The Accompanying Notes are an Integral Part
of these Condensed Consolidated Interim Financial Statements
The Accompanying Notes are an Integral Part
of these Condensed Consolidated Interim Financial Statements
The Accompanying Notes are an Integral Part
of these Condensed Consolidated Interim Financial Statements
The Accompanying Notes are an Integral Part
of these Condensed Consolidated Interim Financial Statements
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 1
|
Business Description and Basis of Presentation
|
Business
Anavex Life Sciences Corp. (the
“Company”) is a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics
for the treatment of neurodegenerative and neurodevelopmental diseases including drug candidates to treat Alzheimer’s disease,
other central nervous system (CNS) diseases, pain and various types of cancer. The Company’s lead compound ANAVEX 2-73 is
being developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other CNS diseases, including rare
diseases, such as Rett syndrome.
Basis of
Presentation
These interim condensed consolidated
financial statements have been prepared, without audit pursuant to the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in the annual financial statements in accordance with
generally accepted accounting principles 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 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. These interim condensed financial statements should be read in conjunction with the audited financial statements
included in its annual report on Form 10-K for the year ended September 30, 2016. The Company follows the same accounting policies
in the preparation of interim reports.
Operating results for the six months
ended March 31, 2017 are not necessarily indicative of the results that may be expected for the year ending September 30, 2017.
Cash
and cash equivalents
The
Company considers only those investments which are highly liquid, readily convertible to cash and that mature within three months
from the date of purchase to be cash equivalents.
Research
and Development Incentive Income
The Company
participates, through its subsidiary in Australia, in the Australian government’s research and development incentive program.
The research and development incentive program provides a refundable tax offset to eligible companies that engage in research and
development activities in Australia. The Company recognizes as other income the amount received for qualified expenses, in the
period they are received.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 1
|
Business Description and Basis of Presentation
–
cont’d
|
Basic
and Diluted Loss per Share
Basic loss per common share is computed
by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.
Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include
the weighted average number of all potentially dilutive securities convertible into shares of common stock that were outstanding
during the period.
As of March 31, 2017, loss per share
excludes 6,053,309 (September 30, 2016 – 6,008,309) potentially dilutive common shares related to outstanding options and
warrants, as their effect was anti-dilutive.
|
Note 2
|
Recent Accounting Pronouncements
|
Recent
Accounting Pronouncements Adopted During the Period
In June 2014,
the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target
Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 requires that a performance target
that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As
such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further
clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will
be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already
been rendered. The Company adopted this standard on October 1, 2016. The adoption of this standard did not have any effect on its
financial condition, results of operations and cash flows.
In August
2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern
(“ASU 2014-15”). ASU 2014-15 explicitly requires management to assess an entity’s ability to continue as a going
concern, and to provide related footnote disclosure in certain circumstances. The Company adopted this standard on October 1, 2016.
The adoption of this standard did not have any effect on its financial condition, results of operations and cash flows.
In April
2015, the Financial Accounting Standards Board (FASB), issued the Accounting Standards Update 2015-03, Interest - Imputation
of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs, that requires debt issuance costs related
to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as
an asset. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial
statements. The Company adopted this standard on October 1, 2016. The adoption of this standard did not have any effect on its
financial condition, results of operations and cash flows.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 2
|
Recent Accounting Pronouncements
– (cont’d)
|
Recent Accounting Pronouncements
Not Yet Adopted
In May, 2014,
the FASB and the International Accounting Standards Board (IASB) issued a converged standard on revenue recognition from contracts
with customers, ASU 2014-09 (Topic 606 and IFRS 15). This standard will supersede nearly all existing revenue recognition guidance.
ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The adoption
of this standard is not expected to have a material impact for any period presented.
