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 ended September 30, 2015

 

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

For the transition period from ______________ to________________

 

Commission file number : 000-51652

 

ANAVEX LIFE SCIENCES CORP.

(Exact name of registrant as specified in its charter)

 

Nevada   98-0608404
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)
     
51 W 52 nd Street, 7 th Floor, New York, NY  USA   10019
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code 1-844-689-3939

 

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

Common Stock, $0.001 par value   NASDAQ Stock Market LLC
Title of each class   Name of each exchange on which registered

    

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.

 

Large accelerated filer       ¨   Accelerated filer     ¨
Non-accelerated filer        ¨ (Do not check if a smaller reporting
company)
Smaller reporting company    x

 

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: $12,504,130 based on a price of $0.84 per share, being the closing price of the registrant’s common stock on March 31, 2015.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date 34,601,173 issued and outstanding as of December 29, 2015.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

None.

 

 

 

 

TABLE OF CONTENTS

 

PART I 1
ITEM 1. BUSINESS 1
ITEM 1A. RISK FACTORS 7
ITEM 1B. UNRESOLVED STAFF COMMENTS 15
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 16
ITEM 4. MINE SAFETY DISCLOSURES 17
PART II 17
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 17
ITEM 6 SELECTED FINANCIAL DATA 19
ITEM 7 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION 19
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 25
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS 26
ITEM 9A. CONTROLS AND PROCEDURES 26
ITEM 9B OTHER INFORMATION 28
PART III 29
ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 29
ITEM 11. EXECUTIVE COMPENSATION 32
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 36
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 38
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 38
PART IV 40
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 40

 

  ii  

 

 

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,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements include, without limitation, statements regarding the anticipated start dates, durations and completion dates of our ongoing and future clinical studies, statements regarding the anticipated designs of our future clinical studies, statements regarding our anticipated future regulatory submissions and statements regarding our anticipated future cash position. We have based these forward-looking statements largely on our current expectations and projections about future events, including the responses we expect from the U.S. Food and Drug Administration, 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, 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.

 

  iii  

 

 

PART I

 

ITEM 1. BUSINESS

 

We are a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics for the treatment of neurodegenerative diseases including drug candidates to treat Alzheimer’s disease, other central nervous system (CNS) diseases, pain and various types of cancer. Our lead compounds ANAVEX 2-73 and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept), are being developed to treat Alzheimer’s disease and potentially other central nervous system (CNS) diseases.

 

In December 2014 a Phase 2a clinical trial was initiated for ANAVEX 2-73, which is being evaluated for the treatment of Alzheimer’s disease. The randomized trial is 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. ANAVEX 2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain and to reverse the pathological hallmarks observed in Alzheimer’s disease. ANAVEX 2-73 showed no serious adverse events in a previously performed Phase 1 study. In pre-clinical studies, ANAVEX 2-73 demonstrated anti-amnesic and neuroprotective properties in various animal models including the transgenic mouse model Tg2576.

 

We intend to identify and initiate discussions with potential partners in 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 pipeline includes one clinical drug candidate and several compounds in different stages of pre-clinical study.

 

Our proprietary SIGMACEPTOR™ Discovery Platform produced small molecule drug candidates with unique modes of action, based on our understanding of sigma receptors. Sigma receptors may be targets for therapeutics to combat many human diseases, including Alzheimer’s disease. When bound by the appropriate ligands, sigma receptors influence the functioning of multiple biochemical signals that are involved in the pathogenesis (origin or development) of disease.

 

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

 

ANAVEX 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.

 

  1  

 

 

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) 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.

 

In December 2014 a Phase 2a clinical trial was initiated for ANAVEX 2-73, which is being evaluated for the treatment of Alzheimer’s disease. The randomized trial is 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. ANAVEX 2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain and to reverse the pathological hallmarks observed in Alzheimer’s disease. ANAVEX 2-73 showed no serious adverse events in a previously performed Phase 1 study. In pre-clinical studies ANAVEX 2-73 demonstrated anti-amnesic and neuroprotective properties in various animal models including the transgenic mouse model Tg2576.

 

Initial analysis of Phase 2a data demonstrated that the study met the primary objective of safety as ANAVEX 2-73 was well tolerated and results were consistent with prior Phase 1 clinical trial data.  The secondary objectives were also met, with ANAVEX 2-73 showing cognitive improvement across all doses in all exploratory cognitive measurements, including the Cogstate battery, Mini Mental State Examination (MMSE), event-related potentials (ERP) and P300 tests, which consistently demonstrated improvements from baseline in the completed PART A portion of the study in 32 mild-to-moderate Alzheimer’s patients.

 

As well, recent preclinical data validates ANAVEX 2-73 as a prospective platform drug for other neurodegenerative diseases beyond Alzheimer’s, most specifically epilepsy. The data demonstrates significant improvement in the reduction of seizures relative to three generations of epilepsy drugs currently on the market, as well as significant synergy with each of these drugs.

 

ANAVEX PLUS

 

ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept®) is a potential novel combination drug for Alzheimer’s disease. Aricept® (donepezil) is now generic. ANAVEX 2-73 showed in combination with donepezil an unexpected and clear synergic effect of memory improvement by up to 80% in animal models. A patent application was filed in the US for the combination of donepezil and ANAVEX 2-73 and if granted would give patent protection at least until 2033.

 

In a humanized calibrated cortical network computer model the unexpected pre-clinical synergy between ANAVEX 2-73 and donepezil was confirmed and 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.

 

  2  

 

 

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 shown to enhance neuroprotection and cognition in Alzheimer's disease. ANAVEX 3-71 is a CNS-penetrable mono-therapy that bridges treatment of both cognitive impairments with disease modifications. It is highly effective in very small doses against the major Alzheimer's hallmarks in transgenic (3xTg-AD) mice, including cognitive deficits, amyloid and tau pathologies, and also has beneficial effects on inflammation and mitochondrial dysfunctions. ANAVEX 3-71 indicates extensive therapeutic advantages in Alzheimer's and other protein-aggregation-related diseases given its ability to enhance neuroprotection and cognition via sigma-1 receptor activation and M1 muscarinic allosteric modulation.

 

ANAVEX 1-41

 

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

 

ANAVEX 1037

 

ANAVEX 1037 is designed for the treatment of prostate cancer. It is a low molecular weight, synthetic compound exhibiting high affinity for sigma-1 receptors at nanomolar levels and moderate affinity for sigma-2 receptors and sodium channels at micromolar levels. In advanced pre-clinical studies, this compound revealed antitumor potential with no toxic side effects. It has also been shown to selectively kill human cancer cells without affecting normal/healthy cells and also to significantly suppress tumor growth in immune-deficient mice models. Scientific publications describe sigma receptor ligands positively, highlighting the possibility that these ligands may stop tumor growth and induce selective cell death in various tumor cell lines. Sigma receptors are highly expressed in different tumor cell types. Binding by appropriate sigma-1 and/or sigma-2 ligands can induce selective apoptosis. In addition, through tumor cell membrane reorganization and interactions with ion channels, our drug candidates may play an important role in inhibiting the processes of metastasis (spreading of cancer cells from the original site to other parts of the body), angiogenesis (the formation of new blood vessels) and tumor cell proliferation.

 

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.

 

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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. 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.

 

· 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.

 

· 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 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 in 2015.

 

Competition

 

The pharmaceutical industry is intensely competitive.

 

At this time, we view our competition as biomedical development companies that are trying to discover and develop compounds to be used in the treatment of Alzheimer’s disease, and those companies already doing so. Those companies include Prana Biotechnology Ltd. (NASDAQ:PRAN), Axovant Sciences Ltd. (NYSE: AXON), Perrigo Company PLC (NYSE:PRGO), Pfizer Inc. (NYSE:PFE), Actavis Plc. (NYSE:ACT), Novartis AG (NYSE:NVS), GlaxoSmithKline PLC (NYSE:GSK), Merck & Co. Inc. (NYSE:MRK), Eli Lilly & Co. (NYSE: LLY), Johnson & Johnson (NYSE:JNJ) and Roche Holding AG (VTX:ROG).

 

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.

 

  4  

 

 

Patents, Trademarks and Intellectual Property

 

Anavex holds three issued U.S. patent and six U.S. patent applications with various international counterpart applications. The most recent U.S. patent application was filed in July of 2015. 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, 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 respect to our technology. If our compounds or other subject matter are claimed under other existing 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 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.

 

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.

 

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 collaborators 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.

 

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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. A 30-day waiting period after the filing of each investigational new drug application 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 application is approved and prior to Phase III trials.

 

Clinical trials to support new drug applications 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 application is generally submitted. The FDA may request additional information before accepting the new drug application for filing, in which case the new drug application must be resubmitted with the additional information. Once the submission has been accepted for filing, the FDA reviews the new drug application 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 application to an appropriate advisory committee for review, evaluation, and recommendation as to whether the new drug application should be approved, although the FDA is not bound by the recommendation of an advisory committee.

 

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.

 

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Research and Development Expenses

 

Historically, a significant portion of our operating expenses has related to research and development. See “Financial Statements and Supplementary Data” of this Annual Report for costs and expenses related to research and development, and other financial information for fiscal years 2015 and 2014.

 

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. Harald Hampel, Ph.D., Dr. Jacqueline French, Dr. Michael Gold, John Harrison, Ph.D., Dr, Ottavio Arancio, Dr. Norman Relkin, Ph.D., Corinne Lasmezas, Ph.D., Tangui Nicolas Maurice, Ph.D., Abraham Fisher, Ph.D., Dr. Paul Aisen, and Dr. Jeffrey Cummings.

 

Officers

 

One of our directors is engaged as an officer-employee of the Company serving in the capacity of Chief Executive Officer, president, secretary, and treasurer.

 

Employees

 

We currently have seven (7) full-time employees, and we retain several independent contractors on an as-needed basis. We believe that we have good relations with our employees.

 

ITEM 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

 

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, 2015, we have an accumulated deficit of $63,281,455. 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 flow 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.

 

  7  

 

 

We are an early development stage pharmaceutical 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.

 

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. 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.

 

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

 

It will take several years before we are able to 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
· 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 application and new drug application 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.

 

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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;
· 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.

 

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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.

 

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.

 

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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.

 

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 patented 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 rights to three issued U.S. patent and six U.S. patent applications with various international counterpart applications, all of which relate to drug candidates. Neither patents nor patent applications ensure the protection of our intellectual property for a number of reasons, including the following:

 

1. Competitors may interfere with our patenting process in a variety of ways. Competitors may claim that they invented the claimed invention prior to us. Competitors may also claim that we are infringing their patents and restrict our freedom to operate. Competitors may also contest our patents and patent applications, if issued, by showing in various patent offices that, among other reasons, the patented subject matter was not original, was not novel or was obvious. In litigation, a competitor could claim that our patents and patent applications are not valid or enforceable for a number of reasons. If a court agrees, we would lose some or all of our patent protection. As a company, we have no meaningful experience with competitors interfering with our patents or patent applications.
2. Because of the time, money and effort involved in obtaining and enforcing patents, our management may spend less time and resources on developing potential drug compounds than they otherwise would, which could increase our operating expenses and delay product programs.

 

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3. Issuance of a patent may not provide much practical protection. If we receive a patent of narrow scope, then it may be easier for competitors to design products that do not infringe our patent(s).
4.

Our primary patent applications for ANAVEX 2-73 and the combination of ANAVEX 2-73 with donepezil are pending only in the United States Patent and Trademark Office. The lack of patent protection in global markets may inhibit our ability to advance our compounds and may make Anavex less attractive to potential partners.

5. Defending a patent lawsuit takes significant time and can be very expensive.
6. If a court decides that our drug compound, its method of manufacture or use, infringes on the competitor’s patent, we may have to pay substantial damages for infringement.
7. A court may prohibit us from making, selling or licensing the potential drug compound unless the patent holder grants a license. A patent holder is not required to grant a license. If a license is available, we may have to pay substantial royalties or grant cross licenses to our patents, and the license terms may be unacceptable.
8. Redesigning our potential drug compounds so that they do not infringe on other patents may not be possible or could require substantial funds and time.

 

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.

 

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 disputes may arise as to the rights to technology or potential drug compounds developed in collaboration with other parties.

 

Our substantial debt and other financial obligations could impair our financial condition and our ability to fulfill our debt obligations. Any refinancing of this substantial debt could be at significantly higher interest rates.

 

As of September 30, 2015, we had total liabilities of $2,660,910 and accumulated deficit of $63,281,455. Our substantial indebtedness and other current financial obligations and any that we may become a party to in the future could:

 

· impair our ability to obtain financing in the future for working capital, capital expenditures, or general corporate purposes;
· 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.

 

 

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If we are unable to meet our debt service obligations and other financial obligations, we could be forced to restructure 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, 2015. Such ineffectiveness was due to material weaknesses regarding our control environment (an insufficient segregation of duties in our finance and accounting functions due to limited personnel) and a lack of monitoring controls to determine the adequacy or our internal control over financial reporting and related policies. 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 2016 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.

 

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:

 

· 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.

 

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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 100,000,000 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. Trading in our stock 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. 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.

 

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 fall.

 

On 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 $50,000,000 of our common stock. Concurrently with the execution of the Purchase Agreement, we agreed to issue 179,598 shares of our common stock to Lincoln Park as a commitment fee and shall issue up to 89,799 shares pro rata, when and if, Lincoln Park purchases at the Company’s discretion the $50,000,000 aggregate commitment. 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. 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 $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.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

Not Applicable.

 

ITEM 2. PROPERTIES

 

We do not own any real property. We maintain several offices of which the office at 7th Floor, 51 West 52nd Street, New York, NY, USA is our main office. Our lease costs are $9,500 per month. We believe our offices are suitable and adequate to operate our business from at this time as they and provide us with sufficient space to conduct our operations. We fully utilize our current premises.

 

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ITEM 3. LEGAL PROCEEDINGS

 

We know of no material, existing or pending legal proceedings to which we are a party or of which any of our properties is the subject. In addition, we do not know of any such proceedings contemplated by any governmental authorities. We know of no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial stockholder is a party adverse to our company or has a material interest adverse to our company.

 

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ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

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 NASDAQ Stock Market LLC (“NASDAQ”) under the symbol “AVXL.” Prior to October 28, 2015 and during the fiscal year ended September 30, 2015, our common stock was quoted on the OTC Markets - OTCQX under the trading symbol “AVXL”.

 

The following table shows the quarterly range of high and low bid information 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. Investors should not rely on historical prices of our common stock as an indication of its future price performance. On December 28, 2015, the closing price of our common stock as reported by NASDAQ was $7.03 per share.

 

Quarter Ended   High     Low  
September 30, 2015   $ 6.52     $ 1.80  
June 30, 2015   $ 1.88     $ 0.91  
March 31, 2015   $ 0.91     $ 0.64  
December 31, 2014   $ 0.83     $ 0.64  
September 30, 2014   $ 1.40     $ 0.72  
June 30, 2014   $ 1.84     $ 1.08  
March 31, 2014   $ 2.12     $ 1.00  
December 31, 2013   $ 2.60     $ 1.00  

 

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 29, 2015, there were approximately 71 holders of record of our common stock. As of such date, 34,601,173 shares of our common stock were issued and outstanding.

 

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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.

 

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, 2015:

 

Equity Compensation Plan Information
Plan Category   Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights 
(a)
    Weighted-average
exercise price of
outstanding options,
warrants and rights
(b)
    Number of securities
remaining available for
future issuances under
equity compensation
plans (excluding
securities reflected in
column (a))
(c)
 
Equity compensation plans approved by security holders     792,500       1.96      

 

Nil

 
Equity compensation plans not approved by security holders     6,050,553       5.04       5,771,803  
Total     6,843,053               5,771,803  

 

Stock Option Plan

 

On 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 directors, officers, employees and consultants of the Company.

 

The maximum number of our common shares reserved for issue under the plan is 6,050,553 shares subject to adjustment in the event of a change of the Company’s capitalization. As a result of the adoption of the 2015 Plan, no further option awards will be granted under any previously existing stock option plan. Stock option awards previously granted under previously existing stock option plans remain outstanding in accordance with their terms.

 

The purpose of the 2015 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 2015 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.

 

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 but in no event will be less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted under the 2015 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by the board, subject to earlier termination in accordance with the terms of the 2015 Plan.

 

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Recent Sales of Unregistered Securities

 

Since the beginning of our fiscal year ended September 30, 2015, 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.

 

Purchases 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, 2015, 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, 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.

 

Our Business

 

We are a clinical stage biopharmaceutical company engaged in the development of drug candidates to treat Alzheimer’s disease, other central nervous system (CNS) diseases, pain and various types of cancer. Our lead compounds ANAVEX 2-73 and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept â ) are being developed to treat Alzheimer’s disease and potentially other central nervous system (CNS) diseases.

 

  19  

 

 

In December 2014 a Phase 2a clinical trial was initiated for ANAVEX 2-73, which is being evaluated for the treatment of Alzheimer’s disease. The randomized trial is 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. ANAVEX 2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain and to reverse the pathological hallmarks observed in Alzheimer’s disease. ANAVEX 2-73 showed no serious adverse events in a previously performed Phase 1 study. In pre-clinical studies ANAVEX 2-73 demonstrated anti-amnesic and neuroprotective properties in various animal models including the transgenic mouse model Tg2576.

 

Initial analysis of Phase 2a data demonstrated that the study met the primary objective of safety as ANAVEX 2-73 was well tolerated and results were consistent with prior Phase 1 clinical trial data.  The secondary objectives were also met, with ANAVEX 2-73 showing cognitive improvement across all doses in all exploratory cognitive measurements, including the Cogstate battery, Mini Mental State Examination (MMSE), event-related potentials (ERP) and P300 tests, which consistently demonstrated improvements from baseline in the completed PART A portion of the study in 32 mild-to-moderate Alzheimer’s patients.

 

We intend to identify and initiate discussions with potential partners in 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 Developments

 

Since the commencement of our fourth quarter ended September 30, 2015, we have experienced the following significant corporate developments:

 

 

· On August 10, 2015, our Company announced that it has been awarded a research grant from The Michael J. Fox Foundation for Parkinson’s Research (MJFF) to develop ANAVEX 2-73 for the treatment of Parkinson’s disease. The MJFF grant is expected to fully fund a preclinical study worth $286,455 on the effect of ANAVEX 2-73 in a Parkinson’s disease animal model. The study may also provide further evidence for the involvement of sigma-1 receptors in potentially disease-modifying therapies for Parkinson’s disease.

 

· On August 12, 2015, our Company announced that it has received a Notice of Allowance from the U.S. Patent and Trademark Office (USPTO) for U.S. Pat. App. No. 14/205,637 related to ANAVEX 2-73. Upon issuance, the patent will provide intellectual property (IP) protection until at least 2030.

 

· Effective October 1, 2015, the board of directors appointed Sandra Boenisch, to serve as the Company’s Principal Financial Officer until the earlier of a successor’s appointment or her resignation.

 

· On October 7, 2015, we effected a 1-for-4 reverse split of our common stock.

 

· On October 28, 2015, we announced that our shares of common stock began trading on NASDAQ under the symbol “AVXL.”

 

· On November 7, 2015 we presented positive safety and cognitive efficacy data for Phase 2a of our ANAVEX 2-73 clinical trial at the international CTAD 2015 conference in Barcelona, Spain. Initial analysis of Phase 2a data demonstrated that the study met the primary objective of safety as ANAVEX 2-73 was well tolerated and results were consistent with prior Phase 1 clinical trial data.

 

The secondary objectives were also met, with ANAVEX 2-73 showing cognitive improvement across all doses in all exploratory cognitive measurements, including the Cogstate battery, Mini Mental State Examination (MMSE), event-related potentials (ERP) and P300 tests, which consistently demonstrated improvements from baseline in the completed PART A portion of the study in 32 mild-to-moderate Alzheimer’s patients.

 

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Results of Operations

 

Revenue

 

We have not earned any revenues since our inception on January 23, 2004. We are still in the development stage and 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.

 

Operating Expenses

 

Our operating expenses for the year ended September 30, 2015 were $7,108,714, which represents an increase of $4,139,739 compared to $2,968,975 for the year ended September 30, 2014. The increase was mainly attributable to an increase in research and development expenses related to our Phase 2a clinical trial for ANAVEX 2-73, which commenced in December, 2014. We expect our research and development expenses will continue to increase as a result of this clinical trial and other auxiliary research and development activities. We continue to target potential research partners to further advance our pipeline compounds. In addition, the increase was attributable to compensation charges associated with the vesting of restricted stock awards to our CEO, in connection with the achievement of certain performance milestones. During the year ended September 30, 2015 we also incurred an increase in consulting fees relating to several consultants engaged to assist the Company with business development and scientific review, and legal fees relating to an increase in financing related activities.

 

Other income (expenses)

 

The aggregate amount in the other income (expense) for the year ended September 30, 2015, amounted to $(4,999,416) as compared to $(8,399,378) for the comparable year ended September 30, 2014. The largest single decrease in this loss was as a result of certain non-cash, non-operational accounting charges related to amendments to the Debentures in the comparative period which resulted in a non-cash accounting charge being recorded on the statement of operations in that period. Other net expenses in the current year consist primarily of accretion charges associated with the early conversion of a majority of the remaining principal balances owing under the Debentures during the year ended September 30, 2015.

 

Income tax expense (benefit)

 

The Company did not have any income tax expense during the year ended September 30, 2015. During the year ended September 30, 2014, the Company recognized a deferred income tax benefit of $1,400,000 in connection with the issuance of Convertible Debentures and a related beneficial conversion feature for accounting purposes, which effectively created a temporary difference for tax purposes. The temporary difference for tax purposes was recognized as a deferred income tax liability, which in turn resulted in the Company being able to reduce its existing valuation allowance against deferred income tax assets available to offset such liability.

 

Liquidity and Capital Resources

 

Working Capital

 

    2015     2014  
Current Assets   $ 15,468,661       7,351,255  
Current Liabilities     2,660,578       1,441,149  
Working Capital   $ 12,808,083       5,910,106  

 

As of September 30, 2015, we had $15,290,976 in cash, an increase of $8,028,838 from September 30, 2014. The principal reason for this increase is due to cash received pursuant to the exercise of outstanding share purchase warrants of the Company, and the issuance of common stock to Lincoln Park under a $10 Million equity purchase agreement. This increase was partially offset by cash used in operations and for the advancement of clinical trial work. We intend to use the majority of our capital resources to complete the next clinical trial for ANAVEX 2-73 and to perform work necessary to prepare for further clinical development.

 

Cash Flows

    2015     2014  
Cash flows used in operating activities   $ (4,227,006 )   $ (2,659,379 )
Cash flows used in investing activities     -       (3,015 )
Cash flows provided by financing activities     12,255,844       9,579,458  
Increase in cash   $ 8,028,838     $ 6,917,064  

 

  21  

 

 

Cash flow used in operating activities

 

Our cash used in operating activities for the year ended September 30, 2015 was $4,227,006 compared to $2,659,379 used in operating activities for the comparative year ended September 30, 2014. The increase in cash used in operating activities was primarily as a result of the increased research and development activities as a result of the commencement of clinical trial work.

 

Cash used in investing activities

 

Cash used in investing activities was $Nil in the current period ended September 30, 2015 compared to $3,015 in the comparative period. This is as a result of a small equipment purchase in the comparative period.

 

Cash flow provided by financing activities

 

Our cash provided by financing activities for the year ended September 30, 2015 was $12,255,844, mostly attributable to cash received pursuant to the exercise of outstanding share purchase warrants and cash from the issuance of common shares under the Purchase Agreement with Lincoln Park (described under Future Financing below).

 

In the comparative year ended September 30, 2014, we had cash inflows of $9,579,458 primarily from the issuance of Senior Secured Convertible debentures in the comparative period.

 

Other Financings

 

$10 Million Lincoln Park Purchase Agreement

 

On July 5, 2013, the Company entered into a Purchase Agreement (the “$10 Million Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”). Pursuant to the $10 Million Purchase Agreement, Lincoln Park initially purchased 250,000 shares of the Company’s common stock for $100,000 and the Company had the right, in its sole discretion over a 25-month period, to sell to Lincoln Park up to the additional aggregate commitment of $9.9 Million of shares of common stock. There were no upper limits on the per share price that Lincoln Park could be required to pay to purchase such common stock. Furthermore, the Company controlled the timing and amount of sales of shares of common stock to Lincoln Park except that, pursuant to the terms of the $10 Million Purchase Agreement, we were unable to sell shares to Lincoln Park if and when the closing sale price of our common stock was below $2 per share, subject to adjustment as set forth in the $10 Million Purchase Agreement. Lincoln Park had no right to require any sales and was obligated to purchase common stock as directed by the Company.

 

During the year ended September 30, 2015, we issued an aggregate of 1,852,144 shares of common stock under the $10 Million Purchase Agreement, including 1,825,000 shares of common stock for an aggregate purchase price of $8,127,265 and 27,144 commitment shares. Subsequent to September 30, 2015, we issued to Lincoln Park an aggregate of 296,104 shares of common stock under the $10 Million Purchase Agreement, including 290,523 shares of common stock for an aggregate purchase price of $1,684,565 and 5,581 commitment shares, representing all remaining purchase amounts due under the $10 Million Purchase Agreement.

 

  22  

 

 

$50 Million Lincoln Park Purchase Agreement

 

On October 21, 2015, the Company entered into a second Purchase Agreement (the “$50 Million Purchase Agreement”) with Lincoln Park. Pursuant to the $50 Million Purchase Agreement, the Company has the right, in its sole discretion over a 36-month period, to sell to Lincoln Park up to an aggregate of $50 Million of shares of its common stock. There are no upper limits on the per share price that Lincoln Park may pay to purchase such common stock. Furthermore, the Company controls the timing and amount of any future sales, if any, of shares of common stock to Lincoln Park except that, pursuant to the terms of the $50 Million Purchase Agreement, we will be unable to sell shares to Lincoln Park if and when the closing sale price of our common stock is below $3 per share, subject to adjustment as set forth in the $50 Million Purchase Agreement. Lincoln Park has no right to require any sales and is obligated to purchase common stock as directed by the Company.

 

Other than our rights related to the Lincoln Park financing, which can only be exercised subject to certain trading price conditions described above, 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 fund our operations for the next 12 months through existing cash on hand and through equity and debt financings in the future. If we raise additional financing by issuing equity securities, our existing stockholders’ ownership will be diluted. Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.

 

Off-Balance Sheet Arrangements

 

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

 

Application of Critical Accounting Policies

 

Our financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States. Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are affected by management’s application of accounting policies. We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our financial statements is critical to an understanding of our financial statements.

 

We base our assumptions and estimates on historical experience and other sources that we believe to be reasonable at the time. Actual results may vary from our estimates due to changes in circumstances, weather, politics, global economics, mechanical problems, general business conditions and other factors. Our significant estimates are related to the valuation of warrants and options.

 

There are accounting policies that we believe are significant to the presentation of our financial statements. The most significant of these accounting policies relates to the accounting for our research and development expenses and stock-based compensation expense and derivative liabilities.

