Item
1. FINANCIAL STATEMENTS
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June
30, 2017
(
Unaudited
)
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED BALANCE SHEETS
June
30, 2017 and September 30, 2016
|
|
June 30,
2017
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September 30,
2016
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|
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|
(Unaudited)
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|
ASSETS
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
24,793,424
|
|
|
$
|
9,186,814
|
|
Sales tax recoverable
|
|
|
8,216
|
|
|
|
79,347
|
|
Prepaid expenses
|
|
|
52,694
|
|
|
|
180,124
|
|
|
|
|
24,854,334
|
|
|
|
9,446,285
|
|
Deposits
|
|
|
52,396
|
|
|
|
52,396
|
|
|
|
$
|
24,906,730
|
|
|
$
|
9,498,681
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|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
|
|
|
|
|
|
|
|
|
Accounts payable and accrued liabilities
|
|
$
|
1,435,498
|
|
|
$
|
3,119,993
|
|
Deferred grant income
|
|
|
19,073
|
|
|
|
70,532
|
|
|
|
|
1,454,571
|
|
|
|
3,190,525
|
|
|
|
|
|
|
|
|
|
|
Commitments - Note 6
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|
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|
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Capital stock
|
|
|
|
|
|
|
|
|
Authorized:
|
|
|
|
|
|
|
|
|
100,000,000 common shares, par value $0.001 per share
|
|
|
|
|
|
|
|
|
Issued and outstanding:
|
|
|
|
|
|
|
|
|
42,172,090 common shares (September 30, 2016 - 36,168,299)
|
|
|
42,173
|
|
|
|
36,169
|
|
Additional paid-in capital
|
|
|
109,733,970
|
|
|
|
84,290,140
|
|
Accumulated deficit
|
|
|
(86,323,984
|
)
|
|
|
(78,018,153
|
)
|
|
|
|
23,452,159
|
|
|
|
6,308,156
|
|
|
|
$
|
24,906,730
|
|
|
$
|
9,498,681
|
|
The
Accompanying Notes are an Integral Part of these Condensed Consolidated Interim Financial Statements
ANAVEX
LIFE SCIENCES CORP.
INTERIM
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for
the three and nine months ended June 30, 2017 and 2016
(Unaudited)
|
|
Three months ended June 30,
|
|
|
Nine months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
General and administrative
|
|
$
|
1,405,026
|
|
|
$
|
1,134,845
|
|
|
$
|
3,647,224
|
|
|
$
|
5,117,591
|
|
Research and development
|
|
|
2,300,277
|
|
|
|
1,158,820
|
|
|
|
6,835,700
|
|
|
|
3,888,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Total operating expenses
|
|
|
(3,705,303
|
)
|
|
|
(2,293,665
|
)
|
|
|
(10,482,924
|
)
|
|
|
(9,006,267
|
)
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|
|
|
|
|
|
|
|
|
|
|
|
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|
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Other income (expenses)
|
|
|
|
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|
|
|
|
|
|
|
|
|
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|
Grant income
|
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|
69,146
|
|
|
|
47,767
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|
|
|
121,116
|
|
|
|
113,701
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|
Research and development incentive income
|
|
|
—
|
|
|
|
—
|
|
|
|
2,022,902
|
|
|
|
571,093
|
|
Interest income, net
|
|
|
26,677
|
|
|
|
2,626
|
|
|
|
48,479
|
|
|
|
6,832
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|
Gain on settlement of accounts payable
|
|
|
75,204
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|
|
|
—
|
|
|
|
75,204
|
|
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|
151,402
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|
Financing related charges and adjustments
|
|
|
—
|
|
|
|
(8
|
)
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|
—
|
|
|
|
(1,175
|
)
|
Foreign exchange gain (loss)
|
|
|
(65,932
|
)
|
|
|
8,924
|
|
|
|
(40,128
|
)
|
|
|
(37,637
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Total other income, net
|
|
|
105,095
|
|
|
|
59,309
|
|
|
|
2,227,573
|
|
|
|
804,216
|
|
Net loss before provision for income taxes
|
|
|
(3,600,208
|
)
|
|
|
(2,234,356
|
)
|
|
|
(8,255,351
|
)
|
|
|
(8,202,051
|
)
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|
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|
|
|
|
|
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|
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Income tax expense - current
|
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|
(9,877
|
)
|
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|
(6,000
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)
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|
(50,480
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)
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|
(23,615
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)
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Net loss and comprehensive loss
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$
|
(3,610,085
|
)
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$
|
(2,240,356
|
)
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$
|
(8,305,831
|
)
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|
$
|
(8,225,666
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)
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Loss per share
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|
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|
|
|
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Basic and diluted
|
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$
|
(0.09
|
)
|
|
$
|
(0.06
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.24
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Weighted average number of shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Basic and diluted
|
|
|
41,509,225
|
|
|
|
35,709,686
|
|
|
|
40,344,149
|
|
|
|
34,961,838
|
|
The
Accompanying Notes are an Integral Part of these Condensed Consolidated Interim Financial Statements
ANAVEX LIFE SCIENCES CORP.
