10-Q 1 e2736_10-q.htm 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2021

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

For the transition period from _____to _____

Commission File Number: 001-37606

ANAVEX LIFE SCIENCES CORP.

(Exact name of registrant as specified in its charter)

Nevada	98-0608404
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

51 West 52^nd Street, 7^thFloor, New York, NY USA 10019

(Address of principal executive offices) (Zip Code)

1-844-689-3939

(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock Par Value $0.001		AVXL		NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes☐ No

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

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act

☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 70,038,920 shares of common stock outstanding as of May 11, 2021.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	4

ITEM 1. FINANCIAL STATEMENTS	4

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	18

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.	32

ITEM 4. CONTROLS AND PROCEDURES.	32

PART II OTHER INFORMATION	33

ITEM 1. LEGAL PROCEEDINGS.	33

ITEM 1A. RISK FACTORS	33

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	34

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.	35

ITEM 4. MINE SAFETY DISCLOSURES	35

ITEM 5. OTHER INFORMATION.	35

ITEM 6. EXHIBITS.	36

SIGNATURES	37

PART I - FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(Unaudited)

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

March 31, 2021 and September 30, 2020

	March 31,			September 30,
	2021			2020
	(Unaudited)
Assets
Current
Cash and cash equivalents	$	75,859,339		$	29,249,018
Incentive and tax receivables		7,328,090			4,849,340
Prepaid expenses and deposits		386,809			443,839
Total Assets	$	83,574,238		$	34,542,197

Liabilities and Stockholders’ Equity
Current Liabilities
Accounts payable	$	3,658,052		$	3,989,054
Accrued liabilities		3,618,779			3,316,574
Deferred grant income		487,111			—
Total Liabilities		7,763,942			7,305,628

Commitments and Contingencies - Note 5

Capital stock
Authorized:
10,000,000 preferred stock, par value $0.001 per share
100,000,000 common stock, par value $0.001 per share
Issued and outstanding:
70,030,620 common shares
(September 30, 2020 - 62,045,198)		70,032			62,047
Additional paid-in capital		251,427,781			186,851,752
Accumulated deficit		(175,687,517	)		(159,677,230	)
Total Stockholders’ Equity		75,810,296			27,236,569
Total Liabilities and Stockholders’ Equity	$	83,574,238		$	34,542,197

See Accompanying Notes to Condensed Consolidated Interim Financial Statements

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the three and six months ended March 31, 2021 and 2020

(Unaudited)

	Three months ended March 31,						Six months ended March 31,
	2021			2020			2021			2020
Operating expenses
General and administrative	$	2,233,745		$	1,720,142		$	3,704,401		$	3,072,176
Research and development		6,720,841			6,053,047			14,646,360			12,401,715
Total operating expenses		(8,954,586	)		(7,773,189	)		(18,350,761	)		(15,473,891	)

Other income (expenses)
Grant income		10,820			74,944			10,820			149,888
Research and development incentive income		960,879			717,328			2,230,195			1,660,543
Interest income, net		9,216			70,180			7,657			116,900
Foreign exchange gain (loss), net		(154,563	)		(325,960	)		178,071			(272,848	)
Total other income, net		826,352			536,492			2,426,743			1,654,483
Net loss before provision for income taxes		(8,128,234	)		(7,236,697	)		(15,924,018	)		(13,819,408	)

Income tax expense, current		(26,988	)		—			(86,269	)		(9,214	)

Net loss and comprehensive loss	$	(8,155,222	)	$	(7,236,697	)	$	(16,010,287	)	$	(13,828,622	)

Net Loss per share
Basic and diluted	$	(0.12	)	$	(0.12	)	$	(0.24	)	$	(0.24	)

Weighted average number of shares outstanding
Basic and diluted		68,594,867			58,353,954			66,421,380			56,544,037

See Accompanying Notes to Condensed Consolidated Interim Financial Statements

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the six months ended March 31, 2021 and 2020

(Unaudited)

	2021			2020

Cash Flows used in Operating Activities
Net loss	$	(16,010,287	)	$	(13,828,622	)
Adjustments to reconcile net loss to net cash used in operations:
Stock-based compensation		2,785,470			2,965,177
Changes in non-cash working capital balances related to operations:
Incentive and tax receivables		(2,478,750	)		(1,509,202	)
Prepaid expenses and deposits		57,030			195,439
Accounts payable		(331,002	)		126,402
Accrued liabilities		302,205			1,062,755
Deferred grant income		487,111			—
Net cash used in operating activities		(15,188,223	)		(10,988,051	)

Cash Flows provided by Financing Activities
Issuance of common shares		61,934,439			15,365,492
Share issue costs		(1,134,697	)		—
Proceeds from exercise of stock options		998,802			—
Net cash provided by financing activities		61,798,544			15,365,492

Increase in cash and cash equivalents during the period		46,610,321			4,377,441
Cash and cash equivalents, beginning of period		29,249,018			22,185,630
Cash and cash equivalents, end of period	$	75,859,339		$	26,563,071

See Accompanying Notes to Condensed Consolidated Interim Financial Statements

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the three months ended March 31, 2021 and 2020

(Unaudited)

	Common Stock
					Additional
					Paid-in			Accumulated
	Shares		Par Value		Capital			Deficit			Total

Balance, January 1, 2021		66,962,957	$	66,964	$	213,766,108		$	(167,532,295	)	$	46,300,777
Shares issued under 2019 Purchase Agreement												—
Purchase shares		661,708		662		6,649,134			—			6,649,796
Commitment shares		21,571		22		(22	)		—			—
Shares issued upon exercise of options		346,900		347		998,455						998,802
Shares issued under Sales Agreement, net of share issue costs		2,037,484		2,037		28,167,950						28,169,987
Share based compensation		—		—		1,846,156			—			1,846,156
Net loss		—		—		—			(8,155,222	)		(8,155,222	)
Balance, March 31, 2021		70,030,620	$	70,032	$	251,427,781		$	(175,687,517	)	$	75,810,296

Balance, January 1, 2020		57,080,356	$	57,082	$	165,891,753		$	(139,988,685	)	$	25,960,150
Shares issued under 2019 Purchase Agreement												—
Purchase shares		1,570,424		1,571		4,365,969			—			4,367,540
Commitment shares		14,166		13		(13	)		—			—
Share based compensation		—		—		1,700,753			—			1,700,753
Net loss		—		—		—			(7,236,697	)		(7,236,697	)
Balance, March 31, 2020		58,664,946	$	58,666	$	171,958,462		$	(147,225,382	)	$	24,791,746

See Accompanying Notes to Condensed Consolidated Interim Financial Statements

ANAVEX LIFE SCIENCES CORP.

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the six months ended March 31, 2021 and 2020

(Unaudited)

	Common Stock
					Additional
					Paid-in			Accumulated
	Shares		Par Value		Capital			Deficit			Total

Balance, October 1, 2020		62,045,198	$	62,047	$	186,851,752		$	(159,677,230	)	$	27,236,569
Shares issued under 2019 purchase agreement
Purchase shares		4,007,996		4,008		24,107,190			—			24,111,198
Commitment shares		78,213		78		(78	)		—			—
Shares issued upon exercise of options		346,900		347		998,455						998,802
Shares issued under Sales Agreement, net of share issue costs		3,552,313		3,552		36,684,992						36,688,544
Share based compensation		—		—		2,785,470			—			2,785,470
Net loss		—		—		—			(16,010,287	)		(16,010,287	)
Balance, March 31, 2021		70,030,620	$	70,032	$	251,427,781		$	(175,687,517	)	$	75,810,296

Balance, October 1, 2019		52,650,521	$	52,652	$	153,633,807		$	(133,396,760	)	$	20,289,699
Shares issued under 2019 Purchase Agreement
Purchase shares		5,964,584		5,965		15,359,527			—			15,365,492
Commitment shares		49,841		49		(49	)		—			—
Share based compensation		—		—		2,965,177			—			2,965,177
Net loss		—		—		—			(13,828,622	)		(13,828,622	)
Balance, March 31, 2020		58,664,946	$	58,666	$	171,958,462		$	(147,225,382	)	$	24,791,746

See Accompanying Notes to Condensed Consolidated Interim Financial Statements

Note 1

Business Description and Basis of Presentation

Business

Anavex Life Sciences Corp. (“Anavex” or the “Company”) is a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics by applying precision medicine to central nervous system (“CNS”) diseases with high unmet need. Anavex analyzes genomic data from clinical studies to identify biomarkers, which are used to select patients that will receive the therapeutic benefit for the treatment of neurodegenerative and neurodevelopmental diseases. The Company’s lead compound ANAVEX^®2-73 is being developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other central nervous system diseases, including rare diseases, such as Rett syndrome, a rare severe neurological monogenic disorder caused by mutations in the X-linked gene, methyl-CpG-binding protein 2 (“MECP2”).

Basis of Presentation

These unaudited interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim reporting. Accordingly, certain information and note disclosures normally included in the annual financial statements in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the disclosures are adequate to make the information presented not misleading.

These accompanying unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, which in the opinion of management are necessary for fair presentation of the information contained herein. The consolidated balance sheet as of September 30, 2020 was derived from the audited annual financial statements but does not include all disclosures required by U.S. GAAP. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended September 30, 2020 filed with the SEC on December 28, 2020. The Company follows the same accounting policies in the preparation of interim reports.

Operating results for the six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the year ending September 30, 2021.