In November 2015,
the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-17 “Income
Taxes: Balance Sheet Classification of Deferred Taxes (“ASU 2015-17”). ASU 2015-17 eliminates the requirement to bifurcate
deferred taxes between current and non-current on the balance sheet and requires that deferred tax liabilities and assets be classified
as noncurrent on the balance sheet. ASU 2015-17 is effective for public entities in fiscal years beginning after December 15,
2016, and for interim periods within those fiscal years. The amendments for ASU-2015-17 can be applied retrospectively or prospectively
and early adoption is permitted. The adoption of this standard is not expected to have a material impact for any period presented.
In February
2016, the FASB issued Accounting Standards Update No. 2016-02,
Leases
(“ASU 2016-02”). The guidance would require
lessees to recognize most leases on their balance sheets as lease liabilities with corresponding right –of use assets. The
guidance is effective for annual and interim reporting periods beginning on or after December 15, 2018. The Company is currently
evaluating the impact this guidance will have on its financial condition, results of operations and cash flows.
In March
2016, the FASB issued ASC 2016-09, “
Compensation – Stock Compensation (Topic 718) – Improvements to Employee
Share-Based Payment Accounting
” (“ASU 2016-09”). These amendments are intended to simplify several aspects
of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either
equity or liabilities, and classification on the statement of cash flows. These amendments are effective for annual and interim
reporting periods beginning on or after December 15, 2016. Early adoption is permitted. Entities have the option to apply the amendments
on either a prospective basis or a modified retrospective basis. The Company is currently evaluating the impact this guidance will
have on its financial condition, results of operations and cash flows.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 2
|
Recent Accounting Pronouncements
– (cont’d)
|
In August
2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments ("ASU
2016-15"). ASU 2016-15 reduces the existing diversity in practice in financial reporting across all industries by clarifying
certain existing principles in ASC 230, Statement of Cash Flows, ("ASC 230") including providing additional guidance
on how and what an entity should consider in determining the classification of certain cash flows. In addition, in November 2016,
the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), Restricted Cash ("ASU 2016-18"). ASU 2016-18
clarifies certain existing principles in ASC 230, including providing additional guidance related to transfers between cash and
restricted cash and how entities present, in their statement of cash flows, the cash receipts and cash payments that directly affect
the restricted cash accounts. These amendments are effective for annual and interim reporting periods beginning on or after December
15, 2017. Early adoption is permitted. The adoption of ASU 2016-15 and ASU 2016-18 will modify the Company's current disclosures
and reclassifications within the consolidated statement of cash flows but they are not expected to have a material effect on the
Company’s consolidated financial statements.
Other than
noted above, 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 flow.
Deferred Grant Income
On June 19, 2015, the Company was
awarded grant funding in the amount of $286,455. The grant has been received in exchange for a commitment to provide research and
development for preclinical validation of Sigma-1 receptor agonism as potential treatment for Parkinson’s disease.
The grant income has been deferred
and is being amortized to other income over the related commitment period as the related research and development expenditures
are incurred. During the three and six months ended March 31, 2017, the Company recognized $16,684 and $51,970, respectively (2016:
$26,879 and $65,934) of this grant on its statement of operations within grant income.
Research and development tax incentive
During the three and six months ended
March 31, 2017, the Company received other income of $2,022,902 and $2,022,902, respectively (2016: $Nil and $571,093, respectively)
in respect of a research and development incentive program offered by the Australian government.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 4
|
Lincoln Park Purchase Agreement
|
On October 21, 2015, the Company
entered into a $50,000,000 purchase agreement (the “2015 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln
Park”), pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to
$50,000,000 in value of its shares of common stock from time to time over a 36-month period. In connection with the Purchase Agreement,
the Company also entered into a registration rights agreement with Lincoln Park whereby the Company agreed to file registration
statements with the Securities and Exchange Commission covering the shares of the Company’s common stock that may be issued
to Lincoln Park under the Purchase Agreement.
The Company may direct Lincoln
Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common stock on any business
day, provided that at least one business day has passed since the most recent purchase. The amount of a purchase may be increased
under certain circumstances provided, however that Lincoln Park’s committed obligation under any single purchase shall not
exceed $2,000,000. The purchase price of shares of common stock related to the future funding will be based on the then prevailing
market prices of such shares at the time of sales as described in the 2015 Purchase Agreement.
