assist the Company in attracting, retaining, and motivating directors, officers and employees of the Company and, (b) to closely align the personal interests of such directors, officers and employees with the interests of the Company and its shareholders.

The Plan provides that stock options may be granted to service providers for the Company. The term “service providers” means:

(a)Any full or part-time employee or Officer, or insider of the Company or any of its subsidiaries;  

(b)Any other person employed by a company or individual providing management services to the Company;  

(c)Any other person or company engaged to provide ongoing consulting services for the Company or any entity controlled by the Company or  

(d) Any individual engaged to provide services that promote the purchase or sale of the issued securities (any person in (a), (b), (c) or (d) hereinafter referred to as an “Eligible Person”); and 

(e) Any registered retirement savings plan established by such Eligible Person, or any corporation controlled by such Eligible Person, the issued and outstanding voting shares of which are, and will continue to be, beneficially owned, directly or indirectly, by such Eligible Person and/or spouse, children and/or grandchildren of such Eligible Person.  

For stock options to Employees, Consultants or Management Company Employees, the Company must represent that the optionee is a bona fide Employee, Consultant or Management Company Employee as the case may be. The terms “insider” “Controlled” and “subsidiary” shall have the meanings ascribed thereto in the Securities Act (Ontario) from time to time. Subject to the foregoing, the board of directors or Committee, as applicable, shall have full and final authority to determine the persons who are to be granted options under the Plan and the number of shares subject to each option.

The Plan shall be administered by the Board of Directors of the Company or a committee established by the Board of Directors for that purpose. Subject to approval of the granting of options by the Board of Directors or Committee, as applicable, the Company shall grant options under the Plan.

The Plan provides that the aggregate number of shares of the Company, which may be issued and sold under the Plan, will not exceed 10% of the issued shares of the Company. The Company shall not, upon the exercise of any option, be required to issue or deliver any shares prior to (a) the admission of such shares to listing on any stock exchange on which the Company’s shares may them be listed, and (b) the completion of such registration or other qualification of such shares under any law, rules or regulation as the Company shall determine to be necessary or advisable. If any shares cannot be issued to any optionee for whatever reason, the obligation of the Company to issue such shares shall terminate and any option exercise price paid to the Company shall be returned to the optionee.

If a stock option expires or otherwise terminates for any reason without having been exercised in full, the number of common shares reserved for issuance under that expired or terminated stock option shall again be available for the purposes of the Plan. Any stock option outstanding when the Plan is terminated will remain in effect until it is exercised or it expires. The Plan provides that it is solely within the discretion of the Board to determine who should receive stock options and in what amounts, subject to the following conditions:

(a)Options will be non-assignable and non-transferable except that they will be exercisable by the personal representative of the option holder in the event of the option holder’s death; 

(b)Under the Plan, options may be exercisable for a maximum of ten years from grant date; 


31



(c)Under the Plan, options to acquire more than 5% of the issued shares of the Company may be granted to any one individual in any 12-month period the approval of the disinterested shareholders of the Company; 

(d) Options to acquire no more than 2% of the issued shares of the Company may be granted to any one consultant in any 12-month period; 

(e)Options to acquire no more than an aggregate of 2% of the issued shares of  the Company may be granted to an employee conducting investor relations activities (as defined in TSX Venture Exchange Policy 1.1), in any 12 month period; 

(f)Options to acquire no more than 10% of the issued shares of the Company may be granted to any insiders in any 12-month period; 

(g)Under the Plan, options held by an option holder who is a director, employee, consultant or management company employee are no longer required to expire within 90 days after the option holder ceases to be a director, employee, consultant or management company employee; 

(h) Under the Plan, options held by an option holder who is engaged in investor relations activities are no longer required expire within 30 days after the option holder ceases to be employed by the Company to provide investor relations activities; and 

(i) In the event of an option holder’s death, the option holder’s personal representative may exercise any portion of the option holder’s vested outstanding options for a period of one year following the option holder’s death. 

The Plan provides that other terms and conditions may be attached to a particular stock option, such terms and conditions to be referred to in a schedule attached to the option certificate. Stock options granted to directors, senior officers, employees or consultants will vest when granted unless otherwise determined by the Board of Directors on a case by case basis, other than stock options granted to consultants performing investor relations activities, which will vest in stages over 12 months with no more than one-fourth of the options vesting in any three month period.

The price at which an option holder may purchase a common share upon the exercise of a stock option will be as set forth in the option certificate issued in respect of such option and in any event will not be less than the discounted market price of the Company’s common shares as of the date of the grant of the stock option (the “Award Date”). The market price of the Company’s common shares for a particular Award Date will typically be the closing trading price of the Company’s common shares on the day immediately preceding the Award Date, or otherwise in accordance with the terms of the Plan. Where there is no such closing price or trade on the prior trading day “market price” shall mean the average of the most recent bid and ask of the shares of the Company on any stock exchange on which the shares are listed or dealing network on which the shares of the Company trade.

In no case will a stock option be exercisable at a price less than the minimum prescribed by each of the organized trading facilities or the applicable regulatory authorities that would apply to the award of the stock option in question.

Common shares will not be issued pursuant to stock options granted under the Plan until they have been fully paid for by the option holder. The Company will not provide financial assistance or loans to option holders to assist them in exercising their stock options.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

7.A. Major Shareholders

As of December 31, 2020, all shareholders have the same voting rights attached thereto as all other common shares of the Company. As of December 31, 2020, the Company is not aware of any companies or individuals that hold more than 5% of the Issued and Outstanding Common Shares.


32



7.A.1.a. Holdings By Major Shareholders.

Refer to ITEM #6.E and Table No. 10.

7.A.1.b. Significant Changes in Major Shareholders’ Holdings.

---No Disclosure Required---

7.A.1.c. Different Voting Rights.

The Company’s major shareholders do not have different voting rights.

7.A.2. Canadian Share Ownership.

On December 31, 2020, the Company’s shareholders’ list showed 69,795,584 common shares outstanding, an estimated 49 registered shareholders. The Company’s transfer agent provides that there are 49 registered shareholders with Canadian addresses.

7.A.3. Control of the Company  

The Company is a publicly owned Canadian corporation, the shares of which are owned primarily by Canadian residents and other foreign residents. The Company is not controlled by any foreign government or other person(s) except as described in ITEM #4.A., “History and Development of the Company”, and ITEM #6.E., “Share Ownership”.

7.A.4. Change of Control of Company Arrangements

---No Disclosure Necessary---

7.B. Related Party Transactions

Related party transactions are described in Note 15 to the consolidated financial statements and are shown below. The remuneration of the Company’s directors and other members of key management, being the President, Chief Executive Officer and Chief Financial Officer, who have the authority and responsibility for planning, directing and controlling the activities of the Company, consist of the following:

 

Year Ended

Year Ended

Year Ended

 

December 31, 2020

December 31, 2019

December 31, 2018

 

$

$

$

Accounts payable and accrued liabilities

-

321,656

-

 

 

 

 

Expenditures:

 

 

 

Management fees

270,000

175,000

150,000

Consulting fees

120,000

218,936

-

Share-based compensation

58,159

41,383

289,008

Professional Fees

120,000

89,000

37,440

 

Share-based compensation relates to stock options granted and vested to management and directors of the Company during the twelve months ended December 31, 2020. All related party transactions were in the normal course of business operations.


33



 

Audit Fees

For the year ended December 31, 2020, the Company expects to pay Manning Elliot LLP audit fees of $26,000.

Indirect Payments

---No Disclosure Required---

Shareholder Loans

---No Disclosure Required---

Amounts Owing to Senior Management/Directors

--No Disclosure Required--

7.C. Interests of Experts and Counsel

---No Disclosure Required---

ITEM 8. FINANCIAL INFORMATION

8.A. Consolidated Statements and Other Financial Information

The consolidated financial statements of the Company comply with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

Basis of preparation

The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The consolidated financial statements are presented in Canadian dollars unless otherwise noted.

Significant estimates and judgments

The preparation of consolidated financial statements in accordance with IFRS requires the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised.

8.A.7. Legal/Arbitration Proceedings

There are no legal proceedings against the Company.

8.B. Significant Changes

There are no significant changes.

ITEM 9. THE OFFER AND LISTING

9.A. Common Share Trading Information

The Company's common shares trade on the TSX Venture Exchange in Toronto, Ontario, Canada, under the symbol "AVCR". The Company also trades on the Pink Sheets under the symbol “AVCRF”.

Table No. 11 lists the high, low and closing sales prices on the TSX Venture Exchange for the last twelve fiscal quarters, and last five fiscal years.


34



Table No. 11

TSX Venture Exchange

Common Shares Trading Activity

 

Canadian Dollars

 

 

High

Low

Closing

 

 

 

 

Fiscal Quarter Ended March 31, 2021

0.59

0.10

0.235

Fiscal Quarter Ended December 31, 2020

0.14

0.08

0.095

Fiscal Quarter Ended September 30, 2020

0.15

0.02

0.15

Fiscal Quarter Ended June 30, 2020

0.07

0.015

0.03

Fiscal Quarter Ended March 31, 2020

0.04

0.01

0.035

Fiscal Quarter Ended December 31, 2019

0.06

0.015

0.03

Fiscal Quarter Ended September 30, 2019

0.07

0.02

0.03

Fiscal Quarter Ended June 30, 2019

0.15

0.05

0.065

Fiscal Quarter Ended March 31, 2019

0.10

0.055

0.06

Fiscal Quarter Ended December 31, 2018

0.225

0.075

0.10

Fiscal Quarter Ended September 30, 2018

0.19

0.1

0.15

Fiscal Quarter Ended June 30, 2018

0.25

0.15

0.18

Fiscal Quarter Ended March 31, 2018

0.75

0.175

0.175

Fiscal Quarter Ended December 31, 2017

0.415

0.120

0.320

Fiscal Quarter Ended September 30, 2017

0.220

0.140

0.195

 

 

 

 

Fiscal Year Ended December 31, 2020

0.15

0.01

0.095

Fiscal Year Ended December 31, 2019

0.15

0.015

0.03

Fiscal Year Ended December 31, 2018

0.75

0.075

0.10

Fiscal Year Ended December 31, 2017

0.49

0.12

0.32

Fiscal Year Ended December 31, 2016

0.231

0.214

0.22

 

 

 

 

 

9.A.5. Common Share Description

Registrar/Common Shares Outstanding/Shareholders

Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.

There are no Indentures or Agreements limiting the payment of dividends and there are no conversion rights, special liquidation rights, pre-emptive rights or subscription rights.

Computershare Trust Company of Canada (located at 2nd Floor, 510 Burrard Street, Vancouver, British Columbia Canada V6C 3B9) is the registrar and transfer agent for the common shares.


35



Stock Options

Refer to ITEM 6.E., Table No. 10 (Aggregate Option Exercises)

The changes in share options including those granted to directors, officers, employees and consultants during the years ended December 31, 2020, 2019 and 2018 are summarized as follows:

 

 

Year ended

December 31, 2020

Year ended

December 31, 2019

Year ended

December 31, 2018

 

Number of Options

Weighted Average Exercise Price

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

2,420,000

$0.24

Options granted

1,730,000

$0.08

3,095,000

$0.06

665,000

$0.23

Expired/Cancelled

(160,000)

$0.07

(319,000)

$0.22

(415,000)

$0.24

Exercised

(105,000)

$0.05

(73,928)

$0.28

(131,000)

$0.23

Ending Balance

6,706,072

$0.08

5,241,072

$0.13

2,539,000

$0.23

Exercisable

6,706,072

$0.08

5,241,072

$0.13

2,536,500

$0.23

 

The following table summarizes information about share options outstanding and exercisable as at December 31, 2020:

 

Exercise Price

Expiry date

Options

 

 

Outstanding

Exercisable

$0.10

July 20, 2022 (1)

150,000

150,000

$0.10

September 27, 2022 (1)

150,000

150,000

$0.10

November 20, 2022 (1)

150,000

150,000

$0.10

December 8, 2022 (2)

1,151,072

1,151,072

$0.10

March 27, 2023 (3)

200,000

200,000

$0.10

April 11, 2023 (4)

150,000

150,000

$0.10

September 12, 2023 (5)

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

610,000

610,000

$0.05

October 1, 2024

1,855,000

1,855,000

$0.08

November 18, 2025

1,020,000

1,020,000

$0.08

December 8, 2025

710,000

710,000

 

 

6,706,072

6,706,072

(1) Options repriced from $0.15 to $0.10 during the year ended December 31, 2020

(2) Options repriced from $0.28 to $0.10 during the year ended December 31, 2020

(3) Options repriced from $0.24 to $0.10 during the year ended December 31, 2020

(4) Options repriced from $0.21 to $0.10 during the year ended December 31, 2020

(5) Options repriced from $0.125 to $0.10 during the year ended December 31, 2020

 

The weighted average remaining life of the stock options outstanding at December 31, 2020 is 3.43 years.

 

Warrants

Table No. 12 lists, as of December 31, 2020, share purchase warrants (options to purchase common shares) outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants. These warrants were issued in conjunction with private placements of the Company’s securities and all holders of the Company’s warrants are resident in Canada.


36



Table No. 12

Share Purchase Warrants Outstanding

 

Year Ended

December 31, 2020

Year Ended

December 31, 2019

Year Ended

December 31, 2018

 

Number of

Warrants

Weighted

Average

Exercise

Price

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

8,381,326

$0.20

Warrants issued

6,485,000

$0.15

6,852,400

$0.15

8,446,438

$0.33

Exercised

(8,446,438)

$0.33

-

-

(2,975,500)

$0.20

Issued and exercisable

18,743,226

$0.16

20,704,664

$0.24

13,852,264

$0.28

 

The following table summarizes information about warrants outstanding and exercisable as at December 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

November 19, 2021

3,060,000

$0.15

November 13, 2021

3,425,000

$0.15

August 13, 2021

6,852,400

 

 

18,743,226

The weighted average remaining life of the warrants outstanding at December 31, 2020 is 1.03 years.

9.A.6. Differing Rights

---No Disclosure Necessary---

9.A.7.a. Subscription Warrants/Right

---No Disclosure Necessary---

9.A.7.b. Convertible Securities/Warrants

---No Disclosure Necessary---

9.C. Stock Exchanges Identified

The common shares of the Company are listed on the TSX Venture Exchange which is headquartered in Toronto, Ontario under the symbol “AVCR” and  in United States quoted on the Pink Sheets under the symbol “AVCRF”.

