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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 20-F

 

(Mark One)

 

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

 

OR

 

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

 

For the fiscal year ended December 31, 2022

 

OR

 

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

 

Date of Event requiring this shell company report _____________

 

For the transition period from ___________________ to ______________________

 

Commission file number: 000-51848

 

AVRICORE HEALTH INC.

 

(Exact name of Registrant as specified in its charter)

 

Not applicable

 

(Translation of Company’s name into English)

 

British Columbia, Canada

 

(Jurisdiction of incorporation or organization)

 

1120 – 789 West Pender Street, Vancouver British Columbia, V6C1H2

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

 

(Address of principal executive offices)

 

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

 

 

Title of each class   Name of each exchange on which registered
Not Applicable   Not Applicable

 

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

 

Common Shares Without Par Value

 

(Title of Class)

 

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

 

None

 

(Title of Class)

 

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report. December 31, 2022 - 99,244,664.

 

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

 

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

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No

 

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

 

Large accelerated filer ☐ Accelerated filer ☐ Non-Accelerated filer ☒ Emerging growth company

 

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

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

 

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

 

U.S. GAAP ☐ International Financial Reporting Standards as issued Other ☐
  by the International Accounting Standards Board ☒  

 

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

 

Item 17 ☐ Item 18 ☐

 

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

 

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

 

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

 

The information set forth in this Annual Report on Form 20-F is as at December 31, 2022 unless an earlier or later date is indicated.

 

 

 

 
 

 

FORM 20-F ANNUAL REPORT

TABLE OF CONTENTS

 

PART I 2
ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS 2
ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE 2
ITEM 3. KEY INFORMATION 2
ITEM 4. INFORMATION ON THE COMPANY 6
Item 4A Unresolved Staff Comments 13
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS 13
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES 16
ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS 24
ITEM 8. FINANCIAL INFORMATION 26
ITEM 9. THE OFFER AND LISTING 27
ITEM 10. ADDITIONAL INFORMATION 29
ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 38
ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES 38
PART II 39
ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES 39
ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS 39
ITEM 15. CONTROLS AND PROCEDURES 39
ITEM 16. RESERVED 40
ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT 40
ITEM 16B. CODE OF ETHICS 40
ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES 41
ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES 42
ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE COMPANY/AFFILIATED PURCHASERS 42
ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT 42
ITEM 16G. CORPORATE GOVERNANCE 42
ITEM 16H. MINE SAFETY DISCLOSURE 42
ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PRESENT INSPECTIONS 42
PART III 43
ITEM 17. FINANCIAL STATEMENTS 43
ITEM 18. FINANCIAL STATEMENTS 43
ITEM 19. EXHIBITS 43
SIGNATURES 45

 

ii
 

 

INTRODUCTION

 

Nomenclature

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

BUSINESS OF AVRICORE HEALTH INC.

 

Avricore Health Inc. (TSXV: AVCR) is a pharmacy service innovator focused on acquiring and developing early-stage technologies aimed at moving pharmacy forward. Through its flagship offering HealthTab™ (a wholly owned subsidiary), it provides a turnkey point-of-care testing platform, creating value for stakeholders and better outcomes for patients.

 

FINANCIAL AND OTHER INFORMATION

 

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

 

1
 

 

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

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

 

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

 

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

 

MEASUREMENT INFORMATION

 

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

 

PART I

 

ITEM 1. IDENTITY OF DIRECTORS SENIOR MANAGEMENT AND ADVISERS

 

Not applicable.

 

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

 

Not applicable.

 

ITEM 3. KEY INFORMATION

 

3.A.1. [Reserved]

 

3.B. Capitalization and Indebtedness

 

Not applicable.

 

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

 

Not applicable.

 

3.D. Risk Factors

 

Risks pertaining to the Company:

 

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

 

Since its inception, the Company has had limited revenues and has experienced significant operating losses each year. These losses are due to substantial expenditures on intellectual property protection, product development and product testing of commercial and consumer infection control product and pre-clinical testing for registration of a number of therapeutic products and over-the-counter (OTC) pharmaceutical products with Health Canada and the FDA. Sales of T36® Antiseptic Hand Sanitizer products were discontinued in the year ended December 31, 2012. During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business. The Company has changed its direction, and its current operations consist of developing and implementing its HealthTab™ point-of-care technology (POCT). Currently the Company is engaged in the rollout of the HealthTab™ point-of-care testing platform to 532 Shoppers Drug Mart and affiliated Loblaws locations nation-wide. As a result, future sales of the Company’s products are difficult to predict.

 

2
 

 

The Company has commenced generating operating cash flow, however failure to generate sufficient revenues and cash flow in the future could cause the Company to go out of business.

 

The Company has no history of pre-tax profit and in the previous four years has had only limited annual revenues for each of the years it has been operating. The Company sustained operating losses for each of its fiscal years and has sustained significant accumulated operating losses. The continued operation of the Company will be dependent upon its ability to generate operating revenues and to procure additional financing. Based upon current plans to introduce HealthTab™ into new markets in Canada and internationally, maintain the Company’s public listing on the TSX-Venture Exchange (the “Exchange”) and support the continued registration of its securities in the US, the Company may incur operating losses in future periods. These losses will occur because there are continuing expenses associated with the roll out of the Company’s HealthTab™ network, legal and accounting fees, the maintenance of its public listing and other expenses associated with running an operating business. Even if the Company becomes operationally profitable, the Company will need to raise significant amounts of new funding to expand these activities. Also, the Company may not be successful in generating significant revenues in the future. At the time of this report, the Company has sufficient funds to continue the roll out of its HealthTab™ network but it may be unable to do so without securing further financing. The Company may not be successful in generating revenues or raising capital in the future. Failure to generate revenues or raise capital could cause the Company to cease operations,

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4
 

 

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

 

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

 

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

 

Management of the Company at the time of this report, collectively own approximately 10% of the Company’s issued and outstanding common shares at that date. These shareholders, if acting together, could significantly influence all matters requiring approval by the Company’s shareholders, including the election of directors and the approval of mergers or other business combination transactions. Management may not make decisions that will maximize shareholder value and may make decisions that will contribute to or cause the entrenchment of management.

 

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

 

The Company’s common shares are currently quoted on the TSX Venture Exchange under the symbol “AVCR” and on the OTCQB under the symbol “AVCRF”. No assurance can be given that a market for the Company’s common shares will be quoted on an exchange in the U.S. or on the Over the Counter Bulletin Board. The Company’s common shares may be subject to illiquidity and investors may not be able to sell their shares in a timely manner.

 

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

 

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

 

(a)Such sale or purchase is exempt from Rule 15g-9;
(b)Prior to the transaction the broker or dealer has (1) approved the person’s account for transaction in penny stocks in accordance with Rule 15g-9, and (2) received from the person a written agreement to the transaction setting forth the identity and quantity of the penny stock to be purchased; and
(c)The purchaser has been provided an appropriate disclosure statement as to penny stock investment.

 

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

 

5
 

 

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

 

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

 

Risks Pertaining to the Industry

 

There is a risk of competition from alternative POCT platforms.

 

Although competition is currently limited competitors may emerge offering alternative platforms. The Company will be competing with companies that are potentially already entrenched in some markets or may be better funded than the Company.

 

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

 

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

 

ITEM 4. INFORMATION ON THE COMPANY

 

4.A. History and Development of the Company

 

Capital Pool Company

 

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

 

6
 

 

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

 

(a)Issues or proposes to issue, in consideration for the acquisition of significant assets or businesses, common shares or securities convertible, exchangeable or exercisable into common shares, which, if fully converted, exchanged or exercised would represent more than 25 percent of its common shares issued and outstanding immediately prior to the issuance;
(b)Enters into an arrangement, amalgamation, merger or reorganization with another issuer with significant assets, whereby the ratio of securities which are distributed to the security holders of the capital pool company and the other issuer results in the security holders of the other issuer acquiring control of the resulting entity; or
(c)Otherwise acquires significant assets other than cash.

