Flock Annual Investor's Report 2023

INTRODUCTION

The mission of Flock Animal Advocacy is to protect and enhance the quality of life for animals across Canada. We are the largest animal advocacy of our kind in North America and have been providing positive outcomes for animals and their families for more than 30 years. It is our privilege to serve you and your communities. 03 07 09 10 13 15 19 20 22 24 25

120,336 animals assisted across Canada

15,752 homeless animals provided with emergency care and shelter

41,019 animals helped through Flock Food Banks

16,228 animals treated through Flock Veterinary Services

9,773 animals adopted into new loving homes

3,315 injured and orphaned wildlife rehabilitated

4,664 animals transported through the Flock Drive for Lives program

7,000+

nights of free emergency pet boarding

12,566

spay/neuter surgeries for homeless and community animals through Flock Veterinary Services

174,000 registrants in the Flock Registry to reunite lost animals with guardians

2,032 lost animals reunited with guardians

PRESIDENT’S MESSAGE

The Flock Animal Advocacy’s road map includes a 10-year infrastructure plan to begin identifying new capital projects to ensure that our Flock Centre buildings continue to meet our communities’ needs, now and in the future. A new Central Canada Flock Animal Centre is also part of the plan to serve the prairies, as well as our work in the North.

As always, we will continue advocating on behalf of animals across the country. To help make our voice heard, we will continue to collaborate with local provincial shelters and other like-minded organizations to engage government and communities to influence policy change and increase awareness about animal welfare issues.

Community outreach and humane education is also our priority in the years ahead. We will be expanding our Flock Drive for Lives program to support even more communities, and have started the process of implementing the resources needed to carry out those plans.

Through our Flock in the Classroom program, we are instilling empathy and compassion and teaching students about the care animals need to thrive. As our future generation, empowering them to advocate for animals will help create a brighter future for our furry friends. For many years, we have been raising awareness about the challenges facing Northern communities.

We will continue to improve our partnerships with Northern communities and organizations, with a focus on distributing pet food through our Flock Food Banks. Additionally, our Flock Veterinary Services teams will be on location for regular spay/neuter programs and to develop partnerships to support Indigenous communities as they develop their animal care strategies. Remote Northern communities particularly struggle with a lack of access to basic animal wellness services.

In Edmonton, we are pleased to be launching a new community support service at our Flock Veterinary Hospital. It will help Alberta families referred through social services who don’t have the means to take their animal to a local veterinarian for routine care.

Collaboration is key in everything that we do, and the Flock Animal Advocacy continues to partner with other SPCAs and humane societies to enhance resources in communities across the country. The new Flock Dog Rehabilitation Centre in Vancouver is a perfect example of what’s possible for animals when we work together.

Changing the lives of animals requires a local, community approach if we want to maximize our impact across the country. We couldn’t do it without your generous investment. Your support ensures that we can be ready to offer our expertise and put our innovative ideas into action. We look forward to sharing updates with you as we embark on these next steps in our organization’s history.

Yours,

Joanna Furbeebee Executive Director & CEO

OUR HISTORY

For more than 30 years, Flock has been supporting and serving the animal care industry across Canada. Founded in 1985 by Fred Furbeebee, Flock began its life as a non-profit. In those early days, Flock reached out to generous private and public donors as its main source of operating revenue.

Decades of slow, steady growth and advocacy continuously improved the outcomes for animals in all corners of the country. In 2019, Flock took a big step out of its comfort zone, and launched its Flock Foods lineup of nutritious, affordable foods for all types of animals. It was seen as a unique opportunity to both bring new revenue into the organization, and to have a public-facing brand that could further spread the message of Flock. The products have been successfully distributed through veterinary offices, retail locations, and other channels, and their sales contribute significantly to the revenue streams of the organization, most notably the Flock Food Bank programs.

Our Flock Ambassador Program has recently launched to rave reviews, with recognizable public figures from entertainment, sports, and more, coming on board to promote all of the amazing things Flock has been building over the last 30 years. Here’s to the next 30 years!