In consideration for entering into
the 2015 Purchase Agreement, the Company issued to Lincoln Park 179,598 shares of common stock as a commitment fee and agreed to
issue up to 89,799 shares pro rata, when and if, Lincoln Park purchases at the Company’s discretion the $50,000,000 aggregate
commitment.
During the six months ended March
31, 2017, the Company issued to Lincoln Park an aggregate of 5,155,200 shares of common stock under the Purchase Agreement, including
5,122,841 shares of common stock for an aggregate purchase price of $18,016,121 and 32,359 commitment shares. At March 31, 2017,
an amount of $30,626,078 remained available under the 2015 Purchase Agreement.
|
Note 5
|
Related Party Transactions
|
As at March 31, 2017, included
in accounts payable and accrued liabilities was $32,042 (September 30, 2016: $59,264) owing to directors and officers of the Company
for director fees and reimbursable expenses, and a former director and officer of the Company for unpaid fees.
The
Company is committed to lease payments as follows:
Fiscal year ending September 30,
|
|
|
|
2017
|
|
$
|
56,094
|
|
2018
|
|
|
112,189
|
|
2019
|
|
|
56,094
|
|
|
|
$
|
224,377
|
|
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 6
|
Commitments
– (cont’d)
|
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.
|
c)
|
Share Purchase Warrants
|
A summary of the status of Company’s
outstanding share purchase warrants is presented below:
|
|
Number of Shares
|
|
|
Weighted
Average
Exercise Price
|
|
Balance, October 1, 2015
|
|
|
4,272,890
|
|
|
$
|
2.11
|
|
Exercised
|
|
|
(2,463,581
|
)
|
|
$
|
1.67
|
|
Balance, September 30, 2016
|
|
|
1,809,309
|
|
|
$
|
2.70
|
|
Exercised
|
|
|
(200,000
|
)
|
|
$
|
3.00
|
|
Balance, March 31, 2017
|
|
|
1,609,309
|
|
|
$
|
2.66
|
|
At March 31,
2017, the Company had share purchase warrants outstanding of 1,609,309, with a weighted average exercise price of $2.66 as follows:
Number
|
|
|
Exercise Price
|
|
|
Expiry Date
|
|
1,262,180
|
|
|
$
|
3.00
|
|
|
July 5, 2018
|
|
30,000
|
|
|
$
|
4.00
|
|
|
February 24, 2019
|
|
277,127
|
|
|
$
|
1.20
|
|
|
March 13, 2019
|
|
1,252
|
|
|
$
|
1.68
|
|
|
March 13, 2019
|
|
31,250
|
|
|
$
|
1.24
|
|
|
May 31, 2019
|
|
7,500
|
|
|
$
|
1.04
|
|
|
May 31, 2019
|
|
1,609,309
|
|
|
|
|
|
|
|
All of the warrants expiring on
July 5, 2018 contain a contingent call provision whereby the Company may have the option to call for cancellation of all or any
portion of the warrants for consideration equal to $0.001 per share, provided the quoted market price of the Company’s common
stock exceeds $6.00 for a period of twenty consecutive trading days, subject to certain minimum volume restrictions and other restrictions
as provided in the warrant agreements.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 6
|
Commitments
– (cont’d)
|
|
c)
|
Share
Purchase Warrants – (cont’d)
|
During the six months ended March
31, 2017, 200,000 share purchase warrants were cashless exercised, resulting in the issuance of 52,562 shares of common stock.
|
d)
|
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 provides 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 is 6,050,553 shares subject to adjustment in the event of a change of the Company’s
capitalization. As a result of the adoption of the 2015 Plan, no further option awards will be granted under any previously existing
stock option plan. Stock option awards previously granted under previously existing stock option plans remain outstanding in accordance
with their terms.
The 2015 Plan is administered by
the board of directors, except that it may, in its discretion, delegate such responsibility to a committee of such board. 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 2015 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 2015 Plan.