Liquidity

All of the Company’s potential drug compounds are in the clinical development stage and the Company cannot be certain that its research and development efforts will be successful or, if successful, that its potential drug compounds will ever be approved for sales to pharmaceutical companies or generate commercial revenues. To date, we have not generated any revenues from our operations. The Company expects the business to continue to experience negative cash flows for the foreseeable future and cannot predict when, if ever, our business might become profitable.

Note 1

Business Description and Basis of Presentation – (Continued)

The Company believes that its existing cash and cash equivalents, along with existing financial commitments from third parties, will be sufficient to meet its cash commitments for up to three years after the date that these interim condensed consolidated financial statements are issued. The process of drug development can be costly, and the timing and outcomes of clinical trials is uncertain. The assumptions upon which the Company has based its estimates are routinely evaluated and may be subject to change. The actual amount of the Company’s expenditures will vary depending upon a number of factors including but not limited to the design, timing and duration of future clinical trials, the progress of the Company’s research and development programs and the level of financial resources available. The Company has the ability to adjust its operating plan spending levels based on the timing of future clinical trials.

Other than our rights related to the Sales Agreement (as defined below in Note 4), there can be no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially reasonable terms. If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its research and development activities.

In December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China. In March 2020, the World Health Organization declared COVID-19 to be a global pandemic as a result of the rapid spread of the virus beyond its point of origin.

The global outbreak of COVID-19 continues to rapidly evolve as of the date these interim condensed consolidated financial statements are issued. As such, it is uncertain as to the full magnitude that the outbreak will have on the Company’s financial condition and future results of operations. Management is actively monitoring the global situation on its business, including on its clinical trials and operations and financial condition. The effects of COVID-19 did not have a material impact on the Company’s result of operations or financial condition for the period ended March 31, 2021. However, given the daily evolution of the COVID-19 situation, and the global responses to curb its spread, the Company is not able to estimate the effects COVID-19 may have on its future results of operations or financial condition.

Use of Estimates

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period. The Company regularly evaluates estimates and assumptions related to accounting for research and development costs, valuation and recoverability of deferred tax assets, asset impairment, stock-based compensation, and loss contingencies. The Company bases its estimates and assumptions on current facts, historical experience, and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources. The actual results experienced by the Company may differ materially and adversely from the Company’s estimates. To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Note 1

Business Description and Basis of Presentation – (Continued)

Principles of Consolidation

These consolidated financial statements include the accounts of Anavex Life Sciences Corp. and its wholly-owned subsidiaries, Anavex Australia Pty Limited., a company incorporated under the laws of Australia, Anavex Germany GmbH, a company incorporated under the laws of Germany, and Anavex Canada Ltd., a company incorporated under the laws of the Province of Ontario, Canada. All inter-company transactions and balances have been eliminated.

Fair Value Measurements

The fair value hierarchy under GAAP is based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

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

Level 2 - observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant value drivers are observable; and

Level 3 - assets and liabilities whose significant value drivers are unobservable by little or no market activity and that are significant to the fair value of the assets or liabilities.

The book value of cash and cash equivalents and accounts payable and accrued liabilities approximate their fair values due to the short-term maturity of those instruments.

At March 31, 2021 and September 30, 2020, the Company did not have any Level 3 assets or liabilities.

Basic and Diluted Loss per Share

Basic income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the sum of (1) the weighted-average number of common shares outstanding during the period, (2) the dilutive effect of the assumed exercise of options and warrants using the treasury stock method and (3) the dilutive effect of other potentially dilutive securities. For purposes of the diluted net loss per share calculation, options and warrants are potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

As of March 31, 2021, loss per share excludes 11,505,199 (September 30, 2020 – 10,576,266) potentially dilutive common shares related to outstanding options and warrants, as their effect was anti-dilutive.

Note 2

Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flows.

Note 3

Other Income

Grant Income

During the six months ended March 31, 2021, the Company received $497,931 of a $995,862 research grant awarded by the Michael J. Fox Foundation for Parkinson’s Research. The grant will be used to fund a clinical trial in the Company’s lead compound, ANAVEX^®2-73 for the treatment of Parkinson’s disease.

The grant income is being deferred when received and amortized to other income as the related research and development expenditures are incurred. During the three and six months ended March 31, 2021, the Company recognized $10,820 and $10,820, respectively (2020: $0 and $0, respectively) of this grant on its statements of operations within grant income.

During the year ended September 30, 2017, the Company was awarded grant funding in the amount of $597,886. The grant was received in equal quarterly installments over a period of two years ending during the year ended September 30, 2020, in exchange for a commitment to complete clinical testing for a therapeutic drug candidate for the treatment of Rett syndrome.

The grant income was deferred when received and amortized to other income as the related research and development expenditures were incurred. During the three and six months ended March 31, 2020, the Company recognized $74,944 and $149,888, respectively of this grant on its statements of operations within grant income.

Research and Development Incentive Income

Research and development incentive income represents the receipt by the Company’s Australian subsidiary, of the Australian research and development incentive credit, (the “ATO R&D Credit”).

During the three and six months ended March 31, 2021, the Company recorded research and development incentive income of $960,879 (AUD 1,244,133) and $2,230,195 (AUD 2,980,095) (2020: $717,328 (AUD 1,203,000) and $1,660,543 (AUD 2,548,000)), respectively, in respect of the ATO R&D Credit for eligible research and development expenses incurred during the period.

Note 4

Equity Offering Agreements – (Continued)

2019 Purchase Agreement

On June 7, 2019, the Company entered into a $50,000,000 purchase agreement (the “2019 Purchase Agreement”) with Lincoln Park, as amended on July 1, 2020, pursuant to which the Company had the right to sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $50,000,000 in value of its shares of common stock from time to time over a three-year period until July 1, 2022.

In consideration for entering into the 2019 Purchase Agreement, the Company issued to Lincoln Park 324,383 shares of common stock as a commitment fee during the year ended September 30, 2019 and agreed to issue up to 162,191 shares pro rata, when and if, Lincoln Park purchased, at the Company’s discretion, the $50,000,000 aggregate commitment.

During the six months ended March 31, 2021, the Company issued to Lincoln Park an aggregate of 4,086,209 (2020 – 6,014,425) shares of common stock under the 2019 Purchase Agreement, including 4,007,996 (2020: 5,964,584) shares of common stock for an aggregate purchase price of $24,111,198 (2020: $15,365,492) and 78,213 (2020: 49,841) commitment shares.

At March 31, 2021, no amount remained available under the 2019 Purchase Agreement (September 30, 2020: $24,111,198).

Sales Agreement

The Company entered into a Controlled Equity Offering Sales Agreement on July 6, 2018, which was amended and restated on May 1, 2020 (the “Sales Agreement”) with Cantor Fitzgerald & Co. and SVB Leerink LLC (together the “Sales Agents”), pursuant to which the Company may offer and sell shares of common stock registered under an effective registration statement from time to time through the Sales Agents (the “Offering”).

Upon delivery of a placement notice based on the Company’s instructions and subject to the terms and conditions of the Sales Agreement, the Sales Agents may sell the Shares by methods deemed to be an “at the market offering” offering, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to the prior written consent of the Company. The Company is not obligated to make any sales of Shares under the Sales Agreement. The Company or Sales Agents may suspend or terminate the offering of Shares upon notice to the other party, subject to certain conditions. The Sales Agents will act as agent on a commercially reasonable efforts basis consistent with their normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq.

The Company has agreed to pay the Sales Agents commissions for their services of up to 3.0% of the gross proceeds from the sale of the Shares pursuant to the Sales Agreement. The Company also agreed to provide the Sales Agents with customary indemnification and contribution rights. During the six months ended March 31, 2021, 3,552,313 shares were sold pursuant to the Offering for gross proceeds of $37,823,241 (net proceeds of $36,688,544 after deducting offering expenses).

Note 5

Commitments and Contingencies

Leases

During the three and six months ended March 31, 2021, the Company incurred office lease expense of $29,903 and $98,290, respectively (2020: $60,861 and $110,915, respectively).

Litigation

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s consolidated financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated financial statements.

Share Purchase Warrants

A summary of the status of the Company’s outstanding share purchase warrants is presented below:

	Number of Shares		Weighted Average Exercise Price ($)
Balance, September 30, 2019		350,000		4.19
Granted		150,000		3.17
Balance, September 30, 2020 and March 31, 2021		500,000		3.88

At March 31, 2021, the Company had share purchase warrants outstanding as follows:

Number		Exercise Price		Expiry Date
	350,000	$	4.19	June 30, 2021
	150,000	$	3.17	May 6, 2024
	500,000

Note 5

Commitments – (Continued)

Stock–based Compensation Plan

2015 Stock Option Plan

On September 18, 2015, the Company’s board of directors approved a 2015 Omnibus Incentive Plan (the “2015 Plan”), which provided for the grant of stock options and restricted stock awards to directors, officers, employees and consultants of the Company.

The maximum number of our common shares reserved for issue under the plan was 6,050,553 shares, subject to adjustment in the event of a change of the Company’s capitalization. At March 31, 2021, 146,371 (September 30, 2020: 146,371) options remain available for issue under the 2015 Plan.