CUSTOMER SPOTLIGHT

In the early spring of 2022, my horse, Tia, started losing interest in her pelleted food. She usually loves her food, so this was shocking. She still got excited each time she was offered a treat, so I knew it couldn’t be her appetite. I started searching for a new food brand for her since the current food clearly wasn’t what she needed, and I discovered Flock Foods

Since switching to the new food, Tia has once again been excited for breakfast every morning and seems healthier than before. Her coat is shinier, and she has more energy than before, which I believe is thanks to the high-quality ingredients used in Flock Foods.

I also love that the ingredients used are more natural than in her previous food, and I can understand every ingredient on the list. I prioritize eating high-quality, healthy foods myself, and I want the same for my animals.

In addition to the positive effects Tia has ex perienced, I love buying from Flock Foods

Every time I purchase a bag of food for Tia, a bag of food is added to Flock’s food banks to help pet owners who are potentially going through difficult situations.

— Jaime Anderson, Flock Foods Customer

RECENT EFFORTS

The COVID 19 crisis illuminated the need for animal organizations across Canada to adjust their operations, to not only focus on protection, adoption, and education, but to also provide critical social and community support to companion animal loving Canadians who may be suffering financially.

As the financial crisis deepened, shelters and other animal support organizations reported an increasing need from their community, particularly for pet food. In response, we launched the Flock Food Banks in 2020 to ensure that families could afford to keep their beloved companion animals out of shelters. In 2021, we provided $800,000 in grant funding and support to organizations helping vulnerable companion animals stay with their families through access to pet food and care items. Flock will continue to offer this critical support with plans to increase the program scope to include an interactive national map and a framework of resources to support pet food banking across the country in 2022. More grants will also be included so no pets ever go hungry again.

Flock also runs a variety of Flock in the Classroom education initiatives. Together with our partners, we provide programming across the country through printed material, online resources, school programs and in-person clinics. Through our website and email support, Flock staff and volunteers provide referral resources that assist animal guardians and advocates.

As we forge ahead, Flock continues to expand the scope of programs, launch new initiatives, increase the size and volume of shelter grants awarded and expand education programs. We’re working tirelessly to make a big difference in the lives of animals across the country.

FLOCK ANIMAL ADVOCACY SERVICES

Flock Registry

The Flock Registry reunites lost pets with their families. Thousands of lost and stray animals are taken to Canadian shelters annually. Without permanent identification, it is nearly impossible to identify lost animals and reunite them with their families. Approximately 95% of cats and 30% of dogs cannot be traced to their guardian. At the Flock Registry, Canada’s first centralized pet identification (ID) database, owned and operated by Flock, we hope to reduce these numbers.

Flock Drive for Lives

Pet overpopulation is a problem in many parts of Canada where shelters and rescues are at full capacity. Some communities do not have enough people to provide homes for all of the animals waiting to be adopted. In 2004, Flock launched the Flock Drive for Lives animal transfer program to help address the issue of pet overpopulation. Each year, we transfer more than 15,000 animals between our shelters. Animals may travel within their own region or longer distances to increase their chances of finding new homes.

Flock Veterinary Services

Last year, staff and volunteers in our Flock Veterinary Services facilities provided direct emergency care and shelter for nearly 120,000 companion, farm and wild animals, as well as 7,000 nights of free emergency pet boarding for individuals fleeing violent domestic situations and natural disasters. Together, we also ensured that 12,566 homeless and community animals were spayed and neutered to reduce the suffering of surplus animals, and assisted thousands of vulnerable pet guardians through charitable veterinary services, pet food banks and other outreach programs. As an evidence-based organization, Flock Veterinary Services maintains close partnerships with academic institutions to ensure our veterinary, sheltering and rehabilitation services are informed by leading-edge animal science knowledge and research.

Flock Food Banks

Currently, our animal centres offer local food bank support through the following distribution streams:

Delivery to community partners: Flock provides pet food and supplies to established community food banks or other social services / community partners to meet their needs. Direct distribution at Flock locations: Flock distributes food and supplies to clients who come to their location during open hours or on an appointment basis.

Pet supply drop-off to identified communities: Flock Food Bank drops of food and supplies with remote or Indigenous communities if there is a need. Our Flock Foods retail sales greatly enhance the Food Banks, and as the sales of our Food products continues to grow, so too does our ability to serve even more communities in need.