 

Research and Development Expenses

 

Research and developments costs are expensed as incurred. These expenses are comprised of the costs of our proprietary research and development efforts, including salaries, facilities costs, overhead costs and other related expenses as well as costs incurred in connection with third-party collaboration efforts. Milestone payments made by us to third parties are expensed when the specific milestone has been achieved.

 

In addition, we incur expenses in respect of the acquisition of intellectual property relating to patents and trademarks. The probability of success and length of time to developing commercial applications of the drugs subject to the acquired patents and trademarks is difficult to determine and numerous risks and uncertainties exist with respect to the timely completion of the development projects. There is no assurance the acquired patents and trademarks will ever be successfully commercialized. Due to these risks and uncertainties, we expense the acquisition of patents and trademarks.

 

  23  

 

 

Stock-based Compensation

 

We account for all stock-based payments and awards under the fair value based method.

 

Stock-based payments to non-employees are measured at the fair value of the consideration received, or the fair value of the equity instruments issued, or liabilities incurred, whichever is more reliably measurable. The fair value of stock-based payments to non-employees is periodically re-measured until the counterparty performance is complete, and any change therein is recognized over the vesting period of the award and in the same manner as if we had paid cash instead of paying with or using equity based instruments. The cost of the stock-based payments to non-employees that are fully vested and non-forfeitable as at the grant date is measured and recognized at that date, unless there is a contractual term for services in which case such compensation would be amortized over the contractual term.

 

We account for the granting of share purchase options to employees using the fair value method whereby all awards to employees will be recorded at fair value on the date of the grant. The fair value of all share purchase options are expensed over their vesting period with a corresponding increase to additional capital surplus. Upon exercise of share purchase options, the consideration paid by the option holder, together with the amount previously recognized in additional capital surplus, is recorded as an increase to share capital.

 

We use the Black-Scholes option valuation model to calculate the fair value of share purchase options at the date of the grant. Option pricing models require the input of highly subjective assumptions, including the expected price volatility. Changes in assumptions can materially affect the fair value estimate and therefore the Black-Scholes model does not necessarily provide a reliable single measure of the fair value of our share purchase options.

 

Derivative Liabilities

 

From time to time, we may issue warrants and convertible promissory notes with embedded conversion options which, dependent on their specific contractual terms or other conditions, 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 results 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.

 

Recent Accounting Pronouncements

 

In June 2014, the FASB issued ASU No. 2014-12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period ("ASU 2014-12"). ASU 2014-12 requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The 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.

 

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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.

 

On May 28, 2014, the FASB and the International Accounting Standards Board (IASB) issued a converged standard on revenue recognition from contracts with customers, ASU 2014-09 (Topic 606 and IFRS 15). This standard will supersede nearly all existing revenue recognition guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

 

In April 2015, the Financial Accounting Standards Board (FASB), issued the Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs, that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. For public business entities, the final guidance will be effective for fiscal years beginning after 15 December 2015, however, early adoption (including in interim periods) is permitted. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. An entity is also required in the year of adoption to provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability). The Company plans to adopt this standard beginning October 1, 2016. We are currently evaluating the impact this guidance will have on our financial condition, results of operations and cash flows.

 

Other than noted above, we do not expect the adoption of recently issued accounting pronouncements to have a significant impact on our results of operations, financial position or cash flow.

 

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

  25  

 

 

ANAVEX LIFE SCIENCES CORP.

 

CONSOLIDATED FINANCIAL STATEMENTS

 

September 30, 2015 and 2014

 

( Stated in US Dollars )

 

  F- 1  

 

 

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, NY

 

We have audited the accompanying consolidated balance sheets of Anavex Life Sciences Corp. as of September 30, 2015 and 2014 and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended September 30, 2015. 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, 2015 and 2014, and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2015 , in conformity with accounting principles generally accepted in the United States of America.

 

/s/ BDO USA, LLP

 

December 29, 2015

 

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.

 

  F- 2  

 

 

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED BALANCE SHEETS

September 30, 2015 and 2014

 

    2015     2014  
          (As Restated)  
             
ASSETS                
                 
Current                
Cash   $ 15,290,976     $ 7,262,138  
GST Recoverable     76,840       -  
Prepaid expenses     100,845       89,117  
      15,468,661       7,351,255  
Equipment     1,252       2,247  
    $ 15,469,913     $ 7,353,502  
                 
LIABILITIES                
                 
Current                
Accounts payable and accrued liabilities   $ 2,503,726     $ 1,249,084  
Deferred grant income     71,614       -  
Promissory notes payable     85,238       192,065  
      2,660,578       1,441,149  
Non-interest bearing liabilities     332       5,719,727  
      2,660,910       7,160,876  
                 
STOCKHOLDERS' EQUITY                
                 
Capital stock                
Authorized:                
100,000,000 common shares, par value $0.001 per share                
Issued and outstanding:                
32,044,213 common shares (September 30, 2014 - 11,800,063)     32,044       11,800  
Additional paid-in capital     74,060,999       50,714,151  
Common stock to be issued     1,997,415       640,000  
Accumulated deficit     (63,281,455 )     (51,173,325 )
      12,809,003       192,626  
    $ 15,469,913     $ 7,353,502  

 

See Accompany Notes

 

  F- 3  

 

 

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

for the years ended September 30, 2015 and 2014

 

    2015     2014  
          (As Restated)  
Operating expenses                
General and administrative   $ 4,836,978     $ 2,236,580  
Research and development     2,271,736       732,395  
                 
Total operating expenses     (7,108,714 )     (2,968,975 )
                 
Other income (expenses)                
Interest and finance expenses, net     (71,825 )     (7,089 )
Gain on settlement of accounts payable     -       199,655  
Financing related charges and adjustments     (4,998,145 )     (8,624,986 )
Foreign exchange gain     70,554       33,042  
                 
Total other expenses, net     (4,999,416 )     (8,399,378 )
Net loss before provision for income taxes     (12,108,130 )     (11,368,353 )
                 
Income tax expense (benefit) - deferred     -       (1,400,000 )
                 
Net loss and comprehensive loss for the period   $ (12,108,130 )   $ (9,968,353 )
                 
Loss per share                
Basic   $ (0.65 )   $ (1.02 )
Diluted   $ (0.65 )   $ (1.02 )
                 
Weighted average number of shares outstanding                
Basic     18,584,820       9,804,539  
Diluted     18,584,820       9,804,539  

 

See Accompanying Notes

 

  F- 4  

 

 

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

for the years ended September 30, 2015 and 2014

 

    2015     2014  
          (As Restated)  
Cash Flows used in Operating Activities                
Net loss for the period   $ (12,108,130 )   $ (9,968,353 )
Adjustments to reconcile net loss to net cash used in operations:                
Amortization and depreciation     995       768  
Accretion of debt discount     4,515,987       1,917,615  
Stock-based compensation     1,633,979       637,925  
Amortization of deferred financing charge     -       1,123,612  
Non-cash financing related charges     29,000       -  
Deferred income tax expense (benefit)     -       (1,400,000 )
Change in fair value of derivative financial instruments     567,000       (2,956,000 )
Gain on settlement of accounts payable     -       (199,655 )
(Gain)/loss on extinguishment of debt     (84,842 )     8,539,759  
Other     (18,683 )     (18,798 )
Changes in non-cash working capital balances related to operations:                
GST recoverable     (76,840 )     -  
Prepaid expenses     (67,692 )     (33,234 )
Accounts payable and accrued liabilities     1,310,606       (303,018 )
Deferred grant income     71,614       -  
Net cash used in operating activities     (4,227,006 )     (2,659,379 )
                 
Cash Flows used in Investing Activities                
Acquisition of equipment     -       (3,015 )
Net cash used in investing activities     -       (3,015 )
                 
Cash Flows provided by Financing Activities                
Issuance of common shares, net of share issue costs     12,343,988       368,170  
Financing fees paid     -       (788,712 )
Repayment of promissory note     (88,144 )     -  
Proceeds from the issuance of convertible debentures     -       10,000,000  
Net cash provided by financing activities     12,255,844       9,579,458  
                 
Increase in cash during the period     8,028,838       6,917,064  
Cash, beginning of period     7,262,138       345,074  
Cash, end of period   $ 15,290,976     $ 7,262,138  

 

Supplemental Cash Flow Information - Note 12

 

See Accompanying Notes

 

  F- 5  

 

  

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

for the years ended September 30, 2015 and 2014

 

    Common Stock              
                Additional     Common              
                Paid-in     Shares to be     Accumulated        
    Shares     Par Value     Capital     Issued     Deficit     Total  
                                     
Balance, October 1, 2013     9,309,400     $ 9,309     $ 38,672,452     $ 60,000     $ (41,204,972 )   $ (2,463,211 )
Equity units issued under Purchase Agreement     100,000       100.00       188,070       -       -       188,170  
Commitment shares issued under terms of Purchase Agreement     628       1       (1 )     -       -       -  
Capital stock issued for cash - at $2.00     30,000       30       59,970       (60,000 )             -  
Capital stock issued for cash - at $1.20     125,000       125       149,875       30,000               180,000  
Share issue costs, net of recovery     -       -       (2,452 )     -       -       (2,452 )
Issuance of detachable warrants     -       -       5,989,900       -       -       5,989,900  
Agent's warrants issued in connection with convertible debentures     -       -       334,900       -       -       334,900  
Beneficial conversion feature on convertible debentures issued, net of deferred income tax     -       -       2,610,100       -       -       2,610,100  
Reclassification of derivative financial instruments upon modification of warrant terms     -       -       221,000       -       -       221,000  
Capital stock issued pursuant to debt conversions - at $1.20     1,594,607       1,595       1,911,932       -       -       1,913,527  
Capital stock issued pursuant to debt conversions - at $1.00     640,428       640       550,480       -       -       551,120  
Stock based compensation     -       -       27,925       610,000       -       637,925  
Net loss for the period     -       -       -       -       (9,968,353 )     (9,968,353 )
Balance, September 30, 2014 (as restated)     11,800,063     $ 11,800     $ 50,714,151     $ 640,000     $ (51,173,325 )   $ 192,626  
Equity units issued under Purchase Agreement     1,825,000       1,825       8,125,440       -       -       8,127,265  
Commitment shares issued under terms of Purchase Agreement     27,144       27       (27 )     -       -       -  
Capital stock issued pursuant to debt conversions - at $1.00     7,272,487       7,272       6,587,850       167,415       -       6,762,537  
Capital stock issued for cash - at $1.00     500,000       500       1,500       -       -       2,000  
Capital stock issued pursuant to subscriptions received - at $1.20     25,000       25       29,975       (30,000 )             -  
Shares issued pursuant to the exercise of warrants - at $1.20     3,097,275       3,097       3,713,629       -       -       3,716,726  
Shares issued pursuant to the exercise of warrants - cashless     6,838,632       6,839       (6,839 )     -       -       -  
Shares issued pursuant to favored nations provision     658,612       659       (659 )     -       -       -  
Reclassification of derivative liability     -       -       4,482,000       -       -       4,482,000  
Stock based compensation     -       -       413,979       1,220,000       -       1,633,979  
Net loss for the period     -       -       -       -       (12,108,130 )     (12,108,130 )
Balance, September 30, 2015     32,044,213     $ 32,044     $ 74,060,999     $ 1,997,415     $ (63,281,455 )   $ 12,809,003  

 

See Accompanying Notes

 

  F- 6  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars)

 

Note 1 Business Description and Basis of Presentation

 

Business

 

Anavex Life Sciences Corp. (the “Company”) is a clinical stage biopharmaceutical company engaged in the development of differentiated therapeutics for the treatment of neurodegenerative diseases including drug candidates to treat Alzheimer’s disease, other central nervous system (CNS) diseases, pain and various types of cancer. The Company’s lead compounds ANAVEX 2-73 and ANAVEX PLUS, a combination of ANAVEX 2-73 with donepezil (Aricept), are being developed to treat Alzheimer’s disease and potentially other central nervous system (CNS) diseases.

 

In December 2014 a Phase 2a clinical trial was initiated for ANAVEX 2-73, which is being evaluated for the treatment of Alzheimer’s disease. The randomized trial is 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. ANAVEX 2-73 targets sigma-1 and muscarinic receptors, which have been shown in preclinical studies to reduce stress levels in the brain and to reverse the pathological hallmarks observed in Alzheimer’s disease. ANAVEX 2-73 showed no serious adverse events in a previously performed Phase 1 study. In pre-clinical studies, ANAVEX 2-73 demonstrated anti-amnesic and neuroprotective properties in various animal models including the transgenic mouse model Tg2576.

 

Effective October 7, 2015, the Company effected a reverse stock split on the basis of 1:4. As such, the Company’s authorized capital was decreased from 400,000,000 shares of common stock, par value $0.001 to 100,000,000 shares of common stock, par value $0.001 and all shares of common stock issued and outstanding were decreased on the basis of one new share for each four old shares. These financial statements give retroactive effect to such reverse split and all share and per share amounts have been adjusted accordingly.

 

Basis of Presentation

 

These financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America and the instructions to Form 10-K.

 

  F- 7  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 8

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

a) Use of Estimates

 

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

 

b) Principles of Consolidation

 

These consolidated financial statements include the accounts of Anavex Life Sciences Corp. and its wholly-owned subsidiaries, Anavex Life Sciences (France) SA, a company incorporated under the laws of France and Anavex Australia Pty Limited, a company incorporated under the laws of Australia. All inter-company transactions and balances have been eliminated.

 

c) Equipment

 

Equipment is recorded at cost and is depreciated at 33% per annum on the straight-line basis.

 

d) Impairment of Long-Lived Assets

 

The Company reviews the recoverability of its long-lived assets whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. The estimated future cash flows are based upon, among other things, assumptions about future operating performance, and may differ from actual cash flows. Long-lived assets evaluated for impairment are grouped with other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If the sum of the projected undiscounted cash flows (excluding interest) is less than the carrying value of the assets, the assets will be written down to the estimated fair value in the period in which the determination is made.

 

  F- 8  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 9

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

e) Financial Instruments

 

The carrying value of the Company’s financial instruments, consisting of cash and accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments. Based on borrowing rates currently available to the Company for similar terms and based on the short term duration of the debt instruments, the carrying value of the promissory notes payable approximate their fair value. Unless otherwise noted, it is management’s opinion that the Company is not exposed to significant interest, currency or credit risks arising from these financial instruments.

 

f) Foreign Currency Translation

 

The functional currency of the Company is the US dollar. Monetary items denominated in a foreign currency are translated into US dollars at exchange rates prevailing at the balance sheet date and non-monetary items are translated at exchange rates prevailing when the assets were acquired or obligations incurred. Foreign currency denominated expense items are translated at exchange rates prevailing at the transaction date. Unrealized gains or losses arising from the translations are credited or charged to income in the period in which they occur.

 

g) Research and Development Expenses

 

Research and developments costs are expensed as incurred. These expenses are comprised of the costs of the Company’s 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 the Company to third parties are expensed when the specific milestone has been achieved.

 

In addition, the Company incurs expenses in respect of the acquisition of intellectual property relating to patents and trademarks. The probability of success and length of time to develop 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, the acquisition of patents and trademarks does not meet the definition of an asset and thus are expensed as incurred.

 

The Company is eligible to obtain a research and development tax credit from the Australian Tax Authority (ATO) for certain research and development activities undertaken in Australia. The tax incentive is available on the basis of specific criteria with which the Company must comply. Although the tax incentive is administered through the ATO, the Company has accounted for the tax incentive outside of the scope of ASC Topic 740, Income Taxes since the incentive is not linked to the Company’s income tax liability and can be realized regardless of whether the Company has generated taxable income in Australia.

 

  F- 9  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 10

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

h) Grant Income

 

Research and development incentive income is recognized when the research and development activities have been undertaken and the Company has completed its assessment of whether such activities meet the relevant qualifying criteria. The Company recognizes such income at the fair value of the grant when it is received and all substantive conditions have been satisfied. Grants received from government and other agencies in advance of the specific research and development costs to which they relate are deferred and recognized in the consolidated statement of operations in the period they are earned and when the related research and development costs are incurred.

 

i) Income Taxes

 

The Company has adopted the provisions of FASB ASC 740 "Income Taxes" (“ASC 740”) which requires the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

 

The Company follows the provisions of ASC 740 regarding accounting for uncertainty in income taxes. The Company initially recognizes tax positions in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement with the tax authority assuming full knowledge of the position and all relevant facts. Application requires numerous estimates based on available information. The Company considers many factors when evaluating and estimating our tax positions and tax benefits, and our recognized tax positions and tax benefits may not accurately anticipate actual outcomes. As additional information is obtained, there may be a need to periodically adjust the recognized tax positions and tax benefits. These periodic adjustments may have a material impact on the consolidated statements of operations.

 

  F- 10  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 11

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

j) Basic and Diluted Loss per Share

 

The basic loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding. Diluted loss per common share is computed similar to basic loss per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. Additionally, the numerator is also adjusted for changes in fair value of the derivative financial instruments where it is presumed they will be share settled.

 

For the year ended September 30, 2015, loss per share excludes 6,101,534 (2014 – 26,967,454) potentially dilutive common shares related to outstanding options, warrants, and convertible debentures as their effect was anti-dilutive.

 

k) Stock-based Compensation

 

The Company accounts for all stock-based payments and awards under the fair value 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 the Company 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 are fully vested and non-forfeitable 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.

 

The Company accounts 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 paid-in capital.

 

The Company uses 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 these assumptions can materially affect the fair value estimates.

 

  F- 11  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 12

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

l) Fair Value Measurements

 

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

 

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

 

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

 

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

 

The book value of cash and accounts payable and accrued liabilities approximate their fair values due to the short term maturity of those instruments. Based on borrowing rates currently available to the Company under similar terms, the book value of promissory notes payable approximates their fair values. The Company’s promissory notes payable are based on Level 2 inputs in the ASC 820 fair value hierarchy.

 

At September 30, 2015, the Company did not have any Level 3 liabilities. During the year ended September 30, 2015 and at September 30, 2014, the Company had Level 3 liabilities consisting of embedded conversion features and warrants that were required to be accounted for as liabilities pursuant to ASC 815 because the Company did not have sufficient authorized and unissued shares available to settle fully certain conversion features of such instruments. During the year ended September 30, 2015, the Company took measures to increase the Company’s authorized common stock such that the instruments were no longer required to be accounted for as liabilities. Therefore pursuant to the guidance of ASC 815, the Company reclassified the fair value of these instruments on the date of this triggering event into equity.

 

  F- 12  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 13

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

l) Fair Value Measurements – (cont’d)

 

The Company calculated the fair value at the inception of those instruments, at September 30, 2014, and at the date of reclassification of the instruments into equity using the binomial option pricing model to determine the fair value. The following assumptions were used for the respective instruments:

 

          September 30,     Reclassification  
Embedded conversion option   At Inception     2014     Date  
Risk-free interest rate     3.13 %     3.21 %     1.47 %
Expected life of options (years)     29.58       29.48       29.00  
Annualized volatility     100.71 %     100.07 %     102.14 %
Stock price   $ 1.04     $ 0.72     $ 0.84  
Dividend rate     0.00 %     0.00 %     0.00 %

 

          Reclassification  
Warrants   At Inception     Date  
Risk-free interest rate     1.46 %     1.47 %
Expected life of options (years)     5.00       4.81  
Annualized volatility     100.21 %     102.14 %
Stock price   $ 0.79     $ 0.84  
Dividend rate     0.00 %     0.00 %

 

Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). There were no assets or liabilities measured at fair value on a nonrecurring basis during the periods ended September 30, 2015 and 2014.

 

  F- 13  

 

  

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 14

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

m) Derivative Liabilities

 

The Company evaluates its financial instruments and other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815. The result of this accounting treatment is that the fair value of the embedded derivative is marked- to-market at each balance sheet date and recorded as a liability and the change in fair value is recorded in the consolidated statements of operations as other income or expense. Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.

 

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Derivative instruments that become subject to reclassification are reclassified at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not settlement of the derivative instrument is expected within 12 months of the balance sheet date.

 

From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. In this case, the Company utilized the latest inception date sequencing method to reclassify outstanding instruments as derivative instruments. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.

 

These derivative instruments do not trade in an active securities market. The Company uses the binomial option pricing model to value derivative liabilities. This model uses Level 3 inputs in the fair value hierarchy established by ASC 820 Fair Value Measurement.

 

F- 14  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 15

 

Note 2 Summary of Significant Accounting Policies – (cont’d)

 

n) Recent Accounting Pronouncements

 

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. The Company is currently evaluating the impact this guidance will have on its financial condition, results of operations and cash flows.

 

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 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. The Company is currently evaluating the impact this guidance will have on its financial condition, results of operations and cash flows.

 

In May, 2014, the FASB and the International Accounting Standards Board (IASB) issued a converged standard on revenue recognition from contracts with customers, ASU 2014-09 (Topic 606 and IFRS 15). This standard will supersede nearly all existing revenue recognition guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. The Company is currently evaluating the impact this guidance will have on its financial condition, results of operations and cash flows.

 

In April 2015, the Financial Accounting Standards Board (FASB), issued the Accounting Standards Update 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs, that requires debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. For public business entities, the final guidance will be effective for fiscal years beginning after December 15, 2015, however, early adoption (including in interim periods) is permitted. Upon adoption, an entity must apply the new guidance retrospectively to all prior periods presented in the financial statements. An entity is also required in the year of adoption to provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial statement line items (that is, debt issuance cost asset and the debt liability). The Company plans to adopt this standard beginning October 1, 2016. The Company is currently evaluating the impact this guidance will have on its financial condition, results of operations and cash flows.

 

F- 15  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 16

 

Note 2 Recent Accounting Pronouncements – (cont’d)

 

Other than noted above, the Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on its results of operations, financial position or cash flow.

 

o) Restatement of prior year

 

Our Form 10-K for the comparative period ended September 30, 2014 contained an error relating to the accounting for Convertible Debentures issued on March 13, 2014 (the “Convertible Debentures”), which contained a beneficial conversion feature.

 

In connection with the issuance of Convertible Debentures, under the guidance of ASC 740-10, the recognition of a beneficial conversion feature for accounting purposes, which is initially recognized in equity at the inception of the related contract, effectively creates a temporary difference for tax purposes which must be recognized as a deferred income tax liability, with an offsetting adjustment to additional paid-in capital. Further, based on the fact that the reversal of the deferred tax liability would be viewed as a source of income pursuant to ASC 740, the Company was able to reduce its existing valuation allowance against deferred income tax assets available to offset such liability. As such, the net effect of such accounting would result in a reduction in additional paid-in capital and a corresponding recognition of a deferred income tax benefit on the consolidated statement of operations.

 

We believe that the errors in the Form 10-K for the year ended September 30, 2014 do not cause the financial statements included therein to be misleading, and therefore such financial statements can still be relied upon. However, we have corrected such errors, including any related disclosures, in this Form 10-K. The impact for the year ended September 30, 2014, was an increase in deferred income tax recovery of $1.4 million, and decrease in additional paid in capital of $1.4 million.

 

Note 3 Equipment

 

    September 30, 2015  
          Accumulated        
    Cost     Depreciation     Net  
                   
Computer equipment   $ 3,015     $ 1,763     $ 1,252  

 

    September 30, 2014  
          Accumulated        
    Cost     Depreciation     Net  
                   
Computer equipment   $ 3,015     $ 768     $ 2,247  

 

F- 16  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 17

 

Note 4 Promissory Notes Payable

 

    2015     2014  
Promissory note dated December 31, 2012 with a principal balance of CDN$100,000 bearing interest at 12% per annum, due on September 30, 2014   $ -     $ 89,618  
                 
Promissory note dated January 9, 2013 with a principal balance of CDN$86,677, bearing interest at 12% per annum, secured by all the present and future assets of the Company; due on demand     64,630       77,679  
                 
Promissory note dated January 9, 2013 with a principal balance of CDN$27,639, bearing interest at 12% per annum, secured by all the present and future assets of the Company; due on demand     20,608       24,768  
    $ 85,238     $ 192,065  

 

On December 31, 2012, the Company issued a promissory note having a principal balance of $89,618 (CDN$100,000) with terms that included interest at 12% per annum and matured on June 30, 2013, in exchange for an accounts payable owing with respect to unpaid consulting fees. This note was not repaid on June 30, 2013 and the maturity date was extended to September 30, 2014. During the year ended September 30, 2014, the Company repaid this note.

 

On January 9, 2013, the Company issued two (2) promissory notes (the “Secured Notes”);

 

a) The Company issued a promissory note in the amount of $64,630 (CDN$86,677) to the former President, Secretary, Treasurer, CFO and director of the Company (the “President”) in exchange for unpaid consulting fees owing to the President. The note is bearing interest at 12% per annum and was due June 30, 2013.

 

b) The Company issued a promissory note in the amount of $20,608 (CDN$27,639) to a former director of the Company (the “Director”) in exchange for unpaid consulting fees owing to the Director. The note is bearing interest at 12% per annum and was due June 30, 2013.

 

The Secured Notes are secured by a right to delay the transfer of any or all of the Company’s assets until the obligations of the Secured Notes are satisfied, including a restriction on the transfer of cash by the Company and a security interest over the intellectual property of the Company. The security interests of the Secured Notes is ranked senior to any and all security interests granted prior to the issuance of the notes and to all subsequent security interests granted, unless the holders agree in writing to other terms.

 

F- 17  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 18

 

Note 4 Promissory Notes Payable – (cont’d)

 

In addition, the Secured Notes contain a provision whereby if they are not repaid within 10 days of their maturity dates, they shall bear late fees in addition to interest accruing, at a rate of $100 per day per note. In an event of default by the Company, under the terms of the Secured Notes, the notes shall bear additional late fees of $500 per day per note.

 

Subsequent to the issuance of these Secured Notes, the former President resigned as President, Secretary, Treasurer, CFO and director of the Company and the former Director resigned as director of the Company.

 

The Company did not repay the notes on June 30, 2013. The Company has disputed the issuance and enforceability of the Secured Notes and should there be an attempt to enforce the Secured Notes or collection on them, the Company will consider a legal remedy. The Company has not accrued any late fees in connection with these Secured Notes as of September 30, 2015 or 2014, as the Company does not consider these amounts to be legally enforceable.

 

Note 5 Deferred Grant Income

 

During the year ended September 30, 2015, the Company was awarded grant funding in the amount of $286,455, of which the Company received $71,614 during the year ended September 30, 2015 and the remainder will be received in equal semi-annual instalments over the 24 month commitment. The grant was received in exchange for a commitment to provide research and development for preclinical validation of sigma-1 receptor agonist ANAVEX 2-73 as potential treatment for Parkinson’s disease.

 

The grant income was deferred and is being amortized as an increase to other income over a two year period using the straight line method over the grant term.

 

F- 18  

 

  

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 19

 

Note 6 Non-interest Bearing Liabilities

 

Non-interest bearing liabilities consists of the following:

 

    2015     2014  
Senior Convertible Debentures   $ 332     $ 263,727  
Derivative Financial Instruments     -       5,456,000  
    $ 332     $ 5,719,727  

 

Senior Convertible Debentures   2015     2014  
             
Senior Convertible Debentures, non-interest bearing, unsecured, due March 18, 2044     6,144       7,446,044  
Less: Debt Discount     (5,812 )     (7,182,317 )
Total carrying value     332       263,727  
Less: current portion     -       -  
Long term liability   $ 332     $ 263,727  

 

On March 13, 2014, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers (the “Purchasers”) pursuant to which the Company issued senior convertible debentures in the aggregate principal amount of $10,000,000 (the “Debentures”).

