UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

[X]

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

For the fiscal year endedSeptember 30, 20142017

[   ]

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

For the transition period from ________________ to ______________________________ to________________

Commission file number:000-51652001-37606

ANAVEX LIFE SCIENCES CORP.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code1-844-689-3939

Securities registered under Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

(Title of class)

Indicate by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes [   ]      No [X]

Indicate by checkmark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.
Yes [   ]      No [X]

Indicate by checkmark whether the registrant has (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes [X]      No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X]      No [   ]

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [   ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes [   ]      No [X]

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter: $14,865,420$163,478,217 based on a price of $0.45$4.90 per share, being the closing price of the registrant’s common stock on March 31, 2014.2016.

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date 54,684,90544,220,833 issued and outstanding as of December 15, 2014.8, 2017.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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TABLE OF CONTENTS

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Forward Looking Statements.

This Annual Report on Form 10-K includes forward-looking statements. All statements other than statements of historical facts contained in this Annual Report on Form 10-K, 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,“continue,” “anticipate,” “intend,” “expect”“expect,” “should,” “forecast,” “could,” “suggest,” “plan,” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements include, without limitation, statements regarding 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. regarding: 

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, or FDA, and other regulatory authorities and financial trends that we believe may affect our financial condition, results of operations, business strategy, preclinical and clinical trials and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions including without limitation the risks described in “Risk Factors” in Part I, Item 1A of this Annual Report on Form 10-K. These risks are not exhaustive. Other sections of this Annual Report on Form 10-K 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, and Canada, we assume no obligation to update or supplement forward-looking statements.

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

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PART I

ITEM 1. BUSINESS

We are

Anavex Life Sciences Corp. 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)(“CNS”) diseases, pain and various types of cancer. Our lead compoundscompound, ANAVEX^®2-73, and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept), areis being developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other central nervous system (CNS) diseases.diseases, including rare diseases, such as Rett syndrome, a severe neurological disorder caused by mutations in the X-linked gene MECP2 (methyl-CpG-binding protein 2).

In December 2014November 2016, a Phase 2a clinical trial, consisting of PART A and PART B, which lasted a total of 57 weeks, was initiatedcompleted for ANAVEX^®2-73 which is being evaluated for the treatment ofin mild-to-moderate Alzheimer’s disease. Thepatients. This open-label randomized trial ismet both primary and secondary endpoints, and was designed to assess the safety and exploratory efficacy of ANAVEX^®2-73 alone as well as in combination with donepezil (ANAVEX PLUS) in patients with mild to moderate Alzheimer’s disease.32 patients. ANAVEX^®2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and to reverse the pathological hallmarks observed in Alzheimer’s disease. In October 2017, we presented pharmacokinetic (PK) and pharmacodynamic (PD) data from its positive Phase 2a study, which established a concentration-effect relationship between ANAVEX^®2-73 showed no serious adverse eventsand study measurements. These measures obtained from all patients who participated in the entire 57 weeks include exploratory cognitive and functional scores as well as biomarker signals of brain activity. Additionally, ANAVEX^®2-73 activity appears to be enhanced by its active metabolite (ANAVEX19-144), which also targets the sigma-1 receptor and has a previously performedhalf-life approximately twice as long as the parent molecule.

In March 2016, we received approval from the Ethics Committee in Australia to extend the Phase 1 study. 2a clinical trial, which had been requested by patients and their caregivers. The trial extension allows participants who completed the 52-week PART B of the study to roll-over into a new trial and continue taking ANAVEX^®2-73 for an additional 104 weeks, providing an opportunity to gather extended safety data. The trial is independent of our planned larger Phase 2/3 double-blind, placebo-controlled study of ANAVEX^®2-73 in Alzheimer’s disease.

In pre-clinical studies,February 2016, we presented positive preclinical data for ANAVEX^®2-73 in Rett syndrome, a rare neurodevelopmental disease. The study was funded by the International Rett Syndrome Foundation (the “Rettsyndrome.org foundation”). In January 2017, we were awarded a financial grant from the Rettsyndrome.org foundation of a minimum of $0.6 million towards covering the costs of a planned U.S. multicenter Phase 2 clinical trial of ANAVEX^®2-73 for the treatment of Rett syndrome. The Phase 2 trial is scheduled to begin following the FDA’s approval of the Company’s investigational new drug (IND) application and will be a randomized, double blind, placebo-controlled study of ANAVEX^®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.

In September 2016, we presented positive preclinical data for ANAVEX^®2-73 in Parkinson’s disease, which demonstrated anti-amnesicsignificant improvements on all measures: behavioral, histopathological, and neuroprotective propertiesneuroinflammatory endpoints. The study was funded by the Michael J Fox Foundation. Additional data was announced in various animal models includingOctober 2017 from the transgenic mouse model Tg2576.for experimental parkinsonism. The data presented indicates that ANAVEX^®2-73 induces robust neurorestoration in experimental parkinsonism. The encouraging results we have gathered in this model, coupled with the favorable profile of this compound in the Alzheimer’s disease trial, support the notion that ANAVEX^®2-73 is a promising clinical candidate drug for Parkinson’s disease.

We intend to identify and initiate discussions with potential commercial partners inwithin 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, both of neurodegenerative nature, including Alzheimer’s disease, as well as of neurodevelopmental nature, like Rett syndrome, a rare 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 2-73

ANAVEX^®2-73

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

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Based on the results of pre-clinical testing, we initiated and completed a Phase 1 single ascending dose (SAD) clinical trial of ANAVEX^®2-73 in 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 (ECG) parameters. ANAVEX^®2-73 was well tolerated below the 55-60 mg dose with only mild adverse events in some subjects. Observed adverse events at doses above the maximum tolerated single dose included headache and dizziness, which were moderate in severity and reversible. These side effects are often seen with drugs that target central nervous system (CNS)CNS conditions, including AD.

The ANAVEX^®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 that has conducted several Alzheimer’s disease studies, and the Technical University of Dresden.

ANAVEX PLUS

ANAVEX PLUS,In December 2014, a combinationPhase 2a clinical trial was initiated for ANAVEX^®2-73, which is being evaluated for the treatment of Alzheimer’s disease. The open-label randomized trial was designed to assess the safety and exploratory efficacy of ANAVEX^®2-73 in 32 patients with mild-to-moderate Alzheimer’s disease. ANAVEX® 2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and to reverse the pathological hallmarks observed in Alzheimer’s disease.

The Phase 2a 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^®2-73 in Alzheimer’s patients, with most receiving also donepezil, (Aricept®)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^®2-73 continued to demonstrate a favorable adverse event (AE) 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 AE 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.

Through 57 weeks, Alzheimer’s patients taking a daily oral dose between 10mg and 50mg of ANAVEX^®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^®2-73 throughout the 57-week study, continued significant improvements from baseline of cognitive, functional and behavioral scores in a group of patients were observed, respectively. This data was analyzed using refined mathematical modeling methods in conjunction with the detailed pharmacokinetic (PK) information.

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^®2-73 was observed. This correlation was positive with all measured scores (MMSE, ADCS-ADL, Cogstate, HAM-D and EEG/ERP).

ANAVEX^®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^®2-73 as a potential novel combinationprospective platform drug for other neurodegenerative diseases beyond Alzheimer’s disease. Aricept® (donepezil) is now generic.as well as neurodevelopmental diseases, more specifically, Parkinson’s disease, epilepsy, Rett syndrome, Angelman syndrome and Fragile X syndrome. ANAVEX^®2-73 showeddemonstrated significant improvements in combination with donepezil an unexpected and clear synergic effectall of memory improvement by up to 80%these indications in the respective preclinical animal models. A patent application was filed

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. We are currently in preparation for a Phase 2 clinical trial for the treatment of Parkinson’s disease.

For epilepsy, data demonstrates both significant and dose related improvement in the USreduction of seizures, as well as significant synergy with each of three generations of epilepsy drugs currently on the market.

In Rett syndrome, administration of ANAVEX^®2-73 resulted in both significant and dose related improvements in an array of behavioral paradigms in the MECP2 HET Rett syndrome disease model. In addition, in a further experiment sponsored by the Rettsyndrome.org foundation, ANAVEX®2-73 was evaluated in automatic visual response and respiration tests in 7-month old mice, an age at which advanced pathology is evident. Vehicle-treated MECP2 mice demonstrated fewer automatic visual responses than wild-type mice. Treatment with ANAVEX^®2-73 for four weeks significantly increased the automatic visual response in the MECP2 Rett syndrome disease mouse.

We have filed an investigational new drug application, or IND, for ANAVEX®2-73 for the combinationtreatment of donepezilRett syndrome and are currently in preparation for a Phase 2 clinical trial. The IND might not be approved by the FDA, or it may be delayed or put on clinical hold or partial hold, or additional preclinical studies may be required.

In May 2017, we announced new preclinical data for ANAVEX^®2-73 in the neurodevelopmental disorders Angelman syndrome and if granted would give patent protection at least until 2033.

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

Preclinical data presented also indicates that ANAVEX^®2-73 demonstrates protective effects of mitochondrial enzyme complexes during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative and neurodevelopmental diseases. In May 2016 and June 2016, the FDA granted Orphan Drug Designation to ANAVEX^®2-73 for the treatment of Rett syndrome and infantile spasms, respectively. 

Additionally, in October 2017 we presented additional data from a preclinical study on ANAVEX^®2-73 related to multiple sclerosis. Data presented indicates that ANAVEX^®2-73 may promote remyelination in multiple sclerosis disease. Further, data also demonstrates that ANAVEX^®2-73 provides protection for oligodendrocytes (“OL’s”) and oligodendrocyte precursor cells (“OPC’s”), as well as central nervous system neurons in addition to helping repair by increasing OPC proliferation and maturation in tissue culture.

ANAVEX PLUS showed an anticipated ADAS-Cog response of 7 points at 12 weeks and 5.5 points at 26 weeks, which represents more than 2x the ADAS-Cog of donepezil alone.3-71

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'sAlzheimer’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'sAlzheimer’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'sAlzheimer’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 the rate of cognitive deficit, amyloid beta pathology and inflammation with the administration of ANAVEX 3-71. In April 2016, the FDA granted Orphan Drug Designation to ANAVEX 3-71 for the treatment of Frontotemporal dementia.