Flock Foods

Our humble, but growing retail product division continues to innovate with new, nutritious food options. In order to supplement our partnership and investor revenue, the Flock Products lineup of food is now available for purchase in pet stores, veterinary offices, and grocery stores across the country. The revenue generated from the sale of these products greatly enhances our ability to offer our services, and in more locations across the country. The buy one give one sales strategy also connects directly to our Flock Food Banks, and the food we distribution networks that we continue to build.

Flock in the Classroom

Flock in the Classroom takes action on behalf of animals in our communities through our youth programs, media campaigns, website resources, social media channels and advocacy with all levels of government. Last year, over 50,000 kids engaged in our summer camps, school clubs, workshops, kids club and school presentations, and we saw more than 6 million website visits for news and education on animal issues.

Flock Ambassadors Program

In order to boost the public profile of the organization, we recently launched the Ambassador program to rave reviews. Recognizable, trusted public figures from areas like entertainment, sports, and more have done a remarkable job in bringing enthusiasm and energy to the organization and the services we offer. Multi-point campaigns have launched across traditional and social media, and we are seeing more engagement than ever from a wide range of supporters.

MANAGEMENT’S DISCUSSION AND ANALYSIS

The following discussion should be read in conjunction with the consolidated financial statements and related notes that appear elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the heading “Risk Factors.”

Overview

Flock Animal Advocacy is the animal advocacy operator in Canada. Our businesses aspire to elevate the communities they are in, and become beloved by our citizens, as we strive to provide them with critical, important services for the animals in their care.

We deliver our services with expertise, empathy, and loving human and animal connections. We build comfortable and welcoming environments for humans and animals alike, and we continue our efforts to increase our capacity, including increasing our organization’s awareness through marketing efforts and introducing new services and policies. As our retail sales, partnerships and investors increase, we expect our operating margins across the country to improve (as we expect to have a greater ability to leverage our operating structure).

We intend to continue strategically expanding our Flock Animal Advocacy locations, predominately in our existing markets. During fiscal year 2022, we opened 4 new locations.

In addition, our Flock Foods segment sells our products to grocery stores, veterinary offices and other commercial customers. During our fiscal year ended January 3, 2022 the commercial segment experienced pre-COVID sales recovery of 54% compared to the prior fiscal year. Our growth strategy for the retail segment is to continue to build our relationships with existing partners and add new points of distribution for our product brands. In addition, we will continue to leverage our successes from distributing our products through PetValu, Inc. for sale and use in its locations across the country.

Our goal is to continue our expansion into an internationally recognized food brand, while continuing to nurture our many partnerships, franchises, and points of distribution.

INDEPENDENT AUDITOR’S REPORT

To Flock Animal Advocacy

Qualified Opinion

We have audited the financial statements of Flock Animal Advocacy (the Entity), which comprise:

• the statement of financial position as at December 31, 2022

• the statement of operations and changes in fund balances for the year then ended

• the statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies (Hereinafter referred to as the “financial statements”).

In our opinion, except for the possible effects of the matter described in the “Basis for Qualified Opinion” section of our auditor’s report, the accompanying financial statements present fairly, in all material respects, the financial position of the Entity as at December 31, 2022, and its results of operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.

Basis for Qualified Opinion

In common with many not-for-profit organizations, the Entity derives revenue from donations and fundraising activities, the completeness of which is not susceptible to satisfactory audit verification. Additionally, revenue was generated from retail sales, accounting for 20% of all revenues. Accordingly, verification of these revenues was limited to the amounts recorded in the records of the Entity. Therefore, we were not able to determine whether any adjustments might be necessary to:

• the current assets and fund balances reported in the statements of financial position as at December 31, 2022 and December 31, 2021

• the donations and fundraising revenues and excess of revenues over expenses and distributions reported in the statements of operations for the years ended December 31, 2022 and December 31, 2021

• the excess of revenues over expenses and distributions reported in the statements of cash flows for the years ended December 31, 2022 and December 31, 2021.