INTERIM CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
for the nine months ended June 30, 2017
(Unaudited)
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash Flows used in Operating Activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(8,305,831
|
)
|
|
$
|
(8,225,666
|
)
|
Adjustments to reconcile net loss to net cash used in operations:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
—
|
|
|
|
746
|
|
Accretion of debt discount
|
|
|
—
|
|
|
|
1,175
|
|
Stock-based compensation
|
|
|
3,017,876
|
|
|
|
1,276,967
|
|
Gain on settlement of accounts payable
|
|
|
(75,204
|
)
|
|
|
(151,402
|
)
|
Unrealized foreign exchange
|
|
|
—
|
|
|
|
2,649
|
|
Changes in non-cash working capital balances related to operations:
|
|
|
|
|
|
|
|
|
Sales tax recoverable
|
|
|
55,967
|
|
|
|
28,887
|
|
Prepaid expenses and deposits
|
|
|
127,430
|
|
|
|
32,371
|
|
Accounts payable and accrued liabilities
|
|
|
(1,594,127
|
)
|
|
|
(294,793
|
)
|
Deferred grant income
|
|
|
(51,459
|
)
|
|
|
(44,490
|
)
|
Net cash used in operating activities
|
|
|
(6,825,348
|
)
|
|
|
(7,373,556
|
)
|
|
|
|
|
|
|
|
|
|
Cash Flows provided by Financing Activity
|
|
|
|
|
|
|
|
|
Issuance of common shares, net of share issue costs
|
|
|
22,431,958
|
|
|
|
1,809,620
|
|
Net cash provided by financing activity
|
|
|
22,431,958
|
|
|
|
1,809,620
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash during the period
|
|
|
15,606,610
|
|
|
|
(5,563,936
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
9,186,814
|
|
|
|
15,290,976
|
|
Cash and cash equivalents, end of period
|
|
$
|
24,793,424
|
|
|
$
|
9,727,040
|
|
The Accompanying Notes are an Integral
Part of these Condensed Consolidated Interim Financial Statements
ANAVEX LIFE SCIENCES CORP.
INTERIM CONDENSED CONSOLIDATED STATEMENT
OF CHANGES IN STOCKHOLDERS’ EQUITY
For the nine months ended June 30, 2017
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-in
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
Par Value
|
|
|
|
Capital
|
|
|
|
Deficit
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, October 1, 2016
|
|
|
36,168,299
|
|
|
$
|
36,169
|
|
|
$
|
84,290,140
|
|
|
$
|
(78,018,153
|
)
|
|
$
|
6,308,156
|
|
Shares issued under purchase agreement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase shares
|
|
|
5,910,939
|
|
|
|
5,911
|
|
|
|
22,426,047
|
|
|
|
—
|
|
|
|
22,431,958
|
|
Commitment shares
|
|
|
40,290
|
|
|
|
40
|
|
|
|
(40
|
)
|
|
|
—
|
|
|
|
—
|
|
Shares issued upon exercise of warrants - cashless
|
|
|
52,562
|
|
|
|
53
|
|
|
|
(53
|
)
|
|
|
—
|
|
|
|
—
|
|
Share based compensation
|
|
|
—
|
|
|
|
—
|
|
|
|
3,017,876
|
|
|
|
—
|
|
|
|
3,017,876
|
|
Net loss for the period
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(8,305,831
|
)
|
|
|
(8,305,831
|
)
|
Balance, June 30, 2017
|
|
|
42,172,090
|
|
|
$
|
42,173
|
|
|
$
|
109,733,970
|
|
|
$
|
(86,323,984
|
)
|
|
$
|
23,452,159
|
|
The Accompanying Notes are an Integral
Part of these Condensed Consolidated Interim Financial Statements
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 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 nine
months ended June 30, 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
June 30, 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 June 30, 2017, loss per
share excludes 6,746,964 (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
June 30, 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 the Company on October
1, 2017. 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.
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.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2017
(
Unaudited
)
|
Note 2
|
Recent Accounting Pronouncements
– (cont’d)
|
In May
2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.
2017-09, “Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting,” clarifying when a change
to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires modification
accounting if the fair value, vesting condition or the classification of the award is not the same immediately before and after
a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basis beginning
on October 1, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will have on its
financial condition, results of operations and cash flows.
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 nine months ended June 30, 2017, the Company recognized $69,146 and $121,116, respectively (2016:
$47,767 and $113,701) of this grant on its statement of operations within grant income.
Research and development tax incentive
During the three and nine months
ended June 30, 2017, the Company received other income of $Nil 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
June 30, 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 nine months ended
June 30, 2017, the Company issued to Lincoln Park an aggregate of 5,951,229 shares of common stock under the Purchase Agreement,
including 5,910,939 shares of common stock for an aggregate purchase price of $22,431,958 and 40,290 commitment shares. At June
30, 2017, an amount of $26,210,241 remained available under the 2015 Purchase Agreement.
|
Note 5
|
Related Party Transactions
|
As at June 30, 2017, included
in accounts payable and accrued liabilities was $41,195 (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
|
|
|
$
|
28,047
|
|
2018
|
|
|
|
112,189
|
|
2019
|
|
|
|
56,094
|
|
|
|
|
$
|
196,330
|
|
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 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,June 30, 2017
|
|
|
|
1,609,309
|
|
|
$
|
2.66
|
|
At June
30, 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.