Refer to ITEM #9.A.4 for trading information and history. At this time, the Company is not seeking a listing on any other stock exchange.

ITEM 10. ADDITIONAL INFORMATION

10.A. Share Capital

10.A.1. Authorized/Issued Capital.

At December 31, 2020, there were an unlimited number of common shares authorized and 69,795,584 common shares issued and outstanding.


37



At December 31, 2019, there were an unlimited number of common shares authorized and 52,472,619 common shares issued and outstanding.

At December 31, 2018, there were an unlimited number of common shares authorized and 40,103,665 common shares issued and outstanding.

At December 31, 2017, there were an unlimited number of common shares authorized and 27,860,623 common shares issued and outstanding.

At December 31, 2016, there were an unlimited number of common shares authorized and 15,001,297 common shares issued and outstanding.

At December 31, 2015, there were an unlimited number of common shares authorized and 14,276,297 common shares issued and outstanding.

At June 30, 2015, there were an unlimited number of common shares authorized and 13,804,770 common shares issued and outstanding.

At June 30, 2014, there were an unlimited number of common shares authorized and 9,191,768 common shares issued and outstanding.

At June 30, 2013, there were an unlimited number of common shares authorized and 5,404,268 common shares issued and outstanding.

At June 30, 2012, there were an unlimited number of common shares authorized and 1,739,920 common shares issued and outstanding. On March 08, 2012 the Company consolidated its shares on a 10 to 1 basis

At June 30, 2011, there were an unlimited number of common shares authorized and 15,999,200 common shares issued and outstanding.

At June 30, 2010, there were an unlimited number of common shares authorized and 14,680,449 common shares issued and outstanding.

At June 30, 2009, there were an unlimited number of common shares authorized and 12,835,449 common shares issued and outstanding.

At June 30, 2008, there were an unlimited number of common shares authorized and there were 12,377,949 common shares issued and outstanding.

At June 30, 2007, there were an unlimited number of common shares authorized and there were 8,048,101 common shares issued and outstanding.

At June 30, 2006, there were an unlimited number of common shares authorized and there were 5,200,101 common shares issued and outstanding.

Effective August 19, 2005, the authorized share capital of the Company was increased to an unlimited number of common shares without par value due to changes in the British Columbia Company Act which permitted this action.

As of June 30, 2005, there were 25,000,000 common shares authorized and 3,946,101 common shares issued.

As of June 30, 2004, there were 25,000,000 common shares authorized and 3,196,101 common shares issued.

As of June 30, 2003, there were 25,000,000 common shares authorized and 612,868 common shares issued.

As of June 30, 2002, there were 25,000,000 common shares authorized and 594,118 common shares issued.

As of June 30, 2001, there were 25,000,000 common shares authorized and 294,118 common shares issued.

During the last five years, less than 10% of the capital has been “paid for” with assets other than cash.


38



10.A.2. Shares Not Representing Capital.

---No Disclosure Necessary---

10.A.3. Shares Held By Company.

---No Disclosure Necessary---

10.A.4. Stock Options/Share Purchase Warrants

---Refer to Tables No. 8, No. 11 No. 13.---

10.A.5. Stock Options/Share Purchase Warrants

---Refer to Tables No. 8, No. 11 No. 13.---

10.A.6. History of Share Capital

The Company has financed its operations through funds raised in public and private placements of common shares and warrants and from revenues from the sale of its products:

Fiscal Year

Nature of Share Issuance

Number of Shares

Amount ($)

Fiscal 2001

Private Placement @ $3.40

29,411

$100,000

Fiscal 2002

Canadian Prospectus Offering (IPO) @$6.80

30,000

$204,000

Fiscal 2003

Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @ $6.80

3,750

$25,500

Fiscal 2004

Private Placement @$6.00

8,666

$52,000

 

Private Placement @$8.00

155,000

$1,240,000

Fiscal 2005

Private Placement @ $4.00

75,000

$300,000

Fiscal 2006

 

Private Placement @$2.00

Private Placement @$2.00

97,900

27,500

$195,800

$55,000

Fiscal 2007

Private Placement @$6.00

Private Placement @$4.00

35,750

200,000

$71,500

$800,000

Fiscal 2008

Private placement @ $4.80

50,000

$240,000

 

Private placement @ $6.00

87,500

$525,000

Fiscal 2009

N/A

N/A

N/A

Fiscal 2010

Private placement @$10.00

150,000

$1,500,000

Fiscal 2011

Private placement @$4.00

Private placement @$4.00

81,875

50,000

$327,500

$200,000

Fiscal 2012

Private placement @$0.40

140,000

$56,000

Fiscal 2013

Private placement @$0.40

2,000,000

$800,000

Fiscal 2014

Private placement @$0.40

937,500

$375,000

Fiscal 2015

Private placement @$0.60

1,901,833

$1,141,000

Fiscal 2016

N/A

N/A

N/A

Fiscal 2017

Private placement @$0.15

10,585,326

$1,587,799

Fiscal 2018

Private placement @$0.15

5,327,335

$799,100

Fiscal 2019

Private placement @$0.05

6,852,400

$342,620

Fiscal 2019

Private placement @$0.07

4,206,435

$294,450

Fiscal 2020

Private placement @$0.10

6,260,000

$626,000

 

10.A.7. Resolutions/Authorizations/Approvals

---No Disclosure Necessary---


39



10.B. Memorandum and Articles of Association

The Company’s corporate constituting documents comprising the Notice of Articles and Articles are registered with the British Columbia Registrar of Companies under Incorporation No. BC0607937. A copy of the Articles was filed as an Exhibit 1 with the Company’s initial registration statement on Form 20-F.

The following is a summary of certain  provisions of the Company's  Notice of Articles and Articles and certain provisions of the British Columbia Business Corporations Act (the “BCA”), applicable to the Company:

Objects and Purposes

The Articles do not specify objects or purposes. Under both the BCA, a British Columbia corporation generally has all the legal powers of a natural person. British Columbia corporations may not undertake certain limited business activities such as operating as a trust company or railroad without alterations to its form of articles and specific government consent.

Share Capital

The authorized capital of the Company consists of an unlimited number of common shares without par value. All of the common shares must be fully paid and are not subject to any future call or assessment. All of the common shares of the Company rank equally as to voting rights, participation in a distribution of the assets of the Company on a liquidation, dissolution or winding-up of the Company and the entitlement to dividends. The holders of the common shares are entitled to receive notice of all shareholder meetings and to attend and vote at such meetings. Shareholders are not entitled to cumulative voting. Each common share carries with it the right to one vote. The common shares do not have preemptive or conversion rights. In addition, there are no sinking fund or redemption provisions applicable to the common shares or any provisions discriminating against any existing or prospective holders of such securities as a result of a shareholder owning a substantial number of shares.

Share Certificates

Under the Articles, a shareholder is entitled to a share certificate representing the number of shares of the Company held or a written acknowledgement of the shareholder’s right to obtain such a share certificate.

No Limitation on Foreign Ownership

There are no limitations under the Company’s Articles or in the BCA on the right of persons who are not citizens of Canada to hold or vote common shares.

Dividends

Dividends may be declared by the Board out of available assets and are paid ratably to holders of common shares. No dividend may be paid if the Company is, or would thereby become, insolvent.

Voting Rights

Each of the Company’s common share is entitled to one vote on matters to which common shares ordinarily vote including the annual election of directors, appointment of auditors and approval of corporate changes. There are no cumulative voting rights applicable to the Company.

Borrowing Powers

The Company, if authorized by the directors, may: (a) borrow money in the manner and amount, on the security, from the sources and on the terms and conditions that they consider appropriate; (b) issue bonds, debentures and other debt obligations either outright or as security for any liability or obligation of the Company or any other person and at such discounts or premiums and on such other terms as they consider appropriate; (c) guarantee the repayment of money by any other person or the performance of any obligation of any other person; and (d) mortgage, charge, whether by way of specific or floating charge, grant a security interest in, or give other security on, the whole or any part of the present and future assets and undertaking of the Company.

Indemnity Provisions

Under the Articles and the BCA, the Company is now permitted (and is, in some circumstances, required) to indemnify a past or present director or officer of the Company or an associated corporation without obtaining prior court approval in respect of an “eligible proceeding”. An “eligible proceeding” includes any legal


40



proceeding relating to the activities of the individual as a director or officer of the Company. However, under the BCA, the Company will be prohibited from paying an indemnity if: (a) the party did not act honestly and in good faith with a view to the best interests of the Company; (b) the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and (c) the proceeding is brought against the party by the Company or an associated corporation.

Directors – Number and Qualification

The Company’s Articles do not specify a maximum number of directors. The minimum under British Columbia law for a public company is three. The number of directors shall be the number of directors fixed by the directors annually or the number that are actually elected at a general shareholders meeting under the Existing Articles. The number of directors is determined, annually, by shareholders at the annual shareholders meeting and all directors are elected at that time. Under the Articles the directors are entitled between successive annual general meetings to appoint one or more additional directors but not more than one-third of the number of directors fixed at a shareholders’ or actually elected at the preceding annual shareholders’ meeting. Directors automatically retire at the commencement of each annual meeting but may be re-elected thereat.

Directors must be of the age of majority (18), and meet eligibility criteria including being mentally competent, not an un-discharged bankrupt, no fraud related convictions in the previous five years. There are residency requirements and there is no mandatory retirement age either under the Articles or under the BCA. Directors need not own any shares of the Company in order to qualify as directors.

Directors - Powers and Limitations

Directors must manage or supervise the management of the business and affairs of the Company and have the authority to exercise all such powers which are not required to be exercised by the shareholders as governed by the BCA. Directors may, by resolution, create and appoint an executive committee consisting of the director or directors that they deem appropriate. This executive committee has, during the intervals between meetings of the Board, all of the directors’ powers, except the power to fill vacancies in the Board, the power to remove a Director, the power to change the membership of, or fill vacancies in, any committee of the Board and any such other powers as may be set out in the resolution or any subsequent directors’ resolution. Directors may also by resolution appoint one or more committees other than the executive committee. These committees may be delegated any of the directors’ powers except the power to fill vacancies on the board of directors, the power to remove a director, the power to change the membership or fill vacancies on any committee of the directors, and the power to appoint or remove officers appointed by the directors.

Under the BCA, directors are obligated to abstain from voting on matters in which they may be financially interested after disclosing in writing such interest. Directors’ compensation is not a matter on which they must abstain. Directors’ borrowing powers are not generally restricted where the borrowing is in the Company’s best interests, but the directors may not authorize the Company to provide financial assistance for any reason where the Company is insolvent or the providing of the guarantee would render it insolvent.

Amendment of Articles and Notice of Articles; Special Transactions

The Articles provide that the general authority required to amend all provisions of the Company’s Articles and the Notice of Articles relating to the authorized share structure is a resolution of the directors and the attachment of special rights and restrictions thereto, including any changes therein, an ordinary resolution. If the amendment prejudices or interferes with the rights or special rights attached to any class of issued shares, by the provisions of the BCA, the consent of the holders of that class of shares by a special separate resolution is also required.

Certain corporate changes or proposed transactions including amalgamation with another company, sale of substantially all of the Company’s assets, re-domiciling out of the jurisdiction of British Columbia, creation of new classes of shares not only require the consent of the holders of common shares by a special separate resolution but generally also give rise to a dissent right which is the right to be paid the fair value of the stockholder’s shares in cash if the required special resolution is actually passed and the Company elects to proceed with the matter notwithstanding receipt of dissent notices. A notice of a shareholders meeting at which


41



such a change or proposed transaction is intended to be considered must include a prominent notice of the dissent right. Dissent provisions are governed by the BCA and not by the Articles of the Company.

Under the Articles, a special separate resolution requires a majority of three-quarters of the votes cast.

Shareholders’ Meetings

In addition to reflecting the present notice and other provisions of the BCA relating to shareholders’ meetings, the Articles provide that shareholders’ meetings may be held at such place as is determined by the directors. Shareholders meetings are governed by the Articles of the Company but many important protections and procedures are contained within the BCA and the Securities Act (British Columbia) and the Securities Act (Alberta) and the respective regulations and rules thereto and the policy statements, notices and blanket orders of the respective commissions of each of British Columbia and Alberta, together with the national policy statements, and national instruments applied by the such commissions (collectively, “Applicable Canadian Securities Law”). The Articles provide that the Company will hold an annual shareholders’ meeting, will provide at least 21 days’ notice and will provide for certain procedural matters and rules of order with respect to conduct of the meeting. The BCA and Applicable Canadian Securities Law superimpose requirements that generally provide that shareholders meetings require not less than a 60 day notice period from initial public notice and that the Company makes a thorough advanced search of intermediary and brokerage registered shareholdings to facilitate communication with beneficial shareholders so that meeting proxy and information materials can be sent via the brokerages to unregistered but beneficial shareholders. The form and content of information circulars and proxies and like matters are governed by Applicable Canadian Securities Law and includes the specifics relating to disclosure requirements for the proxy materials and various corporate actions, background information on the nominees for election for director, executive compensation paid in the previous year and full details of any unusual matters or related party transactions.

The Company must hold an annual shareholders meeting open to all shareholders for personal attendance or by proxy at each shareholder’s determination. The meeting must be held within 15 months of the previous annual shareholders meeting and must present audited statements which are dated no more than six months prior to such meeting.

Change in Control

The Company has not implemented any shareholders’ rights or other “poison pill” protection against possible take-overs. The Company does not have any agreements which are triggered by a take-over or other change of control. There are no provisions in its articles triggered by or affected by a change in outstanding shares which gives rise to a change in control. There are no provisions in the Company’s material agreements giving special rights to any person on a change in control.

Insider Share Ownership Reporting

The Articles of the Company do not require disclosure of share ownership. Share ownership of director nominees must be reported annually in proxy materials sent to the Company’s shareholders. There are no requirements under the BCA to report ownership of shares of the Company but Applicable Canadian Securities Law requires disclosure of trading by insiders (generally officers, directors and holders of 10% of voting shares) within 5 days of the trade. Controlling shareholders (generally those in excess of 20% of outstanding shares) must provide seven days advance notice of share sales.