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 mitochondrial enzyme complexes 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.impairs cell viability. In addition, in animal models, ANAVEX 1-41 prevented the expression of caspase-3, an enzyme that plays a key role in apoptosis (programmed cell death) and loss of cells in the hippocampus, the part of the brain that regulates learning, emotion and memory. These activities involve both muscarinic and sigma-1 receptor systems through a novel mechanism of action.

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

ANAVEX 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.potential. It has also been shown to selectively kill human cancer cells without affecting normal/healthy cells and also to significantly suppress tumor growth in immune-deficient mice models. Scientific publications describe sigma receptor ligands positively, highlightinghighlight 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 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 2014, an estimated 5.2 million Americans are suffering from Alzheimer’s disease. The Alzheimer’s Association® reports that by 2025, 7.1 million Americans will be afflicted by the disease, a 40 percent increase from currently affected patients. Medications on the market today treat only the symptoms of AD 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.

• Depression - Depression is a major cause of morbidity worldwide according to the World Health Organization (WHO). 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. Our market research leads us to believe that the worldwide market for pharmaceutical treatment of depression exceeds $11 billion annually.

• 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 generations anti-epileptic drugs. Decision Resources, one of the world’s leading research and advisory firms for pharmaceutical and healthcare issues, finds that the epilepsy market will increase from $2.9 billion in 2011 to nearly$3.7 billion in 2016.
  including:

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• 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. Our market research leads us to believe the worldwide market for pharmaceutical treatment of neuropathic pain exceeds $5 billion annually.

  Central Nervous System Diseases

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  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.

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  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.

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  Rett syndrome - Rett syndrome is a rare X-linked genetic neurological and developmental disorder that affects the way the brain develops, including protein transcription, which is altered and as a result leads to severe disruptions in neuronal homeostasis. It is considered a rare, progressive neurodevelopmental disorder and is caused by a single mutation in the methyl-CpG-binding protein 2 (MECP2) gene. Because males have a different chromosome combination from females, boys who have the genetic MECP2 mutation are affected in devastating ways. Most of them die before birth or in early infancy. For females who survive infancy, Rett syndrome leads to severe impairments, affecting nearly every aspect of the child’s life; severe mental retardation, their ability to speak, walk and eat, sleeping problems, seizures and even the ability to breathe easily. Rett syndrome affects approximately 1 in every 10,000-15,000 females.

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  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.

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  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.

  
  
  
• 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 from about $900 million in 2012 to $4.4 billion by 2022.
  
  
• Prostate

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

  Cancer – 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 from $8.1 billion in 2012 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. Our market research leads us to believe that the market for the pharmaceutical treatment of pancreatic cancer will exceed $1.2 billion by 2015.

Competition

The pharmaceutical industry is intensely competitive.

At this time, we view our competition ascompetitors are other biomedical development companies that are trying to discover and develop compounds to be used in the treatment of Alzheimer’s disease and other CNS diseases, and those companies already doing so. Those companies include Prana BiotechnologyBiogen (NASDAQ:BIIB), Axovant Sciences Ltd. (NASDAQ:PRAN)(NYSE: AXON), Perrigo Company PLCPlc (NYSE:PRGO), Pfizer Inc. (NYSE:PFE), Actavis Plc.Allergan Plc (NYSE:ACT)AGN), Novartis AG (NYSE:NVS), GlaxoSmithKline PLCPlc (NYSE:GSK), Merck & Co. Inc. (NYSE:MRK), Eli Lilly & Co. (NYSE: LLY), Johnson & Johnson (NYSE:JNJ) and Roche Holding AG (VTX:ROG). For additional discussion of the risks related to competition, see Item 1A “Risk Factors.”

Each of our competitors have greater capital resources, larger overall research and development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory approval, and pharmaceutical product manufacturing and marketing than we do. With these additional resources, our competitors will be able to respond to the rapid and significant technological changes in the biotechnology and pharmaceutical industries faster than we can. Our future success will depend in large part on our ability to acquire funding for our research and development. To continue to acquire funding for our research and development, we will likely have to show progress toward our goals and we will eventually be expected to develop a compound that may result in a transaction with another pharmaceutical company

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Patents, Trademarks and Intellectual Property

Anavex holds one issuedownership or exclusive rights to four U.S. patentpatents and fivenine U.S. or PCT patent applications with various international counterpart applications.applications, all of which relate to drug candidates and methods associated therewith. The most recent U.S. patent application was filed October 20, 2014. Anavex is awaiting formalin September 2017. This patent, documents fromentitled “ANAVEX®2-73 and certain anticholinesterase inhibitors composition and method for neuroprotection” claims a co-inventor ascomposition of matter of ANAVEX®2-73 directed to twoa novel and synergistic neuroprotective compound combined with donepezil and other cholinesterase inhibitors.  The issued patent offers exclusive protection through June, 2034. In addition, we also own a U.S. patent and Continuation in Part (“CiP”) entitled “Bicyclic Heterocyclic Spiro Compounds” for ANAVEX 3-71 with patent protection until January, 2030 and U.S. Patent “Sigma Receptors Ligands With Anti-Apoptotic and/or Proapoptotic Properties, Over Cellular Mechanisms Exhibiting Prototypical Cytoprotective and also Anticancer Activity” covering method of use of a compound related to ANAVEX®2-73, with patent protection until February, 2029. We also own other patent applications covering manufacturing processes, formulations and seeking one assignment fromuses that may provide additional protection of the same co-inventor to an application assigned to Anavex by another co-inventor. respective product or product candidate. 

We regard patents and other intellectual property rights as corporate assets. Accordingly, we attempt to optimize the value of intellectual property in developing our business strategy including the selective development, protection, and exploitation of our intellectual property rights.

In addition to filings made with intellectual property organizations,authorities, we protect our intellectual property and confidential information by means of carefully considered processes of communication and the sharing of information, and by the use of confidentiality and non-disclosure agreements and provisions for the same in contractor’s agreements. While no agreement offers absolute protection, such agreements provide some form of recourse in the event of disclosure, or anticipated disclosure.

Our intellectual property position, like that of many biomedical companies, is uncertain and involves complex legal and technical questions for which important legal principles are unresolved. We may file additional patent applications in the United States, or in other jurisdictions for further inventions. We may not be successful in obtaining critical claims or in protecting our potential drug compounds or processes. Even if we do obtain patents, they may not adequately protect the technology we own or have licensed. In addition, others may challenge, seek to invalidate, infringe or circumvent any patents we own or license, and rights we receive under those patents may not provide competitive advantages to us. Further, the manufacture, use or sale of our potential drug compounds may infringe the patent rights of others

Our success will also depend in part on our ability to commercialize our compounds without infringing the proprietary rights of others. We have not conducted extensive freedom of use patent searches and no assurance can be given that patents do not exist or could not be filed which would have an adverse effect on our ability to market our technology or maintain our competitive position with respectFor more information regarding challenges to our technology. If our compoundsexisting or other subject matter are claimed under other existing United States or otherfuture patents, or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may be required to obtain licenses from such companies in order to develop, manufacture or market our technology. There can be no assurances that we would be able to obtain such licenses or that such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the failure to either develop a commercially viable alternative or obtain such licenses could result in delays in marketing all of our potential drug compounds based on our drug technology or the inability to proceed with the development, manufacture or sale of potential drug compounds requiring such licenses, which could have a material adverse effect on our business, financial condition and results of operations. If we defend ourselves against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease our research and development of our technology.see Item 1A “Risk Factors.”

Government Approval

Regulation by governmental authorities in the United States and foreign countries is a significant factor in the development, manufacture, and expected marketing of our potential drug compounds and in potential future research and development activities. The nature and extent to which such regulation will apply to us will vary depending on the nature of any potential drug compounds developed. We anticipate that all of our potential drug compounds will require regulatory approval by governmental agencies prior to commercialization.

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In particular, human therapeutic products are subject to rigorous non-clinical and clinical testing and other approval procedures of the FDA and similar regulatory authorities in other countries. Various federal statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage, and record-keeping related to such products and their marketing. The process of obtaining these approvals and the subsequent compliance with the appropriate federal statutes and regulations requires substantial time and financial resources. Any failure by us or our collaboratorsFor more information regarding the risks related to obtain, or any delay in obtaining regulatory approval could adversely affect the marketing of any potential drug compounds developed by us, our ability to receive product revenues, and our liquidity and capital resources.government approvals, see Item 1A “Risk Factors.”

The steps ordinarily required before a new drug may be marketed in the United States, which are similar to steps required in most other countries, include:

• non-clinical laboratory tests, non-clinical studies in animals, formulation studies and the submission to the FDA of an investigational new drug application;
• adequate and well-controlled clinical trials to establish the safety and efficacy of the drug;
• the submission of a new drug application or biologic license application to the FDA; and
• FDA review and approval of the new drug application or biologics license application.

Non-clinical tests include laboratory evaluation of potential drug compound chemistry, formulation and toxicity, as well as animal studies. The results of non-clinical testing are submitted to the FDA as part of an investigational new drug application.IND. A 30-day waiting period after the filing of each investigational new drug applicationIND is required prior to commencement of clinical testing in humans. At any time during the 30-day period or at any time thereafter, the FDA may halt proposed or ongoing clinical trials until the FDA authorizes trials under specified terms. The investigational new drug application process may be extremely costly and substantially delay the development of our potential drug compounds. Moreover, positive results of non-clinical tests will not necessarily indicate positive results in subsequent clinical trials. The FDA may require additional animal testing after an initial investigational new drug applicationIND is approved and prior to Phase III trials.

Clinical trials to support new drug applicationsNDAs are typically conducted in three sequential phases, although the phases may overlap. During Phase I, clinical trials are conducted with a small number of subjects to assess metabolism, pharmacokinetics, and pharmacological actions and safety, including side effects associated with increasing doses. Phase II usually involves studies in a limited patient population to assess the efficacy of the drug in specific, targeted indications; assess dosage tolerance and optimal dosage; and identify possible adverse effects and safety risks.