During the nine months ended
June 30, 2017, 200,000 share purchase warrants were cashless exercised, resulting in the issuance of 52,562 shares of common stock.
Anavex Life Sciences Corp.
Notes to the Interim Condensed Consolidated Financial Statements
June 30, 2017
(
Unaudited
)
|
Note 6
|
Commitments
– (cont’d)
|
|
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
|
|
|
|
1,080,000
|
|
|
$
|
5.55
|
|
|
$
|
5.48
|
|
Forfeited
|
|
|
|
(141,345
|
)
|
|
$
|
4.02
|
|
|
|
|
|
Outstanding at June 30, 2017
|
|
|
|
5,137,655
|
|
|
$
|
4.13
|
|
|
|
|
|
Exercisable at June 30, 2017
|
|
|
|
3,124,885
|
|
|
$
|
2.89
|
|
|
|
|
|
Exercisable at September 30, 2016
|
|
|
|
2,290,717
|
|
|
$
|
2.41
|
|
|
|
|
|
Anavex
Life Sciences Corp.
Notes
to the Interim Condensed Consolidated Financial Statements
June
30, 2017
(
Unaudited
)
|
Note
6
|
Commitments
– (cont’d)
|
|
d)
|
Stock-based
Compensation Plan – (cont’d)
|
At
June 30, 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
|
|
$
|
1,860,000
|
|
|
6.01
|
|
|
75,000
|
|
|
75,000
|
|
$
|
1.20
|
|
May
7, 2024
|
|
|
309,000
|
|
|
6.85
|
|
|
125,000
|
|
|
93,750
|
|
$
|
1.32
|
|
May
8, 2024
|
|
|
500,000
|
|
|
6.86
|
|
|
718,750
|
|
|
718,750
|
|
$
|
0.92
|
|
April
2, 2025
|
|
|
3,162,500
|
|
|
7.76
|
|
|
29,167
|
|
|
29,167
|
|
$
|
1.44
|
|
June
8, 2025
|
|
|
113,168
|
|
|
7.94
|
|
|
50,000
|
|
|
33,333
|
|
$
|
1.76
|
|
June
15, 2025
|
|
|
178,000
|
|
|
7.96
|
|
|
273,542
|
|
|
177,500
|
|
$
|
5.04
|
|
September
18, 2025
|
|
|
76,592
|
|
|
8.22
|
|
|
1,500
|
|
|
1,500
|
|
$
|
5.64
|
|
September
30, 2025
|
|
|
—
|
|
|
8.25
|
|
|
31,250
|
|
|
18,230
|
|
$
|
5.68
|
|
October
2, 2025
|
|
|
—
|
|
|
8.26
|
|
|
25,000
|
|
|
14,583
|
|
$
|
8.98
|
|
October
16, 2025
|
|
|
—
|
|
|
8.30
|
|
|
1,500
|
|
|
1,500
|
|
$
|
5.57
|
|
December
31, 2025
|
|
|
—
|
|
|
8.50
|
|
|
1,500
|
|
|
1,500
|
|
$
|
4.90
|
|
March
31, 2026
|
|
|
630
|
|
|
8.75
|
|
|
1,500
|
|
|
1,500
|
|
$
|
5.66
|
|
April
27, 2026
|
|
|
—
|
|
|
8.82
|
|
|
19,697
|
|
|
19,697
|
|
$
|
4.09
|
|
May
18, 2026
|
|
|
24,227
|
|
|
8.88
|
|
|
1,500
|
|
|
1,500
|
|
$
|
6.11
|
|
June
30, 2026
|
|
|
—
|
|
|
9.00
|
|
|
379,625
|
|
|
94,906
|
|
$
|
6.26
|
|
July
5, 2026
|
|
|
—
|
|
|
9.01
|
|
|
861,429
|
|
|
215,357
|
|
$
|
7.06
|
|
July
18, 2026
|
|
|
—
|
|
|
9.05
|
|
|
40,000
|
|
|
13,333
|
|
$
|
3.06
|
|
September
7, 2026
|
|
|
90,400
|
|
|
9.19
|
|
|
1,006,696
|
|
|
1,006,696
|
|
$
|
3.28
|
|
September
22, 2026
|
|
|
2,053,660
|
|
|
9.23
|
|
|
89,999
|
|
|
29,999
|
|
$
|
3.63
|
|
October
3, 2026
|
|
|
152,098
|
|
|
9.26
|
|
|
15,000
|
|
|
3,750
|
|
$
|
4.35
|
|
December
9, 2026
|
|
|
14,550
|
|
|
9.44
|
|
|
50,000
|
|
|
—
|
|
$
|
5.39
|
|
February
7, 2027
|
|
|
—
|
|
|
9.61
|
|
|
40,000
|
|
|
6,666
|
|
$
|
5.26
|
|
February
17, 2027
|
|
|
2,400
|
|
|
9.63
|
|
|
800,000
|
|
|
66,668
|
|
$
|
5.92
|
|
May
12, 2027
|
|
|
—
|
|
|
9.86
|
|
|
5,137,655
|
|
|
3,124,885
|
|
|
|
|
|
|
$
|
8,537,225
|
|
|
|
|
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 June 30, 2017.
