UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15b-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the month of: November 2018
Commission File Number: 000-51848
(Exact name of registrant as specified in its charter)
N/A
(Translation of Registrant’s name into English)
Suite 810 - 789 West Pender Street Vancouver, BC V6C 1H2 CANADA
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F. Form 20-F xo Form 40-F o
Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): Yes o No x
Indicate by check mark if the Registrant is submitting this Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): Yes o No x
Indicate by check mark whether the registrant by furnishing the information contained in this Form 6-K is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934: Yes o No x
Exhibits
The following exhibits are included in this Form 6-K:
Exhibit 99.1 News Release
Exhibit 99.2 Material Change Report
Exhibit 99.3 News Release
Exhibit 99.4 Certificate of Name Change
Exhibit 99.5 Financial Statements
Exhibit 99.6 Management’s Discussion and Analysis
Exhibit 99.7 CEO Certification
Exhibit 99.8 CFO Certification
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: June 17, 2019 |
AVRICORE HEALTH INC. |
|
|
|
By: /s/ Kevin Strong |
|
Kevin Strong |
|
Chief Financial Officer |
Contact:
Bob Rai, Director and CEO
604-247-2639
info@vancpharm.com
www.vancpharm.com
VANC Pharmaceuticals Inc. Provides Corporate Update
VANCOUVER, BC, November 1, 2018 – VANC Pharmaceuticals Inc. ( “VANC” ) is excited to announce that further to its news release announced October 25, 2018, the Company has received TSX Venture Exchange approval to change its name (the “ Name Change ”) to Avricore Health Inc.
“We are pleased to have received TSX approval for our new name, Avricore Health. This is an important, albeit symbolic step in our transformation of the company, its core services and product portfolio going forward,” said Mr. Bob Rai, CEO of VANC.
The name Avricore Health is derived from the Greek word “avrio” meaning “tomorrow” and the English word “core”, signaling the company’s commitment to becoming a health innovator and applying the technologies of tomorrow to the core health issues of today, empowering pharmacists and pharmaceutical companies in Canada and in other countries with innovative products, services and information to optimize patient health.
Effective at the open of the market on Monday, November 5th, 2018, VANC will be trading under its new name Avricore Health Inc. The new trading symbol will be AVCR. The CUSIP AND ISIN numbers have changed to 054521109 and CA0545211090 respectively.
About VANC Pharmaceuticals Inc.
www.vancpharm.com
For more information, please contact Bob Rai at 604-247-2639 or by email at info@vancpharm.com.
Cautionary Note Regarding Forward-looking Statements: Information in this press release that involves VANC’s expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. VANC generally uses words such as “outlook,” “will,” “could,” “would,” “might,” “remains,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” “anticipates,” “estimate,” “future,” “plan,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming,” and similar expressions to help identify forward-looking statements. The forward-looking statements in this release are based upon information available to VANC as of the date of this release, and VANC assumes no obligation to update any such forward-looking statements. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of VANC and are subject to risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Form 51-102F3
Material Change Report
Item 1 Name and Address of Company
VANC Pharmaceuticals Inc. (the “ Company ”)
Suite 810– 789 West Pender Street
Vancouver, BC V6C 1H2
Item 2 Date of Material Change
November 1, 2018
Item 3 News Release
The news release was disseminated on November 1, 2018 by way of the facilities of GlobeNewswire. Copies were also filed on SEDAR with the British Columbia Securities Commission and the Alberta Securities Commission.
Item 4 Summary of Material Change
The Company is pleased to announce that it has received TSX Venture Exchange approval to change its name to Avricore Health Inc.
Item5 Full Description of Material Change
5.1 Full Description of Material Change
VANC Pharmaceuticals Inc. ( “VANC” ) is excited to announce that further to its news release announced October 25, 2018, the Company has received TSX Venture Exchange approval to change its name (the “ Name Change ”) to Avricore Health Inc.
Effective at the open of the market on Monday, November 5th, 2018, VANC will be trading under its new name Avricore Health Inc. The new trading symbol will be AVCR. The CUSIP AND ISIN numbers have changed to 054521109 and CA0545211090 respectively .
5.2 Disclosure for Restructuring Transactions
Not applicable.
Item 6 Reliance on subsection 7.1(2) or (3) of National Instrument 51-102
Not applicable.
Item 7 Omitted Information
Not applicable.
Item 8 Executive Officer
The following senior officer of the Company is knowledgeable about the material change and this Material Change Report and may be contacted:
Bob Rai, Chief Executive Officer and Director
Business Telephone: 604-247-2639
Facsimile: 604-247-2693
Item 9 Date of Report
November 2, 2018
Contact:
Bob Rai, Director and CEO
604-247-2639 info@avricorehealth.com www.avricorehealth.com
Vancouver, November 27, 2018
Avricore Health Signs Letter of Intent to Partner with FoodRocket to Enhance the HealthTab Platform
VANCOUVER, BC, November 27, 2018 – Avricore Health Inc. (TSXV: AVCR) (“ Avricore Health ”) is pleased to announce that it has signed a letter of intent to review opportunities to collaborate with FoodRocket to integrate FoodRocket’s precision health offerings and genomics with the HealthTab platform across Canada.
Avricore Health is actively pursuing the expansion of its offering of point of care testing solutions to community pharmacists. An important component of this is to expand the features that the HealthTab platform offers to pharmacists and patients.
Up to now, pharmacists have generally played a peripheral role in helping patients manage their nutritional and dietary objectives, because a comprehensive system based on scientific principles specifically tailored to an individual patient was unavailable. Dietary objectives were often based on broad generalizations predicated on a “one size fits all” approach. Recent advances in understanding the genetic basis of nutrition, individual responses to nutrients and the development of simple tests to measure these have created the opportunity to individually tailor nutrition and diet to a patient based on their unique genetic and metabolic makeup. At the same time, this has created the opportunity for pharmacists to play a key role in helping patients achieve their nutritional and dietary objectives based
on the pharmacists understanding of the underlying science and human health.
FoodRocket has developed a comprehensive Nutrigenomics based “DNA to Diet” system that allows customers to uniquely tailor their nutrition and diet to their genetic makeup. The FoodRocket platform and personalized Health & Wellness software provides patients with a detailed report which makes nutritional and dietary recommendations, including custom recipes based on their genetic makeup, current health status and dietary objectives. The platform then allows the customer to fulfill these recommendations and recipes through a seamlessly integrated system connected to community pharmacies, local grocers, meal kit services, restaurants and workplace cafeterias.
The HealthTab / FoodRocket integrated wellness product can offer pharmacists the opportunity to implement a first of its kind health management program in Canada. The combination can allow them to benchmark and track key health metrics while implementing a comprehensive nutritional and dietary patient management program founded on core scientific principles.
Pharmacists benefit by offering their customers a nutritional and dietary program that can only be implemented at the pharmacy in conjunction with the HealthTab system. Patients benefit by enrolling in a precision diet and nutrition program that they can simply and seamlessly fulfill with “real” food from food providers through the FoodRocket Health and Wellness Platform.
Avricore Health Inc. | 789 West Pender Street, Suite 810, Vancouver B.C. V6C 1H2 |
www.AvricoreHealth.com |
One of the unique features of the HealthTab screening platform is that it can serve as the foundation of pharmacist led health initiatives by allowing the pharmacist to create a baseline patient profile of core health metrics and then track changes in the metrics over time as the health initiative is implemented. These pharmacist managed health initiatives are an emerging and potentially lucrative opportunity that span a wide spectrum such as diabetes, cardiac, metabolic and nutritional and diet management and that Avricore Health will evaluate.
The proposed transaction remains subject to customary conditions, including the negotiation and execution of a definitive agreement between Avricore Health and FoodRocket and the completion of due diligence. There is no guarantee that a definitive agreement will be executed on the terms contemplated, or at all.
About Avricore Health Inc.
Avricore Health Inc. is committed to becoming a health innovator and applying technologies at the forefront of science to core health issues at the community pharmacy level. Their goal is to empower consumers, patients and pharmacists with innovative 21st century products, services and information to monitor and optimize health.
www.avricorehealth.com
About FoodRocket Inc.
FoodRocket provides individuals with a platform to achieve optimal health through measurable, DNA enabled personalized & actionable food experiences. Their bespoke, shoppable, Nutrigenomics Platform automates the gathering and analyzing of Genomic Data with Real-time Food Consumption Data and Electronic Medical Records in order to optimally treat disease and reduce health care spending.
www.foodrocket.com
Cautionary Note Regarding Forward-Looking Statements: Information in this press release that involves Avricore Health’s expectations, plans, intentions or strategies regarding the future are forward-looking statements that are not facts and involve a number of risks and uncertainties. Avricore Health generally uses words such as “outlook,” “will,” “could,” “would,” “might,” “remains,” “to be,” “plans,” “believes,” “may,” “expects,” “intends,” “anticipates,” “estimate,” “future,” “plan,” “positioned,” “potential,” “project,” “remain,” “scheduled,” “set to,” “subject to,” “upcoming,” and similar expressions to help identify forward-looking statements. In this press release, forward-looking statements include statements regarding: the integration of FoodRocket’s genomics and precision health offerings with the HealthTab platform; the unique features that the HealthTab platform offers to pharmacists and patients; the emergence of pharmacist managed health initiatives and the potentially lucrative opportunities in connection therewith; the opportunity for pharmacists to play a key role in helping patients achieve nutritional and dietary objectives; and the anticipated benefits of the HealthTab/FoodRocket combination to pharmacists and patients. Forward-looking statements reflect the then-current expectations, beliefs, assumptions, estimates and forecasts of Avricore Health’s management. The forward-looking statements in this press release are based upon information available to Avricore Health as of the date of this press release. Forward-looking statements believed to be true when made may ultimately prove to be incorrect. These statements are not guarantees of the future performance of Avricore Health and are subject to a number of risks, uncertainties and other factors, some of which are beyond its control and may cause actual results to differ materially from current expectations, including without limitation: failure to negotiate and enter into a definitive agreement with FoodRocket; failure to meet regulatory requirements; changes in the market; potential downturns in economic conditions; and other risk factors described in Avricore Health’s public filings available on SEDAR at www.sedar.com. Accordingly, readers should exercise caution in relying upon forward-looking statements and Avricore Health undertakes no obligation to publicly revise them to reflect subsequent events or circumstances, except as required by applicable law.
