What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2021-11-24 compared with 2020-12-28 · 773 added, 607 removed, 123 unchanged (92% of the section changed)

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

LIFE SCIENCES CORP.

FINANCIAL STATEMENTS

Report of Independent

Registered Public Accounting Firm

Shareholders and Board

STATEMENTS AND SUPPLEMENTARY DATA

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2021

Report of Independent Registered Public

Accounting Firm

Shareholders and Board of Directors

Anavex Life Sciences Corp.

New York, New York

on the Consolidated Financial Statements

have audited the accompanying consolidated balance sheets of Anavex Life Sciences Corp.

and subsidiaries (the “Company”)

as of September 30, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity, and

cash flows for the years in the period ended September 30, 2020, and the related notes (collectively referred to as the “consolidated

Opinion on the Consolidated

Financial Statements

In our opinion, the consolidated financial statements present fairly, in all material respects,

the financial position of the Company at September 30, 2020 and 2019, and the results of its operations and its cash flows for

the years then ended, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying

consolidated balance sheets of Anavex Life Sciences Corp.

(the “Company”) as of September 30, 2021 and 2020, the related

consolidated statements of operations and comprehensive loss, stockholders’ equity, and cash flows for each of the two years

in the period ended September 30, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company

at September 30, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended

September 30, 2021 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the

standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal

control over financial reporting as of September 30, 2021, based on criteria established in Internal Control – Integrated

Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our

report dated November 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an

opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered

with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with

respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities

and Exchange Commission and the PCAOB.

We conducted our audits

in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable

assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the

purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

we express no such opinion.

Our audits included performing procedures

to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

These consolidated financial

statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

consolidated financial statements based on our audits.

We are a public accounting firm registered with the PCAOB and are required

to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with

the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether

the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to

assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing

procedures that respond to those risks.

3 unchanged sentences

estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

believe that our audits provide a reasonable basis for our opinion.

that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising

from the current period audit of the consolidated financial statements that were communicated or required to be communicated to

the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements

and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ BDO USA, LLP

1 unchanged sentence

New York, New York

December 28, 2020

LIFE SCIENCES CORP.

BALANCE SHEETS

at September 30, 2020 and 2019

and cash equivalents

and tax receivables

expenses and deposits

Liabilities and Stockholders'

November 24, 2021

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Anavex Life Sciences Corp.

New York, New York

Opinion on Internal Control over Financial

We have audited Anavex Life Sciences Corp.’s

(the “Company’s”) internal control over financial reporting as of September 30, 2021, based on criteria established

in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway

Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal

control over financial reporting as of September 30, 2021, based on the COSO criteria .

We also have audited, in accordance with the

standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets

of the Company as of September 30, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’

equity, and cash flows for each of the two years in the period ended September 30, 2021, and the related notes, and our report

dated November 24, 2021 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible

for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control

over financial reporting, included in the accompanying Item 9A, Management’s Report on Internal Control over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of internal control

over financial reporting in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a

material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed

Our audit also included performing such other procedures as we considered necessary in the circumstances.

We believe that

our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control

over Financial Reporting

A company’s internal control over financial

reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation

of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal

control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in

reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable

assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally

accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations

of management and directors of the company;

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized

acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal

control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness

to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree

of compliance with the policies or procedures may deteriorate.

/s/ BDO USA, LLP

New York, New York

November 24, 2021

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED BALANCE SHEETS

As at September 30,

2021 and 2020

Cash and cash equivalents

$ 152,107,745

Incentive and tax receivables

Prepaid expenses and deposits

Deferred financing charges

$ 161,616,490

Liabilities and Stockholders' Equity

Current Liabilities

Commitments and Contingencies

Accounts payable

Accrued liabilities - Note 3

Deferred grant income

Total Liabilities

Commitments and Contingencies - Note 6

Capital stock

10,000,000 preferred

stock, par value $ 0.001 per share

100,000,000 common

stock, par value $ 0.001 per share

and outstanding:

62,045,198 common

shares (2019 - 52,650,521 )

Additional paid-in

10,000,000 preferred stock, par value $ 0.001 per share

common stock, par value $ 0.001

100,000,000 common stock, par value $ 0.001 per share)

Issued and outstanding:

75,918,465 common shares (2020 - 62,045,198 )

Additional paid-in capital

Accumulated deficit

( 197,585,864 )

( 159,677,230 )

Stockholders' Equity

Liabilities and Stockholders' Equity

Accompanying Notes to Consolidated Financial Statements

LIFE SCIENCES CORP.