Anavex
Life Sciences Corp.
Notes
to the Interim Condensed Consolidated Financial Statements
June
30, 2017
(
Unaudited
)
Note 6
|
Commitments
– (cont’d)
|
|
d)
|
Stock–based
Compensation Plan – (cont’d)
|
The
Company recognized stock based compensation expense of $1,159,716 and $3,017,876, respectively, during the three and nine months
ended June 30, 2017 (2016: $230,239 and $666,967 respectively) in connection with the issuance and vesting of stock options
in exchange for services, and $Nil and $Nil respectively (2016: $Nil 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 June 30,
|
|
Nine
months ended June 30,
|
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
General
and administrative
|
$
|
574,470
|
|
$
|
127,473
|
|
$
|
1,452,181
|
|
$
|
715,991
|
|
Research
and development
|
|
585,246
|
|
|
102,766
|
|
|
1,565,695
|
|
|
560,976
|
|
Total
share based compensation
|
$
|
1,159,716
|
|
$
|
230,239
|
|
$
|
3,017,876
|
|
$
|
1,276,967
|
|
An
amount of approximately $8,872,029 in stock based compensation is expected to be recorded over the remaining term of such
options through March 31, 2020.
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
|
|
1.98
|
%
|
|
1.67
|
%
|
Expected life of options
(years)
|
|
6.82
|
|
|
6.63
|
|
Annualized volatility
|
|
111.67
|
%
|
|
105.21
|
%
|
Dividend rate
|
|
0.00
|
%
|
|
0.00
|
%
|
The
fair value of restricted stock compensation charges during the nine months ended June 30, 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.
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” and similar expressions, as they relate to us, are intended to identify forward-looking
statements. Such forward-looking statements include, without limitation, statements regarding the anticipated start dates, durations
and completion dates of our ongoing and future clinical studies, statements regarding the anticipated designs of our future clinical
studies, statements regarding our anticipated future regulatory submissions and statements regarding 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 II, Item 1A of this Quarterly
Report on Form 10-Q. 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. (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
TM
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.
In
November 2016, a Phase 2a clinical trial going over 52 weeks was completed for ANAVEX
TM
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
TM
2-73 in 32 patients. ANAVEX
TM
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. ANAVEX
TM
2-73 showed no serious adverse
events in a previously performed Phase 1 study. In preclinical studies, ANAVEX
TM
2-73 demonstrated anti-amnesic and
neuroprotective properties in various animal models including the transgenic mouse model Tg2576. In March 2016, we received approval
from the Ethics Committee in Australia to extend the ongoing Phase 2a clinical trial, which had been requested by patients and
their caregivers. The trial extension allows participants who completed 52 weeks in PART B to rollover into a new trial and continue
taking ANAVEX
TM
2-73 for an additional 104 weeks, providing an opportunity to gather extended safety data. The trial
is independent of the Company’s planned larger Phase 2/3 double-blind, placebo-controlled study of ANAVEX
TM
2-73
in Alzheimer’s disease.
In
September 2016, the Company presented positive preclinical data for ANAVEX
TM
2-73 in Parkinson’s disease, which
demonstrated significant improvements on all measures: behavioral, histopathological, and neuroinflammatory endpoints. The study
was funded by the Michael J Fox Foundation.
In
February 2016, the Company presented positive preclinical data for ANAVEX
TM
2-73 in Rett syndrome, a rare neurodevelopmental
disease indication. The study was funded by the Rettsyndrome.org foundation. In January 2017, the Company was awarded a financial
grant from the Rettsyndrome.org foundation of a minimum of $0.6 million to cover the majority of a planned U.S. multicenter Phase
2 clinical trial of ANAVEX
TM
2-73 for the treatment of Rett syndrome. The Phase 2 trial is scheduled to begin in calendar
2017 and will be a randomized, double blind, placebo-controlled study of ANAVEX
TM
2-73 in patients with Rett syndrome
lasting up to 12 weeks. Primary and secondary endpoints include safety as well as Rett syndrome conditions such as cognitive impairment,
motor impairment, behavioral symptoms and seizure activity.
We
intend to identify and initiate discussions with potential commercial partners within the next 12 months. Further, we may acquire
or develop new intellectual property and assign, license, or otherwise transfer our intellectual property to further our goals.
Our
Pipeline
Our
research and development pipeline includes one clinical drug candidate and several compounds in different stages of 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, including
Alzheimer’s disease. 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.