 

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

 

Financings

 

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

 

Fiscal Year Ended  Nature of Share Issuance  Number of Shares   Amount ($) 
30-Jun-2001  Private Placement @  $0.34    294,119   $100,000 
30-Jun-2002  Canadian Prospectus Offering (IPO) @  $0.68    300,000   $ 204,000 
30-Jun-2003  Broker’s Warrant Shares on Canadian Prospectus Offering (IPO) @  $0.68    37,500   $25,500 
30-Jun-2004  Private Placement @  $0.60    86,667   $52,000 
   Private Placement @  $0.80    1,550,000   $1,240,000 
30-Jun-2005  Private Placement @  $0.40    750,000   $300,000 
30-Jun-2006  Private Placement @  $0.20    979,000   $195,800 
   Private Placement @  $0.20    275,000   $55,000 
30-Jun-2007  Private Placement @  $0.20    357,500   $71,500 
   Private Placement @  $0.40    2,000,000   $800,000 
30-Jun-2008  Private Placement @  $0.48    500,000   $240,000 
   Private Placement @  $0.60    875,000   $525,000 
30-Jun-2009  N/A             N/A 
30-Jun-2010  Private Placement @  $1.00    1,500,000   $1,500,000 
30-Jun-2011  Private Placement @  $0.40    818,750   $327,500 
   Private Placement @  $0.40    500,000   $200,000 
30-Jun-2012  Private Placement @  $0.40    140,000   $56,000 
30-Jun-2013  Private Placement @  $0.40    2,000,000   $800,000 
30-Jun-2014  Private Placement @  $0.40    937,500   $375,000 
30-Jun-2015  Private Placement @  $0.60    1,901,833   $1,141,100 
Stub period ended 31-Dec-2015  N/A             N/A 
31-Dec-2016  N/A             N/A 
31-Dec-2017  Private Placement @  $0.15    10,585,326   $1,587,799 
31-Dec-2018  Private Placement @  $0.15    5,327,335   $799,100 
31-Dec-2019  Private Placement @  $0.05    6,852,400   $342,620 
31-Dec-2019  Private Placement @  $0.07    4,206,435   $294,450 
31-Dec-2020  Private Placement @  $0.10    6,260,000   $626,000 
31-Dec-2021  Private Placement @  $0.10    8,740,000   $874,000 
31-Dec-2021  Private Placement @  $0.22    7,000,000   $1,540,000 

 

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4.B. Business Overview

 

Operations & Principal Activities

 

Avricore Health Inc. is a pharmacy service innovator focused on acquiring and developing early-stage technologies aimed at moving pharmacy forward. Through its flagship offering HealthTab™ (a wholly owned subsidiary), it provides a turnkey point-of-care testing platform, creating value for stakeholders and better outcomes for patients.

 

During the year ended December 31, 2019, the Company discontinued its over-the-counter (OTC) pharmaceutical products business and ceased production and sales of all generic and over-the-counter pharmaceuticals.

 

Avricore sees the community pharmacy as underutilized and is committed to supporting their ability to deliver innovation to modern healthcare consumers. Pharmacies face reduced revenues as a result of disruptions to the sector and regulatory changes. As a result, pharmacy owners are actively looking for innovations in service and value-added services, like HealthTab™, to support their business growth beyond the traditional dispensing model. Community pharmacy is expected to focus increasingly on cognitive services with attendant point of care testing in the future.

 

The Company hopes to improve health outcomes for patients and lower overall healthcare system costs in this way, bridging traditional healthcare platforms with disruptive innovations and eventually achieving the healthcare cost savings government and private payors are seeking to achieve.

 

This is all possible thanks to the Company’s HealthTab™ technology, which provides lab-accurate results for specific blood work within 12 minutes. Installed at the pharmacy and administered by the attending pharmacist, the patient can quickly access up to 27 bio-markers. The advantage of this innovation is that a consumer can quickly access data on their health with a simple patient assisted finger prick to share with their physician and healthcare team, track their health overtime, measure the impacts of therapies they are undertaking and screen for potential health risks.

 

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

 

During the year ended December 31, 2022, the Company completed the rollout of 416 HealthTab™ systems in Shoppers Drug Mart® and Loblaw family stores including pharmacist walk-in clinics, 378 in Ontario and 23 in British Columbia, 6 in Nova Scotia, 5 in Alberta and 4 in New Brunswick. The Company was honoured to have HealthTab™ placed in the first pharmacist-led primary healthcare clinic located in Lethbridge, Alberta. Not only was this the first clinic, it was also the first system placed in a Real Canadian Superstore®, as well as its first Alberta location.

 

Avricore is focused on expanding and further deploying HealthTab™ to best meet the current community pharmacy sector’s needs. The Company is also in late-stage discussions with other Canadian and international major pharmacy chains, and has a strong prospect list for future expansion.

 

The Company promotes a cleaner and greener economy and continues to drive towards sustainability, including regular evaluations of its sourcing and shipping procedures to ensure they are environmentally friendly.

 

8
 

 

Key developments in the later quarters of the year ended December 31, 2022 have included:

 

Key developments have included:

 

The Company recognized revenue of $1,768,374. The Company recorded deferred revenue of $252,000, for which the Company completed delivery in Q1 2023.

 

The Company significantly expanded the number of Shoppers Drug Mart pharmacies offering its HealthTab™ point-of-care testing platform under a renewed Master Service Agreement (MSA) to 532 locations nation-wide. In addition to Shoppers Drug Mart pharmacies, this new MSA and corresponding Statement of Work (SOW) provided for affiliated locations under the Loblaws family of brands, to utilize HealthTab™ upon request.

 

In 100 of these locations, the Company has deployed Abbott’s ID Now™, either in combination with the Afinion 2™ or standalone, to support virus detection and assess the demand and effectiveness of infectious disease screening in community pharmacies.

 

416 HealthTab™ systems were operating in Shoppers Drug Mart® and Loblaw family stores including pharmacist walk-in clinics as of December 31, 2022, 378 in Ontario and 23 in British Columbia, 6 in Nova Scotia, 5 in Alberta and 4 in New Brunswick. The Company was honoured to have HealthTab™ placed in the first pharmacist-led primary healthcare clinic located in Lethbridge, Alberta. Not only was this the first clinic, it was also the first system placed in a Real Canadian Superstore®, as well as its first Alberta location.

 

As of July 1st, 2022, the Government of Ontario brought into effect an expanded scope of practice for community pharmacists in the province, joining Alberta in this growing and popular approach. This includes limited prescribing for minor ailments, as well as the ability to perform certain point-of-care tests to assist patients with managing chronic disease. Approved tests include glucose, HbA1c and lipids, all of which HealthTab™ currently offers with the Abbott Afinion 2™. Also announced as part of this plan in Ontario, is a second stage of scope modifications, which will begin on January 1, 2023. This stage allows for limited prescribing for minor ailments and certain prescription renewals, further enhancing the value of community pharmacy.

 

These changes, and increasing demand, means Canadian pharmacy business is rapidly changing before our eyes, from being product focused to service focused. At $51.4 billion, the industry already represents a significant impact on healthcare, and the anticipated increase in funding and new service offerings, including point-of-care testing, will mean this practice will play an even more impactful role going forward.

 

During the pilot with Shoppers Drug Mart®, over 15,000 HealthTab™ tests were completed for more than 6,900 patients. The data collected confirmed that the patients tested had a high prevalence of previously undiagnosed diabetes, pre-diabetes and heart disease and significant near-term risk for major health events. Almost 60 per cent of patients needed an intervention to better manage their chronic disease. On average, 31 percent received a new chronic medication, 28 percent required a change in their current medication, and 235 patients were newly identified as diabetic. Patients also reported in post surveys that they valued receiving this information from their pharmacists, and those pharmacists indicated that HealthTab™ enabled an increase in the value of services they were able to provide to their patients.

 

Developed a unique quality assurance program with a third-part reference laboratory to offer HealthTab™ pharmacies industry leading validation for point-of-care instruments and test consumables.

 

Signing of a non-exclusive, pilot supplier distribution agreement in Canada between HealthTab™ Inc., and Abbott, with respect to the handheld blood chemistry analyzer, i-STAT Alinity. The agreement allows HealthTab™ to distribute Abbott’s point-of-care i-STAT Alinity and its associated tests for creatinine in Canadian pharmacies to better support patients with important information about their renal function.

 

Amendment to the Distribution Agreement adds Abbott’s popular ID NOW™ molecular testing device which will add onsite testing and reporting capabilities for SARS-CoV-2 as well as Respiratory Syncytial Virus (RSV), Influenza A & B and Streptococcus – a powerful combination for detecting infections before they spread.

 

9
 

 

Partnered with Ellerca Health Inc. to offer joint diabetes screening and management support.

 

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

 

Developing new pilot programs with national pharmacy chains,

 

Continuing to negotiate new POC diagnostic device integrations to expand the HealthTab™ testing menu.