2019 Stock Option Plan

On January 15, 2019, the Board approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant of stock options and restricted stock awards to directors, officers, employees, consultants and advisors of the Company. Under the terms of the 2019 Plan, 6,000,000 additional shares of Common Stock are available for issuance under the 2019 Plan, in addition to the shares available under the 2015 Plan. Any awards outstanding under the 2015 Plan or the Company’s 2007 Stock Option Plan (the “2007 Plan”) will remain subject to and be paid under the 2015 Plan or the 2007 Plan, respectively, and any shares subject to outstanding awards under the 2015 Plan or the 2007 Plan that subsequently cease to be subject to such awards (other than by reason of settlement of the awards in shares) will automatically become available for issuance under the 2019 Plan.

The 2019 Plan provides that it may be administered by the Board, or the Board may delegate such responsibility to a committee. The exercise price will be determined by the board of directors at the time of grant shall be at least equal to the fair market value on such date. If the grantee is a 10% stockholder on the grant date, then the exercise price shall not be less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted under the 2019 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by the board, subject to earlier termination in accordance with the terms of the 2019 Plan. At March 31, 2021, 1,856,665 (September 30, 2020: 3,161,665) options remain available for issue under the 2019 Plan.

Note 5 Commitments – (Continued)

Stock-based Compensation Plan – (Continued)

A summary of the status of Company’s outstanding stock purchase options is presented below:

	Number of Shares			Weighted Average Exercise Price ($)		Weighted Average Grant Date Fair Value ($)		Aggregate intrinsic value ($)
Outstanding, September 30, 2019		8,462,933			3.58				4,115,032
Granted		1,695,000			2.96		2.27
Forfeited		(68,332	)		3.01
Exercised		(13,335	)		3.15
Outstanding, September 30, 2020		10,076,266			3.48				14,982,581
Granted		1,305,000			5.93		4.47
Forfeited		(29,167	)		1.44
Exercised		(346,900	)		2.88
Outstanding, March 31, 2021		11,005,199			3.79				122,805,858
Exercisable, March 31, 2021		7,513,533			3.65				84,890,710

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s stock for the options that were in-the-money at March 31, 2021.

During the three and six months ended March 31, 2021, the Company recognized stock-based compensation expense of $1,846,156 and $2,785,470, respectively (2020: $1,700,753 and $2,965,177, respectively) in connection with the issuance and vesting of stock options and warrants in exchange for services. These amounts have been included in general and administrative expenses and research and development expenses on the Company’s statements of operations as follows:

	Three months ended March 31,				Six months ended March 31,
	2021		2020		2021		2020
General and administrative	$	793,957	$	810,309	$	1,216,780	$	1,291,410
Research and development	$	1,052,199	$	890,444	$	1,568,690	$	1,673,767
Total share based compensation	$	1,846,156	$	1,700,753	$	2,785,470	$	2,965,177

An amount of approximately $7,091,142 in stock-based compensation is expected to be recorded over the remaining term of such options through fiscal 2024.

The fair value of each option award granted during the six months ended March 31, 2021 and 2020 is estimated on the date of grant using the Black Scholes option pricing model based on the following weighted average assumptions:

	2021			2020
Risk-free interest rate		0.64	%		1.68	%
Expected life of options (years)		5.64			5.44
Annualized volatility		96.26	%		97.61	%
Dividend rate		0.00	%		0.00	%

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our anticipated future clinical and regulatory milestone events, future financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect” “should,” “forecast,” “could,” “suggest,” “plan” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements include, without limitation, statements regarding:

	●	volatility in our stock and in the markets in general;
	●	our ability to successfully conduct clinical and preclinical trials for our product candidates;
	●	our ability to raise additional capital on favorable terms and the impact of such activities on our stockholders and stock price;
	●	the impact of the COVID-19 outbreak and its effect on us;
	●	our ability to generate any revenue or to continue as a going concern;
	●	our ability to execute our research and development plan on time and on budget;
	●	our products ability to demonstrate efficacy or an acceptable safety profile of our product candidates;
	●	our ability to obtain the support of qualified scientific collaborators;
	●	our ability, whether alone or with commercial partners, to successfully commercialize any of our product candidates that may be approved for sale;
	●	our ability to identify and obtain additional product candidates;
	●	our reliance on third parties in non-clinical and clinical studies;
	●	our ability to defend against product liability claims;
	●	our ability to safeguard against security breaches;
	●	our ability to obtain and maintain sufficient intellectual property protection for our product candidates;
	●	our ability to comply with our intellectual property licensing agreements;
	●	our ability to defend against claims of intellectual property infringement;
	●	our ability to comply with the maintenance requirements of the government patent agencies;
	●	our ability to protect our intellectual property rights throughout the world;
	●	competition;
	●	the anticipated start dates, durations and completion dates of our ongoing and future clinical studies;
	●	the anticipated designs of our future clinical studies;
	●	the impact of fast track designation on receipt of actual FDA approval;
	●	our anticipated future regulatory submissions and our ability to receive regulatory approvals to develop and market our product candidates, including any orphan drug or fast track designations; and
	●	our anticipated future cash position.

We have based these forward-looking statements largely on our current expectations and projections about future events, including the responses we expect from the U.S. Food and Drug Administration, (“FDA”), and other regulatory authorities and financial trends that we believe may affect our financial condition, results of operations, business strategy, preclinical and clinical trials, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions including without limitation the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 28, 2020. These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors which could adversely impact our business and financial performance. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. You should not rely upon forward-looking statements as predictions of future events. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable laws including the securities laws of the United States, we assume no obligation to update or supplement forward-looking statements.

As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” and “Anavex” mean Anavex Life Sciences Corp., unless the context clearly requires otherwise.

Our Current Business

Anavex Life Sciences Corp. is a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics by applying precision medicine to central nervous system (“CNS”) diseases with high unmet need. We analyze genomic data from clinical studies to identify biomarkers, which we use to select patients that will receive the therapeutic benefit for the treatment of neurodegenerative and neurodevelopmental diseases.

Our lead compound, ANAVEX^®2-73, is being developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other central nervous system diseases, including rare diseases, such as Rett syndrome, a rare severe neurological monogenic disorder caused by mutations in the X-linked gene, methyl-CpG-binding protein 2 (“MECP2”).

We currently have two core programs and two seed programs. Our core programs are at various stages of clinical and preclinical development, in neurodegenerative and neurodevelopmental diseases.

The following table summarizes key information about our programs:

Anavex has a portfolio of compounds varying in sigma-1 receptor (S1R) binding activities. The SIGMAR1 gene encodes the S1R protein, which is an intracellular chaperone protein with important roles in cellular communication. S1R is also involved in transcriptional regulation at the nuclear envelope and restores homeostasis and stimulates recovery of cell function when activated. In order to validate the ability of our compounds to activate quantitatively the S1R, we performed, in collaboration with Stanford University, a quantitative Positron Emission Tomography (PET) imaging scan in mice, which demonstrated a dose-dependent ANAVEX^®2-73 target engagement or receptor occupancy (RO) with S1R in the brain.

Cellular Homeostasis

Many diseases are possibly directly caused by chronic homeostatic imbalances or cellular stress of brain cells. In pediatric diseases like Rett syndrome or infantile spasms, the chronic cellular stress is possibly caused by the presence of a constant genetic mutation. In neurodegenerative diseases, such as Alzheimer’s and Parkinson’s diseases, chronic cellular stress is possibly caused by age-correlated buildup of cellular insult and hence chronic cellular stress. Specifically, defects in homeostasis of protein or ribonucleic acid (“RNA”) lead to the death of neurons and dysfunction of the nervous system. The spreading of protein aggregates resulting in a proteinopathy, a characteristic finding in Alzheimer’s and Parkinson’s diseases that results from disorders of protein synthesis, trafficking, folding, processing or degradation in cells. The clearance of macromolecules in the brain is particularly susceptible to imbalances that result in aggregation and degeneration in nerve cells. For example, Alzheimer’s disease pathology is characterized by the presence of amyloid plaques, neurofibrillary tangles, which are aggregates of hyperphosphorylated Tau protein that are a marker of other diseases known as tauopathies as well as inflammation of microglia. With the SIGMAR1 activation through SIGMAR1 agonists like ANAVEX^®2-73, our approach is to restore cellular balance, i.e. homeostasis. Therapies that correct defects in cellular homeostasis might have the potential to halt or delay neurodevelopmental and neurodegenerative disease progression.

ANAVEX^®2-73-specific Biomarkers

A full genomic analysis of Alzheimer’s disease (AD) patients treated with ANAVEX^®2-73 resulted in the identification of actionable genetic variants. A significant impact of the genomic biomarkers SIGMAR1, the direct target of ANAVEX^®2-73 and COMT, a gene involved in memory function, on the drug response level was identified, leading to an early ANAVEX^®2-73-specific biomarker hypothesis. It is expected that excluding patients with these two identified biomarker variants (approximately 10%-20% of the population) in prospective studies would identify approximately 80%-90% patients that would display clinically significant improved functional and cognitive scores.

The consistency between the identified DNA and RNA data related to ANAVEX^®2-73, which are considered independent of AD pathology, as well as multiple endpoints and time-points, provides support for precision medicine clinical development of ANAVEX^®2-73 by using genetic biomarkers identified within the study population itself to target patients who are most likely to respond to ANAVEX^®2-73 treatment in AD as well as indications like Parkinson’s disease dementia (PDD) or Rett syndrome (RTT) in which ANAVEX^®2-73 is currently studied.

