AVCRF Avricore Health Inc (QB)

Vanc Pharmaceuticals Inc.

(Formerly Nuva Pharmaceuticals Inc.)

Consolidated Financial Statements

For The Three Month Period Ending June 30, 2014  

(Unaudited - Expressed In Canadian Dollars)

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NOTICE TO THE READER

Under National Instrument 51-102, Part 4, subsection 4.3(3) (a), if an auditor has not performed a review of the interim financial statements, they must be accomplished by a notice indicating that the interim financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim financial statements of the Company have been prepared by and are the responsibility of the Company’s management. The unaudited condensed interim financial statements have been prepared using accounting policies in compliance with International Financial Reporting Stands for the preparation of the condensed interim financial statements and are in accordance with IAS 34 – Interim Financial Reporting.

The Company’s independent auditor has not performed a review of these unaudited condensed interim financial statements in accordance with standards established by the Canadian Chartered Professional Accountants for a review of interim financial statements by an entity’s auditor.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.) Condensed Interim Consolidated Statements of Financial Position As at September 30, 2014 and 2013 (Unaudited - Expressed In Canadian Dollars)
	September 30, 2014	June 30, 2014
ASSETS
Current Assets
Cash and Equivalents	$                95,831	$             295,377
Prepaid	2,500	2,500
Accounts Receivable (Note 4)	9,994	15,629
	108,325	313,506
Equipment	29,938	30,912
Intellectual Property (Note 5)	476,000	476,000
Total Assets	614,264	820,418
LIABILITIES
Current Liabilities
Accounts Payable and Accrued Liabilities (Note 7)	$70,487	$             124,343
Promissory Notes – Current Portion (Note 10)	16,489	32,978
	86,976	157,321
SHAREHOLDERS’ DEFICIT
Share Capital  (Notes 11)	8,990,307	8,990,307
Share Capital – Share Subscriptions (Note 11)	-	-
Reserves  (Notes 11)	4,044,516	4,022,716
Deficit	(12,507,535)	(12,349,927)
	527,288	663,097
Total Liabilities & Shareholders’ Deficit	$                 614,264	$            820,418

*See accompanying notes to the condensed interim consolidated financial statements

Going concern (Note 1) Commitments (Note 15) Subsequent events (Note 18)

Approved and authorized on Behalf of the Board of Directors on November 24, 2014

                                           “ Eugene Beukman”            

                                            “Jamie Lewin”             

                                      Eugene Beukman, Director

Jamie Lewin, Director

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.) Condensed Interim Consolidated Statements of Comprehensive Income / (Loss) For The Three Month Period Ended September 30, 2014 and 2013 (Expressed In Canadian Dollars)
		September 30, 2014		September 30, 2013
Expenses
Amortization	$	973	$	-
Bank Service Charges		306		407
Filling Fees and Transfer Agent		1,040		5,558
Foreign exchange		-		3
Investor Relations		15,000		-
Legal and Audit		1,446		9,317
Management & Consulting Fees		61,800		19,982
Office and Miscellaneous		7,192		496
Product Registration & Development		9,762		1,937
Professional Fees		10,032		7,429
Rent		9,900		-
Research		13,500		-
Stock based compensation		21,800		121,800
Travel		4,858		2,514
Total Expenses		144,108		169,443
Net Loss before Other Items		(157,608)		(169,443)
Other Items
Finance expense		-		-
Other Income		-		-
Net Gain/(Loss) on Liabilities Settled  (Note 12)		-		19,110
Comprehensive Income/(Loss) for the Period	$	(157,608)	$	(150,333)
Basis Earnings/(Loss) Per Share	$	(0.01)	$	(0.01)
Diluted Earnings/(Loss) Per Share	$	(0.01)	$	(0.01)
Weighted Average of Shares Outstanding		34,815,020		21,849,952

*See accompanying notes to the condensed interim consolidated financial statements

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.) Consolidated Statements of Changes In Equity For The Three Month Period Ended September 30, 2014 and 2013 (Expressed In Canadian Dollars)
	Number Of Shares	Share Capital	Share Subscriptions		Warrant Reserve		Option Reserve		Deficit	Total
		$	$		$		$		$	$
Balance July 1, 2013	21,617,075	7,943,874	800,000		1,668,180		1,640,614		(11,615,980)	436,688
Issued during year
For Cash	-	-	-		-		-		-	-
For Assets (Note 11)	3,400,000	306,000	-		-		-		-	306,000
Share issue cost	-	-	-		-		-		-	-
Warrant in placement	-	-	-				-		-	-
Share Subscriptions	-	-	-		-		-		-	-
Stock based compensation	-	-	-		-		121,800		-	121,800
Net comprehensive loss	-	-	-		-		-		(150,333)	(150,333)
Balance September  30, 2013	25,017,075	8,249,874	800,000		1,668,180		1,762,414		(11,766,313)	714,155
Balance June 30, 2014	36,767,075	8,990,307		-	2,090,747	1,931,969		(12,349,926)			663,097
Issued during year
For Cash	-	-		-	-	-		-			-
For Assets (Note 11)	-	-		-	-	-		-			-
Share issue cost	-	-		-	-	-		-			-
Warrant in placement	-	-		-	-	-		-			-
Share Subscriptions	-	-		-	-	-		-			-
Stock based compensation	-	-		-	-	21,800		-			21,800
Net comprehensive loss	-	-		-	-	-		(157,608)			(157,608)
Balance September 30, 2014	36,767,075	8,990,307		-	2,090,747	1,953,769		(12,507,535)			527,288

*See accompanying notes to the condensed interim consolidated financial statements

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)  Condensed Interim Consolidated Statements of Cash Flow For The Three Month Period Ended June 30, 2014 and 2013 (Expressed In Canadian Dollars)
	September 30, 2014	September 30, 2013
Operating Activities:
Income/(Loss) and Comprehensive Income/(Loss)	$ (157,608)	$ (150,333)
Items Not Involving Cash
Amortization	973	-
Settlement of Current Liabilities	-	(19,110)
Stock based compensation	21,800	121,800
	(134,835)	(47,643)
Changes in Non-Cash Working Capital Items
(Increase)/Decrease in Accounts Receivable	5,635	9,663
(Increase)/Decrease in Prepaid	-	-
Increase in Accounts Payable and Accruals	(53,856)	(47,738)
	(48,221)	(38,075)
Investing Activities:
Equipment	-	-
Financing Activities:
Proceeds from Private Placement	-	-
Share Issue Costs	-	-
Short Term Loans	-	(26,906)
Promissory Notes	(16,489)	(30,167)
	(16,489)	(57,073)
Increase/ (Decrease) in Cash	(199,546)	(142,791)
Cash, Beginning of Period	295,377	619,296
Cash, End of Period	$                 95,831	$                 476,404
Transactions Not Involving Cash
Shares for Debt Settlement	$                           -	$                           -
Shares for Assets (FerroHeme & Pedia Safe License)	-	306,000
Total	$                           -	$               306,000

*See accompanying notes to the condensed interim consolidated financial statements

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

1.  NATURE OF OPERATIONS AND GOING CONCERN

Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.) (the “Company”) was incorporated under the Company Act of British Columbia on May 30, 2000 and is listed on the TSX Venture Exchange (the “Exchange)” as “NPH” and is quoted on the OTC as “NUVPF”. The address of the Company’s corporate office and principal place of business is located at 615 - 800 W. Pender St, Vancouver, BC, V6C 2V6.

The Company’s main business activity until October 31, 2011 was the development, production and marketing of infection control agent products, principally a product marketed as “T³6^®”. Effective November 26, 2003, the name of the Company was changed from Duft Biotech Capital Ltd. to ALDA Pharmaceuticals Corp. During the year ended June 30, 2012, the Company granted Canadian manufacturing and marketing rights for certain T³6^® products to a former officer of the Company. On August 12, 2013 the Company again changed its name to Nuva Pharmaceuticals Inc. and subsequent to the year ended June 30, 2014, the Company changed its name to Vanc Pharmaceuticals Inc.

The Company is now focused on the licensing and sales of pharmaceuticals that can be registered as natural products, Over-the-counter’s and generics.

These consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. There are conditions and events, which constitute material uncertainties that may cast significant doubt on the validity of this assumption. The Company has always experienced operating losses and negative operating cash flows. Operations have been funded by the issuance of share capital. Management has estimated that the Company will have adequate funds from existing working capital to meet its corporate, administrative and operational obligations during the upcoming year-ended June 30, 2015.

The continuation of the Company as a going concern is dependent upon its ability to raise additional financing and ultimately attain and maintain profitable operations. To the extent the Company is unable to cover its ongoing cash requirements through operations; the Company expects to raise additional financing to cover any shortfall. There can be no assurance that such financing and profitability will occur in the amounts and with terms expected. During the year-ended June 30, 2013, the Company was successful in raising $800,000 and in April 2014 $375,000 in private placements and has plans to raise additional capital in the subsequent year once raised reserves start to decrease.

In the event that cash flow from operations, if any, together with the proceeds from any future financings are insufficient to meet the Company’s current operating expenses, the Company will be required to re-evaluate its planned expenditures and allocate its total resources in such a manner as the Board of Directors and management deems to be in the Company’s best interest. This may result in a substantial reduction of the scope of existing and planned operations.

These consolidated financial statements do not reflect any adjustments, which could be material, to the carrying values of assets and liabilities, which may be required should the Company be unable to continue as a going concern.

	September 30, 2014 $	June 30, 2013 $
Comprehensive Income/(Loss)	(157,608)	(733,946)
Deficit	(12,507,535)	(12,349,926)
Working capital	21,349	156,185

2.  STATEMENT OF COMPLIANCE

These financial statements have been 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”), including IAS 34, Interim Reporting.

These consolidated financial statements were approved and authorized for issue by the Board  of Directors of the Company on November 24, 2014.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 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 to make estimates and judgments concerning the future. 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 period in which the estimates are revised.

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

i)

Recoverability of the carrying value of Intangible Assets:

The Company is required to review the carrying value of its intangible assets for potential impairment. Impairment is indicated if the carrying value of the Company’s intangible assets is not recoverable. If impairment is indicated, the amount by which the carrying value of intangible assets exceeds the estimated fair value is charged to the statement of loss and comprehensive loss.