 

Refining HealthTab™’s de-centralized clinical trials capabilities to monetize de-identified data associated with high-value Real-World Evaluation (RWE).

 

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

 

Key developments subsequent to December 31, 2022 have included:

 

As of the date of this report 532 participating Shoppers Drug Mart® pharmacies and Loblaw family stores are offering screening tests to patients via HealthTab™ systems. This innovative practice in healthcare delivery is expected to expand, as provinces struggle to recruit more family physicians. The program’s primary focus is to screen patients at-risk for diabetes and cardiovascular disease. In-store signage and print material will let customers know they are able to request HealthTab™ tests, and existing patients will be made aware through direct outreach from their Shoppers Drug Mart® or Real Canadian Superstore® pharmacist based on their health profile.

 

Signed a new Master Service Agreement and Statement of Work with Shoppers Drug Mart pharmacies to significantly expand the HealthTab point-of-care testing platform to up to 450 locations nation-wide, with affiliated locations under the Loblaw family of brands being included.

 

On March 28th, 2023 the Government of Canada tabled it’s budget for the year ahead, including a 10-year funding agreement with the Nation’s provinces to increase healthcare funding. This new funding approach is novel for the fact that each province will have specific agreements, opposed to the more traditional generalized formula. This approach is expected to bring substantial innovations related to healthcare data and new healthcare service delivery, as the provinces agreed to make changes to rules and practices which have limited data-flow optimization and healthcare access.

 

The Canadian Medical Association expressed support for many of the initiatives on March 30th, 2023 in relation to the healthcare agreement and encouraged government to institute recommendations from the Addressing Canada’s Health Workforce Crisis report from the Standing Committee on Health. One of the key items they pointed to was “…optimizing scopes of practice for health professionals…”.

 

Most provinces have already begun expanding the scope of practice of their pharmacists, with 7 provinces allowing these healthcare professionals to prescribe for minor ailments and 8 provinces either allowing or will soon allow them to order and interpret lab results.

 

Industry Trends

 

HealthTab™ is a cloud-based network technology that enables the world’s first harmonized, real-time response system where consumers receive a finger-stick blood test at their local pharmacy via a web-enabled clinical grade blood chemistry analyzer. These results are available in 12 minutes. Consumers’ bio-markers, which include key results related to heart, liver and kidney function, are received via secure login which they can then use to better understand their health performance and share with their healthcare team for evidence-based decision making. This one-of-a-kind real-time reporting system opens the door to improved preventative healthcare in public and private health systems.

 

10
 

 

De-identified data collected, with consumer consent across the HealthTab™ network of analyzers, can be shared with life-science companies and other research entities including the clinical research industry. The traditional clinical trial approach can be limited in the scope of time, demographical outreach, and other inherent exclusionary attributes. HealthTab™ presents a revolutionary model for utilizing the system’s unique ability to offer real-time evaluations of treated populations and real-world evaluation clinical trials.

 

Between January and February 2020, the Deloitte Center for Health Solutions surveyed multiple leaders from 17 pharmaceutical companies on their organizations’ RWE capabilities. Survey questions revolved around current and future applications for RWE, areas of investment, strategic partnerships, and use of Real World Data (RWD) and RWE in R&D.

 

Ninety-four percent of survey respondents believe using RWE in R&D will become important or very important to their organizations by 2022.
   
Almost all companies expect to increase investments in talent, technology, and external partnerships to strengthen their RWE capabilities.
   
Reduced clinical trial costs and trial failure rates using RWE in R&D
   
Entered strategic partnerships to access new sources of RWD (in fact, all have taken this step)

 

The Company believes it is very well positioned as a strategic partner and lead in this exciting growth sector. In addition, HealthTab™ is ideally situated to provide Real Time Real World Data (RTRWD). This is an important distinction from RWD because HealthTab™’s anonymized data can be transmitted in real time versus the lag that is accompanied with RWD that is gathered from clinical reporting systems, insurance claims and adverse event reporting systems.

 

Currently, HealthTab™ is available in certain Shoppers Drug Marts in several Canadian provinces. The Company has secured commitments with other pharmacies in Canada to place additional HealthTab™ systems and is in negotiations with corporate chains. Furthermore, the Company expanded a partnership agreement with the Ontario Pharmacists Association (OPA) to endorse HealthTab™ to pharmacies conducting COVID-19 testing and government for real-time reporting of test results. The OPA is the largest pharmacists’ association in the country, with over 10,000 members and over 4,600 community pharmacy locations.

 

HealthTab™ is being embraced as it is the most credible way to deploy point-of-care testing in the pharmacy and community setting where it offers the reliability, accuracy and flexibility the sector needs. Avricore has enjoyed a robust response from a variety of key industry players including, CROs, labs, pharmacies and researchers and has been engaging in a variety of technical discussions which are anticipated to lead to business.

 

As conversations progress, the Company will be making announcements in due course.

 

Fully Integrated Patient Health Records

 

The Company has been in technical discussions on the integration of HealthTab™ into the electronic medical records and pharmacy management systems with a Canadian market leader in the provision of these systems.

 

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HealthTab™’s API integration capabilities make it ideal to achieve an industry first, where a consumer’s test results can be directly linked to an electronic medical record as well as a patient’s personal health record, for real-time responses and smooth integration across the multiple platforms a health provider will use.

 

Connected Medical Devices

 

With greater utilization of integrated devices in almost all other sectors of daily life, the seamless connection of medical devices has been slow to catch up. That is changing, as Electronic Health Records (EHS) are becoming increasingly important to patients, providers, and researchers. Having quick, reliable access to critical information means better healthcare outcomes and by the end of 2023, the connected medical device market is expected to reach over $23 billion US. This sector includes near-to-patient devices like wearables, screening and diagnostic tools and even hospital-based systems.

 

Community Pharmacy Sector

 

In an era of rapid change in health care delivery, community pharmacy practice models and community pharmacy business models are both experiencing significant evolution in focus and daunting challenges to be met. We strongly believe that Avricore is a game-changing catalyst for community pharmacy to meet their practice and business challenges and increasingly focus on patient-centred cognitive services with attendant point-of-care testing in the future. Avricore is focused on expanding and further deploying its HealthTab™ and to best meet the current community pharmacy sector’s needs.

 

HealthTab Market Fast Facts

 

Point of Care Testing Market to reach $93.21 Billion USD in 2030 (Source)
Nearly 13.6 Million Canadians expected to be diabetic or prediabetic by 2030, with many undiagnosed (Source)
Over 1 in 3 Americans, approximately 88 million people, have pre-diabetes (Source)
Close to 160,000 Canadians 20 years and older are diagnosed with heart disease each year, often it’s only after a heart attack they are diagnosed (Source)
There are more than 10,000 pharmacies in Canada, 88,000 pharmacies in the US, nearly 12,000 in the UK.

 

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

 

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

 

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

 

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

 

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

 

12
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

4.C. Organization structure

 

The Company is not part of a group and has one wholly-owned subsidiaries, HealthTab Inc., which is incorporated in British Columbia.

 

4.D. Equipment

 

The Company’s property, plant and equipment is HealthTabTM systems deployed at pharmacy locations, comprised of system analyzers, system computer hardware and systems software.

 

Item 4A Unresolved Staff Comments

 

Not applicable.

 

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

 

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

 

5. A. Operating Results of the Company

 

Overview

 

In the last several years, the Company’s primary focus was on expanding its HealthTab™ point-of-care testing platform in pharmacies across Canada and beyond and begin to generate more substantial revenues. The pilot project announced with Shoppers Drug Mart® was successfully executed, despite operating under the extraordinary impacts of the COVID-19 pandemic. Currently the Company has completed the rollout of 532 HealthTab™ point-of-care testing platform Shoppers Drug Mart and affiliated Loblaws locations nation-wide.

 

The Company is in discussions with multiple pharmacy groups to expand the Canadian and international HealthTab™ network.

 

13
 

 

The most recent financials demonstrated that fiscal 2022 saw a year-over-year 1,340% increase in revenues and the Company has maintained strong fiscal discipline, maintaining a moderate operating cost model, conserving cash, and limiting exposure to further equity dilution while executing on the build out of HealthTab™.

 

Management’s focus is on expansion of the business to new markets, locations and jurisdictions; cost control and positive cash flows to ensure sustainable operations of the Company.