 

In connection with the issuance of the Debentures, the Company issued an aggregate of 16,916,666 share purchase warrants as follows:

 

          Non-        
    Purchasers     purchasers     Total  
Series A Warrants     8,333,333       125,000       8,458,333  
Series B Warrants     8,333,333       125,000       8,458,333  
      16,666,666       250,000       16,916,666  

 

Each Series A warrant was exercisable into one common share of the Company at $1.20 per share until March 18, 2019.

 

Each Series B warrant was exercisable into one common share of the Company at $1.68 per share until March 18, 2019

 

The Debentures are unsecured, non-interest bearing and are due on March 18, 2044. The Debentures were convertible, in whole or in part, at the option of the holder into common shares of the Company at $1.20 per share (“the Conversion Price”). The Conversion Price of the debenture will be adjusted in the event of common stock dividend, split or consolidation. The Conversion Price was later amended to $1.00 per share, as set forth below.

F- 19  

 

  

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 20

 

Note 6 Non-interest Bearing Liabilities – (cont’d)

 

Senior Convertible Debentures – (cont’d)

 

Pursuant to the guidance of ASC 470-20 Debt with Conversion and Other Options, the Company allocated the proceeds from the issuance of the Debentures between the Debentures and the detachable Purchaser warrants using the relative fair value method. The fair value of the Purchaser warrants of $22,326,200 at issuance resulted in a debt discount at issuance of $5,989,900.

 

The Company recorded a beneficial conversion feature discount of $4,010,100 in respect of the Debentures issued, based on the intrinsic value of the conversion feature limited to a maximum of the total proceeds of the Debentures allocated to the Debentures. The recognition of the beneficial conversion feature also gave rise to the recognition of a deferred income tax liability of $1,400,000, relating to the temporary difference for tax purposes of the book basis of the related Debentures. This deferred income tax liability was immediately offset by the recognition of previously unrecognized future income tax assets available to reduce such liability. The reduction of the valuation allowance against deferred income tax assets was recognized through a deferred income tax benefit recognized on the statement of operations in the period in which the Debentures were issued.

 

The total debt discount at issuance of $10,000,000 was being amortized using the effective interest method over the term of the Debentures.

 

In consideration for the Debentures issued, the Company issued an aggregate of 250,000 share purchase warrants to non-lenders as described above. The fair value of the Non-Purchaser Warrants of $334,900, along with finder’s fees and other financing costs directly associated with the issuance of the Debentures in the amount of $788,712, was recorded as a deferred financing charge and is being amortized to income over the term of the Debentures using the effective interest method.

 

The fair value of the Purchaser and Non-Purchaser warrants at issuance was determined using the Black Scholes option pricing model with the following weighted average assumptions:

 

Risk-free interest rate     1.56 %
Expected life (years)     5.00  
Expected volatility     97.16 %
Stock price   $ 1.76  
Dividend yields     0.00 %

 

In connection with the Purchase Agreement, the Company also entered into a registration rights agreement with each Purchaser (the “RRA”) whereby the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering the resale of the shares of the Company’s common stock issuable upon conversion of the Debentures and upon exercise of the Purchaser warrants.

 

On July 23, 2014, the registration statement was declared effective by the SEC.

 

F- 20  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 21

 

Note 6 Non-interest Bearing Liabilities – (cont’d)

 

Senior Convertible Debentures – (cont’d)

 

Amendment Agreements

 

On August 25, 2014, the Company entered into amendment agreements with each Purchaser, pursuant to which all provisions regarding liquidating damages and the accrual of damages with respect to the obligations for, and rights enforceable against, the Company, were eliminated from the RRAs. As consideration for entering into the amendment agreements and for the Purchasers agreeing to forego an amount of $459,912 in liquidating damages that had accrued and were accruing pursuant to the terms of the original RRAs, the Company agreed to adjust the fixed conversion price of the remaining outstanding debentures from $1.20 per share to $1.00 per share (the “Debenture Amendment”).

 

The Company assessed the guidance under ASC 470-60 Troubled Debt Restructurings and determined that this guidance did not apply to the Debenture Amendment. The Debenture Amendment was considered a substantial change in the terms of the debentures pursuant to ASC 470-50 Modifications and Extinguishments and accordingly, the Company was required to apply debt extinguishment accounting. Consequently, the Company calculated a net non-cash loss on extinguishment of debt of $8,099,137 as the premium of the aggregate fair value of the amended debentures over their aggregate carrying values of $906 immediately prior to the Debenture Amendment and the gain from the forgiveness of accrued liquidating damages of $459,912. This amount is included in other financing related charges and adjustments on the consolidated statement of operations for the year ended September 30, 2014.

 

The Company calculated the fair value of the amended Debentures by discounting future cash flows using rates representative of current borrowing rates for debt instruments without a conversion feature and by using the binomial option pricing model to determine the fair value of the conversion features, using the following assumptions:

 

Risk-free interest rate     3.13 %
Expected life (years)     29.58  
Expected volatility     100.71 %
Stock Price   $ 1.028  
Dividend yields     0.00 %

 

The net loss was recorded as part of financing related charges and adjustments in the consolidated statement of operations during the year ended September 30, 2014. In addition, in accordance with debt extinguishment accounting, remaining unamortized financing costs of $1,110,568 associated with the original Debentures were immediately amortized through earnings upon entering into the amendments. This amount was also included in other financing related charges and adjustments in the consolidated statement of operations for the year ended September 30, 2014.

 

F- 21  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 22

 

Note 6 Non-interest Bearing Liabilities – (cont’d)

 

Senior Convertible Debentures – (cont’d)

 

During the year ended September 30, 2015, the Company issued an aggregate of 7,272,487 shares of common stock and an additional 167,415 shares of common stock were to be issued based on a conversion price of $1.00 per share pursuant to the conversion of $7,439,900 in outstanding principal amounts due under the Debentures.

 

As a result of the bifurcation of the embedded conversion option subsequent to the Debenture Amendments as discussed above, for accounting purposes, two instruments were considered outstanding and, upon exercise of the contractual conversion option, extinguishment accounting was applied. Consequently, the embedded conversion feature was adjusted to fair value at the conversion date and the shares issued pursuant to conversion were recorded at their fair value on the date of issuance, determined with reference to the quoted market price of the Company’s shares on the issuance date. The resulting difference was recorded as a gain or loss on the consolidated statement of operations. During the year ended September 30, 2015, the Company recorded $84,842 (2014: $Nil) in respect of net gains on these conversion of the Debentures. This amount is included in financing and related charges and adjustments on the consolidated statement of operations.

 

During the year ended September 30, 2015 the Company recorded accretion expense of $4,515,987 (2014: $1,917,615) in accretion of discounts on these debentures.

 

Effective March 26, 2015 and upon a change in triggering events, the embedded conversion option is no longer required to be bifurcated and conversion accounting has been applied to all conversions subsequent to the change in triggering events.

 

Embedded conversion options and warrants

 

At September 30, 2014, the Company had outstanding embedded conversion options associated with the Senior Convertible Debentures and outstanding warrants being accounted for as derivative liabilities.

 

These derivative financial instruments arise as a result of applying ASC 815 Derivatives and Hedging (“ASC 815”), which requires the Company to make a determination whether an equity-linked financial instrument, or embedded feature, is indexed to the entity’s own stock. This guidance applies to any freestanding financial instrument or embedded features that have the characteristics of a derivative, and to any freestanding financial instruments that are potentially settled in an entity’s own stock.

 

During the year ended September 30, 2014, the Company issued debentures with fixed price embedded conversion features and, subsequent to certain amendments as discussed above, the Company did not, at the date of issuance of these instruments, have a sufficient number of authorized and available shares of common stock to fully settle the conversion feature of such instruments if exercised. As such, the Company was required to account for these instruments as derivative financial instruments. On the amendment date of the related convertible debentures, the Company recorded a debt discount to the extent of the fair value of the embedded conversion features required to be accounted for as liabilities under ASC 815.

 

F- 22  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 23

 

Note 6 Non-interest Bearing Liabilities – (cont’d)

 

Embedded conversion options and warrants – (cont’d)

 

During the year ended September 30, 2015, the Company issued units consisting of shares of common stock and share purchase warrants and since the Company did not, at the date of issuance of these instruments, have a sufficient number of authorized and available shares of common stock to fully settle the exercise of these warrants if exercised, due to the outstanding embedded conversion features discussed above, the Company was required to account for these instruments as derivative financial instruments. On the commitment date of the related warrants, the Company allocated the proceeds from the issuance of units first to the derivative liability at its fair value, with any remaining proceeds allocated to the common stock.

 

On March 26, 2015, the Company received stockholder approval to approve an amendment to the Company’s articles of incorporation to increase the Company’s authorized common stock from 37,500,000 to 100,000,000 shares, which is now sufficient to fully settle all the outstanding equity contracts. Consequently, these instruments previously accounted for as liabilities under ASC 815 are no longer required to be accounted for as liabilities. Pursuant to the guidance of ASC 815, the Company reclassified the fair value of these instruments on the date of this triggering event into equity, with the change in fair value up to the date of modification being recorded on the consolidated statement of operations as other income.

 

During the year ended September 30, 2013, the Company issued an aggregate of 1,612,242 common stock purchase warrants that were required to be accounted for as liabilities pursuant to ASC 815 as a result of certain features embedded in those instruments. During the year ended September 30, 2014, the Company amended the terms of these common stock purchase warrants. As of the modification date, these warrants were no longer required to be accounted for as liabilities. Pursuant to the guidance of ASC 815, the Company reclassified the fair value of these instruments on the date of modification into equity, with the change in fair value up to the date of modification being recorded on the consolidated statements of operations as other income.

 

As a result of the application of ASC 815, the Company has recorded these liabilities at their fair values as follows:

 

    September 30,  
    2014     2013  
             
Balance, beginning of the period   $ 904,000     $ -  
Fair value at issuance     8,277,000       919,000  
Change in fair value during the year     (2,956,000 )     (15,000 )
Reclassification to equity upon change in triggering events     (221,000 )     -  
Transfer to equity upon exercise     (548,000 )     -  
Balance, end of the period   $ 5,456,000     $ 904,000  

 

F- 23  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 24

 

Note 6 Non-interest Bearing Liabilities – (cont’d)

 

Embedded conversion options and warrants – (cont’d)

 

The embedded conversion features and warrants accounted for as derivative financial instruments have no observable market and the Company estimated their fair values at their reclassification dates and September 30, 2014 using the binomial option pricing model based on the following weighted average management assumptions:

 

    Reclassification
Date
    September
30, 2014
 
Risk-free interest rate     1.47 %     3.21 %
Expected life (years)     24.75       29.48  
Expected volatility     102.14 %     100.07 %
Stock price   $ 0.84     $ 0.736  
Dividend yields     0.00 %     0.00 %

 

Note 7 Capital Stock

 

Authorized

 

On March 26, 2015, the Company received stockholder approval to approve an amendment to the Company’s articles of incorporation to increase the Company’s authorized common stock from 37,500,000 to 100,000,000 shares.

 

Equity Transactions

 

Year ended September 30, 2015

 

On October 22, 2014, the Company entered into a Securities Purchase Agreement (the “10/14 Purchase Agreement”) with one investor for an equity investment of $500,000 at a price of $1.00 per unit. Pursuant to the terms of the 10/14 Purchase Agreement, the Company agreed to sell, and the Investor agreed to purchase, 500,000 shares of common stock. In addition, the Company agreed to issue an aggregate of 1,000,000 stock purchase warrants, of which 500,000 were exercisable at $1.20 per share and 500,000 were exercisable at $1.68 per share, each for a period of five years, subject to normal adjustment for stock splits, combinations, and reclassification events.

 

As discussed in Note 5, the warrants issued were required to be accounted for as derivative liabilities at their date of issuance, pursuant to the guidance of ASC 815. Consequently, the Company allocated the proceeds from the issuance of the units first to the warrants, at their fair value of $527,000 with an amount of $2,000 being allocated to equity at par value on the date of the transaction. The $29,000 excess of the sum of fair value and par value over the proceeds received of $500,000 was recorded as a component of financing related charges and adjustments on the statement of operations during the year ended September 30, 2015. The fair value of the warrants was determined based on the binomial option pricing model using the following weighted average assumptions: risk-free interest rate: 1.46%, expected life: 5 years, expected volatility: 100.21%, dividend yield: 0%.

 

F- 24  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 25

 

Note 7 Capital Stock

 

Equity Transactions – (cont’d)

 

The Company paid a finder’s fee of $50,000 in connection with the 10/14 Purchase Agreement. This amount was expensed as a component of financing related charges and adjustments during the year ended September 30, 2015.

 

On March 16, 2015, pursuant to an anti-dilution provision contained in private placement subscription agreements dated May 31, 2012, the Company adjusted the price of 658,612 shares of common stock from $2.00 to $1.00 per share. Consequently, the Company issued 658,612 shares of common stock for no additional consideration.

 

Year ended September 30, 2014

 

On February 24, 2014, the Company issued 30,000 units at $2.00 per unit for gross proceeds of $60,000, which was received during the year ended September 30, 2013. Each unit consisted of one common share and one common share purchase warrant entitling the holder to purchase additional common shares at $4.00 per share for a period of five years from the date of issuance.

 

On February 24, 2014, the Company issued 125,000 units at $1.20 per unit for gross proceeds of $150,000. Each unit consisted of one common share and one common share purchase warrant entitling the holder to purchase additional common shares at $3.00 per share for a period of five years from the date of issuance.

 

On February 28, 2014, the Company received $30,000 in share subscriptions in respect of the issuance of 25,000 units at $1.20 per unit. Each unit consisted of one common share and one common share purchase warrant entitling the holder to purchase additional common shares at $3.00 per share for a period of five years from the date of issuance. These shares were issued during the year ended September 30, 2015.

 

Common stock to be issued

 

Included in common stock to be issued at September 30, 2015 is an amount of $1,830,000 (2014: $610,000) related to 750,000 (2014: 250,000) shares of common stock issuable to a director and officer of the Company pursuant to the terms of an employment agreement with that director and officer (Note 9).

 

Also included in common stock to be issued at September 30, 2015 is an amount of $167,415 (2014: Nil) related to the application of an incorrect conversion price to conversion notices received during the year ended September 30, 2015. These shares were issued subsequent to September 30, 2015.

 

F- 25  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 26

 

Note 8 Lincoln Park Purchase Agreement

 

On July 5, 2013, the Company entered into a $10,000,000 purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC, (“Lincoln Park”) an Illinois limited liability company (the “Financing”) pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $10,000,000 in value of its shares of common stock from time to time over a 25 month period. In connection with the Financing, the Company also entered into a registration rights agreement with Lincoln Park whereby the Company agreed to file a registration statement with the Securities and Exchange Commission (the “SEC”) covering the shares of the Company’s common stock that may be issued to Lincoln Park under the Purchase Agreement.

 

The Company would determine, at its own discretion, the timing and amount of its sales of common stock, subject to certain conditions and limitations. The purchase price of the shares that may be sold to Lincoln Park under the Purchase Agreement will be based on the market price of the Company’s shares of common stock immediately preceding the time of sale without any fixed discount, provided that in no event will such shares be sold to Lincoln Park when the closing sale price is less than $2.00 per share. There are no upper limits on the per share price that Lincoln Park may pay to purchase such common stock. The purchase price will be equitably adjusted for any reorganization, recapitalization, non-cash dividend, stock split or similar transaction occurring during the business days used to compute such price.

 

Pursuant to the Purchase Agreement, Lincoln Park initially purchased 62,500 shares of the Company’s common stock for $100,000. In consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park 85,465 shares of common stock as a commitment fee and was to issue up to 33,352 shares pro rata, when and if, Lincoln Park purchased, at the Company’s discretion, the remaining $10,000,000 aggregate commitment. The Purchase Agreement could be terminated by the Company at any time at its discretion without any cost to the Company.

 

The Company incurred a net $73,787 in direct expenses in connection with the Purchase Agreement and registration statement. These were recorded as share issuance costs as a charge against additional paid in capital in the period incurred.

 

During the year ended September 30, 2015, the Company issued to Lincoln Park an aggregate of 1,852,144 (2014: 100,628) shares of common stock under the Purchase Agreement, including 1,825,000 (2014: 100,000) shares of common stock for an aggregate purchase price of $8,127,265 (2014: $188,170) and 27,144 (2014: 628) commitment shares. Subsequent to September 30, 2015, the Company issued to Lincoln Park an aggregate of 296,104 shares of common stock under the Purchase Agreement, including 290,523 shares of common stock for an aggregate purchase price of $1,684,565 and 5,581 commitment shares, representing all remaining purchase amounts due under the Purchase Agreement.

 

F- 26  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 27

 

Note 9 Related Party Transactions

 

During the year ended September 30, 2015, the Company was charged general and administrative expenses totaling $2,690,659 in respect of directors fees and share and stock option based compensation charges paid or accrued to directors and officers of the Company (2014: $1,041,140 in respect of directors fees, management bonuses and stock option based compensation charges), inclusive of amounts noted below. Of the total, $331,095 related to non-cash stock option compensation charges, and $2,348,064 was related to stock compensation charges associated with the vesting of restricted stock awards to a director and officer of the Company, in connection with the achievement of certain performance milestones, inclusive of and as further described below.

 

As at September 30, 2015, included in accounts payable and accrued liabilities was $33,000 (2014: $28,232) owing to directors and officers of the Company for director fees and reimbursable expenses, and a former director and officer of the Company for unpaid fees.

 

During the year ended September 30, 2013, pursuant to an employment agreement with the President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer, and Director, of the Company, the Company:

 

i) granted 500,000 fully vested share purchase options exercisable at $1.60 per share until July 5, 2023. The Company recognized stock based compensation expense of $1,002,500 during the year ended September 30, 2013 in connection with these options.

 

ii) issued 1,000,000 shares of restricted common stock that vest as follows:

 

· 25% upon the Company starting a Phase Ib/IIb human study (vested during the year ended September 30, 2015 at a value of $610,000 and included in shares to be issued at September 30, 2015)

· 25% upon the Company in-licensing additional assets in clinical or pre-clinical stage (vested during the year ended September 30, 2014 at a value of $610,000 and included in shares to be issued at September 30, 2015)

· 25% upon the Company securing additional non-dilutive equity funding in 2013 of at least $5,000,000 with a share price higher than the previous funding (vested during the year ended September 30, 2015 at a value of $610,000 and included in shares to be issued at September 30, 2015)

· 25% upon the Company obtaining a listing on a major stock exchange (vested subsequent to September 30, 2015)

 

Included in operating results for the year ended September 30, 2015 are non-cash stock compensation charges of $1,220,000 (2014: $610,000) relating to the vesting of 500,000 (2014: 250,000) shares of restricted common stock upon the achievement of certain performance conditions, and $1,128,064 (2014: $Nil) in additional compensation obligations associated with the vesting. The fair value of $2.44 per share for non-cash stock compensation charges was determined with reference to the quoted market price of the Company’s shares on the commitment date. This amount has been included in common stock to be issued at September 30, 2015.

 

Subsequent to September 30, 2015, the Company obtained a listing on NASDAQ and consequently, an additional 250,000 shares of common stock vested.

 

F- 27  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 28

 

Note 10 Commitments

 

a) Share Purchase Warrants

 

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

 

          Weighted  
          Average  
    Number of Shares     Exercise Price  
Balance, October 1, 2013     2,287,371     $ 3.00  
Expired     (675,128 )   $ 3.00  
Issued     17,116,667     $ 1.44  
Balance, September 30, 2014     18,728,910     $ 1.59  
Expired     (62,500 )   $ 1.40  
Exercised     (15,468,520 )   $ 1.43  
Issued     1,075,000     $ 0.76  
Balance, September 30, 2015     4,272,890     $ 2.11  

 

During the year ended September 30, 2015, the Company issued 6,838,632 shares of common stock pursuant to the exercise of 12,371,245 warrants on a cashless basis.

 

At September 30, 2015, the Company has 4,272,890 currently exercisable share purchase warrants outstanding as follows:

 

Number     Exercise Price     Expiry Date
  1,612,242     $ 3.00     July 5, 2018
  30,000     $ 4.00     February 24, 2019
  700,994     $ 1.20     March 13, 2019
  1,872,154     $ 1.68     March 13, 2019
  12,500     $ 1.24     May 31, 2019
  45,000     $ 1.00     July 31, 2019
  4,272,890              

 

F- 28  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 29

 

Note 10 Commitments – (cont’d)

 

a) Share Purchase Warrants – (cont’d)

 

During the year ended September 30, 2015, the Company issued an aggregate of 12,500 warrants to a consultant of the Company for services to be provided. The fair value of these warrants at issuance was calculated to be $17,800 based on the Black-Scholes option pricing model using the following assumptions: expected term 3.9 years, expected volatility 106.7%, expected dividend yield 0.00%, risk free interest rate 1.83%. Stock based compensation is being recorded in the financial statements over the vesting term of three years from the date of grant. The Company recognized stock based compensation expense of $19,182 during the year ended September 30, 2015 (2014: $Nil) in connection with the warrants.

 

All of the 1,612,242 warrants expiring on July 5, 2018 contain a contingent call provision whereby the Company may have the option to call for cancellation of all or any portion of the warrants for consideration equal to $0.001 per share, provided the quoted market price of the Company’s common stock exceeds $6.00 for a period of twenty consecutive trading days, subject to certain minimum volume restrictions and other restrictions as provided in the warrant agreements.

 

b) Stock–based Compensation Plan

 

2015 Stock Option Plan

 

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

 

The maximum number of our common shares reserved for issue under the plan is 6,050,553 shares subject to adjustment in the event of a change of the Company’s capitalization. As a result of the adoption of the 2015 Plan, no further option awards will be granted under any previously existing stock option plan. Stock option awards previously granted under previously existing stock option plans remain outstanding in accordance with their terms.

 

The 2015 Plan is administered by the board of directors, except that it may, in its discretion, delegate such responsibility to a committee of such board. The exercise price will be determined by the board of directors at the time of grant but in no event will be less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted under the 2015 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by the board, subject to earlier termination in accordance with the terms of the 2015 Plan.

 

F- 29  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 30

 

Note 10 Commitments – (cont’d)

 

b) Stock–based Compensation Plan – (cont’d)

 

A summary of the status of Company’s outstanding stock purchase options for the years ended September 30, 2015 and 2014 is presented below:

 

          Weighted     Weighted Average  
    Number of     Average     Grant Date fair  
    Shares     Exercise Price     value  
Outstanding at October 1, 2013     768,750     $ 5.04          
Expired     (176,250 )   $ 10.80          
Granted     200,000     $ 1.28     $ 1.00  
Outstanding at September 30, 2014     792,500     $ 2.82          
Forfeited     (67,500 )   $ 12.00          
Granted     1,097,500     $ 2.02     $ 1.66  
Outstanding at September 30, 2015     1,822,500     $ 2.00          
Exercisable at September 30, 2015     825,002     $ 1.78          
Exercisable at September 30, 2014     525,000     $ 2.22          

 

At September 30, 2015, the following stock options were outstanding:

 

Number of Shares               Aggregate     Remaining  
      Number     Exercise         Intrinsic     Contractual  
Total     Vested     Price     Expiry Date   Value     Life (yrs)  
  25,000 (1)     25,000     $ 14.68     March 30, 2016   $ -       0.50  
  500,000 (2)     500,000     $ 1.60     July 5, 2023     2,020,000       7.77  
  75,000 (3)     25,000     $ 1.20     May 7, 2024     333,000       8.61  
  125,000 (4)     31,250     $ 1.32     May 8, 2024     540,000       8.61  
  718,750 (5)     239,585     $ 0.92     April 2, 2025     3,392,500       9.51  
  50,000 (6)     4,167     $ 1.44     June 8, 2025     210,000       9.70  
  50,000 (7)     -     $ 1.68     June 15, 2025     194,000       9.72  
  278,750 (8)     -     $ 5.04     September 18, 2025     167,250       9.98  
  1,822,500       825,002                 $ 6,856,750          

 

F- 30  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 31

 

Note 10 Commitments – (cont’d)

 

b) Stock–based Compensation Plan – (cont’d)

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s stock for the options that were in-the-money at September 30, 2015.

 

(1) As of September 30, 2015 and 2014, these options had fully vested. These options were granted during the year ended September 30, 2011 and vested over a period of one year from the date of grant. The fair value of these options at issuance was calculated to be $267,000. The Company did not recognize any stock-based compensation during the year ended September 30, 2015 (2014: $Nil).

 

(2) As of September 30, 2015 and 2014 these options had fully vested. These options were granted during the year ended September 30, 2013 and vested immediately upon granting. The Company did not recognize any stock-based compensation during the year ended September 30, 2015 (2014: $Nil) in connection with these options.

 

(3) As of September 30, 2015 and 2014, 25,000 of these options had vested. These options were issued during the year ended September 30, 2014 and vest annually over a three year period commencing on the first anniversary of the date of the grant. The Company recognized stock based compensation expense of $23,132 during the year ended September 30, 2015 (2014: $9,252) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

 

(4) As of September 30, 2015 and 2014, 31,250 of these options had vested. These options were issued during the year ended September 30, 2014 and vest annually over a four year period commencing on the first anniversary of the date of the grant. The Company recognized stock based compensation expense of $31,950 during the year ended September 30, 2015 (2014: $16,905) in connection with these options.

 

(5) As of September 30, 2015, 239,585 of these options had vested (2014: None of these options had vested). These options were issued during the year ended September 30, 2015 and vest in three equal installments on April 2, 2015, April 2, 2016 and April 2, 2017. The Company recognized stock based compensation expense of $255,747 during the year ended September 30, 2015 (2014: $Nil) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations

 

(6) As of September 30, 2015, 4,167 of these options had vested. These options were issued during the year ended September 30, 2015 and vest quarterly over a three year period commencing on September 8, 2015. The Company recognized stock based compensation expense of $5,981 during the year ended September 30, 2015 (2014: $Nil) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

 

F- 31  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 32

 

Note 10 Commitments – (cont’d)

 

b) Stock–based Compensation Plan – (cont’d)

 

(7) As of September 30, 2015 and 2014, none of these options had vested. These options were issued during the year ended September 30, 2015 and vest over a three year period from the date of grant. The Company recognized stock based compensation expense of $6,863 during the year ended September 30, 2015 (2014: $Nil) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

 

(8) As of September 30, 2015 and 2014, none of these options had vested. These options were issued during the year ended September 30, 2015 and vest over a three year period from the date of grant. The Company recognized stock based compensation expense of $17,899 during the year ended September 30, 2015 (2014: $Nil) in connection with these options. These amounts have been included in general and administrative expenses on the Company’s statement of operations.