Evaluating the recoverability requires judgments in determining whether future economic benefits from sale or otherwise are likely. Evaluation may be more complex where activities have not reached a stage which permits a reasonable assessment of the viability of the asset. Management must make certain estimates and assumptions about future events or circumstances including, but not limited to, the interpretation of marketing and sales data as well as the Company’s financial ability to continue marketing and sales activities and operations.

ii)

Inputs used in Black Scholes valuation model (volatility; interest rate; expected life and dividend yield) in accounting for Share Purchase Warrant transactions and Options granted:

Estimating the fair value of granted share purchase warrants required determining the most appropriate valuation model which is dependent on the terms and conditions of the grant. The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model including the volatility, expected life of warrants and options, risk free interest rate and dividend yield.

iii)

Provision for Contingent Liabilities

Management must estimate the likelihood of a financial obligation arising from a contingent liability if it is deemed more likely than not, that there will be a future cash outflow due to a past event involving the Company. For this estimate, a provision must be made if the amount of the outflow can be reasonably determined.

iv)

Useful life of Equipment

The useful life of equipment is based on management estimates at the time of acquisition. The Company amortizes assets, using declining balance method, over the useful life of the asset. Estimates of residual values, useful lives and amortization methods are reviewed periodically by management. Any changes that arise from periodic reviews are accounted for and adjusted prospectively.

Management must also make significant judgments or assessments as to how financial assets and liabilities are categorized.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

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

i)

Going concern

The assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances (Note 1).

ii)

Tax interpretations, regulations, and legislation in the various jurisdictions operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates. The Company is subject to assessments by tax authorities who may interpret the tax law differently. Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments.

Consolidation

These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Vanc Marine Pharmaceuticals Inc. (Formerly “Nuva Therapeutics Corp.”). The subsidiary is an active company, of which the shares were acquired pursuant to an asset purchase agreement. All significant inter-company balances and transactions have been eliminated on consolidation.

Determination of functional currency

The functional currency of the Company is measured using the currency of the primary economic environment in which that the Company operates. The Company determines the functional currency through an analysis of several indicators such as expenses and cash flow, financing activities, retention of operating cash flows, and frequency of transactions with the reporting entity. The Company’s functional currency is Canadian dollar.

Transactions and balances

Transactions denominated in foreign currencies are translated into the relevant functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the consolidated statements of operations and loss.

Share-based payments

The Company operates an employee stock option plan. Share-based payments to employees are measured at the fair value of the instruments issued and amortized over the vesting periods. Share-based payments to non- employees are measured at the fair value of goods or services received or the fair value of the equity instruments issued, if it is determined the fair value of the goods or services cannot be reliably measured, and are recorded at the date the goods or services are received. The corresponding amount is recorded to the option reserve. The fair value of options is determined using a Black–Scholes pricing model which incorporates all market vesting conditions.

The number of shares and options expected to vest is reviewed and adjusted at the end of each reporting period such that the amount recognized for services received as consideration for the equity instruments granted shall be based on the number of equity instruments that eventually vest.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Share Purchase Warrants

The Company has adopted the Black Scholes Valuation model with respect to the measurement of warrants issued as private placement units. This method allocates the proceeds received based on the fair value of the warrants, with any remaining value greater than the warrant’s fair value being allocated to the common shares. The fair value attributed to the warrants is recorded as contributed surplus. When warrants are exercised, the value is transferred from contributed surplus to capital stock. If the warrants expire unexercised, the related amount remains in contributed surplus.

Earnings/(Loss) per share

Basic loss per share is calculated by dividing the loss attributable to common shareholders by the weighted average number of common shares outstanding in the year. For all years presented, the income/(loss) attributable to common shareholders equals the reported loss attributable to owners of the Company. Diluted loss per share is calculated by the treasury stock method. Under the treasury stock method, the weighted average number of common shares outstanding for the calculation of diluted income/(loss) per share assumes that the proceeds to be received on the exercise of dilutive share options and warrants are used to repurchase common shares at the average market price during the year.

Income taxes

Income tax expense comprises current and deferred tax. Income tax is recognized in the statement of comprehensive income / (loss) except to the extent it relates to items recognized in other comprehensive income or directly in equity.

Current tax

Current tax expense is based on the results for the period as adjusted for items that are not taxable or not deductible. Current tax is calculated using tax rates and laws that were enacted or substantively enacted at the end of the reporting period. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation.  Provisions are established where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred tax

Deferred taxes are the taxes expected to be payable or recoverable on the difference between the carrying amounts of assets in the statement of financial position and their corresponding tax bases used in the computation of taxable profit, and are accounted for using the statement of financial position liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences between the carrying amounts of assets and their corresponding tax bases. Deferred tax assets are recognized to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill or from the initial recognition (other than in a business combination) of other assets in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities:

·

are generally recognized for all taxable temporary differences;

·

are recognized for taxable temporary differences arising on investments in subsidiaries except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future; and

·

are not recognized on temporary differences that arise from goodwill which is not deductible for tax purposes.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

Deferred tax assets:

·

are recognized to the extent it is probable that taxable profits will be available against which the

·

deductible temporary differences can be utilized; and

·

are reviewed at the end of the reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of an asset

Financial instruments

The Company classifies its financial instruments in the following categories: at fair value through profit or loss, loans and receivables, held-to-maturity investments, available-for-sale and other financial liabilities. The classification depends on the purpose for which the financial instruments were acquired. Management determines the classification of its financial instruments at initial recognition. All financial assets and liabilities are recorded at fair value at initial recognition.

Financial assets are classified at fair value through profit or loss when they are either held for trading for the purpose of short-term profit taking, derivatives not held for hedging purposes, or when they are designated as such to avoid an accounting mismatch or to enable performance evaluation where a group of financial assets is managed by key management personnel on a fair value basis in accordance with a documented risk management or investment strategy. Such assets are subsequently measured at fair value with changes in carrying value being included in profit or loss.

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and are subsequently measured at amortized cost. They are included in current assets, except for maturities greater than 12 months after the end of the reporting period. These are classified as non-current assets.

Held-to-maturity investments are non-derivative financial assets that have fixed maturities and fixed or determinable payments, and it is the Company’s intention to hold these investments to maturity. They are subsequently measured at amortized cost. Held-to-maturity investments are included in non-current assets, except for those which are expected to mature within 12 months after the end of the reporting period.

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for- sale or are not suitable to be classified as financial assets at fair value through profit or loss, loans and receivables or held-to maturity investments and are subsequently measured at fair value. These are included in current assets to the extent they are expected to be realized within 12 months after the end of the reporting period. Unrealized gains and losses are recognized in other comprehensive income, except for impairment losses and foreign exchange gains and losses on monetary financial assets.

Other financial liabilities (excluding financial guarantees) are subsequently measured at amortized cost.

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the group commits to purchase the asset. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Company has transferred substantially all risks and rewards of ownership.

At each reporting date, the Company assesses whether there is objective evidence that a financial instrument has been impaired. In the case of available-for-sale financial instruments, a significant and prolonged decline in the value of the instrument is considered to determine whether an impairment has arisen.

The Company does not have any derivative financial assets and liabilities.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

The Company classifies its financial instruments as follows:

Cash and equivalents	Fair value through profit and loss
Accounts Receivable	Loans and receivables
Accounts Payable and Accrued Liabilities	Other Financial Liability
Promissory Notes	Other Financial Liability
Short Term Loans	Other Financial Liability

Equipment

Equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Company and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statements of comprehensive income/(loss) during the financial period in which they are incurred.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized in the statements of comprehensive income/(loss).

Amortization is calculated on a declining balance method over their estimated useful lives. The Company’s equipment, which consists of computer, furniture equipment and leasehold, is amortized at 30%.

Intangible Assets

The carrying values of intangible assets which are determined to have a finite useful life are amortized on a systematic basis over the life of 99 years. Intangible assets are subject to an impairment test on an annual basis, based on a comparison of the fair value of the intangible asset to its carrying value. The carrying value is adjusted for impairment as necessary and any excess of the carrying amount over the fair value of the intangible asset is charged to earnings in the period occurred.

Changes in significant accounting policies and adoption of new accounting standards

The following Standards and Interpretations applicable to the Company were issued but not yet effective. Unless otherwise stated, these new accounting standards and amendments will become effective for the annual period beginning on or after July 1, 2013.

i)

IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IAS 27, Consolidated and Separate Financial Statements and IAS 28, Investments in Associates were revised and reissued as IAS 27, Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures to align with the new consolidation guidance.

ii)

IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. Matters covered include information about the significant judgments and assumptions that any entity has made in determining whether it has control, joint control or significant influence over another entity.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

3.  BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (continued)

iii)

IFRS 13, Fair Value Measurement, is a comprehensive new standard for fair value measurement and disclosure across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e., an exit price.

Future accounting policy changes issued but not yet in effect

Pronouncements that are not applicable or that do not have a significant impact to the Company have not been included in these consolidated financial statements.

In May 2013, the IASB issued IFRIC 21, Levies (“IFRIC 21”), an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual periods commencing on or after January 1, 2014. The Company is currently evaluating the impact of applying IFRIC 21, however it does not expect the implementation of this standard to have a material impact on its consolidated financial statements.

The IASB intends to replace IAS 39, Financial Instruments: Recognition and Measurement in its entirety with IFRS 9, Financial Instruments (“IFRS 9”) and to reduce the complexity in the classification and measurement of financial instruments. The completed version of IFRS 9 will include classification and measurement, impairment and hedge accounting requirements and the IASB has tentatively decided that the mandatory effective date of this new standard will be for annual periods beginning on or after January 1, 2018. The Company is currently monitoring the phases of this IASB project with a view to evaluating the impact of the standard when it is issued in its final form, which is expected in calendar 2014.

4.  ACCOUNTS RECEIVABLE

	September 30, 2014 $	June 30, 2013 $
Other Receivables	-	1,428
Value Added Tax (GST / HST)	9,994	14,201
	9,994	15,629

There is no issue with regards to collectability of the balance of Accounts Receivable that is made up of GST receivable as it is an outstanding amount to be received from the Canada Revenue Agency.