 

Results of Operations for the years ended December 31, 2022, 2021 and 2020

 

Revenue from the continuing operations was $1,768,374 for the year ended December 31, 2022 (2021 - $122,808; 2020 - $33,030). This represents the revenue earned by the POTC HealthTab™ business acquired in 2018.

 

Marketing and Communication expenses

 

  

Year ended

December 31,

2022

  

Year ended

December 31,

2021

  

Year ended

December 31,

2020

 
   $   $   $ 
Marketing   -    -    2,279 
Shareholder communications   173,035    329,342    28,972 
    173,035    329,342    31,251 

 

General and Administrative expenses

 

   Year ended   Year ended   Year ended 
  

December 31,

2022

  

December 31,

2021

  

December 31,

2020

 
   $   $   $ 
Bad debt   -    -    2,977 
Bank service charges   5,421    6,806    5,910 
Filing and registration fees   40,563    59,635    37,715 
Insurance   60,251    44,784    38,283 
Investor relations   -    5,312    1,265 
Office maintenance   31,888    30,738    17,550 
Payroll   34,813    -    - 
Regulatory fees   5,238    8,380    - 
Rent   16,800    12,810    5,268 
Travel   55,170    14,382    5,259 
    250,144    182,847    114,227 

 

Share-based compensation

 

Share-based compensation for the year ended December 31, 2022 of $331,522 (2021: $495,791; 2020: $130,219) is a non-cash item that represents the allocation of the fair value of options over the vesting period.

 

14
 

 

5. B. Liquidity and capital resources

 

Liquidity

 

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

 

Cash flows

 

Sources and Uses of Cash:

 

   Year ended   Year ended   Year ended 
  

December 31,

2022

  

December 31,

2021

  

December 31,

2020

 
   $   $   $ 
Cash used in operating activities   (437,832)   (1,234,154)   (1,223,396)
Cash used in investing activities   (1,208,516)   (140,364)   - 
Cash provided by financing activities   253,880    3,084,798    1,512,312 
Net change in cash and cash equivalents   (1,392,468)   1,710,280    288,916 
Cash and Cash Equivalents   620,527    2,012,995    302,715 

 

Capital resources

 

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

 

At December 31, 2022, the Company had a working capital of $826,238, compared to $2,074,533 at December 31, 2021. The Company believes that its cash on hand, the expected future cash inflows from the sale of its products, net proceeds from the closing of private placements and proceeds from loans, stock options and warrants exercised, if any, will be sufficient to finance the Company’s working capital and operational needs for at least the next 6 months. If the Company’s existing cash resources together with the cash the Company generates from the sales of its products are insufficient to fund its working capital and operational needs, the Company may need to sell additional equity or debt securities or seek additional financing through other arrangements.

 

During the year ended year December 31, 2020, the Company entered into a loan agreement with a third party for a secured loan in the amount of $1,000,000. The Loan was for a term of one year from the date of receipt of the funds, bore interest at a rate of 10% per annum and was secured with all of the present and after-acquired property of the Company. In 2021, the Company repaid the $1,000,000 loan at its maturity. The Company does not have any off-balance sheet arrangements.

 

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

 

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

 

5.D. Trend information

 

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

 

5.G. Safe Harbor

 

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

 

15
 

 

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

 

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

 

A. Directors and Senior Management

 

The following table sets forth certain information as of December 31, 2022 and as of the date of this report about the Company’s current directors and senior management. There have been no subsequent changes to the Company’s current directors and senior management, except as footnoted below:

 

Table No. 6:

Directors and Senior Management:

 

Name   Age   Position  

Other Reporting Companies in Canada

or the United States

            Company   Position
Hector Bremner   41   CEO, Director   N/A   N/A
Kiki Smith   56   CFO & Corporate Secretary  

A.I.S. Resources Limited

Ultra Lithium Inc.

Goldex Resources Corp.

 

Director

Senior Officer

Senior Officer

Rodger Seccombe   42   CTO, Director   N/A   N/A
David Hall   68   Director   RepliCel Life Sciences Inc.   Director
Alan Arnstein   54   Director   N/A   N/A
Robert Sindelar   69   Director   N/A   N/A
David Farnfield   59   Director   N/A   N/A

 

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

 

16
 

 

Ms. Kiki Smith CPA, CGA, CFO and Corporate Secretary,

 

Ms. Smith brings more than two decades of experience in managing and financing junior listed companies in the technology, mining exploration and food production sectors, including debt and equity financings, corporate structure design and management, cash flow management and forecasting, legal and regulatory compliance, investor communications, stakeholder engagement and risk management. She holds a BA in Economics from the University of British Columbia and a Certified Professional Accountant designation from the Certified Professional Accountants Association of British Columbia.

 

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

 

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

 

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

 

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

 

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

 

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

 

17
 

 

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

 

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

 

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

 

6.B. Compensation

 

Cash Compensation

 

Total compensation accrued and/or paid (directly and/or indirectly) to all Directors/Senior Management during the year ended December 31, 2022 and two previous years are detailed in Table No. 7 below:

 

Table No. 7

Annual Compensation of Senior Management

 

      Annual Compensation 

Long Term Compensation

Awards

 
Name and
Principal Position
  Year  Salary
($)
  Bonus
($)
  

Other

Annual

Compensation ($)

   Securities Under
Option/
SAR’s Granted
(#)
   FMV (2) Options
($)
 
                           
Hector Bremner  2022  Nil
   

Nil

    168,000    700,000    93,222 
Chief Executive Officer  2021  Nil
   35,000    150,000    325,000    73,130 
(Former VP Business Development)  2020  Nil   Nil     150,000    500,000    34,857 
                           
Kiki Smith  2022  Nil
   

Nil

    124,200    150,000    19,976 
Chief Financial Officer  2021  Nil
   30,000    120,000    225,000    50,629 
and Corporate Secretary (1)  2020  Nil   Nil    120,000    210,000    14,640 
                           
Rodger Seccombe  2022  Nil   Nil    168,000    700,000    93,222 
Chief Technology Officer  2021  Nil   35,000    127,500    325,000    73,130 
   2020  Nil   Nil    120,000    Nil    Nil 

 

 

(1) Consulting/management fees were paid to a consulting company owned by senior management;
(2) Share-based payments for options granted were measured using the Black-Sholes option pricing model.

 

18
 

 

Table No. 8

Director Stock Option at December 31, 2022

 

   Grant date   FMV(1) - $   Issued   Vested   Expiry Date 
Hector Bremner,    Aug 10, 2022    93,222    700,000 @ 0.15    175,000    Aug 10, 2027 
Director   Mar 22, 2021    73,130    325,000 @ 0.25    325,000    Mar 22, 2026 
    Dec 8, 2020    34,857    500,000 @ 0.08    500,000    Dec 8, 2025 
    Oct 15, 2019    2,031    150,000 @ $0.05    150,000    Oct 15, 2024 
    Jan 24, 2019    8,347    140,000 @ $0.075    140,000    Jan 24, 2024 
                          
Rodger Seccombe,    Aug 10, 2022    93,222    700,000 @ 0.15    175,000    Aug 10, 2027 
Director   Mar 22, 2021    73,130    325,000 @ 0.25    325,000    Mar 22, 2026 
    Oct 15, 2019    8,802    650,000 @ $0.05    650,000    Oct 15, 2024 
    April 11, 2018     30,233    150,000 @$0.21(2)   150,000    Apr 11, 2023 
                          
Alan Arnstein, Director   Aug 10, 2022    16,647    125,000 @ 0.15    31,250    Aug 10, 2027 
    Mar 22, 2021    16,876    75,000 @ 0.25    75,000    Mar 22, 2026 
                          
David Farnfield,    Aug 10, 2022     16,647    125,000 @ 0.15    31,250    Aug 10, 2027 
Director   Mar 22, 2021    16,876    75,000 @ 0.25    75,000    Mar 22, 2026 
    Oct 15, 2019     4,062    300,000 @ $0.05    300,000    Oct 15, 2024 
                          
David Hall, Director   Aug 10, 2022    59,928    450,000 @ 0.15    112,500    Aug 10, 2027 
    Mar 22, 2021    16,876    75,000 @ 0.25    75,000    Mar 22, 2026 
    Oct 15, 2019    812    60,000 @ $0.05    60,000    Oct 15, 2024 
    Apr 1, 2019    2,914    55,000 @ $0.06    55,000    Apr 1, 2024 
                          
Dr. Robert Sindelar,    Aug 10, 2022    16,647    125,000 @ 0.15    31,250    Aug 10, 2027 
Director   Mar 22, 2021    16,876    75,000 @ 0.25    75,000    Mar 22, 2026 
    Oct 15, 2019    1,219    90,000 @ $0.05    90,000    Oct 15, 2024 
    Apr 1, 2019    1,854    35,000 @ $0.06    35,000    Apr 1, 2024 

 

  (1) Share-based payments for options granted were measured using the Black-Sholes option pricing model.
  (2) Options repriced from $0.21 to $0.10 during the year ended December 31, 2020.