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX
Avricore Health Inc. | 789 West Pender Street, Suite 810, Vancouver B.C. V6C 1H2 |
www.AvricoreHealth.com |
Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Avricore Health Inc. | 789 West Pender Street, Suite 810, Vancouver B.C. V6C 1H2 |
www.AvricoreHealth.com |
Avricore Health Inc.
(former VANC Pharmaceuticals Inc.)
Unaudited condensed interim
consolidated financial statements
For the three and nine months ended September 30, 2018
Notice to Reader
Management has prepared the unaudited condensed interim consolidated financial statements for Avricore Health Inc. (former VANC Pharmaceuticals Inc.) (the Company) in accordance with National Instrument 51-102 released by the Canadian Securities Administration. The Company discloses that its auditors have not reviewed the unaudited consolidated financial statements for the period ended September 30, 2018.
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Condensed Interim Consolidated Statements of Financial Position
(Unaudited)
(Expressed In Canadian Dollars)
|
Note |
September 30, 2018 |
December 31, 2017 |
|
|
$ |
$ |
ASSETS |
|
|
|
|
|
|
|
Current Assets |
|
|
|
Cash and cash equivalents |
|
300,614 |
559,733 |
Accounts receivable |
5 |
222,786 |
450,437 |
Prepaid expenses |
6 |
553,983 |
452,953 |
Inventories |
7 |
185,855 |
211,225 |
|
|
1,263,238 |
1,674,348 |
|
|
|
|
Equipment |
8 |
34,784 |
89,721 |
Intangible assets |
9 |
1,516,815 |
1,136,117 |
Total Assets |
|
2,814,837 |
2,900,186 |
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
Accounts payable and accrued liabilities |
10 |
204,778 |
302,089 |
Asset acquisition liability |
4 |
- |
100,000 |
|
|
204,778 |
402,089 |
SHAREHOLDERS’ EQUITY |
|
|
|
Share capital |
11 |
20,284,820 |
18,340,491 |
Shares to be issued |
4 |
462,933 |
973,333 |
Reserves |
11 |
5,121,483 |
4,275,882 |
Deficit |
|
(23,259,177) |
(21,091,609) |
|
|
2,610,059 |
2,498,097 |
Total Liabilities and Shareholders’ Equity |
|
2,814,837 |
2,900,186 |
|
|
|
|
Commitments (Note 17)
Segmented information (Note 19)
Approved and authorized on behalf of the Board of Directors on November 29, 2018.
“Sukhwinder Bob Rai” “David Hall”
Sukhwinder Bob Rai, Director David Hall, Chairman
The accompanying notes are an integral part of these financial statements
Page 2
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Condensed Interim Consolidated Statements of Operations and Comprehensive Loss
For the three and nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
|
Three months ended September 30 |
Nine months ended September 30, |
||
|
Note |
2018 |
2017 |
2018 |
2017 |
|
|
|
|
|
|
|
|
$ |
$ |
$ |
$ |
Revenue |
|
|
|
|
|
Sales |
|
30,737 |
523,088 |
500,612 |
1,355,774 |
Marketing, promotional incentives |
|
(33,694) |
(398,646) |
(188,688) |
(930,597) |
Net sales |
|
(2,957) |
124,442 |
311,924 |
425,177 |
|
|
|
|
|
|
Cost of Sales |
|
94,694 |
46,108 |
199,535 |
229,634 |
|
|
|
|
|
|
Gross Profit |
|
(97,651) |
78,334 |
112,389 |
195,543 |
|
|
|
|
|
|
Expenses |
|
|
|
|
|
Product registration and development |
12 |
70,398 |
71,628 |
218,230 |
170,499 |
Selling and marketing |
13 |
191,874 |
176,378 |
544,777 |
523,482 |
Amortization |
|
184,705 |
7,755 |
440,117 |
23,263 |
General and administrative |
14 |
206,767 |
152,767 |
614,663 |
398,381 |
Professional fees |
|
56,384 |
169,945 |
171,060 |
224,919 |
Share-based compensation |
11 |
9,300 |
51,460 |
333,601 |
177,493 |
|
|
719,428 |
629,933 |
2,322,448 |
1,518,037 |
Other income (expense) |
|
|
|
|
|
Finance costs |
|
- |
- |
(342) |
- |
Other income |
|
17,750 |
7,971 |
23,626 |
27,539 |
Gain on debt settlement |
|
178,285 |
- |
178,285 |
- |
Write-down of inventories |
7 |
(61,755) |
(56,359) |
(159,078) |
(447,717) |
|
|
|
|
|
|
Net loss and comprehensive loss for the period |
|
(682,799) |
(599,987) |
(2,167,568) |
(1,742,672) |
|
|
|
|
|
|
Basic and Diluted Loss Per Share |
|
(0.02) |
(0.03) |
(0.07) |
(0.10) |
Weighted Average Number of Common Shares Outstanding |
|
32,072,877 |
20,231,922 |
32,072,877 |
16,828,600 |
|
|
|
|
|
|
Segmented information (Note 19)
The accompanying notes are an integral part of these financial statements
Page 3
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Condensed Interim Consolidated Statements of Changes in Equity
For the nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
Number of Shares |
Share Capital |
Shares to be Issued |
Warrant Reserve |
Option Reserve |
Deficit |
Total |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
|
|
|
|
|
|
|
|
Balance, December 31, 2016 |
15,001,306 |
16,320,006 |
- |
209,774 |
3,743,105 |
(18,354,892) |
1,917,993 |
Private placements |
5,735,326 |
860,299 |
- |
- |
- |
- |
860,299 |
Share issuance cost |
- |
(15,410) |
- |
8,210 |
- |
- |
(7,200) |
Share-based compensation |
- |
- |
- |
- |
177,493 |
- |
177,493 |
Net loss |
- |
- |
- |
- |
- |
(1,742,672) |
(1,742,672) |
Balance, September 30, 2017 |
20,736,632 |
17,164,895 |
- |
217,984 |
3,920,598 |
(20,097,564) |
1,205,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
5,327,335 |
771,504 |
- |
9,332 |
- |
- |
780,836 |
Exercise of warrants |
2,975,500 |
603,310 |
- |
(8,210) |
- |
- |
595,100 |
Shares issued for services |
233,450 |
43,915 |
- |
- |
- |
- |
43,915 |
Acquisition of HealthTab Inc. |
1,760,000 |
325,600 |
(510,400) |
- |
- |
- |
(184,800) |
Acquisition of Corozon Platform |
909,090 |
200,000 |
- |
- |
- |
- |
200,000 |
Acquisition of distribution rights |
- |
- |
- |
510,878 |
- |
- |
510,878 |
Share-based compensation |
- |
- |
- |
- |
333,601 |
- |
333,601 |
Net loss |
- |
- |
- |
- |
- |
(2,167,568) |
(2,167,568) |
Balance, September 30, 2018 |
39,065,998 |
20,284,820 |
462,933 |
733,388 |
4,388,095 |
(23,259,177) |
2,610,059 |
The accompanying notes are an integral part of these financial statements
Page 4
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Condensed Interim Consolidated Statements of Cash Flows
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
Nine months ended September 30, |
|
|
2018 |
2017 |
|
$ |
$ |
Operating Activities |
|
|
Net loss |
(2,167,568) |
(1,742,672) |
Adjustment for the non-cash items: |
|
|
Amortization |
440,117 |
23,263 |
Share-based payments |
333,601 |
177,493 |
Write-down of inventories |
159,078 |
391,358 |
Finance cost |
- |
447,717 |
Gain on debt settlement |
(178,286) |
- |
Services paid in shares |
37,401 |
- |
|
|
|
Change in working capital items: |
|
|
Accounts receivable |
227,651 |
226,134 |
Prepaid expenses and deposits |
(101,030) |
(287,421) |
Inventories |
(133,708) |
95,020 |
Accounts payable and accrued liabilities |
(76,478) |
(144,089) |
Net cash used in operating activities |
(1,459,222) |
(1,204,555) |
|
|
|
Investing Activities |
|
|
Intangible assets |
(120,833) |
- |
Purchase of equipment |
(5,000) |
- |
Net cash used in investing activities |
(125,833) |
- |
|
|
|
Financing Activities |
|
|
Proceeds from issuance of shares, net |
730,836 |
853,099 |
Proceeds from exercise of options |
- |
- |
Proceeds from exercise of warrants |
595,100 |
- |
Net cash provided by financing activities |
1,325,936 |
853,099 |
|
|
|
Increase (Decrease) in Cash |
(259,119) |
(351,456) |
Cash and Cash Equivalents, Beginning of Period |
559,733 |
427,482 |
Cash and Cash Equivalents (Bank Overdraft), End of Period |
300,614 |
76,026 |
|
|
|
Cash and Cash Equivalents (Bank Overdraft) Consist of: |
|
|
Cash |
283,888 |
66,026 |
Guaranteed Investment Certificates |
16,726 |
10,000 |
Cash and cash equivalents (Bank overdraft) |
300,614 |
76,026 |
|
|
|
|
|
|
Supplemental cash flow information (Note 20)
The accompanying notes are an integral part of these financial statements
Page 5
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
1. NATURE OF OPERATIONS AND GOING CONCERN
Avricore Health Inc. (former VANC Pharmaceuticals 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 symbol “AVCR” and are quoted on the OTCIQ Market as “NUVPF”. The Company’s registered office is at 810 – 789 West Pender Street, Vancouver, British Columbia, V6C 1H2.