Clinical Studies Overview

Alzheimer’s Disease

In November 2016, we completed a Phase 2a clinical trial, consisting of PART A and PART B, which lasted a total of 57 weeks, for ANAVEX^®2-73 in mild-to-moderate Alzheimer’s patients. This open-label randomized trial met both primary and secondary endpoints and was designed to assess the safety and exploratory efficacy of ANAVEX^®2-73 in 32 patients. ANAVEX^®2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and to reverse the pathological hallmarks observed in Alzheimer’s disease. The Phase 2a trial demonstrated positive pharmacokinetic (PK) and pharmacodynamic (PD) data, which established a concentration-effect relationship between ANAVEX^®2-73 and study measurements. These measures obtained from all patients who participated in the entire 57 weeks include exploratory cognitive and functional scores as well as biomarker signals of brain activity. Additionally, the study appears to show that ANAVEX^®2-73 activity is enhanced by its active metabolite (ANAVEX19-144), which also targets the sigma-1 receptor and has a half-life approximately twice as long as the parent molecule.

Two consecutive trial extensions for the Phase 2a trial have allowed participants who completed the 52-week PART B of the study to continue taking ANAVEX^®2-73, providing an opportunity to gather extended safety data for a cumulative time period of five years. In August 2020, patients completing these Phase 2a trial extensions were granted continued access to treatment with ANAVEX^®2-73 through the Australian Government Department of Health – Therapeutic Goods Administration (TGA) compassionate use Special Access Scheme.

A larger Phase 2b/3 double-blind, placebo-controlled study of ANAVEX^®2-73 in Alzheimer’s disease commenced in August 2018. The Phase 2b/3 study will enroll approximately 450 patients for 48 weeks, randomized 1:1:1 to two different ANAVEX^®2-73 doses or placebo. The trial commenced in Australia; and additional regions have been added in the United Kingdom, The Netherlands, Germany and Canada. The ANAVEX^®2-73 Phase 2b/3 study design incorporates genomic precision medicine biomarkers identified in the ANAVEX^®2-73 Phase 2a study. Primary and secondary endpoints will assess safety and both cognitive and functional efficacy, measured through Alzheimer’s Disease Assessment Scale – Cognition (ADAS-Cog), ADCS-ADL and Clinical Dementia Rating – Sum of Boxes for cognition and function (CDR-SB).

In October 2019, we initiated a long-term open label extension study of ANAVEX^®2-73, entitled the ATTENTION-AD study, for patients who have completed the 48-week Phase 2b/3 placebo-controlled trial referenced above. This study is expected to last two years and will give patients the opportunity to continue their treatment.

Rett Syndrome

In February 2016, we presented positive preclinical data for ANAVEX^®2-73 in Rett syndrome, a rare neurodevelopmental disease. The study was funded by the International Rett Syndrome Foundation (“Rettsyndrome.org”). In January 2017, we were awarded a financial grant from Rettsyndrome.org of a minimum of $0.6 million to cover some of the costs of a multicenter Phase 2 clinical trial of ANAVEX^®2-73 for the treatment of Rett syndrome. This award was received in quarterly instalments which commenced during fiscal 2018.

In March 2019, we commenced the first Phase 2 clinical trial in a planned Rett syndrome program of ANAVEX^®2-73 for the treatment of Rett syndrome. The studies are being conducted in a range of patient age demographics and geographic regions, utilizing a convenient oral liquid once-daily formulation of ANAVEX^®2-73.

The first Phase 2 study, which took place in the United States, was completed in December 2020. This trial was a randomized double-blind, placebo-controlled safety, tolerability, pharmacokinetic and efficacy study of oral liquid ANAVEX^®2-73 formulation in 25 adult female patients with Rett syndrome over a 7-week treatment period including ANAVEX^®2-73-specific genomic precision medicine biomarkers. The primary endpoint of the trial was safety. The dosing of 5 mg ANAVEX^®2-73 was well-tolerated and demonstrated dose-proportional PK (pharmacokinetics). All secondary efficacy endpoints of the trial showed statistically significant and clinically meaningful, drug exposure-dependent response in the Rett Syndrome Behaviour Questionnaire (RSBQ) Total scores, when compared to placebo, in the ITT cohort (all participants, p = 0.048). 66.7% of ANAVEX^®2-73 treated subjects showed a statistically significant improvement in drug exposure-dependent RSBQ response as compared to 10% of the subjects on placebo in the ITT cohort (all participants, p = 0.011). ANAVEX^®2-73 treatment resulted in a sustained improvement in Clinical Global Impression Improvement (CGI-I) scores throughout the 7-week study, when compared to placebo in the ITT cohort (all participants, p = 0.014). 86.7% of ANAVEX^®2-73 treated subjects showed a statistically significant CGI-I response, defined as sustained improvement to treatment, as compared to 40% of the subjects on placebo in the ITT cohort (all participants, p = 0.014). Consistent with previous ANAVEX^®2-73 clinical trials, patients carrying the common form of the SIGMAR1 gene treated with ANAVEX^®2-73 experienced stronger improvements in the prespecified efficacy endpoints.

The second Phase 2 study of ANAVEX^®2-73 for the treatment of Rett syndrome, called the AVATAR study, commenced in June 2019. This study is taking place in Australia and the United Kingdom using a higher dose than the U.S. based Phase 2 study for Rett syndrome. The study will evaluate the safety and efficacy of ANAVEX^®2-73 in approximately 33 patients over a 7-week treatment period including ANAVEX^®2-73 specific precision medicine biomarkers. All patients who participate in the study will be eligible to receive ANAVEX^®2-73 under a voluntary open label extension protocol.

In July 2020, we commenced the third study of ANAVEX^®2-73 for the treatment of Rett syndrome, called the EXCELLENCE study. This Phase 2/3 study in pediatric patients with Rett syndrome will evaluate the safety and efficacy of ANAVEX^®2-73 in at least 69 pediatric patients, aged 5 to 18, over a 12-week treatment period incorporating ANAVEX^®2-73 specific precision medicine biomarkers. All patients who participate in the study will be eligible to receive ANAVEX^®2-73 under a voluntary open label extension protocol.

Parkinson’s Disease

In September 2016, we presented positive preclinical data for ANAVEX^®2-73 in an animal model of Parkinson’s disease, which demonstrated significant improvements on behavioral, histopathological, and neuroinflammatory endpoints. The study was funded by the Michael J. Fox Foundation. Additional data announced in October 2017 indicates that ANAVEX^®2-73 induces robust neurorestoration in experimental parkinsonism. The encouraging results we have gathered in this model, coupled with the favorable profile of this compound in the Alzheimer’s disease trial, support the notion that ANAVEX^®2-73 is a promising clinical candidate drug for Parkinson’s disease dementia.

In October 2020, we completed a double-blind, randomized, placebo-controlled proof-of-concept Phase 2 trial with ANAVEX^®2-73 in Parkinson’s Disease Dementia (PDD), to study the effect of the compound on both the cognitive and motor impairment of Parkinson’s disease. The Phase 2 study enrolled approximately 132 patients for 14 weeks, randomized 1:1:1 to two different ANAVEX^®2-73 doses, 30mg and 50mg, or placebo. The ANAVEX^®2-73 Phase 2 PDD study design incorporated genomic precision medicine biomarkers identified in the ANAVEX^®2-73 Phase 2a Alzheimer’s disease study.

Within this study ANAVEX^®2-73 was safe and well tolerated in oral doses up to 50mg once daily. The results show clinically meaningful, dose-dependent, and statistically significant improvements in the Cognitive Drug Research (CDR) computerized assessment system analysis. The study confirmed the precision medicine approach of targeting SIGMAR1 as a genetic biomarker in response to ANAVEX^®2-73.

In August 2020, we announced a financial commitment by Shake It Up Australia Foundation for Parkinson’s Research to fund up to 50% of the costs of an Australian clinical study to develop ANAVEX^®2-73 for the disease modifying treatment of Parkinson’s disease. The financial commitment would be made through private placement purchases of our common stock at 200% of the fair market value on the purchase date and will be contingent upon the completion of certain clinical trial milestones relating to the proposed clinical trial. The proposed clinical trial will use a convenient, once-daily oral ANAVEX^®2-73 formulation to confirm the potential disease modifying features of ANAVEX^®2-73 in an animal model of Parkinson’s disease. Safety and efficacy will be investigated in an appropriately powered placebo-controlled clinical study of Parkinson’s disease patients over at least 48-weeks including ANAVEX^®2-73-specific precision medicine biomarkers.

In January 2021, we announced we were awarded a research grant of $1.0 million from The Michael J. Fox Foundation for Parkinson’s Research (MJFF) to develop ANAVEX^®2-73 for the treatment of Parkinson’s disease. The award will explore utilization of PET imaging biomarkers to enable measurement of target engagement and pathway activation of the sigma-1 receptor (SIGMAR1) with clinically relevant doses in people with Parkinson’s disease.

Frontotemporal Dementia

In July 2020, we commenced the First-in-Human Phase 1 clinical trial of ANAVEX^®3-71, which was previously granted orphan drug designation for the treatment of Frontotemporal Dementia (FTD) by the FDA. ANAVEX^®3-71 is an orally administered small molecule targeting sigma-1 and M1 muscarinic receptors that is designed to be beneficial for neurodegenerative diseases. In preclinical studies, ANAVEX^®3-71 demonstrated disease-modifying activity against the major hallmarks of Alzheimer’s disease in transgenic (3xTg-AD) mice, including cognitive deficits, amyloid and tau pathologies, as well as beneficial effects on mitochondrial dysfunction and neuroinflammation.