 

The following table gives certain information concerning stock option exercises during Fiscal 2022 by the Company’s Senior Management and Directors. It also gives information concerning stock option values.

 

Table No. 9

Aggregated Stock Options Exercises in the year ended December 31, 2022

Fiscal Year-end Unexercised Stock Options

Fiscal Year-end Stock Option Values

Senior Management/Directors

 

Name  Number of Shares Acquired on Exercise   Aggregate Value Realized   Value of Unexercised In-the-Money Options at Fiscal Year-End Exercisable/Un-exercisable 
Total   625,000   $62,500   $553,013 

 

19
 

 

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

 

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

 

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

 

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

 

Pension/Retirement Benefits: No funds were set aside or accrued by the Company during the year ended December 31, 2022 to provide pension, retirement or similar benefits for Directors or Senior Management.

 

6.C. Board Practices

 

6.C.1. Terms of Office.

 

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

 

6.C.2. Directors’ Service Contracts.

 

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

 

Each Officer agrees to provide sufficient time and attention to the business and affairs of the Company, to advise and counsel the Board of Directors of the Company and to channel to the Company all knowledge, business and customer contacts and any other information that could concern or be in any way beneficial to the Company. All information communicated to the Company will be the property of the Company. The Officers acknowledge that each is a “person in a special relationship”, as that expression is defined in the securities laws of various provinces of Canada, and may receive material information concerning the business and affairs of the Company that has not been generally disclosed, and covenant and agree that they will not purchase or sell any securities of the Company until such information has been generally disclosed. The Company is aware that the Officers may provide services to certain other companies from time to time as disclosed above. The Officers agree that they will not provide services to any other companies without the written approval of the Company.

 

The Company will pay a consulting fee in the amount of (Cdn) $18,000 per month to Hector Bremner for CEO services through a consulting agreement.

 

The Company will pay a consulting fee in the amount of (Cdn) $10,700 per month to a company controlled by Kiki Smith for CFO and Corporate Secretarial services through a consulting agreement.

 

The Company will pay a consulting fee in the amount of (Cdn) $18,000 per month to Rodger Seccombe for CTO services through a consulting agreement.

 

20
 

 

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

 

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

 

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

 

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

 

6.C.3. Board of Director Committees.

 

The Company has an Audit Committee, which is governed by an Audit Committee Charter (filed as Exhibit hereto) and recommends to the Board of Directors the engagement of the independent auditors of the Company and reviews with the independent auditors the scope and results of the Company’s audits, the Company’s internal accounting controls, and the professional services furnished by the independent auditors to the Company. The current members of the Audit Committee are: David Hall (Chairman), Robert Sindelar (Director) and Alan Arnstein (Director). The Audit Committee met once during the year ended December 31, 2022 to discuss and recommend approval by the Board of the Company’s audited financial statements. The interim financial statements and related Management Discussion and Analysis were approved by joint consent resolution.

 

6.D. Employees

 

As of December 31, 2022, the Company employed 1 employee. The Company engaged the services of President, Chief Executive Officer, Chief Financial Officer and Corporate Secretary, and Head of HealthTab Division through consulting service contracts.

 

21
 

 

6.E. Share Ownership

 

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

 

Table No. 10

Shareholdings of Directors and Senior Management

 

Title of Class  Name of Beneficial Owner  Number of Shares  

Options and

Warrants

  

Percent of

Class *

 
Common  Hector Bremner   1,350,000    2,115,000 options    3.48%
Common  Kiki Smith   916,000    720,300 options    1.64%
Common  Rodger Seccombe   4,461,111    1,975,000 options    6.46%
Common  Robert Sindelar   760,000    525,000 options    1.29%
Common  Alan Arnstein   25,000    400,000 options    0.43%
Common  David Farnfield   620,000    700,000 options    1.32%
Common  David Hall   1,367,618    890,000 options    2.27%
   Total Directors/Management   9,499,729    

Nil warrants

7,325,300 options

    16.89%

 

* Based on 99,644,664 shares outstanding as at June 14, 2023

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

22
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23
 

 

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

 

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

 

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

 

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

 

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

 

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

 

7.A. Major Shareholders

 

As of December 31, 2022, all shareholders have the same voting rights attached thereto as all other common shares of the Company. As of December 31, 2022, the Company is not aware of any companies or individuals that hold more than 5% of the Issued and Outstanding Common Shares.

 

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

 

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

 

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

 

—No Disclosure Required—

 

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

 

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

 

7.A.2. Canadian Share Ownership.

 

On December 31, 2022, the Company’s shareholders’ list showed 99,244,664 common shares outstanding, an estimated 53 registered shareholders. The Company’s transfer agent provides that there are 53 registered shareholders with Canadian addresses.

 

24
 

 

7.A.3. Control of the Company

 

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

 

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

 

—No Disclosure Necessary—

 

7.B. Related Party Transactions

 

Related party transactions are described in Note 18 to the consolidated financial statements and are shown below. The remuneration of the Company’s directors and other members of key management, being the President, Chief Executive Officer and Chief Financial Officer, who have the authority and responsibility for planning, directing and controlling the activities of the Company, consist of the following:

 

   Year Ended   Year Ended   Year Ended 
  

December 31,

2022

  

December 31,

2021

  

December 31,

2020

 
   $   $   $ 
Accounts payable and accrued liabilities   -    -    - 
                
Expenditures:               
Management fees   168,000    205,000    270,000 
Consulting fees   168,000    162,500    120,000 
Share-based compensation   151,088    264,393    58,159 
Professional Fees   124,200    150,000    120,000 

 

Share-based compensation relates to stock options granted and vested to management and directors of the Company during the twelve months ended December 31, 2022. All related party transactions were in the normal course of business operations.

 

Audit Fees

 

For the year ended December 31, 2022, the Company expects to pay Manning Elliot LLP audit fees of $65,000.

 

Indirect Payments

 

—No Disclosure Required—

 

Shareholder Loans

 

—No Disclosure Required—

 

Amounts Owing to Senior Management/Directors

 

—No Disclosure Required—

 

7.C. Interests of Experts and Counsel

 

—No Disclosure Required—

 

25
 

 

ITEM 8. FINANCIAL INFORMATION

 

8.A. Consolidated Statements and Other Financial Information

 

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

 

Basis of preparation

 

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

 

Significant estimates and judgments

 

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

 

8.A.7. Legal/Arbitration Proceedings

 

There are no legal proceedings against the Company.

 

8.B. Significant Changes

 

There are no significant changes.

 

26
 

 

ITEM 9. THE OFFER AND LISTING

 

9.A. Common Share Trading Information

 

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

 

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

 

Table No. 11

TSX Venture Exchange

Common Shares Trading Activity

Canadian Dollars

 

   High   Low   Closing 
Fiscal Quarter Ended March 31, 2023   0.37    0.275    0.30 
Fiscal Quarter Ended December 31, 2022   0.41    0.145    0.315 
Fiscal Quarter Ended September 30, 2022   0.19    0.125    0.155 
Fiscal Quarter Ended June 30, 2022   0.19    0.08    0.18 
Fiscal Quarter Ended March 31, 2022   0.17    0.11    0.13 
Fiscal Quarter Ended December 31, 2021   0.175    0.11    0.16 
Fiscal Quarter Ended September 30, 2021   0.22    0.15    0.15 
Fiscal Quarter Ended June 30, 2021   0.285    0.12    0.17 
Fiscal Quarter Ended March 31, 2021   0.69    0.09    0.235 
Fiscal Quarter Ended December 31, 2020   0.14    0.08    0.095 
Fiscal Quarter Ended September 30, 2020   0.15    0.02    0.15 
Fiscal Quarter Ended June 30, 2020   0.07    0.015    0.03 
Fiscal Quarter Ended March 31, 2020   0.04    0.01    0.035 
Fiscal Quarter Ended December 31, 2019   0.06    0.015    0.03 
Fiscal Quarter Ended September 30, 2019   0.07    0.02    0.03 
Fiscal Quarter Ended June 30, 2019   0.15    0.05    0.065 
Fiscal Quarter Ended March 31, 2019   0.10    0.055    0.06 
Fiscal Quarter Ended December 31, 2018   0.225    0.075    0.10 
Fiscal Quarter Ended September 30, 2018   0.19    0.1    0.15 
                