 

Note 11 Income Taxes

 

The tax effects of the temporary differences that give rise to the Company’s estimated deferred tax assets and liabilities are as follows:

 

    2015     2014  
          (As restated)  
Tax rate     34 %     34 %
                 
Net operating loss carryforwards   $ 9,177,000     $ 8,270,000  
Research and development tax credits     794,000       745,000  
Foreign exchange     (10,000 )     (23,000 )
Unpaid charges     832,000       170,000  
Intangible asset costs     64,000       70,000  
Stock-based compensation     581,000       441,000  
Valuation allowance for deferred tax assets     (11,438,000 )     (9,673,000 )
                 
Net deferred tax assets   $ -     $ -  

 

F- 32  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 33

 

Note 11 Income Taxes – (cont’d)

 

The provision for income taxes differ from the amount established using the statutory income tax rate as follows:

 

    2015     2014  
          (As Restated)  
Income benefit at statutory rate of 34%   $ (4,117,000 )   $ (3,865,000 )
Foreign income taxed at other rates     80,000       13,000  
Permanent differences                
Effect of stock based compensation     -       202,000  
Debt extinguishment     (29,000 )     2,736,000  
Mark-to-market deriative liability adjustment     193,000       (994,000 )
Non-deductible finance and accretion expenses     1,511,000       808,000  
Other permanent differences     (5,000 )     (16,000 )
Research and development tax credit     502,000       (26,000 )
Adjustment and true up to prior years' tax provision     100,000       14,000  
Change in valuation allowance related to current year provision     1,765,000       2,528,000  
                 
Income Tax Recovery   $ -     $ 1,400,000  

 

As of September 30, 2015, the Company had net operating loss carry-forwards of approximately $25,000,000 (2014: $24,000,000) in the United States available to offset future taxable income. The carry-forwards will begin to expire in 2027 unless utilized in earlier years.

 

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and this causes a change in management’s judgment about the recoverability of deferred tax assets, the impact of the change on the valuation allowance is reflected in current income. Because management of the Company does not currently believe that it is more likely than not that the Company will receive the benefit of these assets, a valuation allowance equal to the deferred tax asset has been established at both September 30, 2015 and 2014.

 

Uncertain Tax Positions

 

The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company’s tax returns are subject to tax examinations by U.S. federal and state tax authorities, or examinations by foreign tax authorities until the respective statutes of limitation expire. The Company is subject to tax examinations by tax authorities for all taxation years commencing on or after 2007.

 

F- 33  

 

 

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2015 and 2014

(Stated in US Dollars) – Page 34

 

Note 12 Supplemental Cash Flow Information

 

Investing and financing activities that do not have a direct impact on current cash flows are excluded from the statement of cash flows.

 

During the year ended September 30, 2015;

 

i) the Company issued 7,272,487 shares of common stock and an additional 167,415 shares of common stock are issuable upon conversion of $7,439,900 in principal amount of convertible debentures at a conversion price of $1.00 per share;

 

ii) the Company reclassified an amount of $4,482,000 into equity upon modification of the terms of certain derivative instruments.

 

During the year ended September 30, 2014;

 

a) the Company reclassified an amount of $221,000 into equity upon modification of the terms of certain derivative instruments.

 

b) the Company issued 1,594,607 shares of common stock of the Company pursuant to the conversion of $1,913,528 face value of convertible debentures at $1.20 per share;

 

c) the Company issued 640,428 shares of common stock of the Company at a fair value of $551,120 pursuant to the conversion of convertible debentures at a conversion price of $1.00 per share.

 

Note 13 Subsequent Events

 

i) On October 21, 2015, the Company entered into a $50,000,000 purchase agreement (the “Purchase Agreement”) with Lincoln Park pursuant to which the Company may sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $50,000,000 in value of its shares of common stock from time to time over a 36 month period. In connection with the Purchase Agreement, the Company also entered into a registration rights agreement with Lincoln Park whereby the Company agreed to file a registration statement with the SEC covering the shares of the Company’s common stock that may be issued to Lincoln Park under the Purchase Agreement.

 

The Company may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 50,000 shares of common stock on any business day, provided that at least one business day has passed since the most recent purchase. The amount of a purchase may be increased under certain circumstances provided, however that Lincoln Park’s committed obligation under any single purchase shall not exceed $2,000,000. The purchase price of shares of common stock related to the future funding will be based on the then prevailing market prices of such shares at the time of sales as described in the Purchase Agreement.

 

In consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park 179,598 shares of common stock as a commitment fee and shall issue up to 89,799 shares pro rata, when and if, Lincoln Park purchases at the Company’s discretion the $50,000,000 aggregate commitment. 

 

ii) On December 22, 2015, the Company received a subpoena from the Securities and Exchange Commission (SEC) which indicates that the agency is conducting a formal investigation. The Company believes the subpoena and investigation relate to the recent unusual activity in the market for the Company’s shares. The Company is fully cooperating with the SEC in this investigation and is unable to predict when this matter will be resolved or what further action, if any, the SEC may take in connection with it.

 

 

F- 34  

 

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS

 

Not Applicable

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

As required by Rule 13a-15 under the Securities Exchange Act of 1934, our management, with the participation of our principal executive officer and principal financial officer, evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934) as of the end of the period covered by this Annual Report on Form 10-K.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to our principal executive officer and principal financial officer to allow timely decisions regarding required disclosure.

 

Based on its evaluation, our management, with the participation of our principal executive officer and principal financial officer, concluded that as of the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due to internal control weaknesses further described below in Management’s Report on Internal Control over Financial Reporting.

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over our financial reporting. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, our management, with the participation of our principal executive officer and our principal financial officer have conducted an assessment, including testing, using the criteria in Internal Control — Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Our system of internal control over financial reporting is 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.

 

Our management believes that because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions and that the degree of compliance with the policies or procedures may deteriorate.

 

Based on our evaluation under the framework in COSO, our management concluded that our internal control over financial reporting was ineffective as of September 30, 2015. The ineffectiveness of our internal control over financial reporting was due to the existence of material weaknesses. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management identified the following material weaknesses:

 

  26  

 

 

(i) We had an insufficient segregation of duties in our finance and accounting functions due to limited personnel. During the fiscal year ended September 30, 2015, we had limited staff that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This creates certain incompatible duties and a lack of review over the financial reporting process that would likely result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the Securities and Exchange Commission. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected;

 

(ii) We did not maintain a sufficient compliment of personnel with an appropriate level of tax and complex accounting knowledge and training commensurate with our financial reporting requirements and business environment. This weakness resulted in material post closing adjustments which were reflected in our financial statements for the year ended September 30, 2015 and 2014;

 

(iii) we did not maintain effective monitoring controls to determine the adequacy of our internal control over financial reporting and related policies and procedures because our policies and procedures with respect to the review, supervision and monitoring of our accounting operations throughout the organization were either not designed and in place or not operating effectively.

 

To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

 

Plan for Remediation of Material Weaknesses

 

The weaknesses and their related risks are not uncommon in a company of our size because of the limitations in the size and number of staff. Due to our size and nature, segregation of all conflicting duties has not always been possible.

 

Subsequent to September 30, 2015, we engaged additional staff who participate in the financial reporting process which we believe will enable us to maintain adequate segregation of duties of our finance and accounting functions going forward. In addition, we intend to take additional appropriate and reasonable steps to remediate the material weaknesses identified. In particular, we intend to update the documentation of our internal control processes, including formal risk assessment of our financial reporting processes and formal documentation of our internal controls over financial reporting and related policies and procedures.

 

We believe that the foregoing steps will remediate the deficiencies identified above, and we intend to continue to monitor the effectiveness of these steps and make any changes that our management deems appropriate.

 

Limitations on Effectiveness of Controls

 

Our principal executive officer and principal financial officer do not expect that our disclosure controls and procedures or our internal control over financial reporting will be able to prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additional controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

 

  27  

 

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2015 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting. Subsequent to September 30, 2015, we engaged additional staff in the financial reporting process which we believe will enable us to maintain adequate segregation of duties of our finance and accounting functions going forward.

 

ITEM 9B OTHER INFORMATION

 

None.

 

  28  

 

 

PART III

 

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

Directors and Executive Officers

 

Our directors are to be elected at our annual meeting and each director elected is to hold office until his or her successor is elected and qualified. Our board of directors may remove our officers at any time.

 

Our directors and executive officers, their age, positions held, and duration of such, are as follows:

 

Name   Position   Age   Date first appointed
Christopher Missling, PhD   Director, President, Chief Executive Officer, Secretary, Treasurer   50   July 5, 2013
Athanasios Skarpelos   Director   49   January 9, 2013
Bernd Metzner, PhD   Director   45   May 7, 2014
Elliot Favus, MD   Director   40   May 7, 2014
Steffen Thomas, PhD   Director   50   June 15, 2015
Sandra Boenisch   Principal Financial Officer   34   October 1, 2015

 

Business Experience

 

The following is a brief account of the education and business experience of directors and executive officers during at least the past five years, indicating their principal occupation during the period, and the name and principal business of the organization by which they were employed.

 

Christopher Missling, PhD . Christopher Missling has over twenty (20) years of healthcare industry experience in big pharmaceutical, biotech industry and investment banking. Most recently, from March, 2007 until his appointment by our company, Mr. Missling served as the head of healthcare investment banking at Brimberg & Co. in New York, New York. Also, Mr. Missling served as the Chief Financial Officer of Curis, Inc. (NASDAQ:CRIS) and ImmunoGen, Inc. (NASDAQ:IMGN). Mr. Missling earned his MS and PhD from the University of Munich and an MBA from Northwestern University Kellogg School of Management and WHU Otto Beisheim School of Management.

 

Athanasios Skarpelos . Athanasios (Tom) Skarpelos is a self-employed investor with 18 years of experience working with private and public companies. For the past 10 years, he has been focused on biotechnology companies involved in drug discovery and drug development projects. Mr. Skarpelos was engaged as a consultant to our company for one year effective August 2, 2010. His experience has led to relationships with researchers at academic institutes in Europe and North America. Mr. Skarpelos is a founder of Anavex.

 

Bernd Metzner, PhD. Bernd Metzner has been the Chief Financial Officer of Ströer Media AG since June 2014 and serves as its Member of Management Board. Prior, Dr. Metzner served as Chief Financial Officer of the Doehler Group, a global producer and provider of technology-based natural ingredients for the food and beverage industry with sales activities in more than 130 countries. Previously, he was Chief Administration Officer and member of the Board of Management of Bayer Schering Pharma AG, the pharmaceutical division of $100+ billion market cap company Bayer AG. In this position, Dr. Metzner had worldwide financial responsibility for the Bayer Pharma Group. During his almost 10-years with Bayer AG, Dr. Metzner also held several senior international management positions in the corporate finance organization of Bayer AG, including Chief Financial Officer of Bayer S.p.A. Italy and heading the coordination of the successful spin-off of Lanxess, a specialty chemicals group. Dr. Metzner started his career at the law firm Flick Gocke Schaumburg and has a degree in business administration from the University of Siegen. After obtaining his doctorate, he became a chartered accountant.

 

  29  

 

 

Elliot Favus, MD. Elliot Favus is Chief Executive Officer of Favus Institutional Research, a healthcare research firm serving institutional investors. He has been a healthcare equity research analyst on Wall Street since 2006, starting at Lazard Capital Markets and subsequently at Och-Ziff Capital Management Group. Prior to working on Wall Street, Dr. Favus was an Instructor in medicine at Mount Sinai School of Medicine in New York. He attended the University of Michigan (BA, 1996), the University of Chicago Pritzker School of Medicine (MD, 2001) and the NYU-Bellevue Hospital Internal Medicine Residency Program (2004). He is board-certified in Internal Medicine (2004) and has 10 years of basic science laboratory experience working on human genetics projects at Harvard Medical School, the University of Chicago and the University of Pittsburgh.

 

Steffen Thomas, PhD Steffen Thomas, PhD, has over 15 years of experience as a European patent attorney and is currently practicing at Epping Hermann Fischer, a major intellectual property law firm in Europe. Previously, he worked for Japan-based Takeda Pharmaceutical Company, the largest pharmaceutical company in Asia and a top firm worldwide, as an in-house patent attorney. Prior to that, he worked for Nycomed Pharma, acquired by Takeda in 2011 for approximately USD $10 billion. Dr. Thomas’ legal practice covers drafting of patent applications, prosecuting patent applications before national and international patent offices, defending and challenging patents in opposition, appeal, and nullity proceedings, enforcing patents before the infringement courts, and preparing opinions on patentability and infringement in the technical field of chemistry. Dr. Thomas has particular expertise in small molecule pharmaceuticals. He holds MS and PhD degrees in Chemistry from the University of Munich.

 

Sandra Boenisch, CPA, CGA Ms. Boenisch is a Chartered Professional Accountant (CPA, CGA) with 14 years of accounting, audit, and financial reporting experience in a variety of industries, both in the United States and Canada. Ms. Boenisch has been an independent consultant, providing financial reporting services to a range of public companies in the United States and Canada since January 2012. From 2008 until 2012, Ms. Boenisch was employed at BDO Canada LLP (Vancouver, BC) where she was hired as a Senior Accountant and was later promoted to Manager, Audit Assurance. Ms. Boenisch specialized in managing assurance engagements for public companies in the United States and Canada. Prior to that, Ms. Boenisch worked for a public accounting firm beginning in 2001. As an independent consultant, Ms. Boenisch has acquired considerable experience in finance, governance, and regulatory compliance. She holds a BComm from Laurentian University.

 

Family Relationships

 

There are no family relationships between any director or executive officer.

 

Involvement in Certain Legal Proceedings

 

There are no material proceedings to which any director or executive officer or any associate of any such director or officer is a party adverse to our company or has a material interest adverse to our company.

 

No director or executive officer has been involved in any of the following events during the past ten years:

 

1. any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

2. any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

3. being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities;

4. being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

5. being the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: (i) any federal or state securities or commodities law or regulation; or (ii) any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease- and- desist order, or removal or prohibition order; or (iii) any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

 

  30  

 

 

6. being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Securities Exchange Act of 1934), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors and persons who own more than 10% of our common stock to file with the Securities and Exchange Commission initial statements of beneficial ownership, reports of changes in ownership and annual reports concerning their ownership of our common stock and other equity securities, on Forms 3, 4 and 5 respectively. Executive officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission regulations to furnish us with copies of all Section 16(a) reports that they file.

 

Based solely on the copies of such reports and amendments thereto received by us, or written representations that no filings were required, we believe that all Section 16(a) filing requirements applicable to our executive officers and directors and 10% stockholders were met for the year ended September 30, 2015, with the exception of the following:

 

Name   Number of LateReports    

Number of   Transactions Not

Reported on a TimelyBasis

    Failure to
File Requested Forms
Christopher Missling     2 (1)     2     Nil
Bernd Metzner     1 (1)     1     Nil
Elliot Favus     1 (1)     1     Nil
Athanasios Skarpelos     1 (1)     1     Nil

(1) Failure to file Form 4 – Statement of Changes in Beneficial Ownership.

 

Code of Ethics

 

We have adopted a code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. We have posted our policy on our website at www.anavex.com .

 

Audit Committee and Audit Committee Financial Experts

 

The members of the Audit Committee are Bernd Metzner (Chairman), Elliot Favus and Steffen Thomas. Our board of directors has determined that Bernd Metzner is an “audit committee financial expert” as defined by applicable SEC and Nasdaq rules.

 

The Audit Committee oversees and reports to our board of directors on various auditing and accounting-related matters, including, among other things, the maintenance of the integrity of our financial statements, reporting process and internal controls; the selection, evaluation, compensation and retention of our independent registered public accounting firm; legal and regulatory compliance, including our disclosure controls and procedures; and oversight over our risk management policies and procedures.

 

The Audit Committee operates under a charter that was adopted by our board of directors.

 

  31  

 

 

Nominating and Corporate Governance Committee

 

The members of our Nominating and Corporate Governance Committee are Bernd Metzner (Chairman) and Elliot Favus.

 

The Nominating and Corporate Governance Committee is appointed by the Board to oversee and evaluate the Board's performance and the company's compliance with corporate governance regulations, guidelines and principles, to identify individuals qualified to become Board members, to recommend to the Board proposed nominees for Board membership, and to recommend to the Board directors to serve on each standing committee.

 

Compensation Committee

 

The members of our Compensation Committee are Bernd Metzner (Chairman) and Elliot Favus.

 

The Compensation Committee assists our board of directors in discharging its responsibilities relating to compensation of our directors and executive officers. Its responsibilities include, among other things, reviewing, approving and recommending compensation programs and arrangements applicable to our officers; determining the objectives of our executive officer compensation programs; overseeing the evaluation of our senior executives; administering our incentive compensation plans and equity-based plans, including reviewing and granting equity awards to our executive officers; and reviewing and approving director compensation and benefits. The Compensation Committee can delegate to other members of our board of directors, or an officer or officers of the Company, the authority to review and grant stock-based compensation for employees who are not executive officers.

 

The Compensation Committee has the responsibilities and authority designated by Nasdaq rules. Specifically, the Compensation Committee has the sole discretion to select and receive advice from a compensation consultant, legal counsel or other adviser and is directly responsible for oversight of their work. The Compensation Committee must also determine reasonable compensation to be paid to such advisors by us.

 

Prior to the formation of our Compensation Committee, our board of directors performed the functions that would have been handled by the Compensation Committee.

 

The Compensation Committee operates under a charter that was adopted by our board of directors.

 

ITEM 11. EXECUTIVE COMPENSATION

 

Summary Compensation

 

The particulars of compensation paid to the following persons for the last two completed fiscal years:

 

a) our principal executive officers;

b) each of our two most highly compensated executive officers who were serving as executive officers at the end of the fiscal year ended September 30, 2015 who had total compensation exceeding $100,000; and

c) up to two additional individuals for whom disclosure would have been provided under (b) but for the fact that the individual was not serving as our executive officer at the end of the most recently completed financial year, who we will collectively refer to as the named executive officers, for our fiscal years ended September 30, 2015 and 2014, are set out in the following summary compensation table:

 

  32  

 

 

Name and Principal 
Position
  Year     Salary 
($)
    Bonus 
($)
    Stock 
Awards 
($)
    Option 
Awards 
($)
    Other 
Annual 
Compen- 
sation 
($)
    Total 
($)
 
Christopher Missling, PhD (1)     2015       240,000         1,220,000       1,151,309       1,128,064 (2)     3,739,373  
President, Chief Executive Officer,     2014       240,000       400,000 (3)     Nil       127,800       Nil       767,800  
Chief Financial Officer and Director                                                        
Sandra Boenisch (4)     2015       Nil       Nil       Nil       Nil       Nil       Nil  
Principal Financial Officer     2014       Nil       Nil       Nil       Nil       Nil       Nil  

 

(1) Christopher Missling was appointed as director, President, Chief Executive Officer, Chief Financial Officer, Secretary and Treasurer on July 5, 2013.

(2) The compensation was recorded in connection with the Company’s payment of an income tax withholding obligation arising as a result of the vesting of restricted stock awards during the year ended September 30, 2015, in accordance with the terms of Mr. Missling’s employment agreement dated July 5, 2013.

(3) The bonus was a result of the successful financing in March, 2014.
(4) Sandra Boenisch’s employment became effective on October 1, 2015. Ms. Boenisch was not been paid any compensation or bonuses, or granted any stock or option awards for fiscal year end 2015 and 2014

 

Employment Agreements

 

Christopher Missling

 

In connection with Mr. Missling’s appointment as Chief Executive Officer, the Company and Mr. Missling entered into an employment agreement commencing on July 5, 2013 and ending on July 5, 2016, whereby: (a) the Company shall pay to Mr. Missling an initial monthly base salary of $20,000 with Mr. Missling being eligible for bonuses and salary increases; (b) Mr. Missling received a sign-on stock option grant; (c) Mr. Missling shall receive a restricted stock grant subject to certain vesting milestones; (d) Mr. Missling shall be able to participate in the Company’s employee benefit plans; and (e) the Company agreed to indemnify Mr. Missling in connection with his provision of services to the Company.

 

Sandra Boenisch

 

In connection with Ms. Boenisch’s appointment as Principal Financial Officer, the Company and Ms. Boenisch entered into an employment agreement, effective October 1, 2015, whereby: (a) the Company shall pay to Ms. Boenisch an annual base salary of Seventy-Eight Thousand and 00/100 Canadian Dollars ($78,000 CAD), with Ms. Boenisch being eligible for bonuses which are anticipated to be up to 25% of her annual base salary, and salary increases; (b) Ms. Boenisch shall receive a sign-on stock option grant of 100,000 shares; and (c) Ms. Boenisch shall be able to participate in the Company’s employee benefit plans.

 

  33  

 

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table sets forth for each named executive officer and director certain information concerning the outstanding equity awards as of September 30, 2015.

 

Option Awards   Stock Awards  
Name   Number of 
Securities 
Underlying 
Exercisable
Options 
(#)
    Number of 
Securities 
Underlying 
Unexercisable 
Options 
(#)
    Equity
Incentive 
Plan
Awards: 
Number
of 
Securities 
Underlying 
Unexercised 
Unearned
Options 
(#)
    Option
Exercise 
Price 
($)
    Option 
Expiration 
Date
  Number
of 
Shares
of 
Units of
Stock 
that have
not 
Vested 
(#)
    Market 
Value of 
Shares or 
Units of 
Stock that 
have not 
Vested 
($)
    Equity 
Incentive 
Plan 
Awards: 
Number 
of 
Unearned 
Shares, 
Units
or 
Other 
Rights 
that
have 
not 
Vested 
(#)
    Equity 
Incentive 
Plan 
Awards: 
Market or 
Payout 
Value of 
Unearned 
Shares, 
Units or 
Other 
Rights that 
have not 
Vested 
($)
 
Christopher Missling     500,000       Nil       Nil       1.60     July 5, 2023     250,000       1,410,000       Nil       Nil  
      31,250       93,750       Nil       1.32     May 8, 2024                                
      166,667       333,333       Nil       0.92     April 2, 2025                                
      Nil       187,500       Nil       5.04     September 18, 2025                                
                                                                     
Athanasios Skarpelos     16,667       33,333       Nil       0.92     April 2, 2025     Nil       N/A       Nil       N/A  
                                                                     
Bernd Metzner     16,667       33,333       Nil       0.92     April 2, 2025     Nil       N/A       Nil       N/A  
                                                                     
Elliot Favus     16,667       33,333       Nil       0.92     April 2, 2025     Nil       N/A       Nil       N/A  
                                                                     
Steffen Thomas     -       50,000       Nil       1.68     June 15, 2025     Nil       N/A       Nil       N/A  

 

Stock Option Plan

 

Our board of directors adopted an Omnibus Incentive Plan (the “2015 Plan”), which was approved by our board on September 18, 2015. The 2015 Plan provides for the grant of stock options and restricted stock awards to directors, officers, employees and consultants of the Company.

 

The maximum number of our common shares reserved for issue under the plan is 6,050,553 shares, subject to adjustment in the event of a change of the Company’s capitalization. As a result of the adoption of the 2015 Plan, no further option awards will be granted under any previously existing stock option plan. Stock option awards previously granted under previously existing stock option plans remain outstanding in accordance with their terms.

 

  34  

 

 

The 2015 Plan is administered by our board of directors, except that it may, in its discretion, delegate such responsibility to a committee of such board. The exercise price is determined by the board of directors at the time of grant but in no event will be less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted under the 2015 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by the board, subject to earlier termination in accordance with the terms of the 2015 Plan.

 

Compensation of Directors

 

The table below shows the compensation of our directors who were not our named executive officers for the fiscal year ended September 30, 2015:

Name   Fees Earned
or Paid in
Cash
($)
    Stock 
Awards 
($)
    Option 
Awards 
($)
    Non-Equity
Incentive
Plan
Compensation
($)
    Nonqualified
Deferred
Compensation
Earnings
($)
    All Other
Compensation
($)
    Total 
($)
 
                                           
Athanasios Skarpelos     Nil       Nil       35,860       Nil       Nil       Nil       35,860  
                                                         
Bernd Metzner     11,500       Nil       35,860       Nil       Nil       Nil       47,360  
                                                         
Elliot Favus     Nil       Nil       35,860       Nil       Nil       Nil       35,860  
                                                         
Steffen Thomas     Nil       Nil       70,300       Nil       Nil       Nil       70,300  

 

We have agreed to compensate Bernd Metzner an amount of $4,000 per quarter for performing the functions of Chairman of the Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

 

We have agreed to grant stock options to purchase an aggregate of 6,000 shares of common stock each calendar quarter to Elliot Favus as compensation for serving as a member of our Company’s Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee.

 

In addition, directors are entitled to reimbursement for reasonable travel and other out-of-pocket expenses incurred in connection with attendance at meetings of our board of directors. Our board of directors may award further special remuneration to any director undertaking any special services on our behalf other than services ordinarily required of a director.

 

Retirement or Similar Benefit Plans

 

There are no arrangements or plans in which we provide retirement or similar benefits for our directors or executive officers.

 

Resignation, Retirement, Other Termination, or Change in Control Arrangements

 

Our employment agreement with Christopher Missling, PhD contains provisions regarding our obligations to Mr. Missling upon his termination and upon a change of control. In the event of a change of control, as such term is defined in the employment agreement, all of the restricted stock granted to Mr. Missling shall vest. Depending on the nature of the termination of Mr. Missling’s services, certain of his salary, bonus and granted securities shall vest in the amounts at such time as set forth in the agreement. A copy of the employment agreement is set forth in its entirety as an exhibit to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2013.

 

Our employment agreement with Sandra Boenisch contains provisions regarding our obligations to Ms. Boenisch upon a change of control. In the event of a change of control, as such term is defined in the employment agreement, all of the remaining unvested option shares granted to Ms. Boenisch will immediately vest with no restrictions on purchase or sales. A copy of the employment agreement is set forth in its entirety as an exhibit hereto.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of December 29, 2015, certain information with respect to the beneficial ownership of our common stock by each stockholder known by us to be the beneficial owner of more than 5% of our common stock and by each of our current directors and our named executive officers and by our current directors and executive officers as a group. We have determined the number and percentage of shares beneficially owned by such person in accordance with Rule 13d-3 under the Securities Exchange Act of 1934. This information does not necessarily indicate beneficial ownership for any other purpose.

 

Title of class   Name and address of
beneficial owner
  Amount and nature of
beneficial ownership
    Percent of
class (1)
 
Common Stock   Athanasios Skarpelos (Director)
2, Place du Port
Geneva, Switzerland CH 1204
    1,323,125 (2)     3.8 %
                     
Common Stock   Christopher Missling (CEO/Director)
51 W 52nd Street,
7th floor
New York, NY 10019
    1,701,167 (3)     4.7 %
                     
Common Stock  

Bernd Metzner (Director)

51 W 52 nd Street,

7 th Floor

New York, NY 10019

    29,167 (4)     0.1 %
                     
Common Stock  

Elliot Favus (Director)

51 W 52 nd Street,

7 th Floor

New York, NY 10019

    29,167 (4)     0.1 %
                     
Common Stock  

Steffen Thomas (Director)

51 W 52 nd Street,

7 th Floor

New York, NY 10019

    - (5)     -  
                     
Common Stock  

Sandra Boenisch (Principal Financial Officer)

51 W 52 nd Street,

7 th Floor

New York, NY 10019

    25,046 (6)     0.1 %
                     
Common Stock   Directors & Executive Officers as a group (6 persons)     3,107,672       8.6 %

 

  36  

 

 

(1) Percentage of ownership is based on 34,601,173 shares of our common stock issued and outstanding as of December 29, 2015. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed above, based on information furnished by such owners, have sole investment and voting power with respect to such shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days, are deemed outstanding for purposes of computing the percentage ownership of the person holding such option or warrants, but are not deemed outstanding for purposes of computing the percentage ownership of any other person.