The Phase 1 clinical trial will be a prospective double-blind, randomized, placebo-controlled study. A total of at least 36 healthy male and female subjects will be included. Single escalating doses of ANAVEX^®3-71 will be administered in order to evaluate the safety, tolerability, and pharmacokinetics (PK) of ANAVEX^®3-71 and the effects of food and gender on its PK in healthy volunteers. This study is expected to be followed by longer duration dosing including patients with FTD or other dementia indications with unmet medical need, incorporating exploratory efficacy and disease biomarker measures.

Our Pipeline

Our research and development pipeline includes ANAVEX^®2-73 currently in three different clinical study indications, and several other compounds in different stages of clinical and pre-clinical study.

Our proprietary SIGMACEPTOR™ Discovery Platform produced small molecule drug candidates with unique modes of action, based on our understanding of sigma receptors. Sigma receptors may be targets for therapeutics to combat many human diseases, both of neurodegenerative nature, including Alzheimer’s disease, as well as of neurodevelopmental nature, like Rett syndrome. When bound by the appropriate ligands, sigma receptors influence the functioning of multiple biochemical signals that are involved in the pathogenesis (origin or development) of disease. Multiple viruses including SARS-CoV-2 (COVID-19) induce cellular stress by intrinsic mitochondrial apoptosis and other related cellular processes, in order to ensure survival and replication. Hence, it is possible that S1R could play a role in modulating the cellular response to viral infection and ameliorate pathogenesis.

Compounds that have been subjects of our research include the following:

ANAVEX^®2-73 (blarcamesine)

ANAVEX^®2-73 may offer a disease-modifying approach in neurodegenerative and neurodevelopmental diseases by activation of sigma-1 receptors.

In Rett syndrome, administration of ANAVEX^®2-73 resulted in both significant and dose related improvements in an array of behavioral paradigms in the MECP2 HET Rett syndrome disease model. In addition, in a further experiment sponsored by Rettsyndrome.org, ANAVEX^®2-73 was evaluated in automatic visual response and respiration tests in 7-month old mice, an age at which advanced pathology is evident. Vehicle-treated MECP2 mice demonstrated fewer automatic visual responses than wild-type mice. Treatment with ANAVEX^®2-73 for four weeks significantly increased the automatic visual response in the MECP2 Rett syndrome disease mouse. Additionally, chronic oral dosing daily for 6.5 weeks of ANAVEX^®2-73 starting at ~5.5 weeks of age was conducted in the MECP2 HET Rett syndrome disease mouse model assessed the different aspects of muscular coordination, balance, motor learning and muscular strengths, some of the core deficits observed in Rett syndrome. Administration of ANAVEX^®2-73 resulted in both significant and dose related improvements in an array of these behavioral paradigms in the MECP2 HET Rett syndrome disease model.

In March 2019, we commenced the first Phase 2 clinical trial in a planned Rett syndrome program of ANAVEX^®2-73 for the treatment of Rett syndrome. This study, which took place in the United States, was completed in December 2020, however two other clinical trials in Rett syndrome, the AVATAR study and the EXCELLENCE study, are still underway. The studies are being conducted in a range of patient age demographics and geographic regions, as more fully described above under Clinical Studies Overview – Rett Syndrome.

In May 2016 and June 2016, the FDA granted Orphan Drug Designation to ANAVEX^®2-73 for the treatment of Rett syndrome and infantile spasms, respectively. In November 2019, the FDA granted to ANAVEX^®2-73 the Rare Pediatric Disease (RPD) designation for the treatment of Rett syndrome. The RPD designation provides priority review by the FDA to encourage the development of treatments for rare pediatric diseases.

Further, in February 2020, the FDA granted Fast Track designation for the ANAVEX^®2-73 clinical development program for the treatment of Rett syndrome. The FDA Fast Track program is designed to facilitate and expedite the development and review of new drugs to address unmet medical needs in the treatment of serious and life-threatening conditions.

For Parkinson’s disease, data demonstrates significant improvements and restoration of function in a disease modifying animal model of Parkinson’s disease. Significant improvements were seen on all measures tested: behavioral, histopathological, and neuroinflammatory endpoints. In October 2020, we completed a double-blind, randomized, placebo-controlled proof-of-concept Phase 2 trial with ANAVEX^®2-73 in Parkinson’s Disease Dementia (PDD), to study the effect of the compound on both the cognitive and motor impairment of Parkinson’s disease. The Phase 2 study enrolled approximately 132 patients for 14 weeks, randomized 1:1:1 to two different ANAVEX^®2-73 doses, 30mg and 50mg, or placebo. The ANAVEX^®2-73 Phase 2 PDD study design incorporated genomic precision medicine biomarkers identified in the ANAVEX^®2-73 Phase 2a Alzheimer’s disease study.

The study found that ANAVEX^®2-73 was safe and well tolerated in oral doses up to 50mg once daily. The results show clinically meaningful, dose-dependent, and statistically significant improvements in the Cognitive Drug Research (CDR) computerized assessment system analysis. We anticipate conducting further clinical trials of ANAVEX^®2-73 in Parkinson’s disease dementia after submitting the results of the study to the FDA to obtain regulatory guidance.

In Alzheimer’s disease (AD) animal models, ANAVEX^®2-73 has shown pharmacological, histological and behavioral evidence as a potential neuroprotective, anti-amnesic, anti-convulsive and anti-depressive therapeutic agent, due to its potent affinity to sigma-1 receptors and moderate affinities to M1-4 type muscarinic receptors. In addition, ANAVEX^®2-73 has shown a potential dual mechanism which may impact amyloid, tau pathology and inflammation. In a transgenic AD animal model Tg2576, ANAVEX^®2-73 induced a statistically significant neuroprotective effect against the development of oxidative stress in the mouse brain, as well as significantly increased the expression of functional and synaptic plasticity markers that is apparently amyloid-beta independent. It also statistically alleviated the learning and memory deficits developed over time in the animals, regardless of sex, both in terms of spatial working memory and long-term spatial reference memory.

Based on the results of pre-clinical testing, we initiated and completed a Phase 1 single ascending dose (SAD) clinical trial of ANAVEX^®2-73. In this Phase 1 SAD trial, the maximum tolerated single dose was defined per protocol as 55-60 mg. This dose is above the equivalent dose shown to have positive effects in mouse models of AD. There were no significant changes in laboratory or electrocardiogram (ECG) parameters. ANAVEX^®2-73 was well tolerated below the 55-60 mg dose with only mild adverse events in some subjects. Observed adverse events at doses above the maximum tolerated single dose included headache and dizziness, which were moderate in severity and reversible. These side effects are often seen with drugs that target CNS conditions, including AD.

In December 2014, a Phase 2a clinical trial was initiated for ANAVEX^®2-73, for the treatment of Alzheimer’s disease. The open-label randomized trial was designed to assess the safety and exploratory efficacy of ANAVEX^®2-73 in 32 patients with mild-to-moderate Alzheimer’s disease. ANAVEX^®2-73 is an orally available drug candidate that restores cellular homeostasis by targeting sigma-1 and muscarinic receptors. Preclinical studies demonstrated its potential to halt and/or reverse the course of Alzheimer’s. The Phase 2a study met both primary and secondary objectives of the study.

In July 2018, we presented the results of a genomic DNA and RNA evaluation of the participants in the Phase 2a study. More than 33,000 genes were analyzed using unbiased, data driven, machine learning, artificial intelligence (AI) system for analyzing DNA & RNA data in patients exposed to ANAVEX^®2-73. The analysis identified genetic variants that impacted response to ANAVEX^®2-73, among them variants related to the Sigma-1 receptor (SIGMAR1), the target for ANAVEX^®2-73. Results showed that study participants with the common SIGMAR1 wild type gene variant, which is about 80 percent of the population worldwide, demonstrated improved cognitive (MMSE) and the functional (ADCS-ADL) scores. The results from this evaluation have been used to establish a precision medicine approach in subsequent clinical trials, since these signatures can now be applied to neurological indications tested in clinical studies with ANAVEX^®2-73 including Alzheimer’s disease, Parkinson’s disease dementia and Rett syndrome.

ANAVEX^®2-73 data presented met prerequisite information in order to progress into a Phase 2b/3 placebo-controlled study. On July 2, 2018, the Human Research Ethics Committee in Australia approved the initiation of our Phase 2b/3, double-blind, randomized, placebo-controlled 48-week safety and efficacy trial of ANAVEX^®2-73 for the treatment of early Alzheimer’s disease. Clinical trial sites in Canada, the United Kingdom, the Netherlands and Germany were also added. This Phase 2b/3 study design incorporates inclusion of genomic precision medicine biomarkers identified in the ANAVEX^®2-73 Phase 2a study. The Phase 2b/3 study, which is expected to enroll approximately 450 patients, randomized 1:1:1 to either two different ANAVEX^®2-73 doses or placebo, commenced in October 2018.

Preclinical data also validates ANAVEX^®2-73 as a prospective platform drug for other neurodegenerative diseases beyond Alzheimer’s disease, Parkinson’s disease or Rett syndrome, more specifically, epilepsy, infantile spasms, Fragile X syndrome, Angelman syndrome, multiple sclerosis and, more recently, tuberous sclerosis complex (TSC). ANAVEX^®2-73 demonstrated significant improvements in all of these indications in the respective preclinical animal models.