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

5. EQUIPMENT

		Furniture &	Leasehold
	Computers	Equipment	Improvements	Total
Cost
Balance June 30, 2014	$              1,702	$                    5,976	$                       24,182	$            31,912
Additions	-	-	-	-
Balance Sept 30, 2014	1,702	5,976	24,182	31,984
Amortization
Balance June 30, 2014	(116)	(353)	(604)	(1,073)
Depreciation	(117)	(315)	(416)	(790)
Balance Sept 30, 2014	(233)	(668)	(1,020)	(1,863)
NBV June 30, 2014	1,586	5,747	23,578	30,912
NBV September 30, 2014	$            1,469	$               5,308	$                 23,162	$          29,938

6.  INTELLECTUAL PROPERTY

	September 30, 2014 $	June 30, 2014 $
Pedia Safe License	170,000	170,000
FerroHeme	306,000	306,000
	476,000	476,000

On September 05, 2013, Vanc Pharmaceuticals Inc. announced an Agreement between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The License Agreement provided the Company with the global sales and marketing rights, and the right to make or have made FerroHeme Iron Supplement.

The Agreement provided for the payment by the issuance of 3,400,000 Common Shares of the Company. The fair value of these shares was measured at $306,000. This transaction did not result in a change of control or in the creation of new insiders.

On September 12, 2012, Vanc Pharmaceuticals Inc. announced that the TSX Venture Exchange had provided acceptance of the License Agreement between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The License Agreement provided the Company with the global sales and marketing rights, except for China and India, and the right to make or have made Pedia-Safe Polyvitamin Drops. The License Agreement is effective for 99 years from the effective date of signing of the agreement. At this time, the Company has not commenced amortization of the intangible asset as the Company has plans to commence the sales operations in the subsequent year. Amortization on the intangible assets will commence once the Pedia-Safe Polyvitamin Drops are in commercial production.

The Agreement provided for the payment by the issuance of 3,400,000 Common Shares of the Company. The fair value of these shares was measured at $170,000. This transaction did not result in a change of control or in the creation of new insiders.

14

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

7.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

(a)

	September 30, 2014 $	June 30,  2014 $
Accounts Payable	63,487	110,343
Accruals (Audit Fees)	7,000	14,000
	70,487	124,343

8.  SPONSORSHIP LIABILITY

Sponsorship liability represents final payments owing per the sponsorship agreement to be fully paid by December 31, 2012. The scheduled sponsorship payments per the sponsorship agreement were in default. At June 30, 2012, the total outstanding sponsorship liability was $875,000. The Company had been unable to pay the remaining $875,000 that was owed to the Canadian Olympic Committee (“the COC”) under the terms of the Sponsorship. As a result, the Company has agreed to stop using the Olympics marks. Also, with the agreement of the Company, the full amount of the COC liability has been assigned by the COC to a third party.

On September 12, 2012 the entire amount of the liability was settled by the issuance of 10,687,500 shares at a value of $0.05 per share. All of these shares are subject to resale restrictions equivalent to a TSX-V Tier 2 Value Security Escrow Agreement which allows a scheduled release of shares from escrow over a three year period.

Escrow Schedule:

Release Date	To Be Released
August 30, 2012	10% or 1,068,750 securities
February 28,2013	15% or 1,603,125 securities
August 30, 2013	15% or 1,603,125 securities
February 28, 2014	15% or 1,603,125 securities
August 30, 2014	15% or 1,603,125 securities
February 28, 2015	15% or 1,603,125 securities
August 30, 2015	15% or 1,603,125 securities
Total	10,687,500 securities

As of September 30, 2014, there are 3,206,250 shares held in Escrow.

15

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

10.  PROMISSORY NOTES

	Sept 30, 2014 $	June 30, 2014 $
Related Parties – Current	16,489	32,978
Non-related Parties	-	-
Promissory Notes - Current	16,489	32,978
Related Parties – Non-current	-	-
Total Promissory Notes	16,489	32,978

On December 23, 2013, the related parties signed a revised agreement. Under the new payment schedule, the total related party promissory note debt is due on October 1, 2014.

During the year ended June 30, 2014, the Company repaid a financial loan in the net amount of $12,500 from the non-related party and $67,133 to the related parties.

11.  SHAREHOLDERS’ EQUITY

a)

Authorized Share Capital

Authorized: Unlimited common shares without par value

Issued share capital

During the year ended June 30, 2014, the Company issued 3,400,000 shares for the acquisition of an asset, 8,000,000 shares for share subscriptions received in the year ended June 30, 2014, and 3,750,000 shares were issued through a private placement. At September 30, 2014, there were 36,767,075 shares (June 30, 2013 - 21,617,075 shares) issued and outstanding.

Private Placements

i)

On April 08, 2014 the Company closed a non-brokered Private Placement of 1,750,000 units of the Company at a price of $0.10 per unit for gross proceeds of $175,000.

Each Unit consists of one (1) common share and one (1) transferrable share purchase warrant. Each Warrant will entitle the holder thereof to purchase one (1) additional Common Share for a period of twelve (12) months from the Closing Date of the Offering at a price of CDN$0.30 per Common Share.

The Warrants will be subject to an accelerated exercise provision in the event the shares trade more than $0.10 above the exercise price for ten (10) consecutive days.

In addition, on April 08, 2014 the Company closed a non-brokered Private Placement of 2,000,000 units of the Company at a price of $0.10 per unit for gross proceeds of $200,000.

Each Unit consists of one (1) common share and one (1) transferrable share purchase warrant. Each warrant will entitle the holder thereof to purchase one (1) additional Common Share for a period of twenty four (24) months from the Closing Date of the Offering at a price of CDN$0.13 per Common Share.

In accordance with the Private Placements, Finder’s fees of $12,000 cash were paid in addition to the issuance of 300,000 warrants. 120,000 warrants have a life of two years and are exercisable at $0.13. The remaining 180,000 warrants have a life of one year and are exercisable at $0.30. The fair value of these warrants was measured at $47,567. Total share issue cost was $59,567.

16

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

11.  SHAREHOLDERS’ EQUITY (continued)

Proceeds from the Offering will be used by the Company for general ongoing corporate and working capital purposes.

The fair value of the warrants was estimated using the Black-Scholes option pricing model using the following parameters was $375,000.

	April 2014
Dividend yield	-
Expected volatility	201.52%
Risk free interest rate	1.07%
Expected average term	1 -2 years

ii)

On September 12, 2013 the Company closed a non-brokered private placement of 8,000,000 units of the Company’s common shares at a price of $0.10 per unit, for proceeds of $800,000. Each Unit will be exchangeable for one common share of the Company and one share purchase warrant.

Each warrant will entitle the holder to purchase one additional common share of the Company for a period of 36 months at a price of $0.30 per common share in the first year, $0.40 in the second year and $0.50 in the third year. The Units cannot be exchanged for shares and warrants during the first year unless the holder either simultaneously exercises or forgoes the warrants.

The warrants will be subject to an accelerated exercise provision in the event that the shares trade more than $0.10 above the exercise price for ten consecutive trading days.

The private placement was subject to a TSX-V hold period expiring on October 12, 2013. As of September 30, 2013, the private placement was classified as Share Subscriptions. Legal fees of $850 and finders’ fees of $57,600 were charged against share capital in connection with the private placement. The fair value of the warrants issued as part of the private placement is $663,834.

Shares issued for debt

On September 7, 2012, the Company announced that the TSX Venture Exchange had accepted a share for debt arrangement. Debts totaling $935,300 would be settled by issuing 11,257,395 common shares to creditors at $0.05 per share. Of these shares, 10,687,500 were subjected to resale restrictions equivalent to a TSX-V Tier 2 Value Security Escrow Agreement (Note 8) which allows a scheduled release of shares from escrow over a three year period.

	June 30, 2013 $	Shares
COC Assignment Sept. 12, 2012	875,000	10,687,500
Accounts Payable Sept. 12, 2012	20,540	172,295
Mgmt. Fees Sept. 12, 2012	39,760	397,600
	935,300	11,257,395

Shares issued for assets

On September 20, 2013, the TSX-V approved a License Agreement (LA) between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The (LA) provided the Company with the global sales and marketing rights, and the right to make or have made FerroHeme Iron Supplement.

The Agreement provided for the payment by the issuance of 3,400,000 Common Shares of the Company to the shareholders of Canagen.  The fair value of these shares was measured at $306,000. This transaction did not result in a change of control.

17

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

11.  SHAREHOLDERS’ EQUITY (continued)

On September 17, 2012, the Company announced that the TSX Venture Exchange had provided acceptance of the License Agreement (LA) between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The (LA) provided the Company with the global sales, manufacturing and marketing rights, except for China and India, to Pedia-Safe Polyvitamin Drops.

The Agreement provided for the payment of $170,000 by the issuance of 3,400,000 Common Shares of the Company. This transaction did not result in a change of control.

b)

Stock options

The Company has adopted an incentive share purchase option plan under the rules of the TSX Venture Exchange pursuant to which it is authorized to grant options to executive officers, directors, employees and consultants, enabling them to acquire up to 10% of the issued and outstanding common shares of the Company. The options can be granted for a maximum term of 5 years and generally vest either immediately or in specified increments of 25%.

No individual may hold options to purchase common shares of the Company exceeding 5% of the total number of common shares outstanding from time to time. Pursuant to the policies of the TSX Venture Exchange, shares issued on exercise of options are restricted from trading during the four month period subsequent to the date of grant.

A summary of the Company’s stock options and changes is presented below:

	Year Ended June 30, 2014		Year Ended June 30, 2013
		Weighted		Weighted
		Average		Average
	Number	Exercise	Number	Exercise
	of Shares	Price	of Shares	Price
Beginning Balance	2,250,000	-	-	-
Options issued	200,000 (v)	$0.10	1,400,000 (i)	$0.10
Options issued	25,000 (vi)		1,000,000 (ii)	$0.10
Options issued			800,000 (iii)	$0.13
Options canceled			(950,000) (iv)	$0.10
Ending Balance
	2,450,000	$0.10	2,250,000	$0.10
Exercisable	1,650,000	$0.10	1,650,000	$0.10

(i)

In September 2013, a total of 1,400,000 options were issued to Directors and Consultants of the Company. They have an exercise price of $0.10 and a life of 5 years. The options were valued at $0.083 each or $116,633 using the Black – Scholes method and the following parameters.

(ii)

In February 2014, a total of 1,000,000 options were issued to an Officer of the Company. They have an exercise price of $0.10 and a life of 5 years. The options were valued at $0.12 each or $120,441 using the Black – Scholes method and the following parameters

(iii)

On May 08, 2014 a total of 400,000 options having a life of 5 years and an exercise price of $0.13 were issued to Directors, vesting 25% on the date of grant and every 6 months thereafter. The options were valued at $0.187 each or $74,922 using the Black – Scholes method and the following parameters.  As  at  June  30,  2014,  $28,703  has  been  recognized  as  Stock-based compensation.