The Company’s operations consist of the marketing and distribution of generic and over-the-counter (“OTC”) pharmaceuticals and point of care technology and point of care tests.
The interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern, which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. The Company has always experienced operating losses and negative operating cash flows. Operations have been funded by the issuance of share capital. These conditions may cast substantial doubt on the Company’s ability to continue as a going concern.
The continuation of the Company as a going concern is dependent upon its ability to generate revenue from its operations, or raise additional financing to cover ongoing cash requirements.
The interim consolidated financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.
|
Nine months ended September 30, 2018 |
Year ended December 31, 2017 |
|
$ |
$ |
Deficit |
(23,259,177) |
(21,091,609) |
Working capital |
1,058,460 |
1,272,259 |
|
|
|
Economic dependence
The Company currently has licensing arrangements with three manufacturers to purchase, distribute and commercialize their drug molecules in Canada. The Company derives the majority of its gross sales from four distributors for the nine months ended September 30, 2018. The ability of the Company to sustain operations is partially dependent on the continued operation of these distributors. The launch of new OTC products diversifies the Company’s portfolio and reduces the risk of the economic dependence.
2. BASIS OF PRESENTATION
a) Statement of Compliance and basis of presentation
The interim consolidated financial statements for the nine months ended September 30, 2018 have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), IAS 34 Interim Financial Reporting. The interim consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company’s annual consolidated financial statements as at and for the year ended December 31, 2017. The accounting policies followed in these interim financial statements are consistent with those applied in the Company’s most recent annual financial statements for the year ended December 31, 2017.
Page 6
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
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 period presented.
The consolidated financial statements are presented in Canadian dollars, which is also the Company’s functional currency, unless other indicated.
The preparation of consolidated financial statements in accordance with IFRS requires the Company’s management to make estimates, judgments and assumptions that affect amounts reported in the consolidated financial statements and accompanying notes to the consolidated financial statements. The areas involving a higher degree of judgment and complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 3(a). 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) Consistency of presentation
The Company retains the presentation and classification of items in the financial statements from the previous period; however, some items on the statement of operations and comprehensive loss were reclassified to improve the presentation of financial statements.
These consolidated financial statements include the accounts of the Company and its controlled wholly owned subsidiary, Vanc Marine Pharmaceuticals Inc. and HealthTab Inc. During the reporting period, Vanc Marine Pharmaceuticals Inc. was dormant with neither transactions nor balances.
d) Changes in accounting standards
IFRS 9 – Financial Instruments
The Company adopted IFRS 9, which replaced IAS 39 – Financial Instruments: Recognition and Measurement, in its consolidated financial statements beginning January 1, 2018.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities, however it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.
Under IFRS 9 there are three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit and lost (“FVTPL”). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
IFRS replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ model. The new impairment model applies to financial assets measure at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39.
The adoption of IFRS 9 did not have a material impact on the Company’s consolidated financial statements.
Page 7
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
IFRS 15, Revenue from Contracts with Customers
On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the goods or services. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. IFRS 15 is effective for reporting periods beginning on or after January 1, 2018 with early application permitted. The adoption of IFRS 15 did not have a material impact on the Company’s consolidated financial statements.
e) Accounting standards issued, but not yet in effective
The following is an overview of accounting standard changes that the Company will be required to adopt in future years.
IFRS 16 Leases
On January 13, 2016, the International Accounting Standards Board published a new standard, IFRS 16, Leases, eliminating the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Under the new standard, a lease becomes an on-balance sheet liability that attracts interest, together with a new right-of-use asset. In addition, lessees will recognize a front-loaded pattern of expense for most leases, even when cash rentals are constant. IFRS 16 is effective for reporting periods beginning on or after January 1, 2019. The Company is in the process of assessing the impact of this pronouncement. The extent of the impact has not yet been determined.
Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies applied by the Company in these condensed interim consolidated financial statements are the same as those applied by the Company as at and for the year ended December 31, 2017.
a) Significant accounting estimates and judgments
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.
Page 8
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
Revenue recognition
Revenues are recognized when the risks and rewards of ownership have passed to the customer based on the terms of the sale, collection of the relevant receivable is probable, evidence of an arrangement exists and the sales price is fixed or determinable. Risks and rewards of ownership pass to the customer upon successful completion of shipment of pharmaceuticals. Provisions for sales discounts, incentives, and rebates and returns are made based upon historical experiences.
Useful lives of depreciable assets
The Company reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utilization of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utilization of certain equipment.
Intellectual property
The recoverability of the carrying value of the intellectual property is dependent on successful development and commercial stage to the point where revenue is possible. The carrying value of these assets is reviewed by management when events or circumstances indicate that its carrying value may not be recovered. If impairment is determined to exist, an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount.
Share-based payments
The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.
The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield. Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.
Significant judgments
Significant judgments used in applying accounting policies that have the most significant effect on the amounts recognized in the financial statements are as follows:
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.
Page 9
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
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 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) (Notes 11 and 19);
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;
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; 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
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.
The shares to be issued have been valued based on the Company’s share price on the acquisition. Due to the uncertainty associated with future revenue derived from HealthTab, the Company has estimated the 2019 and 2020 share issuances to be $100,000 each.
The aggregate fair values of assets acquired and liabilities assumed were as follows on the acquisition date, December 28, 2017:
|
|
$ |
Purchase consideration: |
|
|
Cash |
|
100,000 |
Asset acquisition liability |
|
100,000 |
Shares to be issued |
|
973,333 |
Acquisition costs |
|
28,806 |
|
|
1,202,139 |
|
|
|
Net assets acquired: |
|
|
Cash |
|
38 |
Equipment |
|
64,608 |
Intangible assets |
|
1,140,283 |
Accounts payable and accrued liabilities |
|
(2,790) |
Total net assets acquired |
|
1,202,139 |
Page 10
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
5. ACCOUNTS RECEIVABLE
The Company’s accounts receivable consists of the following:
|
September 30, 2018 |
December 31, 2017 |
|
$ |
$ |
Trade receivables |
154,905 |
425,284 |
GST receivable |
67,881 |
24,995 |
Employee advances |
- |
158 |
|
222,786 |
450,437 |
6. PREPAID EXPENSES AND DEPOSITS
The closing balance consists of the deposits for inventory purchases and prepaid expense to vendors of $514,078 (December 31, 2017 – $437,137), security deposit for office of $8,420 (December 31, 2017 - $8,420), prepaid business insurance of $19,485 (December 31, 2017 - $7,396) and security deposits of $12,000 (December 31, 2017 - $Nil).
7. INVENTORIES
At September 30, 2018 and December 31, 2017, the Company’s inventory consists of the following:
|
September 30, 2018 |
December 31, 2017 |
|
$ |
$ |
Work in process |
52,275 |
39,845 |
Finished goods |
133,581 |
171,380 |
|
185,856 |
211,225 |
Inventories expensed to cost of sales during the nine months ended September 30, 2018 are $116,861 (2017 - $198,588). During the nine months ended September 30, 2018, the Company recorded a write-down of inventory of $159,078 (2017 - $447,717).