In a study sponsored by the Foundation for Angelman Syndrome, ANAVEX^®2-73 was assessed in a mouse model for the development of audiogenic seizures. The results indicated that ANAVEX^®2-73 administration significantly reduced audiogenic-induced seizures. In a study sponsored by FRAXA Research Foundation regarding Fragile X syndrome, data demonstrated that ANAVEX^®2-73 restored hippocampal brain-derived neurotrophic factor (BDNF) expression to normal levels. BDNF under-expression has been observed in many neurodevelopmental and neurodegenerative pathologies. BDNF signaling promotes maturation of both excitatory and inhibitory synapses. ANAVEX^®2-73 normalization of BDNF expression could be a contributing factor for the positive data observed in both neurodevelopmental and neurodegenerative disorders like Angelman and Fragile X syndromes.

Preclinical data presented also indicates that ANAVEX^®2-73 demonstrates protective effects of mitochondrial enzyme complexes during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental diseases.

Preclinical data on ANAVEX^®2-73 related to multiple sclerosis indicates that ANAVEX^®2-73 may promote remyelination in multiple sclerosis disease. Further, data also demonstrates that ANAVEX^®2-73 provides protection for oligodendrocytes (“OL’s”) and oligodendrocyte precursor cells (“OPC’s”), as well as central nervous system neurons in addition to helping repair by increasing OPC proliferation and maturation in tissue culture.

In March 2018, we presented preclinical data of ANAVEX^®2-73 in a genetic mouse model of tuberous sclerosis complex (“TSC”). TSC is a rare genetic disorder characterized by the growth of numerous benign tumors in many parts of the body with a high incidence of seizures. The new preclinical data demonstrates that treatment with ANAVEX^®2-73 significantly increases survival and reduces seizures.

ANAVEX^®3-71

ANAVEX^®3-71 is a clinical drug candidate with a novel mechanism of action via sigma-1 receptor activation and M1 muscarinic allosteric modulation, which has been shown to enhance neuroprotection and cognition in Alzheimer’s disease models. ANAVEX^®3-71 is a CNS-penetrable potential disease modifying treatment for cognitive impairments. It is highly effective in very small doses against the major Alzheimer’s hallmarks in transgenic (3xTg-AD) mice, including cognitive deficits, amyloid and tau pathologies, and also has beneficial effects on inflammation and mitochondrial dysfunctions. ANAVEX^®3-71 indicates extensive therapeutic advantages in Alzheimer’s and other protein-aggregation-related diseases given its ability to enhance neuroprotection and cognition via sigma-1 receptor activation and M1 muscarinic allosteric modulation.

A preclinical study examined the response of ANAVEX^®3-71 in aged transgenic animal models and showed a significant reduction in the rate of cognitive deficit, amyloid beta pathology and inflammation with the administration of ANAVEX 3-71. In April 2016, the FDA granted Orphan Drug Designation to ANAVEX^®3-71 for the treatment of Frontotemporal dementia (FTD).

During pathological conditions ANAVEX^®3-71 demonstrated the formation of new synapses between neurons (synaptogenesis) without causing an abnormal increase in the number of astrocytes. In neurodegenerative diseases such as Alzheimer’s and Parkinson’s disease, synaptogenesis is believed to be impaired. Additional preclinical data presented also indicates that in addition to reducing oxidative stress, ANAVEX^®3-71 demonstrates protective effects of mitochondrial enzyme complexes during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental diseases.

In July 2020, we commenced the first Phase 1 clinical trial of ANAVEX^®3-71, with focus on the treatment of Frontotemporal Dementia (FTD) and other dementia indications with unmet medical need. The study is more fully described above under Clinical Studies Overview – Frontotemporal Dementia.

ANAVEX^®1-41

ANAVEX^®1-41 is a sigma-1 receptor agonist. Pre-clinical tests revealed significant neuroprotective benefits (i.e., protects nerve cells from degeneration or death) through the modulation of endoplasmic reticulum, mitochondrial and oxidative stress, which damages and impairs cell viability. In addition, in animal models, ANAVEX^®1-41 prevented the expression of caspase-3, an enzyme that plays a key role in apoptosis (programmed cell death) and loss of cells in the hippocampus, the part of the brain that regulates learning, emotion and memory. These activities involve both muscarinic and sigma-1 receptor systems through a novel mechanism of action.

Preclinical data presented also indicates that ANAVEX^®1-41 demonstrates protective effects of mitochondrial enzyme complexes during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental diseases.

ANAVEX^®1066

ANAVEX^®1066, a mixed sigma-1/sigma-2 ligand is designed for the potential treatment of neuropathic and visceral pain. ANAVEX^®1066 was tested in two preclinical models of neuropathic and visceral pain that have been extensively validated in rats. In the chronic constriction injury model of neuropathic pain, a single oral administration of ANAVEX^®1066 dose-dependently restored the nociceptive threshold in the affected paw to normal levels while leaving the contralateral healthy paw unchanged. Efficacy was rapid and remained significant for two hours. In a model of visceral pain, chronic colonic hypersensitivity was induced by injection of an inflammatory agent directly into the colon and a single oral administration of ANAVEX^®1066 returned the nociceptive threshold to control levels in a dose-dependent manner. Companion studies in rats demonstrated the lack of any effects on normal gastrointestinal transit with ANAVEX^®1066 and a favorable safety profile in a battery of behavioral measures.

ANAVEX^®1037

ANAVEX^®1037 is designed for the treatment of prostate and pancreatic cancer. It is a low molecular weight, synthetic compound exhibiting high affinity for sigma-1 receptors at nanomolar levels and moderate affinity for sigma-2 receptors and sodium channels at micromolar levels. In advanced pre-clinical studies, this compound revealed antitumor potential. It has also been shown to selectively kill human cancer cells without affecting normal/healthy cells and also to significantly suppress tumor growth in immune-deficient mice models. Scientific publications highlight the possibility that these ligands may stop tumor growth and induce selective cell death in various tumor cell lines. Sigma receptors are highly expressed in different tumor cell types. Binding by appropriate sigma-1 and/or sigma-2 ligands can induce selective apoptosis. In addition, through tumor cell membrane reorganization and interactions with ion channels, our drug candidates may play an important role in inhibiting the processes of metastasis (spreading of cancer cells from the original site to other parts of the body), angiogenesis (the formation of new blood vessels) and tumor cell proliferation.

Our compounds are in the clinical and pre-clinical testing stages of development, and there is no guarantee that the activity demonstrated in pre-clinical models will be shown in human testing.

We continue to identify and initiate discussions with potential strategic and commercial partners to most effectively advance our programs and realize maximum shareholder value. Further, we may acquire or develop new intellectual property and assign, license, or otherwise transfer our intellectual property to further our goals.

Our Target Indications

We have developed compounds with potential application to two broad categories and several specific indications. including:

Central Nervous System Diseases

	●	Alzheimer’s disease – In 2020, an estimated 5.8 million Americans were suffering from Alzheimer’s disease. The Alzheimer’s Association^® estimates that by 2050, this number will rise to nearly 14 million Americans. Medications on the market today treat only the symptoms of Alzheimer’s disease and do not have the ability to stop its onset or its progression. There is an urgent and unmet need for both a disease modifying cure for Alzheimer’s disease as well as for better symptomatic treatments.

	●	Parkinson’s disease – Parkinson’s disease is a progressive disease of the nervous system marked by tremors, muscular rigidity, and slow, imprecise movement. It is associated with degeneration of the basal ganglia of the brain and a deficiency of the neurotransmitter dopamine. Parkinson’s disease afflicts more than 10 million people worldwide, typically middle-aged and elderly people. The Parkinson’s disease market is expected to expand to $3.2 billion by 2021, according to business intelligence provider GBI Research.

	●	Rett syndrome – Rett syndrome is a rare X-linked genetic neurological and developmental disorder that affects the way the brain develops, including protein transcription, which is altered and as a result leads to severe disruptions in neuronal homeostasis. It is considered a rare, progressive neurodevelopmental disorder and is caused by a single mutation in the MECP2 gene. Because males have a different chromosome combination from females, boys who have the genetic MECP2 mutation are affected in devastating ways. Most of them die before birth or in early infancy. For females who survive infancy, Rett syndrome leads to severe impairments, affecting nearly every aspect of the child’s life; severe mental retardation, their ability to speak, walk and eat, sleeping problems, seizures and even the ability to breathe easily. Rett syndrome affects approximately 1 in every 10,000-15,000 females.

	●	Depression – Depression is a major cause of morbidity worldwide according to the World Health Organization. Pharmaceutical treatment for depression is dominated by blockbuster brands, with the leading nine brands historically accounting for approximately 75% of total sales. However, the dominance of the leading brands is waning, largely due to the effects of patent expiration and generic competition.

	●	Epilepsy – Epilepsy is a common chronic neurological disorder characterized by recurrent unprovoked seizures. These seizures are transient signs and/or symptoms of abnormal, excessive or synchronous neuronal activity in the brain. According to the Centers for Disease Control and Prevention, in 2015 epilepsy affected 3.4 million Americans. Today, epilepsy is often controlled, but not cured, with medication that is categorized as older traditional anti-epileptic drugs and second generation anti-epileptic drugs. Because epilepsy afflicts sufferers in different ways, there is a need for drugs used in combination with both traditional anti-epileptic drugs and second generation anti-epileptic drugs.