In addition on May 08, 2014, 400,000 options having a life of two years, an exercise price of $0.13, and the vesting term of 25% on the date of grant and every 6 months thereafter were granted to

18

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

11.  SHAREHOLDERS’ EQUITY (continued)

 

investor relations consultants. The options were valued at $0.17 each or $66,767 using the Black – Scholes method and the following parameters. As at June 30, 2014, $25,579 has been recognized as Stock-based compensation.

(iv)

During the year ended June 30, 2014 a total of 950,000 options issued in September 2013 at $0.10 were canceled.

(v)

On July 25, 2014 200,000 options were issued to an officer of the Company. They have an exercise price of $0.10 and a life of 5 years. The options were valued at $0.109 using the Black-Scholes method and the following parameters.

(vi)

On September 15, 2014 the Company issued 25,000 options to a consultant for five years with an exercise price of $0.10 and a hold until February 01, 2015

	July 2014	May 2014	February 2014
Dividend yield	0%	0%	0%
Expected volatility	179.04%	155.21-177.52%	152.70%
Risk free interest rate	1.05%	1.07-1.65%	1.69%
Expected average term	5 years	2-5 years	5 years

(vii)

The weighted average life of options is 4.631years.

c)  

Warrants

The Company has issued warrants entitling the holders to acquire common shares of the Company. A summary of changes in unexercised warrants is presented below:

	Warrants (1)	Warrants @ $0.13 (2)	Warrants @ $0.30 (3)	Total
June 30, 2013	8,000,000	-	-	8,000,000
Canceled	(250,000			(250,000)
Issued in PP		2,000,000	1,750,000	3,750,000
Finders	-	120,000	180,000	300,000
September 30 and June 30, 2014	7,750,000	2,120,000	1,930,000	11,800,000

(1)

Exercisable at a price of $0.30 per warrant until June 12, 2014 and at $0.40 until June 12, 2015, and at $0.50 until June 12, 2016, granted pursuant to a private placement.

(2)

Exercisable at $0.13 until April 08, 2016

(3)

Private Placement exercisable at $0.13 until April 08, 2016; Finders at $0.30 April 08, 2015

The fair value of each warrant was estimated as at the date of grant using the Black-Scholes pricing model with the following weighted-average assumptions.

	June 30, 2014	June 30, 2013
Dividend yield	0%	0%
Expected volatility	190%	128%
Risk free interest rate	1.07%	1.08%
Expected average term	1.48 years	3 years

19

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

11.  SHAREHOLDERS’ EQUITY (continued)

d)

Warrant Reserve:

The stock warrant reserve records items recognized as warrants until such time that they are exercised, at which time the corresponding amount will be transferred to share capital. If the warrants expire unexercised, the amount remains in the warrant reserve.

	September 30, 2014	June 30, 2014
Beginning Balance	$          2,090,747	$          1,668,180
Private Placement	-	422,567
Ending Balance	$          2,090,747	$          2,090,747

·

On April 27, 2014 560,000 warrants expired, unexercised.

·

On September 7, 2012 327,500 warrants having a value of $57,581 expired.

·

On January 12, 2013 200,000 warrants expired having a value of $18,676 expired.

·

Weighted average exercise price is $0.34 as at September 30, 2014.

e)

Option Reserve:

The stock option reserve records items recognized as stock-based compensation expense until such time that the stock options are exercised, at which time the corresponding amount will be transferred to share capital. If the options expire unexercised, the amount recorded remains in the reserve.

	September 30, 2014	June 30, 2014
Beginning Balance	$ 1,931,969	$ 1,640,614
Options Granted	21,800	291,355
Ending Balance	$ 1,953,769	$ 1,931,969

13.  RELATED PARTY TRANSACTIONS

a)

During the three month period ended September 30, 2014, the Company was invoiced by officers and directors, the Company incurred management fee of $30,000 to Arun Nayyar (June 30, 2014 - $78,333), management/consulting fees of $nil (June 30, 2014 - $9,000) to Tom Kennedy and $6,000 (June 30, 2013 - $26,380) to Eugene Beukman.

b)

During the three month period ended September 30, 2014, the Company paid $5,085 (June 30, 2014 - $26,620) for accounting fees to a company owned by the CFO, Jamie Lewin.

c)

During the three month period ended September 30, 2014, the following received stock options valued at: CEO, Arun Nayyar $21,800 (June 30, 2014 - $120,440), CFO and Director, Jamie Lewin $nil, Directors Tom Kennedy and Eugene Beukman $nil each (June 30, 2014 - $24,990), Sina Pirooz $nil (June 30, 2014 - $10,764) and Michael Bianco $nil (June 30, 2014 - $17,939).

d)

During the three month period ended September 30, 2014, the Company incurred $4,500 of rent (June 30, 2014 - $9,530) and $1,500 of automobile expenses (June 30, 2014 - $2,647) to Arun Nayyar.

e)

As of September 30, 2014, the Company owed $13,189 to the former CEO, Terry Owen (June 30, 2014 - $26,375) in addition to the promissory note (Note 10).

These transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All related party transactions were in the normal course of business operations.

20

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

14.  CAPITAL DISCLOSURES

The Company includes shareholders’ equity and cash and equivalents in the definition of capital, which totaled 623,119 (June 30, 2014 – $958,474). The Company’s objective when managing capital is to maintain sufficient cash resources to support its day-to-day operations. The availability of capital is solely through the issuance of the Company’s common shares. The Company will not issue additional equity until such time when funds are needed and the market conditions become favorable to the Company. There are no assurances that funds will be made available to the Company when required. The Company makes every effort to safeguard its capital and minimize its dilution to its shareholders.

The Company is not subject to any externally imposed capital requirements.

15.  COMMITMENTS

Lease commitments - The Company has entered into contracts for leased premises, which expire in 2017. Total future minimum lease payments (net of sub-lease arrangement) under these contracts are as follows:

Within 1 year	$	29,520
2 years	$	26,400
		55,920

16.  FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT

The Company’s financial instruments include cash and equivalents, accounts receivable, accounts payable and accrued liabilities, short term loans and promissory notes. The carrying values of these financial instruments approximate their fair values due to their relatively short periods to maturity. The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of financial instruments.

This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and processes for measuring and managing these risks. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies

a)

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and equivalents and accounts receivables. The Company’s cash and equivalents are held through a large Canadian financial institution. Cash equivalents are composed of financial instruments issued by Canadian banks with high investment-grade ratings. The Company does not have financial assets that are invested in asset backed commercial paper.

The Company performs ongoing credit evaluations of its accounts receivables, but does not require collateral. The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers and historical data.

The Company monitors the concentration of exposure and where possible, if necessary, takes steps to limit exposure to any counterparty.  The Company views credit risk on cash deposits and accounts receivables as minimal.

b)

Liquidity risk

Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient

21

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation.

See Note 1 for working capital balances.

The Company monitors its spending plans, repayment obligations and cash resources and takes actions with the objective of ensuring that there is sufficient capital in order to meet short-term business requirements. To facilitate its expenditure program, the Company raises funds primarily through public equity financing. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions.

As at September 30, 2014, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities of $70,487 and promissory notes valuing $16,489.

c)

Market risk

Market risk for the Company consists of currency risk, and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

i)

Currency risk

Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Company’s purchases and sales are denominated in Canadian dollars, and has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency exchange risk at this time.

ii)

Interest rate risk

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

The Company is not exposed to interest rate risk on its short term liabilities, and does not have any long-term liabilities as of September 30, 2014.

d)

Determination of Fair Value –

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

i)

Cash and cash equivalents are measured at fair value. For accounts receivable, accounts payable and accrued liabilities, carrying amounts approximate fair value due to their short-term maturity;

ii)

The fair value of promissory notes payable approximate their carrying value as their effective interest rates approximate current market rates;

iii)

The fair value of derivative financial instruments is determined based on fair market valuation methods.

	Fair Value at June 30, 2014
	Level 1	Level 2	Level 3
Financial Assets
Cash and equivalents	$         95,831	$                  -	$              -

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are described below:

22

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

16.  FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT (continued)

Level 1:

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities and amounts resulting from direct arm’s length transactions.

Cash and equivalents are valued using quoted market prices or from amounts resulting from direct arm’s length transactions. As a result, these financial assets and liabilities have been included in Level 1 of the fair value hierarchy.

Level 2:

Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly, for substantially the full contractual term. Derivatives are included in Level 2 of the fair value hierarchy as they are valued using price models. These models require a variety of inputs, including, but not limited to, contractual terms, market prices, forward price curves, yield curves and credit spreads. The Company has no financial instruments at this level

Level 3:

Inputs for the asset or liability are not based on observable market data. Currently the Company has no financial instruments at this level.

17.  INCOME TAXES

The Company has non capital loss carry forwards of approximately $9,600,805 which may be carried forward to apply against future year income tax for Canadian income tax purposes, subject to the final determination by taxation authorities, expiring in the following years:

EXPIRY	$
2015	542,107
2026	463,528
2027	450,897
2028	893,646
2029	859,482
2030	3,456,877
2031	1,422,631
2032	755,486
2033	236,246
2034	519,905
TOTAL	9,600,805

The deferred tax assets have not been recognized because at this stage of the Company’s development, it is not determinable that future taxable profit will be available against which the Company can utilize such deferred tax assets.

18.  SUBSEQUENT EVENTS

On October 15, 2014 the Company paid down an additional $16,488 of the promissory notes and $13,062 of accounts payable that was mentioned in Note 10.

On November 08, 2014 200,000 options vested to directors and a consultant and on November 14, 2014 the Company granted 200,000 options at $0.10 per share for a period of five years to an officer of the Company.

23

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Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.)

Notes To The Condensed Interim Consolidated Financial Statements

For The Three Month Period Ended September 30, 2014 and 2013

Notice of Compliance

November 18, 2014 – Vanc Pharmaceuticals Inc. (“Vanc” or the “Company”) is pleased to announce that it has received Notice of Compliance (NOC) from Health Canada for 22 generic molecules. These 22 molecules will comprise of 51 dosage forms across various therapeutic categories; including both chronic (long term) therapy and acute (short term) therapy.  The Notice of Compliance from Health Canada provides the authorization for Vanc to market and sell the generic molecules in Canada.

Table 1.0 provides details on each of the molecules.