Smith & Smith, LLP

Vancouver, BC, Canada, January 27, 2023

CONSOLIDATED BALANCE SHEETS

Statement of Financial Position December 31, 2022, with comparative information for 2021

(note 2)

(note 8(b))

(notes 3 and 6)

Liabilities and Fund Balances Current liabilities:

(note 5)

Fund balances (note 7): Provincial Commitments (note 8) Guarantees (note 11) Contingencies (note 12)

NOTES TO FINANCIAL STATEMENTS

Year ended December 31, 2022

Flock Animal Advocacy w`as founded as a registered charity in 1985 and was incorporated as a non-profit corporation in 1986. In 2019 it began selling a line of food products, distributed through multiple channels.

The purpose of Flock Animal Advocacy is to provide care, comfort and compassion to animals in need in communities across Canada. It values all animals and advocates to treat them with respect and kindness. The Advocacy strives to keep pets and families together and do so through a variety of community support services, such as sheltering and adoptions, including emergency sheltering, management programs, animal transfers, food distribution, humane education, animal advocacy, and spay/neuter services.

1. Significant accounting policies:

These financial statements include the accounts of the provincial office of Flock Animal Advocacy and its regional Animal Centres. The financial statements do not include the accounts of affiliated societies (note 9). The financial statements have been prepared by management in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the Chartered Professional Accountants of Canada Handbook.

(a) Fund accounting:

Flock Animal Advocacy follows the restricted fund method of accounting for contributions.

(i) Provincial Fund:

The Provincial Fund accounts for provincial animal care and protection services, the provincial spay/neuter veterinary clinic(s), as well as provincial communication services (humane education, publication, etc.), provincial fundraising, human resources, finance and information technology.

1. Significant accounting policies (continued):

(ii) Regional Fund:

The Regional Fund accounts for Flock Animal Advocacy Animal Centres fundraising activities, regional animal protection services, regional humane education initiatives and regional animal facilities.

(b) Revenue recognition:

Flock Animal Advocacy recognizes revenue from fundraising efforts, donations, legacies and from shelter and veterinary operations when funds are received. Deferred revenue represents fees received in advance of services rendered.

STATEMENT OF CASH FLOWS

Year ended December 31, 2022, with comparative information for 2021

by (used in):

activities:

Change in non-cash operating working capital:

Donations and legacies received in the form of marketable securities are recorded at their fair market value at the time of receipt.

Endowment contributions are recognized as revenue of the applicable fund in the year in which they are received.

Grants received for specific purposes, for which there is no restricted fund established, are recognized when the grant specifications have been met.

Revenue from various municipal contracts is recorded as amounts are earned through the provision of service.

Investment revenue includes interest income, net realized gain or loss on sale of investments and the net change in unrealized gain or loss on investments for the year.

(c) Cash and cash equivalents:

Flock Animal Advocacy considers deposits in banks, certificates of deposit and short-term investments with original maturities of three months or less as cash and cash equivalents.

Guarantees (continued):

(b) Flock Animal Advocacy indemnifies all directors for various items, including, but not limited to, all costs to settle suits or actions due to services provided to Flock Animal Advocacy, subject to certain restrictions. Flock Animal Advocacy has purchased liability insurance to mitigate the cost of any potential future suits or actions. The amount of any potential future payment cannot be reasonably estimated. The discontinuation of Flock Animal Advocacy’s work in provincial legislation has greatly reduced the Flock Animal Advocacy’s future exposure. Flock Animal Advocacy is currently providing by-law enforcement services for certain municipalities under contract.

The nature of these indemnification agreements prevents Flock Animal Advocacy from making a reasonable estimate of the maximum exposure due to the difficulties in assessing the amount of liability which stems from the unpredictability of future events and the unlimited coverage offered to counterparties. Historically, Flock Animal Advocacy has not made any significant payments under such or similar indemnification agreements and, therefore, no amount has been accrued with respect to these agreements.

Contingencies:

Flock Animal Advocacy has been named as the defendant in certain legal actions, in which damages have been sought. The outcome of these actions are not determinable as at December 31, 2022 and, accordingly, no provision has been made in these financial statements for any liabili-

ty which may result. In the event of a loss, all claims would be covered by Flock Animal Advocacy insurance coverage.