If a compound is found to be potentially effective and to have an acceptable safety profile in Phase I and II evaluations, Phase III trials are undertaken to further demonstrate clinical efficacy and to further test for safety within an expanded patient population at geographically dispersed clinical trial sites.

After successful completion of the required clinical trials, a new drug applicationNDA is generally submitted. The FDA may request additional information before accepting the new drug applicationNDA for filing, in which case the new drug applicationNDA must be resubmitted with the additional information. Once the submission has been accepted for filing, the FDA reviews the new drug applicationNDA and responds to the applicant. The FDA’s requests for additional information or clarification often significantly extends the review process. The FDA may refer the new drug applicationNDA to an appropriate advisory committee for review, evaluation, and recommendation as to whether the new drug applicationNDA should be approved, although the FDA is not bound by the recommendation of an advisory committee.

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Under the United States Orphan Drug Act, a sponsor may request that the FDA designate a drug intended to treat a “rare disease or condition” as an “orphan drug.” A “rare disease or condition” is one which affects less than 200,000 people in the United States, or which affects more than 200,000 people, but for which the cost of developing and making available the product is not expected to be recovered from sales of the product in the United States. Upon the approval of the first NDA or BLA for a drug designated as an orphan drug for a specified indication, the sponsor of that NDA or BLA is entitled to seven years of exclusive marketing rights in the United States unless the sponsor cannot assure the availability of sufficient quantities to meet the needs of persons with the disease. However, orphan drug status is particular to the approved indication and does not prevent another company from seeking approval of an off-patent drug that has other labeled indications that are not under orphan or other exclusivities. Orphan drugs may also be eligible for federal income tax credits for costs associated with the drugs’ development. In order to increase the development and marketing of drugs for rare disorders, regulatory bodies outside the United States have enacted regulations similar to the Orphan Drug Act.

Sales outside the United States of potential drug compounds we develop will also be subject to foreign regulatory requirements governing human clinical trials and marketing for drugs. The requirements vary widely from country to country, but typically the registration and approval process takes several years and requires significant resources. In most cases, if the FDA has not approved a potential drug compound for sale in the United States, the potential drug compound may be exported for sale outside of the United States, only if it has been approved in any one of the following: the European Union, Canada, Australia, New Zealand, Japan, Israel, Switzerland and South Africa. There are specific FDA regulations that govern this process.

Research and Development Expenses

Historically, a significant portion of our operating expenses has related to research and development. See “Financialour Consolidated Financial Statements and Supplementary Data” ofcontained elsewhere in this Annual Report for costs and expenses related to research and development, and other financial information for fiscal years 20142017, 2016 and 2013.2015.

Scientific Advisors

We are advised by scientists and physicians with experience relevant to our Company and our product candidates. In the past twelve months, our advisors included Dr. Michael Gold,Drs Harald Hampel, MD, PhD, Jacqueline French, MD, John Harrison, Ph.D., Dr,PhD, Ottavio Arancio, Dr.MD, Norman Relkin, Ph.D., Ph.D.,MD, PhD, Corinne Lasmezas, PhD, Tangui Nicolas Maurice, Ph.D.,PhD, Abraham Fisher, Ph.D., Dr.PhD, Paul Aisen, and Dr.MD, Jeffrey Cummings.Cummings, MD, Tanya Simuni, MD, Daniel Weintraub, MD.

Officers

One of our directors is engaged as an officer-employee of the Company serving in the capacity of president, secretary, treasurer, chief executive officer and chief financial officer.

Employees

We currently have four (4)ten full-time employees, and we retain several independent contractors on an as-needed basis. We believe that we have good relations with our employees.

Available Information

Our internet website address is www.anavex.com. Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to section 13(a) or 15(d) of the Exchange Act are available free of charge through our website. We include our website address in this report only as an inactive textual reference and do not intend it to be an active link to our website. The contents of our website are not incorporated into this report. 

ITEM 1 A.1A. RISK FACTORS

In addition to other information in this Annual Report on Form 10-K, the following risk factors should be carefully considered in evaluating our business because such factors may have a significant impact on our business, operating results, liquidity and financial condition. As a result of the risk factors set forth below, actual results could differ materially from those projected in any forward-looking statements. Additional risks and uncertainties not presently known to us, or that we currently consider to be immaterial, may also impact our business, operating results, liquidity and financial condition. If any such risks occur, our business, operating results, liquidity and financial condition could be materially affected in an adverse manner. Under such circumstances, the trading price of our securities could decline, and you may lose all or part of your investment.

Risks Related to our Company

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We have had a history of losses and no revenue, which raise substantial doubt about our ability to continue as a going concern.

Since inception on January 23, 2004 through September 30, 2014,2017, we have an accumulated deficit of $52,573,325.$91,478,558. We can offer no assurance that we will ever operate profitably or that we will generate positive cash flow in the future. To date, we have not generated any revenues from our operations. Our history of losses and no revenues raise substantial doubt about our ability to continue as a going concern. As a result, our management expects the business to continue to experience negative cash flowflows for the foreseeable future and cannot predict when, if ever, our business might become profitable. We will need to raise additional funds, and such funds may not be available on commercially acceptable terms, if at all. If we are unable to raise funds on acceptable terms, we may not be able to execute our business plan, take advantage of future opportunities, or respond to competitive pressures or unanticipated requirements. This may seriously harm our business, financial condition and results of operations.

We are a clinicalan early stage biopharmaceuticalpharmaceutical research and development company and may never be able to successfully develop marketable products or generate any revenue. We have a very limited relevant operating history upon which an evaluation of our performance and prospects can be made. There is no assurance that our future operations will result in profits. If we cannot generate sufficient revenues, we may suspend or cease operations.

We are an early development stage company and have not generated any revenues to date and have no operating history. All of our potential drug compounds are in the concept stage or early clinical development stage. Moreover, we cannot be certain that our research and development efforts will be successful or, if successful, that our potential drug compounds will ever be approved for sales to pharmaceutical companies or generate commercial revenues. We have no relevant operating history upon which an evaluation of our performance and prospects can be made. We are subject to all of the business risks associated with a new enterprise, including, but not limited to, risks of unforeseen capital requirements, failure of potential drug compounds either in non-clinical testing or in clinical trials, failure to establish business relationships and competitive disadvantages against larger and more established companies. If we fail to become profitable, we may suspend or cease operations.

We will need additional funding and may be unable to raise additional capital when needed, which would force us to delay, reduce or eliminate our research and development activities.

We will need to raise additional funding and the current economic conditions may have a negative impact on our ability to raise additional needed capital on terms that are favorable to our Company or at all. We may not be able to generate significant revenues for several years, if at all. Until we can generate significant revenues, if ever, we expect to satisfy our future cash needs through equity or debt financing. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are not available, we may be required to delay, reduce the scope of, or eliminate one or more of our research and development activities.

Risks Related to our Business

Even if we are able to develop our potential drug compounds, we may not be able to receive regulatory approval, or if approved, we may not be able to generate significant revenues or successfully commercialize our products, which will adversely affect our financial results and financial condition and we will have to delay or terminate some or all of our research and development plans which may force us to cease operations.

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All of our potential drug compounds will require extensive additional research and development, including non-clinical testing and clinical trials, as well as regulatory approvals, before we can market them. In particular, human therapeutic products are subject to rigorous non-clinical and clinical testing and other approval procedures of the FDA and similar regulatory authorities in other countries. Various federal statutes and regulations also govern or influence testing, manufacturing, safety, labeling, storage, and record-keeping related to such products and their marketing. We cannot predict if or when any of the potential drug compounds we intend to develop will be approved for marketing. There are many reasons that we may fail in our efforts to develop our potential drug compounds. These include:

• the possibility that non-clinical testing or clinical trials may show that our potential drug compounds are ineffective and/or cause harmful side effects;
• our potential drug compounds may prove to be too expensive to manufacture or administer to patients;
• our potential drug compounds may fail to receive necessary regulatory approvals from the United States Food and Drug Administration or foreign regulatory authorities in a timely manner, or at all;
• even if our potential drug compounds are approved, we may not be able to produce them in commercial quantities or at reasonable costs;
• even if our potential drug compounds are approved, they may not achieve commercial acceptance;
• regulatory or governmental authorities may apply restrictions to any of our potential drug compounds, which could adversely affect their commercial success; and
• the proprietary rights of other parties may prevent us or our potential collaborative partners from marketing our potential drug compounds.

If we fail to develop our potential drug compounds, our financial results and financial condition will be adversely affected, we will have to delay or terminate some or all of our research and development plans and may be forced to cease operations.

Our research and development plans will require substantial additional future funding which could impact our operationaloperations and financial condition. Without the required additional funds, we will likely cease operations.

It will take several years before we are able tocan develop potentially marketable products, if at all. Our research and development plans will require substantial additional capital, arising from costs to:

• conduct research, non-clinical testing and human studies;
• establish pilot scale and commercial scale manufacturing processes and facilities; and
• establish and develop quality control, regulatory, marketing, sales, finance and administrative capabilities to support these programs.

Our future operating and capital needs will depend on many factors, including:

• the pace of scientific progress in our research and development programs and the magnitude of these programs;
• the scope and results of pre-clinical testing and human studies;
• the time and costs involved in obtaining regulatory approvals;
• the time and costs involved in preparing, filing, prosecuting, securing, maintaining and enforcing patents;
• competing technological and market developments;
• our ability to establish additional collaborations;
• changes in our existing collaborations;
• the cost of manufacturing scale-up; and

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• the effectiveness of our commercialization activities.

We base our outlook regarding the need for funds on many uncertain variables. Such uncertainties include the success of our research initiatives, regulatory approvals, the timing of events outside our direct control such as negotiations with potential strategic partners and other factors. Any of these uncertain events can significantly change our cash requirements as they determine such one-time events as the receipt or payment of major milestones and other payments.