	●	Neuropathic Pain – We define neuralgia, or neuropathic pain, as pain that is not related to activation of pain receptor cells in any part of the body. Neuralgia is more difficult to treat than some other types of pain because it does not respond well to normal pain medications. Special medications have become more specific to neuralgia and typically fall under the category of membrane stabilizing drugs or antidepressants.

Cancer

	●	Malignant Melanoma – Predominantly a skin cancer, malignant melanoma can also occur in melanocytes found in the bowel and the eye. Malignant melanoma accounts for 75% of all deaths associated with skin cancer. The treatment includes surgical removal of the tumor, adjuvant treatment, chemo and immunotherapy, or radiation therapy. According to IMS Health the worldwide malignant melanoma market is expected to grow to $4.4 billion by 2022.

	●	Prostate Cancer – Specific to men, prostate cancer is a form of cancer that develops in the prostate, a gland in the male reproductive system. The cancer cells may metastasize from the prostate to other parts of the body, particularly the bones and lymph nodes. Drug therapeutics for prostate cancer are expected to increase to nearly $13.5 billion in 2024 according to Datamonitor Healthcare.

	●	Pancreatic Cancer – Pancreatic cancer is a malignant neoplasm of the pancreas. In the United States, approximately 55,000 new cases of pancreatic cancer will be diagnosed this year and approximately 44,000 patients will die as a result of their cancer, according to the American Cancer Society. Sales predictions by GBI Research forecast that the market for the pharmaceutical treatment of pancreatic cancer in the United States and five largest European countries will increase to $2.9 billion by 2021.

Patents, Trademarks and Intellectual Property

We hold ownership or exclusive rights to thirteen U.S. patents, seventeen U.S. patent applications, and various PCT or ex-U.S. patent applications relating to our drug candidates, methods associated therewith, and to our research programs.

We own one issued U.S. patent entitled “ANAVEX^®2-73 and certain anticholinesterase inhibitors composition and method for neuroprotection” claims a composition of matter of ANAVEX^®2-73 directed to a novel and synergistic neuroprotective compound combined with donepezil and other cholinesterase inhibitors. This patent is expected to expire in June 2034, absent any patent term extension for regulatory delays. We own two issued U.S. patents each with claims directed to crystalline forms of ANAVEX^®2-73. The first of these two patents claims crystalline forms of ANAVEX^®2-73, dosage forms and compositions containing crystalline ANAVEX^®2-73, and methods of treatment for Alzheimer’s disease using them. This patent is expected to expire in July 2036, absent any patent term extension for regulatory delays. The second of these two patents claims pharmaceutical compositions containing a crystalline form of ANAVEX^®2-73, and methods of treatment for Alzheimer’s disease using the compositions. This patent is expected to expire in June 2037, absent any patent term extension for regulatory delays. We also own two issued U.S. patents on seizure treatment. The first of these two patents claims methods and dosage forms for treating seizures, the dosage forms containing a low-dose anti-epilepsy drug combined with either: (i) ANAVEX^®2-73 and its active metabolite ANAVEX^®19-144; or (ii) ANAVEX^®19-144. The second of these two patents further claims the seizure treatment being co-timely or coordinated administration of anti-epilepsy drugs and (i) ANAVEX 19-144^® or (ii) ANAVEX 19-144^® with ANAVEX 2-73^®. Both patents are expected to expire in October 2035, absent any patent term extension for regulatory delays. We also own two issued U.S. patents with claims directed to treating neurodevelopmental disorders. These patents claim methods for treating a neurodevelopmental disorder or multiple sclerosis by administering ANAVEX^®2-73, ANAVEX^®19-144, and/or ANAVEX^®1-41 (another sigma receptor ligand similar to ANAVEX^®2-73), or compositions thereof. Both patents are expected to expire in January 2037, absent any patent term extension for regulatory delays. In addition, we own one issued U.S. Patent with claims directed to methods of treating melanoma with a compound related to ANAVEX^®2-73. This patent is expected to expire in February 2030, absent any patent term extension for regulatory delays. We also own an issued U.S. patent that claims crystalline forms of ANAVEX^®19-144, dosage forms and compositions containing the crystalline forms of ANAVEX^®19-144, and methods of treatment for Alzheimer’s disease. This patent is expected to expire in July 2036, absent any patent term extension for regulatory delays.

We also own two issued U.S. patents related to ANAVEX^®1066. The first of these two patents claims methods for treating or preventing pain using (+) ANAVEX^®1066 isomer. The second patent claims methods for treating or preventing pain using (-) ANAVEX^®1066 isomer Both patents are expected to expire in November 2036, absent any patent term extension for regulatory delays.

For ANAVEX^®2-73, ANAVEX^®19-144, ANAVEX^®1-41, and ANAVEX^®1066, we also have granted or pending applications in Australia, Canada, China, Europe, Japan, and Hong Kong, and are expected to expire after 2035.

With regard to ANAVEX^®3-71, we own exclusive rights to two issued U.S. patents with claims respectively directed to the ANAVEX^®3-71 compound and methods of treating various diseases including Alzheimer’s with the same. These patents are expected to expire in April 2030, and January 2030, respectively, absent any patent term extension for regulatory delays. We also own exclusive rights to related patents or applications that are granted or pending in Australia, Canada, China, Europe, Japan, Korea, New Zealand, Russia, and South Africa, and are expected to expire in January 2030.

We also own other patent applications directed to enantiomers, crystals, formulations, uses, and patient selection methods that may provide additional protection for one or more of our product candidates.

We regard patents and other intellectual property rights as corporate assets. Accordingly, we attempt to optimize the value of intellectual property in developing our business strategy including the selective development, protection, and exploitation of our intellectual property rights. In addition to filings made with intellectual property authorities, we protect our intellectual property and confidential information by means of carefully considered processes of communication and the sharing of information, and by the use of confidentiality and non-disclosure agreements and provisions for the same in contractor’s agreements. While no agreement offers absolute protection, such agreements provide some form of recourse in the event of disclosure, or anticipated disclosure.

Our intellectual property position, like that of many biomedical companies, is uncertain and involves complex legal and technical questions for which important legal principles are unresolved. For more information regarding challenges to our existing or future patents, see “Risk Factors” “ in Part I, Item 1A of our Annual Report on Form 10-K filed with the Securities and Exchange Commission on December 28, 2020.

Financial Highlights

At March 31, 2021, our cash position had increased to $75.9 million, from $29.2 million at our fiscal year end of September 30, 2020.

Operating expenses for the second quarter of fiscal 2021 were $9.0 million, compared to $7.8 million for the comparable quarter in fiscal 2020. The operating expenses include an aggregate of $1.8 million, as compared to $1.7 million in the second quarter of fiscal 2020, in non-cash charges related to the issuance and vesting of stock options. Our research and development expenses for the second quarter of fiscal 2021 were $6.7 million, compared to $6.1 million in the comparable period in fiscal 2020. The increase is attributable to the continued advancement of our ongoing clinical trials.

Net loss for the second quarter of fiscal 2021 was $8.2 million, or $0.12 per share, as compared to $7.2 million, or $0.12 per share in the comparative quarter of fiscal 2020.

Results of Operations

Revenue

We are in the development stage and have not earned any revenues since our inception and we do not anticipate earning any revenues until we can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.

Three and six months ended March 31, 2021 compared to three and six months ended March 31, 2020.

Operating Expenses

Total operating expenses for the second quarter of fiscal 2021 were $9.0 million, compared to $7.8 million for the comparable quarter of fiscal 2020. Total operating expenses for the first half of fiscal 2021 were $18.4 million compared to $15.5 million for the same period in fiscal 2020. This represents an increase of $1.2 million for the three-month period and $2.9 million for the six-month period.

Research and development expenses for the second quarter of fiscal 2021 were $6.7 million, compared to $6.1 million for the second quarter of fiscal 2020 and $14.6 million for the six-month period ended March 31, 2021, as compared to $12.4 million for the applicable prior year period. This increase in both the current quarter and the year-to-date period is attributable to the continued advancement of our ongoing clinical trials, most notably, the expansion of our Phase 2b/3 Alzheimer’s disease trial internationally, as well as the international Rett syndrome program.

General and administrative expenses have increased to $2.2 million for the three months ended March 31, 2021, as compared to $1.7 million for the second quarter of fiscal 2020. Similarly, general and administrative expenses increased to $3.7 million for the six-month period ended March 31, 2021, as compared to $3.1 million for the applicable prior year period. The increase in general and administrative expenses was primarily related to an increase in professional and consulting fees.

Other income

The net amount of other income was $0.8 million for the three-month period ended March 31, 2021 as compared to $0.5 million for the three-month period ended March 31, 2020 and $2.4 million for the six-month period as compared to $1.7 million for the comparable six-month period in fiscal 2020. The increase in other income is attributable to an increase in Australian research and development incentive income in connection with the increase in eligible clinical activities in Australia over the comparable period. Foreign exchange gains and losses during the period were related to the fluctuations in the Australian dollar against the US dollar and its related impact on Incentive and tax receivables during the period.

Liquidity and Capital Resources

Working Capital

	March 31, 2021		September 30, 2020
Current Assets	$	83,574,238	$	34,542,197
Current Liabilities		7,763,942		7,305,628
Working Capital	$	75,810,296	$	27,236,569

At March 31, 2021, we had $75.9 million in cash and cash equivalents, an increase of $46.6 million from September 30, 2020. During the six-month period ended March 31, 2021, we received cash of $61.8 million, net of issuance costs, primarily from the issuance of shares of common stock under the 2019 Purchase Agreement and through the Sales Agreement, as more fully described elsewhere in this Quarterly Report.