STATEMENTS OF OPERATIONS

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

$ 161,616,490

See Accompanying Notes to Consolidated Financial Statements

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

the years ended September 30, 2021 and 2020

Operating expenses

General and administrative

and development

Research and development

Total operating expenses

( 42,001,185 )

( 31,088,232 )

Other income (expenses)

Research and development

incentive income

Research and development incentive income

Interest income, net

Gain on settlement

of accounts payable

Financing related charges

exchange gain (loss), net

other income, net

Net loss before provision

for income taxes

tax expense, current

loss and comprehensive loss

Foreign exchange gain (loss), net

Total other income, net

Net loss before provision for income taxes

( 37,641,069 )

( 26,257,806 )

Income tax expense, current

Net loss and comprehensive loss

$ ( 37,908,634 )

$ ( 26,280,470 )

Net Loss per share

Weighted average number of shares

Accompanying Notes to Consolidated Financial Statements

LIFE SCIENCES CORP.

STATEMENTS OF CASH FLOWS

the years ended September 30, 2020 and 2019

Cash Flows used in

Operating Activities

Basic and diluted

Weighted average number of shares outstanding

Basic and diluted

See Accompanying Notes to Consolidated Financial Statements

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the years ended September

30, 2021 and 2020

Cash Flows used in Operating Activities

$ ( 37,908,634 )

$ ( 26,280,470 )

Adjustments to reconcile

net loss to net cash used in operations:

Adjustments to reconcile net loss to net cash used in operations:

Stock-based compensation

Deferred costs

Gain on settlement

of accounts payable

Changes in non-cash

working capital balances related to operations:

Changes in non-cash working capital balances related to operations:

Incentive and tax receivables

( 4,287,491 )

Prepaid expenses and

( 2,206,595 )

Prepaid expenses and deposits

Accounts payable

Net cash used in operating

Accrued liabilities

Deferred grant income

Net cash used in operating activities

( 30,383,674 )

( 21,287,046 )

Cash Flows provided

by Financing Activities

Cash Flows provided by Financing Activities

Issuance of common shares

Share issue costs

financing charges

Net cash provided by

financing activities

Increase (decrease)

in cash and cash equivalents during the period

and cash equivalents, beginning of year

and cash equivalents, end of year

Accompanying Notes to Consolidated Financial Statements

LIFE SCIENCES CORP.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

the years ended September 30, 2020 and 2019

( 5,550,921 )

Proceeds from exercise of warrants

Proceeds from exercise of stock options

Net cash provided by financing activities

Increase in cash and cash equivalents during the period

Cash and cash equivalents, beginning of period

Cash and cash equivalents, end of period

$ 152,107,745

Supplemental Cash Flow Information

Cash paid for state and local minimum income taxes

See Accompanying Notes to Consolidated Financial Statements

ANAVEX LIFE SCIENCES CORP.

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

years ended September 30, 2021 and 2020

Balance, September 30, 2019

1 unchanged sentence

$ ( 133,396,760 )

Shares issued under

2015 Purchase Agreement

Purchase shares

Commitment shares

Shares issued under

2019 Purchase Agreement

Shares issued under 2019 purchase agreement

Purchase shares

Commitment shares

Shares issued pursuant

to cashless exercise of warrants

Shares issued pursuant to cashless exercise of stock options

Shares issued under Sales Agreement, net of share issuance costs

Share based compensation

4 unchanged sentences

$ ( 159,677,230 )

Shares issued under

2019 Purchase Agreement

Purchase shares

Shares issued under 2019 purchase agreement Purchase shares

Commitment shares

Shares issued pursuant

to cashless exercise of options

Shares issued under

Sales Agreement, net of shares issue costs

Shares issued pursuant to exercise of stock options

Shares issued under Sales Agreement, net of share issuance costs

Shares issued pursuant to registered direct offering, net of share issue costs

Shares issued pursuant to exercise of warrants

Share based compensation

4 unchanged sentences

$ 150,818,104

Accompanying Notes to Consolidated Financial Statements

Business Description

and Basis of Presentation

Life Sciences Corp.

(“Anavex” or the “Company”) is a clinical stage biopharmaceutical company engaged

in the development of differentiated therapeutics by applying precision medicine to central nervous system (“CNS”)

diseases with high unmet need.