Applicable Canadian Securities Law

Applicable Canadian Securities Law governs matters typically pertaining to public companies such as continuous quarterly financial reporting, immediate disclosure of material changes, insider trade reporting, take-over protections to ensure fair and equal treatment of all shareholders, exemption and resale rules pertaining to non-prospectus securities issuances as well as civil liability for certain misrepresentations, disciplinary, appeal and discretionary ruling matters. All of the Company’s shareholders regardless of residence have equal rights under this legislation.


42



10.C. Material Contracts

There are currently no material contracts.

10.D. Exchange Controls

Canada has no system of exchange controls. There are no Canadian restrictions on the repatriation of capital or earnings of a Canadian public company to non-resident investors. There are no laws in Canada or exchange restrictions affecting the remittance of dividends, profits, interest, royalties and other payments to non-resident holders of the Company’s securities, except as discussed in ITEM 10, ”Taxation" below.

Restrictions on Share Ownership by Non-Canadians:  There are no limitations under the laws of Canada or in the organizing documents of the Company on the right of foreigners to hold or vote securities of the Company, except that the Investment Canada Act may require review and approval by the Minister of Industry (Canada) of certain acquisitions of "control" of the Company by a "non-Canadian". The threshold for acquisitions of control is generally defined as being one-third or more of the voting shares of the Company. "Non-Canadian" generally means an individual who is not a Canadian citizen, or a corporation, partnership, trust or joint venture that is ultimately controlled by non-Canadians. If a “non-Canadian” (for example, a US resident acquirer) were to acquire such a control position, they would not be required to do any filings or provide any notices to the Ministry of Industry (Canada) unless notified first by that Ministry that their acquisition of control was under review.

Canada has, as does the United States, competition laws designed to promote competition in industry and markets. The Competition Act (Canada) provides Canada’s federal government with the power to review or prevent business transactions, such as acquiring a controlling interest in a company similar to the Company , if it is found that the acquisition of control would reduce competition in a given market or industry. Since the market that the Company competes in is extremely competitive, no single company, including the Company, seems to have significant market power. Acquisition of the Company, therefore, would not lead to reduced competition.

10.E. Taxation

 

Canadian Federal Income Tax Considerations:

The following is a brief summary of some of the principal Canadian federal income tax consequences to a holder of common shares of the Company (a "U.S. Holder") who deals at arm's length with the Company, holds the shares as capital property and who, for the purposes of the Income Tax Act (Canada) (the "Act") and the Canada – United States Income Tax Convention (the "Treaty"), is at all relevant times resident in the United States, is not and is not deemed to be resident in Canada and does not use or hold and is not deemed to use or hold the shares in carrying on a business in Canada. Special rules, which are not discussed below, may apply to a U.S. Holder that is an insurer that carries on business in Canada and elsewhere.

Under the Act and the Treaty, a U.S. Holder of common shares will generally be subject to a 5% withholding tax on dividends paid or credited or deemed by the Act to have been paid or credited on such shares. The withholding tax rate is 5% where the U.S. Holder is a corporation that beneficially owns at least 10% of the voting shares of the Company and the dividends may be exempt from such withholding in the case of some U.S. Holders such as qualifying pension funds and charities.

In general, a U.S. Holder will not be subject to Canadian income tax on capital gains arising on the disposition of shares of the Company unless (i) at any time in the five-year period immediately preceding the disposition, 25% or more of the shares of any class or series of the capital stock of the Company was owned by (or was under option of or subject to an interest of) the U.S. holder or persons with whom the U.S. holder did not deal at arm's length, and (ii) the value of the common shares of the Company at the time of the disposition derives principally from real property (as defined in the Treaty) situated in Canada. For this purpose, the Treaty defines real property situated in Canada to include rights to explore for or exploit mineral deposits and other natural resources situated in Canada, rights to amounts computed by reference to the amount or value of production from such resources, certain other rights in respect of natural resources situated in Canada and shares of a corporation the value of whose shares is derived principally from real property situated in Canada.


43



The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2019 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.

Dividends:

A Holder will be subject to Canadian withholding tax ("Part XIII Tax") equal to 25%, or such lower rate as may be available under an applicable tax treaty, of the gross amount of any dividend paid or deemed to be paid on common shares. Under the Canada-U.S. Income Tax Convention (1980) as amended by the Protocols signed on 6/14/1983, 3/28/1984, 3/17/1995, and 7/29/1997 (the "Treaty"), the rate of Part XIII Tax applicable to a dividend on common shares paid to a Holder who is a resident of the United States and who is the beneficial owner of the dividend, is 5%. If the Holder is a company that owns at least 10% of the voting stock of the Company paying the dividend, and, in all other cases, the tax rate is 15% of the gross amount of the dividend. The Company will be required to withhold the applicable amount of Part XIII Tax from each dividend so paid and remit the withheld amount directly to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares:

A Holder who disposes of a common share, including by deemed disposition on death, will not normally be subject to Canadian tax on any capital gain (or capital loss) thereby realized unless the common share constituted "taxable Canadian property" as defined by the Act. Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder if the share is listed on a prescribed stock exchange unless the Holder or persons with whom the Holder did not deal at arm's length alone or together held or held options to acquire, at any time within the five years preceding the disposition, 25% or more of the shares of any class of the capital stock of the Company. The TSX Venture Exchange is a prescribed stock exchange under the Act. A Holder who is a resident of the United States and realizes a capital gain on a disposition of a common share that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax thereon unless:

(a)  More than 50% of the value of the common shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resource properties,

(b)The common share formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 month period preceding the disposition, or 

(c)The Holder is an individual who (i) was a resident of Canada at any time during the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the common share when he ceased to be resident in Canada. 

A Holder who is subject to Canadian tax in respect of a capital gain realized on a disposition of a common share must include half of the capital gain (taxable capital gain) in computing the Holder's taxable income earned in Canada. The Holder may, subject to certain limitations, deduct half of any capital loss (allowable capital loss) arising on a disposition of taxable Canadian property from taxable capital gains realized in the year of disposition in respect to taxable Canadian property and, to the extent not so deductible, from such taxable capital gains realized in any of the three preceding years or any subsequent year.

United States Taxation:

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation ("U.S. Taxpayer") will recognize a gain or loss on the sale of the Company's common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or


44



loss will be a capital gain or capital loss if the Company's common shares are a capital asset in U.S. Taxpayer's hands.

For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company's common shares. A U.S. Taxpayer who pays Canadian tax on a dividend on common shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability. A domestic corporation that owns at least 10% of the voting shares should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company's common shares.

Under a number of circumstances, United States Investor acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Center where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Center, Philadelphia, PA 19255. In particular, any United States Investor who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return. Other filing requirements may apply. United States Investors should consult their own tax advisors concerning these requirements.

The US Internal Revenue Code provides special anti-deferral rules regarding certain distributions received by US persons with respect to, and sales and other dispositions (including pledges) of stock of, a passive foreign investment company. A foreign corporation, such as the Company, will be treated as a passive foreign investment company if 75% or more of its gross income is passive income for a taxable year or if the average percentage of its assets (by value) that produce, or are held for the production of, passive income is at least 50% for a taxable year. The Company believes that it was not a passive foreign investment company for the taxable year ended December 31, 2019 and, furthermore, expects to conduct its affairs in such a manner so that it will not meet the criteria to be considered passive foreign investment company in the foreseeable future.

10.F. Dividends and Paying Agents

The Company has not declared any dividends on its common shares for the last five years and does not anticipate that it will do so in the foreseeable future. The present policy of the Company is to retain future earnings for use in its operations and the expansion of its business.

Notwithstanding the aforementioned: the Company is unaware of any dividend restrictions; has no specific procedure for the setting of the date of dividend entitlement; but might expect to set a record date for stock ownership to determine entitlement; has no specific procedures for non-resident holders to claim dividends, but might expect to mail their dividends in the same manner as resident holders. The Company has not nominated any financial institutions to be the potential paying agents for dividends in the United States.

10.G. Statement by Experts

The Company’s auditor for its consolidated financial statements was Manning Elliot for the years ended December 31, 2020 & 2019 and Davidson & Company LLP for 2018 & 2017. Their audit reports for the years ended December 31, 2020, 2019, and 2018 are included with the related consolidated financial statements in this Annual Report.

10.H. Document on Display

--- No Disclosure Necessary ---

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

--- No Disclosure Necessary ---

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

12.A. Debt Securities

--- No Disclosure Necessary ---


45



12.B. Warrants and Rights  

--- No Disclosure Necessary ---

12.C. Other Securities     

--- No Disclosure Necessary ---

12.D. American Depository Shares

-- No Disclosure Necessary ---

PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

--- No Disclosure Necessary ---

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

--- No Disclosure Necessary ---

ITEM 15. CONTROLS AND PROCEDURES

The Company’s management is responsible for establishing and maintaining disclosure controls and procedures to provide reasonable assurance that material information related to the Company, including its consolidated subsidiaries, is made known to senior management, including Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”), by others within those entities on a timely basis so that appropriate decisions can be made regarding public disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as of December 31, 2020.  The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2020, were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Management’s Annual Report on Internal Control over Financial Reporting

The Company’s management is responsible for designing, establishing and maintaining a system of internal controls over financial reporting (as defined in Exchange Act Rule 13a-15(f)) to provide reasonable assurance that the financial information prepared by the Company for external purposes is reliable and has been recorded, processed and reported in an accurate and timely manner in accordance with IFRS as issued by IASB.  The Board of Directors is responsible for ensuring that management fulfills its responsibilities.  The Audit Committee fulfills its role of ensuring the integrity of the reported information through its review of the interim and annual financial statements.  Management reviewed the results of their assessment with the Company’s Audit Committee.

Because of its inherent limitations, the Company’s internal control over financial reporting may not prevent or detect all possible misstatements or frauds.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control – Integrated Framework (2013), which is a suitable, recognized control framework


46



established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).  Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2020.

Limitations on the Effectiveness of Controls

The Company's management, including the CEO and CFO, does not expect that our Disclosure Controls or our Internal Controls will prevent all error and all fraud.  A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.  These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.  Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.  The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.  Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Attestation Report of the Registered Accounting Firm.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Form 20-F Annual Report.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

There have been no changes in the Company's internal controls over financial reporting during the period covered by this annual report that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting with regard to deficiencies or material weaknesses other than the corrective actions to ensure proper disclosure is included in the Company’s filings under the Exchange Act, including the Form 20-F Annual Report.

ITEM 16. RESERVED

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Mr. David Hall is a financially literate member of the Company’s Audit Committee.

ITEM 16B. CODE OF ETHICS

The Company has not adopted a formal code of ethics because, as a TSX Venture Exchange issuer, the Company is only required have an audit committee.

In lieu of a code of ethics, the Company has adopted the following methodology with respect to corporate governance.

The management of the Company is responsible for establishing and maintaining disclosure controls and procedures for information relating to the Company, including its consolidated subsidiaries. The Company’s


47



management is also responsible for establishing and maintaining adequate internal control over financial reporting.

The Company’s Board of Directors facilitates its exercise of independent supervision over management by ensuring that the Board of Directors is composed of a majority of independent directors. The Board of Directors, at present, is composed of six directors, four of which are considered to be independent. Two directors, Mr. Hector Bremner and Mr. Rodger Seccombe are also senior officers. In determining whether a director is independent, the Board considers, for example, whether the director has a relationship, which could, or could be perceived to, interfere with the director's ability to objectively assess the performance of management.

The Board of Directors monitors the ethical conduct of Avricore Health and its management and ensures that it complies with applicable legal and regulatory requirements, such as those of relevant securities commissions and stock exchanges. The Board of Directors has found that the fiduciary duties placed on individual directors by the Company’s governing corporate legislation and the common law, as well as the restrictions placed by applicable corporate legislation on the individual director’s participation in decisions of the Board of Directors in which the director has an interest, have been sufficient to ensure that the Board of Directors operates independently of management and in the best interests of the Company.

The Board of Directors is specifically responsible for approving long-term strategic plans and annual operating plans and budgets recommended by management. Board consideration and approval is also required for all material contracts, business transactions and all debt and equity financing proposals. The independent directors on the Board of Directors are also responsible for approving senior executive compensation and retirement plans.

The Board of Directors delegates to management, through the offices of Chief Executive Officer and Chief Financial Officer, responsibility for meeting defined corporate objectives, implementing approved strategic and operating plans, carrying on the Company’s business in the ordinary course, managing the Company’s cash flow, evaluating new business opportunities, recruiting staff and complying with applicable regulatory requirements. The Board of Directors also looks to management to furnish recommendations respecting corporate objectives, long-term strategic plans and annual operating plans.

Given the relatively small composition of the Board of Directors and the Company’s management over the last several years, the Board of Directors has not appointed a corporate governance committee and these functions are currently performed by the Board of Directors as a whole.

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

External Auditor Service Fees

The Company’s auditors were Manning Elliot LLP for the years ended December 31, 2019 and 2020 and Davidson & Company LLP during the year ended December 31, 2018. The following table sets out the aggregate fees billed by Manning Elliot LLP and Davidson & Company LLP over their engagement with the Company.

Year ended

Audit Fees

Audit Related Fees(1)

Tax Fees(2)

All Other Fees(3)

 

December 31, 2020

$26,000

$Nil

$Nil

$Nil (0%)

 

December 31, 2019

$26,000

$Nil

$ Nil

$Nil (0%)

 

December 31, 2018

$65,000

$Nil

$4,500

$Nil (0%)

 

(1) Related to assurance and related services that are reasonably related to the performance of the audit and review of the Company’s financial statements and not included in the amounts noted under Audit Fees

(2) Related to fees billed by the Company’s external auditor for professional services rendered for tax compliance, tax advice and tax planning. 

(3) Related to other accounting services that is excluded from the Audit Fees


48



Pre-Approval Policies and Procedures

The Audit Committee has adopted an Audit Committee Charter (see “Exhibit”) governing the provision of audit and non-audit services by the external auditor. This charter requires the Audit Committee to:

1.recommend to the Board of Directors the external auditor to be nominated by the Board of Directors and the compensation of the external auditor, and 

2.to pre-approve all non-audit services provided by the external auditor. 

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

---Not applicable---

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS

---Not applicable---

ITEM 16F.  CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

---Not applicable---

ITEM 16G. CORPORATE GOVERNANCE

---Not applicable---

ITEM 16H.  MINE SAFETY DISCLOSURE

---Not applicable---


49



PART III

ITEM 17. FINANCIAL STATEMENTS

The Company's financial statements are stated in Canadian Dollars (CDN$) and are prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”) and interpretations of the International Financial Reporting Interpretations Committee (“IFRIC”).