 

(2) Includes options to purchase 16,667 shares of our common stock at $0.92 per share that have vested. Excludes options to purchase 33,333 shares of our common stock at $0.92 per share that do not vest within 60 days.

 

(3) Includes options to purchase 500,000 shares of our common stock at $1.60 that have vested, options to purchase 31,250 shares of our common stock at $1.32 that have vested, options to purchase 166,667 shares of our common stock at $0.92 per share that have vested, and 1,000,000 shares of restricted common stock that have vested pursuant to the achievement of certain objectives. Excludes options to purchase 93,750 shares of our common stock at $1.32 per share, options to purchase 333,333 shares of our common stock at $0.92 per share and options to purchase 187,500 shares of our common stock at $5.04 per share that do not vest within 60 days.

 

(4) Includes options to purchase 12,500 shares of our common stock at $1.20 per share and 16,667 shares of our common stock at $0.92 per share that have vested. Excludes options to purchase 25,000 shares of our common stock at $1.20 per share and 33,333 shares of our common stock at $0.92 per share that do not vest within 60 days.

 

(5) Excludes options to purchase 50,000 shares of our common stock at $1.76 per share that do not vest within 60 days.

 

(6) Includes options to purchase 2,083 shares of our common stock at $5.68 per share that have vested. Excludes options to purchase 22,917 shares of our common stock at $5.68 per share that do not vest within 60 days.

 

Change in Control

 

We are unaware of any contract or other arrangement the operation of which may at a subsequent date result in a change of control of our Company.

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

Transactions with related persons

 

There have been no other transactions, since October 1, 2014, or currently proposed transactions, in which we were or are to be a participant and the amount involved exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any of the following persons had or will have a direct or indirect material interest.

 

i. any director or executive officer of our company;

 

ii. any beneficial owner of shares carrying more than 5% of the voting rights attached to our outstanding shares of common stock; and

 

iii. any member of the immediate family (including spouse, parents, children, siblings and in-laws) of any of the foregoing persons.

 

Compensation of Named Executive Officers and Directors

 

For information regarding compensation of named executive officers and directors, please see “Item 11. Executive Compensation.”

 

Director Independence

 

We deem that Christopher Missling, PhD is not independent as that term is defined by NASDAQ 5605(a)(2) because Mr. Missling serves as our President, Chief Executive Officer, Secretary and Treasurer. We have also determined that Athanasios Skarpelos is not independent as that term is defined by NASDAQ 5605(a)(2).

 

We deem that Bernd Metzner, Elliot Favus and Steffen Thomas are independent as that term is defined by NASDAQ 5605(a)(2).

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

 

Fees Paid to Our Independent Registered Public Accounting Firm

 

The following table sets forth the aggregate fees billed or expected to be billed to our company for professional services rendered by our independent registered public accounting firm, for the fiscal years ended September 30, 2015 and 2014:

 

    2015     2014  
Audit Fees   $ 98,490     $ 86,000  
Audit Related Fees   $ 22,358     $ 29,125  
Tax Fees     Nil       Nil  
All Other Fees     Nil       Nil  
Total Fees   $ 120,848     $ 115,125  

 

Audit Fees . Consist of fees billed for professional services rendered for the audits of our financial statements, reviews of our interim financial statements included in quarterly reports, services performed in connection with regular filings with the Securities and Exchange Commission and other services that are normally provided by our independent registered public accounting firm for the fiscal years ended September 30, 2015 and 2014, in connection with statutory and regulatory filings or engagements.

 

  38  

 

 

Audit Related Fees . Consists of fees billed for professional services rendered in connection with the Company’s filings on form S-1 Registration Statement.

 

Tax Fees . Consist of fees billed for the preparation of corporate tax returns

 

Policy on Pre-Approval by Audit Committee of Services Performed by Independent Registered Public Accounting Firm

 

Our Audit Committee pre-approves all services provided by our independent registered public accounting firm. All of the above services and fees were reviewed and approved by our Audit Committee and board of directors before the respective services were rendered.

 

Our Audit Committee and board of directors has considered the nature and amount of fees billed or expected to be billed by BDO USA, LLP and believes that the provision of services for activities unrelated to the audit was compatible with maintaining BDO USA, LLP’s independence.

 

  39  

 

 

PART IV

 

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

 

Exhibit
Number
  Description
(3)   Articles of Incorporation and Bylaws
3.1   Articles of Incorporation (incorporated by reference to an exhibit to our Registration Statement on Form SB-2 filed on January 13, 2005)
3.2   Bylaws (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 28, 2007)
3.3   Articles of Merger filed with the Secretary of State of Nevada on January 10, 2007 and which is effective January 25, 2007 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on January 25, 2007)
3.4*   Certificate of Change filed with the Secretary of State of Nevada on October 6, 2015 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on October 6, 2015)
(4)   Instruments defining rights of security holders, including indentures
4.1   Specimen Stock Certificate (incorporated by reference to an exhibit to our Registration Statement on Form SB-2 filed on January 13, 2005)
4.2   Form of Convertible Loan Agreement (incorporated by reference to an exhibit to our Form 8-K filed on April 3, 2009)
4.3   8% Convertible Loan Agreement dated June 3, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
4.4   8% Convertible Loan Agreement dated June 19, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 26, 2009)
(10)   Material Contracts
10.1   Agreement between Anavex Life Sciences Corp. and Dr. Alexandre Vamvakides dated January 31, 2007 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2007)
10.2   Form of Stock Option Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 22, 2007)
10.3   Shares for Services and Subscription Agreement dated September 11, 2007 between our company and Eurogenet Labs S.A. (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 27, 2007)
10.4   2007 Stock Option Plan (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 28, 2007)
10.5   Consulting Agreement with Cameron Durrant dated May 20, 2008 (incorporated by reference to an exhibit to our Quarterly Report on Form 10-QSB filed on August 18, 2008
10.6   Form of Convertible Loan Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)
10.7   Consulting Agreement with Tariq Arshad dated March 2, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)
10.8   Consulting Agreement with Dr. Mark Smith dated January 13, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)
10.9   Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)

 

  40  

 

 

Exhibit
Number
  Description
10.10   Form of Warrant Certificate (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)
10.11   Amended Consulting Agreement with Cameron Durrant dated May 14, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.12   CEO Consulting Agreement with Dr. Herve de Kergrohen dated June 12, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.13   Form of Private Placement subscription agreement dated June 15, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.14   Shares for Services Agreement with Andreas Eleuthariadis dated June 10, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.15   Shares for Services Agreement with Vasileios Kourafalos dated June 10, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.16   Shares for Services Agreement with George Kalkanis dated June 10, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.17   Stock Option Agreement with Alexandre Vamvakides dated June 11, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 23, 2009)
10.19   Form of Private Placement Subscription Agreement Convertible Loan (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 26, 2009)
10.20   Form of Private Placement Subscription Agreement for Units (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 26, 2009)
10.21   Consultant Services Agreement with NAD Ltd. dated July 1, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 24, 2009)
10.22   Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 24, 2009)
10.23   Form of Warrant Certificate (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on August 12, 2009)
10.24   Stock Option Agreement with Alexander Vamvakides dated October 19, 2009 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 24, 2009)
10.25   Promissory note issued to Stonehedge Limited on January 1, 2010 (incorporated by reference to an exhibit to our Quarterly Report on Form 10-Q filed on March 31, 2010)
10.26   Second Amended Consulting Agreement with Dr. Cameron Durrant dated January 2, 2010 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)
10.27   Contract Lease Agreement with Euro Genet Labs SA dated February 1, 2010 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)
10.28   Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)
10.29   Form of Warrant Certificate (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)
10.30   Form of Convertible Loan Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)
10.31   Form of Subscription Agreement for US subscribers (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 6, 2010)
10.32   Form of Subscription Agreement for non-US subscribers (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 6, 2010)
10.33   Form of Warrant Certificate for US warrant holders (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 6, 2010)

 

  41  

 

 

Exhibit
Number
  Description
10.34   Form of Warrant Certificate for non-US warrant holders (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 6, 2010)
10.35   Shares for Services Agreement dated July 5, 2010 with Eurogenet Labs SA (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 9, 2010)
10.36   Form of Warrant Certificate for non-US warrant holders (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 9, 2010)
10.37   Agreement for Services with Genesis Biopharma Group LLC dated August 10, 2010 (incorporated by reference to an exhibit of our Current Report on Form 8-K filed on August 18, 2010) (portions of the exhibit have been omitted pursuant to a request for confidential treatment)
10.38   Agreement for Services with ABX-CRO Advanced Pharmaceutical Services dated August 10, 2010 (incorporated by reference to an exhibit of our Current Report on Form 8-K filed on August 18, 2010) (portions of the exhibit have been omitted pursuant to a request for confidential treatment)
10.39   Form of Subscription Agreement (US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 9, 2010)
10.40   Form of Subscription Agreement (Canadian and Offshore Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 9, 2010)
10.41   Form of Warrant Certificate (US warrant holders)(incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 9, 2010)
10.42   Form of Warrant Certificate (Canadian and Offshore warrant holders) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 9, 2010)
10.43   Consulting Agreement dated August 2, 2010 with Tom Skarpelos (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 27, 2010)
10.44   Independent Contractor Agreement dated September 1, 2010 with David Tousley (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 27, 2010)
10.45   Sublease Contract with Genesis Research LLC dated September 15, 2010 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 27, 2010)
10.46   Form of Subscription Agreement (US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.47   Form of Subscription Agreement (non-US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.48   Form of Warrant Certificate (US Warrant Holders) (US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.49   Form of Warrant Certificate (non-US Warrant Holders) (US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.50   Shares for Service and Subscription Agreement dated November 1, 2010 with Eurogenet Labs SA (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.51   Subscription Agreement with Stonehedge Limited dated November 17, 2010 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 22, 2010)
10.52   Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 30, 2010)
10.53   Form of Warrant Certificate Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 30, 2010)
10.54   Shares for Services Agreement Form of Subscription Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on November 30, 2010)

 

  42  

 

 

Exhibit
Number
  Description
10.55   Form of Subscription Agreement (non-US Purchasers) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2011)
10.56   Form of Warrant Certificate (non-US Warrant Holders) (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2011)
10.57   Termination Agreement dated February 2, 2011 with Genesis BioPharma Group, LLC  (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2011)
10.58   Independent Contractor Agreement with Harvey Lalach dated February 1, 2011 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2011)
10.59   Independent Contractor Agreement with Dr. Angelos Stergiou dated February 1, 2011 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 7, 2011)
10.60   Amended and Restated 2007 Stock Option Plan (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 8, 2011)
10.61   Form of Advisory Board Consulting Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on February 28, 2011)
10.62   Consulting Agreement dated March 30, 2011 with Shackleton Consulting Corp. (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 13, 2011)
10.63   Form of subscription agreement for convertible debenture (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on April 26, 2011)
10.64   Form of subscription agreement for convertible debenture (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on May 9, 2011)
10.65   Form of warrant certificate (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on May 9, 2011)
10.66   Amended Stock Option Agreement dated September 16, 2011 with Cameron Durrant (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 21, 2011)
10.67   Consulting Agreement dated effective October 10, 2011, with George Tidmarsh (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on October 14, 2011)
10.68   Form of subscription agreement for services (US purchaser) (incorporated by reference to our current report on Form 8-K filed on February 10, 2012)
10.69   Form of subscription agreement for units (Offshore purchasers) (incorporated by reference to our current report on Form 8-K filed on February 10, 2012)
10.70   Unsecured Promissory Note dated April 20, 2012 issued to Georgia Georgopoulou (incorporated by reference to our quarterly report on Form 10-Q filed on May 15, 2012)
10.71   Form of subscription agreements for convertible debenture and promissory notes (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on June 7, 2012)
10.72   Promissory Note dated October 17, 2012 issued to Akira International Limited (incorporated by reference to an exhibit to our Annual Report on Form 10-K filed on December 31, 2012)
10.73   Promissory Note dated November 12, 2012 issued to Akira International Limited (incorporated by reference to an exhibit to our Annual Report on Form 10-K filed on December 31, 2012)
10.74   Form of SPA (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 8, 2013)
10.75   Form of Exchange Agreement (incorporated by reference to an exhibit to our Current Report on Form 8- K filed on July 8, 2013)
10.76   Form of Warrant (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 8, 2013)

 

  43  

 

 

Exhibit
Number
  Description
10.77   Form of Registration Rights Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 8, 2013)
10.78   Purchase Agreement, dated as of July 5, 2013, by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 8, 2013)
10.79   Registration Rights Agreement, dated as of July 5, 2013, by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on July 8, 2013)
10.80   Employment Agreement, dated as of July 5, 2013, by and between the Company and Christopher Missling, PhD (incorporated by reference to an exhibit to our Quarterly Report on Form 10-Q filed on August 14, 2013)
10.81   2012 Addendum to the Contract for the Transfer of a Patent Invention and Scientific Collaboration dated January 11, 2013 (incorporated by reference to an exhibit to our Annual Report on Form 10-K filed on December 30, 2013)
10.82   Appendix A to the 2012 Addendum to the Contract for the Transfer of a Patent Invention and Scientific Collaboration dated January 11, 2013 (incorporated by reference to an exhibit to our Annual Report on Form 10-K filed on December 30, 2013)
10.83   Form of Amendment No. 1 to Common Stock Securities Purchase Warrant, entered into December 21, 2013 Agreement, dated March 13, 2014, by and among the Company and the Purchasers named therein (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on March 19, 2014)
10.84   Form of Registration Rights Agreement, dated March 13, 2014, by and among the Company and the parties identified therein (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on March 19, 2014)
10.85   Form of Senior Convertible Debenture (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on March 19, 2014)
10.86   Form of Series A/B Warrant (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on March 19, 2014)
10.87   Form of Amendment No. 1 to Registration Rights Agreement (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on August 25, 2014
10.88   Securities Purchase Agreement, dated October 22, 2014, by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on October 23, 2014)
10.89   Form of Series A Common Stock Purchase Warrant (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on October 23, 2014)
10.90   Form of Series B Common Stock Purchase Warrant (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on October 23, 2014)
10.91*   2015 Omnibus Incentive Plan
10.92*   Employment Agreement, dated as of October 1, 2015, by and between the Company and Sandra Boenisch
10.93   Purchase Agreement, dated as of October 21, 2015, by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to our Current Report on Form 8-K filed on October 26, 2015)
10.94   Registration Rights Agreement, dated as of October 21, 2015, by and between the Company and Lincoln Park Capital Fund, LLC (incorporated by reference to our Current Report on Form 8-K filed on October 26, 2015)

 

  44  

 

 

Exhibit
Number
  Description
(21)   Subsidiaries
21.1   Anavex Life Sciences (France) SA, incorporated under the laws of France
21.2   Anavex Australia Pty Limited, a company incorporated under the laws of Australia
(31)   Section 302 Certifications
31.1*   Section 302 Certification of Christopher Missling, PhD.
31.2*   Section 302 Certification of Sandra Boenisch
(32)   Section 906 Certifications
32.1*   Section 906 Certification of Christopher Missling, PhD and Sandra Boenisch
(99)   Additional Exhibits
99.1   Insider Trading Policy Adopted August 27, 2010 (incorporated by reference to an exhibit to our Current Report on Form 8-K filed on September 27, 2010)
(101)   XBRL
101.INS*   XBRL INSTANCE DOCUMENT
101.SCH*   XBRL TAXONOMY EXTENSION SCHEMA
101.CAL*   XBRL TAXONOMY EXTENSION CALCULATION LINKBASE
101.DEF*   XBRL TAXONOMY EXTENSION DEFINITION LINKBASE
101.LAB*   XBRL TAXONOMY EXTENSION LABEL LINKBASE
101.PRE*   XBRL TAXONOMY EXTENSION PRESENTATION LINKBASE

 

* Filed herewith.

 

  45  

 

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Date: December 29, 2015 ANAVEX LIFE SCIENCES CORP.
   
  By:

/s/ Christopher Missling, PhD

  Name: Christopher Missling, PhD
  Title: Chief Executive Officer and Treasurer (Principal Executive Officer)

  

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signatures

 

Title(s)

 

Date

         

/s/ Christopher Missling, PhD

      December 29, 2015
Christopher Missling, PhD   Chief Executive Officer and Treasurer (Principal Executive Officer)    
         

/s/ Sandra Boenisch

    December 29, 2015
Sandra Boenisch   Principal Financial Officer (Principal Accounting Officer)    
         

/s/ Athanasios Skarpelos

      December 29, 2015
Athanasios Skarpelos   Director    
         

/s/ Bernd Metzner, PhD

      December 29, 2015
Bernd Metzner, PhD   Director    
         

/s/ Elliot Favus, MD

      December 29, 2015
Elliot Favus, MD   Director    
         

/s/ Steffen Thomas, PhD

      December 29, 2015
Steffen Thomas, PhD   Director    

 

  46  

 

Exhibit 10.91  

 

anavex life sciences corp.

2015 OMNIBUS INCENTIVE PLAN

 

Anavex Life Sciences Corp. sets forth herein the terms and conditions of its 2015 Omnibus Incentive Plan, as follows:

 

1. PURPOSE

 

The Plan is intended to enhance the Company’s and its Affiliates’ ability to attract and retain highly qualified officers, Non-Employee Directors, key employees and Consultants, and to motivate such officers, Non-Employee Directors, key employees and Consultants to serve the Company and its Affiliates and to expend maximum effort to improve the business results and earnings of the Company, by providing to such persons an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. To this end, the Plan provides for the grant of stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, other share-based awards and cash awards. Any of these awards may, but need not, be made as performance incentives to reward attainment of performance goals in accordance with the terms and conditions hereof. Stock options granted under the Plan may be non-qualified stock options or incentive stock options, as provided herein. Upon becoming effective, the Plan replaces, and no further awards shall be made under, the Prior Plan.

 

2. DEFINITIONS

 

For purposes of interpreting the Plan and related documents (including Award Agreements), the following definitions shall apply:

 

2.1.          “Affiliate” means any company or other trade or business that “controls,” is “controlled by” or is “under common control” with the Company within the meaning of Rule 405 of Regulation C under the Securities Act, including any Subsidiary.

 

2.2.          “Annual Incentive Award” means a cash-based Performance Award with a performance period that is the Company’s fiscal year or other 12-month (or shorter) performance period as specified under the terms and conditions of the Award as approved by the Board.

 

2.3.          “Award” means a grant of an Option, SAR, Restricted Stock, RSU, Other Share-based Award or cash award under the Plan.

 

2.4.          “Award Agreement” means a written agreement between the Company and a Grantee, or notice from the Company or an Affiliate to a Grantee that evidences and sets out the terms and conditions of an Award.

 

2.5.          “Board” means the Board of Directors of the Company.

 

 

 

 

2.6.          “Cause” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Cause” means, unless otherwise provided in the applicable Award Agreement: (i) the commission of any act by the Grantee constituting financial dishonesty against the Company or its Affiliates (which act would be chargeable as a crime under applicable law); (ii) the Grantee’s engaging in any other act of dishonesty, fraud, intentional misrepresentation, moral turpitude, illegality or harassment that would (a) materially adversely affect the business or the reputation of the Company or any of its Affiliates with their respective current or prospective customers, suppliers, lenders or other third parties with whom such entity does or might do business or (b) expose the Company or any of its Affiliates to a risk of civil or criminal legal damages, liabilities or penalties; (iii) the repeated failure by the Grantee to follow the directives of the Chief Executive Officer of the Company or any of its Affiliates or the Board; or (iv) any material misconduct, violation of the Company’s or Affiliates’ policies, or willful and deliberate non-performance of duty by the Grantee in connection with the business affairs of the Company or its Affiliates.

 

2.7.          “Change in Control” shall have the meaning set forth in Section 15.3.2 .

 

2.8.          “Code” means the Internal Revenue Code of 1986.

 

2.9.          “Committee” means the Compensation Committee of the Board or any committee or other person or persons designated by the Board to administer the Plan. The Board will cause the Committee to satisfy the applicable requirements of any securities exchange on which the Common Stock may then be listed. For purposes of Awards to Covered Employees intended to qualify as “performance-based compensation” under Section 162(m), to the extent required by Section 162(m), Committee means all of the members of the Committee who are “outside directors” within the meaning of Section 162(m). For purposes of Awards to Grantees who are subject to Section 16 of the Exchange Act, Committee means all of the members of the Committee who are “non-employee directors” within the meaning of Rule 16b-3 adopted under the Exchange Act. All references in the Plan to the Board shall mean such Committee or the Board to the extent the Committee has been designated by the Board to administer the Plan.

 

2.10.        “Company”   means Anavex Life Sciences Corp., a Nevada corporation, or any successor corporation.

 

2.11.        “Common Stock” means the common stock of the Company.

 

2.12.        “Consultant” means a consultant or advisor that provides bona fide services to the Company or any Affiliate and who qualifies as a consultant or advisor under Form S-8.

 

2.13.        “Corporate Transaction” means a reorganization, merger, statutory share exchange, consolidation, sale of all or substantially all of the Company’s assets or the acquisition of assets or stock of another entity by the Company or other corporate transaction involving the Company or any of its Subsidiaries.

 

2.14.        “Covered Employee” means a Grantee who is a “covered employee” within the meaning of Section 162(m), as qualified by Section 12.4 .

 

2.15.         “Disability” shall be defined as that term is defined in the Grantee’s offer letter or other applicable employment agreement; or, if there is no such definition, “Disability” means, unless otherwise provided in the applicable Award Agreement, the Grantee is unable to perform each of the essential duties of such Grantee’s position by reason of a medically determinable physical or mental impairment that is potentially permanent in character or that can be expected to last for a continuous period of not less than 12 months; provided , however , that, with respect to rules regarding expiration of an Incentive Stock Option following termination of the Grantee’s Service, “Disability” means “permanent and total disability” as set forth in Code Section 22(e)(3).

 

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2.16.       “Effective Date” means September 18, 2015.

 

2.17.       “Exchange Act” means the Securities Exchange Act of 1934.

 

2.18.       “Fair Market Value” of a Share as of a particular date means (i) if the Common Stock is listed on a national securities exchange, the closing or last price of the Common Stock on the composite tape or other comparable reporting system for the applicable date, or if the applicable date is not a trading day, the trading day immediately preceding the applicable date, or (ii) if the Common Stock is not then listed on a national securities exchange, the closing or last price of the Common Stock quoted by an established quotation service for over-the-counter securities or (iii) if the Common Stock is not then listed on a national securities exchange or quoted by an established quotation service for over-the-counter securities, or the value of the Common Stock is not otherwise determinable, such value as determined by the Board.

 

2.19.       “Family Member” means a person who is a spouse, former spouse, child, stepchild, grandchild, parent, stepparent, grandparent, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother, sister, brother-in-law or sister-in-law, including adoptive relationships, of the applicable individual, any person sharing the applicable individual’s household (other than a tenant or employee), a trust in which any one or more of these persons have more than 50% of the beneficial interest, a foundation in which any one or more of these persons (or the applicable individual) control the management of assets, and any other entity in which one or more of these persons (or the applicable individual) own more than 50% of the voting interests.

 

2.20.       “Grant Date” means the latest to occur of (i) the date as of which the Board approves an Award, (ii) the date on which the recipient of an Award first becomes eligible to receive an Award under Section 6 or (iii) such other date as may be specified by the Board in the Award Agreement.

 

2.21.       “Grantee” means a person who receives or holds an Award.

 

2.22.       “Incentive Stock Option” means an “incentive stock option” within the meaning of Code Section 422.

 

2.23.       “Non-Employee Director” means a member of the Board or the board of directors of an Affiliate, in each case who is not an officer or employee of the Company or any Affiliate.

 

2.24.       “Non-qualified Stock Option” means an Option that is not an Incentive Stock Option.

 

2.25.       “Option” means an option to purchase one or more Shares pursuant to the Plan.

 

2.26.        “Option Price” means the exercise price for each Share subject to an Option.

 

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2.27.        “Other Share-based Awards” means Awards consisting of Share units, or other Awards, valued in whole or in part by reference to, or otherwise based on, Common Stock, other than Options, SARs, Restricted Stock and RSUs.

 

2.28.        “Performance Award” means an Award made subject to the attainment of performance goals (as described in Section 12 ) over a performance period established by the Committee, and includes an Annual Incentive Award.

 

2.29.        “Person” means an individual, entity or group within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act.

 

2.30.        “Plan” means this Anavex Life Sciences Corp. 2015 Omnibus Incentive Plan.

 

2.31.        “Prior Plan” means the Anavex Life Sciences Corp. 2007 Stock Option Plan.

 

2.32.        “Purchase Price” means the purchase price for each Share pursuant to a grant of Restricted Stock.

 

2.33.        “Restricted Period” shall have the meaning set forth in Section 10.1 .

 

2.34.        “Restricted Stock” means restricted Shares that are subject to specified terms and conditions, awarded to a Grantee pursuant to Section 10 .

 

2.35.        “Restricted Stock Unit” or “RSU” means a bookkeeping entry representing the right to receive Shares subject to the satisfaction of specified terms and conditions, awarded to a Grantee pursuant to Section 10 .

 

2.36.        “SAR Exercise Price” means the per Share exercise price of a SAR granted to a Grantee under Section 9 .

 

2.37.        “SEC” means the United States Securities and Exchange Commission.

 

2.38.        “Section 162(m)” means Code Section 162(m).

 

2.39.        “Section 409A” means Code Section 409A.

 

2.40.        “Securities Act” means the Securities Act of 1933.

 

2.41.        “Separation from Service” means the termination of a Service Provider’s Service, whether initiated by the Service Provider or the Company or an Affiliate; provided  that if any Award governed by Section 409A is to be distributed on a Separation from Service, then the definition of Separation from Service for such purposes shall comply with the definition provided in Section 409A.

 

  4  

 

 

2.42.        “Service” means service as a Service Provider to the Company or an Affiliate. Unless otherwise provided in the applicable Award Agreement, a Grantee’s change in position or duties shall not result in interrupted or terminated Service, so long as such Grantee continues to be a Service Provider to the Company or an Affiliate.

 

2.43.        “Service Provider” means an employee, officer, Non-Employee Director or Consultant of the Company or an Affiliate.

 

2.44.       “Share” means a share of Common Stock.

 

2.45.       “Stock Appreciation Right” or “SAR” means a right granted to a Grantee pursuant to Section 9 .

 

2.46.        “Stockholder” means a stockholder of the Company.

 

2.47.       “Subsidiary” means any “subsidiary corporation” of the Company within the meaning of Code Section 424(f).

 

2.48.        “Substitute Award” means any Award granted in assumption of or in substitution for an award of a company or business acquired by the Company or an Affiliate or with which the Company or an Affiliate combines.

 

2.49.        “Ten Percent Stockholder” means an individual who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its parent or any of its Subsidiaries. In determining stock ownership, the attribution rules of Code Section 424(d) shall be applied.