Additional funds will be required to support our operations and if we are unable to obtain them on favorable terms, we may be required to cease or reduce further research and development of our drug product programs, sell some or all of our intellectual property, merge with another entity or cease operations.

If we fail to demonstrate efficacy in our non-clinical studies and clinical trials our future business prospects, financial condition and operating results will be materially adversely affected.

The success of our research and development efforts will be greatly dependent upon our ability to demonstrate potential drug compound efficacy in non-clinical studies, as well as in clinical trials. Non-clinical studies involve testing potential drug compounds in appropriate non-human disease models to demonstrate efficacy and safety. Regulatory agencies evaluate these data carefully before they will approve clinical testing in humans. If certain non-clinical data reveals potential safety issues or the results are inconsistent with an expectation of the potential drug compound’s efficacy in humans, the regulatory agencies may require additional more rigorous testing before allowing human clinical trials. This additional testing will increase program expenses and extend timelines. We may decide to suspend further testing on our potential drug compounds if, in the judgment of our management and advisors, the non-clinical test results do not support further development.

Moreover, success in non-clinical testing and early clinical trials does not ensure that later clinical trials will be successful, and we cannot be sure that the results of later clinical trials will replicate the results of prior clinical trials and non-clinical testing. The clinical trial process may fail to demonstrate that our potential drug compounds are safe for humans and effective for indicated uses. This failure would cause us to abandon a drug candidate and may delay development of other potential drug compounds. Any delay in, or termination of, our non-clinical testing or clinical trials will delay the filing of an investigational new drug applicationIND and new drug applicationNDA with the Food and Drug Administration or the equivalent applications with pharmaceutical regulatory authorities outside the United States and, ultimately, our ability to commercialize our potential drug compounds and generate product revenues. In addition, we expect that our early clinical trials will involve small patient populations. Because of the small sample size, the results of these early clinical trials may not be indicative of future results. Also, the IND process may be extremely costly and may substantially delay the development of our potential drug compounds. Moreover, positive results of non-clinical tests will not necessarily indicate positive results in subsequent clinical trials.  

Following successful non-clinical testing, potential drug compounds will need to be tested in a clinical development program to provide data on safety and efficacy prior to becoming eligible for product approval and licensure by regulatory agencies. From the first human trial through to regulatory approval can take many years and 10-12 years is not unusual for certain compounds.

If any of our future clinical development potential drug compounds become the subject of problems, our ability to sustain our development programs will become critically compromised. For example, efficacy or safety concerns may arise, whether or not justified, that could lead to the suspension or termination of our clinical programs. Examples of problems that could arise include, among others:

• efficacy or safety concerns with the potential drug compounds, even if not justified;

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• manufacturing difficulties or concerns;
• regulatory proceedings subjecting the potential drug compounds to potential recall;
• publicity affecting doctor prescription or patient use of the potential drug compounds;
• pressure from competitive products; or
• introduction of more effective treatments.

Each clinical phase is designed to test attributes of the drug and problems that might result in the termination of the entire clinical plan can be revealed at any time throughout the overall clinical program. The failure to demonstrate efficacy in our clinical trials would have a material adverse effect on our future business prospects, financial condition and operating results.

If we do not obtain the support of qualified scientific collaborators, our revenue, growth and profitability will likely be limited, which would have a material adverse effect on our business.

We will need to establish relationships with leading scientists and research institutions. We believe that such relationships are pivotal to establishing products using our technologies as a standard of care for various indications. Additionally, although in discussion, there is no assurance that our current research partners will continue to work with us or that we will be able to attract additional research partners. If we are not able to establish scientific relationships to assist in our research and development, we may not be able to successfully develop our potential drug compounds. If this happens, our business will be adversely affected.

We may not be able to develop, market or generate sales of our products to the extent anticipated. Our business may fail and investors could lose all of their investment in our Company.

Assuming that we are successful in developing our potential drug compounds and receiving regulatory clearances to market our products, our ability to successfully penetrate the market and generate sales of those products may be limited by a number of factors, including the following:

• If our competitors receive regulatory approvals for and begin marketing similar products in the United States, the European Union, Japan and other territories before we do, greater awareness of their products as compared to ours will cause our competitive position to suffer;
• Information from our competitors or the academic community indicating that current products or new products are more effective or offer compelling other benefits than our future products could impede our market penetration or decrease our future market share; and
• The pricing and reimbursement environment for our future products, as well as pricing and reimbursement decisions by our competitors and by payers, may have an effect on our revenues.

If this happens, our business will be adversely affected.

None of our potential drug compounds may reach the commercial market for a number of reasons and our business may fail.

Successful research and development of pharmaceutical products is high risk. Most products and development candidates fail to reach the market. Our success depends on the discovery of new drug compounds that we can commercialize. It is possible that our products may never reach the market for a number of reasons. They may be found ineffective or may cause harmful side-effects during non-clinical testing or clinical trials or fail to receive necessary regulatory approvals. We may find that certain products cannot be manufactured at a commercial scale and, therefore, they may not be economical to produce. Our potential products could also fail to achieve market acceptance or be precluded from commercialization by proprietary rights of third parties. Our patents, patent applications, trademarks and other intellectual property may be challenged, and this may delay or prohibit us from effectively commercializing our products. Furthermore, we do not expect our potential drug compounds to be commercially available for a number of years, if at all. If none of our potential drug compounds reach the commercial market, our business will likely fail and investors will lose all of their investment in our Company. If this happens, our business will be adversely affected.

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If our competitors succeed in developing products and technologies that are more effective or with a better profile than our own, or if scientific developments change our understanding of the potential scope and utility of our potential products, then our technologies and future products may be rendered undesirable or obsolete.

We face significant competition from industry participants that are pursuing technologies in similar disease states to those that we are pursuing and are developing pharmaceutical products that are competitive with our products. Nearly all of our industry competitors have greater capital resources, larger overall research and development staffs and facilities, and a longer history in drug discovery and development, obtaining regulatory approval and pharmaceutical product manufacturing and marketing than we do. With these additional resources, our competitors may be able to respond to the rapid and significant technological changes in the biotechnology and pharmaceutical industries faster than we can. Our future success will depend in large part on our ability to maintain a competitive position with respect to these technologies. Rapid technological development, as well as new scientific developments, may result in our products becoming obsolete before we can recover any of the expenses incurred to develop them. For example, changes in our understanding of the appropriate population of patients who should be treated with a targeted therapy like we are developing may limit the drug’s market potential if it is subsequently demonstrated that only certain subsets of patients should be treated with the targeted therapy.

Our reliance on third parties, such as university laboratories, contract manufacturing organizations and contract or clinical research organizations, may result in delays in completing, or a failure to complete, non-clinical testing or clinical trials if they fail to perform under our agreements with them.

In the course of product development, we may engage university laboratories, other biotechnology companies or contract or clinical manufacturing organizations to manufacture drug material for us to be used in non-clinical and clinical testing and contract research organizations to conduct and manage non-clinical and clinical studies. If we engage these organizations to help us with our non-clinical and clinical programs, many important aspects of this process have been and will be out of our direct control. If any of these organizations we may engage in the future fail to perform their obligations under our agreements with them or fail to perform non-clinical testing and/or clinical trials in a satisfactory manner, we may face delays in completing our clinical trials, as well as commercialization of any of our potential drug compounds. Furthermore, any loss or delay in obtaining contracts with such entities may also delay the completion of our clinical trials, regulatory filings and the potential market approval of our potential drug compounds.

If we fail to compete successfully with respect to partnering, licensing, mergers, acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to research and develop our potential drug compounds.

Our competitors compete with us to attract established biotechnology and pharmaceutical companies or organizations for partnering, licensing, mergers, acquisitions, joint ventures or other collaborations. Collaborations include contracting with academic research institutions for the performance of specific scientific testing. If our competitors successfully enter into partnering arrangements or license agreements with academic research institutions, we will then be precluded from pursuing those specific opportunities. Since each of these opportunities is unique, we may not be able to find a substitute. Other companies have already begun many drug development programs, which may target diseases that we are also targeting, and have already entered into partnering and licensing arrangements with academic research institutions, reducing the pool of available opportunities.

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Universities and public and private research institutions also compete with us. While these organizations primarily have educational or basic research objectives, they may develop proprietary technology and acquire patent applications and patents that we may need for the development of our potential drug compounds. In some instances, we will attempt to license this proprietary technology, if available. These licenses may not be available to us on acceptable terms, if at all. If we are unable to compete successfully with respect to acquisitions, joint venture and other collaboration opportunities, we may be limited in our ability to develop new products.

The use of any of our products in clinical trials may expose us to liability claims, which may cost us significant amounts of money to defend against or pay out, causing our business to suffer.

The nature of our business exposes us to potential liability risks inherent in the testing, manufacturing and marketing of our products. We currently have one drug compound in clinical trials, however, when any of our products enter into clinical trials or become marketed products, they could potentially harm people or allegedly harm people possibly subjecting us to costly and damaging product liability claims. Some of the patients who participate in clinical trials are already ill when they enter a trial or may intentionally or unintentionally fail to meet the exclusion criteria. The waivers we obtain may not be enforceable and may not protect us from liability or the costs of product liability litigation. Although we intend to obtain product liability insurance which we believe is adequate, we are subject to the risk that our insurance will not be sufficient to cover claims. The insurance costs along with the defense or payment of liabilities above the amount of coverage could cost us significant amounts of money and management distraction from other elements of the business, causing our business to suffer.

The patent positions of biopharmaceutical products and processes are complex and uncertain and we may not be able to protect our patentedpatents or other intellectual property. If we cannot protect this property, we may be prevented from using it, or our competitors may use it, and our business could suffer significant harm. Also, the time and money we spend on acquiring and enforcing patents and other intellectual property will reduce the time and money we have available for our research and development, possibly resulting in a slow down or cessation of our research and development.