Compounds
that have been subjects of our research include the following:
ANAVEX
TM
2-73
ANAVEX
TM
2-73 may offer a disease-modifying approach in Alzheimer’s disease (“AD”) by using ligands that activate
sigma-1 receptors.
In
AD animal models, ANAVEX
TM
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
TM
2-73 has shown a potential dual mechanism which
may impact both amyloid and tau pathology. In a transgenic AD animal model Tg2576, ANAVEX
TM
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 significantly
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
TM
2-73 in 2011. 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 parameters. ANAVEX
TM
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.
The
ANAVEX
TM
2-73 Phase 1 SAD trial was conducted as a randomized, placebo-controlled study. Healthy male volunteers between
the ages of 18 and 55 received single, ascending oral doses over the course of the trial. Study endpoints included safety and
tolerability together with pharmacokinetic parameters. Pharmacokinetics includes the absorption and distribution of a drug, the
rate at which a drug enters the blood and the duration of its effect, as well as chemical changes of the substance in the body.
This study was conducted in Germany in collaboration with ABX-CRO, a clinical research organization and the Technical University
of Dresden.
In
December 2014, a Phase 2a clinical trial was initiated for ANAVEX 2-73
TM
, which is being evaluated for the treatment
of Alzheimer’s disease. The open-label randomized trial is designed to assess the safety and exploratory efficacy of ANAVEX
TM
2-73 in 32 patients with mild to moderate Alzheimer’s disease. ANAVEX
TM
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. ANAVEX
TM
2-73 showed no serious adverse
events in a previously performed Phase 1 study. In pre-clinical studies ANAVEX
TM
2-73 demonstrated anti-amnesic and
neuroprotective properties in various animal models including the transgenic mouse model Tg2576.
The
Phase 2a study met both primary and secondary objectives of the study. The 31-week preliminary exploratory safety and efficacy
data from the Phase 2a study of ANAVEX
TM
2-73 in Alzheimer’s patients, with most also receiving donepezil, the
current standard of care, demonstrated favorable safety, maximum tolerated dose, positive dose response, sustained efficacy response
through 31 weeks for both cognitive and functional measures, as well as positive unexpected therapeutic response events. ANAVEX
TM
2-73 continued to demonstrate a favorable adverse event profile through 31 weeks in a patient population of elderly Alzheimer’s
patients with varying degrees of physical fragility. The most common side effects across all adverse events categories tended
to be of mild severity grade 1, and were resolved with dose reductions that were anticipated within the adaptive design of the
study protocol.
At
41 weeks, Alzheimer’s patients taking a daily oral dose of ANAVEX
TM
2-73 in the exploratory, not yet dose optimized
Phase 2a clinical trial, showed a stabilization of cognitive and functional measures. This data of stabilization is promising
since Alzheimer’s disease is a progressive disease where current therapeutics are only able to temporarily slow the worsening
of dementia symptoms and do not stop the disease from progressing. At 41 weeks, oral daily dosing between 10mg and 50mg, ANAVEX
TM
2-73 was well tolerated, and no patients discontinued treatment due to adverse events. There were no clinically significant
treatment-related adverse events, and no serious adverse events.
Pre-specified
exploratory analyses included the cognitive (MMSE) and the functional (ADCS-ADL) changes from baseline. A continued stabilization
of both cognitive (MMSE) and functional (ADCS-ADL) measures in patients treated with ANAVEX
TM
2-73 was observed. This
correlation was positive with all measured scores (MMSE, ADCS-ADL, Cogstate, HAM-D and EEG/ERP).
At
57 weeks, Alzheimer’s patients taking a daily oral dose between 10mg and 50mg, ANAVEX
TM
2-73 was well tolerated. There were
no clinically significant treatment-related adverse events and no serious adverse events. Despite non-optimized dosing of ANAVEX
TM
2-73 throughout the 57-week study, continued significant improvements from baseline of cognitive, functional and behavioural scores
in a group of patients were observed, respectively. This data will be analyzed using refined mathematical modeling methods in
conjunction with the detailed pharmacokinetic (PK) information.
ANAVEX
TM
2-73 data presented meets prerequisite information in order to progress into a Phase 2/3 placebo controlled study, which
is currently in the preparation phase.
Preclinical
data also validates ANAVEX
TM
2-73 as a prospective platform drug for other neurodegenerative diseases beyond Alzheimer’s
as well as neurodevelopmental diseases, more specifically, Parkinson’s disease, epilepsy, Rett syndrome, Angelman syndrome
and Fragile X syndrome.
For
Parkinson’s disease, data demonstrates significant improvements and restoration of function in a classic animal model of
Parkinson’s disease. Significant improvements were seen on all measures tested: behavioral, histopathological, and neuroinflammatory
endpoints.
For
epilepsy, data demonstrates both significant and dose related improvement in the reduction of seizures, as well as significant
synergy with each of three generations of epilepsy drugs currently on the market.
In
Rett syndrome, a rare neurodevelopmental disease indication, administration of ANAVEX
TM
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
TM
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
TM
2-73 for four
weeks significantly increased the automatic visual response in the MECP2 Rett syndrome disease mouse.