Anavex analyzes genomic data from clinical studies to identify biomarkers, which are used to select

patients that will receive the therapeutic benefit for the treatment of neurodegenerative and neurodevelopmental diseases.

Company’s lead compound ANAVEX ® 2-73 is being developed to treat Alzheimer’s disease, Parkinson’s

See Accompanying Notes to Consolidated Financial Statements

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 1

Note 1 Business Description and Basis of

Anavex Life Sciences Corp.

or the “Company”) is a clinical stage biopharmaceutical company engaged in the development

of differentiated therapeutics by applying precision medicine to central nervous system (“CNS”) diseases with high

Anavex analyzes genomic data from clinical studies to identify biomarkers, which are used to select patients that will

receive the therapeutic benefit for the treatment of neurodegenerative and neurodevelopmental diseases.

The Company’s

lead compound ANAVEX®2-73 is being developed to treat Alzheimer’s disease, Parkinson’s

disease and potentially other central nervous system diseases, including rare diseases, such as Rett syndrome, a rare severe neurological

monogenic disorder caused by mutations in the X-linked gene, methyl-CpG-binding protein 2 (“MECP2”) .

of Presentation

consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission

(“SEC”) and the instructions to Form 10-K and have been prepared under the accounting principles generally accepted

in the United States of America (“U.S.

of the Company’s potential drug compounds are in the clinical development stage and the Company cannot be certain that its

research and development efforts will be successful or, if successful, that its potential drug compounds will ever be approved

for sales to pharmaceutical companies or generate commercial revenues.

On May 25, 2021, the Company filed

a Certificate of Amendment to its Articles of Incorporation with the Secretary of the State of Nevada effecting an amendment to

increase the number of authorized shares of the Company’s common stock, par value $ 0.001 per share, from 100,000,000 shares

to 200,000,000 shares.

The Certificate of Amendment was approved by the Company’s stockholders at an annual meeting of stockholders

on May 25, 2021.

These consolidated financial statements

have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and the

instructions to Form 10-K and have been prepared under the accounting principles generally accepted in the United States of America

All of the Company’s potential

drug compounds are in the clinical development stage and the Company cannot be certain that its research and development efforts

will be successful or, if successful, that its potential drug compounds will ever be approved for sale or generate commercial revenues.

To date, we have not generated any revenues from our operations.

The Company expects the business to continue to experience negative cash flows for the foreseeable future and cannot predict when,

if ever, our business might become profitable.

Company believes that its existing cash and cash equivalents, along with existing financial commitments from third parties, will

be sufficient to meet its cash commitments for in excess of two years after the date that these consolidated financial statements

The process of drug development can be costly, and the timing and outcomes of clinical trials is uncertain.

assumptions upon which the Company has based its estimates are routinely evaluated and may be subject to change.

amount of the Company’s expenditures will vary depending upon a number of factors including but not limited to the design,

timing and duration of future clinical trials, the progress of the Company’s research and development programs and the level

of financial resources available.

The Company has the ability to adjust its operating plan spending levels based on the timing

of future clinical trials.

than our rights related to the 2019 Purchase Agreement and the Sales Agreement (each as defined below in Note 4), there can be

no assurance that additional financing will be available to us when needed or, if available, that it can be obtained on commercially

reasonable terms.

If the Company is not able to obtain the additional financing on a timely basis, if and when it is needed, it

will be forced to delay or scale down some or all of its research and development activities.

December 2019, a novel strain of coronavirus, COVID-19, was reported to have surfaced in Wuhan, China.

In March 2020, the World

Health Organization (“WHO”) declared COVID-19 to be a global pandemic as a result of the rapid spread of the virus

beyond its point of origin.

Business Description and

Basis of Presentation - (continued)

global outbreak of COVID-19 continues to rapidly evolve as of the date these consolidated financial statements are issued.

such, it is uncertain as to the full magnitude that the outbreak will have on the Company’s financial condition and future

results of operations.

Management is actively monitoring the global situation on its business, including on its clinical trials

and operations and financial condition.

The effects of COVID-19 did not have a material impact on the Company’s result of

operations or financial condition for the year ended September 30, 2020.

However, given the daily evolution of the COVID-19 situation,

and the global responses to curb its spread, the Company is not able to estimate the effects COVID-19 may have on its future results

of operations or financial condition.

March 27, 2020, the President of the United States signed into law the “Coronavirus Aid, Relief, and Economic Security (CARES)

Act.” The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer

side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to

the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections

to tax depreciation methods for qualified improvement property.