We hold ownership or exclusive rights to onefour issued U.S. patent and fivenine U.S. or PCT patent applications with various international counterpart applications, all of which relate to drug candidates. We are seeking the remaining rights as to one application,candidates and declarations from the same co-inventor. However, neithermethods associated therewith. Neither patents nor patent applications ensure the protection of our intellectual property for a number of reasons, including the following:

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It is also unclear whether our trade secrets are adequately protected. While we use reasonable efforts to protect our trade secrets, our employees or consultants may unintentionally or willfully disclose our information to competitors. Enforcing a claim that someone illegally obtained and is using our trade secrets, like patent litigation, is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Our competitors may independently develop equivalent knowledge, methods and know-how.

We may also support and collaborate in research conducted by government organizations, hospitals, universities or other educational institutions. These research partners may be unable or unwilling to grant us exclusive rights to technology or products derived from these collaborations prior to entering into the relationship.collaborations.

If we do not obtain required intellectual property licenses or rights, we could encounter delays in our product development efforts while we attempt to design around other patents or even be prohibited from developing, manufacturing or selling potential drug compounds requiring these rights or licenses. There is also a risk that legal disputes may arise as to the rights to technology or potential drug compounds developed in collaboration with other parties.parties, all with attendant risk, distraction, expense, and lack of predictability.

We may be subject to patent infringement actions.

We may file additional patent applications in the United States, or in other jurisdictions for further inventions. We may not be successful in obtaining critical claims or in protecting our potential drug compounds or processes. Even if we do obtain patents, they may not adequately protect the technology we own or have licensed. In addition, others may challenge, seek to invalidate, infringe or circumvent any patents we own or license, and rights we receive under those patents may not provide competitive advantages to us. Further, the manufacture, use or sale of our potential drug compounds may infringe the patent rights of others.

Our substantial debt and other financial obligations could impair our financial condition andsuccess will also depend in part on our ability to fulfillcommercialize our debt obligations. Any refinancingcompounds without infringing the proprietary rights of this substantial debtothers. We have not conducted extensive freedom of use patent searches and no assurance can be given that patents do not exist or could be at significantly higher interest rates.

As of September 30, 2014, we had total liabilities of $7,160,876 and accumulated deficit of $52,573,325. Our substantial indebtedness and other current financial obligations and any that we may become a party to in the future could:

• impairissued which would have an adverse effect on our ability to market our technology or maintain our competitive position with respect to our technology. If our compounds or other subject matter are claimed under other United States or other patents or are otherwise protected by third party proprietary rights, we may be subject to infringement actions. In such event, we may challenge the validity of such patents or other proprietary rights or we may be required to obtain financinglicenses from such companies in order to develop, manufacture or market our technology. There can be no assurances that we would be successful in a challenge or be able to obtain such licenses or that such licenses, if available, could be obtained on commercially reasonable terms. Furthermore, the future for working capital, capital expenditures,failure to succeed in a challenge, develop a commercially viable alternative or general corporate purposes;obtain needed licenses could be materially adverse. Adverse consequences include delays in marketing some or all of our potential drug compounds based on our drug technology or the inability to proceed with the development, manufacture or sale of potential drug compounds requiring such licenses. If we defend ourselves against charges of patent infringement or to protect our proprietary rights against third parties, substantial costs will be incurred regardless of whether we are successful. Such proceedings are typically protracted with no certainty of success. An adverse outcome could subject us to significant liabilities to third parties and force us to curtail or cease our research and development of our technology.

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• If we are unable to safeguard against security breaches with respect to our information systems our business may be adversely affected.

  In the course of our business, we gather, transmit and retain confidential information through our information systems. Although we endeavor to protect confidential information through the implementation of security technologies, processes and procedures, it is possible that an individual or group could defeat security measures and access sensitive information about our business and employees. Any misappropriation, loss or other unauthorized disclosure of confidential information gathered, stored or used by us could have a material impact on the operation of our business, including damaging our reputation with our employees, third parties and investors. We could also incur significant costs implementing additional security measures and organizational changes, implementing additional protection technologies, training employees or engaging consultants. In addition, we could incur increased litigation as a result of any potential cyber-security breach. We are not aware that we have experienced any material misappropriation, loss or other unauthorized disclosure of confidential or personally identifiable information as a result of a cyber-security breach or other act, however, a cyber-security breach or other act and/or disruption to our information technology systems could have a material adverse effect on us if we fail to comply with financial and affirmative and restrictive covenants in debt agreements and an event of default occurs as a result of a failure that is not cured or waived;

• require us to dedicate a substantial portion of our cash flow for interest payments on our indebtedness and other financial obligations, thereby reducing the availability of our cash flow to fund working capital and capital expenditures;
• limit our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and place us at a competitive disadvantage compared to our competitors that have proportionally
• less debt.

If we are unable to meet our debt service obligations and otherprospects, financial obligations, we could be forced to restructurecondition or refinance our indebtedness and other financial transactions, seek additional equity capital, sell our assets or curtail our operations. We might then be unable to obtain such financing or capital or sell our assets on satisfactory terms, if at all. Any refinancing of our indebtedness could be at significantly higher interest rates, and/or incur significant transaction fees.

In the past we have experienced material weaknesses in our internal control over financial reporting, which if continued, could impair our financial condition.

As reported here in this Annual Report on Form 10-K, our management concluded that our internal control over financial reporting was not effective as of September 30, 2014. Such ineffectiveness was due to material weaknesses regarding our control environment (the maintenance of sufficient personnel with an appropriate level of accounting knowledge, experience, and training in the applicable of GAAP commensurate with our financial reporting requirements, and an insufficient segregation of duties in our finance and accounting functions due to limited personnel), a lack of monitoring controls to determine the adequacy or our internal control over financial reporting and related policies, and we did not establish and maintain effective controls to ensure the correct application of GAAP related to equity transactions. Due to our size and nature, segregation of all conflicting duties has not always been possible and may not be economically feasible. We endeavor to take appropriate and reasonable steps to make improvements to remediate these deficiencies, and intend to consider the results of our remediation efforts and related testing as part of our year-end 2015 assessment of the effectiveness of our internal control over financial reporting in light of our strategic plan and make any changes that our management deems appropriate. If we have continued material weaknesses in our internal financial reporting, our financial condition could be impaired.operations.

Risks Related to our Common Stock

A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations and would severely dilute existing or future investors if we were to raise funds at lower prices.

A prolonged decline in the price of our common stock could result in a reduction in our ability to raise capital. Because our operations have been financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our continued operations. Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a significant negative effect on our business plans and operations, including our ability to develop new products and continue our current operations. If our stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations. We believe the following factors could cause the market price of our common stock to continue to fluctuate widely and could cause our common stock to trade at a price below the price at which you purchase your shares of common stock:

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• actual or anticipated variations in our quarterly operating results;
• announcements of new services, products, acquisitions or strategic relationships by us or our competitors;
• changes in accounting treatments or principles;
• changes in earnings estimates by securities analysts and in analyst recommendations; and
• general political, economic, regulatory and market conditions.

The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors. Any failure to meet these expectations, even if minor, could materially adversely affect the market price of our common stock.

If we issue additional shares of common stock in the future, it will result in the dilution of our existing stockholders.

Our articles of incorporation authorize the issuance of 150,000,000100,000,000 shares of common stock. Our board of directors has the authority to issue additional shares of common stock up to the authorized capital stated in the articles of incorporation. Our board of directors may choose to issue some or all of such shares of common stock to acquire one or more businesses or to provide additional financing in the future. The issuance of any such shares of common stock will result in a reduction of the book value or market price of the outstanding shares of our common stock. If we do issue any such additional shares of common stock, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders. Further, any such issuance may result in a change of control of our corporation.

Trading of our common stock may be volatile and sporadic, which could depress the market price of our common stock and make it difficult for our stockholders to resell their shares.

There is currently a limited market for our common stock and the volume of our common stock traded on any day may vary significantly from one period to another. Our common stock is quoted on OTC Market’s OTCQX. Trading in our stock quoted on OTC Market’s OTCQX is often thin and characterized by wide fluctuations in trading prices, due to many factors that may have little to do with our operations or business prospects. The availability of buyers and sellers represented by this volatility could lead to a market price for our common stock that is unrelated to operating performance. Moreover, OTC Market’s OTCQX is not a stock exchange, and trading of securities quoted on OTC Market’s OTCQX is often more sporadic than the trading of securities listed on a stock exchange like NASDAQ. There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for our stockholders to resell their stock.

Our stock is classed as a “penny stock.” Trading of our stock may be restricted by the Securities and Exchange Commission’s penny stock regulations which may limit a stockholder’s ability to buy and sell our stock.

Our stock is a penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which generally defines “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors.” The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 (excluding the value of the primary residence of such individuals) or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the Securities and Exchange Commission which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

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The Financial Industry Regulatory Authority sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority or FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for shares of our common stock.

The sale or issuance of our common stock to Lincoln Park may cause dilution and the sale of the shares of common stock acquired by Lincoln Park, or the perception that such sales may occur, could cause the price of our common stock to fallfall..

On July 5, 2013,October 21, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant to which Lincoln Park committed to purchase up to $10,000,000$50,000,000 of our common stock. Concurrently with the execution of the Purchase Agreement, we issued 341,858agreed to issue 179,598 shares of our common stock to Lincoln Park as a commitment fee for its commitmentand shall issue up to purchase89,799 shares ofpro rata, when and if, Lincoln Park purchases at our common stock underdiscretion the Purchase Agreement.$50,000,000 aggregate commitment. The purchase shares that may be sold pursuant to the Purchase Agreement may beare sold by us to Lincoln Park at our discretion from time to time over a 25-month period commencing after the SEC declared effective the related registration statement.36-month period. The purchase price for the shares that we may sell to Lincoln Park under the Purchase Agreement will fluctuate based on the price of our common stock. Depending on market liquidity at the time, sales of such shares may cause the trading price of our common stock to fall.