	Molecule Name	Presentations	Brand Reference
1	VAN-Rizatriptan	5 MG and 10 MG Tab	Maxalt™
2	VAN-Irbesartan	75 MG, 150 MG and 300 MG Tab	Avapro™
3	VAN-Irbesartan-HCTZ	150+12.5 MG, 300+12.5 MG and 300+25 MG Tab	Avalide™
4	VAN-Donepezil	5 MG and 10 MG Tab	Aricept™
5	VAN-Amlodipine	5 MG and 10 MG Tab	Norvasc™
6	VAN-Losartan	25 MG, 50 MG and 100 MG Tab	Cozaar™
7	VAN-Losartan-HCTZ	50+12.5 MG and 100+25 MG Tab	Hyzaar™
8	VAN-Levetiracetam	250 MG, 500 MG and 750 MG Tab	Keppra™
9	VAN-Gabapentin	600 MG and 800 MG Tab	Neurontin™
10	VAN-Omeperazole	20 MG DR Tab	Losec™
11	VAN-Finasteride	5 MG Tab	Proscar™
12	VAN-Alendronate	5 MG, 10 MG and 70 MG Tab	Fosamax™
13	VAN-Bicalutamide	50 MG Tab	Casodex™
14	VAN-Letrozole	2.5 MG Tab	Femara™
15	VAN-Olanzapine	2.5 MG, 5 MG, 7.5 MG, 10 MG and 15 MG Tab	Zyprexa™
16	VAN-Sertraline cap	25 MG, 50 MG and 100 MG Cap	Zoloft™
17	VAN-Anastrozole	1 MG Tab	Arimidex™
18	VAN-Pantoprazole	40 MG Tab	Pantoloc™
19	VAN-Gabapentin	100 MG, 300 MG and 400 MG Cap	Neurontin™
20	VAN-Ciprofloxacin	250 MG, 500 MG and 750 MG Tab	Cipro™
21	VAN-Montelukast	4 MG and 5 MG Chew Tabs, 10 MG Tab	Singulair™
22	VAN-Sildenafil	25 MG, 50 MG and 100 MG Tab	Viagra™

24

Vanc Pharmaceuticals Inc.

(Formerly Nuva Pharmaceuticals Inc.)

Management’s Discussion & Analysis

For the Three Month Period Ended

September 30, 2014

Section	Description	Page
1.01	Date	2
1.02	Overall Performance	2
1.03	Selected Annual Information	4
1.04	Result of Operations	4
1.05	Summary of Quarterly Results	5
1.06	Liquidity	7
1.07	Capital Resources	7
1.08	Commitments and Agreements	9
1.09	Off Balance Sheet Arrangements	10
1.10	Transactions with Related Parties	10
1.11	Quarterly Activities	11
1.12	Subsequent Events	11
1.13	Critical Accounting Estimates	11
1.14	Recent Accounting Pronouncements	13
1.15	Financial Instruments	14
1.16	Other MDA Requirements	17

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VANC PHARMACEURICALS INC.

(FORMERLY NUVA PHARMACEUTICALS INC)

MANAGEMENT DISCUSSION AND ANALYSIS

FOR THE THREE MONTH PERIOD ENDED

September 30, 2014

1.01

DATE

This Management Discussion and Analysis (“MD&A”) is dated November 24, 2014 and should be read in conjunction with the condensed interim consolidated financial statements of Vanc Pharmaceuticals Inc. (Formerly Nuva Pharmaceuticals Inc.) (“VANC” or the “Company”) for the three month period ended September 30, 2014 and the annual audited financial statements for the year ended June 30, 2014.  All financial information is expressed in Canadian dollars and is prepared using accounting policies in compliance with International Financial Reporting Standards (“IFRS”).  

The condensed interim consolidated financial statements have been prepared on the basis of accounting principles applicable to a going concern which assumes that the Company will continue in operations for the foreseeable future and be able to realize assets and satisfy liabilities in the normal course of business. During the year ended June 30, 2014, the Company was funded $375,000 by the issuance of share capital. The Company has yet to achieve a level of revenues adequate to achieve profitability. The application of the going concern assumption is dependent on management’s ability to successfully execute its business plan, to secure sufficient financing, and to develop profitable operations. Additional equity or debt-based financing may be required to continue the Company’s operations and pursue product developments.

1.02

OVERALL PERFORMANCE

In 2003, VANC developed a patented infection control formulation, referred to as T³6^®, a mixture of ethanol containing the anti-microbial ingredients o-phenylphenol (“OPP”), benzalkonium chloride (“BZK”), chlorhexidine gluconate (“CHG”) and Nonoxynol-9 (”N-9”). All of these component chemicals are bio-degradable.

The Company is no longer maintaining patents for the T3/6 product except in Canada and China. The Company is negotiating a joint venture agreement in China for the marketing of this product.

On August 12, 2013, Vanc Pharmaceuticals Inc. trades on the TSX Venture Exchange in Canada under the symbol “NPH” and on February 23, 2014 on the OTCQB under the symbol “NUVPF”.

The Company is now focused on the licensing and sales of pharmaceuticals that can be registered as natural products, OTC’s and generics.

On April 16, 2014 – the Company announced that it has signed Cross Referencing Agreements(“CRA”) for prescription generic products for Canadian markets. These agreements cover 48 prescription generic products and are for acute and chronic diseases.  (See Subsequent Events 1.12)

Sales

There have been no sales during the three month period ended September 30, 2014 (September 30, 2013 - $nil).

Manufacturing

On April 16^th, 2014 the company announced that it had signed CRAs with three large pharmaceutical companies for multiple products in the prescription generic drug lines. The suppliers will manufacture and VANC will market and sell these new product lines under its own label.

 

On August 01, 2013 and on September 11, 2012, the Company entered into agreements with Canagen Pharmaceuticals Inc. that granted Canagen the sole, exclusive right to manufacture Pedia-Safe and FerroHeme or to have Pedia-Safe and FerroHeme manufactured by a third party manufacturer for the Company and/or its sub-licensees, according to any packaging label the Company requires and delivering the Product to any destination required by the Company.

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Patents  

The Company has abandoned T3/6 patent renewals in Europe, the USA and Australia. It is maintaining the Chinese patent and the Canadian patent, which was assigned in a debt settlement agreement with a former Director.

China

On February 6, 2008, the Company announced that Certificate of Invention Patent Number ZL02829642.7 had been issued by the State Intellectual Property Office of the People’s Republic of China. The patent provides protection for the composition and production methods for T36^® formulation until August 20, 2022. On November 25, 2010 the Company was advised that the above patent became vulnerable to an application for a compulsory license on October 17, 2010. Under Chinese patent practice, it is possible for a third party to apply for the grant of a compulsory license should the invention not have been “worked” or otherwise been impeded from being worked, three years from the grant of a Patent. This may take into account circumstances where the conditions attached to the licensing of the invention are unreasonable, or the demand for the invention is not reasonably being met. The government body responsible for considering applications for a compulsory license will consider a multitude of factors before granting such a license and there may be mechanisms available for patentees to respond, or comment, on such applications.

Amendments to the original patent application were also drafted by the Company. As in the case of the amendments prepared for CIPO, the proposed amendments to the original Chinese patent application expanded the original claims to include a number of therapeutic applications of the T³6^® formulation, including its use in cosmetics and in a microbicidal gel to prevent the transmission of sexually transmitted infections (“STI’s”). On October 10, 2007, the Company was advised that the amended claims had been submitted to the Chinese Patent Office. On January 30, 2008 the Chinese Patent office assigned Chinese Divisional Patent Application No. 200710142798.3 to the new application which was published in the Chinese Patent Gazette, under Publication No. CN101112624A. On April 13, 2010, the Company received an Office Action from the Chinese Patent Office and a response was filed by the Company prior to the deadline of June 11, 2010. A second Office Action was received on September 23, 2010 and a response was filed prior to the deadline of October 16, 2010. A third Office Action was received by the Company on February 1, 2011. The Company chose not to respond to this Office Action.

Canada

On April 6, 2011, the Company announced in a news release that the Canadian patent had been allowed. The Company allowed the patent to become temporarily abandoned and had it reinstated on October 3, 2012. The company settled debts with a former Officer and Director with the transfer of the T3/6 patent for Canada. Part of the agreement was that the Company would maintain the patent renewals.

Trademarks

“T³6^®”

The Company successfully trademarked “T³6^®” and the design of the T³6^® logo in Canada on April 22, 2004 (Registration No. TMA608308) for “pharmaceuticals, namely a disinfectant agent”.

“Pedia-Safe” “FerroHeme” “Sennalax”

On April 25, 2014 the Company made application to have the above-mentioned three trade-marks registered.

Products Registered in Canada

The following table summarizes the NPN’s that have been received from Health Canada.

NPN’s - Products to be marketed by the Company.

80026139	30-Jun-11	Pedia-Safe Polyvitamin Drops1
80001571	05-Apr-06	Ferroheme2

¹ Licensed to the Company by Canagen in an agreement dated September 11, 2012.

² A Memorandum of Understanding dated October 17, 2012 is in place for licensing of Ferroheme to the Company by Canagen.  Agreement signed on August 01, 2013.

For Notice of Compliance (NOC) products see Subsequent Events 1.12.

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Risk Factors

Limited Operating History

There is no assurance that Vanc will earn profits in the future, or that profitability, if achieved, will be sustained. Operating in the pharmaceutical and biotechnology industry and the pharmaceutical contract manufacturing industry requires financial resources, and there is no assurance that future revenues will be sufficient to generate the funds required to continue Vanc business development and marketing activities. If Vanc does not have sufficient capital to fund its operations, we may be required to reduce our sales and marketing efforts or forego certain business opportunities.

Development of Technological Capabilities

The market for Vanc’s products is characterized by changing technology and continuing process development. The future success of Vanc’s business will depend in large part upon our ability to maintain and enhance the Company’s technological capabilities, develop and market products and services which meet changing customer needs and successfully anticipate or respond to technological changes on a cost effective and timely basis. Although we believe that Vanc’s operations provide the products and services currently required by our customers, there can be no assurance that Vanc’s process development efforts will be successful or that the emergence of new technologies, industry standards or customer requirements will not render Vanc’s products or services uncompetitive. If Vanc needs new technologies and equipment to remain competitive, the development, acquisition and implementation of those technologies and equipment may require us to make significant capital investments. Vanc may not be able to raise the required capital on terms satisfactory to Vanc or at all.