The enactment of the CARES Act did not have any material impact

on the Company’s consolidated financial statements or deferred tax assets or liabilities.

Summary of Significant

Accounting Policies

preparation of financial statements in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and

expenses in the reporting period.

The Company regularly evaluates estimates and assumptions related to accounting for research

and development costs, incentive income receivable, valuation and recoverability of deferred tax assets, asset impairment, stock-based

compensation and loss contingencies.

The Company bases its estimates and assumptions on current facts, historical experience and

various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making

judgments about the book 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

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

consolidated financial statements include the accounts of Anavex Life Sciences Corp.

and its wholly-owned subsidiaries, Anavex

Australia Pty Limited.

(“Anavex Australia”), a company incorporated under the laws of Australia, Anavex Germany GmbH,

a company incorporated under the laws of Germany, and Anavex Canada Ltd., a company incorporated under the laws of the Province

of Ontario, Canada.

All inter-company transactions and balances have been eliminated.

and equivalents

The Company expects the business to continue to experience negative

cash flows for the foreseeable future and cannot predict when, if ever, its business might become profitable.

Management believes that the current

working capital position will be sufficient to meet the Company’s working capital requirements beyond the next 12 months

after the date that these consolidated financial statements are issued.

The process of drug development can be costly, and the

timing and outcomes of clinical trials is uncertain.

The assumptions upon which the Company has based its estimates are routinely

evaluated and may be subject to change.

The actual amount of the Company’s expenditures will vary depending upon a number

of factors including but not limited to the design, timing and duration of future clinical trials, the progress of the Company’s

research and development programs and the level of financial resources available.

The Company has the ability to adjust its operating

plan spending levels based on the timing of future clinical trials.

Other than our rights related to

the Sales Agreement (as defined below in Note 5), there can be no assurance that additional financing will be available to us when

needed or, if available, that it can be obtained on commercially reasonable terms.

If the Company is not able to obtain the additional

financing on a timely basis, if and when it is needed, it will be forced to delay or scale down some or all of its research and

development activities.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 2

Note 1 Business Description and Basis of

Presentation – Continued

Coronavirus Disease 2019 (COVID-19)

The recent global outbreak of COVID-19

has not had a material impact on the Company’s result of operations or financial condition for the year ended September 30,

However, the pandemic continues to rapidly evolve as of the date these consolidated financial statements are issued and has

created a dynamic and uncertain situation in the global economy.

As such, it is uncertain as to the full magnitude that the outbreak

will have on the Company’s financial condition and future results of operations.

Management is actively monitoring the global

situation on its business, including on its clinical trials and operations and financial condition.

Given the daily evolution of

the COVID-19 situation, and the global responses to curb its spread, the Company is not able to estimate the effects COVID-19 may

have on its future results of operations or financial condition.

Note 2 Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements

in accordance with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and

liabilities at the date of the financial statements and the reported amounts of revenue and expenses in the reporting period.

Company regularly evaluates estimates and assumptions related to accounting for research and development costs, incentive income

receivable, valuation and recoverability of deferred tax assets, asset impairment, stock-based compensation and loss contingencies.

The Company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes

to be reasonable under the circumstances, the results of which form the basis for making judgments about the book 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 Australia Pty Limited.

Australia”), a company incorporated under the laws of Australia, Anavex Germany GmbH, a company incorporated under the laws

of Germany, and Anavex Canada Ltd., a company incorporated under the laws of the Province of Ontario, Canada.

All inter-company

transactions and balances have been eliminated.

c) Cash and equivalents

Company considers only those investments which are highly liquid, readily convertible to cash and that mature within three months

from the date of purchase to be cash equivalents .

Summary of Significant

Accounting Policies - (continued)

and Development Expenses

and development costs are expensed as incurred.

These expenses are comprised of the costs of the Company’s proprietary research

and development efforts, including preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits and

stock based compensation expense, contract services including external research and development expenses incurred under arrangements

with third parties such as contract research organizations (“CROs”), facilities costs, overhead costs and other related

Milestone payments made by the Company to third parties are expensed when the specific milestone has been achieved.

Manufacturing costs are expensed as incurred in accordance with Accounting Standard Codification (“ASC”) 730, Research

and Development, as these materials have no alternative future use outside of their intended use.

Highly liquid investments

that are considered cash equivalents include money market accounts, money market funds and certificates of

The carrying value of cash equivalents approximates fair value due to the short-term maturity of these securities.