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of Manning Elliott LLP and Davidson & Company LLP, Chartered Professional Accountants, are included herein immediately preceding the audited financial statements.

Audited Financial Statements

-- included after exhibit list

ITEM 18. FINANCIAL STATEMENTS

The Company has elected to provide financial statements pursuant to ITEM #17.

ITEM 19. EXHIBITS

The financial statements thereto as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The report of the Company’s independent auditors for the audited financial statements are included herein immediately preceding the audited financial statements.

(A) Financial information

 

(i)Audited Consolidated Financial Statements for the year ended December 31, 2020. 

1.Auditor’s Reports, dated April 28, 2021 and May 30, 2019. 

2.Consolidated Statements of Financial Position at December 31, 2020 and 2019. 

3.Consolidated Statements of Comprehensive Loss for the years ended December 31, 2020, 2019, and 2018. 

4.Consolidated Statements of Changes in Equity (Deficiency) for the years ended December 31, 2020, 2019, and 2018. 

5.Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019, and 2018. 

6.Notes to Consolidated Financial Statements. 


50



(B)  Index to Exhibits:

 

1. Articles of Incorporation – 

 Amendment to Articles of Incorporation, Name Change, July 28, 2014, filed with Form 6-K, November 18, 2014

 Amendment to Articles of Incorporation, Name Change, November 5, 2018, filed with Form 6-K, June 17, 2019

 

2.  Instruments defining the rights of holders – N/A

3.Intentionally deleted. 

4.  Material contracts – N/A

5. N/A

6.  Calculation of earnings per share – N/A

7.  Explanation of calculation of ratios – N/A

8.  Subsidiaries - N/A

9.  Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities – N/A

10.  Notice required by Rule 104 of Regulation BTR – N/A

11.  Code of Ethics – N/A

12.1*  Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002

12.2*  Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002

13.1*  Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002

13.2*  Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002

14.  Legal opinion – N/A

15.  Additional exhibits:

a)Audit Committee Charter  

b)Stock Option Plan 

c)Letter from former auditor Davidsons & Company LLP, dated June 23, 2021* 

 

16.  Mine Safety Disclosures – N/A

101.INS* XBRL Instance Document

101.SCH* XBRL Taxonomy Extension Schema Document

101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF* XBRL Taxonomy Extension Definitions Linkbase Document

101.LAB* XBRL Taxonomy Extension Label Linkbase Document

101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document.

 

 

* Filed herewith.


51



Picture 1 

 

 

 

 

Avricore Health Inc.

 

 

Consolidated Financial Statements

 

For the years ended December 31, 2020 and 2019


52



Picture 7 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of

Avricore Health Inc.

 

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated financial statements of Avricore Health Inc. and its subsidiaries (the “Company”), which comprise the consolidated statements of financial position as at December 31, 2020 and 2019, and the consolidated statements of operations and comprehensive loss, changes in deficiency and cash flows for the years ended December 31, 2020 and 2019, and the related notes, including a summary of significant accounting policies and other explanatory information (collectively referred to as the “consolidated financial statements”).

 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years ended December 31, 2020 and 2019 in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Emphasis of Matter

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has a working capital deficit and has accumulated losses since inception. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement, whether due to fraud or error. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

 

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a reasonable basis for our audit opinion.

 

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

 

We have served as the Company’s auditor since 2019.

 

/S/ MANNING ELLIOTT

 

CHARTERED PROFESSIONAL ACCOUNTANTS

 

Vancouver, Canada

 

April 28, 2021


53



Picture 1 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

To the Shareholders and Directors of

Avricore Health Inc. (formerly Vanc Pharmaceuticals Inc.)

 

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated statements of operations and comprehensive loss, changes in shareholders’ equity, and cash flows for the year ended December 31, 2018, and the related notes (collectively referred to as the “financial statements”) of Avricore Health Inc. (formerly Vanc Pharmaceuticals Inc.) (the “Company”). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2018 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Going Concern

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has negative cash flows that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatements of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provide a reasonable basis for our opinion.

 

We have served as the Company’s auditor since 2017.

 

/s/ DAVIDSON & COMPANY LLP

Vancouver, CanadaChartered Professional Accountants 

 

May 30, 2019

 

Picture 1 


54


Avricore Health Inc.

Consolidated Statements of Financial Position

(Expressed in Canadian Dollars)


 

Note

December 31,

2020

December 31,

2019

 

 

$

$

ASSETS

 

 

 

 

 

 

 

Current Assets

 

 

 

Cash and cash equivalents

 

302,715

13,799

Accounts receivable

5

11,928

15,474

Prepaid expenses

6

125,444

179,123

 

 

440,087

208,396

 

 

 

 

Intangible assets

10

3

3

Total Assets

 

440,090

208,399

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Current Liabilities

 

 

 

Accounts payable and accrued liabilities

11

152,569

652,460

Lease liabilities

12

-

21,390

Loans payable

13

1,001,562

-

 

 

1,154,131

673,850

 

 

 

 

SHAREHOLDERS’ EQUITY (DEFICIENCY)

 

 

 

Share capital   

14

22,286,852

21,400,106

Subscription

 

10,000

10,000

Shares to be issued

4

-

100,000

Reserves

14

5,497,092

5,358,462

Deficit

 

(28,507,985)

(27,334,019)

 

 

(714,041)

(465,451)

Total Liabilities and Shareholders’ Equity (Deficiency)

 

440,090

208,399

 

 

 

 

 

Nature of operations and going concern (Note 1)

Subsequent events (Note 24)

 

 

Approved and authorized on behalf of the Board of Directors on April 28, 2021.

 

 

 

 

          Hector Bremner                    “David Hall”          

 

Hector Bremner, DirectorDavid Hall, Chairman  


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

Page 55


Avricore Health Inc.

Consolidated Statements of Operations and Comprehensive Loss

For the years ended December 31, 2020, 2019 and 2018

(Expressed in Canadian Dollars)


 

Note

2020

2019

2018

 

 

 

 

 

 

 

$

$

$

 

 

 

 

 

Revenue

 

33,030

33,000

15,295

 

 

 

 

 

Cost of Sales

 

15,550

18,502

16,258

 

 

 

 

 

Gross profit (loss)

 

17,480

14,498

(963)

 

 

 

 

 

Expenses

 

 

 

 

Amortization

 

-

180,469

526,243

Consulting

18

174,321

509,734

494,783

General and administrative

16

120,577

198,837

377,690

Management fees

18

270,000

175,000

150,000

Marketing and communications

15

31,251

247,243

283,587

Professional fees

18

159,593

219,948

268,621

Share-based compensation

18

130,219

86,420

372,137

 

 

885,961

1,617,651

2,473,061

Other income (expense)

 

 

 

 

Finance costs

13

(158,952)

(5,144)

(102)

Gain on settlement of liabilities

 

33,899

3,058

5,119

Interest income

 

-

405

1,715

Write down of intangible assets

10

-

(313,514)

(946,173)

Write down of inventories

7

(180,432)

-

-

Write down of equipment

 

-

-

(45,114)

Other income

 

-

2,096

438

Net loss from continuing operations

 

(1,173,966)

(1,916,252)

(3,458,141)

 

 

 

 

 

Loss from discontinued operations

17

-

(189,356)

(678,661)

 

 

 

 

 

Net loss and comprehensive loss for the year

 

(1,173,966)

(2,105,608)

(4,136,802)

 

 

 

 

 

Basic and Diluted Loss Per Share

 

 

 

 

  Continuing operations

 

(0.02)

(0.04)

(0.10)

  Discontinued operations

 

-

(0.00)

(0.02)

 

 

(0.02)

(0.04)

(0.12)

Weighted Average Number of Common Shares Outstanding

 

60,449,165

47,292,091

33,869,642

 

 

 

 

 

 

Segmented information (Note 20)


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

Page 56


Avricore Health Inc.

Consolidated Statements of Changes in Shareholders’ Equity (Deficiency)

For the years ended December 31, 2020, 2019 and 2018

(Expressed in Canadian Dollars)


 

Number

of Shares

Share

Capital

Shares to be Issued

Shares Subscribed

Warrant

Reserve

Option

Reserve

 

Deficit

 

Total

 

 

$

$

$

$

$

$

$

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

27,860,623

18,340,491

973,333

-

221,388

4,054,494

(21,091,609)

2,498,097

 Shares issued for cash, net

5,327,335

771,504

-

-

9,332

-

-

780,836

 Exercise of warrants

2,975,500

603,310

-

-

(8,210)

-

-

595,100

 Exercise of stock options

131,000

69,001

-

-

-

(40,181)

-

28,820

 Shares issued for services

233,450

43,915

11,167

-

-

-

-

55,082

 Acquisition of HealthTab Inc.

2,666,667

773,333

(773,333)

-

-

-

-

-

 Acquisition of Corozon Platform

909,090

181,818

-

-

-

-

-

181,818

 Acquisition of distribution rights

-

-

-

-

510,878

-

-

510,878

Share-based compensation

-

-

-

-

-

372,137

-

372,137

Net loss

-

-

-

-

-

-

(4,136,802)

(4,136,802)

Balance, December 31, 2018

40,103,665

20,783,372

211,167

-

733,388

4,386,450

(25,228,411)

885,966

 Shares issued for cash, net

11,058,835

465,760

-

-

171,310

-

-

637,070

 Exercise of stock options

73,928

39,807

-

-

-

(19,106)

-

20,701

 Shares issued for services

125,081

11,167

(11,167)

-

-

-

-

-

 Acquisition of HealthTab Inc.

1,111,110

100,000

(100,000)

-

-

-

-

-

 Share subscriptions received

-

-

-

10,000

-

-

-

10,000

Share-based compensation

-

-

-

-

-

86,420

-

86,420

Net loss

-

-

-

-

-

-

(2,105,608)

(2,105,608)

Balance, December 31, 2019

52,472,619

21,400,106

100,000

10,000

904,698

4,453,764

(27,334,019)

(465,451)

 Shares issued for cash

6,260,000

626,000

-

-

-

-

-

626,000

 Exercise of stock options

105,000

6,672

-

-

-

(1,422)

-

5,250

 Bonus shares for loan

3,480,000

52,200

-

-

-

-

-

52,200

 Shares issued for services and payables

5,477,965

136,949

-

(10,000)

-

-

-

126,949

 Acquisition of HealthTab Inc.

2,000,000

100,000

(100,000)

-

-

-

-

-

 Share issuance cost

-

(35,075)

-

-

9,833

-

-

(25,242)

 Share subscriptions received

-

-

-

10,000

-

-

-

10,000

Share-based compensation

-

-

-

-

-

130,219

-

130,219

Net loss

-

-

-

-

-

-

(1,173,966)

(1,173,966)

Balance, December 31, 2020

69,795,584

22,286,852

-

10,000

914,531

4,582,561

(28,507,985)

(714,041)


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

Page 57


Avricore Health Inc.  

Consolidated Statements of Cash Flows

For the years ended December 31, 2020, 2019 and 2018

(Expressed in Canadian Dollars)


 

2020

2019

2018

 

$

$

$

Operating Activities

 

 

 

 Net loss from continuing operations

(1,173,966)

(1,916,252)

(3,458,141)

Adjustment for the non-cash items:

 

 

 

 Amortization

-

180,469

526,243

 Finance cost

144,488

5,144

-

 Share-based payments

130,219

86,420

372,137

 Write down of intangible assets

-

313,514

946,173

 Write down of inventories

180,432

-

-

 Write down of equipment

-

-

45,114

 Gain on debt settlement

(33,899)

(3,058)

(5,119)

 Services paid/to be paid in shares

-

-

55,082

 

 

 

 

Change in working capital items:

 

 

 

 Accounts receivable

3,546

-

-

 Prepaid expenses and deposits

45,259

107,123

161,269

 Inventories

(180,432)

-

-

 Accounts payable and accrued liabilities

(339,043)

364,306

(53,648)

Net cash used in operating activities

(1,223,396)

(862,334)

(1,410,890)

Net cash provided by (used in) operating activities of discontinued operations

-

175,927

(314,157)

 

(1,223,396)

(686,407)

(1,725,047)

 

 

 

 

Investing Activities

 

 

 

 Intangible assets

-

-

(50,000)

 Acquisition net of cash received

-

-

(100,000)

Net cash used in investing activities

-

-

(150,000)

Net cash used in investing activities of discontinued operations

-

-

(5,000)

 

-

-

(155,000)

 

 

 

 

Financing Activities

 

 

 

 Proceeds from issuance of shares, net

626,000

637,070

780,836

 Share subscriptions received

10,000

10,000

-

 Proceeds from exercise of options

5,250

20,701

28,820

 Proceeds from exercise of warrants

-

-

595,100

 Share issuance costs

(25,242)

-

-

 Loan proceeds

940,000

-

-

 Finance cost

(30,000)

-

-

 Lease payments

(13,696)

(52,007)

-

Net cash provided by financing activities

1,512,312

615,764

1,404,756

 

 

 

 

Increase (Decrease) in Cash

288,916

(70,643)

(475,291)

Cash and Cash Equivalents, Beginning of year

13,799

84,442

559,733

Cash and Cash Equivalents, End of year

302,715

13,799

84,442

 

 

 

 

Cash and Cash Equivalents Consist of:

 

 

 

 Cash

292,715

13,799

67,494

 Guaranteed Investment Certificates

10,000

-

16,948

Cash and cash equivalents

302,715

13,799

84,442

 

Supplemental cash flow information (Note 21)


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

Page 5


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


1.NATURE OF OPERATIONS AND GOING CONCERN 

 

Avricore Health Inc. (the “Company”) was incorporated under the Company Act of British Columbia on May 30, 2000. The Company’s common shares trade on the TSX Venture Exchange (the “Exchange”) under the symbol “AVCR” and are quoted on the OTCIQ Market as “NUVPF”. The Company’s registered office is at 700 – 1199 West Hastings Street, Vancouver, British Columbia, V6E 3T5. 

 

The Company is involved in the business of health data and point-of-care technologies (“POCT”).

 

The consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. The Company has always experienced operating losses and negative operating cash flows. Operations have been funded by the issuance of share capital. These conditions 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 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.