 

2.50.        “Termination Date” means the date that is 10 years after the Effective Date, unless the Plan is earlier terminated by the Board under Section 5.2 .

 

3.          ADMINISTRATION OF THE PLAN

 

3.1.          General

 

The Board shall have such powers and authorities related to the administration of the Plan as are consistent with the Company’s articles of incorporation and bylaws and applicable law. The Board shall have the power and authority to delegate its responsibilities hereunder to the Committee, which shall have full authority to act in accordance with its charter, and with respect to the power and authority of the Board to act hereunder, all references to the Board shall be deemed to include a reference to the Committee, unless such power or authority is specifically reserved by the Board. Except as specifically provided in Section 14 or as otherwise may be required by applicable law, regulatory requirement or the articles of incorporation or the bylaws of the Company, the Board shall have full power and authority to take all actions and to make all determinations required or provided for under the Plan, any Award or any Award Agreement, and shall have full power and authority to take all such other actions and make all such other determinations not inconsistent with the specific terms and conditions of the Plan that the Board deems to be necessary or appropriate to the administration of the Plan. The Committee shall administer the Plan; provided that, the Board shall retain the right to exercise the authority of the Committee to the extent consistent with applicable law and the applicable requirements of any securities exchange on which the Common Stock may then be listed. All actions, determinations and decisions by the Board or the Committee under the Plan, any Award or any Award Agreement shall be in the Board’s (or the Committee’s, as applicable) sole discretion and shall be final, binding and conclusive. Without limitation, the Board shall have full and final power and authority, subject to the other terms and conditions of the Plan, to:

 

  5  

 

 

(i) designate Grantees;

 

(ii) determine the type or types of Awards to be made to Grantees;

 

(iii) determine the number of Shares to be subject to an Award;

 

(iv) establish the terms and conditions of each Award (including the Option Price of any Option, the nature and duration of any restriction or condition (or provision for lapse thereof) relating to the vesting, exercise, transfer or forfeiture of an Award or the Shares subject thereto and any terms or conditions that may be necessary to qualify Options as Incentive Stock Options);

 

(v) prescribe the form of each Award Agreement; and

 

(vi) amend, modify or supplement the terms or conditions of any outstanding Award including the authority, in order to effectuate the purposes of the Plan, to modify Awards to foreign nationals or individuals who are employed outside the United States to recognize differences in local law, tax policy or custom.

 

To the extent permitted by applicable law, the Board may delegate its authority as identified herein to any individual or committee of individuals (who need not be directors), including the authority to make Awards to Grantees who are not subject to Section 16 of the Exchange Act or who are not Covered Employees. To the extent that the Board delegates its authority to make Awards as provided by this Section 3.1 , all references in the Plan to the Board’s authority to make Awards and determinations with respect thereto shall be deemed to include the Board’s delegate. Any such delegate shall serve at the pleasure of, and may be removed at any time by, the Board.

 

3.2.          No Repricing

 

Notwithstanding any provision herein to the contrary, the repricing of Options or SARs is prohibited without prior approval of the Stockholders. For this purpose, a “repricing” means any of the following (or any other action that has the same effect as any of the following): (i) changing the terms or conditions of an Option or SAR to lower its Option Price or SAR Exercise Price; (ii) any other action that is treated as a “repricing” under generally accepted accounting principles; and (iii) repurchasing for cash or canceling an Option or SAR at a time when its Option Price or SAR Exercise Price is greater than the Fair Market Value of the underlying Shares in exchange for another Award, unless the cancellation and exchange occurs in connection with a change in capitalization or similar change under Section 15 . A cancellation and exchange under clause (iii) would be considered a “repricing” regardless of whether it is treated as a “repricing” under generally accepted accounting principles and regardless of whether it is voluntary on the part of the Grantee.

 

  6  

 

 

3.3.          Award Agreements; Clawbacks

 

The grant of any Award may be contingent upon the Grantee executing the appropriate Award Agreement. The Company may retain the right in an Award Agreement to cause a forfeiture of the gain realized by a Grantee on account of actions taken by the Grantee in violation or breach of or in conflict with any employment agreement, non-competition agreement, any agreement prohibiting solicitation of employees or clients of the Company or any Affiliate thereof or any confidentiality obligation with respect to the Company or any Affiliate thereof, or otherwise in competition with the Company or any Affiliate thereof, to the extent specified in such Award Agreement applicable to the Grantee. Furthermore, the Company may annul an Award if the Grantee is terminated for Cause.

 

All Awards and any amounts or benefits received under the Plan shall be subject to potential cancellation, recoupment, rescission, payback or other action in accordance with the terms or conditions of any applicable Company clawback policy or any applicable law, as may be in effect from time to time, including the requirements of (i) Section 304 of the Sarbanes Oxley Act and Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, (ii) similar rules under the laws of any other jurisdiction and (iii) any policies adopted by the Company to implement such requirements. By accepting an Award, a Grantee shall be deemed to have acknowledged and consented to the Company’s application, implementation and enforcement of any applicable Company clawback policy that may apply to the Grantee, whether adopted prior to or following the Award’s Grant Date, and any provision of applicable law relating to cancellation, recoupment, rescission or payback of compensation, and to have agreed that the Company may take such actions as may be necessary to effectuate any such policy or applicable law, without further consideration or action.

 

3.4.          Deferral Arrangement

 

The Board may permit or require the deferral of any Award payment into a deferred compensation arrangement, subject to such rules and procedures as it may establish and in accordance with Section 409A, which may include provisions for the payment or crediting of interest or dividend equivalents, including converting such credits into deferred Share units.

 

3.5.          No Liability

 

No member of the Board or of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award or Award Agreement.

 

3.6.          Book Entry

 

Notwithstanding any other provision of the Plan to the contrary, the Company may elect to satisfy any requirement under the Plan for the delivery of stock certificates through the use of book entry.

 

  7  

 

 

4.          STOCK SUBJECT TO THE PLAN

 

4.1.          Authorized Number of Shares

 

Subject to adjustment under Section 15 , the aggregate number of Shares authorized to be awarded under the Plan shall not exceed 24,202,211. In addition, Shares underlying any outstanding award granted under the Prior Plan that, following the Effective Date, expires, or is terminated, surrendered or forfeited for any reason without issuance of Shares shall be available for the grant of new Awards. As provided in Section 1 , no new awards shall be granted under the Prior Plan following the Effective Date. Shares issued under the Plan may consist in whole or in part of authorized but unissued Shares, treasury Shares or Shares purchased on the open market or otherwise, all as determined by the Board from time to time.

 

4.2.          Share Counting

 

4.2.1.          General

 

Each Share granted in connection with an Award shall be counted as one Share against the limit in Section 4.1 , subject to the provisions of this Section 4.2 .

 

4.2.2.          Cash-Settled Awards

 

Any Award settled in cash shall not be counted as issued Shares for any purpose under the Plan.

 

4.2.3.          Expired or Terminated Awards

 

If any Award expires, or is terminated, surrendered or forfeited, in whole or in part, the unissued Shares covered by such Award shall again be available for the grant of Awards.

 

4.2.4.          Payment of Option Price or Tax Withholding in Shares

 

If Shares issuable upon exercise, vesting or settlement of an Award, or Shares owned by a Grantee (which are not subject to any pledge or other security interest) are surrendered or tendered to the Company in payment of the Option Price or Purchase Price of an Award or any taxes required to be withheld in respect of an Award, in each case, in accordance with the terms and conditions of the Plan and any applicable Award Agreement, such surrendered or tendered Shares shall again be available for the grant of Awards. For a stock-settled SAR, only the net Shares actually issued upon exercise of the SAR shall be counted against the limit in Section 4.1.

 

4.2.5.          Substitute Awards

 

Substitute Awards shall not be counted against the number of Shares reserved under the Plan.

 

  8  

 

 

4.3.          Award Limits

 

4.3.1.          Incentive Stock Options

 

Subject to adjustment under Section 15, unless and until determined otherwise by the Board, no Shares available for issuance under the Plan shall be available for issuance as Incentive Stock Options.

 

4.3.2.          Individual Award Limits for Section 162(m) – Share-Based Awards

 

Subject to adjustment under Section 15 , the maximum number of each type of Award (other than cash-based Performance Awards) intended to qualify as “performance-based compensation” under Section 162(m) granted to any Grantee in any calendar year shall not exceed the number of Shares determined by the Board, including : (i) Options and SARs; and (ii) all share-based Performance Awards (including Restricted Stock, RSUs and Other Share-based Awards that are Performance Awards).

 

4.3.3.          Individual Award Limits for Section 162(m) – Cash-Based Awards

 

The maximum amount of cash-based Performance Awards intended to constitute “performance-based compensation” under Section 162(m) granted to any Grantee in any calendar year, including (i) Annual Incentive Awards; and (ii) all other cash-based Performance Awards, shall be determined by the Board.

 

4.3.4.          Limits on Awards to Non-Employee Directors

 

The Board shall determine how much money may be granted in share-based Awards during any one year to a Grantee who is a Non-Employee Director (based on the Fair Market Value underlying the Award as of the applicable Grant Date in the case of Restricted Stock, RSUs or Other Share-based Awards, and based on the applicable grant date fair value for accounting purposes in the case of Options or SARs); provided , however , that share-based Awards made to a Grantee who is a Non-Employee Director at such Grantee’s election in lieu of all or a portion of his or her retainer for service on the Board and any Board committee shall not be counted towards the limit under this Section 4.3.4 .

 

5. EFFECTIVE DATE, DURATION AND AMENDMENTS

 

5.1.          Term

 

The Plan shall be effective as of the Effective Date. The Plan shall terminate automatically on the 10-year anniversary of the Effective Date and may be terminated on any earlier date as provided in Section 5.2 .

 

 

  9  

 

 

5.2.          Amendment and Termination of the Plan

 

The Board may, at any time and from time to time, amend, suspend or terminate the Plan as to any Awards that have not been made. An amendment shall be contingent on approval of the Stockholders to the extent stated by the Board, required by applicable law or required by applicable securities exchange listing requirements. No Awards shall be made after the Termination Date. The applicable terms and conditions of the Plan, and any terms and conditions applicable to Awards granted prior to the Termination Date shall survive the termination of the Plan and continue to apply to such Awards. No amendment, suspension or termination of the Plan shall, without the consent of the Grantee, materially impair rights or obligations under any Award theretofore awarded.

 

6. AWARD ELIGIBILITY AND LIMITATIONS

 

6.1.          Service Providers

 

Subject to this Section 6.1 , Awards may be made to any Service Provider as the Board may determine and designate from time to time.

 

6.2.          Successive Awards

 

An eligible person may receive more than one Award, subject to such restrictions as are provided herein.

 

6.3.          Stand-Alone, Additional, Tandem, and Substitute Awards

 

Awards may be granted either alone or in addition to, in tandem with or in substitution or exchange for, any other Award or any award granted under another plan of the Company, any Affiliate or any business entity to be acquired by the Company or an Affiliate, or any other right of a Grantee to receive payment from the Company or any Affiliate. Such additional, tandem or substitute or exchange Awards may be granted at any time. If an Award is granted in substitution or exchange for another award, the Board shall have the right to require the surrender of such other award in consideration for the grant of the new Award. Subject to the requirements of applicable law, the Board may make Awards in substitution or exchange for any other award under another plan of the Company, any Affiliate or any business entity to be acquired by the Company or an Affiliate. In addition, Awards may be granted in lieu of cash compensation, including in lieu of cash amounts payable under other plans of the Company or any Affiliate, in which the value of Shares subject to the Award is equivalent in value to the cash compensation (for example, RSUs or Restricted Stock).

 

7. AWARD AGREEMENT

 

The grant of any Award may be contingent upon the Grantee executing an appropriate Award Agreement, in such form or forms as the Board shall from time to time determine. Without limiting the foregoing, an Award Agreement may be provided in the form of a notice that provides that acceptance of the Award constitutes acceptance of all terms and conditions of the Plan and the notice. Award Agreements granted from time to time or at the same time need not contain similar provisions but shall be consistent with the terms and conditions of the Plan. Each Award Agreement evidencing an Award of Options shall specify whether such Options are intended to be Non-qualified Stock Options or Incentive Stock Options, and in the absence of such specification such options shall be deemed Non-qualified Stock Options.

 

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8. TERMS AND CONDITIONS OF OPTIONS

 

8.1.          Option Price

 

The Option Price of each Option shall be fixed by the Board and stated in the related Award Agreement. The Option Price of each Option (except those that constitute Substitute Awards) shall be at least the Fair Market Value on the Grant Date; provided , however , that in the event that a Grantee is a Ten Percent Stockholder as of the Grant Date, the Option Price of an Option granted to such Grantee that is intended to be an Incentive Stock Option shall be not less than 110% of the Fair Market Value on the Grant Date. In no case shall the Option Price of any Option be less than the par value of a Share.

 

8.2.          Vesting

 

Subject to Section 8.3 , each Option shall become exercisable at such times and under such conditions (including performance requirements) as stated in the Award Agreement.

 

8.3.          Term

 

Each Option shall terminate, and all rights to purchase Shares thereunder shall cease, upon the expiration of 10 years from the Grant Date, or under such circumstances and on such date prior thereto as is set forth in the Plan or as may be fixed by the Board and stated in the related Award Agreement; provided , however , that in the event that the Grantee is a Ten Percent Stockholder, an Option granted to such Grantee that is intended to be an Incentive Stock Option at the Grant Date shall not be exercisable after the expiration of five years from its Grant Date.

 

8.4.          Limitations on Exercise of Option

 

Notwithstanding any other provision of the Plan, in no event may any Option be exercised, in whole or in part, after the occurrence of an event that results in termination of the Option.

 

8.5.          Method of Exercise

 

An Option that is exercisable may be exercised by the Grantee’s delivery of a notice of exercise to the Company, setting forth the number of Shares with respect to which the Option is to be exercised, accompanied by full payment for the Shares. To be effective, notice of exercise must be made in accordance with procedures established by the Company from time to time.

 

8.6.          Rights of Holders of Options

 

Unless otherwise provided in the applicable Award Agreement, an individual holding or exercising an Option shall have none of the rights of a Stockholder (for example, the right to receive cash or dividend payments or distributions attributable to the subject Shares or to direct the voting of the subject Shares) until the Shares covered thereby are fully paid and issued to him. Except as provided in Section 15 or the related Award Agreement, no adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date of such issuance.

 

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8.7.          Delivery of Stock Certificates

 

Subject to Section 3.6 , promptly after the exercise of an Option by a Grantee and the payment in full of the Option Price, such Grantee shall be entitled to the issuance of a stock certificate or certificates evidencing his or her ownership of the Shares subject to the Option.

 

8.8.          Limitations on Incentive Stock Options

 

An Option shall constitute an Incentive Stock Option only (i) if the Plan is approved by the Stockholders within 12 months before or after the Effective Date, provided that any Option that is intended to be an Incentive Stock Option that is granted prior to such Stockholder approval must be granted subject to such Stockholder approval, (ii) if the Grantee of such Option is an employee of the Company or any Subsidiary of the Company, (iii) to the extent specifically provided in the related Award Agreement and (iv) to the extent that the aggregate Fair Market Value (determined at the time the Option is granted) with respect to which all Incentive Stock Options held by such Grantee become exercisable for the first time during any calendar year (under the Plan and all other plans of the Grantee’s employer and its Affiliates) does not exceed $100,000. This limitation shall be applied by taking Options into account in the order in which they were granted.

 

9. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS

 

9.1.          Right to Payment

 

A SAR shall confer on the Grantee a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value on the date of exercise over (ii) the SAR Exercise Price, as determined by the Board. The Award Agreement for a SAR (except those that constitute Substitute Awards) shall specify the SAR Exercise Price, which shall be fixed on the Grant Date as not less than the Fair Market Value on that date. SARs may be granted alone or in conjunction with all or part of an Option or at any subsequent time during the term of such Option or in conjunction with all or part of any other Award. A SAR granted in tandem with an outstanding Option following the Grant Date of such Option shall have a grant price that is equal to the Option Price; provided , however , that the SAR’s grant price may not be less than the Fair Market Value on the Grant Date of the SAR to the extent required by Section 409A.

 

9.2.          Other Terms

 

The Board shall determine the time or times at which and the circumstances under which a SAR may be exercised in whole or in part (including based on achievement of performance goals and/or future service requirements), the time or times at which SARs shall cease to be or become exercisable following Separation from Service or upon other conditions, the method of exercise, whether or not a SAR shall be in tandem or in combination with any other Award and any other terms and conditions of any SAR.

 

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9.3.          Term of SARs

 

The term of a SAR shall be determined by the Board; provided , however , that such term shall not exceed 10 years.

 

9.4.          Payment of SAR Amount

 

Upon exercise of a SAR, a Grantee shall be entitled to receive payment from the Company (in cash or Shares, as determined by the Board) in an amount determined by multiplying:

 

(i)           the difference between the Fair Market Value on the date of exercise over the SAR Exercise Price; by

 

(ii)          the number of Shares with respect to which the SAR is exercised.

 

10. TERMS AND CONDITIONS OF RESTRICTED STOCK AND RESTRICTED STOCK UNITS

 

10.1.       Restrictions

 

At the time of grant, the Board may establish a period of time (a “ Restricted Period ”) and any additional restrictions including the satisfaction of corporate or individual performance objectives applicable to an Award of Restricted Stock or RSUs. Each Award of Restricted Stock or RSUs may be subject to a different Restricted Period and additional restrictions. Neither Restricted Stock nor RSUs may be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restricted Period or prior to the satisfaction of any other applicable restrictions.

 

10.2.       Restricted Stock Certificates

 

The Company shall issue Shares, in the name of each Grantee to whom Restricted Stock has been granted, stock certificates or other evidence of ownership representing the total number of Shares of Restricted Stock granted to the Grantee, as soon as reasonably practicable after the Grant Date. The Board may provide in an Award Agreement that either (i) the Secretary of the Company shall hold such certificates for the Grantee’s benefit until such time as the Restricted Stock is forfeited to the Company or the restrictions lapse, or (ii) such certificates shall be delivered to the Grantee; provided , however , that such certificates shall bear a legend or legends that comply with the applicable securities laws and regulations and make appropriate reference to the restrictions imposed under the Plan and the Award Agreement.

 

10.3.       Rights of Holders of Restricted Stock

 

Unless the otherwise provided in the applicable Award Agreement and subject to Section 17.10 , holders of Restricted Stock shall have rights as Stockholders, including voting and dividend rights.

 

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10.4.      Rights of Holders of RSUs

 

10.4.1.          Settlement of RSUs

 

RSUs may be settled in cash or Shares, as determined by the Board and set forth in the Award Agreement. The Award Agreement shall also set forth whether the RSUs shall be settled (i) within the time period specified for “short term deferrals” under Section 409A or (ii) otherwise within the requirements of Section 409A, in which case the Award Agreement shall specify upon which events such RSUs shall be settled.

 

10.4.2.          Voting and Dividend Rights

 

Unless otherwise provided in the applicable Award Agreement and subject to Section 17.10 , holders of RSUs shall not have rights as Stockholders, including voting or dividend or dividend equivalents rights.

 

10.4.3.          Creditor’s Rights

 

A holder of RSUs shall have no rights other than those of a general creditor of the Company. RSUs represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Award Agreement.

 

10.5.       Purchase of Restricted Stock

 

The Grantee shall be required, to the extent required by applicable law, to purchase the Restricted Stock from the Company at a Purchase Price equal to the greater of (i) the aggregate par value of the Shares represented by such Restricted Stock or (ii) the Purchase Price, if any, specified in the related Award Agreement. If specified in the Award Agreement, the Purchase Price may be deemed paid by Services already rendered. The Purchase Price shall be payable in a form described in Section 11 or, if so determined by the Board, in consideration for past Services rendered.

 

10.6.        Delivery of Shares

 

Upon the expiration or termination of any Restricted Period and the satisfaction of any other conditions prescribed by the Board, the restrictions applicable to Shares of Restricted Stock or RSUs settled in Shares shall lapse, and, unless otherwise provided in the applicable Award Agreement, a stock certificate for such Shares shall be delivered, free of all such restrictions, to the Grantee or the Grantee’s beneficiary or estate, as the case may be.

 

11. FORM OF PAYMENT FOR OPTIONS AND RESTRICTED STOCK

 

11.1.        General Rule

 

Payment of the Option Price for the Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock shall be made in cash or in cash equivalents acceptable to the Company, except as provided in this Section 11 .

 

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11.2.        Surrender of Shares

 

To the extent the Award Agreement so provides, payment of the Option Price for Shares purchased pursuant to the exercise of an Option or the Purchase Price for Restricted Stock may be made all or in part through the tender to the Company of Shares, which Shares shall be valued, for purposes of determining the extent to which the Option Price or Purchase Price for Restricted Stock has been paid thereby, at their Fair Market Value on the date of exercise or surrender. Notwithstanding the foregoing, in the case of an Incentive Stock Option, the right to make payment in the form of already-owned Shares may be authorized only at the time of grant.

 

11.3.        Cashless Exercise

 

With respect to an Option only (and not with respect to Restricted Stock), to the extent permitted by law and to the extent the Award Agreement so provides, payment of the Option Price may be made all or in part by delivery (on a form acceptable to the Company) of an irrevocable direction to a licensed securities broker acceptable to the Company to sell Shares and to deliver all or part of the sales proceeds to the Company in payment of the Option Price and any withholding taxes described in Section 17.3 .

 

11.4.        Other Forms of Payment

 

To the extent the Award Agreement so provides, payment of the Option Price or the Purchase Price for Restricted Stock may be made in any other form that is consistent with applicable laws, regulations and rules, including the Company’s withholding of Shares otherwise due to the exercising Grantee.

 

12. TERMS AND CONDITIONS OF PERFORMANCE AWARDS

 

12.1.        Performance Conditions

 

The right of a Grantee to exercise or receive a grant or settlement of any Award, and the timing thereof, may be subject to such performance conditions as may be specified by the Committee. The Committee may use such business criteria and other measures of performance as it may deem appropriate in establishing any performance conditions.

 

12.2.        Performance Awards Granted to Designated Covered Employees

 

If and to the extent that the Committee determines that a Performance Award to be granted to a Grantee who is designated by the Committee as likely to be a Covered Employee should qualify as “performance-based compensation” for purposes of Section 162(m), the grant, exercise and/or settlement of such Performance Award shall be contingent upon achievement of pre-established performance goals and other terms and conditions set forth in this Section 12.2 . Notwithstanding anything herein to the contrary, the Committee may provide for Performance Awards to Covered Employees that are not intended to qualify as “performance-based compensation” for purposes of Section 162(m).

 

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12.2.1.        Performance Goals Generally

 

The performance goals for Performance Awards shall consist of one or more business criteria and a targeted level or levels of performance with respect to each of such criteria, as specified by the Committee consistent with this Section 12.2 . Performance goals shall be objective and shall otherwise meet the requirements of Section 162(m), including the requirement that the level or levels of performance targeted by the Committee result in the achievement of performance goals being “substantially uncertain.” The Committee may determine that Performance Awards shall be granted, exercised and/or settled upon achievement of any one performance goal or that two or more of the performance goals must be achieved as a condition to grant, exercise and/or settlement of the Performance Awards. Performance goals may be established on a Company-wide basis, or with respect to one or more business units, divisions, Affiliates or business segments, as applicable. Performance goals may be absolute or relative (to the performance of one or more comparable companies or indices). To the extent consistent with the requirements of Section 162(m), the Committee may determine at the time that goals under this Section 12 are established the extent to which measurement of performance goals may exclude the impact of charges for restructuring, discontinued operations, extraordinary items, debt redemption or retirement, asset write downs, litigation or claim judgments or settlements, acquisitions or divestitures, foreign exchange gains and losses and other extraordinary, unusual or non-recurring items, and the cumulative effects of tax or accounting changes (each as defined by generally accepted accounting principles and as identified in the Company’s financial statements or other SEC filings). Performance goals may differ for Performance Awards granted to any one Grantee or to different Grantees.

 

12.2.2.        Business Criteria

 

One or more of the following business criteria for the Company, on a consolidated basis, and/or specified Affiliates or business units of the Company (except with respect to the total stockholder return and earnings per share criteria), shall be used exclusively by the Committee in establishing performance goals for Performance Awards: (i) cash flow; (ii) earnings per share, as adjusted for any stock split, stock dividend or other recapitalization; (iii) earnings measures (including EBIT and EBITDA)); (iv) return on equity; (v) total stockholder return; (vi) share price performance, as adjusted for any stock split, stock dividend or other recapitalization; (vii) return on capital; (viii) revenue; (ix) income; (x) profit margin; (xi) return on operating revenue; (xii) brand recognition or acceptance; (xiii) customer metrics (including customer satisfaction, customer retention, customer profitability or customer contract terms); (xiv) productivity; (xv) expense targets; (xvi) market share; (xvii) cost control measures; (xviii) balance sheet metrics; (xix) strategic initiatives; (xx) implementation, completion or attainment of measurable objectives with respect to recruitment or retention of personnel or employee satisfaction; (xxi) return on assets; (xxii) growth in net sales; (xxiii) the ratio of net sales to net working capital; (xxiv) stockholder value added; (xxv) improvement in management of working capital items (inventory, accounts receivable or accounts payable); (xxvi) sales from newly-introduced products; (xxvii) successful completion of, or achievement of milestones or objectives related to, financing or capital raising transactions, strategic acquisitions or divestitures, joint ventures, partnerships, collaborations or other transactions; (xxviii) product quality, safety, productivity, yield or reliability (on time and complete orders); (xxix) funds from operations; (xxx) regulatory body approval for commercialization of a product; (xxxi) debt levels or reduction or debt ratios; (xxxii) economic value; (xxxiii) operating efficiency; (xxxiv) research and development achievements; or (xxxv) any combination of the forgoing business criteria; provided , however , that such business criteria shall include any derivations of business criteria listed above ( e.g. , income shall include pre-tax income, net income and operating income).

 

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12.2.3.       Timing for Establishing Performance Goals

 

Performance goals shall be established not later than 90 days after the beginning of any performance period applicable to Performance Awards, or at such other date as may be required or permitted for “performance-based compensation” under Section 162(m).

 

12.2.4.        Settlement of Performance Awards; Other Terms

 

Settlement of Performance Awards may be in cash, Shares, other Awards or other property, as determined by the Committee. The Committee may reduce the amount of a settlement otherwise to be made in connection with Performance Awards.

 

12.3.      Written Determinations

 

All determinations by the Committee as to the establishment of performance goals, the amount of any Performance Award pool or potential individual Performance Awards and as to the achievement of performance goals relating to Performance Awards, shall be made in writing in the case of any Award intended to qualify as “performance-based compensation” under Section 162(m) to the extent required by Section 162(m). To the extent permitted by Section 162(m), the Committee may delegate any responsibility relating to such Performance Awards.