Company ’ s investment policy allows for investments in domestic money market certificates, certificates of deposit,

money market funds, commercial papers, bonds or commercial papers, and establishes diversification and credit quality requirements

and limits investments by maturity and issuer.

The Company currently maintains its investments at one large well known financial

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 3

Note 2 Summary of Significant Accounting Policies –

c) Cash and equivalents –

The Company maintains

its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Accounts are guaranteed by the Federal

Deposit Insurance Corporation (FDIC) up to $ 250,000 , under current regulations.

The Company mitigates this risk by maintaining

its cash balances in a large well known financial institutions.

The Company has not experienced any losses in such accounts.

d) Research and Development Expenses

Research and development costs

are expensed as incurred.

These expenses are comprised of the costs of the Company’s proprietary research and development

efforts, including preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits and stock-based compensation

expense, contract services including external research and development expenses incurred under arrangements with third parties

such as contract research organizations (“CROs”), facilities costs, overhead costs and other related expenses.

payments made by the Company to third parties are expensed when the specific milestone has been achieved.

Manufacturing costs are

expensed as incurred in accordance with Accounting Standard Codification (“ASC”) 730, Research and Development, as

these materials have no alternative future use outside of their intended use.

Nonrefundable

advance payments for goods or services that will be used or rendered for future research and development activities are deferred

and amortized over the period that the goods are delivered, or the related services are performed, subject to an assessment of

recoverability.

The Company makes estimates of costs incurred in relation to external CROs, and clinical site costs.

analyzes the progress of clinical trials, including levels of patient enrollment, invoices received and contracted costs when

evaluating the adequacy of the amount expensed and the related prepaid asset and accrued liability.

Significant judgments and

estimates must be made and used in determining the accrued balance and expense in any accounting period.

The Company reviews and

accrues CRO expenses and clinical trial study expenses based on work performed and relies upon estimates of those costs applicable

to the stage of completion of a study.

Accrued CRO costs are subject to revisions as such trials progress to completion.

are charged to expense in the period in which the facts that give rise to the revision become known.

With respect to clinical

site costs, the financial terms of these agreements are subject to negotiation and vary from contract to contract.

Payments under

these contracts may be uneven and depend on factors such as the achievement of certain events, the successful recruitment of patients,

the completion of portions of the clinical trial or similar conditions.

The objective of our policy is to record expenses in our

financial statements based on the actual services received and efforts expended.

As such, expense accruals related to clinical

site costs are recognized based on our estimate of the degree of completion of the event or events specified in the specific clinical

study or trial contract.

addition, the Company incurs expenses in respect of intellectual property costs relating to patents and trademarks.

The probability

of success and length of time to develop commercial applications of the compounds subject to the underlying patent and trademark costs

is difficult to determine and numerous risks and uncertainties exist with respect to the timely completion of the development

There is no assurance the compounds subject to the underlying patents and trademarks will ever be successfully commercialized.

to these risks and uncertainties, the patent and trademark costs do not meet the definition of an asset and thus are expensed

as incurred within general and administrative expenses.

Summary of Significant

Accounting Policies - (continued)

and Development Incentive Income

Company is eligible to obtain certain research and development tax credits, including the New York City Biotechnology Tax Credit

(“NYC Biotech credit”), and the Australian research and development tax incentive credit (the “Australia R&D

credit”) through a program administered through the Australian Tax Office (the “ATO”), which provides for a

cash refund based on a percentage of certain research and development activities undertaken in Australia by the Company’s

and amortized over the period that the goods are delivered, or the related services are performed,

subject to an assessment of recoverability.

The Company makes estimates of costs incurred in relation to external CROs, and clinical

When evaluating the adequacy of the accrued liabilities, the Company analyzes progress of the studies including the

phase or completion of events, invoices received and contracted costs.

Judgments and estimates are made in determining

the accrued balances at the end of any reporting period.

Actual results could differ from the Company’s estimates.

The Company’s

historical accrual estimates have not been materially different from actual costs.

In addition, the Company incurs

expenses in respect of intellectual property costs relating to patents and trademarks.

The probability of success and length of

time to develop commercial applications of the drugs subject to the underlying patent and trademark costs 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 drugs subject to the underlying patents and trademarks will ever be successfully commercialized.