The
Company is currently in preparation for a Phase 2 clinical trial for the treatment of Rett syndrome.
In
May 2017, the Company announced new preclinical data for ANAVEX
TM
2-73 in the neurodevelopmental disorders Angelman
syndrome and Fragile X syndrome. For Angelman syndrome, in a study sponsored by the Foundation for Angelman Syndrome, ANAVEX
TM
2-73 was assessed in a mouse model for the development of audiogenic seizures. The results indicated that ANAVEX
TM
2-73 administration significantly reduced audiogenic-induced seizures. In Fragile X, in a recent study sponsored by Fraxa
Research Foundation, data demonstrated that ANAVEX
TM
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
TM
2-73 normalization of BDNF
expression could be a contributing factor for the positive data observed in both neurodevelopmental and neurodegenerative disorders.
Recent
preclinical data presented also indicates that ANAVEX
TM
2-73 demonstrates protective effects of the mitochondrial enzyme
complexes I and IV during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative
and neurodevelopmental diseases. The FDA has granted Orphan Drug Designation to ANAVEX 2-73 for the treatment of Rett syndrome
and infantile spasms, in May 2016 and June 2016, respectively.
ANAVEX
3-71
ANAVEX
3-71, previously named AF710B is a preclinical 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.
ANAVEX 3-71 is a CNS-penetrable mono-therapy that bridges treatment of both cognitive impairments with disease modifications.
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
recent preclinical study examined the response of ANAVEX 3-71 in aged transgenic animal models, and showed a significant reduction
in 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.
In
April 2017, new preclinical data was presented for ANAVEX 3-71 indicating that 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 the mitochondrial enzyme complexes I and IV during pathological conditions, which, if impaired, are believed to play
a role in the pathogenesis of neurodegenerative and neurodevelopmental diseases.
ANAVEX
1-41
ANAVEX
1-41 is a sigma-1 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 destroys cells
and is believed by some scientists to be a primary cause of AD. 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.
Recent
preclinical data presented also indicates that ANAVEX 1-41 demonstrates protective effects of the mitochondrial enzyme complexes
I and IV during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative
and neurodevelopmental diseases.
ANAVEX
1037
ANAVEX
1037 is designed for the treatment of prostate 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 with no toxic side effects. 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 describe sigma receptor ligands positively, highlighting 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.
ANAVEX
1066
ANAVEX
1066, a mixed sigma-1/sigma-2 ligand is designed for the potential treatment of neuropathic pain 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.
Our
compounds are in the pre-clinical and clinical testing stages of development, and there is no guarantee that the activity demonstrated
in pre-clinical models will be shown in human testing.
Our
Target Indications
We
have developed compounds with potential application to two broad categories and several specific indications. The two categories
are diseases of the central nervous system, and cancer. Specific indications include:
●
|
Alzheimer’s disease
- In 2016, an estimated 5.4 million Americans were suffering from Alzheimer’s disease. The Alzheimer’s Association®
reports that by 2025, 7.1 million Americans will be afflicted by the disease, a 30 percent increase from currently affected
patients. 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 set to expand from $2.1 billion in 2014 to $3.2 billion by 2021, according to business intelligence provider GBI
Research.
|
|
|
●
|
Rett syndrome - Rett syndrome is a rare non-inherited
genetic postnatal progressive neurodevelopmental disorder that occurs almost exclusively in girls and leads to severe impairments,
affecting nearly every aspect of the child’s life: their ability to speak, walk, eat, and even breathe easily. Rett
syndrome is caused by mutations in the MECP2 gene and strikes all racial and ethnic groups and occurs worldwide in approximately
1 in every 10,000-15,000 live female births.
|
|
|
●
|
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 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, epilepsy affects
2.2 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.
GBI Research estimates that the epilepsy market will increase to $4.5 billion by 2019.
|
|
|
●
|
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.
|
|
|
●
|
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 $18.6 billion in 2017 according to BCC Research.
|
|
|
●
|
Pancreatic Cancer - Pancreatic cancer is a malignant
neoplasm of the pancreas. In the United States, approximately 45,000 new cases of pancreatic cancer will be diagnosed this
year and approximately 38,000 patients will die as a result of their cancer. 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.
|
Financial
Highlights
We
had cash of $24.8 million at June 30, 2017, compared to $9.2 million at September 30, 2016. The increase in cash is primarily
a result of the sale of shares of common stock for aggregate proceeds of $22.4 million under a Purchase Agreement by and between
the Company and Lincoln Park Capital Fund, LLC (“Lincoln Park”) dated October 21, 2015 (the “Purchase Agreement”).
During the fiscal year to the end of our third quarter, we also received $2.0 million in other income from the Australian Tax
Office, as part of a government sponsored research and development incentive program.
Operating
expenses for the third quarter of fiscal 2017 were $3.7 million, compared to $2.3 million for the comparable quarter in fiscal
2016. The principal reason for the increase in operating costs was due to an increase in research and development costs, as a
result of increased preclinical activities, as well as clinical preparatory activities and the ongoing Phase 2a clinical trial
extension.