8. EQUIPMENT
|
Office Furniture and Equipment |
Computer equipment and Systems |
Laboratory Equipment |
Leasehold Improvements |
Total |
Cost |
$ |
$ |
$ |
$ |
$ |
Balance, December 31, 2017 |
7,491 |
66,870 |
38,896 |
24,182 |
137,439 |
Additions |
5,000 |
- |
- |
- |
5,000 |
Balance, September 30, 2018 |
12,491 |
66,870 |
38,896 |
24,182 |
142,439 |
|
|
|
|
|
|
Accumulated Amortization |
|
|
|
|
|
Balance, December 31, 2017 |
1,612 |
2,130 |
25,342 |
18,634 |
47,718 |
Amortization |
451 |
55,188 |
3,050 |
1,248 |
59,937 |
Balance, September 30, 2018 |
2,063 |
57,318 |
28,392 |
19,882 |
107,655 |
|
|
|
|
|
|
Carrying value |
|
|
|
|
|
As at December 31, 2017 |
5,879 |
64,740 |
13,554 |
5,548 |
89,721 |
As at September 30, 2018 |
10,428 |
9,552 |
10,504 |
4,300 |
34,784 |
Page 11
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
9. INTANGIBLE ASSETS
|
|
|
|
Cost |
|
|
$ |
Balance, December 31, 2017 |
|
|
1,140,283 |
Acquired distribution rights |
|
|
510,878 |
Balance, September 30, 2018 |
|
|
1,651,161 |
|
|
|
|
Accumulated Amortization |
|
|
|
Balance, December 31, 2017 |
|
|
4,166 |
Amortization |
|
|
348,930 |
Balance, September 30, 2018 |
|
|
353,096 |
|
|
|
|
Carrying value |
|
|
|
As at December 31, 2017 |
|
|
1,136,117 |
As at September 30, 2018 |
|
|
1,298,065 |
On April 11, 2018, the Company entered into an asset purchase agreement with Corozon Consulting Corporation for the acquisition of the Corozon Platform. The Corozon Platform consists of two complementary modules: Corozon Academy which offers practical professional education to community pharmacists and Corozon Hardware which is an e-commerce portal that allows pharmacists to order point-of-care diagnostic devices and supplies. For consideration, the Company will pay twelve monthly instalments totaling $50,000 ($20,833 paid) and issue 909,090 common shares valued at $200,000 (issued) (Notes 11 and 19).
On April 15, 2018, the Company entered into a supply and distribution agreement with Emerald Health Therapeutics, Inc. (“Emerald”) to sell and distribute certain proprietary endocannabinoid-supporting products in Canada to licensed pharmacies. For consideration, the Company issued 3,030,303 warrants to Emerald valued at $510,878 to acquire 3,030,303 common shares of the Company at a price of $0.33 per share until April 15, 2020 (issued) (Notes 11 and 19).
10. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
The Company’s accounts payable and accrued costs consist of the following:
|
September 30, 2018 |
December 31, 2017 |
|
$ |
$ |
Trade accounts payable |
157,675 |
160,249 |
Accrued liabilities |
47,103 |
141,840 |
|
204,778 |
302,089 |
During the nine months ended September 30 2018, the Company issued 233,450 common shares to Lampyon Canada Inc. valued at $43,915 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018, of which $27,600 was included in accounts payable and $11,962 was included in prepaid expenses (Notes 11 and 19).
Page 12
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
11. SHAREHOLDERS’ EQUITY
Authorized share capital
Authorized: Unlimited number of common shares without par value.
Issued share capital
On June 26, 2017, the Company closed a private placement and issued 4,408,659 units at a price of $0.15 per unit for gross proceeds of $661,299. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until June 26, 2022. The Company paid finder’s fees of $7,200 in cash and issued 48,000 finder’s warrants valued at $8,210. The finder’s warrants are exercisable to purchase one common share of the Company at $0.20 per share until June 26, 2022.
On August 3, 2017, the Company closed a private placement and issued 1,326,667 units at a price of $0.15 per unit for gross proceeds of $199,000. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until August 3, 2022.
On November 27, 2017, the Company closed a private placement and issued 4,850,000 units at a price of $0.15 per unit for gross proceeds of $727,500. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.20 per share until November 27, 2022. The Company paid finder’s fees of $3,300 in cash and issued 22,000 finder’s warrants valued at $3,404. The finder’s warrants are exercisable to purchase one common share of the Company at $0.20 per share until November 27, 2022.
On December 8, 2017, the Company issued 2,274,000 common shares related to 2,274,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $454,800.
On January 11, 2018, the Company issued 200,000 common shares related to 200,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $40,000.
On January 15, 2018, the Company issued 164,000 common shares related to 164,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $32,800.
On January 22, 2018, the Company issued 177,500 common shares related to 177,500 warrants with an exercise price of $0.20 being exercised for gross proceeds of $35,500.
On February 9, 2018, the Company issued 50,000 common shares related to 50,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $10,000.
On April 25, 2018, the Company issued 2,000,000 common shares related to 2,000,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $400,000.
On April 27, 2018, the Company issued 880,000 common shares valued at $255,200 related to the acquisition of HealthTab (Notes 4 and 19).
On May 10, 2018, the Company issued 384,000 common shares related to 384,000 warrants with an exercise price of $0.20 being exercised for gross proceeds of $76,800.
Page 13
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
On May 31, 2018, the Company issued 909,090 common shares valued at $200,000 related to the acquisition of the Corozon Platform (Notes 8 and 19).
On June 14 2018, the Company issued 182,992 common shares to Lampyon Canada Inc. valued at $36,598 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018. (Notes 10 and 19).
On July 31, 2018, the Company closed a private placement and issued 5,327,335 units at a price of $0.15 per unit for gross proceeds of $799,100. Each unit consisted of one common share and one share purchase warrant entitling the holder thereof to acquire additional common share of the Company at a price of $0.33 per share until July 27, 2020. The Company paid finder’s fees of $13,320 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.
On August 8 2018, the Company issued 50,458 common shares to Lampyon Canada Inc. valued at $7,316 in consideration for services rendered pursuant to the terms of a service agreement entered into on April 10, 2018.
On August 23, 2018, the Company issued 880,000 common shares valued at $145,200 related to the acquisition of HealthTab (Notes 4 and 19).
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 nine months ended September 30, 2018 are summarized as follows:
|
Nine months ended September 30, 2018 |
Year ended December 31, 2017 |
||
|
Number of Options |
Weighted Average Exercise Price |
Number of Options |
Weighted Average Exercise Price |
Beginning Balance |
2,420,000 |
$0.24 |
1,460,938 |
$1.38 |
Options granted |
665,000 |
$0.23 |
2,420,000 |
$0.24 |
Expired/Cancelled |
(415,000) |
$0.24 |
(1,460,938) |
$1.38 |
Exercised |
- |
- |
- |
- |
Ending Balance |
2,670,000 |
$0.23 |
2,420,000 |
$0.24 |
Exercisable |
2,641,250 |
$0.23 |
1,188,750 |
$0.22 |
Page 14
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
The following table summarizes information about share options outstanding and exercisable as at September 30, 2018:
Exercise Price |
Expiry date |
Options |
||
|
|
Outstanding |
Exercisable |
|
$0.22 |
January 27, 2022 |
300,000 |
300,000 |
|
$0.15 |
July 20, 2022 |
150,000 |
150,000 |
|
$0.15 |
August 3, 2019 |
75,000 |
75,000 |
|
$0.15 |
September 27, 2022 |
150,000 |
150,000 |
|
$0.28 |
November 15, 2022 |
150,000 |
150,000 |
|
$0.28 |
December 8, 2022 |
1,330,000 |
1,301,250 |
|
$0.24 |
March 27, 2023 |
200,000 |
200,000 |
|
$0.21 |
April 11, 2023 |
175,000 |
175,000 |
|
$0.125 |
September 12, 2023 |
140,000 |
140,000 |
|
|
|
2,670,000 |
2,641,250 |
Share-based compensation
Share-based compensation of $333,601 were recognized during nine months ended September 30, 2018 (2017 - $177,493) for stock options 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:
|
Nine months ended September 30, 2018 |
Year ended December 31, 2017 |
Expected life |
5.0 years |
2.0 – 5.0 years |
Volatility |
142% - 157% |
148% - 164% |
Dividend yield |
0% |
0% |
Risk-free interest rate |
2.03% - 2.24% |
1.23% - 1.69% |
Option pricing models require the use of highly subjective estimates and assumptions, including the expected stock price volatility. Changes in the underlying assumptions can materially affect the fair value estimates.
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.
|
Nine months ended September 30, 2018 |
Year ended December 31, 2017 |
||
|
Number of Warrants |
Weighted Average Exercise Price |
Number of Warrants |
Weighted Average Exercise Price |
Beginning Balance |
8,381,326 |
$0.20 |
- |
- |
Warrants issued |
5,416,135 |
$0.33 |
10,655,326 |
$0.20 |
Expired/Cancelled |
- |
- |
- |
- |
Exercised |
(2,975,500) |
$0.20 |
(2,274,000) |
$0.20 |
Outstanding |
10,821,961 |
$0.27 |
8,381,326 |
$0.20 |
Page 15
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
The following table summarizes information about warrants outstanding and exercisable as at September 30, 2018:
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 |
$0.33 |
July 31, 2020 |
5,416,135 |
|
|
10,821,961 |
During the nine months ended September 30, 2018 and year ended December 31, 2017, the fair value of the warrants was calculated using the Black-Scholes Option Pricing Model using the following assumptions:
|
Nine months ended September 30, 2018 |
Year ended December 31, 2017 |
Expected life |
2.0 years |
5.0 years |
Volatility |
154% - 169% |
154% - 159% |
Dividend yield |
0% |
0% |
Risk-free interest rate |
2.05% - 2.10% |
1.15% - 1.62% |
12. PRODUCT REGISTRATION AND DEVELOPMENT
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Payroll |
49,645 |
41,291 |
179,761 |
98,286 |
Product registration and licensing fees |
20,753 |
30,337 |
38,469 |
72,213 |
|
70,398 |
71,628 |
218,230 |
170,499 |
13. SELLING AND MARKETING EXPENSES
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Payroll (sales personnel) |
41,757 |
69,701 |
132,244 |
259,863 |
Marketing and advertising |
117,040 |
66,600 |
321,055 |
120,304 |
Distribution |
33,077 |
27,430 |
90,495 |
78,313 |
Travel |
- |
12,647 |
983 |
65,002 |
|
191,874 |
176,378 |
544,777 |
523,482 |
14. GENERAL AND ADMINISTRATIVE EXPENSES
Page 16
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Management and consulting fees |
139,156 |
60,000 |
365,951 |
143,900 |
Payroll |
459 |
13,865 |
30,534 |
62,278 |
Office maintenance |
25,675 |
40,466 |
56,497 |
59,024 |
Travel |
4,468 |
9,044 |
29,077 |
18,529 |
Insurance |
(135) |
- |
13,431 |
24,663 |
Rent |
12,740 |
12,315 |
37,597 |
36,729 |
Seminar and conferences |
- |
- |
15,082 |
- |
Filing and registration fees |
23,591 |
16,183 |
64,067 |
51,425 |
Bank service charges |
962 |
894 |
2,734 |
1,833 |
Foreign exchange |
(149) |
- |
(307) |
- |
|
206,767 |
152,767 |
614,663 |
398,381 |
15. 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:
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Accounting fees |
19,333 |
- |
44,333 |
- |
Management and consulting fees |
- |
51,000 |
- |
134,900 |
Salaries and benefits |
68,599 |
- |
222,730 |
- |
Share-based compensation |
(17,256) |
23,018 |
266,867 |
115,875 |
|
70,676 |
74,018 |
533,930 |
250,775 |
As at September 30, 2018, there was $nil (December 31, 2017 - $13,152) due to related parties included in accounts payable and accrued liabilities.