 

 

Year ended

December 31, 2020

Year ended

December 31, 2019

Year ended December 31, 2018

 

$

$

$

Deficit

(28,507,985)

(27,334,019)

(25,228,411)

Working capital

(714,044)

(465,454)

439,228

 

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.

 

2.BASIS OF PRESENTATION  

 

a)Statement of Compliance and basis of presentation 

 

The consolidated financial statements for the year ended December 31, 2020 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”).

 

b)Basis of presentation  

 

The consolidated financial statements of the Company have been prepared on an accrual basis and are based on historical costs, modified where applicable. The significant accounting policies are presented in Note 3 and have been consistently applied in each of the periods presented. The consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency, unless other indicated.


Page 6


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


2.BASIS OF PRESENTATION (continued) 

 

The preparation of consolidated financial statements in accordance with IFRS requires the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements. 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(l). Actual results might differ from these estimates. The Company’s management reviews these estimates and underlying judgments on an ongoing basis, based on experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Revisions to estimates are adjusted for prospectively in the year in which the estimates are revised.

 

c)Basis of consolidation 

 

Consolidated financial statements include the assets, liabilities and results of operations of all entities controlled by the Company. Inter-company balances and transactions, including unrealized income and expenses arising from inter-company transactions, are eliminated in preparing the Company’s the consolidated financial statements.  Where control of an entity is obtained during a financial year, its results are included in the consolidated statements of operations and comprehensive loss from the date on which control commences. Where control of an entity ceases during a financial year, its results are included for that part of the year during which control exists.

 

These consolidated financial statements include the accounts of the Company and its controlled wholly owned subsidiaries, Vanc Marine Pharmaceuticals Inc. and HealthTab Inc.

 

3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  

 

a)Revenue recognition 

 

The Company’s revenues are generated from operating leases of the POC system and sale of testing panels. Revenue comprises the fair value of the consideration received or receivable and it is shown net of tax and discounts. The Company also earned revenue from the sale of over-the-counter pharmaceuticals (“OTC”), however, the Company discontinued this segment during the year ended December 31, 2019 (see Note 17).

 

The Company recognizes revenue to depict the transfer of goods and services to clients in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods and services by applying the following steps:

 

Identify the contract with a client; 

Identify the performance obligations in the contract; 

Determine the transaction price; 

Allocate the transaction price to the performance obligations; and 

Recognize revenue when, or as, the Company satisfies a performance obligation. 

 

Revenue may be earned over time as the performance obligations are satisfied or at a point in time which is when the entity has earned a right to payment, the customer has possession of the asset and the related significant risks and rewards of ownership, and the customer has accepted the asset.

 

The Company's arrangements with clients can include multiple performance obligations. When contracts involve various performance obligations, the Company evaluates whether each performance obligation is distinct and should be accounted for as a separate unit of accounting under IFRS 15, Revenue from Contracts with Customers.


Page 7


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

a)Revenue recognition (continued) 

 

The Company determines the standalone selling price by considering its overall pricing objectives and market conditions. Significant pricing practices taken into consideration include discounting practices, the size and volume of our transactions, our marketing strategy, historical sales and contract prices. The determination of standalone selling prices is made through consultation with and approval by management, taking into consideration our go-to-market strategy. As the Company's go-to-market strategies evolve, the Company may modify its pricing practices in the future, which could result in changes in relative standalone selling prices.

 

The Company generally receives payment from its clients after invoicing within the normal 28-day commercial terms. If a client is specifically identified as a credit risk, recognition of revenue is stopped except to the extent of fees that have already been collected.

 

b)Leases 

 

A contract is, or contains, a lease if the contract conveys a lessee the right to control the use of lessor’s identified asset for a period of time in exchange for consideration.

 

The Company as a lessee

 

A lease liability is recognized at the commencement of the lease term at the present value of the lease payments that are not paid at that date. At the commencement date, a corresponding right-of-use asset is recognized at the amount of the lease liability, adjusted for lease incentives received, retirement costs and initial direct costs. Depreciation is recognized on the right-of-use asset over the lease term. Interest expense is recognized on the lease liabilities using the effective interest rate method and payments are applied against the lease liability.

 

Key areas where management has made judgments, estimates, and assumptions related to the application of IFRS 16 include:

 

-The incremental borrowing rates are based on judgments including economic environment, term, currency, and the underlying risk inherent to the asset. The carrying balance of the right-of-use assets, lease liabilities, and the resulting interest expense and depreciation expense, may differ due to changes in the market conditions and lease term. 

-Lease terms are based on assumptions regarding extension terms that allow for operational flexibility and future market conditions. 

 

The Company as a lessor

 

A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership of an underlying asset. All other leases are classified as finance leases.

 

Leases of the Company’s POC systems to customers are classified are operating leases. Lease payments from operating leases are recognized as income on a straight-line basis. All costs, including depreciation, incurred in earning the operating lease income are recognized as an expense. Initial direct costs incurred in obtaining an operating lease are added to the carrying amount of the underlying asset and recognized as an expense over the lease term on the same basis as the lease income. The depreciation for depreciable underlying assets subject to operating leases is in accordance with depreciation policy for the Company’s equipment.


Page 8


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

c)Foreign currency 

 

These consolidated financial statements are presented in Canadian dollars, which is also the functional currency of the Company and its subsidiaries.

 

Foreign currency transactions are translated into the functional currency of the respective entity, using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the remeasurement of monetary items at year-end exchange rates are recognized in profit or loss.

 

Non-monetary items measured at historical cost are translated using the exchange rates at the date of the transaction and are not retranslated. Non-monetary items measured at fair value are translated using the exchange rates at the date when fair value was determined.

 

d)Cash equivalents 

 

Cash equivalents include short-term guaranteed investment certificates readily convertible into a known amount of cash, which is subject to insignificant change in value.

 

e)Intangible assets 

 

All intangible assets acquired separately by the Company are recorded at cost on the date of acquisition. Intangible assets that have indefinite lives are measured at cost less accumulated impairment losses. Intangible assets that have finite useful lives are measured at cost less accumulated amortization and accumulated impairment losses. Intangible assets comprise of intellectual property, trademarks and web domains and distribution rights, which are amortized on a straight-line basis over 3 years. Amortization rates are reviewed annually to ensure they are aligned with estimates of remaining economic useful lives of the associated intangible assets.

 

f)Share-based payments 

 

The Company operates an incentive share purchase option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share- based payments to non-employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using the Black-Scholes option pricing model, which incorporates all market vesting conditions. The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

 

g)Share capital 

 

Proceeds from the exercise of stock options and warrants are recorded as share capital in the amount for which the option or warrant enabled the holder to purchase a share in the Company. Any previously recorded share-based payment included in the reserves account is transferred to share capital on exercise of options. Share capital issued for non-monetary consideration is valued at the closing market price at the date of issuance. The proceeds from issuance of units are allocated between common shares and warrants based on the residual method. Under this method, the proceeds are allocated first to share capital based on the fair value of the common shares at the time the units are priced and any residual value is allocated to the warrants reserve. Consideration received for the exercise of warrants is recorded in share capital, and any related amount recorded in warrants reserve is transferred to share capital.


Page 9


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

h)Loss per share 

 

Basic loss per share is calculated by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share reflect the potential dilution of securities that could share in earnings of an entity. In a loss year, potentially dilutive common shares are excluded from the loss per share calculation as the effect would be anti-dilutive. Basic and diluted loss per share are the same for the periods presented.

 

i)Income taxes 

 

Income tax expense, consisting of current and deferred tax expense, is recognized in the statements of operations. Current tax expense is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at period-end, adjusted for amendments to tax payable with regard to previous years.

 

Deferred tax assets and liabilities and the related deferred income tax expense or recovery are recognized for deferred tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted or substantively enacted tax rates expected to apply when the asset is realized or the liability settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income (loss) in the period that substantive enactment occurs.

 

A deferred tax asset is recognized to the extent that it is probable that future taxable profits will be available against which the asset can be utilized. To the extent that the Company does not consider it probable that a deferred tax asset will be recovered, the deferred tax asset is reduced. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Company intends to settle its current tax assets and liabilities on a net basis.

 

j)Financial Instruments 

 

Classification

 

The Company classifies its financial instruments in the following categories: at fair value through profit and loss (“FVTPL”), at fair value through other comprehensive income (loss) (“FVTOCI”), or at amortized cost. The Company determines the classification of financial assets at initial recognition. The classification of debt instruments is driven by the Company’s business model for managing the financial assets and their contractual cash flow characteristics. Equity instruments that are held for trading are classified as FVTPL. For other equity instruments, on the day of acquisition the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVTOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVTPL (such as instruments held for trading or derivatives) or the Company has opted to measure them at FVTPL.

 

The Company has classified its cash and cash equivalents as FVTPL and accounts receivable, accounts payable, loans payable and lease liabilities as amortized cost.

 

Measurement

 

Financial assets and liabilities at amortized cost

Financial assets and liabilities at amortized cost are initially recognized at fair value plus or minus transaction costs, respectively, and subsequently carried at amortized cost less any impairment.


Page 10


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

Financial assets and liabilities at FVTPL

Financial assets and liabilities carried at FVTPL are initially recorded at fair value and transaction costs are expensed in profit or loss. Realized and unrealized gains and losses arising from changes in the fair value of the financial assets and liabilities held at FVTPL are included in the profit or loss in the period in which they arise.

 

Financial assets at FVTOCI

Investments in equity instruments at FVTOCI are initially recognized at fair value plus transaction costs. Subsequently they are measured at fair value, with gains and losses arising from changes in fair value recognized in other comprehensive income (loss) as they arise.

 

Impairment of financial assets at amortized cost

An ‘expected credit loss’ impairment model applies which requires a loss allowance to be recognized based on expected credit losses. The estimated present value of future cash flows associated with the asset is determined and an impairment loss is recognized for the difference between this amount and the carrying amount as follows: the carrying amount of the asset is reduced to estimated present value of the future cash flows associated with the asset, discounted at the financial asset’s original effective interest rate, either directly or through the use of an allowance account and the resulting loss is recognized in profit or loss for the period. In a subsequent period, if the amount of the impairment loss related to financial assets measured at amortized cost decreases, the previously recognized impairment loss is reversed through profit or loss to the extent that the carrying amount of the investment at the date the impairment is reversed does not exceed what the amortized cost would have been had the impairment not been recognized.

 

Derecognition

 

Financial assets

The Company derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all of the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in profit or loss.

 

The Company provides information about its financial instruments measured at fair value at one of three levels according to the relative reliability of the inputs used to estimate the fair value:

Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;

Level 2 – inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices); and  

Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs)

 

k)Impairment of equipment and intangible assets 

 

At the end of each reporting period, if there are indicators of impairment, the Company reviews the carrying amounts of its equipment and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. Individual assets are grouped together as a cash generating unit for impairment assessment purposes at the lowest level at which there are identifiable cash flows that are independent from other group assets.

 

If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. The recoverable amount is the higher of fair value less costs to sell and value in use. Where the carrying amount of a cash generating unit exceeds its recoverable amount, the cash generating unit is considered impaired and is written down to its recoverable amount. In assessing the value in use, the estimated future cash flows are adjusted for the risks specific to the cash generating unit and are discounted to their present value with a discount rate that reflects the current market indicators. The recoverable amount of intangible assets with an indefinite useful life, intangible assets not available for use, or goodwill acquired in a business combination are measured annually whether or not there are any indications that impairment exists.

 

Where an impairment loss subsequently reverses, the carrying amount of the cash generating unit is increased to the revised estimate of its recoverable amount, to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the cash generating unit in prior years. A reversal of an impairment loss is recognized as income immediately.


Page 11


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

l)Significant accounting estimates and judgments 

 

Estimates

 

Significant estimates used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

 

Inventory valuation

 

The Company estimates the net realizable values of inventories, taking into account the most reliable evidence available at each reporting date. The future realization of these inventories may be affected by regulatory changes or other market-driven changes that may reduce future selling prices. In determining net realizable value, the Company considers such factors as turnover, historical experience, expiry dates and shelf life of the products. A change to these assumptions could impact the Company’s inventory valuation and gross margin. The Company attempts to sell products with short shelf life with significant rebates. Any unsold products with short shelf life and expired products are written-off.

 

Share-based payments

 

The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.

 

The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield. Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.

 

Judgements

 

Significant judgments used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:

 

Revenue recognition

 

Revenue is recognized when the revenue recognition criteria expressed in the accounting policy stated above for Revenue Recognition have been met. Judgment may be required when allocating revenue or discounts on sales amongst the various elements in a sale involving multiple deliverables.

 

Deferred tax assets

 

Tax interpretations, regulations and legislation in the various jurisdictions in which the Company operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments. If a positive forecast of taxable income indicates the probable use of a deferred tax asset, especially when it can be utilized without a time limit, that deferred tax asset is usually recognized in full.


Page 12


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 

 

l)Significant accounting estimates and judgments (continued) 

 

Going concern

 

The Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the Company has the resources to continue in business for the foreseeable future.  The factors considered by management are disclosed in Note 1.

 

m)Reclassifications 

 

Certain reclassifications have been made to the prior period’s consolidated financial statements to conform to the current period’s presentation on the consolidated statements of financial position, comprehensive loss and changes in equity.

 

n)New accounting standards adopted 

 

In October 2018, the IASB issued amendments to IFRS 3, Business Combinations that narrowed and clarified the definition of a business. The amendments permit a simplified assessment of whether an acquired set of activities and assets is a group of assets rather than a business. The amendments are effective January 1, 2020 with earlier adoption permitted. The amendments apply to business combinations after the date of adoption. At January 1, 2020, the Company adopted this standard and there was no material impact on the Company's consolidated financial statements.

 

In October 2018, the IASB issued amendments to IAS 1, Presentation of Financial Statements and IAS 8, Accounting Policies, Changes in Accounting Estimates and Errors. The amendments make minor changes to the definition of the term "material" and align the definition across all IFRS Standards. Materiality is used in making judgments related to the preparation of consolidated financial statements. The amendments are effective January 1, 2020 with earlier adoption permitted. At January 1, 2020, the Company adopted this standard and there was no material impact on the Company's consolidated financial statements.

 

o)Accounting standards issued but not yet effective 

 

There are no accounting pronouncements with future effective dates that are applicable or are expected to have a material impact on the Company’s consolidated financial statements.