Due to these risks and uncertainties,

the patent and trademark costs do not meet the definition of an asset and thus are expensed as incurred within general and administrative

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 4

Note 2 Summary of Significant Accounting Policies –

e) Research and Development Incentive Income

The Company is eligible to obtain

certain research and development tax credits, including the Australian research and development tax incentive credit (the “Australia

R&D credit”) through a program administered through the Australian Tax Office (the “ATO”), which provides

for a cash refund based on a percentage of certain research and development activities undertaken in Australia by the Company’s

wholly owned subsidiary, Anavex Australia Pty Ltd.

(“Anavex Australia”).

The cash refund is available to eligible

companies with an annual aggregate revenue of less than $20.0 million Australian during the reimbursable period.

tax incentives are available on the basis of specific criteria with which the Company must comply.

Although the tax incentive

may be administered through the local tax authority, the Company has accounted for the incentives outside of the scope of ASC

Topic 740, Income Taxes (“ASC 740”), since the incentives are not linked to the Company’s taxable income and

can be realized regardless of whether the Company has generated taxable income in the respective jurisdictions.

respect to the Australia R&D credit, Anavex Australia may be eligible to receive the cash refund for certain research and

development expenses incurred by Anavex Australia outside of Australia, to the extent such expenses are pre-approved by the Australian

authority pursuant to an advanced overseas finding application.

The Company accrues for the amount of cash refund it expects to

receive in relation to research and development expenses outside of Australia only to the extent it has received advanced approval

from the Department of Industry, Innovation and Science in Australia, pursuant to an approved advanced overseas finding application.

Company recognizes the amount of cash refund it expects to receive related to the NYC Biotech credit and Australian research and

development tax incentive program when there is reasonable assurance that the cash refund will be received, when the relevant

expenditures have been incurred, and when the amount can be reliably measured.

This amount is included in Incentive and tax receivables

The cash refund is available to eligible companies

with an annual aggregate revenue of less than $20.0 million Australian during the reimbursable period.

The tax incentives are available

on the basis of specific criteria with which the Company must comply.

Although the tax incentive may be administered through the

local tax authority, the Company has accounted for the incentives outside of the scope of ASC Topic 740, Income Taxes (“ASC

740”), since the incentives are not linked to the Company’s taxable income and can be realized regardless of whether

the Company has generated taxable income in the respective jurisdictions.

With respect to the Australia R&D

credit, Anavex Australia may be eligible to receive the cash refund for certain research and development expenses incurred by Anavex

Australia outside of Australia, to the extent such expenses are pre-approved by the Australian authority pursuant to an advanced

overseas finding application.

The Company accrues for the amount of cash refund it expects to receive in relation to research and

development expenses outside of Australia only to the extent it has received advanced approval from the Department of Industry,

Innovation and Science in Australia, pursuant to an approved advanced overseas finding application.

In addition, Anavex Australia and

Anavex Canada incur Goods and Services Tax (GST) on certain services provided by local vendors.

As a domestic entity in those jurisdictions,

Anavex Australia and Anavex Canada are entitled to a refund of the GST paid.

Similarly, Anavex Germany incurs Value Added Tax (VAT)

on certain services provided by local vendors, to which it is entitled to a refund of such VAT paid.

The Company’s estimate

of the amount of cash refund it expects to receive related to GST and VAT incurred is included in Incentive and tax receivables

in the accompanying consolidated balance sheets.

addition, Anavex Australia and Anavex Canada incur Goods and Services Tax (GST) on certain services provided by local vendors.

As a domestic entity in those jurisdictions, Anavex Australia and Anavex Canada are entitled to a refund of the GST paid.

Anavex Germany incurs Value Added Tax (VAT) on certain services provided by local vendors, to which it is entitled to a refund

of such VAT paid.

The Company’s estimate of the amount of cash refund it expects to receive related to GST and VAT incurred

is included in Incentive and tax receivables in the accompanying consolidated balance sheets.

and Diluted Loss per Share

income/(loss) per common share is computed by dividing net income/(loss) available to common stockholders by the weighted average

number of common shares outstanding during the period.

Diluted income/(loss) per common share is computed by dividing net income/(loss)

available to common stockholders by the sum of (1) the weighted-average number of common shares outstanding during the period,

(2) the dilutive effect of the assumed exercise of options and warrants using the treasury stock method and (3) the dilutive effect

of other potentially dilutive securities.

For purposes of the diluted net loss per share calculation, options and warrants are

potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would

be anti-dilutive.