We
expect our research and development expenses will continue to increase as we proceed into a Phase 2/3 clinical study for Alzheimer’s
disease, a Phase 2 trial for Rett syndrome, a Phase 2 study in Parkinson’s disease and continue to advance other auxiliary
research and development activities. We continue to target potential research partners to further advance our pipeline compounds.
Net
loss for the third quarter of fiscal 2017 was $3.6 million, or $0.09 per share, as compared to $2.2 million, or $0.06 per share
in the comparable quarter in fiscal 2016.
Results
of Operations
Revenue
We
have not earned any revenues since our inception on January 23, 2004. 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
months ended June 30, 2017 compared to three months ended June 30, 2016
Operating
Expenses
Our
operating expenses for the three months ended June 30, 2017 were $3.7 million which represents an increase of $1.4 million from
the comparable quarter in fiscal 2016. The increase in operating costs was primarily attributable to an increase in research and
development expenses of $1.1 million, primarily as a result of an increase in preclinical programs on ANAVEX
TM
2-73
for additional indications, as well as clinical trial preparatory activities, and an expanded research and development team.
There
was also an increase in general and administrative expenses of $0.3 million, which is mostly related to an increase in salaries
and wages, as a result of an increase in staff.
Other
income (expenses)
The
net amount of other income for the quarter ended June 30, 2017 was $0.1 million as compared to $0.06 million for the comparable
quarter ended June 30, 2016. The largest reason for the increase in other income was a gain in respect of a negotiated
settlement of accounts payable.
Nine
months ended June 30, 2017 compared to nine months ended June 30, 2016
Operating
Expenses
Our
operating expenses for the nine months ended June 30, 2017 were $10.5 million which represents an increase of $1.5 million from
the comparable period in fiscal 2016. The increase in operating costs was primarily attributable to an increase in research and
development expenses of $2.9 million, attributable to expanded preclinical programs, clinical preparatory activities and an expanded
research and development team. The increase in research and development expenses was substantially offset by a decrease in general
and administrative expenses related to one-time charges incurred in the comparable period and increased legal fees in the comparable
period as a result of financing and related activities in that period.
Other
income (expenses)
The
net amount of other income for the nine months ended June 30, 2017 was $2.2 million as compared to $0.8 million for the nine months
ended June 30, 2016. The largest reason for the increase in other income was the receipt of $2.0 million in other income as part
of a research and development incentive program offered by the Australian Tax Office, which was granted in connection with eligible
expenditures from our clinical trials in Australia.
Liquidity
and Capital Resources
Working
Capital
|
|
June 30, 2017
|
|
|
September 30, 2016
|
|
Current Assets
|
|
$
|
24,854,334
|
|
|
$
|
9,446,285
|
|
Current Liabilities
|
|
|
1,454,571
|
|
|
|
3,190,525
|
|
Working Capital
|
|
$
|
23,399,763
|
|
|
$
|
6,255,760
|
|
At June 30, 2017, we had $24.8 million in cash, an increase of $15.6 million from September 30, 2016. The principal reason for
this increase is the $22.4 million in cash received from the issuance of shares of common stock under the Purchase Agreement.
In our second quarter, we also received approximately $2.0 million in other income as part of a research and development incentive
program offered by the Australian Tax Office. We intend to use the majority of our capital resources to complete the next clinical
trials for ANAVEX
TM
2-73, and to perform work necessary to prepare for further clinical development.
Cash
Flows
|
|
Nine months ended June 30,
|
|
|
|
2017
|
|
|
2016
|
|
Cash flows used in operating activities
|
|
$
|
(6,825,348
|
)
|
|
$
|
(7,373,556
|
)
|
Cash flows from financing activities
|
|
|
22,431,958
|
|
|
|
1,809,620
|
|
Increase (decrease) in cash during the period
|
|
$
|
15,606,610
|
|
|
$
|
(5,563,936
|
)
|
Cash
flow used in operating activities
Cash
used in operating activities for the nine-month period ended June 30, 2017 was $6.8 million, compared to $7.4 million during the
nine-month period ended June 30, 2016. The principal reason for this decrease in cash used from operating activities in the current
period is the receipt of $2.0 million in research and development incentive income during our second quarter, compared to $0.6
million in the comparable nine-month period.
Cash
flow provided by financing activities
Cash
provided by financing activities for the period ended June 30, 2017 was $22.4 million, attributable to cash received from the
issuance of 5,951,229 common shares at various market prices under the Purchase Agreement.
In
the comparable period ended June 30, 2016, cash provided by financing activities amounted to $1.8 million, mostly attributable
to cash received pursuant to the exercise of outstanding share purchase warrants, and cash received from the issuance of common
shares under a purchase agreement with Lincoln Park dated July 5, 2013, which is no longer in effect.