 

4.ACQUISITION 

 

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 to be 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) 


Page 13


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


4.ACQUISITION (continued) 

 

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.

 

5.ACCOUNTS RECEIVABLE  

 

The Company’s accounts receivable consists of the following:

 

December 31, 2020

December 31, 2019

 

$

$

Trade receivables

9,800

12,375

GST receivable

2,128

3,099

 

11,928

15,474

 

6.PREPAID EXPENSES AND DEPOSITS 

 

The balance consists of prepaid expenses to vendors of $103,967 (2019 - $152,704), office security deposit of $nil (2019 - $8,420), prepaid business insurance of $9,477 (2019 - $5,999) and security deposits of $12,000 (2019 - $12,000).

 

7.INVENTORIES 

 

During the year ended December 31, 2020, the Company recorded an inventory write-down of $180,432 related to hand sanitizers purchased during the year.

 

8.RIGHT-OF-USE ASSET 

 

 

Office Lease

 

$

Cost

 

Balance, December 31, 2018

-

Recognized on adoption of IFRS 16

68,253

Additions

-

Balance, December 31, 2019 and 2020

68,253

 

 

Accumulated Amortization

 

Balance, December 31, 2018

-

Amortization

68,253

Balance, December 31, 2019 and 2020

68,253

 

 

Carrying value as at December 31, 2019 and 2020

-

 

Right-of-use asset comprised of the Company’s leased office space. During the year ended December 31, 2019, the Company determined it would terminate the remaining lease, and accordingly fully amortized 100% of the right-of-use asset.

 

During the year ended December 31, 2020, the Company terminated its lease agreement for its office premise. Pursuant to the cancelation, the Company forfeited its deposit of $8,420 and paid the outstanding rent for the months of January to March, 2020.


Page 14


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


9.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

and 2020

-

-

-

-

-

 

 

 

 

 

 

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

and 2020

-

-

-

-

-

 

 

 

 

 

 

Carrying value

 

 

 

 

 

As at December 31, 2019

and 2020

-

-

-

-

-

 

The write-off of equipment of $14,704 during the year ended December 31, 2019 is included in the loss from discontinued operations in the consolidated statements of operations and comprehensive loss.

 

10.INTANGIBLE ASSETS 

 

 

HealthTab

Corozon

Emerald

Total

 

$

$

$

$

Cost

 

 

 

 

Balance, December 31, 2018

1

1

510,878

510,880

Write down

-

-

(510,877)

(510,877)

Balance, December 31, 2019 and 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 2020

-

-

-

-

 

 

 

 

 

Carrying value

 

 

 

 

As at December 31, 2019 and 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 assets exceeded the recoverable amount and accordingly recognized impairment of the intangible assets 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 15


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


11.ACCOUNTS PAYABLE AND ACCRUED LIABILITIES  

 

As at December 31, 2020 and 2019, the Company’s accounts payable and accrued costs consist of the following:

 

 

December 31, 2020

December 31, 2019

 

$

$

Trade accounts payable

126,569

625,460

Accrued liabilities

26,000

27,000

 

152,569

652,460

 

12.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, December 31, 2020

-

 

13.LOANS PAYABLE 

 

During the year ended December 31, 2020, the Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000. The Loan 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 with a fair value of $52,500, which was recorded against the carrying value of the loan. During the year ended December 31, 2020, the Company recorded $78,904 as interest expense and recorded $64,158 as accretion expense on the loan which was been included in finance cost in the consolidated statements of operations and comprehensive loss.

 

During the year ended December 31, 2020, the Company received a Canada Emergency Business Account loan of $40,000 to be repaid on or before December 31, 2025. The loan is interest-free until December 31, 2022. Thereafter, the outstanding loan balance will bear interest at the rate of 5% per annum.

 

14.SHAREHOLDERS’ EQUITY 

 

Authorized share capital

 

Authorized: Unlimited number of common shares without par value.


Page 16


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


14.SHAREHOLDERS’ EQUITY (continued) 

 

Issued share capital

 

During the year ended December 31, 2020:

 

The Company closed a tranche of a non-brokered private placement and issued 6,260,000 units at a price of $0.10 per unit for gross proceeds of $626,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $0.15 per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company paid finder’s fee totaling $22,500 and issued 225,000 finder’s warrants valued at $9,833. The Company’s directors and officers participated in the private placement.

 

The Company issued 5,477,965 common shares in exchange for services received and to settle accounts payables of $136,949.  An aggregate of 1,900,000 shares were issued in settlement of $47,500 in amounts owing to certain directors and officers of the Company. The common shares issued to the related parties are subject to a four month plus one day hold period.

 

The Company issued 105,000 common shares pursuant to the exercise of stock options for gross proceeds of $5,250. $1,422 was reclassified from reserves to share capital on exercise of the options.

 

The Company issued 2,000,000 common shares valued at $100,000 related to the acquisition of HealthTab (see Note 4).

 

The Company issued 3,480,000 common shares valued at $52,200 as bonus shares pursuant to a loan agreement (see Note 13).

 

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 4).

 

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 an additional common share of the Company at a price of $0.15 per share until August 13, 2021. The fair value of common shares was $171,310 based on share price and, the residual value of $171,310 was allocated to the warrants.

 

During the year ended December 31, 2018:

 

The Company issued 2,666,667 common shares valued at $773,733 related to the acquisition of HealthTab (Note 4).

 

The Company issued 909,090 common shares valued at $181,818 related to the acquisition of the Corozon Platform.

 

The Company issued 233,450 common shares to Lampyon valued at $43,915 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018.

 


Page 17


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


14.SHAREHOLDERS’ EQUITY (continued) 

 

Issued share capital (continued):

 

The Company closed a private placement and issued 5,327,335 units at a price of $0.15 per unit for gross proceeds of $799,100. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.33 per share until July 27, 2020. The Company paid finder’s fees of $18,264 in cash and issued 88,800 finder’s warrants valued at $9,332. The finder’s warrants are exercisable to purchase one common share of the Company at $0.33 per share until July 31, 2020.

 

The Company issued 131,000 common shares for exercise of 131,000 stock options for gross proceeds of $28,820. $40,181 was reclassified from reserves to share capital on exercise of options.

 

The Company issued 2,975,500 common shares for exercise of 2,975,500 warrants for gross proceeds of $595,100. $8,210 was reclassified from reserves to share capital on exercise of warrants.

 

The Company granted 3,030,330 warrants valued at $510,878 to Emerald as consideration for a supply and distribution agreement.

 

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 during years ended December 31, 2020, 2019 and 2018 are summarized as follows:

 

 

Year ended

December 31, 2020

Year ended

December 31, 2019

Year ended

December 31, 2018

 

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

Number of Options

Weighted Average Exercise Price

Beginning Balance

5,241,072

$0.13

2,539,000

$0.24

2,420,000

$0.24

Options granted

1,730,000

$0.08

3,095,000

$0.06

665,000

$0.23

Expired/Cancelled

(160,000)

$0.07

(319,000)

$0.22

(415,000)

$0.24

Exercised

(105,000)

$0.05

(73,928)

$0.28

(131,000)

$0.22

Ending Balance

6,706,072

$0.08

5,241,072

$0.13

2,539,000

$0.24

Exercisable

6,706,072

$0.08

5,241,072

$0.13

2,536,500

$0.24


Page 18


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


14.SHAREHOLDERS’ EQUITY (continued) 

 

Stock options (continued)

 

The following table summarizes information about share options outstanding and exercisable as at December 31, 2020:

 

Exercise Price

Expiry date

Options

 

 

Outstanding

Exercisable

$0.10 (1)

July 20, 2022

150,000

150,000

$0.10 (1)

September 27, 2022

150,000

150,000

$0.10 (1)

November 20, 2022

150,000

150,000

$0.10 (2)

December 8, 2022

1,151,072

1,151,072

$0.10 (3)

March 27, 2023

200,000

200,000

$0.10 (4)

April 11, 2023

150,000

150,000

$0.10 (5)

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

610,000

610,000

$0.05

October 1, 2024

1,855,000

1,855,000

$0.08

November 18, 2025

1,020,000

1,020,000

$0.08

December 8, 2025

710,000

710,000

 

 

6,706,072

6,706,072

 

(1) Options repriced from $0.15 to $0.10 during the year ended December 31, 2020

(2) Options repriced from $0.28 to $0.10 during the year ended December 31, 2020

(3) Options repriced from $0.24 to $0.10 during the year ended December 31, 2020

(4) Options repriced from $0.21 to $0.10 during the year ended December 31, 2020

(5) Options repriced from $0.125 to $0.10 during the year ended December 31, 2020

 

The weighted average remaining life of the stock options outstanding at December 31, 2020 is 3.43 years.

 

Share-based compensation

 

Share-based compensation of $130,219 was recognized during the year ended December 31, 2020 (2019 - $86,420; 2018 - $372,137) 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:

 

 

Year ended

December 31, 2020

Year ended

December 31, 2019

Year ended

December 31, 2018

Expected life

2 - 5 years

5 years

5 years

Volatility

141% - 180%

110% - 143%

142% - 157%

Dividend yield

0%

0%

0%

Risk-free interest rate

0.23% - 0.47%

1.58% - 1.86%

2.03% - 2.24%

 

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 19


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


14.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.

 

 

Year ended

December 31, 2020

Year ended

December 31, 2019

Year ended

December 31, 2018

 

Number of Warrants

Weighted Average Exercise Price

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

8,381,326

$0.20

Warrants issued

6,485,000

$0.15

6,852,400

$0.15

8,446,438

$0.33

Expired/Cancelled

(8,446,438)

$0.33

-

-

-

-

Exercised

-

-

-

-

(2,975,500)

$0.20

Outstanding

18,743,226

$0.16

20,704,664

$0.24

13,852,264

$0.28

 

The following table summarizes information about warrants outstanding and exercisable as at December 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

November 19, 2021

3,060,000

$0.15

November 13, 2021

3,425,000

$0.15

August 13, 2021

6,852,400

 

 

18,743,226

 

The weighted average remaining life of the warrants outstanding at December 31, 2020 is 1.03 years.

 

15.MARKETING AND COMMUNICATIONS EXPENSES 

 

 

Year ended December 31,

 

2020

2019

2018

 

$

$

$

Marketing and advertising

2,279

44,693

164,420

Shareholder communications

28,972

202,550

119,167

 

31,251

247,243

283,587


Page 20


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


16.GENERAL AND ADMINISTRATIVE EXPENSES 

 

 

Year ended December 31,

 

2020

2019

2018

 

$

$

$

Bad debt

2,977

-

-

Bank service charges

5,910

5,916

3,969

Filing and registration fees

37,715

72,076

94,029

Foreign exchange

6,350

150

692

Insurance

38,283

33,557

18,147

Investor relations

1,265

1,990

9,974

Office maintenance

17,550

49,713

86,700

Payroll

-

-

68,417

Rent

5,268

15

50,336

Travel

5,259

35,420

45,426

 

120,577

198,837

377,690

 

 

17.DISCONTINUED OPERATIONS 

 

During the year ended December 31, 2019, the Company discontinued operations of its OTC pharmaceuticals products business division business segment. During the year ended December 31, 2020, 2019 and 2018, the loss attributable to the discontinued operations are as follows:

 

 

Year ended December 31,

 

 

2020

2019

2018

 

 

$

$

$

Sales

 

-

129,776

812,666

Marketing, promotional activities

 

-

(27,842)

(317,929)

Net Revenue

 

-

101,934

494,737

 

 

 

 

 

Cost of Sales

 

-

33,481

172,136

Gross profit (loss)

 

-

68,453

322,601

 

 

 

 

 

Expenses

 

 

 

 

Amortization

 

-

6,301

9,266

Product registration and development

 

-

5,458

251,508

General and administrative

 

-

-

40,967

Selling and marketing

 

-

121,405

472,496

 

 

-

133,164

774,237

Other income (expense)

 

 

 

 

Write-down of inventories

 

-

(109,941)

(227,025)

Write-down of equipment

 

-

(14,704)

-

 

 

 

 

 

Net loss from discontinued operations

 

-

(189,356)

(678,661)


Page 21


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


17.DISCONTINUED OPERATIONS (continued) 

 

The net cash flows attributable to the discontinued operations are as follows:

 

 

 

 

 

Year ended December 31,

 

2020

2019

2018

 

$

$

$

Operating Activities

 

 

 

 Net loss from discontinued operations

-

(189,356)

(678,661)

Adjustment for the non-cash items:

 

 

 

 Amortization

-

6,301

9,266

 Write-down of inventories  

-

109,941

227,025

 Write-down of equipment

-

14,704

-

 

 

 

 

Change in working capital items:

 

 

 

 Accounts receivable

-

264,806

170,157

 Prepaid expenses and deposits

-

-

5,438

 Inventories

-

(7,442)

(118,299)

 Accounts payable and accrued liabilities

-

(23,027)

70,917

 

-

175,927

(314,157)

 

 

 

 

Investing Activities

 

 

 

 Purchase of equipment

-

-

(5,000)

 

 

 

 

Increase (Decrease) in Cash

-

175,927

(319,157)

 

 

 

 

 

18.RELATED PARTY TRANSACTIONS 

 

For the years ended December 31, 2020, 2019 and 2018, the Company recorded the following transactions with related parties:

 

a)$150,000 in management fees to the Chief Executive Officer and former Executive Vice President of the Company (2019 - $31,250; 2018 - $nil). 

 

b)$nil in consulting fees to the Chief Executive Officer and former Executive Vice President of the Company (2019 - $45,000; 2018 - $nil). 

 

c)$120,000 in management fees to a former President and Chief Executive Officer of the Company (2019 - $143,750; 2018 - $150,000). 

 

d)$120,000 in professional fees to a company controlled by the Chief Financial Officer of the Company (2019 - $75,000; 2018 - $nil) 

 

e)$120,000 in consulting fees to an officer of the Company’s subsidiary, HealthTab Inc. (2019 - $126,667; 2018 - $nil). 

 

f)$nil in consulting fees to a Company of which a former Chief Financial Officer and former Corporate Secretary of the Company are employees (2019 - $47,270; 2018 - $nil). 

 

g)$nil in professional fees to a Company controlled by a former Chief Financial Officer (2019 - $14,000; 2018 - $37,440). 