Fiscal Year Ended December 31, 2022   0.41    0.08    0.315 
Fiscal Year Ended December 31, 2021   0.69    0.09    0.16 
Fiscal Year Ended December 31, 2020   0.15    0.01    0.095 
Fiscal Year Ended December 31, 2019   0.15    0.015    0.03 
Fiscal Year Ended December 31, 2018   0.75    0.075    0.10 

 

27
 

 

9.A.5. Common Share Description

 

Registrar/Common Shares Outstanding/Shareholders

 

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

 

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

 

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

 

Stock Options

 

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

 

The changes in share options including those granted to directors, officers, employees and consultants during the years ended December 31, 2022, 2021 and 2020 are summarized as follows:

 

  

Year ended

December 31, 2022

  

Year ended

December 31, 2021

  

Year ended

December 31, 2020

 
   Number of Options   Weighted Average Exercise Price   Number of Options   Weighted Average Exercise Price   Number of Options   Weighted Average Exercise Price 
Beginning Balance   7,880,052   $0.13    6,706,072   $0.08    5,241,072   $0.13 
Options granted   3,125,000   $0.15    2,840,000   $0.22    1,730,000   $0.08 
Expired/Cancelled   (1,570,052)  $0.13    -    -    (160,000)  $0.07 
Exercised   (800,000)  $0.10    (1,666,020)  $0.08    (105,000)  $0.05 
Ending Balance   8,635,000   $0.14    7,880,052   $0.13    6,706,072   $0.08 
Exercisable   6,216,250   $0.14    7,692,552   $0.13    6,706,072   $0.08 

 

The following table summarizes information about share options outstanding and exercisable as at December 31, 2022:

 

Exercise Price   Expiry date  Options 
       Outstanding   Exercisable 
$0.17   March 13, 2023   250,000    250,000 
$0.10 (1)  March 27, 2023   200,000    200,000 
$0.10(2)  April 11, 2023   150,000    150,000 
$0.075   January 24, 2024   140,000    140,000 
$0.06   April 1, 2024   140,000    140,000 
$0.05   October 15, 2024   1,470,000    1,470,000 
$0.08   November 18, 2025   500,000    500,000 
$0.08   December 8, 2025   710,000    710,000 
$0.19   January 28, 2026   150,000    150,000 
$0.25   March 22, 2026   1,800,000    1,800,000 
$0.15   August 10, 2027   2,725,000    681,250 
$0.15   August 12, 2027   100,000    25,000 
$0.16   October 12, 2027   300,000    - 
         8,635,000    6,216,250 

 

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

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

 

28
 

 

The weighted average remaining life of the stock options outstanding at December 31, 2022 is 3.17 years (2021: 2.73 years).

 

Warrants

 

Table No. 12 lists, as of December 31, 2022, share purchase warrants (options to purchase common shares) outstanding, the date the share purchase warrants were issued, the exercise price, and the expiration date of the share purchase warrants. These warrants were issued in conjunction with private placements of the Company’s securities and all holders of the Company’s warrants are resident in Canada.

 

Table No. 12

Share Purchase Warrants Outstanding

 

  

Year Ended

December 31, 2022

  

Year Ended

December 31, 2021

  

Year Ended

December 31, 2020

 
  

Number of

Warrants

  

Weighted

Average

Exercise

Price

  

Number of

Warrants

  

Weighted

Average

Exercise

Price

  

Number of

Warrants

  

Weighted

Average

Exercise

Price

 
Beginning balance   18,781,066   $0.21    18,743,226   $0.16    20,704,664   $0.24 
Warrants issued   -    -    16,274,000    -    6,485,000   $0.15 
Exercised   (909,400)  $0.19    (10,058,660)  $0.16    -    - 
Warrants expired   (17,871,666)  $0.22    (6,177,500)  $0.15    (8,446,438)  $0.33 
Issued and exercisable   -    -    18,781,066   $0.21    18,743,226   $0.16 

 

9.A.6. Differing Rights

 

—No Disclosure Necessary—

 

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

 

—No Disclosure Necessary—

 

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

 

—No Disclosure Necessary—

 

9.C. Stock Exchanges Identified

 

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

 

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

 

ITEM 10. ADDITIONAL INFORMATION

 

10.A. Share Capital

 

10.A.1. Authorized/Issued Capital.

 

At December 31, 2022, there were an unlimited number of common shares authorized and 99,244,664 common shares issued and outstanding.

 

At December 31, 2021, there were an unlimited number of common shares authorized and 97,535,264 common shares issued and outstanding.

 

29
 

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

30
 

 

10.A.2. Shares Not Representing Capital.

 

—No Disclosure Necessary—

 

10.A.3. Shares Held By Company.

 

—No Disclosure Necessary—

 

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

 

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

 

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

 

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

 

10.A.6. History of Share Capital

 

The Company has financed its operations through funds raised in public and private placements of common shares and warrants and from revenues from the sale of its products. There is one class of shares with one vote per common share.

 

   Number of Shares   Share Capital 
Balance, December 31, 2019   52,472,619    21,400,106 
Shares issued for cash   6,260,000    626,000 
Exercise of options   105,000    6,672 
Shares issued for services (b)   3,480,000    52,200 
Acquisition of HealthTab™ Inc. (a)   2,000,000    100,000 
Shares issued for debt (c)   5,477,965    136,949 
Share issue cost   -    (35,075)
Balance, December 31, 2020   69,795,584    22,286,852 
Shares issued for cash   15,740,000    2,414,000 
Exercise of warrants   10,058,660    1,805,132 
Exercise of stock options   1,666,020    312,052 
Share issued for services (d)   275,000    38,500 
Share issuance costs   -    (238,221)
Balance, December 31, 2021   97,535,264    26,618,315 
Exercise of warrants   909,400    175,412 
Exercise of stock options   800,000    271,000 
Balance, December 31, 2022   99,244,664    27,064,727 

 

(a) On December 28, 2017, the Company completed the acquisition of all the common shares of HealthTab Inc. Under the share purchase agreement, the consideration paid by the Company included staged cash payment of $200,000 (paid in the fiscal year 2018), issuance of 2,666, 667 common shares (issued in the fiscal year 2018). In addition, in the years ended December 31, 2019 and 2020, common shares with an aggregate value of $200,000 were issued at the deemed price determined based on the market price of the shares at the time of issuance.

 

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

 

31
 

 

(c) The Company issued 5,477,965 common shares in exchange for services received and to settle accounts payables of $136,949. An aggregate of 1,900,000 shares were issued in settlement of $47,500 in amounts owing to certain directors and officers of the Company.

 

(d) The Company issued 275,000 common shares valued at $38,500 to a consultant in exchange for services received.

 

Except as disclosed above, no other shares were issued with a consideration other than cash during the years ended December 2020, 2021 and 2022. There were no changes in classes of shares or voting rights.

 

10.A.7. Resolutions/Authorizations/Approvals

 

—No Disclosure Necessary—

 

10.B. Memorandum and Articles of Association

 

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

 

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

 

Objects and Purposes

 

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

 

Share Capital

 

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

 

Share Certificates

 

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

 

No Limitation on Foreign Ownership

 

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

 

Dividends

 

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

 

Voting Rights

 

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

 

32
 

 

Borrowing Powers

 

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

 

Indemnity Provisions

 

Under the Articles and the BCA, the Company is now permitted (and is, in some circumstances, required) to indemnify a past or present director or officer of the Company or an associated corporation without obtaining prior court approval in respect of an “eligible proceeding”. An “eligible proceeding” includes any legal proceeding relating to the activities of the individual as a director or officer of the Company. However, under the BCA, the Company will be prohibited from paying an indemnity if: (a) the party did not act honestly and in good faith with a view to the best interests of the Company; (b) the proceeding was not a civil proceeding and the party did not have reasonable grounds for believing that his or her conduct was lawful; and (c) the proceeding is brought against the party by the Company or an associated corporation.