16. 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 nine months ended September 30, 2018.
17. COMMITMENTS
Page 17
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
Leased premises
The Company has entered into contracts for leased premises, which expire in 2018. In September 2017, the Company extended the lease. Total future minimum lease payments under these contracts are as follows:
|
September 30, 2018 |
|
$ |
Within 1 year |
38,865 |
2 years |
64,127 |
|
102,992 |
18. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and asset acquisition liability. 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 47% of trade receivables are due from one customer at September 30, 2018 (December 31, 2017 – 35% from one customer).
Pursuant to their collective terms, accounts receivable from customers were aged as follows:
Page 18
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
September 30, 2018 |
December 31, 2017 |
|
$ |
$ |
0 – 30 days past due |
38,291 |
274,755 |
31 – 60 days past due |
38,606 |
7,055 |
61 – 90 days past due |
35,084 |
15,387 |
Over 90 days past due |
93,214 |
128,087 |
|
205,195 |
425,284 |
As at September 30, 2018, the allowance for doubtful accounts receivable was $50,765 (December 31, 2017 – $59,045).
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.
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.
As at September 30, 2018, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities of $204,778 (December 31, 2017 - $302,089) and asset acquisition liability of $Nil (December 31, 2017 - $100,000).
c) Market risk
Market risk for the Company consists of currency risk and interest rate risk. The objective of market risk management is to manage and control market risk exposure within acceptable limits, while maximizing returns.
Currency risk
Foreign currency risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Company’s purchases and sales are denominated in Canadian dollars, and it has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency risk at this time.
Interest rate risk
Interest rate risk is the risk that fair values or future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Company’s policy is to invest cash at floating interest rates and cash reserves are to be maintained in cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders.
The Company is not exposed to significant interest rate risk.
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, accrued liabilities and asset acquisition liability carrying amounts approximate fair value due to their short-term maturity;
Page 19
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
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 has no financial instruments 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.
19. SEGMENTED INFORMATION
The company has the following business divisions:
Products Business Division
Marketing and distribution of generic and over-the-counter (OTC) pharmaceutical products and, through the Company's Corozon Platform, the distribution of point of care screening devices and related supplies and training materials.
Point of Care Business Division
Point of care screening services provided through the Company's HealthTab system and software platform.
Summarized financial information concerning reportable segments is shown in the following tables:
|
VANC |
HealthTab |
Total |
|
$ |
$ |
$ |
Accounts receivable |
222,311 |
475 |
222,786 |
Inventories |
185,855 |
- |
185,855 |
Equipment |
24,585 |
10,199 |
34,784 |
Intangible assets |
665,769 |
851,046 |
1,516,815 |
|
|
|
|
Accounts payable |
199,598 |
5,180 |
204,778 |
19. SEGMENTED INFORMATION
Page 20
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
VANC Pharmaceuticals |
|
|
|
|
|
30-Sep-18 |
30-Sep-18 |
30-Sep-17 |
30-Sep-17 |
|
9 months |
3 months |
9 months |
3 months |
Revenue |
$ |
$ |
$ |
$ |
Sales |
492,134 |
28,548 |
1,355,774 |
523,088 |
Marketing, promotional incentives |
(188,688) |
(34,220) |
(930,597) |
(398,646) |
Net sales |
303,446 |
(5,672) |
425,177 |
124,442 |
Cost of sales |
187,243 |
85,043 |
229,634 |
46,108 |
|
|
|
|
|
Gross profit |
116,203 |
(90,715) |
195,543 |
78,334 |
|
|
|
|
|
Expenses |
|
|
|
|
Product registration and development |
218,230 |
70,398 |
170,499 |
71,628 |
Selling and marketing |
544,146 |
191,243 |
523,482 |
176,378 |
Amortization |
100,796 |
(142,084) |
23,263 |
7,755 |
General and administrative |
544,102 |
137,656 |
398,381 |
152,767 |
Professional fee |
170,384 |
55,708 |
224,919 |
169,945 |
HealthTab |
|
|
|
|
|
30-Sep-18 |
30-Sep-18 |
30-Sep-17 |
30-Sep-17 |
|
9 months |
3 months |
9 months |
3 months |
Revenue |
|
|
|
|
Sales |
8,478 |
2,189 |
- |
- |
Marketing, promotional incentives |
- |
- |
- |
- |
Net sales |
8,478 |
2,189 |
- |
- |
|
|
- |
|
|
Cost of sales |
12,292 |
9,651 |
- |
- |
|
|
|
|
|
Gross profit |
(3,814) |
(7,462) |
- |
- |
|
|
|
|
|
Expenses |
|
|
|
|
Product registration and development |
- |
- |
- |
- |
Selling and marketing |
631 |
105 |
- |
- |
Amortization |
339,321 |
326,789 |
- |
- |
General and administrative |
70,561 |
36,327 |
- |
- |
Professional fee |
676 |
676 |
- |
- |
20. SUPPLEMENTAL CASH FLOW INFORMATION
Page 21
Avricore Health Inc. (former VANC Pharmaceuticals Inc.)
Notes to the Condensed Interim Consolidated Financial Statements
For nine months ended September 30, 2018 and 2017
(Unaudited)
(Expressed In Canadian Dollars)
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
$ |
$ |
$ |
$ |
Cash paid for interest |
- |
- |
- |
- |
Cash paid for income taxes |
- |
- |
- |
- |
|
- |
- |
- |
- |
On April 27 and August 23, 2018, the Company issued in total 1,760,000 common shares valued at $325,600 related to the acquisition of HealthTab (Notes 4 and 11).
On May 31, 2018, the Company issued 909,090 common shares valued at $200,000 related to the acquisition of the Corozon Platform (Notes 8 and 11).
On June 14 2018, the Company issued 182,992 common shares to Lampyon Canada Inc. valued at $39,562 in consideration for services. On August 8 2018, the Company issued 50,458 common shares to Lampyon Canada Inc. valued at $7,316 in consideration for services.
On April 15, 2018, the Company entered into a supply and distribution agreement with Emerald Health Therapeutics, Inc. (“Emerald”) to sell and distribute certain proprietary endocannabinoid-supporting products in Canada to licensed pharmacies. For consideration, the Company will issue 3,030,303 warrants to Emerald to acquire 3,030,303 common shares of the Company at a price of $0.33 per share until April 15, 2020 (issued) (Notes 9 and 11).
Page 22
Avricore Health Inc.
(former VANC Pharmaceuticals Inc.)
Management’s Discussion & Analysis
For the 3 and 9 months ended
September 30, 2018
This Management Discussion and Analysis (“MD&A”) of Avricore Health Inc. (former VANC Pharmaceuticals Inc.) (“AVRICORE”, the “Company”, “we”, “us” or “our”) for the 3 and 9 months ended September 30, 2018 and as is on November 29, 2018. This MD&A should be read in conjunction with the un-audited financial statements of the Company for the 3 and 9 months ended September 30, 2018 and the related notes thereto.
Our financial statements are prepared in accordance International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”). This MD&A contains “forward-looking statements” and the non-GAAP performance measures that are subject to risk factors set out in a cautionary note contained herein.
All amounts are expressed in Canadian dollars unless otherwise indicated.
Additional information about Avricore Health Inc. (former VANC Pharmaceuticals Inc.) can be found on the SEDAR website ( www.sedar.com ) and on the Company’s website ( www.vancpharm.com ).