We generally have the right to control the timing and amount of any sales of our shares to Lincoln Park, except that, pursuant to the terms of our agreements with Lincoln Park, we would be unable to sell shares to Lincoln Park if and when the closing sale price of our common stock is below $0.50$3.00 per share, subject to adjustment as set forth in the Purchase Agreement. Additional sales of our common stock, if any, to Lincoln Park will depend upon market conditions and other factors to be determined by us. Lincoln Park may ultimately purchase all of the shares of our common stock that may be sold pursuant to the Purchase Agreement and, after it has acquired shares, Lincoln Park may sell all, some or none of those shares. Therefore, sales to Lincoln Park by us could result in substantial dilution to the interests of other holders of our common stock. Additionally, the sale of a substantial number of shares of our common stock to Lincoln Park, or the anticipation of such sales, could make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise wish to effect sales.

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The exercise or conversion of the Warrants and Debentures issued to Private Placement Investors and Placement Agent may cause dilution.

On March 13, 2014, we entered into a Securities Purchase Agreement (the “Securities PurchaseAgreement”) with the certain investors pursuant to which the Company agreed to sell, and the investors agreed to purchase, Senior Convertible Debentures due March 18, 2044 (the “Debentures”) in the aggregate principal amount of $10,000,000. In addition to the Debentures, we agreed to issue to the investors and the placement agent two (2) series of warrants representing the right to purchase up to an aggregate of 67,666,666 shares of the Company’s common stock (the “Warrants” and together with the Debentures, the “Securities”). The purchase and sale of the Securities was consummated on March 18, 2014, and resulted in gross proceeds to the Company in the amount of $10,000,000, before deducting agent fees and other transaction-related expenses. The exercise or conversion of the Securities could result in the dilution to the interests of other holders of our common stock.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2. PROPERTIES

We do not own any properties.real property. We maintain several offices of which the office at 7^th7th Floor, 51 West 52^nd52nd Street, New York, NY, USA which weis our main office. Our lease at a cost of $4,000costs are $10,500 per month. The lease is on a month to month basis. We believe our offices are suitable and adequate to operate our business from at this timenow as they and provide us with sufficient space to conduct our operations. We fully utilize our current premises.

ITEM 3. LEGAL PROCEEDINGS

We know of no material existing or pending legal proceedings, other than ordinary routine litigation incidental to our business, to which we areour company or our subsidiary is a party or of which any of our propertiestheir property is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities. We know ofThere are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder holding more than 5% of our shares, is aan adverse party adverse to our company or has a material interest adverse to our company.or our subsidiary’s interest.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market information

Our common stock is quoted on the OTCQXNASDAQ Stock Market LLC (“NASDAQ”) under the symbol “AVXL.”

The following table showscontains information about the quarterly range of high and low bid informationsale prices for our common stock over the fiscal quarters for the last two fiscal years as quoted on OTCQX. We obtained the following high and low bid information from the OTC-Markets. These over-the-counter market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions.NASDAQ. Investors should not rely on historical prices of our common stock as an indication of its future price performance. On December 15, 2014,8, 2017, the closing price of our common stock as reported by OTCQXNASDAQ was $0.19$3.69 per share.

Transfer Agent

Shares of our common stock are issued in registered form. The Nevada Agency and Trust Company, 50 West Liberty Street, Reno, Nevada (Telephone: (775) 322-0626; Facsimile: (775) 322-5623) is the registrar and transfer agent for shares of our common stock.

Holders of Common Stock

As of December 15, 2014,8, 2017, there were approximately 7954 holders of record of our common stock. As of such date, 54,684,905and 44,220,833 shares of our common stock were issued and outstanding.

Dividends

We have not paid any cash dividends on our common stock and have no intention of paying any dividends on the shares of our common stock. Our current policy is to retain earnings, if any, for use in our operations and in the development of our business. Our future dividend policy will be determined from time to time by our board of directors.

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Securities Authorized for Issuance under Equity Compensation Plans or Individual Compensation Arrangements

The following table summarizes certain information regarding our equity compensation plan or individual compensation arrangements as at September 30, 2014:2017:

Stock Option Plan

On April 17, 2007,September 18, 2015, our 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 our directors, adoptedofficers, employees and consultants. The approval of the 2007 Stock Option Plan. On May 25, 2007,2015 Plan was ratified by our stockholders ratified and approved the 2007 Stock Option Plan at the annual meeting of stockholders. As of September 30, 2014, 3,170,000 options have been granted to employees, directors, officers and consultantson May 6, 2016.

The maximum number of our company.common shares reserved for issue under the plan is 6,050,553 shares subject to adjustment in the event of a change of our 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 purpose of the 2007 Stock Option2015 Plan is to retain the services of valued key employees and consultants of our company and such other persons as will be select in accordance with the 2007 Stock Option2015 Plan, and to encourage such persons to acquire a greater proprietary interest in our company, thereby strengthening their incentive to achieve the objectives of the shareholders of our company, and to serve as an aid and inducement in the hiring of new employees and to provide an equity incentive to consultants.

On February 2, 2011 we amended

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, and restatedthe exercise price of each option shall be at least the fair market value on the grant date; provided, however, that in the event that a grantee owns more than 10% of our 2007common stock as of the date of grant, the exercise price of an option granted to such grantee that is intended to be an incentive stock option plan to increaseshall be not less than 110% of the numberfair market value on the date of shares authorized togrant. Stock options may be issuedgranted under the plan2015 Plan for an exercise period of up to 4,000,000.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.

Recent Sales of Unregistered Securities

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Since the beginning of our fiscal year ended September 30, 2014,2017, we have not sold any equity securities that were not registered under the Securities Act of 1933 that were not previously reported in a quarterly report on Form 10-Q or in a current report on Form 8-K.

PurchasesRepurchases of Equity Securities by Our Company and Affiliated Purchasers

None.

ITEM 6 SELECTED FINANCIAL DATA

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide information under this item.

ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the fiscal year ended September 30, 2014,2017, included elsewhere in this Annual Report on Form 10-K. The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contains “forward-looking statements”. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “may,” “should,” “forecast,” “could,” “expect,” “suggest,” “believe,” “anticipate,” “intend,” “plan,” or other similar words. The forward-looking statements contained in this Annual Report on Form 10-K involve a number of risks and uncertainties, many of which are outside of our control. Factors that could cause actual results to differ materially from projected results include, but are not limited to, those discussed in “Risk Factors” elsewhere in this Annual Report on Form 10-K. Readers are expressly advised to review and consider those Risk Factors, which include risks associated with (1) our ability to successfully conduct clinical and preclinical trials for our product candidates, (2) our ability to obtain required regulatory approvals to develop and market our product candidates, (3) our ability to raise additional capital on favorable terms, (4) our ability to execute our development plan on time and on budget, (5) our ability to obtain commercial partners, (6) our ability, whether alone or with commercial partners, to successfully commercialize any of our product candidates that may be approved for sale, and (7) our ability to identify and obtain additional product candidates. Although we believe that the assumptions underlying the forward-looking statements contained in this Annual Report on Form 10-K are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that such statements will be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations and share price is not necessarily indicative of future performance. Except as required by applicable laws including the securities laws of the United States and Canada, we disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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Our Business

We are

Anavex Life Sciences Corp. 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)(“CNS”) diseases, pain and various types of cancer. Our lead compoundscompound, ANAVEX^®2-73, and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept®) areis being developed to treat Alzheimer’s disease, Parkinson’s disease and potentially other central nervous system (CNS) diseases.diseases, including rare diseases, such as Rett syndrome.

In December 2014November 2016, a Phase 2a clinical trial, consisting of PART A and PART B, which lasted a total of 57 weeks, was initiatedcompleted for ANAVEX^®2-73 which is being evaluated for the treatment ofin mild-to-moderate Alzheimer’s disease. Thepatients. This open-label randomized trial ismet both primary and secondary endpoints, and was designed to assess the safety and exploratory efficacy of ANAVEX^®2-73 alone as well as in combination with donepezil (ANAVEX PLUS) in patients with mild to moderate Alzheimer’s disease.32 patients. ANAVEX^®2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain believed to restore cellular homeostasis and to reverse the pathological hallmarks observed in Alzheimer’s disease. In October 2017, we presented pharmacokinetic (PK) and pharmacodynamic (PD) data from its positive Phase 2a study, which established a concentration-effect relationship between ANAVEX^®2-73 showed no serious adverse eventsand study measurements. These measures obtained from all patients who participated in the full 57 weeks include exploratory cognitive and functional scores as well as biomarker signals of brain activity. Additionally, ANAVEX^®2-73 activity appears to be enhanced by its active metabolite (ANAVEX19-144), which also targets the sigma-1 receptor and has a previously performedhalf-life approximately twice as long as the parent molecule. 

In March 2016, we received approval from the Ethics Committee in Australia to extend the Phase 1 study. 2a clinical trial, which had been requested by patients and their caregivers.  The trial extension allows participants who completed the 52-week PART B of the study to roll-over into a new trial and continue taking ANAVEX^®2-73 for an additional 104 weeks, providing an opportunity to gather extended safety data.  The trial is independent of our planned larger Phase 2/3 double-blind, placebo-controlled study of ANAVEX^®2-73 in Alzheimer’s disease.

In pre-clinical studiesFebruary 2016, we presented positive preclinical data for ANAVEX^®2-73 in Rett syndrome, a rare neurodevelopmental disease. The study was funded by the Rettsyndrome.org foundation. In January 2017, we were awarded a financial grant from the Rettsyndrome.org foundation of a minimum of $0.6 million towards covering the costs of a planned U.S. multicenter Phase 2 clinical trial of ANAVEX^®2-73 for the treatment of Rett syndrome. The Phase 2 trial is scheduled to begin following the FDA’s approval of the Company’s IND application and will be a randomized, double blind, placebo-controlled study of ANAVEX^®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.

In September 2016, we presented positive preclinical data for ANAVEX^®2-73 in Parkinson’s disease, which demonstrated anti-amnesicsignificant improvements on all measures: behavioral, histopathological, and neuroprotective propertiesneuroinflammatory endpoints. The study was funded by the Michael J Fox Foundation. Additional data was announced in various animal models includingOctober 2017 from the transgenic mouse model Tg2576.for experimental parkinsonism which indicates that ANAVEX^®2-73 induces robust neurorestoration in experimental parkinsonism. The encouraging results gathered in this model, coupled with the favorable profile of the compound in the Alzheimer’s disease trial, support the notion that ANAVEX^®2-73 is a promising clinical candidate drug for Parkinson’s disease.