Summary of Significant

Accounting Policies - (continued)

and Diluted Loss per Share – (continued)

of September 30, 2020, diluted loss per share excludes 10,576,266 (2019 – 8,812,933 ) potentially dilutive common shares

related to outstanding options and warrants, as their effect was anti-dilutive.

book value of the Company’s financial instruments, consisting of cash and equivalents, incentive and tax receivables, and

accounts payable and accrued liabilities approximate their fair value due to the short-term maturity of such instruments.

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.

Currency Translation

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 on the transaction date.

Unrealized gains or losses arising from the translations are credited or charged to income

in the period in which they occur.

Company has determined that the functional currency of Anavex Australia Pty Limited, Anavex Germany GmbH, and Anavex Canada Ltd.

is the US dollar.

and Geographic Reporting

segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the

chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance.

Company views its operations and manages its business as one operating segment, which is the business of developing novel therapies

for the management of CNS diseases.

f) Basic and Diluted Loss per Share

Basic income/(loss) per common

share is computed by dividing net income/(loss) available to common stockholders by the weighted average number of common shares

outstanding during the period.

Diluted income/(loss) per common share is computed by dividing net income/(loss) available to common

stockholders by the sum of (1) the weighted-average number of common shares outstanding during the period, (2) the dilutive effect

of the assumed exercise of options and warrants using the treasury stock method and (3) the dilutive effect of other potentially

dilutive securities.

For purposes of the diluted net loss per share calculation, options and warrants are potentially dilutive

securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 5

Note 2 Summary of Significant Accounting Policies –

and Diluted Loss

– (continued)

As of September 30, 2021, diluted

loss per share excludes 11,540,903 (2020 – 10,576,266 ) potentially dilutive common shares related to outstanding options

and warrants, as their effect was anti-dilutive.

The book value of the Company’s

financial instruments, consisting of cash and equivalents, incentive and tax receivables, and accounts payable and accrued liabilities

approximate their fair value due to the short-term maturity of such instruments.

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.

h) 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 on the transaction

Unrealized gains or losses arising from the translations are credited or charged to income in the period in which they occur.

The Company has determined that

the functional currency of Anavex Australia Pty Limited, Anavex Germany GmbH, and Anavex Canada Ltd.

is also the US dollar.

i) Segment and Geographic Reporting

Operating segments are defined

as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision

maker or decision-making group, in deciding how to allocate resources and in assessing performance.

The Company views its operations

and manages its business as one operating segment, which is the business of developing novel therapies for the management of CNS

j) Grant Income

income is recognized at the fair value of the grant when it is received, and all substantive conditions have been satisfied.

2 unchanged sentences

and development costs are incurred.

Company follows the provisions of ASC 740, which requires the asset and liability method of accounting for income taxes.

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

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.

Summary of Significant

Accounting Policies - (continued)

Taxes – (continued)

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 its tax positions and tax benefits, and its 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.

Company recognizes interest and penalties related to current income tax expense on the interest income, net line, in the accompanying

consolidated statement of operations.

Accrued interest and penalties, if any, are included in accrued liabilities on the consolidated

balance sheets.

l) Stock-based

Company accounts for all stock-based payments and awards under the fair value method.

Company accounts for the granting of share purchase options and warrants 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 and

warrants are expensed over their contractual vesting period, or over the expected performance period for only the portion of awards

expected to vest, in the case of milestone-based vesting, with a corresponding increase to additional paid-in capital.

purchase options and warrants issued to non-employees are measured at the fair value of the equity instruments issued.

expense for share purchase options and warrants issued to non-employees is recorded over the service performance period.

to the Company’s adoption of ASU No.

2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based

Payment Accounting on October 1, 2019, options and warrants subject to vesting were periodically re-measured until the counterparty

performance was complete, and any change therein was 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.

After the adoption of ASU No.

the Company measures equity-classified share-based payment awards issued to nonemployees on the grant date, rather than remeasuring

the awards through the performance completion date as previously required (see Note 2 n)).

costs for stock-based payments with graded vesting are recognized on a straight-line basis.

Company uses the Black-Scholes option valuation model to calculate the fair value of share purchase options and warrants 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.

Summary of Significant Accounting Policies - (continued)

Value Measurements

value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in

the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at

the measurement date.

Assets and liabilities that are measured at fair value are reported using a three-level fair value hierarchy

that prioritizes the inputs used to measure fair value.

This hierarchy maximizes the use of observable inputs and minimizes the

use of unobservable inputs.