Forward Looking Statements
This MD&A contains or incorporates forward-looking statements within the meaning of Canadian securities legislation (collectively, “forward-looking statements”). These forward-looking statements relate to, among other things, revenue, earnings, changes in cost and expenses, capital expenditures and other objectives, strategic plans and business development goals, and may also include other statements that are predictive in nature or that depend upon or refer to future events or conditions, and can generally be identified by words such as “may”, “will”, “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates” or similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. These statements are not historical facts but instead represent only Avricore’s expectations, estimates and projections regarding future events.
Although the Company believes the expectations reflected in such forward-looking statements are reasonable, such statements are not guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. Undue reliance should not be placed on such statements. Certain material assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. Known and unknown factors could cause actual results to differ materially from those expressed or implied in the forward-looking statements. Important assumptions, influencing factors, risks and uncertainties are referred to in the body of this MD&A, in the press release announcing the Company’s financial results for the 3 and 9 months ended September 30, 2018 and for the fiscal year ended December 31, 2017 in Avricore’s annual and interim financial statements and the notes thereto. These documents are available at www.sedar.com.
The forward-looking statements contained in this MD&A are made as at the date of this MD&A and, accordingly, are subject to change after such date. Except as required by law, Avricore does not undertake any obligation to update or revise any forward-looking statements made or incorporated in this MD&A, whether as a result of new information, future events or otherwise.
Page 1
Overview
Avricore Health Inc., formerly VANC Pharmaceuticals Inc., continued to build on the initiatives started in the previous quarter to reimagine its business model. A strategic shift to becoming a key partner to community pharmacists by offering innovative, value added products and services was implemented. Avricore embarked on a process to retrench, streamline and consolidate its business and business operations.
The Company continues to build on the success of core BTC (behind the counter) and OTC (over the counter) high margin products. The pharmaceutical side of Avricore still provides the bulk of sales and sustains operations but the product range has been streamlined to focus on a few high margin OTC and BTC products such as Hemafer and Cortivera H. Avricore continues to expand sales of Hemafer increasing both the geographic scope and volume of sales.
Avricore is focused on expanding and further deploying its HealthTab and Corozon Platforms in line with ongoing changes in the community pharmacy sector of the healthcare industry. Community pharmacy is expected to focus increasingly on cognitive services with attendant point of care testing as well as medical cannabis 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 1 st April 2018.
HealthTab, as one of the new core business divisions of the company, has been engaged in pilot programs across the county to optimize its offering. Pharmacist and patient feedback has been gathered from these programs to support a broader launch into several pharmacy chains. A comprehensive marketing and sales program is being developed to support both pharmacists and patients based on the pilot programs and the feedback gathered.
Avricore commissioned external consultants to initiate an audit of its business operations and to implement best practice solutions to its regulatory, marketing and sales initiatives. As a first step, the company is implementing a comprehensive sales reporting and benchmarking program to support marketing and sales activities. Furthermore, Avricore has a ppointed Philippe Ugnat as a Strategic Advisor to help drive the corporate growth and strengthen the Company’s presence in the Province of Ontario and Québec.
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 increase sales of its core businesses including OTC products and point of care testing.
Page 2
HealthTab Point of Care Tests
Pharmacies continue to face revenue pressure as a result of decreased educational rebates to their generic drug business. As a result, pharmacy owners are actively looking for innovative, value-added services like HealthTab to help their businesses evolve beyond the traditional dispensing model.
Since being acquired by Avricore Health Inc. (former VANC Pharmaceuticals Inc.), HealthTab has been working to streamline operations and reduce the time and costs associated with new deployments.
Key developments in the third quarter included the following:
o Launched additional HealthTab pharmacy locations in Ontario.
o Engaged 7 new pharmacy partner locations in Ontario with a major chain in the GTA with plans to launch in Q4.
o Launches so far have brought a marked increase in service billables, with one location in the GTA showing an increase over 30% YoY.
Continued to negotiate new PoC service integrations to expand the HealthTab testing menu.
Corozon Platform
Subsequent to the acquisition of Corozon Platform by Avricore, integration of the Platform into ongoing programs continues, driving direct engagement with pharmacies through the online tools available on the Platform.
Strategic partnerships and pilot programs continued to build awareness, validation and uptake of the Platform.
Becton Dickinson (BD) Veritor devices, related supplies and relevant training materials are available on the Platform and BD is directing customers to the Platform to access these materials and supplies.
Discussions continue with one of Canada’s largest distributors and wholesalers is committed to move forward with forging a partnership with Avricore to utilize the Platform as an important part of its Continuing Medical Education program for Canada and potentially the US. This has huge potential for the future development of the Platform.
A new sub-branding capability of the Corozon Platform has been launched, allowing tighter integration with partners going forward.
The Corozon Hardware module has been replaced by the new Corozon Store ecommerce module to allow for the introduction of new product lines. The Company plans to launch sales of an endocannabinoid-supporting product line in the near future.
Page 3
Non-Prescription and Generic Products
INSTI HIV-1/HIV-2 Rapid Antibody Test
Avricore continues to explore partnerships to expand the reach of this initiative.
Successfully deployed sales detail aid materials, including all necessary forms and counseling information on the Corozon Platform.
Additional sales detail aid materials were created based on feedback and learnings so far.
Endocannabinoid-Supporting Product Line
Avricore Health’s partner, Emerald Health Therapeutics has filed for approval of its endocannabinoid-supporting product line with Health Canada Natural and Non-prescription Health Products Directorate (NNHPD).
Once Emerald Health Therapeutics receives approval, the endocannabinoid-supporting product line will be made available for sale on the Corozon Platform shortly thereafter.
Hema-Fer
New physician samples and updated marketing materials to medical clinics continued to be distributed.
Sales of Hema-Fer through the Amazon store continue to be consistent. New marketing initiatives have been explored and will be launched shortly to drive traffic.
Hema-Fer has been listed by a significant pharmacy partner in Atlantic Canada, which will drive sales in the next quarter.
Avricore continues to have discussions with pharmacy partners to expand the scope of listings to position Hema-Fer as the brand name heme iron supplement of choice.
CortiVera
Avricore Health has previously made the decision not to move forward with further manufacturing of CortiVera 0.5% cream, CortiVera 0.5% ointment and CortiVera Plus 1% ointment. In line with this earlier decision, existing inventory was rolled out but no further production was initiated.
The Company has decided to focus on sales of Cortivera-H and CortiVera Plus 1% cream due to stronger sales of these products.
SennAce
Avricore Health has previously made the decision not to move forward with further manufacturing of this product. In line with this earlier decision, existing inventory was rolled out but no further production was initiated.
Page 4
Generic Prescription Products
• Avricore continued the process of winding down its generic portfolio, moving all DINs to Dormant status with Health Canada, and working with regulatory consultants to ensure compliance with Health Canada until such a point when we can completely exit the market.
• The Company is in discussions to explore opportunities that can potentially expedite its exit from this market to reduce ongoing regulatory costs.
RESULTS OF OPERATIONS – THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018
Revenue
The gross revenue was $500,612 for the nine months ended September 30, 2018 (2017: $1,355,774). Net sales were $311,924 for the nine months ended September 30, 2018 (2017: $425,177) after deducting the cost of customer marketing and promotional incentives of $188,688 (2017: $930,597) for the nine months ended September 30, 2018.
The gross revenue was $30,737 for the quarter ended September 30, 2018 compared to $523,088 in the same quarter last year, and the net sales were $(2,957) for the quarter compared to $124,442 in the same quarter last year.
The decrease in gross revenues for the nine and three months ended September 30, 2018 is in part due to transition the Company is going through during the period.
The Company’s generic products portfolio forms about 58% of the gross revenue. Intense competition in this segment leads to lower margins. Currently we are selling to pharmacy chains and independent pharmacies. The Company is reviewing generic portfolio to market high margin products and at the same time striving to improve margins with our vendors.
The Company’s sale of higher margin OTC products is showing better acceptance within the medical community. Company’s OTC products are listed in the largest distributor in Canada. There has been a positive trend in the sale of OTC product from quarter to quarter.
Manufacturing
The Company does not have its own manufacturing facilities and currently relies, and expects to continue to rely, on the third-party manufacturers of the product. The Company has various agreements in place to manufacturer its OTC products.
Other Operating Expenses
Page 5
Management improved the disclosure on expense classification to monitor separate activities cost. Selling and Marketing expenses include all expenses related to sales personnel, selling and marketing, and distribution costs. Product registration and development includes all expenses related to acquiring new drugs, scientific consulting, regulatory fees and regulatory personnel. General and administrative cost includes expenses associated with running the day-to-day operations of the business.
Product Registration and Development Expenses
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 for the total of $70,398 (2017: $71,628) and $218,230(2017: $170,499) for the three and nine months ended September 30, 2018 respectively. We currently have one full-time regulatory personnel and one senior regulatory consultant doing the product filings process with Health Canada and other regulatory agencies to support the increased level of OTC and generic product lines.
Sales and Marketing Expenses
Sales and marketing expenses in the amount of $191,874 (2017: $176,378) and $544,777 (2017: $523,482) for the three and nine months ended September 30, 2018 respectively. Which consist of sales personnel payroll cost of $132,244 for the nine months ended September 30, 2018 (2017: $259,863); marketing and advertising costs in relation with the promotion of generics and OTC products to the market in amount of $321,055 for the nine months ended September 30, 2018 (2017: $120,304), logistics and distribution cost of $90,495 for the nine months ended September 30, 2018 (2017: $78,313) and sales force travel and customer relations expenses of $983 for the nine months ended September 30, 2018 (2017: $65,002).