 

h)The Company issued an aggregate of 1,900,000 shares in settlement of $47,500 in amounts owing to certain directors and officers of the Company for services received. The shares issued to the related parties are subject to a four month plus one day hold period. There was no gain or loss on settlement. 


Page 22


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


18.    RELATED PARTY TRANSACTIONS

 

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, consist of the following:

 

 

Year ended December 31,

 

2020

2019

2018

 

$

$

$

Consulting fees

120,000

218,936

-

Management fees

270,000

175,000

150,000

Professional fees

120,000

89,000

37,440

Share-based compensation

58,158

41,383

289,008

 

568,159

524,319

476,448

 

As at December 31, 2020 and 2019, the following amounts due to related parties were included in accounts payable and accrued liabilities:

 

 Due to

2020

2019

 

$

$

President and former Chief Executive Officer

-

134,339

Chief Executive Officer

-

               59,304

Company controlled by the CFO

-

               5,513

Officer of HealthTab Inc.

-

122,500

Total

-

             321,656

 

19.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 year ended December 31, 2020.

 

20.SEGMENTED INFORMATION 

 

At December 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 17).

 

21.SUPPLEMENTAL CASH FLOW INFORMATION 

 

During the year ended December 31, 2020, the Company:

 

- Issued in total 2,000,000 common shares valued at $100,000 related to the acquisition of HealthTab (see Notes 4 and 14).

- Issued in total 3,480,000 common shares valued at $52,200 as bonus shares under a loan agreement (see Note 13).

- Issued 5,477,965 common shares in exchange for services received and to settle payables of $136,949.


Page 23


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


21.SUPPLEMENTAL CASH FLOW INFORMATION (continued) 

 

During the year ended December 31, 2019 the Company:

 

-issued in total 1,111,110 common shares valued at $100,000 related to the acquisition of HealthTab (Notes 4 and 14). 

-issued 125,081 common shares to a vendor valued at $11,167. 

 

During the year ended December 31, 2018, the Company:

 

-granted 3,030,303 warrants valued at $51,878 to Emerald for certain intangibles (Note 14); 

-issued in total 2,666,667 common shares valued at $773,333 related to the acquisition of HealthTab (Notes 4 and 14); 

-issued 909,090 common shares valued at $181,818 related to the acquisition of the Corozon Platform (Note 14); 

-issued 233,450 common shares to a vendor valued at $43,915. 

-issued a total of 88,800 finder’s warrants with a fair value of $9,332 (Note 14). 

 

22.INCOME TAXES 

 

The following table reconciles the expected income tax expense (recovery) at the Canadian statutory income tax rates to the amounts recognized in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020, 2019 and 2018 :

 

 

2020

2019

2018

 

 

 

 

Loss for the year

$       (1,173,966)

$       (2,105,608)

$       (4,136,802)

 

 

 

 

Expected income tax (recovery)

$         (317,000)

$         (569,000)

$       (1,117,000)

Change in statutory, foreign tax, foreign exchange rates and other

(3,000)

25,000

(133,000)

Permanent differences

35,000

24,000

103,000

Share issue cost

(5,000)

(5,000)

(5,000)

Adjustment to prior years provision versus statutory tax returns & expiry of non-capital losses

1,000

572,000

(9,000)

Change in unrecognized deductible temporary differences

289,000

(47,000)

1,161,000

Total income tax expense (recovery)

$                        -

$                        -

$                        -

 

The significant components of the Company’s deferred tax assets and liabilities are as follows:

 

 

 

2020

2019

 

 

$

$

 

Deferred tax assets (liabilities)

 

 

 

Share issue costs

8,000

4,000

 

Property and equipment

164,000

164,000

 

Intangible asset

157,000

157,000

 

Non-capital losses

5,301,000

5,016,000

 

Total

5,630,000

5,341,000

 

Unrecognized deferred tax assets

(5,630,000)

(5,341,000)

 

Total income tax expense (recovery)

-

-

 

The Company has approximately $19,633,000 in non-capital losses for Canadian tax purposes which begin expiring in 2026.


Page 24


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


23.FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT 

 

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, loans 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 December 31, 2020 (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.

 

The Company monitors its spending plans, repayment obligations and cash resources, and takes actions with the objective of ensuring that there is sufficient capital in order to meet short-term business requirements. To facilitate its expenditure program, the Company raises funds primarily through public equity financing. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions, however, there can be no guarantees that sufficient funds will be raised.

 

As at December 31, 2020, the Company’s liabilities were comprised of accounts payable and accrued liabilities, and loans payable of $1,154,131 (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.


Page 25


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


23.   FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

 

c)Market risk (continued) 

 

Interest rate risk

 

Interest rate risk is the risk that fair values or future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Company’s policy is to invest cash at floating interest rates and cash reserves are to be maintained in cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders.

 

The Company is not exposed to significant interest rate risk. The Company’s loans payable bear fixed interest rate.

 

d)Fair value of financials instruments  

 

The fair values of financial assets and financial liabilities are determined as follows:

 

Cash and cash equivalents are measured at fair value. For accounts receivable, accounts payable, and loans 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.

 

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.

 

24.   SUBSEQUENT EVENTS

 

a)On January 28, 2021, the Company closed the final tranche of a non-brokered private placement and issued 8,740,000 units at a price of $0.10 per unit for gross proceeds of $874,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $0.15 per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company paid finder’s fee totaling $27,800 and issued 278,000 finder’s warrants. The Company’s directors and officers participated in the private placement.  

 

b)On January 28, 2021, the Company granted 150,000 stock options to a consultant of the Company at an exercise price of $0.19 per common share. The stock options fully vested on the date of grant and are exercisable for a period of 5 years. 


Page 26


Avricore Health Inc.  

Notes to the Consolidated Financial Statements

For the years ended December 31, 2020 and 2019

(Expressed in Canadian Dollars)


24.   SUBSEQUENT EVENTS (continued)

 

c)On February 12, 2021, the Company completed a non-brokered private placement and issued 7,000,000 units at a price of $0.22 per unit for gross proceeds of $1,540,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire an additional common share of the Company at a price of $0.30 per share for a period of 12 months from the date of closing subject to an accelerated expiry condition. The Company paid finder’s fee totaling $56,320 and issued 256,000 finder’s warrants. The Company’s directors and officers participated in the private placement. 

 

d)The Company issued 7,201,160 common shares upon exercise of warrants for gross proceeds of $1,225,112.  

 

e)The Company issued 590,000 common shares upon exercise of stock options for gross proceeds of $42,550.  

 

f)On March 22, 2021, the Company granted 1,800,000 stock options to the directors, officers and consultants of the Company at an exercise price of $0.25 per common share. The stock options are exercisable for a period of 5 years. 200,000 consultant options vest 50% after six months with the balance vesting quarterly thereafter. The remaining options vest on the date of grant. 

 

g)The Company repaid the $1,000,000 secured loan from a third party at the end of the term (see Note 13).  


Page 27



SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this registration report on its behalf.

Dated:  June 23, 2021

AVRICORE HEALTH INC.

 

 

 

By: /s/ Kiki Smith

 

Kiki Smith,

 

Chief Financial Officer



 


Exhibit 12.1

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Hector Bremner, certify that:

 

1.I have reviewed this Report on Form 20-F of Avricore Health Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

 

 

Date: June 23, 2021

 

 

/s/     Hector Bremner                    

Hector Bremner, Chief Executive Officer

 

 


Exhibit 12.2

 

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, Kiki Smith, certify that:

 

1.I have reviewed this Report on Form 20-F of Avricore Health Inc.

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;  

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

 

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

 

(c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

 

(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 

 

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): 

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and 

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. 

 

Date: June 23, 2021

 

 

/s/    Kiki Smith                            

Kiki Smith, Chief Financial Officer

 

 

 

Exhibit 13.1

 

Certification Pursuant to 18 U.S.C. Section 1650,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

I, Hector Bremner, Chief Executive Officer of AVRICORE HEALTH INC. (the “Company”), certify that to the best of my knowledge:

 

1. the Report on Form 20-F of the Company for year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and 

 

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

 

 

/s/     “Hector Bremner                                                   

Hector Bremner

Chief Executive Officer

June 23, 2021

 

Exhibit 13.2

 

Certification Pursuant to 18 U.S.C. Section 1650,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

I, Kiki Smith, Chief Financial Officer of AVRICORE HEALTH INC. (the “Company”), certify that to the best of my knowledge:

 

1. the Report on Form 20-F of the Company for year ended December 31, 2020 as filed with the Securities and Exchange Commission (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and 

 

2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. 

 

 

/s/   Kiki Smith”                  

Kiki Smith

Chief Financial Officer

June 23, 2021

 

 

 

Exhibit 15.1

AUDIT COMMITTEE CHARTER

The Audit Committee (the "Committee") is a committee of the Board of Directors (the "Board") of Avricore Health 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 52-107 Acceptable 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 with External 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 51-110 Audit 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 least three (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 least one (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. 

 

Exhibit 15.2

 

 

Avricore Health Inc.

2003(1) STOCK OPTION INCENTIVE PLAN
EFFECTIVE:   APRIL 16, 2021

1.PURPOSE 

The purpose of this Stock Option Incentive Plan is to provide an incentive to Eligible Persons to acquire an equity interest in the Company, to continue their participation in the affairs of the Company and to increase their efforts on behalf of the Company.

2.DEFINITIONS 

In this Plan, the following words have the following meanings:

(a)“Associate” has the meaning set out in the policies of the TSX Venture Exchange, or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by National Instrument 45-106 - Prospectus and Registration Exemptions

(b)“Board” means the Board of Directors of the Company; 

(c)“Common Shares” means the common shares of the Company; 

(d)“Company” means Avricore Health Inc. and any successor thereto; 

(e)“Consultant” has the meaning set out in the policies of the TSX Venture Exchange , or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by National Instrument 45-106 - Prospectus and Registration Exemptions

(f)“Consultant Company” has the meaning set out in the policies of the TSX Venture Exchange; 

(g)“Director” has the meaning set out in the policies of the TSX Venture Exchange, or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by National Instrument 45-106 - Prospectus and Registration Exemptions

(h)“Discounted Market Price” means the Market Price of the Common Shares, less any discount permitted by an Exchange; 

(i)“Disinterested Shareholder Approval” means the means the approval by a majority of votes at a meeting of the shareholders of the Company cast on the resolution by shareholders of the Company (or, if acceptable under applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable policies of an Exchange) by the written consent of a majority of such shareholders) who are not Insiders of the Company that qualify as Eligible Persons under the Plan and Associates of such Insiders and, for so long as the Common Shares are listed on the TSX Venture Exchange, includes holders of non-voting and subordinate voting shares of the Company; 

(j)“Effective Date” means the day following the date upon the last of the initial approvals set out in Section 13 of this Plan; 

(k)“Eligible Person” means any Director, Employee, or Consultant of the Company or any affiliate of the Company or any Management Company Employee; 



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(l)“Employee” has the meaning set out in the policies of the TSX Venture Exchange, or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by National Instrument 45-106 - Prospectus and Registration Exemptions

(m)“Exchange” means the TSX Venture Exchange and/or any other stock exchange or stock quotation system on which the Common Shares are listed for trading or otherwise quoted; 

(n)“Investor Relations Activities” has the meaning set out in the policies of the TSX Venture Exchange, or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by National Instrument 45-106 - Prospectus and Registration Exemptions

(o)“Insider” has the meaning set out in the policies of the TSX Venture Exchange or, if the Common Shares are listed or quoted on an Exchange other than the TSX Venture Exchange, the meaning prescribed by the Securities Act (British Columbia); 

(p)“Management Company Employee” has the meaning set out in the policies of the TSX Venture Exchange, or if the Common Shares are not listed on the TSX Venture Exchange, the meaning prescribed by the Securities Rules (British Columbia); 

(q)“Market Price” means, as of any date, the Price of the Common Shares, determined as follows: 

(i)if the Common Shares are listed on the TSX Venture Exchange, the Market Price shall be the last closing sales price for such shares as quoted on such Exchange for the market trading day immediately prior to the date of grant of the Option; 

(ii)if the Common Shares are listed on an Exchange other than the TSX Venture Exchange, the market Price shall be the closing sales price of such shares (or the closing bid, if no sales were reported) as quoted on such Exchange for the market trading day immediately prior to the time of determination; and 

(iii)if the Common Shares are not listed on an Exchange, the Market Price shall be determined in good faith by the Board; 

(r)“Option” means the option granted to an Optionee under this Plan and the Option Agreement; 

(s)“Option Agreement” means such option agreement or agreements as is approved from time to time by the Board and as is not inconsistent with the terms of this Plan; 

(t)“Option Date” means the date of grant of an Option to an Optionee; 

(u)“Optionee” means a person to whom an outstanding Option has been granted; 

(v)“Option Price” is the price at which the Optionee is entitled pursuant to the Plan and the Option Agreement to acquire Option Shares; 

(w)“Option Shares” means, subject to the provisions of Article 8 of this Plan, the Common Shares which the Optionee is entitled to acquire pursuant to this Plan and the applicable Option Agreement;  

(x)“Plan” means this 2003 Stock Option Incentive Plan, as amended from time to time; 

(y)“Shareholder Approval” means the approval by a majority of votes at a meeting of the shareholders of the Company cast on the resolution by shareholders of the Company (or, if acceptable under applicable securities regulation or law of any applicable  


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governmental or regulatory body (including the applicable policies of an Exchange) by the written consent of a majority of such shareholders) entitled to attend at and cast a vote on the resolution.

3.Interpretation 

In this Plan:

(a)the division into sections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Plan; 

(b)the terms “this Plan”, “hereof”, “hereunder” and similar expressions refer to this Plan and not to any particular section, paragraph or other portion hereof and include any Plan supplemental hereto; 

(c)unless something in the subject matter or context is inconsistent therewith, references herein to sections and paragraphs are to sections and paragraphs of this Plan; 

(d)words importing the singular number only shall include the plural and vice versa, words importing the masculine gender shall include the feminine and neuter genders and vice versa and words importing persons shall include individuals, partnerships, associations, trusts, unincorporated organizations and corporations; 

(e)unless otherwise specifically provided in this Plan, any reference in this Plan to any law, by-law, rule, regulation, policy, order, act or statute of any government, governmental body, Exchange or other regulatory body shall be construed as a reference to those as amended or re-enacted from time to time or as a reference to any successor to those; and 

This Plan and any Option Agreement related hereto shall be exclusively governed by and interpreted in accordance with the laws from time to time in force in British Columbia and the laws of Canada applicable thereto.