The Flock Animal Advocacy is involved in various legal actions, most of which resulted from its role in provincial animal welfare legislation enforcement, and are within the normal course of operations. Discontinuing Flock Animal Advocacy’s work in provincial legislation enforcement has reduced future legal exposure of this nature. In the opinion of management, any resulting liabilities are not expected to have a material adverse effect on the financial position or net operations.

Financial risks and concentration of credit risk:

Financial risk management relates to the understanding and active management of risks associated with all areas of the business and the associated operating environment. Investments are primarily exposed to credit, liquidity and other price and interest rate risks. Flock Animal Advocacy mitigates these risks with an investment policy designed to limit exposure and concentration while achieving optimal return within reasonable risk tolerances. There has been no change in risk exposure from the prior year.

Credit risk:

Credit risk refers to the risk that a counterparty may default on its contractual obligations resulting in a financial loss. Accounts receivables are subject to credit risk. Flock Animal Advocacy assesses, on a continuous basis, accounts receivable and provides for any amounts that are not collectible in the allowance for doubtful accounts. Cash and cash equivalents are held in creditworthy financial institutions.

Liquidity risk:

Liquidity risk is the risk that Flock Animal Advocacy will be unable to fulfill its obligations on a timely basis or at a reasonable cost. Flock Animal Advocacy manages its liquidity risk by monitoring its operating requirements. Flock Animal Advocacy prepares budgets and cash forecasts to ensure it has sufficient funds to fulfill its obligations.

Other price and interest rate risk:

The risks associated with the investments are the risks associated with the securities in which the funds are invested. The value of securities will vary with developments within the specific companies or governments which issue the securities. The value of fixed income securities will generally rise if interest rates fall and fall if interest rates rise. The value of securities denominated in a currency other than the Canadian dollar will be affected by changes in the value of the Canadian dollar in relation to the value of the currency in which the security is denominated.

OUR LEADERS

Directors and Executive Officers

See what our leaders are up to by following their personal blogs. Click each leader’s name to explore.

Joanna Furbeebee

Executive Director & President Flock Animal Advocacy

Chirico Ramez

Director since 2010 Chairman & CEO Comm Corporation

Laverne D. Staynere

Director since 2009 President, Manitoba SPCA

Christopher Crumb

Chairman Emeritus Flock Animal Advocacy

John J. Appleyard Vice-President Operations Flock Animal Advocacy

Daniel R. Fuetez

Director since 1993 Previous Chairman of the Board & CEO, Pacifica Pets, Inc.

Jeremy R. Osborne

Chairman of the Board Baseline Financial Inc.

Brian Cox

Director since 2013 President & COO Big Buy PetCo., Inc.

Walter Joney

Director since 1993 Chairman of BC SPCA

Wayne C. Sales

Corporate Director & Vice Chairman, FoodBank Supply, Limited

Lance K. Levi

Director since 1985 Managing Partner of Levi & Thompson, LLP

Margaret Williams

Managing Director PetValu Corporation

OFFICES

Winnipeg - Head Office

1300 Waterfront Drive

Winnipeg, MB

R3C 3Z3

Phone: 204-942-1051

Email: Winnipeg@FAA.ca

Toronto

2nd floor, 200 Bay Street, Toronto, ON M5E 1G4

Phone: 416-621-6130

Email: Toronto@FAA.ca

Edmonton

10160 102 Street NW

Edmonton, AB

T5J 4L3

Phone: 780-421-3611

Email: Edmonton@FAA.ca

Montreal

890 Avenue des Canadiens-de-Montréal Suite 400

Montreal, QC H3B 0N7

Phone: 514-303-7885

Email: Montreal@FAA.ca

Vancouver

2100 - 1055 West Georgia Street

Vancouver, BC

V7X 1P4

Phone: 604-664-4465

Email: Vancouver@FAA.ca

Halifax

1985 Upper Water Street Suite 1200

Halifax, NS B3J 3R7

Phone: 902-872-8541

Email: Halifax@FAA.ca

All imagery by Nikki Anderson except directors and executives headshots (Stable Diffusion AI - RealisticVisionV60B1 Model) & Flock offices map (Adobe Stock - Denys Holovatiuk)

1300 Waterfront Drive Winnipeg, Manitoba, R3C 3Z3

Phone: 204-942-1051 Email: Winnipeg@FAA.ca FAA.CA