The efficiencies in the Selling and Marketing expense compared to prior periods is due to restructuring and further optimization of the Sales Force department. The Company provides free samples of OTC products as a part of market awareness strategy. The Company is providing professional use only samples of the OTC products to medical doctors as part of our market awareness strategy. The total cost of the free samples is in the amount of $2,917 for the nine months ended September 30, 2018 (2017: $14,245) was reported as part of marketing and advertising expense.
General and administrative expenses
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Management and consulting fees |
139,156 |
60,000 |
365,951 |
143,900 |
Payroll |
459 |
13,865 |
30,534 |
62,278 |
Office maintenance |
25,675 |
40,466 |
56,497 |
59,024 |
Travel |
4,468 |
9,044 |
29,077 |
18,529 |
Insurance |
(135) |
- |
13,431 |
24,663 |
Rent |
12,740 |
12,315 |
37,597 |
36,729 |
Seminar and conferences |
- |
- |
15,082 |
- |
Filing and registration fees |
23,591 |
16,183 |
64,067 |
51,425 |
Bank service charges |
962 |
894 |
2,734 |
1,833 |
Foreign exchange |
(149) |
- |
(307) |
- |
|
206,767 |
152,767 |
614,663 |
398,381 |
Page 6
The increase in management and consulting fees in 2018 compared to 2017 was mainly due to hiring consultants for the HealthTab division acquired at the end of December 2017.
The increase in seminar and conferences and travel in 2018 compared to 2017 was mainly due to the Company attending various events and conferences to increase the Company’s brand awareness, showcase its products and services offered, secure interest in HealthTab deployments and generate negotiations with pharmacy networks.
The increase in legal, audit and accounting fees in 2018 compared to 2017 was mainly due to legal services related to the acquisition of the Corozon Platform and Emerald distribution rights.
The increase in amortization in 2018 compared to 2017 was mainly due to the amortization of the Corozon Platform and intangible assets related to the acquisition of HealthTab and Emerald distribution rights.
The level of general and administrative expenses did not fluctuate significantly in comparison to the previous periods. All the General and Administrative expenses are in line with the normal course of business operations.
Share-based compensation
Share-based compensation of $333,601 were recognized during the nine months ended September 30, 2018 (2017: $177,493) for stock options 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.
Inventory Write Down provision
Inventories are stated at net realizable value. The Company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to Other Expense. During the three and nine months ended September 30, 2018, the Company experienced total write-downs and write-offs of $61,755 (2017: $56,359) and $159,078 (2017: $447,017), respectively.
QUARTERLY FINANCIAL INFORMATION
The following table highlights selected unaudited consolidated financial data for each of the eight most recent quarters that, in management’s opinion, have been prepared on a basis consistent with the audited consolidated financial statements for the year ended December 31, 2017. These results are not necessarily indicative of results for any future period and you should not rely on these results to predict future performance.
Page 7
Sep 2018 |
Jun 2018 |
Mar 2018 |
Dec 2017 |
Sept 2017 |
Jun 2017 |
Mar 2017 |
Dec 2016 |
Sept 2016 |
|
|
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
$ |
Gross revenue |
30,737 |
160,087 |
309,788 |
261,309 |
523,088 |
645,078 |
187,608 |
437,625 |
639,472 |
Net sales |
(2,957) |
159,789 |
155,092 |
112,537 |
124,442 |
180,249 |
120,486 |
11,295 |
399,311 |
Gross profit |
(97,651) |
112,111 |
97,929 |
51,300 |
78,334 |
46,738 |
70,471 |
(124,446) |
178,857 |
Other operating expenses |
639,730 |
740,676 |
532,509 |
613,189 |
570,502 |
406,434 |
336,069 |
519,493 |
393,471 |
Write-down of inventories |
61,755 |
74,868 |
22,455 |
298,260 |
56,359 |
51,138 |
340,220 |
291,794 |
- |
Share-based compensation |
9,300 |
97,369 |
226,932 |
133,896 |
51,460 |
9,059 |
116,974 |
67,351 |
99,567 |
|
|
|
|
|
|
|
|
|
|
Net Loss |
682,799 |
800,802 |
683,967 |
994,045 |
599,987 |
419,893 |
722,792 |
1,003,083 |
314,181 |
Loss/Share |
(0.02) |
(0.03) |
(0.02) |
(0.04) |
(0.03) |
(0.03) |
(0.05) |
(0.07) |
(0.03) |
Total Assets |
2,814,837 |
2,882,936 |
2,489,118 |
2,900,186 |
1,411,412 |
2,206,409 |
1,653,750 |
2,275,335 |
3,207,417 |
LIQUIDITY AND CAPITAL RESOURCES
The Company’s operations have been financed through the issuance of common shares. The Company commenced to commercialize its generic and OTC products during the second half of 2015 but has not been able to generate positive cash flows from its operating activity yet. Management anticipate that additional financings or capital requirements to fund the current commercial operations and working capital will be required to grow the business to a sustainable level.
Cash flows
Sources and Uses of Cash:
|
Nine Months Ended |
Nine Months Ended |
|
September 30, 2018 |
September 30, 2017 |
|
$ |
$ |
Cash used in operating activities |
(1,459,222) |
(1,204,555) |
Cash used in investing activities |
(125,833) |
- |
Cash provided by financing activities |
1,325,936 |
853,099 |
|
|
|
Cash and Cash Equivalents, closing balance |
300,614 |
76,026 |
There is an overall cash outflow of $259,119 for the nine months ended September 30, 2018 compared to cash inflow of $351,456 in comparable period in 2017. The increase of cash used in operating activities is the result of business growth and expanding of commercial activity compared to 2017. In addition, the Company made cash payments totaling $100,000 related to the HealthTab acquisition during the nine months ended September 30, 2018.
Page 8
Funding Requirements
Management devotes financial resources to the Company’s operations, sales and commercialization efforts, regulatory approvals and business development. The Company will require cash to support working capital.
The future funding requirements will depend on many factors including:
- the extent to which we will be commercially successful in launching our new OTC and Generic products
- to the extent of liquidation of the existing inventory of Generics and OTCs
- the size, cost and effectiveness of our sales and marketing program, distributions and marketing arrangements.
As at September 30, 2018, the Company had working capital of $1,058,460 (December 31, 2017: $1,272,259). We believe that our cash on hand, the expected future cash inflows from the sale of our products, net proceeds from the warrants exercised, if any, may not be sufficient to finance our working capital within the next 6-9 months. If our existing cash resources together with the cash we generate from the sales of our products are insufficient to fund our working capital, operational needs, we may need to sell additional equity or debt securities or seek additional financing through other arrangements.
DISCLOSURE OF OUTSTANDING SHARE DATA
The following table summarizes the Company’s outstanding share capital as at report date:
|
Reporting date |
|
|
Common Shares |
39,065,998 |
Stock Options |
2,670,000 |
Stock Warrants |
10,821,961 |
COMMITMENTS AND AGREEMENTS
Leased premises
The Company has entered into contracts for leased premises, which expire in 2018. In September 2017, the Company extended the lease. Total future minimum lease payments under these contracts are as follows:
|
September 30, 2018 |
|
$ |
Within 1 year |
38,865 |
2 – years |
64,127 |
|
102,992 |
Page 9
CRITICAL ACCOUNTING POLICIES AND SIGNIFICANT ESTIMATES
Our consolidated financial statements are prepared in accordance with IFRS. 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 inventories, reporting of revenue recognition, bad debt and doubtful accounts, income taxes, accounting for stock-based compensation expense, and commitments and contingencies.
The significant accounting policies that we believe are the most critical in fully understanding and evaluating our reported financial results include revenue recognition, stock-based compensation and fair value measurements of financial instruments. These and other significant accounting policies are described more fully in Note 2 and 3 of our quarterly consolidated financial statements for the three and nine months ended September 30, 2018.
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. Provision is calculated based on the expiry date. The Company attempts to sell products with short shelf life with significant rebates. Any unsold products with short shelf life and expired products are written-off.
Revenue recognition
Revenues are recognized when the risks and rewards of ownership have passed to the customer based on the terms of the sale, collection of the relevant receivable is probable, evidence of an arrangement exists and the sales price is fixed or determinable. Risks and rewards of ownership pass to the customer upon successful completion of shipment of pharmaceuticals. Provisions for sales discounts, incentives, and rebates and returns are made based upon historical experiences.
Useful lives of depreciable assets
The Company reviews its estimate of the useful lives of depreciable assets at each reporting date, based on the expected utilization of the assets. Uncertainties in these estimates relate to technical obsolescence that may change the utilization of certain equipment.
Page 10
Intellectual property
The recoverability of the carrying value of the intellectual property is dependent on successful development and commercial stage to the point where revenue is possible. The carrying value of these assets is reviewed by management when events or circumstances indicate that its carrying value may not be recovered. If impairment is determined to exist, an impairment loss is recognized to the extent that the carrying amount exceeds the recoverable amount.
Share-based payments
The Company grants share-based awards to certain directors, officers, employees, consultants and other eligible persons. For equity-settled awards, the fair value is charged to the statement of operations and comprehensive loss and credited to the reserves over the vesting period using the graded vesting method, after adjusting for the estimated number of awards that are expected to vest.