4.ADMINISTRATION 

The Plan shall be administered by the Board, and subject to the rules of the TSX Venture Exchange and/or any other Exchange from time to time and except as provided for herein, the Board shall have full authority to:

(a)determine and designate from time to time those Eligible Persons to whom Options are to be granted and the number of Option Shares to be optioned to each such Eligible Person; 

(b)determine the time or times when, and the manner in which, each Option shall be exercisable and the duration of the exercise period; 

(c)determine from time to time the Option Price, provided such determination is not inconsistent with this Plan; and 

(d)interpret the Plan and to make such rules and regulations and establish such procedures as it deems appropriate for the administration of the Plan, taking into consideration the recommendations of management. 


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5.OPTIONEES 

Optionees must be Eligible Persons who, by the nature of their jobs or their participation in the affairs of the Company, in the opinion of the Board, are in a position to contribute to the success of the Company.

6.EFFECTIVENESS AND TERMINATION OF PLAN 

The Plan shall be effective as of the Effective Date and shall terminate on the earlier of:

(a)the date which is ten years from the Effective Date; and 

(b)such earlier date as the Board may determine. 

Any Option outstanding under the Plan at the time of termination of the Plan shall remain in effect in accordance with the terms and conditions of the Plan and the Option Agreement.

7.THE OPTION SHARES 

The aggregate number of Option Shares reserved for issuance under the Plan and Common Shares reserved for issuance under any other share compensation arrangement granted or made available by the Company from time to time may not exceed, in aggregate, 10% of the Company’s Common Shares issued and outstanding at the time of grant.

 

8.GRANTS, TERMS AND CONDITIONS OF OPTIONS 

Options may be granted by the Board at any time and from time to time prior to the termination of the Plan.  Options granted pursuant to the Plan shall be contained in an Option Agreement and, except as hereinafter provided, shall be subject to the following terms and conditions:

(a)Option Price 

The Option Price shall be determined by the Board, provided that such price shall not be lower than the Discounted Market Price of the Option Shares on the date of grant of the Option.

(b)Duration and Exercise of Options 

Except as otherwise provided elsewhere in this Plan, the Options shall be exercisable for a period to be determined in each instance by the Board, not exceeding ten years from the Option Date.  The Options must be exercised in accordance with this Plan and the Option Agreement.

Except as contemplated in (c) below, no Option may be exercised by an Optionee who was an Eligible Person at the time of grant of such Option unless the Optionee shall have been an Eligible Person continuously since the Option Date.  Absence on leave, with the approval of the Company, shall not be considered an interruption of employment for the purpose of the Plan.  Notwithstanding anything else contained herein, each Eligible Person shall be responsible for the payment of all applicable taxes, including, but not limited to, income taxes payable in connection with the exercise of any Options under the Plan and the Company shall bear no liability in connection with the payment of such taxes. If the Company is required under the Income Tax Act (Canada) or any other applicable law to make source deductions in respect of employee stock option benefits and to remit to the applicable governmental authority an amount on account of tax on the value of the taxable benefit associated with the issuance of Option Shares on exercise of Options, then the Optionee shall:


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(i)pay to the Company, in addition to the exercise price for the Options, sufficient cash as is reasonably determined by the Company to be the amount necessary to permit the required tax remittance; 

(ii)authorize the Company, on behalf of the Optionee, to sell in the market on such terms and at such time or times as the Company determines a portion of the Common Shares being issued upon exercise of the Options to realize cash proceeds to be used to satisfy the required tax remittance; or 

(iii)make other arrangements acceptable to the Company to fund the required tax remittance. 

(c)Termination 

All rights to exercise Options shall terminate upon the earliest of:

(i)the expiration date of the Option; 

(ii)the date on which the Optionee ceases to be an Eligible Person by reason or termination of the Eligible Person as an Employee, Consultant of the Company for cause (which, in the case of a Consultant, includes any breach of an agreement between the Company and the Consultant or the Consultant Company), or termination, for any reason, of a Management Company Employee by a person providing management services to the Company; 

(iii)the date determined by the Board, on or after which the Optionee ceases to be an Eligible Person by reason or termination of the Eligible Person as an Employee or Consultant of the Company other than for cause; or 

(iv)if any Option is exercisable by the heirs or administrators of an Optionee who ceases to be an Eligible Person by reason the Eligible Persons death, the first anniversary of the date of death of the Eligible Person. 

(d)Re-issuance of Options 

Options which are cancelled or expire prior to exercise may be re-issued under the Plan without Shareholder Approval.

(e)Transferability of Option 

Options are non-transferable and non-assignable.

(f)Other Terms and Conditions 

The Option Agreement may contain such other provisions as the Board deems appropriate, provided such provisions are not inconsistent with the Plan and the requirements of an Exchange.

In addition, for as long as the Common Shares of the Company are listed on the TSX Venture Exchange, the Company shall comply with the following requirements:

(i)Options to acquire more than 2% of the issued Common Shares of the Company, calculated on the date of grant, may not be granted to any one Consultant in any twelve (12) month period; 

(ii)Options to acquire more than 2% of the issued Common Shares of the Company, calculated on the date of grant, may not be granted to any or all persons conducting Investor Relations Activities in any twelve (12) month period; 


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(iii)Options issued to Consultants conducting Investor Relations Activities must vest in stages over twelve (12) months with no more than one-quarter (¼) of the options vesting in any three month period; 

(iv)the approval of the Disinterested Shareholders shall be obtained: 

(A)if Common Shares reserved for issuance upon the exercise of Options granted to Insiders pursuant to this Plan and any previously established and outstanding stock option plans or grants of the Company, exceed 10% of the issued Common Shares of the Company at the time of such the grant;  

(B)if Options are granted to any one Optionee to acquire more than 5% of the issued and outstanding Common Shares of the Company at the time of such the grant in any twelve (12) month period; 

(C)if Options are granted to Insiders to acquire more than 10% of the issued and outstanding Common Shares of the Company at the time of such the grant in any twelve (12) month period; 

(D)any decrease of the Option Price of Options granted to Insiders pursuant to this Plan or any previously established and outstanding stock option plans or grants of the Company; and 

(v)for Options granted to Employees, Consultants or Management Company Employees of the Company, the Company will represent that the Optionee is a bona fide Employee, Consultant or Management Company Employee of the Company, as the case may be. 

9.ADJUSTMENT OF AND CHANGES IN THE OPTION SHARES 

(a)If the Option Shares, as presently constituted, are changed into or exchanged for a different number or kind of shares or other securities of the Company or of another Company (whether by reason of merger, consolidation, amalgamation, recapitalization, reclassification, split, reverse split, combination of shares, or otherwise) or if the number of such Option Shares are increased through the payment of a stock dividend, then there shall be substituted for or added to each Option Share subject to or which may become subject to an Option under this Plan, the number and kind of shares or other securities into which each outstanding Option Share is so changed, or for which each such Option Share is exchanged, or to which each such Option Share is entitled, as the case may be.  Outstanding Options under the Option Agreements shall also be appropriately amended as to price and other terms as may be necessary to reflect the foregoing events.  In the event that there is any other change in the number or kind of the outstanding Option Shares or of any shares or other securities into which such Option Shares are changed, or for which they have been exchanged, then, if the Board shall, in its sole discretion, determine that such change equitably requires an adjustment in any Option theretofore granted or which may be granted under the Plan, such adjustment  shall be made in accordance with such determination.  Subject to the requirements of an Exchange, any such amendment shall be effective upon receipt of Board approval of it, and the approval of any of the shareholders of the Company or any Optionee is not required to give effect to such amendment. 

(b)Fractional shares resulting from any adjustment in Options pursuant to this Section 8 will be cancelled.  Notice of any adjustment shall be given by the Company to each holder of an Option which has been so adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan. 


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10.PAYMENT 

Subject as hereinafter provided, the full purchase price for each of the Option Shares shall be paid by cash, bank draft, certified cheque or electronic transfer of immediately available funds in favour of the Company upon exercise thereof.  An Optionee shall have none of the rights of a shareholder in respect of the Option Shares until the Option Shares are issued to such Optionee as fully paid.

11.SECURITIES LAW REQUIREMENTS 

No Option shall be exercisable in whole or in part, nor shall the Company be obligated to issue any Option Shares pursuant to the exercise of any such Option, if such exercise and issuance would, in the opinion of counsel for the Company, constitute a breach of any applicable laws from time to time, or the rules from time to time of the Exchange.  Each Option shall be subject to the further requirement that if at any time the Board determines that the listing or qualification of the Option Shares under any securities legislation or other applicable law, or the consent or approval of any governmental or other regulatory body (including the Exchange), is necessary as a condition of, or in connection with, the issue of the Option Shares hereunder, such Option may not be exercised in whole or in part unless such listing, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Board.

12.AMENDMENT OF THE PLAN OR OPTIONS 

(a)The Board may, subject to the requirements of any applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable policies of an Exchange), amend, suspend or terminate the Plan or any portion thereof or any outstanding Options or Option Agreements related thereto, at any time, including: 

(i)an increase the aggregate number of Shares which may be issued under the Plan; 

(ii)materially modifying the requirements as to the eligibility for participation in the Plan which would have the potential of broadening or increasing Insider participation; 

(iii)the addition of any form of financial assistance or any amendment to a financial assistance provision which is more favourable to participants under the Plan; 

(iv)the addition of a cashless exercise feature, payable in cash or securities, which does not provide for a full deduction of the number of underlying securities from the Plan reserve; or 

(v)materially increasing the benefits accruing to participants under the Plan; 

provided that if required by applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable policies of an Exchange) the Board shall obtain within twelve (12) months either before or after the Board’s adoption of a resolution authorizing such amendment, suspension or termination, Shareholder Approval, and, where required, approval of Disinterested Shareholder Approval

However, notwithstanding the foregoing, the Board may amend the terms of the Plan to comply with the requirements of any applicable regulatory authority without obtaining Shareholder Approval, including:

(vi)amendments of a housekeeping nature to the Plan; 

(vii)a change to the vesting provisions of a security or the Plan; 


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(viii)a change to the termination provisions of a security or the Plan which does not entail an extension beyond the original expiry date; 

(ix)the addition of a cashless exercise feature, payable in cash or securities, which provides for a full deduction of the number of underlying securities from the Plan reserve. 

(b)If required by any Exchange on which Common Shares or any Option Shares are at any time to be listed or quoted, to the extent that there are any Options which are outstanding and unexercised at the time of such application for such listing or quotation, the Option Price, the aggregate number of Option Shares, the exercise period, and any other relevant terms of such Options and the Option Agreements related thereto, shall be amended in accordance with the requirements of the applicable rules and policies of any Exchange on which such Common Shares or Option Shares are listed and quoted and any Exchange for which listing or quotation of such Common Shares or Option Shares has been applied for).  Subject to the requirements of an Exchange, any such amendment shall be effective upon receipt of Board approval of it, and the approval of any shareholders of the Company or Optionee is not required to give effect to such amendment. 

(c)The Board shall have the power, in the event of: 

(i)any disposition of substantially all of the assets of the Company, dissolution or any merger, amalgamation or consolidation of the Company, with or into any other Company, or the merger, amalgamation or consolidation of any other Company with or into the Company; or 

(ii)any acquisition pursuant to a public tender offer of a majority of the then issued and outstanding Common Shares; 

but subject to applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable rule and policies of an Exchange), to amend any outstanding Options to permit the exercise of all such Options prior to the effectiveness of any such transaction, and to terminate such Options as of such effectiveness in the case of transactions referred to in subsection (i) above, and as of the effectiveness of such tender offer or such later date as the Board may determine in the case of any transaction described in subsection (ii) above.  If the Board exercises such power, all Options then outstanding and subject to such requirements shall be deemed to have been amended to permit the exercise thereof in whole or in part by the Optionee at any time or from time to time as determined by the Board prior to the effectiveness of such transaction, and such Options shall also be deemed to have terminated as provided above.

13.APPROVAL & RATIFICATION 

If required by applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable policies of an Exchange), this Plan is initially subject to:

(a)the approval of the Board; 

(b)the approval or acceptance of any Exchange; 

(c)Shareholder Approval; and 

(d)if applicable, Disinterested Shareholder Approval. 


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Thereafter, if required by applicable securities regulation or law of any applicable governmental or regulatory body (including the applicable policies of an Exchange), this Plan shall be subject to the annual approval or acceptance of any Exchange and Shareholder Approval obtained any at each annual meeting of the shareholders of the Company.  Any Options granted prior to such approvals are conditional upon such approvals being given, and no such Options may be exercised unless and until such approvals are given.

  

(1)Shareholder approval received at the meeting held June 20, 2003; TSX Venture Exchange approval received November 14, 2003. 

Ratified and Adopted by the Shareholders of the Company at the Annual General & Special Meeting of December 13, 2004.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 13, 2005.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 15, 2006.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 14, 2007.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 12, 2008.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 11, 2009.

Ratified and Adopted by the Shareholders of the Company at the Annual General Meeting of December 10, 2010.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special Meeting of January 27, 2012 (TSX-V approved for 2011 and 2012).

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special Meeting of April 26, 2013.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of January 31, 2014, approved by the TSX Venture Exchange on March 19, 2014.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of April 30, 2015, approved by the TSX Venture Exchange on May 15, 2015.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of June 22, 2016, approved by the TSX Venture Exchange on July 6, 2016.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of September 15, 2017.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of October 12, 2018.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of April 2, 2020.

Ratified and Adopted by the Shareholders of the Company at the Annual General and Special meeting of April 16, 2021.


9

Exhibit 15.3

 

Picture 1 

 

June 23, 2021

 

 

Securities and Exchange Commission

100 F Street, N.E.

Washington, D.C.

20549-7561 USA

 

Dear Sirs/Madams:

 

We have read Item 16F of Avricore Health Inc.’s December 31, 2020 Form 20-F dated June 23, 2021, and have the following comments:

 

1.We agree with the statements made concerning our Firm. 

 

2.We have no basis on which to agree or disagree with other statements of the registrant contained therein. 

 

Yours very truly

 

Picture 2 

 

DAVIDSON & COMPANY LLP

Chartered Professional Accountants



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