 

Directors – Number and Qualification

 

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

 

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

 

Directors - Powers and Limitations

 

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

 

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

 

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Amendment of Articles and Notice of Articles; Special Transactions

 

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

 

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

 

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

 

Shareholders’ Meetings

 

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

 

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

 

Change in Control

 

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

 

Insider Share Ownership Reporting

 

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

 

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Applicable Canadian Securities Law

 

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

 

10.C. Material Contracts

 

There are currently no material contracts.

 

10.D. Exchange Controls

 

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

 

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

 

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

 

10.E. Taxation

 

Canadian Federal Income Tax Considerations:

 

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

 

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

 

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

 

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

 

Dividends:

 

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

 

Disposition of Common Shares:

 

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

 

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

 

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

 

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

 

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

 

United States Taxation:

 

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation (“U.S. Taxpayer”) will recognize a gain or loss on the sale of the Company’s common shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the common shares. The gain or loss will be a capital gain or capital loss if the Company’s common shares are a capital asset in U.S. Taxpayer’s hands.

 

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

 

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

 

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

 

10.F. Dividends and Paying Agents

 

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

 

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

 

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10.G. Statement by Experts

 

The Company’s auditor for its consolidated financial statements was Manning Elliot for the years ended December 31, 2022, 2021 & 2020. Their audit reports for the years ended December 31, 2022, 2021, and 2020 are included with the related consolidated financial statements in this Annual Report.

 

10.H. Document on Display

 

— No Disclosure Necessary —

 

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

— No Disclosure Necessary —

 

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

 

12.A. Debt Securities

 

— No Disclosure Necessary —

 

12.B. Warrants and Rights

 

— No Disclosure Necessary —

 

12.C. Other Securities

 

— No Disclosure Necessary —

 

12.D. American Depository Shares

 

— No Disclosure Necessary —

 

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PART II

 

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

 

— No Disclosure Necessary —

 

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

 

— No Disclosure Necessary —

 

ITEM 15. CONTROLS AND PROCEDURES

 

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

 

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer and our Principal Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)) under the Securities and Exchange Act of 1934, as amended) as of December 31, 2022. The Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures as of December 31, 2022, were effective to give reasonable assurance that the information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and (ii) accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

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

 

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

 

To evaluate the effectiveness of the Company’s internal control over financial reporting, Management has used the Internal Control – Integrated Framework (2013), which is a suitable, recognized control framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management has assessed the effectiveness of the Company’s internal control over financial reporting and concluded that such internal control over financial reporting is effective as of December 31, 2022.

 

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Limitations on the Effectiveness of Controls

 

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

 

Attestation Report of the Registered Accounting Firm.

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

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

 

ITEM 16. RESERVED

 

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

 

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

 

ITEM 16B. CODE OF ETHICS

 

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

 

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

 

The management of the Company is responsible for establishing and maintaining disclosure controls and procedures for information relating to the Company, including its consolidated subsidiaries. The Company’s management is also responsible for establishing and maintaining adequate internal control over financial reporting.

 

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

 

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

 

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

 

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

 

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

 

ITEM 16C. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

External Auditor Service Fees

 

The Company’s auditors were Manning Elliot LLP for the years ended December 31, 2020-2022. The following table sets out the aggregate fees billed by Manning Elliot LLP over their engagement with the Company.

 

Year ended  Audit Fees  Audit Related Fees(1)  Tax Fees(2)  All Other Fees(3)
December 31, 2022  $65,000   $4,500   $Nil   $7,500 (0%)
                     
December 31, 2021  $29,500   $Nil   $Nil   $Nil (0%)
                     
December 31, 2020  $26,000   $Nil   $Nil   $Nil (0%)

 

(1)Related to assurance and related services that are reasonably related to the performance of the audit and review of the Company’s financial statements and not included in the amounts noted under Audit Fees.
(2)Related to fees billed by the Company’s external auditor for professional services rendered for tax compliance, tax advice and tax planning.
(3)Related to other accounting services that is excluded from the Audit Fees.

 

Pre-Approval Policies and Procedures

 

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

 

1.recommend to the Board of Directors the external auditor to be nominated by the Board of Directors and the compensation of the external auditor, and
2.to pre-approve all non-audit services provided by the external auditor.

 

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

 

—Not applicable—

 

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

 

—Not applicable—

 

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

 

—Not applicable—

 

ITEM 16G. CORPORATE GOVERNANCE

 

—Not applicable—

 

ITEM 16H. MINE SAFETY DISCLOSURE

 

—Not applicable—

 

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PRESEVNT INSPECTIONS

 

—Not applicable—

 

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PART III

 

ITEM 17. FINANCIAL STATEMENTS

 

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

 

The financial statements as required under ITEM #17 are attached hereto and found immediately following the text of this Annual Report. The audit reports of Manning Elliott LLP, Chartered Professional Accountants, are included herein immediately preceding the audited financial statements. (Manning Elliot LLP, Vancouver, British Columbia; PCAOB ID # 1524).

 

Audited Financial Statements

 

— included after exhibit list

 

ITEM 18. FINANCIAL STATEMENTS

 

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

 

ITEM 19. EXHIBITS

 

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

 

(A) Financial information

 

(i)Audited Consolidated Financial Statements for the year ended December 31, 2022.

 

  1. Auditor’s Reports, dated May 1, 2023, April 22, 2022 and April 28, 2021.
2.Consolidated Statements of Financial Position at December 31, 2022 and 2021.
3.Consolidated Statements of Comprehensive Loss for the years ended December 31, 2022, 2021, and 2020.
4.Consolidated Statements of Changes in Equity (Deficiency) for the years ended December 31, 2022, 2021, and 2020.
5.Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020.
6.Notes to Consolidated Financial Statements.

 

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(B) Index to Exhibits:

 

1. Articles of Incorporation –

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

 

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

2. Instruments defining the rights of holders – N/A
3. Intentionally deleted.
4. Material contracts – N/A
5. N/A
6. Calculation of earnings per share – N/A
7. Explanation of calculation of ratios – N/A
8. Subsidiaries - N/A
9. Statement pursuant to the instructions to Item 8.A.4, regarding the financial statements filed in registration statements for initial public offerings of securities – N/A
10. Notice required by Rule 104 of Regulation BTR – N/A
11. Code of Ethics – N/A
12.1* Certification of Chief Executive Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002
12.2* Certification of Chief Financial Officer pursuant to Section 302 of Sarbanes–Oxley Act of 2002
13.1* Certification of Chief Executive Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002
13.2* Certification of Chief Financial Officer pursuant to Section 906 of Sarbanes–Oxley Act of 2002
14. Legal opinion – N/A
15. Additional exhibits:

 

  a) Audit Committee Charter
  b) Stock Option Plan

 

16. Mine Safety Disclosures – N/A
101. INS* XBRL Instance Document
101. SCH* XBRL Taxonomy Extension Schema Document
101. CAL* XBRL Taxonomy Extension Calculation Linkbase Document
101. DEF* XBRL Taxonomy Extension Definitions Linkbase Document
101. LAB* XBRL Taxonomy Extension Label Linkbase Document
101 .PRE*XBRL Taxonomy Extension Presentation Linkbase Document.

 

* Filed herewith.

 

44
 

 

 

Avricore Health Inc.

 

Consolidated Financial Statements

 

For the years ended December 31, 2022, 2021 and 2020

 

F-1
 

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders and the Board of Directors of Avricore Health Inc.

 

Opinion on the Consolidated Financial Statements

 

We have audited the accompanying consolidated statements of financial position of Avricore Health Inc. and its subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive loss, changes in equity and cash flows for the years ended December 31, 2022, 2021 and 2020, and the related notes (collectively referred to as the “consolidated financial statements”).

 

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years ended December 31, 2022, 2021 and 2020, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

 

Explanatory Paragraph – Going Concern

 

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

 

Basis for Opinion

 

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

 

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

 

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

 

Critical Audit Matters

 

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

 

/s/ Manning Elliott LLP

 

CHARTERED PROFESSIONAL ACCOUNTANTS

 

Vancouver, Canada

 

May 1, 2023

 

PCAOB ID: 1524

 

We have served as the Company’s auditor since 2020.

 

F-2
 

 

Avricore Health Inc.