The fair value of equity-settled awards is determined at the date of the grant using the Black-Scholes option pricing model. For equity-settled awards to non-employees, the fair value is measured at each vesting date. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model, including the volatility, expected life of warrants and options, risk free interest rate and dividend yield. Changes in these assumptions can materially affect the fair value estimate, and therefore the existing models do not necessarily provide a reliable measure of the fair value of the Company’s options and warrants issued. Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.
CHANGES IN ACCOUNTING STANDARDS
IFRS 9 – Financial Instruments
The Company adopted IFRS 9, which replaced IAS 39 – Financial Instruments: Recognition and Measurement, in its consolidated financial statements beginning January 1, 2018.
IFRS 9 largely retains the existing requirements in IAS 39 for the classification and measurement of financial liabilities, however it eliminates the previous IAS 39 categories for financial assets of held to maturity, loans and receivables and available for sale.
Under IFRS 9 there are three principal classification categories for financial assets: measured at amortized cost, fair value through other comprehensive income (“FVOCI”) and fair value through profit and lost (“FVTPL”). The classification of financial assets under IFRS 9 is based on the business model in which a financial asset is managed and its contractual cash flow characteristics. Derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
IFRS replaces the ‘incurred loss’ model in IAS 39 with an ‘expected credit loss’ model. The new impairment model applies to financial assets measure at amortized cost, contract assets and debt investments at FVOCI, but not to investments in equity instruments. Under IFRS 9, credit losses are recognized earlier than under IAS 39.
Page 11
The adoption of IFRS 9 did not have a material impact on the Company’s consolidated financial statements.
IFRS 15, Revenue from Contracts with Customers
On May 28, 2014 the IASB issued IFRS 15, Revenue from Contracts with Customers. IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. Revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the goods or services. The standard replaces IAS 18 Revenue and IAS 11 Construction contracts and related interpretations. IFRS 15 is effective for reporting periods beginning on or after January 1, 2018 with early application permitted. The adoption of IFRS 15 did not have a material impact on the Company’s consolidated financial statements.
NEW STANDARDS, INTERPRETATIONS AND AMENDMENTS NOT YET EFFECTIVE
The following is an overview of accounting standard changes that the Company will be required to adopt in future years.
IFRS 16 Leases
On January 13, 2016, the International Accounting Standards Board published a new standard, IFRS 16, Leases, eliminating the current dual accounting model for lessees, which distinguishes between on-balance sheet finance leases and off-balance sheet operating leases. Under the new standard, a lease becomes an on-balance sheet liability that attracts interest, together with a new right-of-use asset. In addition, lessees will recognize a front-loaded pattern of expense for most leases, even when cash rentals are constant. IFRS 16 is effective for reporting periods beginning on or after January 1, 2019. The Company is in the process of assessing the impact of this pronouncement. The extent of the impact has not yet been determined.
Other new standards or amendments are either not applicable or not expected to have a significant impact on the Company’s consolidated financial statements.
FINANCIAL INSTRUMENTS AND RISKS
Operational Risk Factors
Limited Operating History
There is no assurance that AVRICORE will earn profits in the future, or that profitability will be sustained. Operating in the pharmaceutical and biotechnology industry requires substantial financial resources, and there is no assurance that future revenues will be sufficient to generate the funds required to continue AVRICORE business development and marketing activities. In case AVRICORE does not have sufficient capital to fund its operations, the management may be required to restructure the operations.
Going concern
Page 12
The assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.
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.
Development of Technological Capabilities
The market for AVRICORE’s products is characterized by changing technology and continuing process development. The future success of Company’s business will depend in large part upon our ability to maintain and enhance the Company’s technological capabilities, develop and market products and services which meet changing customer needs and successfully anticipate or respond to technological changes on a cost effective and timely basis. Although we believe that Company’s operations provide the products and services currently required by our customers, there can be no assurance that the Company’s process development efforts will be successful or that the emergence of new technologies, industry standards or customer requirements will not render AVRICORE’s products or services uncompetitive. If AVRICORE needs new technologies and equipment to remain competitive, the development, acquisition and implementation of those technologies and equipment may require us to make significant capital investments.
Economic dependence
The Company currently has licensing arrangements with three manufacturers to purchase, distribute and commercialize their drug molecules in Canada. The Company derives over 88% of its gross sales from four major national distributors for the nine months ended September 30, 2018. The ability of the Company to sustain operations is dependent on the continued operation of these customers. The launch of new OTC products diversifies the Company’s portfolio and reduces the risk of the economic dependence.
Financial Instruments and Risk Management
The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities and asset acquisition liability. 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.
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.
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.
Page 13
The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers and historical data.
Approximately 47% of trade receivables are due from one customer at September 30, 2018 (December 31, 2017 – 35% from one customer).
Pursuant to their collective terms, accounts receivable were aged as follows:
|
September 30, 2018 |
December 31, 2017 |
|
$ |
$ |
0 – 30 days past due |
38,291 |
274,755 |
31 – 60 days past due |
38,606 |
7,055 |
61 – 90 days past due |
35,084 |
15,387 |
Over 90 days past due |
93,214 |
128,087 |
|
205,195 |
425,284 |
As at September 30, 2018, the allowance for doubtful accounts receivable was $50,765 (December 31, 2017 – $59,045).
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.
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.
As at September 30, 2018, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities of $204,778 (December 31, 2017 - $302,089) and asset acquisition liability of $Nil (December 31, 2017 - $100,000).
Currency risk
Foreign currency risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Company’s purchases and sales are denominated in Canadian dollars, and it has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency risk at this time.
Interest rate risk
Interest rate risk is the risk that fair values or future cash flows will fluctuate as a result of changes in market interest rates. In respect of financial assets, the Company’s policy is to invest cash at floating interest rates and cash reserves are to be maintained in cash equivalents in order to maintain liquidity, while achieving a satisfactory return for shareholders. The Company is not exposed to significant interest rate risk.
RELATED PARTY TRANSACTIONS
Page 14
Related party transactions are shown below:
|
Three months ended September 30, |
Nine months ended September 30, |
||
|
2018 |
2017 |
2018 |
2017 |
|
|
|
$ |
$ |
Accounting fees |
19,333 |
- |
44,333 |
- |
Management and consulting fees |
- |
51,000 |
- |
134,900 |
Salaries and benefits |
68,599 |
- |
222,730 |
- |
Share-based compensation |
(17,256) |
23,018 |
266,867 |
115,875 |
|
70,676 |
74,018 |
533,930 |
250,775 |
As at September 30, 2018, there was $nil (December 31, 2017 - $13,152) due to related parties included in accounts payable and accrued liabilities.
Salaries and benefits are paid to Mr. Bob Rai, Chief Executive Officer and Director and Mr. Mark Kunzli, Executive Vice President.
Accounting fees are paid to a company controlled by Mr. Dong Shim, outgoing Chief Financial Officer and to a company of which incoming Chief Financial Officer is employee.
Share-based compensation relates to stock options granted and vested to management and directors of the Company during the three and nine months ended September 30, 2018.
All related party transactions were in the normal course of business operations.
OFF-BALANCE SHEET ARRANGEMENTS
The Company does not have any off-balance sheet arrangements, which would require disclosure.
Page 15
This is an unofficial consolidation of Form 52-109FV2 Certification of Interim Filings Venture Issuer Basic Certificate reflecting amendments made effective January 1, 2011 in connection with Canada’s changeover to IFRS. The amendments apply for financial periods relating to financial years beginning on or after January 1, 2011. This document is for reference purposes only and is not an official statement of the law. |
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Sukhwinder Bob Rai , Chief Executive Officer of VANC Pharmaceuticals Inc. , certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of VANC Pharmaceuticals Inc. (the “Issuer”) for the first interim period ended September 30, 2018 .
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods presented in the interim filings.
Date: November 29, 2018
“Sukhwinder Bob Rai”
Sukhwinder Bob Rai, Chief Executive Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
1
This is an unofficial consolidation of Form 52-109FV2 Certification of Interim Filings Venture Issuer Basic Certificate reflecting amendments made effective January 1, 2011 in connection with Canada’s changeover to IFRS. The amendments apply for financial periods relating to financial years beginning on or after January 1, 2011. This document is for reference purposes only and is not an official statement of the law. |
Form 52-109FV2
Certification of Interim Filings
Venture Issuer Basic Certificate
I, Dong Shim , Chief Financial Officer of VANC Pharmaceuticals Inc. , certify the following:
1. Review: I have reviewed the interim financial report and interim MD&A (together, the “interim filings”) of VANC Pharmaceuticals Inc. (the “Issuer”) for the first interim period ended September 30, 2018 .
2. No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the interim filings.
3. Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial report together with the other financial information included in the interim filings fairly present in all material respects the financial condition, financial performance and cash flows of the Issuer, as of the date of and for the periods presented in the interim filings.
Date: November 29, 2018
“Dong Shim”
Dong Shim, Chief Financial Officer
NOTE TO READER
In contrast to the certificate required for non-venture issuers under National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109), this Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in NI 52-109. In particular, the certifying officers filing this certificate are not making any representations relating to the establishment and maintenance of
i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and
ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the issuer’s GAAP.
The issuer’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in this certificate. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost effective basis DC&P and ICFR as defined in NI 52-109 may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
1