1.03

  SELECTED ANNUAL FINANCIAL INFORMATION

For the twelve month period ended	June 30, 2014	June 30, 2013	June 30, 2012
Revenue	$   Nil	$   Nil	$  83,361
Comprehensive Income/(Loss)	(733,946)	283,432	(306,565)
Basic and Diluted Loss Per Share	(0.03)	0.02 and 0.01	(0.05)
Total Assets	820,418	800,991	19,571
Accounts Payable and Accrued Liabilities	124,343	215,785	347,235
Sponsorship Liability	Nil	Nil	875,000
Short Term Loans	Nil	35,907	Nil
Promissory Notes	32,978	112,611	118,500

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Fluctuations in the Comprehensive Income (Loss) for the year can be attributed to trends in expenses.

The year ending June 30, 2014 saw an increase in expenses, especially with regards to: management fees, research, stock based compensation and travel.

The year ending June 30, 2013 saw a decline in expenses especially with regards to inventory (there was none), investor relations (there were none), management fees and wages. In addition, the settlement of many liabilities resulted in a gain on liabilities settled of $475,007.

The year ending June 30, 2012 saw a decline in expenses especially with regards to inventory ($177,896), investor relations ($69,877), management fees ($216,273) and wages ($174,378).

The large increase in assets occurred in 2013 and is attributed to a private placement of $800,000.

1.04        SUMMARY OF QUARTERLY RESULTS

Significant fluctuations in Net Income for the Quarterly Results stem from: Stock Based Compensation June/14, Mar/14 and Sept 13 Consulting in June/14 and Dec/13, year-end accruals June/13 and Gain on the Settlement of Liabilities June/13.

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1.05         RESULTS OF OPERATIONS

For the Three Month Period Ended September 30, 2014

Consulting & Management

Consulting and management fees for the three month period ended September 30, 2014 were $61,800 compared to $19,982 for the three month period ended September 30, 2013. A non-cash based stock compensation was recorded during the three month period ended September 30, 2014 of $21,800 (September 30, 2013 - $121,800).    

Dues and Filing Fees

The dues and filing fees amounted to $1,040 for the three month period ended September 30, 2014 compared to $5,558 for the same period ended September 30, 2013.  

Legal and Accounting Fees

Legal and accounting fees were $1,446 for the three month period ended September 30, 2014 compared to $19,982 for the same period ended September 30, 2013.   

Product Registration and Development Costs

Total costs incurred in this category for the three month period ended September 30, 2014 were $$9,762, while for the same period ended September 30, 2013, $1,937. Costs incurred in this category consisted primarily of fees paid to maintain the Company’s patents and patent applications.

 

Comprehensive (Gain)/Loss from Operations

The Comprehensive (loss) from operations was $(157,608) for the three month period ended September 30, 2014 compared to a loss of $(150,333) during the same three month period ended September 30, 2013.

1.06         LIQUIDITY

As at September 30, 2014, the Company had a working capital of $21,349 and ($156,185 – June 30, 2014).

	Sept 30, 2014	June 30, 2014
Current Assets	108,325	313,506
Current Liabilities	(86,976)	(157,321)
Working Capital	21,349	156,185

Management is actively looking for addition equity and debt financing to address future cash flow needs. While the Company has been successful in securing financings in the past, there is no assurance that it will be able to do so in the future.

1.07

     CAPITAL RESOURCES

During the three month period ended September 30, 2014 no options or warrants expired or were canceled. During the year ended June 30, 2014 a total of 810,000 warrants and 950,000 options expired or were canceled.

Financings

April 08, 2014 the Company closed a non-brokered Private Placement of up to 1,750,000 units of the Company at a price of $0.10 per unit for gross proceeds of up to $175,000.  

Each Unit will consist of one (1) common share and one (1) transferrable share purchase warrant.  Each Warrant will entitle the holder thereof to purchase one (1) additional Common Share for a period of twenty four (24) months from the Closing Date of the Offering at a price of CDN$0.30 per Common Share.  

The Warrants will be subject to an accelerated exercise provision in the event the shares trade more than $0.10 above the exercise price for ten (10) consecutive days.

April 08, 2014 the Company closed a non-brokered Private Placement of up to 2,000,000 units of the Company at a price of $0.10 per unit for gross proceeds of up to $200,000.  

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Each Unit will consist of one (1) common share and one (1) transferrable share purchase warrant.  Each warrant will entitle the holder thereof to purchase one (1) additional Common Share for a period of twenty four (24) months from the Closing Date of the Offering at a price of CDN$0.13 per Common Share.  

Finder’s fees of $12,000 were paid in addition to the issuance of 300,000 warrants. 120,000 warrants have a life of 2 years and are exercisable at $0.13. The remaining 180,000 warrants have a life of one year and are exercisable at $0.30.

Proceeds from the Offering will be used by VANC for general ongoing corporate and working capital purposes.

Warrants were given a nil value according to the residual method.

***

On June 12, 2013 the Company closed a non-brokered private placement of 8,000,000 units of the Company’s common shares at a price of $0.10 per unit, for proceeds of $800,000. Each Unit is exchangeable for one common share of the Company and one share purchase warrant. Each warrant will entitle the holder to purchase one additional common share of the Company for a period of 36 months at a price of $0.30 per common share in the first year, $0.40 in the second year and $0.50 in the third year. The Units cannot be exchanged for shares and warrants during the first year unless the holder either simultaneously exercises or forgoes the warrants. The warrants are subject to an accelerated exercise provision if the shares trade more than $0.10 above the exercise price for ten consecutive trading days.

The private placement was subject to a TSX-V hold period expiring on October 12, 2013.  Legal fees of $850 and finders’ fees of $ 57,600 were charged against share capital in connection with the private placement.  Warrants were valued at $663,834 using the Black Scholes Valuation method.

***

On April 27, 2012, the Company closed a non-brokered private placement of 560,000 units of the Company’s common shares at a price of 10 cents per unit, for proceeds of $560,000.  Each unit consists of one common share of the Company and one share purchase warrant, which will entitle the holder thereof to purchase one additional common share of the Company for a period of 24 months from the closing date of the offering at an exercise price of 15 cents for the first 12 months and 20 cents during the next 12 months.  The Company has paid a finder’s fee of $4,100 pursuant to the policies of the TSX Venture Exchange.

***

On January 12, 2011, the Company completed a private placement of 200,000 units of the Company at a consolidated price of $1.00 per unit for gross proceeds of $200,000. Each unit consists of one common share of the Company and one share purchase warrant. Each warrant entitles the holder to acquire one additional common share at a price of $2.00 per share until January 12, 2013 with a forced exercise provision attached to each warrant. Legal fees of $5,626 were charged against share capital in connection with the private placement. Warrants were valued at $18,676.

Options

During the year ended June 30, 2014 the Company issued 2,250,000 options to Officers, Directors and Consultants with an exercise price of $0.10 for a period of 5 years.

As a result of director resignations there were no options outstanding at June 30, 2013.

¹ On hold until February 01, 2015.

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Additional Financing

There is no assurance that the Company will be able to obtain adequate financing in the future to fulfill its business objectives or that the terms of such financing will be favorable. A lack of funds will impair the Company’s ability to establish marketing and sales plans once the products have been approved for sale. 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, which might alter the capital structure of the Company, 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.

1.08

COMMITMENTS AND AGREEMENTS

1.

The Company has consulting agreements with three officers and two consultants who perform services on a regular basis.

2.

On May 01, 2014 the Company signed an Investor Relations and Communications Agreement with Pure Advertising and Marketing for $60,000 per year.

3.

On April 16, 2014 – the Company announced that it has signed Cross Referencing Agreements (the “CRAs”) for prescription generic products for Canadian markets. These agreements cover 48 prescription generic products and are for acute and chronic diseases.

4.

On January 08, 2014 the Company signed Research Agreement for product development, which is a maximum of $100,000 with 25% overhead.

5.

The Company has a lease agreement with Canagen Pharmaceuticals Inc. which covers office space and a storage area for $1,800 per month.

6.

On September 05, 2013, the VANC announced an Agreement between the Company and Canagen Pharmaceuticals Inc. of Richmond, B.C. The License Agreement provided the Company with the global sales and marketing rights, and the right to make or have made FerroHeme Iron Supplement.

7.

 On September 11, 2012, the Company entered into an agreement with Canagen Pharmaceuticals Inc.      that granted the Company global sales and marketing rights, excluding China and India, to Pedia-Safe polyvitamin drops. Pedia-Safe is a liquid multivitamin formulation developed for expectant and breast-feeding mothers, infants and children up to 9 years of age, which is registered for sale in Canada under Health Canada’s Natural Health Products Regulations, with the issuance of Natural Product Number 80026139.

8.

On September 11, 2012, the Company entered into an agreement with Canagen Pharmaceuticals Inc. that granted the Company the sole, exclusive to manufacture Pedia-Safe or to have Pedia-Safe manufactured by a third party manufacturer for the Company and/or its sub-licensees, according to any packaging label the Company requires and delivering the Product to any destination required by the Company.

9.

On October 19, 2012, the Company announced that it had entered into a binding Memorandum of Understanding that grants VANC an option to acquire a number of new pharmaceutical products (“the Products”) from Canagen Pharmaceuticals Inc. (“Canagen”) of Richmond, BC. The Products include:

a.

Patentable, compounds for the treatment of:

i.

Melanoma and other forms of skin cancer and

ii.

Alzheimer’s.

b.

A non-prescription, proprietary opiate addiction treatment product, which has been endorsed by the World Health Organization (WHO) and registered as a pharmaceutical in China, Cambodia, Thailand, Myanmar and successfully used in these countries to treat opiate-addicted patients.

c.

A new, patented TB drug, which has been registered and used as a drug in Ukraine for the treatment of Tuberculosis and multi-drug resistant TB.

d.

The generic chemotherapy compounds, paclitaxel and docetaxel,

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e.

Octacosanyl nicotinate, a cardiovascular drug with US Patent 7,615,641 and

f.

Any other products that Canagen wishes to include in the Option.

Under the terms of the Memorandum of Understanding, VANC will have the right to undertake due diligence on the Products in order to validate any claims of efficacy, evaluate their market potential and estimate the costs to bring them to market. VANC will have a Right of First Refusal to match the terms offered by any third party for any of the Products.

The acquisition of any of the Products will be subject to the policies of the TSX Venture Exchange. A definitive agreement is in progress. No other actions have been taken.