We intend to identify and initiate discussions with potential commercial partners inwithin 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.

Recent Corporate DevelopmentsFinancial Highlights

Since the commencement

We had cash and cash equivalents of our fourth quarter endedapproximately $27.4 million at September 30, 2014, we have experienced2017, compared to approximately $9.2 million at September 30, 2016. The increase in cash is primarily a result of the following significant corporate developments:

• On October 22, 2014, we entered into a Securitiessale of shares of common stock for aggregate proceeds of $27.3 million under the Purchase Agreement (the “Purchase Agreement”) withby and between us and Lincoln Park Capital Fund, LLC, or Lincoln Park, dated October 21, 2015, (the “Purchase Agreement”). During fiscal 2017 we also received $2.0 million in other income from the Australian Tax Office, as part of a long time investorgovernment sponsored research and development incentive program.

  Operating expenses in fiscal 2017 were approximately $15.7 million, compared to approximately $15.6 million in fiscal 2016 and $7.1 million in fiscal 2015. We incurred a decrease in general and administrative expenses of $3.3 million, primarily attributable to one-time compensation related charges incurred in fiscal 2016, as well as increased legal fees in that period as a result of financing and related activities. These decreases were largely offset by a $3.3 million increase in research and development expenses, attributable to clinical preparatory activities, expanded preclinical programs, and expanding our company, for an equity investment of $500,000 atresearch and development team.

  We expect our research and development expenses will continue to increase as a price of $0.25 per unit. Pursuant to the termsresult of the Purchase Agreement, we agreed to sell,planned ANAVEX®2-73 clinical studies for the treatment of Rett syndrome, Alzheimer’s disease and Lincoln Park agreed to purchase, 2,000,000 shares of common stock. In addition, we agreed to issue to Lincoln Park an aggregate of 4,000,000 stock purchase warrants, of which 2,000,000 are exercisable at $0.30 per share and 2,000,000 are exercisable at $0.42 per share, each for a period of five years, subject to adjustment for stock splits, combinations, and reclassification events.

• On November 3, 2014, we announced our Company has received regulatory approval fromParkinson’s disease, as well as the Ethics Committee in Australia to initiate a Phase 2a clinical trial extension and other auxiliary research and development activities. We continue to target potential research partners to further advance our pipeline compounds. 

  Net loss for fiscal 2017 was $13.5 million, or $0.33 per share, compared to a net loss of our proprietary compound, ANAVEX 2-73, as well as ANAVEX PLUS, the combinationapproximately $14.7 million, or $0.42 per share for fiscal 2016 and $12.1 million, or $0.65 per share for fiscal 2015.

  Results of ANAVEX 2-73 and donepezil (Aricept®). The approved Phase 2a clinical trial is the first study of ANAVEX 2-73 in Alzheimer’s patients.

• Effective as of December 12, 2014, our Company’s common stock began being quoted on the OTC Market Group’s OTCQX tier under the Company’s existing stock ticker “AVXL”. The OTCQX is the highest tier of the OTC Market Group’s trading marketplace.

RESULTS OF OPERATIONSOperations

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Revenue

We are in the development stage and have not earned any revenues since our inception on January 23, 2004. We are still in the development stage2004 and we do not anticipate earning any revenues until we can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.

Year ended September 30, 2017 compared to year ended September 30, 2016

Operating Expenses

Our operating expenses for fiscal 2017 were approximately $15.7 million, which was an increase of $0.1 million as compared to fiscal 2016. 

In fiscal 2017, our general and administrative expenses decreased by $3.3 million, or 39.9% compared to fiscal 2016 This decrease was mainly attributable to a decrease in one-time compensation related charges, including share based compensation charges, as well as a decrease in legal fees. The decrease in legal fees was a result of financing and reporting activities in fiscal 2016.

These decreases in general and administrative expenses were offset by an increase in research and development expenses. Our research and development expenses for fiscal 2017 were approximately $10.7 million as compared to approximately $7.3 million for fiscal 2016, which represents an increase of 47%. The increase was associated with expenditures incurred in preparation of our planned clinical studies for ANAVEX^®2-73, and an increase in preclinical activities for ANAVEX^®3-71 and ANAVEX^®1066. 

Salaries and wages, excluding share based compensation, decreased by $2.6 million, or 58%, in fiscal 2017 as a result of one-time charges incurred in fiscal 2016 associated with the vesting of restricted stock awards. We continue to expand our team with the addition of scientific staff and support staff. We incurred non-cash stock based compensation charges of $4.1 million, compared to $5.1 million during fiscal 2016, associated with the vesting of stock options to management, employees and consultants, as part of long term compensation packages. 

During fiscal 2017, our legal fees decreased to $0.6 million, from $1.3 million during fiscal 2016. This decrease was as a result of financing and SEC related activities during fiscal 2016 that did not recur in fiscal 2017.

Other income (expenses)

The aggregate amount in the other income for the year ended September 30, 2014 were $2,968,975, which represents an increase of $831,6082017, amounted to $2.3 million as compared to $2,137,367$0.9 million for the year ended September 30, 2013. 2016.

The largest reason for the increase in other income was the receipt during fiscal 2017 of $2.0 million in connection with a research and development incentive program offered by the Australian Tax Office, or the ATO, as compared to $0.6 million during fiscal 2016. This amount is granted by the ATO in relation to eligible expenditures incurred in Australia in respect of our clinical trials, and other auxiliary research, and is generally a function of expenditures incurred in Australia. In addition, we received a research grant from the Michael J. Fox Foundation, or the MJFF, to develop ANAVEX^®2-73 for the treatment of Parkinson’s disease. The MJFF research grant of $0.29 million was received over a period of two years to July 2017 and was recognized as income as the related expenditures were incurred. During each of the years ended September 30, 2017 and 2016, we recognized $0.14 million of this grant on our statement of operations.

Year ended September 30, 2016 compared to year ended September 30, 2015

Operating Expenses

Our operating expenses for fiscal 2016 were approximately $15.6 million which as an increase of 119.3% compared to approximately $7.1 million in fiscal 2015.

The increase was mainly attributable to (i) an increase in investor relations expenses and other professional fees and bonus payment as a result of our capital raising efforts related to a $10,000,000 convertible Debenture financing, which resulted in one-time compensation charges in the aggregate amount of $1,010,000, including a non-cash charge of $610,000 for the vesting of common stock under our President’s employment agreement and (ii) an increase in research and development activitiesexpenses, as well as an increase in the current year,salaries and wages, including clinical trial work,non-cash stock based compensation charges.

Our research and development expenses for fiscal 2016 were approximately $7.3 million as compared to approximately $2.3 million for fiscal 2015, which represents an increase of 219.3%. Our research and development expenses have increased significantly as a result of funding secured.an increase in expenses related to our Phase 2a clinical trial for ANAVEX^®2-73 for Alzheimer’s disease, which commenced in December 2014; and a significant increase in preclinical activities undertaken for ANAVEX^®2-73 for other CNS indications.

Salaries and wages increased as a result of our expanded team. In fiscal 2016, we incurred non-cash stock based compensation charges of $5.1 million associated with the vesting of stock options and restricted stock units issued to directors and officers, management and employees as part of long term compensation packages. In addition, we incurred other non-recurring compensation charges associated with the vesting of restricted stock awards to our CEO, in connection with the achievement of certain performance milestones stipulated in his 2013 employment agreement.

During fiscal 2016, we also incurred an increase in legal fees as a result of financing and SEC related activities.

Other income (expenses)

The aggregate amount in the other income (expense) for the year ended September 30, 2014,fiscal 2016, amounted to $(8,399,378)$0.9 million as compared to $(1,562,679)$(5.0) million for the comparable year ended September 30, 2013. 2015.

The largest singlereason for the increase in this lossother income was as a result of certain non-cash, non-operational accounting charges related to certain amendments toa $0.7 million in grant income received during the Debentures.

Generally accepted accounting principlesperiod. We received other income in the United States (US GAAP) accounting rules deemed the amendments to the termsamount of the Debentures to require extinguishment accounting to be applied to them. This resulted in a net non-cash, non-operational accounting charge being recorded in our consolidated statement of operations of $8,099,137, net of the recovery$0.6 million as part of a finance chargeresearch and development incentive program offered by the Australian government, in connection with eligible expenditures on our Phase 2a clinical trial, which was conducted in Australia. In addition, we received a research grant of $459,912, being$0.29 million from the total accrued liquidating damages owedMJFF to develop ANAVEX^® 2-73 for the holderstreatment of the convertible debentures at the date of the amendment, though these amounts were satisfied through the modification of the conversion price.

Further, we do not have a sufficient number of authorized and unissued shares of common stock available to satisfy the additional shares that could be issued under the terms of the Debentures. As a result, US GAAP accounting rules require that we account for such shares underlying the Debentures as derivative liabilities. It is the requirement of these accounting rules, that we re-measure derivative financial instruments to their respective fair values at each reporting period, with the changes in fair value being reported as a non-operating item on the consolidated statement of operations. Consequently, we were required to record non-cash, non-operational gains related to the change in the calculated value of derivative liabilities of $2,955,000 forParkinson’s disease. During the year ended September 30, 2014.

These accounting charges did not result in an actual cash impact2016, we recognized $0.14 million of this grant on our Company. Removing the effect of all financing related accelerated charges and adjustments to our consolidated statement of operations, resultsoperations.

In addition, there was a decrease in financing-related charges as a net lossresult of $(2,760,714), or $(0.09) per share, as shown below:the conversion of a majority of the remaining principal balance on outstanding convertible debentures during the third and fourth quarter of fiscal 2015.