Cash Flows

	Six months ended March 31,
	2021			2020
Net cash flows used in operating activities	$	(15,188,223	)	$	(10,988,051	)
Net cash flows from financing activities		61,798,544			15,365,492
Increase in cash and cash equivalents	$	46,610,321		$	4,377,441

Cash flow used in operating activities

Net cash used in operating activities for the first six months of fiscal 2021 was $15.2 million, compared to $11.0 million during the comparable period of fiscal 2020. The principal reason for this increase in net cash used from operating activities in the current period is due to an increase in research and development expenses and an increase in research and development incentive income receivable, as compared to the comparable period.

Cash flow provided by financing activities

Cash provided by financing activities for the first six months in fiscal 2021 was $61.8 million, primarily attributable to cash received from the issuance of common shares at various market prices under the 2019 Purchase Agreement and the Sales Agreement, net of financing costs.

Cash provided by financing activities for the first six months in fiscal 2020 was $15.4 million, attributable to cash received from the issuance of common shares at various market prices under the 2019 Purchase Agreement.

Other Financing

Purchase Agreement

On June 7, 2019, we entered into a Purchase Agreement (the “2019 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), as amended on July 1, 2020, pursuant to which Lincoln Park committed to purchase up to $50,000,000 of our common stock. Concurrently with the execution of the 2019 Purchase Agreement in 2019, we issued 324,383 shares of our common stock to Lincoln Park as a fee for its commitment to purchase shares of our common stock under the 2019 Purchase Agreement and became obligated to issue up to 162,191 shares pro rata, when and if Lincoln Park purchased, at our discretion, the $50,000,000 aggregate commitment.

During the six months ended March 31, 2021, the Company issued to Lincoln Park an aggregate of 4,086,209 shares of common stock under the 2019 Purchase Agreement, including 4,007,996 shares of common stock for an aggregate purchase price of $24,111,198 and 78,213 commitment shares. As of March 31, 2021, no shares of our common stock remain available for purchase by Lincoln Park under the 2019 Purchase Agreement.

Controlled Equity Offering Sales Agreement

On May 1, 2020, we entered into an Amended and Restated Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. and SVB Leerink LLC (the “Sales Agents”), pursuant to which we may offer and sell shares of common stock registered under an effective registration statement from time to time through the Sales Agents (the “At-the-Market Offering”).

Upon delivery of a placement notice based on our instructions and subject to the terms and conditions of the Sales Agreement, the Sales Agents may sell shares of common stock by methods deemed to be an “at the market offering”, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to our prior written consent. We are not obligated to make any sales of shares under the Sales Agreement. We or the Sales Agents may suspend or terminate the At-the-Market Offering upon notice to the other party, subject to certain conditions. The Sales Agents will act as agents on a commercially reasonable efforts basis consistent with their normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of Nasdaq.

We have agreed to pay the Sales Agents commissions for their services of 3.0% of the gross proceeds from the sale of the Shares pursuant to the Sales Agreement. We have also agreed to provide the Sales Agents with customary indemnification and contribution rights.

During the six months ended March 31, 2021, 3,552,313 shares were sold pursuant to the Offering for gross proceeds of $37,823,241 (net proceeds of $36,688,544 after deducting commissions and offering expenses).

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

CRITICAL ACCOUNTING POLICIES

We prepare our interim condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

There have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended September 30, 2020 as filed with the SEC on December 28, 2020.

RECENT ACCOUNTING PRONOUNCEMENTS

Please refer to Note 2 “Recent Accounting Pronouncements” in notes to our Interim Condensed Consolidated Financial Statements included in this Form 10-Q.

Item 3. Quantitative and Qualitative Disclosures about Market Risks.

Not applicable

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, our chief executive officer and our principal financial officer, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a 15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of March 31, 2021.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2021, there were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a 15(d) or 15d 15(d) of the Exchange Act that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

We know of no material pending legal proceedings, other than ordinary routine litigation incidental to our business, to which our Company or our subsidiary is a party or of which any of their property is subject. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder holding more than 5% of our shares, is an adverse party or has a material interest adverse to our or our subsidiary’s interest.

Item 1A. Risk Factors.

There have been no material changes to the risk factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC on December 28, 2020 except for the following new risks:

Our stock price has recently been volatile and may be volatile in the future.

Our stock price has recently been volatile and may be volatile in the future. For example, on February 1, 2021, the price of our common stock closed at $6.53 per share while on February 9, 2021, the price of our common stock closed at $14.99 per share without disclosure of news or other developments by us. On February 4, 2021, the opening price of our common stock was $19.94 and the intra-day sales price of our common stock fluctuated between a reported low sale price of $13.80 and a reported high sales price of $28.70, closing at $14.91. Our volume on this day was 116,590,800, which was a substantial increase from the volume of 18,086,230 and 3,161,525 on the two days immediately preceding February 4, 2021. We may incur rapid and substantial increases or decreases in our stock price in the foreseeable future that are do not coincide in timing with the disclosure of news or developments by us. The stock market in general, and the market for biotechnology and pharmaceutical companies in particular, has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. The market price for our common stock may be influenced by many factors, including the following:

●

announcements of new data, clinical trial results or those of companies that are perceived to be similar to us;

●

announcements related to any delays in any preclinical or clinical trials related to our products;

●

announcements related to our products’ ability to demonstrate efficacy or an acceptable safety profile of our product candidates or similar announcements by companies that are perceived to be similar to us;

●

our ability to meet or exceed expectations of analysts or investors;

●

news that the number of patients required for clinical trials for our drug candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, participants may drop out of these clinical trials at a higher rate than we anticipate or the duration of these clinical trials may be longer than we anticipate;

●

actions taken by regulatory agencies with respect to our product candidates or the progress of our clinical studies, including with respect to any fast track or orphan drug designations;

●

announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us, our strategic collaboration partners or our competitors;

●

grants awarded to us or companies that are perceived to be similar to us from outside entities;

●

variations in our financial results or those of companies that are perceived to be similar to us;

●

trading volume of our common stock;

●

developments concerning our collaborations or partners;

●

the impact of the COVID-19 outbreak and its effect on us;

●

the perception of the biotechnology or pharmaceutical industries by the public, legislatures, regulators and the investment community;

●

developments or disputes concerning intellectual property rights;

●

significant lawsuits, including patent or stockholder litigation;

●

our ability or inability to raise additional capital and the terms on which we raise it;

●

sales of our common stock by us or our stockholders;

●

declines in the market prices of stocks generally or of companies that are perceived to be similar to us; and

●

general economic, industry and market conditions.

In addition, companies trading in the stock market in general, and The Nasdaq Capital Market in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects. There can be no guarantee that our stock price will remain at current prices.

Our common stock may become the target of a “short squeeze.”

In the past several weeks prior to the filing of this Quarterly Report on Form 10-Q, securities of certain companies have increasingly experienced significant and extreme volatility in stock price due to short sellers of shares of common stock, known as a “short squeeze.” These short squeezes have caused extreme volatility in those companies and in the market and have led to the price per share of those companies to trade at a significantly inflated rate that is disconnected from the underlying value of the company. Many investors who have purchased shares in those companies at an inflated rate face the risk of losing a significant portion of their original investment as the price per share has declined steadily as interest in those stocks have abated. There can be no assurance that we will not, in the future be, a target of a short squeeze, and you may lose a significant portion or all of your investment if you purchase our shares at a rate that is significantly disconnected from our underlying value.

In addition to the information set forth in this Form 10-Q, you should carefully review and consider the risk factors discussed in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended September 30, 2020 filed with the SEC on December 28, 2020. These risks could materially and adversely affect our business, financial condition and results of operations. The risks described in herein and in our Form 10-K are not the only risks we face. Our operations could also be affected by additional factors that are not presently known to us or by factors that we currently consider immaterial to our business.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

During the period covered by this Quarterly Report on Form 10-Q, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a Current Report on Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number	Description
(3)	Articles of Incorporation and Bylaws
3.1	Articles of Incorporation (incorporated by reference to Exhibit 3.1 to our Quarterly Report on Form 10-Q for the quarter ended March 31, 2019 filed on May 9, 2019)
3.2	Bylaws (incorporated by reference to our Current Report on Form 8-K filed on September 28, 2007)
3.3	Articles of Merger filed with the Secretary of State of Nevada on January 10, 2007 and which is effective January 25, 2007 (incorporated by reference to our Current Report on Form 8-K filed on January 25, 2007)
(31)	Rule 13a-14(a)/15(d)-14(a)Certifications
31.1*	Certification of Christopher Missling, PhD.
31.2*	Certification of Sandra Boenisch
(32)	Section 1350 Certifications
32.1*	Certification of Christopher Missling, PhD and Sandra Boenisch.
(101)	XBRL
101.INS*	XBRL INSTANCE DOCUMENT
101.SCH*	XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*	XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*	XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*	XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*	XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

* Filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ANAVEX LIFE SCIENCES CORP.

/s/Christopher Missling, PhD
Christopher Missling, PhD
Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 2021


/s/ Sandra Boenisch
Sandra Boenisch, CPA, CGA
Principal Financial Officer
(Principal Financial and Accounting Officer)
Date: May 13, 2021

SEC Form 10-Q filed by Anavex Life Sciences Corp.