Other
Financing
On
October 21, 2015, we entered into the Purchase Agreement) with Lincoln Park, pursuant to which Lincoln Park committed to purchase
up to $50.0 million of our common stock. Concurrently with the execution of the Purchase Agreement, we issued 179,598 shares of
our common stock to Lincoln Park as a fee for its commitment to purchase shares of our common stock under the Purchase Agreement.
The shares that may be sold pursuant to the Purchase Agreement may be sold by us to Lincoln Park at our discretion from time to
time over a 36-month period ending September 6, 2019, the date the Securities and Exchange Commission (the “SEC”)
declared effective the related registration statement. As of June 30, 2017, an amount of $26.2 million remained available under
the Purchase Agreement.
We
may direct Lincoln Park, at our sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of our 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 $2.0 million. The purchase price of shares of common stock related to the financing are based
on the then prevailing market prices of such shares at the time of sales, as described in the Purchase Agreement.
Other
than our rights related to the Lincoln Park financing, 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 we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to delay or scale down some or all of our research and
development activities or perhaps even cease the operation of our business.
We
expect that we will be able to continue to fund our operations through the next 12 months using existing cash on hand, the sale
of shares of common stock under the Purchase Agreement, and through other equity financing in the future. If we raise additional
financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining commercial loans,
assuming those loans would be available, will increase our liabilities and future cash commitments.
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.
Contractual
Obligations
The
following table summarizes our contractual obligations as of June 30, 2017, excluding amounts related to uncertain tax positions,
funding commitments, contingent development, and regulatory and commercial milestone payments:
Contractual
Obligations
|
|
Payments
Due by Period
|
|
|
|
Total
|
|
|
Less
than 1
year
|
|
|
1-3
years
|
|
|
4 -
5
years
|
|
|
After
5
years
|
|
Long-Term Debt
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Capital Lease Obligations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Operating
Leases
|
|
$
|
196,330
|
|
|
$
|
112,189
|
|
|
$
|
84,141
|
|
|
|
—
|
|
|
|
—
|
|
Unconditional
Purchase Obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Other
Long-Term Obligations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
Contractual Cash Obligations
|
|
$
|
196,330
|
|
|
$
|
112,189
|
|
|
$
|
84,141
|
|
|
|
—
|
|
|
|
—
|
|
Application
of Critical Accounting Policies
Our
financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United
States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management’s application of
accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following
aspects of our financial statements is critical to an understanding of our financial statements.
We
base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual
results may vary from our estimates due to changes in circumstances, weather, politics, global economics, mechanical problems,
general business conditions and other factors. Our significant estimates are related to the valuation of warrants and options.
There
are accounting policies that we believe are significant to the presentation of our financial statements. The most significant
of these accounting policies relates to the accounting for our research and development expenses and stock-based compensation
expense and derivative liabilities.
Research
and Development Expenses
Research
and developments costs are expensed as incurred. These expenses are comprised of the costs of our proprietary research and development
efforts, including salaries, facilities costs, overhead costs and other related expenses as well as costs incurred in connection
with third-party collaboration efforts. Milestone payments made by us to third parties are expensed when the specific milestone
has been achieved.
In
addition, we incur expenses in respect of the acquisition of intellectual property relating to patents and trademarks. The probability
of success and length of time to developing commercial applications of the drugs subject to the acquired patents and trademarks
is difficult to determine and numerous risks and uncertainties exist with respect to the timely completion of the development
projects. There is no assurance the acquired patents and trademarks will ever be successfully commercialized. Due to these risks
and uncertainties, we expense the acquisition of patents and trademarks.
Stock-based
Compensation
We
account for all stock-based payments and awards under the fair value based method.
Stock-based
payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments
issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees
is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting
period of the award and in the same manner as if we had paid cash instead of paying with or using equity based instruments. The
cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date is measured and
recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over
the contractual term.
We
account for the granting of share purchase options to employees using the fair value method whereby all awards to employees will
be recorded at fair value on the date of the grant. The fair value of all share purchase options are expensed over their vesting
period with a corresponding increase to additional capital surplus. Upon exercise of share purchase options, the consideration
paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase
to share capital.
We
use the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of the grant. Option
pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions
can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single
measure of the fair value of our share purchase options.
Recent
Accounting Pronouncements
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
our 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 our 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 our
financial condition, results of operations and cash flows.
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. We are
currently evaluating the impact this guidance will have on our 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. We are currently evaluating the impact this
guidance will have on our financial condition, results of operations and cash flows.
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 is not expected to have a material
effect on the our consolidated financial statements.
In
May 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”)
No. 2017-09, “Compensation–Stock Compensation (Topic 718): Scope of Modification Accounting,” clarifying when
a change to the terms or conditions of a share-based payment award must be accounted for as a modification. The new guidance requires
modification accounting if the fair value, vesting condition or the classification of the award is not the same immediately before
and after a change to the terms and conditions of the award. The new guidance is effective for the Company on a prospective basis
beginning on October 1, 2018, with early adoption permitted. The Company is currently evaluating the impact this guidance will
have on its financial condition, results of operations and cash flows.
Other
than noted above, we do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our
results of operations, financial position or cash flow.