1.09

OFF-BALANCE SHEET ARRANGEMENTS

The Company is not aware of any off-balance sheet transactions requiring disclosure.

1.10

TRANSACTIONS WITH RELATED PARTIES

a)  

During the three month period ended September 30, 2014, the Company was invoiced by officers and directors, the Company incurred management fee of $30,000 to Arun Nayyar (June 30, 2014 - $78,333), management/consulting fees of $nil to Tom Kennedy(June 30, 2014 -9,000) and $6,000 to Eugene Beukman (June 30, 2013 - $26,380).

b)  

During the three month period ended September 30, 2014, the Company paid $5,085 (June 30, 2014 - $26,620) for accounting fees to a company owned by the CFO, Jamie Lewin.

c)  

During the three month period ended September 30, 2014, the following received stock options valued at: CEO, Arun Nayyar $21,800 (June 30, 2014 - $120,440), CFO and Director, Jamie Lewin $nil, Directors Tom Kennedy and Eugene Beukman $nil each (June 30, 2014 - $24,990), Sina Pirooz $nil (June 30, 2014 - $10,764) and Michael Bianco $nil (June 30, 2014 - $17,939).

d)  

During the three month period ended September 30, 2014, the Company incurred $4,500 of rent (June 30, 2014 - $9,530) and $1,500 of automobile expenses (June 30, 2014 - $2,647) to Arun Nayyar.

e)  

As of September 30, 2014, the Company owed $13,189 to the former CEO, Terry Owen (June 30, 2014 - $26,375) in addition to the promissory note (Note 10).

These transactions were measured at the exchange amount, which is the amount of consideration established and agreed to by the related parties. All related party transactions were in the normal course of business operations

1.11

QUARTERLY ACTIVITIES NOT NOTED ELSEWHERE

On July 1, 2014 the Company paid down an additional $16,488 of the promissory notes and $13,062 of accounts payable to the former CEO.

On August 6, 2014 the Company announced that it had changed its name from Nuva Pharmaceuticals Inc. to Vanc Pharmaceuticals Inc.

1.12

SUBSEQUENT EVENTS

On October 1, 2014 the Company paid down an additional $16,488 of the promissory notes and $13,062 of accounts payable that was mentioned in Note 10.

On November 08, 2014 200,000 options vested to directors and a consultant and on November 14, 2014 the Company granted 200,000 options at $0.10 per share for a period of five years to an officer of the Company.

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Notice of Compliance

November 18, 2014 – Vanc Pharmaceuticals Inc. (“Vanc” or the “Company”) is pleased to announce that it has received Notice of Compliance (NOC) from Health Canada for 22 generic molecules. These 22 molecules will comprise of 51 dosage forms across various therapeutic categories; including both chronic (long term) therapy and acute (short term) therapy.  The Notice of Compliance from Health Canada provides the authorization for Vanc to market and sell the generic molecules in Canada.

Table 1.0 provides details on each of the molecules.

	Molecule Name	Presentations	Brand Reference
1	VAN-Rizatriptan	5 MG and 10 MG Tab	Maxalt™
2	VAN-Irbesartan	75 MG, 150 MG and 300 MG Tab	Avapro™
3	VAN-Irbesartan-HCTZ	150+12.5 MG, 300+12.5 MG and 300+25 MG Tab	Avalide™
4	VAN-Donepezil	5 MG and 10 MG Tab	Aricept™
5	VAN-Amlodipine	5 MG and 10 MG Tab	Norvasc™
6	VAN-Losartan	25 MG, 50 MG and 100 MG Tab	Cozaar™
7	VAN-Losartan-HCTZ	50+12.5 MG and 100+25 MG Tab	Hyzaar™
8	VAN-Levetiracetam	250 MG, 500 MG and 750 MG Tab	Keppra™
9	VAN-Gabapentin	600 MG and 800 MG Tab	Neurontin™
10	VAN-Omeperazole	20 MG DR Tab	Losec™
11	VAN-Finasteride	5 MG Tab	Proscar™
12	VAN-Alendronate	5 MG, 10 MG and 70 MG Tab	Fosamax™
13	VAN-Bicalutamide	50 MG Tab	Casodex™
14	VAN-Letrozole	2.5 MG Tab	Femara™
15	VAN-Olanzapine	2.5 MG, 5 MG, 7.5 MG, 10 MG and 15 MG Tab	Zyprexa™
16	VAN-Sertraline cap	25 MG, 50 MG and 100 MG Cap	Zoloft™
17	VAN-Anastrozole	1 MG Tab	Arimidex™
18	VAN-Pantoprazole	40 MG Tab	Pantoloc™
19	VAN-Gabapentin	100 MG, 300 MG and 400 MG Cap	Neurontin™
20	VAN-Ciprofloxacin	250 MG, 500 MG and 750 MG Tab	Cipro™
21	VAN-Montelukast	4 MG and 5 MG Chew Tabs, 10 MG Tab	Singulair™
22	VAN-Sildenafil	25 MG, 50 MG and 100 MG Tab	Viagra™

1.13

CRITICAL ACCOUNTING ESTIMATES

The Company’s significant accounting policies are presented in Note 3 of the audited consolidated financial statements for the year ended June 30, 2014.  The preparation of financial statements using accounting policies in compliance with IFRS requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates may have a significant impact on the consolidated financial statements.  Actual amounts could differ materially from the estimates used and, accordingly, affect the results of the operations.   

The preparation of the consolidated financial statements also requires management to exercise judgment in the process of applying the accounting policies.  

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

i)

Recoverability of the carrying value of Intangible Assets:

The Company is required to review the carrying value of its intangible assets for potential impairment.  Impairment is indicated if the carrying value of the Company’s intangible assets is not recoverable.  If impairment is indicated, the amount by which the carrying value of intangible assets exceeds the estimated fair value is charged to the statement of loss and comprehensive loss.

Evaluating the recoverability requires judgments in determining whether future economic benefits from sale or otherwise are likely.  Evaluation may be more complex where activities have not reached a stage which permits a reasonable assessment of the viability of the asset.  Management must make certain estimates and assumptions about future events or circumstances including, but not limited to, the interpretation of marketing and sales data as well as the Company’s financial ability to continue marketing and sales activities and operations.

ii)

Inputs used in Black Scholes valuation model (volatility; interest rate; expected life and dividend yield) in accounting for Share Purchase Warrant transactions and Options granted:

Estimating the fair value of granted share purchase warrants required determining the most appropriate valuation model which is dependent on the terms and conditions of the grant.  The estimate of warrant and option valuation also requires determining the most appropriate inputs to the valuation model including the volatility, expected life of warrants and options, risk free interest rate and dividend yield.

iii)

Provision for Contingent Liabilities

Management must estimate the likelihood of a financial obligation arising from a contingent liability if it is deemed more likely than not, that there will be a future cash outflow due to a past event involving the Company. For this estimate, a provision must be made if the amount of the outflow can be reasonably determined.

iv)

Useful life of Equipment

The useful life of equipment is based on management estimates at the time of acquisition. The Company amortizes assets, using declining balance method, over the useful life of the asset. Estimates of residual values, useful lives and amortization methods are reviewed periodically by management. Any changes that arise from periodic reviews are accounted for and adjusted prospectively.

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

i)

Going concern

The assessment of the Company’s ability to execute its strategy by funding future working capital requirements involves judgment. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances (Note 1).

ii)

Tax interpretations, regulations, and legislation in the various jurisdictions operates are subject to change. The determination of income tax expense and deferred tax involves judgment and estimates as to the future taxable earnings, expected timing of reversals of deferred tax assets and liabilities, and interpretations of laws in the countries in which the Company operates.  The Company is subject to assessments by tax authorities who may interpret the tax law differently.  Changes in these estimates may materially affect the final amount of deferred taxes or the timing of tax payments.

1.14       RECENT ACCOUNTING PRONOUNCEMENTS

Changes in significant accounting policies and adoption of new accounting standards

The Company has not adopted new accounting policies since its recent year ended June 30, 2013. The following Standards and Interpretations applicable to the Company were issued but not yet effective. Unless otherwise stated,

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these new accounting standards and amendments will become effective for the annual period beginning on or after July 1, 2013.

i)

IFRS 10, Consolidated Financial Statements, requires an entity to consolidate an investee when it has power over the investee, is exposed, or has rights to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. IAS 27, Consolidated and Separate Financial Statements and IAS 28, Investments in Associates were revised and reissued as IAS 27, Separate Financial Statements and IAS 28, Investments in Associates and Joint Ventures to align with the new consolidation guidance.

ii)

IFRS 12, Disclosure of Interests in Other Entities, establishes disclosure requirements for all forms of interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. Matters covered include information about the significant judgments and assumptions that any entity has made in determining whether it has control, joint control or significant influence over another entity.

iii)

IFRS 13, Fair Value Measurement, is a comprehensive new standard for fair value measurement and disclosure across all IFRS standards. The new standard clarifies that fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, i.e., an exit price.

Accounting standards, not yet effective

Certain pronouncements were issued by the IASB or the IFRIC that are mandatory for accounting periods after April 1, 2014 or later periods. Many are not applicable or do not have a significant impact to the Company and have been excluded from the summary below. The following have not yet been adopted and are being evaluated to determine their impact on the Company.

In May 2013, the IASB issued IFRIC 21, Levies (“IFRIC 21”), an interpretation of IAS 37, Provisions, Contingent Liabilities and Contingent Assets (“IAS 37”), on the accounting for levies imposed by governments. IAS 37 sets out criteria for the recognition of a liability, one of which is the requirement for the entity to have a present obligation as a result of a past event (“obligating event”). IFRIC 21 clarifies that the obligating event that gives rise to a liability to pay a levy is the activity described in the relevant legislation that triggers the payment of the levy. IFRIC 21 is effective for annual periods commencing on or after January 1, 2014. The Company is currently evaluating the impact of applying IFRIC 21, however it does not expect the implementation of this standard to have a material impact on its consolidated financial statements.  