 

12.4.      Status of Section 12.2 Awards under Section 162(m)

 

It is the intent of the Company that Performance Awards under Section 12.2 granted to persons who are designated by the Committee as likely to be Covered Employees within the meaning of Section 162(m) shall, if so designated by the Committee, qualify as “performance-based compensation” within the meaning of Section 162(m). Accordingly, the terms and conditions of Section 12.2 , including the definitions of Covered Employee and other terms used therein, shall be interpreted in a manner consistent with Section 162(m). The foregoing notwithstanding, because the Committee cannot determine with certainty whether a given Grantee will be a Covered Employee with respect to a fiscal year that has not yet been completed, the term Covered Employee as used herein shall mean only a person designated by the Committee, at the time of grant of Performance Awards, as likely to be a Covered Employee with respect to that fiscal year or any subsequent fiscal year. If any provision of the Plan or any agreement relating to such Performance Awards does not comply or is inconsistent with the requirements of Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements.

 

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13. other SHARE-based awards

 

13.1.          Grant of Other Share-based Awards

 

Other Share-based Awards may be granted either alone or in addition to or in conjunction with other Awards. Other Share-based Awards may be granted in lieu of other cash or other compensation to which a Service Provider is entitled from the Company or may be used in the settlement of amounts payable in Shares under any other compensation plan or arrangement of the Company. Subject to the provisions of the Plan, the Board shall have the authority to determine the persons to whom and the time or times at which such Awards will be made, the number of Shares to be granted pursuant to such Awards, and all other terms and conditions of such Awards. Unless the Board determines otherwise, any such Award shall be confirmed by an Award Agreement, which shall contain such provisions as the Board determines to be necessary or appropriate to carry out the intent of the Plan with respect to such Award.

 

13.2.          Terms of Other Share-based Awards

 

Any Common Stock subject to Awards made under this Section 13 may not be sold, assigned, transferred, pledged or otherwise encumbered prior to the date on which the Shares are issued, or, if later, the date on which any applicable restriction, performance or deferral period lapses.

 

14. REQUIREMENTS OF LAW

 

14.1.          General

 

The Company shall not be required to sell or issue any Shares under any Award if the sale or issuance of such Shares would constitute a violation by the Grantee, any other individual exercising an Option or the Company of any provision of any law or regulation of any governmental authority, including any federal or state securities laws or regulations. If at any time the Board determines that the listing, registration or qualification of any Shares subject to an Award upon any securities exchange or under any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the issuance or purchase of Shares hereunder, no Shares may be issued or sold to the Grantee or any other individual exercising an Option pursuant to such Award unless such listing, registration, qualification, consent or approval shall have been effected or obtained free of any conditions not acceptable to the Company, and any delay caused thereby shall in no way affect the date of termination of the Award. Specifically, in connection with the Securities Act, upon the exercise of any Option or the delivery of any Shares underlying an Award, unless a registration statement under such Act is in effect with respect to the Shares covered by such Award, the Company shall not be required to sell or issue such Shares unless the Board has received evidence satisfactory to it that the Grantee or any other individual exercising an Option may acquire such Shares pursuant to an exemption from registration under the Securities Act. The Company may, but shall in no event be obligated to, register any securities covered hereby pursuant to the Securities Act. The Company shall not be obligated to take any affirmative action in order to cause the exercise of an Option or the issuance of Shares pursuant to the Plan to comply with any law or regulation of any governmental authority. As to any jurisdiction that expressly imposes the requirement that an Option shall not be exercisable until the Shares covered by such Option are registered or are exempt from registration, the exercise of such Option (under circumstances in which the laws of such jurisdiction apply) shall be deemed conditioned upon the effectiveness of such registration or the availability of such an exemption.

 

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14.2.          Rule 16b-3

 

During any time when the Company has a class of equity security registered under Section 12 of the Exchange Act, it is the intent of the Company that Awards and the exercise of Options granted to officers and directors hereunder will qualify for the exemption provided by Rule 16b-3 under the Exchange Act. To the extent that any provision of the Plan or action by the Board or Committee does not comply with the requirements of Rule 16b-3, it shall be deemed inoperative to the extent permitted by law and deemed advisable by the Board, and shall not affect the validity of the Plan. In the event that Rule 16b-3 is revised or replaced, the Board may modify the Plan in any respect necessary to satisfy the requirements of, or to take advantage of any features of, the revised exemption or its replacement.

 

15. EFFECT OF CHANGES IN CAPITALIZATION

 

15.1.          Changes in Common Stock

 

If (i) the number of outstanding Shares is increased or decreased or the Shares are changed into or exchanged for a different number or kind of shares or other securities of the Company on account of any recapitalization, reclassification, stock split, reverse split, combination of Shares, exchange of Shares, stock dividend or other distribution payable in capital stock, or other increase or decrease in such Shares effected without receipt of consideration by the Company occurring after the Effective Date or (ii) there occurs any spin-off, split-up, extraordinary cash dividend or other distribution of assets by the Company, the number and kinds of shares for Awards granted (including the per-Grantee maximums set forth in Section 4 ) shall be equitably adjusted by the Company; provided that any such adjustment shall comply with Section 409A. In addition, in the event of any such increase or decease in the number of outstanding Shares or other transaction described in clause (ii) above, the number and kind of Shares for which Awards are outstanding and the Option Price per Share of outstanding Options and SAR Exercise Price per Share of outstanding SARs shall be equitably adjusted; provided that any such adjustment shall comply with Section 409A.

 

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15.2.          Effect of Certain Transactions

 

Except as otherwise provided in an Award Agreement and subject to the provisions of Section 15.3 , in the event of a Corporate Transaction, the Plan and the Awards shall continue in effect in accordance with their respective terms and conditions, except that following a Corporate Transaction either (i) each outstanding Award shall be treated as provided for in the agreement entered into in connection with the Corporate Transaction or (ii) if not so provided in such agreement, each Grantee shall be entitled to receive in respect of each Share subject to any outstanding Awards, upon exercise or payment or transfer in respect of any Award, the same number and kind of stock, securities, cash, property or other consideration that each holder of a Share was entitled to receive in the Corporate Transaction in respect of a Share; provided , however , that, unless otherwise determined by the Board, such stock, securities, cash, property or other consideration shall remain subject to all of the conditions, restrictions and performance criteria that were applicable to the Awards prior to such Corporate Transaction. Without limiting the generality of the foregoing, the treatment of outstanding Options and SARs pursuant to this Section 15.2 in connection with a Corporate Transaction in which the consideration paid or distributed to the Stockholders is not entirely shares of common stock of the acquiring or resulting corporation may include the cancellation of outstanding Options and SARs upon consummation of the Corporate Transaction as long as, at the election of the Board, (i) the holders of affected Options and SARs have been given a period of at least 15 days prior to the date of the consummation of the Corporate Transaction to exercise the Options or SARs (to the extent otherwise exercisable) or (ii) the holders of the affected Options and SARs are paid (in cash or cash equivalents) in respect of each Share covered by the Option or SAR being canceled an amount equal to the excess, if any, of the per Share price paid or distributed to Stockholders in the Corporate Transaction (the value of any non-cash consideration to be determined by the Board) over the Option Price or SAR Exercise Price, as applicable. For avoidance of doubt, (1) the cancellation of Options and SARs pursuant to clause (ii) of the preceding sentence may be effected notwithstanding anything to the contrary contained in the Plan or any Award Agreement and (2) if the amount determined pursuant to clause (ii) of the preceding sentence is zero or less, the affected Option or SAR may be cancelled without any payment therefore. The treatment of any Award as provided in this Section 15.2 shall be conclusively presumed to be appropriate for purposes of Section 15.1 .

 

15.3.     Change in Control

 

15.3.1.      Consequences of a Change in Control

 

For Awards granted to Non-Employee Directors, except as may otherwise be provided in the applicable Award Agreement, upon a Change in Control all such outstanding Awards that may be exercised shall become fully exercisable, all restrictions with respect to such outstanding Awards shall lapse and become vested and non-forfeitable, and any specified performance goals with respect to outstanding Awards shall be deemed to be satisfied at target.

 

For Awards granted to any other Service Providers, except as may otherwise be provided in the applicable Award Agreement, either of the following provisions shall apply, depending on whether, and the extent to which, such Awards are assumed, converted or replaced by the resulting entity in a Change in Control:

 

(i) To the extent such Awards are not assumed, converted or replaced by the resulting entity in the Change in Control, then upon the Change in Control such outstanding Awards that may be exercised shall become fully exercisable, all restrictions with respect to such outstanding Awards, other than for Performance Awards, shall lapse and become vested and non-forfeitable, and for any outstanding Performance Awards the target payout opportunities attainable under such Awards shall be deemed to have been fully earned as of the Change in Control based upon the greater of (A) an assumed achievement of all relevant performance goals at the “target” level or (B) the actual level of achievement of all relevant performance goals against target as of the Company’s fiscal quarter end preceding the Change in Control and the Award shall become vested pro rata based on the portion of the applicable performance period completed through the date of the Change in Control.

 

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(ii) To the extent such Awards are assumed, converted or replaced by the resulting entity in the Change in Control, if, within two years after the date of the Change in Control, the Service Provider has a Separation from Service either (1) by the Company other than for Cause or (2) by the Service Provider for “good reason” (as defined in the applicable Award Agreement), then such outstanding Awards that may be exercised shall become fully exercisable, all restrictions with respect to such outstanding Awards, other than for Performance Awards, shall lapse and become vested and non-forfeitable, and for any outstanding Performance Awards the target payout opportunities attainable under such Awards shall be deemed to have been fully earned as of the Separation from Service based upon the greater of (A) an assumed achievement of all relevant performance goals at the “target” level or (B) the actual level of achievement of all relevant performance goals against target as of the Company’s fiscal quarter end preceding the Change in Control and the Award shall become vested pro rata based on the portion of the applicable performance period completed through the date of the Separation from Service.

 

15.3.2.      Change in Control Defined

 

Unless otherwise provided in the applicable Award Agreement, a “ Change in Control ” means the consummation of any of the following events:

 

(i) The acquisition, other than from the Company, by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Exchange Act), other than the Company or any subsidiary, affiliate (within the meaning of Rule 144 promulgated under the Securities Act) or employee benefit plan of the Company, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than 50% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “ Voting Securities ”); or

 

(ii) A reorganization, merger, consolidation or recapitalization of the Company (a “ Business Combination ”), other than a Business Combination in which more than 50% of the combined voting power of the outstanding voting securities of the surviving or resulting entity immediately following the Business Combination is held by the Persons who, immediately prior to the Business Combination, were the holders of the Voting Securities; or

 

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(iii) A complete liquidation or dissolution of the Company, or a sale of all or substantially all of the assets of the Company; or

 

(iv) During any period of 24 consecutive months, the Incumbent Directors cease to constitute a majority of the Board; “ Incumbent Directors ” means individuals who were members of the Board at the beginning of such period or individuals whose election or nomination for election to the Board by the Stockholders was approved by a vote of at least a majority of the then Incumbent Directors (but excluding any individual whose initial election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors).

 

Notwithstanding the foregoing, if it is determined that an Award is subject to the requirements of Section 409A and payable upon a Change in Control, the Company will not be deemed to have undergone a Change in Control for purposes of the Plan unless the Company is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A.

 

15.4.       Adjustments

 

Adjustments under this Section 15 related to Shares or securities of the Company shall be made by the Board. No fractional Shares or other securities shall be issued pursuant to any such adjustment, and any fractions resulting from any such adjustment shall be eliminated in each case by rounding downward to the nearest whole Share.

 

16.        No Limitations on Company

 

The making of Awards shall not affect or limit in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure or to merge, consolidate, dissolve or liquidate, or to sell or transfer all or any part of its business or assets.

 

17.       TERMS APPLICABLE GENERALLY TO AWARDS

 

17.1.       Disclaimer of Rights

 

No provision in the Plan or in any Award Agreement shall be construed to confer upon any individual the right to remain in the employ or service of the Company or any Affiliate, or to interfere in any way with any contractual or other right or authority of the Company or any Affiliate either to increase or decrease the compensation or other payments to any individual at any time, or to terminate any employment or other relationship between any individual and the Company or any Affiliate. In addition, notwithstanding anything contained in the Plan to the contrary, unless otherwise provided in the applicable Award Agreement, no Award shall be affected by any change of duties or position of the Grantee, so long as such Grantee continues to be a Service Provider. The obligation of the Company to pay any benefits pursuant to the Plan shall be interpreted as a contractual obligation to pay only those amounts described herein, in the manner and under the conditions prescribed herein. The Plan shall in no way be interpreted to require the Company to transfer any amounts to a third party trustee or otherwise hold any amounts in trust or escrow for payment to any Grantee or beneficiary under the terms and conditions of the Plan.

 

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17.2.        Nonexclusivity of the Plan

 

Neither the adoption of the Plan nor the submission of the Plan to the Stockholders for approval shall be construed as creating any limitations upon the right and authority of the Board or its delegate to adopt such other compensation arrangements as the Board or its delegate determines desirable.

 

17.3.        Withholding Taxes

 

The Company or an Affiliate, as the case may be, shall have the right to deduct from payments of any kind otherwise due to a Grantee any federal, state or local taxes of any kind required by law to be withheld (i) with respect to the vesting of or other lapse of restrictions applicable to an Award, (ii) upon the issuance of any Shares upon the exercise of an Option or SAR or (iii) otherwise due in connection with an Award. At the time of such vesting, lapse or exercise, the Grantee shall pay to the Company or the Affiliate, as the case may be, any amount that the Company or the Affiliate may reasonably determine to be necessary to satisfy such withholding obligation. Subject to the prior approval of the Board, the Grantee may elect to satisfy such obligations, or the Company may require such obligations to be satisfied, in whole or in part, (i) by causing the Company or the Affiliate to withhold the minimum required number of Shares otherwise issuable to the Grantee as may be necessary to satisfy such withholding obligation or (ii) by delivering to the Company or the Affiliate Shares already owned by the Grantee. The Shares so delivered or withheld shall have an aggregate Fair Market Value equal to such withholding obligations. The Fair Market Value used to satisfy such withholding obligation shall be determined by the Company or the Affiliate as of the date that the amount of tax to be withheld is to be determined. A Grantee who has made an election pursuant to this Section 17.3 may satisfy his or her withholding obligation only with Shares that are not subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.

 

17.4.       Other Provisions

 

Each Award Agreement may contain such other terms and conditions not inconsistent with the Plan as may be determined by the Board. In the event of any conflict between the terms and conditions of an employment agreement and the Plan, the terms and conditions of the employment agreement shall govern.

 

17.5.        Severability

 

If any provision of the Plan or any Award Agreement shall be determined to be illegal or unenforceable by any court of law in any jurisdiction, the remaining provisions hereof and thereof shall be severable and enforceable in accordance with their terms and conditions, and all provisions shall remain enforceable in any other jurisdiction.

 

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17.6.       Governing Law

 

The Plan shall be governed by and construed in accordance with the laws of the State of Nevada without giving effect to the principles of conflicts of law, and applicable Federal law.

 

17.7.       Section 409A

 

The Plan is intended to comply with Section 409A to the extent subject thereto, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted and administered to be in compliance therewith. Any payments described in the Plan that are due within the “short-term deferral period” as defined in Section 409A shall not be treated as deferred compensation unless applicable laws require otherwise. Notwithstanding anything to the contrary in the Plan, to the extent required to avoid accelerated taxation and tax penalties under Section 409A, amounts that would otherwise be payable and benefits that would otherwise be provided pursuant to the Plan during the six-month period immediately following the Grantee’s Separation from Service shall instead be paid on the first payroll date after the six-month anniversary of the Grantee’s Separation from Service (or the Grantee’s death, if earlier). Notwithstanding the foregoing, neither the Company nor the Board shall have any obligation to take any action to prevent the assessment of any excise tax or penalty on any Grantee under Section 409A and neither the Company nor the Board shall have any liability to any Grantee for such tax or penalty.

 

17.8.       Separation from Service

 

The Board shall determine the effect of a Separation from Service upon Awards, and such effect shall be set forth in the applicable Award Agreement. Without limiting the foregoing, the Board may provide in the Award Agreements at the time of grant, or any time thereafter with the consent of the Grantee, the actions that will be taken upon the occurrence of a Separation from Service, including accelerated vesting or termination, depending upon the circumstances surrounding the Separation from Service.

 

17.9.       Transferability of Awards

 

17.9.1.        Transfers in General

 

Except as provided in Section 17.9.2 , no Award shall be assignable or transferable by the Grantee to whom it is granted, other than by will or the laws of descent and distribution, and, during the lifetime of the Grantee, only the Grantee personally (or the Grantee’s personal representative) may exercise rights under the Plan.

 

17.9.2.        Family Transfers

 

If authorized in the applicable Award Agreement, a Grantee may transfer, not for value, all or part of an Award (other than Incentive Stock Options) to any Family Member. For the purpose of this Section 17.9.2 , a “not for value” transfer is a transfer that is (i) a gift, (ii) a transfer under a domestic relations order in settlement of marital property rights or (iii) a transfer to an entity in which more than 50% of the voting interests are owned by Family Members (or the Grantee) in exchange for an interest in that entity. Following a transfer under this Section 17.9.2 , any such Award shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. Subsequent transfers of transferred Awards are prohibited except to Family Members of the original Grantee in accordance with this Section 17.9.2 or by will or the laws of descent and distribution.

 

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17.10.     Dividends and Dividend Equivalent Rights

 

If specified in the Award Agreement, the recipient of an Award may be entitled to receive, currently or on a deferred basis, dividends or dividend equivalents with respect to the Common Stock or other securities covered by an Award. The terms and conditions of a dividend equivalent right may be set forth in the Award Agreement. Dividend equivalents credited to a Grantee may be paid currently or may be deemed to be reinvested in additional Shares or other securities of the Company at a price per unit equal to the Fair Market Value on the date that such dividend was paid to Stockholders, as determined by the Board. Notwithstanding the foregoing, in no event will dividends or dividend equivalents on any Award that is subject to the achievement of performance criteria be payable before the Award has become earned and payable.

 

17.11.     Plan Construction

 

In the Plan, unless otherwise stated, the following uses apply: (i) references to a statute or law refer to the statute or law and any amendments and any successor statutes or laws, and to all valid and binding governmental regulations, court decisions and other regulatory and judicial authority issued or rendered thereunder, as amended, or their successors, as in effect at the relevant time; (ii) in computing periods from a specified date to a later specified date, the words “from” and “commencing on” (and the like) mean “from and including,” and the words “to,” “until” and “ending on” (and the like) mean “to and including”; (iii) indications of time of day shall be based upon the time applicable to the location of the principal headquarters of the Company; (iv) the words “include,” “includes” and “including” (and the like) mean “include, without limitation,” “includes, without limitation” and “including, without limitation” (and the like), respectively; (v) all references to articles and sections are to articles and sections in the Plan; (vi) all words used shall be construed to be of such gender or number as the circumstances and context require; (vii) the captions and headings of articles and sections have been inserted solely for convenience of reference and shall not be considered a part of the Plan, nor shall any of them affect the meaning or interpretation of the Plan or any of its provisions; (viii) any reference to an agreement, plan, policy, form, document or set of documents, and the rights and obligations of the parties under any such agreement, plan, policy, form, document or set of documents, shall mean such agreement, plan, policy, form, document or set of documents as amended from time to time, and any and all modifications, extensions, renewals, substitutions or replacements thereof; and (ix) all accounting terms not specifically defined shall be construed in accordance with generally accepted accounting principles.

 

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Exhibit 10.92

 

EMPLOYMENT AGREEMENT

 

THIS AGREEMENT , dated September 17, 2015 with an effective date of October 1, 2015 (the “ Agreement ”), is by and between Anavex Life Sciences Corp. (the “ Company ” or “ Anavex ”), and Sandra Boenisch (the “ Employee ”). The Company and the Employee are referred to each individually as a “ Party ” and collectively as the “ Parties .”

 

RECITALS

 

WHEREAS , the Company desires to employ and retain the Employee in order to advance the business and interests of the Company on the terms and conditions set forth herein; and

 

WHEREAS , the Employee wishes to be employed by the Company and desires to provide her services to the Company in such capacities, on and subject to the terms and conditions hereof; and

 

WHEREAS, the Company expends significant time and expense on an ongoing basis in supporting its employees, including the Employee ; and

 

WHEREAS , the Company is clinical-stage biopharmaceutical company engaged in the development of novel drug candidates to treat Alzheimer’s disease, other CNS diseases and various types of cancer (the “ Business ”); and

 

WHEREAS, in the course of the Employee’s employment by the Company , the Employee may receive, be taught or otherwise have access to items and information associated with the Business such as technical and non-technical information relating to the Company’s products, research, processes, methods, correspondence, records, clinical data, protocols, specifications, technique, financial information, pricing information, computer systems, computer software applications, business plans and other information which is confidential and proprietary; and

 

WHEREAS, the Company has acquired and/or developed certain trade secrets and Confidential Information , as more fully described below, and has expended significant time and expense in acquiring or developing its trade secret or Confidential Information ; and

 

NOW, THEREFORE , in consideration of the mutual promises, covenants and agreements contained herein, and intending to be legally bound hereby, the Company and the Employee do hereby agree as follows:

 

AGREEMENT

 

1.           Adoption of Recitals . The Company and Employee adopt the above recitals as being true and correct.

 

 

 

 

(a)          Employment . This Agreement will commence on the October 1, 2015 (the “ Effective Date ”) and shall terminate on September 30, 2017 (the “ Initial Term ”), unless sooner terminated in accordance with the provisions of this Agreement. The Initial Term and any extensions shall be referred to as the “ Employment Period .” The Agreement must be renewed in writing, signed by both parties. If the Agreement is not renewed in writing, the non-renewal is not considered a Termination (as defined below).

 

2.           Position and Duties .

 

(a)        The Employee shall, during the Employment Period hereunder, serve as Principal Financial Officer (“PFO”) for the Company and shall perform the executive, administrative, and accounting duties, functions and privileges incumbent with the position of PFO and such other duties as reasonably determined by the CEO or the Board of Directors of the Company (the “ Board ”) from time to time. While the duties may be changed, with or without notice, the PFO’s duties may include preparation of SEC continuous disclosures and regulatory filings; bookkeeping and day-to-day accounting, bill payments and maintenance of accounts payable, preparation of quarterly working papers and financial statements, serving as a liaison with auditors and legal counsel, overseeing and implementing corporate governance procedures and protocols, preparation of the corporate tax returns and filings, preparation of POSAM and registration statements, assist with the establishment, implementation and maintenance of disclosure controls and procedures, and budgeting.

 

(b)        The Employee will report to the CEO of the Company or his designee. The Employee ’s authority is subject to approval by the CEO of the Company and/or the Board .

 

(c)         The Employee agrees to serve the Company faithfully, conscientiously and to the best of her ability, and to devote all of her business time to the business and affairs of the Company (and, if requested by the CEO and/or the Board , any subsidiary or affiliate of the Company ) so as to promote the profit, benefit and advantage of the Company and, if applicable, any subsidiaries or affiliates of the Company . The Employee shall fulfill her duties of loyalty, fidelity and allegiance to act at all times in the best interests of the Company and to do no act which would injure the business, interests or reputation of the Company . The Employee ’s employment is subject to compliance with all the Company’s policies, including the Business Code of Conduct & Ethics Policy, all as may be amended from time to time.

 

3.           Compensation .

 

(a)          Base Salary . During the Employment Period , the Company shall pay to the Employee an annual base salary (“ Base Salary ”) of Seventy-Eight Thousand and 00/100 Canadian Dollars ($78,000 CAD) payable by the Company and payable in accordance with the Company’s payroll schedules throughout the term of such employment, subject to the provisions of Section 5 hereof (governing Terminations), and subject to any applicable tax and payroll deductions; provided, however , that in the Company’s sole discretion, based on factors such as the market and the Employee’s job performance, salary increases may be made. There, however, is never a guarantee of an increase in Base Salary . Salary decreases may be made through a written modification of this Agreement executed and signed by the Parties .

 

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(b)            Annual Bonus .

 

(i)       At the sole discretion of the Company , the Company may award the Employee a bonus (“ Annual Bonus ”) that reflects and rewards the contributions of the Employee to the Company’s business and success.

 

(ii)       Any Annual Bonus is awarded at the option of the Company based upon individual and Company milestones. The Employee’s bonus target for her Annual Bonus is anticipated to be 25% of her Base Salary . Annual Bonuses are not deemed earned and accrued until the Board awards the Annual Bonus .

 

(iii)       Except as set forth in Subsection 5(g)(iii), Annual Bonuses that are not earned and accrued are deemed waived if the Employee’s employment terminates for any reason prior to the Board awarding the Annual Bonus .

 

(c)           Other Benefits . During the Employment Period , the Employee shall be entitled to participate in such employee benefit plans, programs or arrangements (collectively the “ Plans ”), implemented by the Company and available to similarly situated employees of the Company within ninety (90) days following Employee’s starting date. The Company shall have the right, from time to time and in its sole discretion, to modify and amend the benefits provided to its similarly situated employees, including the Employee , consistent with the provisions herein.

 

(d)           Fringe benefits .

 

(i)        Business Expenses . During the Employment Period , the Company shall pay for directly or reimburse the Employee for all reasonable, customary and necessary business-related expenses incurred by the Employee in connection with the duties of the Employee hereunder, upon submission by the Employee to the Company of such written evidence of such expense as the Company may require. Any disputes as to the eligibility of an expense for reimbursement shall be resolved in the sole discretion of the Board .

 

(ii)        Paid Time Off . During the Employment Period , the Company agrees that the Employee shall earn four (4) weeks (20 business days) of Paid Time Off (“ PTO ”) per calendar year for use as the Employee sees fit, provided that such PTO intended for use as vacation time shall be taken at times mutually agreeable to the Employee and Company and otherwise pursuant to applicable workplace policies governing the use of PTO . If at the end of the calendar year, the Employee has accrued PTO that she did not use, the Employee shall be permitted to carry forward up to 40 hours of unused PTO . The Employee shall further be entitled to paid holidays and authorized leaves (paid and unpaid) in accordance with the policies of the Company then in effect for its senior executives. At all times, irrespective of the reason for the use, the Employee ’s use of PTO shall be consistent with the applicable workplace policies.

 

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(iii)        Long-Term Compensation .

 

(1)       At the next meeting of the Board of Directors of the Company, the Company shall award Employee one-hundred-thousand (100,000) stock options. A portion of the Options shall vest on the final day of each calendar quarter during the three (3) years following execution of this Agreement.

 

(2)       The Company agrees that if Anavex is subject to a Change in Control, then 100% of the remaining unvested option shares will immediately vest with no restrictions on purchase or sale (other than as legally required per statute or other applicable regulation). “ Change in Control ” means (a) the consummation of a merger or consolidation of the Company into another entity in which the Company is not the surviving entity, (b) the dissolution, liquidation or winding up of the Company , (c) the closing of the sale, lease, transfer or other disposition of all or substantially all of the Company’s assets in one transaction or a series of related transactions or (d) the closing of the transfer of the Company’ s outstanding securities, in one transaction or a series of related transactions, to a person or group of affiliated persons if, after such closing, such person or group of affiliated persons would hold a majority of the voting power of the capital stock of the Company . The foregoing notwithstanding, a merger or consolidation of the Company does not constitute a Change in Control if immediately after the merger or consolidation a majority of the voting power of the capital stock of the continuing or surviving entity, or any direct or indirect parent corporation of the continuing or surviving entity, will be owned by the persons who were the Company’s stockholders immediately prior to the merger or consolidation in substantially the same proportions as their ownership of the voting power of the Company’s capital stock immediately prior to the merger or consolidation.