Consolidated Statements of Financial Position

As at December 31, 2022 and 2021

(Expressed in Canadian Dollars)

 

   Note   2022   2021 
       $   $ 
ASSETS              
               
Current Assets              
Cash and cash equivalents       620,527    2,012,995 
Term deposit       10,000    - 
Accounts receivable  4    770,373    91,548 
Prepaid expenses and deposits  5    30,231    54,467 
Current assets       1,431,131    2,159,010 
               
Equipment  6    1,107,991    90,875 
Intangible assets  7    29,861    31,508 
Total Assets       2,568,983    2,281,393 
               
LIABILITIES              
               
Current Liabilities              
Accounts payable and accrued liabilities  8    312,893    44,477 
Deferred revenue       252,000    - 
Loans payable  9    40,000    40,000 
Liabilities       604,893    84,477 
               
SHAREHOLDERS’ EQUITY (DEFICIENCY)              
Share capital  10    27,064,727    26,618,315 
Reserves  10    5,933,708    5,794,718 
Deficit       (31,034,345)   (30,216,117)
Equity       1,964,090    2,196,916 
Total Liabilities and Shareholders’ Equity (Deficiency)       2,568,983    2,281,393 

 

Nature of operations and going concern (Note 1)

Subsequent events (Note 19)

 

Approved and authorized on behalf of the Board of Directors on May 1, 2023.

 

“Hector Bremner”   “David Hall”
Hector Bremner, Director   David Hall, Chairman

 

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

 

F-3
 

 

Avricore Health Inc.

Consolidated Statements of Operations and Comprehensive Loss

For the years ended December 31, 2022, 2021 and 2020

(Expressed in Canadian Dollars)

 

   Note   2022   2021   2020 
       $   $     
Revenue  18    1,768,374    122,808    33,030 
                    
Cost of sales       1,311,581    92,287    15,550 
Gross profit       456,793    30,521    17,480 
                    
Expenses                   
Advertising and promotion       2,961    -    - 
Amortization  6 & 7    631    17,984    - 
Consulting  12    197,860    355,350    174,321 
General and administrative  11    250,144    182,847    114,227 
Management Fees  12    168,000    205,000    270,000 
Shareholder communications       173,035    329,342    31,251 
Professional fees  12    150,585    189,796    159,593 
Share-based compensation  10 & 12    331,522    495,791    130,219 
Expense, by nature       (1,274,738)   (1,776,110)   (879,611)
Other income (expense)                   
Finance costs  9    -    (38,438)   (158,952)
Gain on settlement and write-off of liabilities       -    75,467    33,899 
Foreign exchange gain (loss)       298    (153)   (6,350)
Write-down on inventories       -    -    (180,432)
Interest income       8,086    581    - 
Write-off of accounts receivable       (8,667)   -    - 
Net loss from continuing operations       (283)   37,457    (311,835)
                    
Net loss and comprehensive loss for the year       (818,228)   (1,708,132)   (1,173,966)
                    
Basic and Diluted Loss Per Share       (0.01)   (0.02)   (0.02)
                    
Weighted Average Number of Common Shares Outstanding       97,859,216    92,610,766    60,449,165 

 

Segmented information (Note 14)

 

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

 

F-4
 

 

Avricore Health Inc.

Consolidated Statements of Changes in Equity (Deficiency)

For the years ended December 31, 2022, 2021 and 2020

(Expressed in Canadian Dollars)

 

   

Number

of Shares

    Share Capital     Shares to be Issued     Shares Subscribed    

Warrant

Reserve

   

Option

Reserve

    Deficit     Total  
          $     $     $     $     $     $     $  
Balance, December 31, 2019     52,472,619       21,400,106       100,000       10,000       904,698       4,453,764       (27,334,019 )     (465,451 )
Shares issued for cash     6,260,000       626,000       -       -       -       -       -       626,000  
Exercise of options     105,000       6,672       -       -       -       (1,422 )     -       5,250  
Shares issued for services     3,480,000       52,200       -       -       -       -       -       52,200  
Acquisition of HealthTab™ Inc.     2,000,000       100,000       (100,000 )     -       -       -       -       -  
Shares issued for debt     5,477,965       136,949       -       (10,000 )     -       -       -       126,949  
Share issue cost     -       (35,075 )     -       -       9,833       -       -       (25,242 )
Share subscriptions received     -       -       -       10,000       -       -       -       10,000  
Share-based compensation     -       -       -       -       -       130,219       -       130,219  
Net loss for the year     -       -       -       -       -       -       (1,173,966 )     (1,173,966 )
Balance, December 31, 2020     69,795,584       22,286,852       -       10,000       914,531       4,582,561       (28,507,985 )     (714,041 )
Shares issued for cash     15,740,000       2,414,000       -       (10,000 )     -       -       -       2,404,000  
Exercise of warrants     10,058,660       1,805,132       -       -       (151,395 )     -       -       1,653,737  
Exercise of stock options     1,666,020       312,052       -       -       -       (186,395 )     -       125,657  
Share issued for services     275,000       38,500       -       -       -       -       -       38,500  
Share issuance costs     -       (238,221 )     -       -       139,625       -       -       (98,596 )
Share-based compensation     -       -       -       -       -       495,791       -       495,791  
Net loss for the year     -       -       -       -       -       -       (1,708,132 )     (1,708,132 )
Balance, December 31, 2021     97,535,264       26,618,315       -       -       902,761       4,891,957       (30,216,117 )     2,196,916  

 

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

 

F-5
 

 

Avricore Health Inc.

Consolidated Statements of Changes in Equity (Deficiency)

For the years ended December 31, 2022, 2021 and 2020

(Expressed in Canadian Dollars)

 

  

Number

of Shares

  

Share

Capital

   Shares to be Issued  

Shares

Subscribed

  

Warrant

Reserve

  

Option

Reserve

  

 

Deficit

  

 

Total

 
       $   $   $   $   $   $   $ 

Balance, December 31, 2021

   97,535,264    26,618,315         -               -    902,761    4,891,957    (30,216,117)   2,196,916 
Exercise of warrants   909,400    175,412    -    -    (1,532)   -    -    173,880 
Exercise of options   800,000    271,000    -    -    -    (191,000)   -    80,000 
Share-based compensation   -    -    -    -    -    331,522    -    331,522 
Net loss for the year   -    -    -    -    -    -    (818,228)   (818,228)
Balance, December 31, 2022   99,244,664    27,064,727    -    -    901,229    5,032,479    (31,034,345)   1,964,090 

 

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

 

F-6
 

 

Avricore Health Inc.

Consolidated Statements of Cash Flows

For the years ended December 31, 2022, 2021 and 2020

(Expressed in Canadian Dollars)

 

   2022   2021   2020 
   $   $     
Operating Activities               
Net loss   (818,228)   (1,708,132)   (1,173,966)
Adjustment for non-cash items:               
Amortization   183,047    17,984    - 
Finance cost   -    38,438    144,488 
Gain on settlement of liabilities   -    -    (33,899)
Write-down of inventories   -    -    180,432 
Write-off of accounts receivable   8,667    -    - 
Share-based payments   331,522    495,791    130,219 
Change in working capital items:               
Accounts receivable   (687,492)   (79,620)   3,546 
Prepaid expenses and deposits   24,236    70,977    45,259 
Deferred revenue   252,000    -    - 
Inventories   -    -    (180,432)
Accounts payable and accrued liabilities   268,416    (69,592)   (339,043)
Net cash used in operating activities   (437,832)   (1,234,154)   (1,223,396)
                
Investing Activities               
Intangible assets   (5,171)   (35,006)   - 
Purchase of equipment   (1,193,345)   (105,358)   - 
Term deposit   (10,000)   -    - 
Net cash used in investing activities   (1,208,516)   (140,364)   - 
                
Financing Activities               
Proceeds from issuance of shares   -    2,404,000    626,000 
Proceeds from exercise of warrants   173,880    1,653,737    - 
Proceeds from exercise of stock options   80,000    125,657    5,250 
Share issuance costs   -    (98,596)   (25,242)
Share subscription received   -    -    10,000 
Loan repaid   -    (1,000,000)   - 
Loan proceeds   -    -    940,000 
Finance cost   -    -    (30,000)
Lease payments   -    -    (13,696)
Net cash provided by financing activities   253,880    3,084,798    1,512,312 
                
(Decrease) increase in Cash and Cash Equivalents   (1,392,468)   1,710,280    288,916 
Cash and Cash Equivalents, Beginning of Year   2,012,995    302,715    13,799 
Cash and Cash Equivalents, End of Year