The IASB intends to replace IAS 39, Financial Instruments: Recognition and Measurement in its entirety with IFRS 9, Financial Instruments (“IFRS 9”) and to reduce the complexity in the classification and measurement of financial instruments. The completed version of IFRS 9 will include classification and measurement, impairment and hedge accounting requirements and the IASB has tentatively decided that the mandatory effective date of this new standard will be for annual periods beginning on or after January 1, 2018. The Company is currently monitoring the phases of this IASB project with a view to evaluating the impact of the standard when it is issued in its final form, which is expected in calendar 2014  

Segment reporting

A reportable segment, as defined by 'IFRS 8 Operating Segments', is a distinguishable business or geographical component of the Company, which are subject to risks and rewards that are different from those of other segments. The Company considers its primary reporting format to be business segments. The Company considers that it has only one reportable segment, being its operations in Canada.

1.15       FINANCIAL INSTRUMENTS

Financial instruments are initially recognized at their fair value on a settlement date basis when the Company becomes a party to the contractual provisions of the financial instrument or non-financial derivative contract.   

Fair Values - Fair value is the amount at which a financial instrument could be exchanged between willing parties based on current markets for instruments with the same risk, principal and remaining maturity. Fair value estimates are based on present value and other valuation techniques using rates that reflect those that the Company could currently obtain, on the market, for financial instruments with similar terms, conditions and maturities.

The fair value hierarchy establishes three levels to classify the inputs to valuation techniques used to measure fair value.  The three levels of the fair value hierarchy are described below:

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Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Inputs that are observable, either directly or indirectly, but do not qualify as Level 1 inputs (i.e., quoted prices for similar assets or liabilities).

Level 3 – Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).

Unless otherwise noted, cash and cash equivalents, GST receivable, and accounts payable and accrued liabilities are stated at amounts that approximate their fair value.  The fair values of these instruments approximate their carrying values due to the short term nature of these financial instruments.

This section establishes standards for the recognition, measurement disclosure and presentation of financial instruments.  Under the new standard, financial assets and liabilities are initially recognized at fair value and are subsequently measured based on their classification as fair value through profit or loss, held-to-maturity, loans and receivables, available-for-sale, or other financial liabilities, as described below:

Financial assets at fair value through profit or loss (“FVTPL”) - Financial assets and financial liabilities that are purchased and incurred with the intention of generating profits in the near term are classified as FVTPL.  Any financial instrument can be designated as FVTPL as long as its fair value can be reliably measured.  These instruments are measured at fair value with subsequent changes in fair value included in earnings.

The Company has classified cash and cash equivalents as FVTPL, which accordingly are carried at their fair values.  FVTPL assets are not subject to significant credit, foreign exchange or interest rate risk due to their short term nature.

Held-to-maturity - Financial assets that have a fixed maturity date and fixed or determinable payments, where the Company intends and has the ability to hold the financial asset to maturity are classified as held-to-maturity and measured at amortized cost using the effective interest rate method.  Any gains and losses arising from the sale of held-to-maturity financial assets are included in earnings. Any transaction costs incurred to acquire held-to-maturity financial assets will be included in earnings.  Currently, the Company has no held-to-maturity financial assets.

Loans and receivables - Items classified as loans and receivables are measured at amortized cost using the effective interest method.  Any gains or losses on the realization of loans and receivables are included in earnings. Any transaction costs incurred to acquire loans and receivables financial instruments will be included in earnings. The Company has classified GST receivable as loans and receivables.

Available-for-sale - Available-for-sale assets are those financial assets that are not classified as held-for-trading, held-to-maturity or loans or receivables, and are carried at fair value.  Any unrealized gains or losses arising from the change in fair value are recorded as other comprehensive income.  Available-for-sale securities are written down to fair value through earnings whenever it is necessary to reflect other-than-temporary impairment.  Cumulative gains and losses arising upon the sale of the instrument are included in earnings. Any transaction costs incurred to acquire  available-for-sale financial assets will be included in earnings. Currently, the Company has no available-for-sale financial assets.

Other financial liabilities - Financial liabilities that are not classified as held-to-maturity are classified as other financial liabilities, and are carried at amortized cost using the effective interest method.  Any gains or losses arising from the realization of other financial liabilities are included in earnings.  

The Company has classified accounts payable and accrued liabilities, sponsorship liability and promissory notes as other financial instruments, which are accordingly carried at amortized cost.  Due to their short-term natures, the fair values of other financial liabilities approximate their carrying values, and they are not subject to significant credit, foreign exchange or interest rate risk.

The Company has made the following classifications:

Cash and equivalents	Fair value through profit or loss
Accounts receivable	Loans and receivables
Accounts payable and accrued liabilities	Other financial liabilities
Sponsorship liability	Other financial liabilities
Promissory Notes	Other financial liabilities

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The Company’s risk management policies are established to identify and analyze the risks faced by the Company, to set appropriate risk limits and controls, and to monitor risks and adherence to market conditions and the Company’s activities. The Company has exposure to credit risk, liquidity risk and market risk as a result of its use of financial instruments.

This note presents information about the Company’s exposure to each of the above risks and the Company’s objectives, policies and processes for measuring and managing these risks. Further quantitative disclosures are included throughout these financial statements. The Board of Directors has overall responsibility for the establishment and oversight of the Company’s risk management framework. The Board has implemented and monitors compliance with risk management policies.

Credit risk

Credit risk is the risk of financial loss to the Company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises primarily from the Company’s cash and cash equivalents, trade receivables, and GST input tax credits.

The Company’s cash and equivalents are held through a large Canadian financial institution.  Cash equivalents are composed of financial instruments issued by Canadian banks with high investment-grade ratings.  The Company does not have financial assets that are invested in asset backed commercial paper.

The Company performs ongoing credit evaluations of its trade receivables, but does not require collateral.  The Company establishes an allowance for doubtful accounts based on the credit risk applicable to particular customers and historical data.

  

The Company monitors the concentration of exposure and where possible, if necessary, takes steps to limit exposures to any counterparty.  The Company views credit risk on cash deposits, trade receivables, and GST input tax credits as minimal.

Liquidity risk

Liquidity risk is the risk that the Company will incur difficulties meeting its financial obligations as they are due. The Company’s approach to managing liquidity is to ensure, as far as possible, that it will have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions without incurring unacceptable losses or risking harm to the Company’s reputation.  See Note 1 for working capital balances.

The Company monitors its spending plans, repayment obligations and cash resources and takes actions with the objective of ensuring that there is sufficient capital in order to meet short-term business requirements.  To facilitate its expenditure program, the Company raises funds primarily through public equity financing. The Company anticipates it will have adequate liquidity to fund its financial liabilities through future equity contributions.

As at September 30, 2014, the Company’s financial liabilities were comprised of accounts payable and accrued liabilities of $70,487 and Promissory Notes valuing $16,489.

Market risk  

Market risk for the Company consists of currency risk, and interest rate risk. The objective of market risk management is to manage and control market risk exposures within acceptable limits, while maximizing returns.

Currency risk

Foreign currency exchange rate risk is the risk that the fair value or future cash flows will fluctuate as a result of changes in foreign exchange rates. As all of the Company’s purchases and sales are denominated in Canadian dollars, and has no significant cash balances denominated in foreign currencies, the Company is not exposed to foreign currency exchange risk at this time.

Interest rate risk

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

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Determination of fair value

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

i) For cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities carrying amounts approximate fair value due to their short-term maturity;

ii) The fair value of notes payable and obligations under capital lease approximate their carrying value as their effective interest rates approximate current market rates;

iii) The fair value of derivative financial instruments is determined based on fair market valuation methods.

	Fair Value at September 30, 2014
	Level 1	Level 2	Level 3
Financial Assets
Cash and cash equivalents	95,831	-	-

	Fair Value at June 30, 2014
	Level 1	Level 2	Level 3
Financial Assets
Cash and cash equivalents	295,377	-	-

 

1.16

OTHER MD&A REQUIRMENTS

(a)

Additional Information

Additional information relating to the Company can be found on the Canadian Securities Administrators’ System for Electronic Document Analysis and Retrieval (SEDAR) database at www.sedar.com.

Additional relevant disclosure, such as expensed research and development costs, general and administration expenses, material costs, whether capitalized, deferred or expensed are disclosed in the accompanying financial statements for the for the year ended June 30, 2014 as allowed in NI 51-102, Section 5.3 (3).

(b)      Disclosure of Outstanding Share Data

The following table summarizes the Company’s outstanding share capital as at report date:

Security in Number	September 30, 2014	Reporting Date
Each class and series of voting or equity securities for which there are securities outstanding:
Common Shares	36,767,075	36,767,075
Each class and series of securities for which there are securities outstanding if the securities are convertible into, or exercisable or exchangeable for, voting or equity securities
Stock Options	2,475,000	2,075,000
Warrants	11,800,000	11,800,000
Convertible Debentures	-	-
Each class and series of voting or equity securities that are issuable on the conversion, exercise or exchange of outstanding securities above
Options and Warrants	14,275,000	13,875,000
Fully diluted	51,042,075	50,642,075

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(c)

Disclosure Controls and Procedures

The management of VANC is responsible for establishing and maintaining disclosure controls and procedures for the Company and has designed such disclosure controls and procedures, or caused them to be designed under VANC management’s supervision, to provide reasonable assurance that material information relating to the Company, including its consolidated subsidiaries, is made known to VANC management by others within those entities particularly during the period covered by this MD&A.

VANC management has evaluated the effectiveness of the Company’s disclosure controls and procedures for the period covered by this MD&A and based on that evaluation; the management has concluded that the disclosure controls and procedures are effective.

(d)

Internal Control Over Financial Reporting

Venture issuers are not required to include representations relating to the establishment and maintenance of disclosure controls and procedures (DC&P) and internal control over financial reporting (ICFR), as defined in National Instrument 52-109 Certification of Disclosure in Issuer’s Annual and Interim Filings (“NI 52- 109”). In particular, the Company’s certifying officers are not making any representations relating to the establishment and maintenance of:

i) controls and other procedures designed to provide reasonable assurance that information required to be disclosed by the Company in its annual filings, interim filings or other reports filed or submitted under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation; and

ii) a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with the Company’s generally accepted accounting principles.

The Company’s certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they make. Investors should be aware that inherent limitations on the ability of the Company are certifying officers to design and implement on a cost effective basis.

Forward Looking Statements

The statements contained in this report that are not purely historical are forward-looking statements. “Forward looking statements” include statements regarding our expectations, hopes, intentions or strategies regarding the future. Forward looking statements include: statements regarding future products or products or product development; statements regarding future selling, general and administrative costs and research and development spending; and our product development strategy; statements regarding future capital expenditures and financing requirements; and similar forward looking statements. It is important to note that our actual results could differ materially from those in such forward-looking statements.

 

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