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
|
|
Outstanding at October 1, 2015
|
|
|
1,822,500
|
|
|
$
|
2.00
|
|
|
|
|
|
Granted
|
|
|
2,401,500
|
|
|
$
|
5.22
|
|
|
$
|
4.38
|
|
Expired
|
|
|
(25,000
|
)
|
|
$
|
14.68
|
|
|
|
|
|
Outstanding at September 30, 2016
|
|
|
4,199,000
|
|
|
$
|
3.76
|
|
|
|
|
|
Granted
|
|
|
245,000
|
|
|
$
|
4.30
|
|
|
$
|
3.70
|
|
Outstanding at March 31, 2017
|
|
|
4,444,000
|
|
|
$
|
3.80
|
|
|
|
|
|
Exercisable at March 31, 2017
|
|
|
2,608,133
|
|
|
$
|
2.86
|
|
|
|
|
|
Exercisable at September 30, 2016
|
|
|
2,290,716
|
|
|
$
|
2.41
|
|
|
|
|
|
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 6
|
Commitments
– (cont’d)
|
|
d)
|
Stock-based Compensation Plan – (cont’d)
|
At March 31, 2017, the following
stock options were outstanding:
Number of Shares
|
|
|
|
|
|
|
|
Aggregate
|
|
|
Remaining
|
|
|
|
|
Number
|
|
|
Exercise
|
|
|
|
|
Intrinsic
|
|
|
Contractual
|
|
Total
|
|
|
Vested
|
|
|
Price
|
|
|
Expiry Date
|
|
Value
|
|
|
Life (yrs)
|
|
|
500,000
|
|
|
|
500,000
|
|
|
$
|
1.60
|
|
|
July 5, 2023
|
|
$
|
2,070,000
|
|
|
|
6.26
|
|
|
75,000
|
|
|
|
50,000
|
|
|
$
|
1.20
|
|
|
May 7, 2024
|
|
|
340,500
|
|
|
|
7.10
|
|
|
125,000
|
|
|
|
62,500
|
|
|
$
|
1.32
|
|
|
May 8, 2024
|
|
|
552,500
|
|
|
|
7.10
|
|
|
718,750
|
|
|
|
479,170
|
|
|
$
|
0.92
|
|
|
April 2, 2025
|
|
|
3,464,375
|
|
|
|
8.01
|
|
|
50,000
|
|
|
|
29,167
|
|
|
$
|
1.44
|
|
|
June 8, 2025
|
|
|
215,000
|
|
|
|
8.19
|
|
|
50,000
|
|
|
|
16,667
|
|
|
$
|
1.76
|
|
|
June 15, 2025
|
|
|
199,000
|
|
|
|
8.21
|
|
|
278,750
|
|
|
|
162,604
|
|
|
$
|
5.04
|
|
|
September 18, 2025
|
|
|
195,125
|
|
|
|
8.47
|
|
|
1,500
|
|
|
|
1,500
|
|
|
$
|
5.64
|
|
|
September 30, 2025
|
|
|
150
|
|
|
|
8.50
|
|
|
31,250
|
|
|
|
15,625
|
|
|
$
|
5.68
|
|
|
October 2, 2025
|
|
|
1,875
|
|
|
|
8.51
|
|
|
25,000
|
|
|
|
12,500
|
|
|
$
|
8.98
|
|
|
October 16, 2025
|
|
|
-
|
|
|
|
8.54
|
|
|
1,500
|
|
|
|
1,500
|
|
|
$
|
5.57
|
|
|
December 31, 2025
|
|
|
255
|
|
|
|
8.75
|
|
|
1,500
|
|
|
|
1,500
|
|
|
$
|
4.90
|
|
|
March 31, 2026
|
|
|
1,260
|
|
|
|
9.00
|
|
|
1,500
|
|
|
|
1,500
|
|
|
$
|
5.66
|
|
|
April 27, 2026
|
|
|
120
|
|
|
|
9.07
|
|
|
50,000
|
|
|
|
19,697
|
|
|
$
|
4.09
|
|
|
May 18, 2026
|
|
|
82,500
|
|
|
|
9.13
|
|
|
1,500
|
|
|
|
1,500
|
|
|
$
|
6.11
|
|
|
June 30, 2026
|
|
|
-
|
|
|
|
9.25
|
|
|
379,625
|
|
|
|
63,271
|
|
|
$
|
6.26
|
|
|
July 5, 2026
|
|
|
-
|
|
|
|
9.26
|
|
|
861,429
|
|
|
|
143,572
|
|
|
$
|
7.06
|
|
|
July 18, 2026
|
|
|
-
|
|
|
|
9.30
|
|
|
40,000
|
|
|
|
10,000
|
|
|
$
|
3.06
|
|
|
September 7, 2026
|
|
|
107,200
|
|
|
|
9.44
|
|
|
1,006,696
|
|
|
|
1,006,696
|
|