23

Liquidity and Capital Resources

Working Capital

As of September 30, 2014,2017, we had $7,262,138$27.4 million in cash and cash equivalents, an increase of $6,917,064$18.3 million, from $9.2 million at September 30, 2013.2016. The principal reason for this increase is due tothe $27.3 million in cash received in respect offrom the issuance of shares of common stock under the DebenturesPurchase Agreement. In our second fiscal quarter, we also received approximately $2.0 million in other income as part of a research and development incentive program offered by the aggregate principal amount of $10,000,000 that were issued in the current year. We intend to use the funds from these Debentures to implement our plan of operation of researching and developing our compounds, the related patents and any further intellectual property we may acquire. ATO.

We intend to use the majority of our capital resources to complete the next clinical trialtrials for ANAVEX^®2-73, and ANAVEX PLUS, and to perform work necessary to prepare for further clinical development.

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Cash Flows

Cash flow used in operating activities

Our

There was a small decrease in cash used in operating activities for the year ended September 30, 2014 was $2,659,379of $0.2 million during fiscal 2017 as compared to $777,573 usedfiscal 2016. This decrease is primarily due to the increase in operating activities for the comparative year ended September 30, 2013. other income received during fiscal 2017, as described above.

The increase in cash used in operating activities during fiscal 2016 as compared to fiscal 2015 was primarily as a result of the increased net loss for the current periodresearch and development activities offset by a decrease in internal staffing costs, as more fully described above, and as a result of an increasenon-recurring tax payments made on behalf of a director and officer in corporate activities and research and development following the Debenture financing in March, 2014.accordance with a 2013 employment agreement.

Cash used in investing activities

Cash used in investing activities was $3,015 in the current year ended September 30, 2014. This is as a result of small equipment purchases in the current year.

Cash flow provided by financing activities

Our cash

Cash provided by financing activities for the year ended September 30, 2014fiscal 2017 was $9,579,458, mostly attributablerelated to cash received from the issuance of the Debentures in the aggregate principal amount of $10,000,000, less related fees and expenses of $788,712 incurred in connection with the closing of these Debentures. We also received cash from the issuance of common shares under the Purchase Agreement with Lincoln Park Capital Fund, LLC (described under Other Financing below).

In the comparative year ended September 30, 2013,Park. During fiscal 2017, we hadissued 7.1 million shares for gross proceeds of $27.3 million. During fiscal 2016, cash inflows of $1,111,285flows from financing activities also related to the exercise of outstanding share purchase warrants.

Cash provided by financing activities for fiscal 2015 was primarily attributable to cash received pursuant to the exercise of outstanding share purchase warrants and cash from the issuance of short term debt andcommon shares under a private placement equity financings.

Other Financing

Onpurchase agreement entered into with Lincoln Park on July 5, 2013, the Company entered into a Purchase Agreement (“Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuantpursuant to the Purchase Agreement,which Lincoln Park initially purchased 250,000 shares of the Company’sour common stock for $100,000. During the nine months ended June 30, 2014,$100,000 and we issued an aggregate of 402,510 shares of common stock under the Purchase Agreement, including 400,000 shares of common stock for an aggregate purchase price of $188,170 and 2,510 commitment shares.

The Company hashad the right, in itsour sole discretion over a 25-month period, to sell to Lincoln Park up to the additional aggregate commitment of $9.9 Millionmillion of shares of common stock. There are no upper limits

Other Financings

$50 Million Lincoln Park Purchase Agreement

On October 21, 2015, we entered into a Purchase Agreement (the “Purchase Agreement”) with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $50,000,000 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 and shall issue up to 89,799 shares pro rata, when and if Lincoln Park purchases, at our discretion, the $50,000,000 aggregate commitment. The purchase 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 commencing after the SEC declared effective the related registration statement.

We 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 per share pricemost recent purchase. The amount of a purchase may be increased under certain circumstances provided, however that Lincoln Park may pay toPark’s committed obligation under any single purchase such common stock. Furthermore, the Company controls the timing and amount of any future sales, if any,shall not exceed $2,000,000. The purchase price of shares of common stock to Lincoln Park except that, pursuantrelated to the termsfuture funding will be based on the then prevailing market prices of such shares at the Purchase Agreement, we would be unable to sell shares to Lincoln Park if and when the closing sale pricetime of our common stock is below $0.50 per share, subject to adjustmentsales as set forthdescribed in the Purchase Agreement. Lincoln Park has no right to require any sales and is obligated to purchase common stock as directed by the Company.

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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 for the next 12 months through existing cash on hand and through equity and debt financingsfinancing 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, willwould increase our liabilities and future cash commitments.

Contractual Obligations and Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely

The following table summarizes our contractual obligations as of September 30, 2017, excluding amounts related to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, resultsuncertain tax positions, funding commitments, contingent development, regulatory and commercial milestone payments:

Application of operations, liquidity, capital expenditures or capital resources that is material to our stockholders.Critical Accounting Policies

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 financials.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.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 into 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.

26

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. Compensation costs for stock-based payments with graded vesting are recognized on a straight-line basis. The cost of the stock-based payments to non-employees that isare 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.

Derivative Liabilities

From time to time, we may issue convertible promissory notes which include embedded conversion options which, dependent on their specific contractual terms, may be required to be accounted for as separate derivative liabilities. These liabilities are required to be measured at fair value. These instruments are then adjusted to reflect fair value at each period end. Any increase or decrease in the fair value is recorded in resultsFor a discussion of operations as change in fair value of derivative liabilities. In determining the appropriate fair value, we use the binomial pricing model because these instruments are not quoted on an active market.

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 binomial model does not necessarily provide a reliable single measure of the fair value of these instruments.

27

Recent Accounting Pronouncements

In June 2014, the FASB issued Accounting Standards Updated No. 2014-10, "Development Stage Entities” (“ASU 2014-10”) which removes the definition of a development stage entity from the Master Glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the update eliminates the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage. During the year ended September 30, 2014, we elected to early adopt ASU 2014-10. The adoption of this ASU allowed our company to remove the inception to date information and all references to development stage.

Recent Accounting Pronouncements Not Yet Adopted

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 amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. We are currently evaluating the impact this guidance 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 will explicitly require management to assess an entity’s ability to continue as a going concern, and to provide related footnote disclosure in certain circumstances. The new standard will be effective for all entities in the first annual period ending after December 15, 2016. We are currently evaluating the impact this guidance 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, 2016. 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 issuedrecent accounting pronouncements to have a significant impactand their possible effect on our results, of operations, financial position or cash flow.see Note 2(n) to our Consolidated Financial Statements found elsewhere in this Annual Report.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to a smaller reporting companyvariety of market risks, including interest rate risk and foreign currency exchange risk.

Interest Rate Risk

We invest a major portion of our cash surplus in bank deposits in the United States and, to a lesser extent, Australia. Since the bank deposits typically carry fixed interest rates, financial income over the holding period is not sensitive to changes in interest rates, but only the fair value of these instruments. However, our interest gains from future deposits could decline in the future as defined by Rule 12b-2a result of changes in the financial markets. In any event, given the historic low levels of the Securitiesinterest rate, we estimate that a decline in the interest rate we are currently receiving will not result in a material adverse effect to our business.

Foreign Currency Exchange ActRisk

A significant portion of 1934our expenditures, including clinical research expenses relate to our operations in Australia and a portion of our consultancy expenses are not requiredincurred in Euros. The cost of those expenses, as expressed in US dollars, is influenced by the exchange rate of these currencies against the US Dollar. If the US dollar declines in value in relation to provide information underthese currencies, it will become more expensive for us to fund our operations. A 10% change in exchange rate with the Australian dollar would result in less than a $10,000 impact on our expenses. To limit this item.risk, the Company holds minimal cash reserves in Australian Dollars and Euros.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

28

ANAVEXANAVEX LIFE SCIENCES CORP.

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2014 and 2013

(Stated in US Dollars)2017

Tel: 212-885-8000 Fax: 212-697-1299 www.bdo.com

100 Park Avenue New York, NY 10017

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Anavex Life Sciences Corp.

New York, New York

We have audited Anavex Life Sciences Corp.’s internal control over financial reporting as of September 30, 2017, based on criteria established inInternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Anavex Life Sciences Corp.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Item 9A, Management’s Report on Internal Control Over Financial Reporting”. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Anavex Life Sciences Corp. maintained, in all material respects, effective internal control over financial reporting as of September 30, 2017, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Anavex Life Sciences Corp. as of September 30, 2017 and 2016, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended September 30, 2017 and our report dated December 11, 2017 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

New York, New York

December 11, 2017

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Report of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Anavex Life Sciences Corp.

New York, NY

We have audited the accompanying consolidated balance sheets of Anavex Life Sciences Corp. as of September 30, 20142017 and 20132016 and the related consolidated statements of operations, cash flows, and changes in stockholders’ equity, (capital deficit)and cash flows for each of the twothree years in the period ended September 30, 2014.2017. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Anavex Life Sciences Corp. at September 30, 20142017 and 2013,2016, and the results of its operations and its cash flows for each of the twothree years in the period ended September 30, 20142017, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Anavex Life Sciences Corp.’s internal control over financial reporting as of September 30, 2017, based on criteria established inInternal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our report dated December 11, 2017 expressed an unqualified opinion thereon.

/s/ BDO USA, LLP

New York, NYNew York

December 29, 201411, 2017

F-1BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

ANAVEXLIFESCIENCESCORP.

CONSOLIDATED BALANCE SHEETS

September 30, 20142017 and 2013

SEE ACCOMPANYING NOTES2016

F-2

ANAVEXLIFESCIENCESCORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
for

For the years ended September 30, 20142017, 2016 and 2013

SEE ACCOMPANYING NOTES2015

F-3

ANAVEXLIFESCIENCESCORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
fortheyearsendedSeptember30,2014and2013

SEE ACCOMPANYING NOTES

F-4

ANAVEXLIFESCIENCESCORP.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (CAPITAL DEFICIT)
forFor the years ended September 30, 20142017, 2016 and 2013

SEE ACCOMPANYING NOTES2015

F-5

See Accompanying Notes to Consolidated Financial Statements

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY

For the years ended September 30, 2017, 2016 and 2015