 

(iv)       Nothing paid to the Employee under any of the Company Plans or fringe benefit arrangements shall be deemed to be in lieu of Base Salary payable to the Employee hereunder.

 

(v)        Recovery of Incentive Compensation . Notwithstanding anything herein to the contrary, the Employee agrees that incentive compensation payable to the Employee under this Agreement or otherwise shall be subject to any clawback policy adopted or implemented by the Company in respect to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 and such regulations as are promulgated thereunder from time to time, or in respect to any other applicable law, regulation or Company policy.

 

4.           Termination .

 

(a)           Termination for Cause . The Company may terminate the Employee for Cause, by giving written Notice of Termination to Employee . The Date of Termination shall be specified in the Notice of Termination. For purposes hereof, “ Cause ” shall mean: (i) the Employee’s failure to perform and discharge the duties and responsibilities of the Employee under this Agreement after receiving written notice and allowing the Employee thirty (30) days to cure such failures, if so curable, ( provided, however , that after one such notice has been given to the Employee during the Employment Period, the Company is no longer required to provide time to cure subsequent failures under this Subsection 5(c)(i)); or (ii) any breach by the Employee of the provisions of Sections 6, 8 and/or 9 hereof; or (iii) misconduct which, in the opinion and sole discretion of the Company , is injurious to the Company ; or (iv) felony conviction involving the personal dishonesty or moral turpitude of the Employee ; or (v) engagement in illegal drug use or alcohol abuse which in the sole discretion of the Company prevents the Employee from performing her duties in any manner; or (vi) any misappropriation, embezzlement or conversion of the Company’s or any of its parent’s, subsidiary’s or affiliate’s property by the Employee ; or (vii) willful misconduct or breach of fiduciary duty by the Employee in respect of the duties or obligations of the Employee under this Agreement .

 

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(b)          Termination by the Company without Cause . Except as set forth in Section 5(c) hereof, the Company may terminate this Agreement at any time by providing a Notice of Termination which includes a Date of Termination at least thirty (30) calendar days after delivery of the Notice of Termination.

 

(c)           Termination by the Employee . The Employee may terminate this Agreement by delivering a Notice of Termination to the Company . The Date of Termination shall be specified in the Notice of Termination; provided however , that the Date of Termination shall not be earlier than thirty (30) calendar days after delivery of the Notice of Termination.

 

(d)          Obligations Upon Termination .

 

(i)        Termination for Cause . In the event that the employment of the Employee is terminated pursuant to Subsection 5(a), no Compensation (as set forth in Section 4 above), no severance, no pro-rated bonuses or other post-termination payment shall be due or payable by the Company to the Employee (except solely such Base Salary or other payments as may have been accrued but not yet paid prior to the Date of Termination). Any outstanding stock option or other stock awards held by Employee as of the Date of Termination shall be subject to the terms of the applicable plan documents.

 

(ii)        Termination by the Company without Cause . In the event that the employment of the Employee is terminated pursuant to Subsection 5(b), no Compensation (as set forth in Section 4 above), no severance, no pro-rated bonuses or other post-termination payment shall be due or payable by the Company to the Employee (except solely such Base Salary or other payments as may have been accrued but not yet paid prior to the Date of Termination). The Company may opt to have the Employee cease providing services to the Company during the thirty (30) day notice-period. In such event, Company shall continue the Compensation and Benefits (as set forth in Section 4 above) during the thirty (30) day notice-period. Further, any outstanding stock option or other stock awards vesting in the contract year of Termination held by Employee as of the Date of Termination shall immediately vest and become exercisable.

 

(iii)        Termination by the Employee . In the event that the employment of the Employee is terminated pursuant to Subsection 5(c), no Compensation (as set forth in Section 4 above), no severance, no pro-rated bonuses or other post-termination payment shall be due or payable by the Company to the Employee (except solely such Base Salary or other payments as may have been accrued but not yet paid prior to the Date of Termination). The Company may opt to accept Employee’s resignation and have Employee cease providing services to the Company prior to the expiration of the thirty (30) day notice-period. If the Company waives the thirty (30) day notice-period, the Date of Termination shall be deemed to occur on the final date Employee actually provided services to the Company .

 

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(iv)        Employee’s Duty to Render Final Accounting and Return Company Property . Upon termination of the Agreement , the Employee shall (i) within thirty (30) days thereafter, render a final accounting to the Company which shall include all adjustments between the Parties to ensure that all commitments of the Company addressed; and (ii) immediately surrender to the Company or as the Company may direct, all property, books and records of the Company then in the custody, possession, or control of the Employee , and as further described in Section 8 of this Agreement .

 

(e)        Notice of Termination . A “ Notice of Termination to effectuate a termination under Section 5 shall be made in accordance with the Notice provision defined in Section 7. For purposes of this Agreement, a Notice of Termination shall mean a notice, in writing, which shall indicate the specific termination provision of this Agreement relied upon as the basis for the Termination and the Date of Termination. The Date of Termination shall not be earlier than the date such Notice of Termination is delivered (as defined above); provided however , that the Company , at its option, may elect to have the Employee not report to work after the date of the written notice.

 

(f)        Date of Termination . “ Date of Termination ” means the date on which this Agreement shall terminate in accordance with the provisions of this Section 5.

 

5.                Restrictive Covenants .

 

(a)          Definitions .

 

(i)       The term “ Anavex ” for purposes of Section 6 of this Agreement shall mean Anavex Life Sciences Corp. and its affiliated and related entities including, but not limited to, all of its subsidiaries and joint ventures. It is understood that any affiliated or related entities of Anavex are intended third-party beneficiaries of the provisions of this Agreement.

 

(ii)       The term “ Confidential Information ” shall include, but not be limited to, (i) all technical and non-technical information relating to Anavex’s pharmaceutical products, research, processes, methods, equipment, products, business practices, and/or clinical trials; Customer lists and Prospective Customer lists; specific information on Customers and Prospective Customers (including information on purchasing preferences, credit information, and pricing); terms and conditions under which Anavex deals with Vendors and supplier or prospective Vendors or suppliers; employee and independent contractor lists; Anavex’s sources of supply; Anavex’s billing rates; pricing lists (including item and Customer specific pricing information); names of agents; operations; contractual or personnel data; trade secrets; license agreements; proprietary purchasing and sales methods and techniques; proprietary compositions, ideas and improvements; pricing methods and strategies; computer programs, computer systems, computer data, system documentation, special hardware, product hardware, related software development and computer software design and/or improvements; methods of distribution; market feasibility studies; proposed or existing marketing techniques or plans; sales and sales volumes; purchasing, transportation, documentation, marketing and trading techniques of Customers, potential Customers and/or Vendors; inventions (including Inventions as defined below; future Anavex business plans; project files; design systems; information on current and potential Vendors including, but not limited to, their identity, pricing, and purchasing information not generally known; personal information about Anavex’s executives, officers and directors; correspondence, and letters, notes, notebooks, reports, flowcharts, proposals, processes and/or any and all other confidential or proprietary information belonging to Anavex or relating to Anavex’s business and/or affairs; and (ii) any information that is of value or significance to Anavex that derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, including information not generally known to the competitors of Anavex nor intended by Anavex for general dissemination. Confidential Information shall not include any (a) information known generally to the public (other than as a result of unauthorized disclosure by the Employee ), (b) information that became available from a third party source and such source is not bound by a confidentiality agreement, or (c) any information not otherwise considered by the Board to be Confidential Information.

 

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(iii)       The term “ Customer ” shall mean any person or entity which has purchased products from Anavex , entered into any contract for products with Anavex , and/or entered into any contract for the distribution of any products with Anavex within the one (1) year immediately preceding the termination of the Employee’s employment with Anavex for whatever reason.

 

(iv)       The phrase “ directly or indirectly ” shall include the Employee either on her own account, or as a partner, owner, promoter, joint venturer, employee, agent, consultant, advisor, manager, executive, independent contractor, officer, director, stockholder, or otherwise, of an entity.

 

(v)       The term “ Non-Compete Period ” shall mean the Employment Period and the twelve (12) months immediately following termination of the Employee’s employment with Anavex for whatever reason.

 

(vi)       The term “ Prospective Customer ” shall mean any person or entity which has expressed interest in purchasing products from Anavex , expressed interest in entering into any contract for products or services with Anavex , and/or expressed interest in entering into any contract for the distribution of any products with Anavex within the one (1) year immediately preceding the termination of the Employee’s employment with Anavex for whatever reason.

 

(vii)       The term “ Restricted Area ” shall include any geographical location anywhere in the world where Anavex , its affiliates or subsidiaries either (a) are engaged in business, or (b) have evidenced an intention to engage in business.

 

(viii)       The term “ Restricted Business ” shall mean any business that competes with the business of Anavex , as such business now exists or as it may exist at the time of the termination of the Employee’s employment with Anavex for whatever reason, including any entity in the business of developing and/or distributing pharmaceutical products.

 

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(ix)       The term “ Vendor ” shall mean any supplier, person or entity from which Anavex has purchased products or services during the one (1) year immediately preceding the termination of the Employee ’s employment with Anavex for whatever reason.

 

(b)          Non-Competition . During the Non-Compete Period, in the Restricted Area, the Employee shall not, directly or indirectly, engage in, promote, finance, own, operate, develop, sell or manage or assist in or carry on in any Restricted Business, provided, however , that the Employee may at any time own securities of any competitor corporation whose securities are publicly traded on a recognized exchange so long as the aggregate holdings of the Employee in any one such corporation shall constitute not more than 5% of the voting stock of such corporation.

 

(c)            Non-Solicitation of Employees or Independent Contractors . During the Non-Compete Period, the Employee shall not, directly or indirectly, solicit or attempt to induce any employee of Anavex or independent contractor engaged and/or utilized by Anavex in any capacity to terminate her employment with, or engagement by, Anavex . Likewise, during the Non-Compete Period, the Employee shall not, directly or indirectly, hire or attempt to hire for another entity or person any employee of Anavex or independent contractor engaged and/or utilized by Anavex in any capacity.

 

(d)           Non-Solicitation of Customers, Prospective Customers or Vendors . During the Non-Compete Period, the Employee shall not, directly or indirectly, provide services to Anavex to any Customer, Prospective Customer or Vendor of Anavex through any entity other than Anavex . The Employee acknowledges and agrees that Anavex has substantial relationships with its Customers, Vendors and Prospective Customers, which Anavex expends significant time and resources in acquiring and maintaining, and that Anavex has Confidential Information pertaining to its business and its Customer, Vendors and Prospective Customers, and that Anavex’s Confidential Information and relationships with its Customers, Vendors and Prospective Customers constitute significant and valuable assets of Anavex .

 

(e)           Non-Disclosure of Confidential Information . During and after employment under this Agreement, including but not limited to the Non-Compete Period, the Employee shall not, directly or indirectly, without the prior written consent of the Board , or a person duly authorized thereby, other than a person to whom disclosure is reasonably necessary or appropriate in connection with the performance by the Employee of the duties of the Employee as an employee of Anavex , disclose or use for the benefit of herself or any other person, corporation, partnership, joint venture, association, or other business organization, any of the trade secrets or Confidential Information of Anavex . If the Employee is legally required to disclose any Confidential Information or trade secrets, the Employee will notify Anavex prior to doing so by providing Anavex with written notice ten (10) business days in advance of the intended or compelled disclosure. (If disclosure is required sooner than ten (10) days, the Employee must provide Anavex with Notice immediately upon learning that disclosure is sought and before disclosure is required or compelled.) Notice shall be provided as defined in Section 7 below.

 

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(f)            Need for Restrictions . The Employee acknowledges and agrees that each of the restrictive covenants contained in this Section 6 is reasonable and necessary to protect the legitimate business interests of Anavex , including, without limitation, the need to protect Anavex ’s trade secrets and Confidential Information and the need to protect its relationships with its Customers, Prospective Customers, Vendors and agents. The Employee also acknowledges and agrees, as set forth in Subsection 6(h) below, that Anavex may obtain a temporary, preliminary and/or permanent injunction to restrain any violations of, or otherwise enforce, the restrictive covenants contained in Section 6. The Employee also acknowledges and agrees that, if her future employment’s job duties would inevitably cause her to disclose Confidential Information or trade secrets of Anavex , Anavex may seek to protect its legitimate business interests by enjoining her from working in that future position.

 

(g)           Proprietary Rights .

 

(i)        Ownership . Anavex shall own all right, title and interest in and to all documentation, manuals, materials, creative works, methods, techniques, compositions, ideas, recipes, creations, improvements, inventions, computer programs and data, system documentation, special hardware, product hardware, related software development, correspondence, letters, notes, notebooks, reports, flowcharts, proposals, know-how and other information, in any medium whatsoever (including, without limitation, any Confidential Information , trade secrets and all software, software code, processes, copyrights, patents, technologies and inventions (collectively, “ Inventions ”), including, without limitation, new contributions, improvements, ideas and discoveries, whether patentable or not, conceived, developed, invented or made by the Employee during her employment by Anavex (including her employment with Anavex prior to the date hereof), provided that such Inventions grew out of the Employee ’s work with Anavex , are related in any manner to the Business , as such term is defined in the Recitals, or are conceived or made on Anavex’s time or with the use of Anavex ’s facilities or materials). The Employee acknowledges and agrees that any of her work product created, produced or conceived in connection with her association with Anavex shall be deemed work for hire and shall be deemed owned exclusively by Anavex .

 

(ii)        Employee's Obligations . The Employee shall (i) promptly disclose such Inventions to Anavex ; (ii) assign to Anavex , without additional compensation, all patent and other rights to such Inventions for the United States and foreign countries; (iii) execute and deliver all documents required by Anavex to document or perfect Anavex’s proprietary rights in and to Anavex’s work product; and (iv) give testimony in support of his inventorship. The Employee shall deliver all Confidential Information , trade secrets and/or Inventions to Anavex upon Anavex’s request, and, in any event, immediately upon termination of the Employee ’s employment by Anavex .

 

(iii)        Employee’s Restrictions . The Employee acknowledges that the Confidential Information , trade secrets and/or Inventions constitute valuable trade secrets of Anavex . The Employee shall not infringe or violate any trade secret or other proprietary right of Anavex related to the Confidential Information , trade secrets and/or Inventions , and shall not own, apply for or otherwise attempt to obtain, on behalf of the Employee or others, any proprietary right in any Confidential Information , trade secrets and/or Inventions , which Anavex owns or has a right to own, in which Anavex has an interest and/or to which Anavex has title.

 

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(h)           Breach of Restrictive Covenants . In the event of a breach or threatened breach by the Employee of any restrictive covenant set forth in Section 6, the Employee agrees that such a breach or threatened breach would cause irreparable injury to Anavex , and that, if Anavex shall bring legal proceedings against the Employee to enforce any restrictive covenant, Anavex shall be entitled to seek all available civil remedies, at law or in equity, including, without limitation, an injunction without posting a bond, damages, attorneys’ fees, and costs.

 

(i)            Successors and Assigns . Anavex and its successors and assigns may enforce these restrictive covenants.

 

(j)            Construction, Survival . If the period of time, area, or scope of restriction specified in this Section 6 should be adjudged unreasonable in any proceeding, then the period of time, area, or scope shall be reduced so that the restrictions may be enforced as is adjudged to be reasonable. If the Employee violates any of the restrictions contained in this Section 6, the restrictive period shall be tolled during the time that the Employee is in violation. All the provisions of this Section 6 shall survive the term of this Agreement and the Employee’s employment with Anavex .

 

6.           Notice . For the purpose of this Agreement , notices and all other communications to either Party hereunder provided for in the Agreement shall be in writing and shall be deemed to have been duly given when: (a) delivered in person, mailed by certified mail, return receipt requested or recognized overnight delivery service and (b) transmitted via electronic mail.

 

If to Anavex : Anavex Life Sciences Corp.
  51 W 52nd Street, 7th floor
  New York, NY 10019
  Telephone: (212) 332 4449
  Attention: Christopher U. Missling
  E-mail: cmissling@anavexcorp.com

 

With a copy to: K&L Gates LLP
  Southeast Financial Center – 39th Floor  
  200 South Biscayne Blvd.
  Miami, FL 33131-2399  
  Telephone:  305.539.3300
  Attention:  Clayton Parker, Esq.
  E-mail: clayton.parker@klgates.com

 

If to the Employee : Sandra Boenisch
  1500 West Georgia Street
  13th Floor
  Vancouver, BC
  Canada V6G 2Z6
  Telephone: (604) 281 4558
  E-mail: sandra.boenisch@nakedbrandgroup.com

 

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or to such other address as either party shall designate by giving written notice of such change to the other party.

 

7.           Return of the Company’s Property . All of the Company ’s and its subsidiaries’ and affiliates’ products, Customer correspondence, internal memoranda, designs, brochures, training manuals, project files, price lists, Customer and Vendor lists, prospectus reports, Customer or Vendor information, data and databases, clinical trial protocols, project agreements, product literature, notebooks, textbooks, e-mails and Internet access, and all other like information or products, including all copies, duplications, replications and derivatives of such information or products, acquired by the Employee while in the employ of the Company , whether prepared by the Employee or coming into the Employee’s possession, shall be the exclusive property of the Company and shall be returned immediately to the Company upon the expiration or termination of this Agreement for any reason or upon request by the Chief Executive Officer of the Company or the Board . The Employee also shall return immediately return any Company issued property including, but not limited to, laptops, computers, thumb drives, removable media devices, flash drives, smartphones, cellular phones, iPads and other devices upon the expiration or termination of this Agreement for any reason or upon request by the Chief Executive Officer of the Company or the Board . The Employee’s obligations under this Section 8 shall exist whether or not any of these items or materials contain Confidential Information or trade secrets. The Parties hereto shall comply with all applicable laws and regulations regarding retention of and access to this Agreement and all books, documents and records in connection therewith. The Employee shall provide the Company with a signed certificate evidencing that all such property has been returned, and that no such property or Confidential Information or trade secret has been retained by the Employee in any form. If the Company has a good faith basis for suspecting that Employee has retained documents, property or information in violation of this provision, if requested, the Employee is obligated to provide the Company and/or its agent with access to the Employee’s laptop(s), external drive(s), computer(s), flash drive(s) and/or removable media to ensure all property of the Company or its subsidiaries and affiliates has been returned, and Employee is not retaining copies of the documents or property without the Company permission.

 

8.           Prior Agreements .

 

(a)          The Employee represents to the Company (1) that there are no restrictions, agreements, or understandings whatsoever to which the Employee is a party which would prevent or make unlawful the Employee’s execution of this Agreement or employment hereunder, (2) that the Employee’s execution of this Agreement and employment hereunder shall not constitute a breach of any contract, agreement or understanding, oral or written, to which the Employee is a party or by which the Employee is bound, and (3) that the Employee is free and able to execute this Agreement and to enter into employment by the Company . The Employee further represents and agrees that she will not bring with her, disclose or otherwise use any confidential, proprietary or trade secret information acquired from any prior employer, whether that information was created by the Employee or others. A written or oral notice or complaint that Employee breached this provision or violated a restrictive covenant or an agreement not to disclose Confidential Information shall subject the Employee , at the Company’s sole discretion, to immediate termination with Cause. The Employee also agrees to fully indemnify the Company for any and all damages, costs and/or attorney’s fees incurred by the Company that arise from any claims that were related to the Employee’s alleged or actual breach of a restrictive covenant or an agreement not to disclose Confidential Information .

 

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(b)          The Parties mutually acknowledge and agree that any prior offer letters and/or employment agreements between and among the Company or any affiliate or subsidiary and the Employee , including, but not limited to, the September 2015 draft Management and Administrative Services Agreement between the Company and the Employee , are declared null and void with no legal effect, and the Employee will take nothing from any such prior agreements, including any right to any severance or termination benefits.

 

9.           Specific Performance . It is agreed that the rights granted to the Parties hereunder are of a special and unique kind and character and that, if there is a breach by any Party of any material provision of this Agreement , the other Party would not have any adequate remedy at law. It is expressly agreed, therefore, that the rights of the Parties hereunder may be enforced by an action for specific performance and other equitable relief without the Parties posting a bond, or, if a bond is required, the Parties agree that the lowest bond permitted shall be adequate.

 

10.         Further Assurances . Each of the Parties hereto shall execute and deliver any and all additional papers, documents and other assurances, and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of the Parties hereto.

 

11.         Right to Review and Seek Counsel . The Employee acknowledges that she has had the opportunity to seek independent counsel and tax advice in connection with the execution of this Agreement, and the Employee represents and warrants to the Company (a) that she has sought such independent counsel and advice as she has deemed appropriate in connection with the execution hereof and the transactions contemplated hereby, and (b) that she has not relied on any representation of the Company as to tax matters, or as to the consequences of the execution hereof.

 

12.         Waiver/Amendments . The waiver by the Company of a breach or threatened breach of this Agreement by the Employee shall not be construed as a waiver of any subsequent breach by the Employee . No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is approved by the Board and agreed to in writing signed by Employee and such officer as may be specifically authorized by the Board .

 

13.         Entire Agreement . This Agreement contains the entire understanding of the Parties and no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either Party , which are not set forth expressly in this Agreement . This Agreement supersedes all negotiations, preliminary agreements, and all prior and contemporaneous discussions and understandings of the Parties and/or their affiliates. The Employee acknowledges that she has not relied on any prior or contemporaneous discussions or understandings in entering into this Agreement .

 

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14.         Neutral Construction . No Party may rely on any drafts of this Agreement in any interpretation of the Agreement . Each Party to this Agreement has reviewed this Agreement and has participated in its drafting and, accordingly, no Party shall attempt to invoke the normal rule of construction to the effect that ambiguities are to be resolved against the drafting Party in any interpretation of this Agreement .

 

15.         Governing Law . This Agreement shall be governed and construed in accordance with the laws of the State of New York without regard to conflicts of law.

 

16.         Headings and Captions . The titles and captions of paragraphs, sections, subparagraphs and subsections contained in this Agreement are provided for convenience of reference only, and shall not be considered terms or conditions of this Agreement .

 

17.         Validity . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement , which shall remain in full force and effect.

 

18.         Survival . The provisions of this Agreement shall not survive the termination of the Employee ’s employment hereunder, except that the provisions of (i) Section 5 hereto relating to post-termination payment obligations; (ii) Section 6 hereto relating to the restrictive covenants; (iii) Section 8 hereto relating to return of the Company’s property; and (iv) Section 17 relating to jurisdiction, venue and waiver of personal service shall remain binding upon the Parties .

 

19.         Successors and Assigns . This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and the Employee agrees that this Agreement may be assigned by the Company without Employee’s consent. This Agreement is not assignable by the Employee .

 

20.         Counterparts . This Agreement may be executed in one or more separate counterparts, each of which, when so executed, shall be deemed to be an original. Such counterparts shall, together, constitute and shall be one and the same instrument. This Agreement, and the counterparts thereto, may be executed by the Parties using their respective signatures transmitted via facsimile machines or via electronic mail.

 

21.         Jury Trial Waiver, Arbitration . ALL ISSUES, MATTERS AND DISPUTES BETWEEN THE PARTIES CONCERNING THIS AGREEMENT SHALL BE SUBMITTED TO ARBITRATION. Employee agrees, on behalf of herself and her agents or assigns that, except as otherwise provided in this paragraph, all potentially litigable claims or controversies arising out of this Agreement shall be submitted to binding arbitration before a mutually acceptable arbitrator and in accordance with the American Arbitration Association (“ AAA ”) under the Employment Arbitration Rules and Mediation Procedures. If the Parties cannot agree upon an arbitrator, the claim or controversy shall be arbitrated by a single arbitrator selected in accordance with the applicable AAA rules. THIS PROVISION TO ARBITRATE SHALL NOT APPLY TO ANY CLAIM FOR BREACH OF THE RESTRICTIVE COVENANTS, AS SET FORTH ABOVE IN SECTION 6, INCLUDING ANY REQUEST FOR INJUNCTIVE RELIEF TO ENFORCE COMPLIANCE WITH THE TERMS OF SECTION 6. EITHER PARTY MUST PROCEED EXCLUSIVELY IN COURT TO ENFORCE THE REQUIREMENTS OF SECTION 6 . The Employee hereby consents to personal jurisdiction and exclusive venue in the United States District Court for the Southern District of New York, if such Court can exercise jurisdiction over the matter for any action brought by the Company seeking injunctive relief. In the event the foregoing Court lacks jurisdiction, the Employee consents to personal jurisdiction and exclusive venue in the Supreme Court of the State of New York, New York County. ALL CLAIMS CONCERNING THIS AGREEMENT FOR INJUNCTIVE RELIEF SHALL BE TRIED BY A JUDGE IN A NON-JURY TRIAL.

 

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IN WITNESS WHEREOF , the parties hereto have executed this Agreement on September 17, 2015.

 

ANAVEX LIFE SCIENCES CORP.   SANDRA BOENISCH
       
By:    
       
Name: Christopher U Missling    
       
Title: President    

 

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Exhibit 23.1

 

Consent of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholders

Anavex Life Sciences Corp.

New York, New York

 

We hereby consent to the incorporation by reference in the Registration Statement on Form S-3 (No. 333-207600) of Anavex Life Sciences Corp. of our report dated December 29, 2015, relating to the consolidated financial statements which appear in this Form 10-K.

 

/s/ BDO USA, LLP

 

December 29, 2015

 

 

Exhibit 31.1

 

CERTIFICATION

 

I, Christopher Missling, certify that:

 

1.   I have reviewed this Annual Report on Form 10-K of Anavex Life Sciences Corp.;
     
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     
    a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       
    b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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 principals;
       
    c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       
    d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     
    a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
       
    b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

 

Date: December 29, 2015  
   
/s/ Christopher Missling  
Christopher Missling  
Chief Executive Officer, President, Secretary, Treasurer
(Principal Executive Officer)
 

 

 

 

Exhibit 31.2

 

CERTIFICATION

I, Sandra Boenisch, certify that:

 

1.   I have reviewed this Annual Report on Form 10-K of Anavex Life Sciences Corp.;
     
2.   Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
3.   Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.   The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15-d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     
    a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
       
    b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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 principals;
       
    c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
       
    d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     
5.   The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
     
    a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
       
    b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: December 29, 2015  
   
/s/ Sandra Boenisch  
Sandra Boenisch  
Principal Financial Officer
(Principal Financial and Accounting Officer)
 

 

 

 Exhibit 32 .1

 

CERTIFICATION

 

In connection with the Annual Report of Anavex Life Sciences Corp. (the “Company”) on Form 10-K for the fiscal year ending September 30, 2015 as filed with the Securities and Exchange Commission (the “Report”), we, Christopher Missling, Chief Executive Officer (Principal Executive Officer) and Sandra Boenisch, Principal Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of our knowledge:

 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
   
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

 

Date: December 29, 2015  
   
/s/ Christopher Missling  
Christopher Missling  
Chief Executive Officer, President, Secretary, Treasurer
(Principal Executive Officer)
 
   
/s/ Sandra Boenisch  
Sandra Boenisch  
Principal Financial Officer
(Principal Financial and Accounting Officer)