|
$
|
3.28
|
|
|
September 22, 2026
|
|
|
2,476,472
|
|
|
|
9.48
|
|
|
140,000
|
|
|
|
23,331
|
|
|
$
|
3.63
|
|
|
October 3, 2026
|
|
|
295,400
|
|
|
|
9.51
|
|
|
15,000
|
|
|
|
2,500
|
|
|
$
|
4.35
|
|
|
December 9, 2026
|
|
|
20,850
|
|
|
|
9.69
|
|
|
50,000
|
|
|
|
-
|
|
|
$
|
5.39
|
|
|
February 7, 2027
|
|
|
17,500
|
|
|
|
9.86
|
|
|
40,000
|
|
|
|
3,333
|
|
|
$
|
5.26
|
|
|
February 17, 2027
|
|
|
19,200
|
|
|
|
9.88
|
|
|
4,444,000
|
|
|
|
2,608,133
|
|
|
|
|
|
|
|
|
$
|
10,059,282
|
|
|
|
|
|
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, 2017.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
March 31, 2017
(
Unaudited
)
|
Note 6
|
Commitments
– (cont’d)
|
|
d)
|
Stock–based
Compensation Plan – (cont’d)
|
The Company recognized stock based compensation expense of $968,893 and $1,858,160, respectively, during the
three and six months ended March 31, 2017 (2016: $222,690 and $438,710, respectively) in connection with the issuance and vesting
of stock options in exchange for services, and $0 and $0 respectively (2016: $0 and $610,000, respectively), in connection with
the vesting of restricted stock in exchange for services. These amounts have been included in general and administrative expenses
and research and development expenses on the Company’s statement of operations as follows:
|
|
Three months ended March 31,
|
|
|
Six months ended March 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
General and administrative
|
|
$
|
450,128
|
|
|
$
|
143,672
|
|
|
$
|
877,711
|
|
|
$
|
574,235
|
|
Research and development
|
|
|
518,765
|
|
|
|
79,019
|
|
|
|
980,449
|
|
|
|
474,476
|
|
Total share based compensation
|
|
$
|
968,893
|
|
|
$
|
222,690
|
|
|
$
|
1,858,160
|
|
|
$
|
1,048,710
|
|
An amount of approximately $6,898,526
in stock based compensation is expected to be recorded over the remaining term of such options through December 31, 2019.
The fair value
of each option award is estimated on the date of grant using the Black Scholes option pricing model based on the following weighted
average assumptions:
|
|
2017
|
|
|
2016
|
|
Risk-free interest rate
|
|
|
1.76
|
%
|
|
|
1.68
|
%
|
Expected life of options (years)
|
|
|
6.79
|
|
|
|
6.76
|
|
Annualized volatility
|
|
|
111.81
|
%
|
|
|
101.92
|
%
|
Dividend rate
|
|
|
0.00
|
%
|
|
|
0.00
|
%
|
The fair value of restricted stock compensation charges during the six months ended March 31, 2016 was determined with reference to
the quoted market price of the Company’s shares on the commitment date.
|
Note 7
|
Comparative Figures
|
Certain comparative figures have been reclassified to
conform to the current year’s presentation.