The three levels of inputs used to measure fair value are as follows:

1 - quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access

at the measurement date;

2 - observable inputs other than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices

for identical or similar assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable

or whose significant value drivers are observable;

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.

September 30, 2020 and 2019, the Company did not have any Level 3 assets or liabilities.

Accounting Pronouncements

Adopted Accounting Pronouncements

February 2016, Topic 842, Leases was issued to replace the leases requirements in Topic 840, Leases.

The main difference

between previous U.S.

GAAP and Topic 842 is the recognition of lease assets and lease liabilities by lessees for those leases

classified as operating leases under previous U.S.

A lessee should recognize in the balance sheet a liability to make

lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the

For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class

of underlying asset not to recognize lease assets and lease liabilities.

If a lessee makes this election, it should recognize

lease expense for such leases generally on a straight-line basis over the lease term.

The accounting applied by a lessor is

largely unchanged from that applied under previous U.S.

The Company elected the package of practical expedients

permitted under the transition guidance that allowed, among other things, the historical lease classifications to be carried

forward without reassessment.

Further, the Company elected to not recognize lease assets and lease liabilities for leases

with a term of 12 months or less.

The adoption of this standard on October 1, 2019 did not have any impact on the Company's

consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

Summary of Significant

Accounting Policies - (continued)

Recently Adopted Accounting Pronouncements – (continued)

June 2018, the FASB issued ASU No.

2018-07, Compensation-Stock Compensation (Topic 718):

Improvements to Nonemployee Share-Based

Payment Accounting, which simplifies the accounting for share-based payments to nonemployees for goods and services by aligning

it with the accounting for share-based payments to employees, with certain exceptions.

The new guidance was effective for the

Company beginning on October 1, 2019 and was required to be applied retrospectively with the cumulative effect recognized at the

date of initial application.

The adoption of this standard on October 1, 2019 did not have any material impact on the Company's

consolidated results of operations, financial condition, cash flows, and financial statement disclosures.

Accounting Pronouncements Not Yet Adopted

December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (ASC 740)", which is intended

to simplify various aspects related to accounting for income taxes by removing certain exceptions to the general principles in

Topic 740 and clarifying and amending existing guidance to improve consistent application.

ASU 2019-12 is effective for the Company

on October 1, 2021.

Early adoption is permitted.

The Company is currently evaluating the impact of this guidance on its consolidated

financial statements but does not expect such guidance to have a material impact.

the year ended September 30, 2017, the Company was awarded grant funding in the amount of $ 597,886 .

The grant was received in

equal quarterly installments over a period of two years ending during the year ended September 30, 2020, in exchange for a commitment

k) Income Taxes

The Company follows the provisions

of 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.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 6

Note 2 Summary of

Significant Accounting Policies – (continued)

k) Income Taxes – (continued)

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 its tax positions

and tax benefits, and its 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.

The Company recognizes interest

and penalties related to current income tax expense on the interest income, net line, in the accompanying consolidated statement

of operations.

Accrued interest and penalties, if any, are included in accrued liabilities on the consolidated balance sheets.

l) Stock-based Compensation

The Company accounts for all stock-based

payments and awards under the fair value method.

The fair value of all share purchase

options and warrants are expensed over their contractual vesting period, or over the expected performance period for only the portion

of awards expected to vest, in the case of milestone-based vesting, with a corresponding increase to additional paid-in capital.

Compensation costs for stock-based

payments with graded vesting are recognized on a straight-line basis.

Stock based compensation expense is adjusted for actual forfeitures

of unvested awards as they occur.

The Company has granted share purchase

option awards that vest upon achievement of certain performance criteria, or milestone-based awards.

The Company estimates an implicit

service period for achieving performance criteria for each award and recognizes the resulting fair value as expense over the implicit

service period when it concludes that achieving the performance criteria is probable.

The Company periodically reviews and updates

as appropriate its estimates of implicit service periods and conclusions on achieving the performance criteria.

Performance awards

vest upon achievement of the performance criteria.

The Company uses the Black-Scholes

option valuation model to calculate the fair value of share purchase options and warrants at the date of the grant.

requires the input of subjective assumptions, including the expected price volatility, expected life and estimated forfeitures of

The Company uses the U.S.

Treasury daily treasury yield curve rates for the expected term of the option as the

risk-free rate.

The expected term represents the period that options granted are expected to be outstanding using the simplified

The Company’s historical share option exercise experience does not provide a reasonable basis for estimating the

expected term.

Expected volatility is based on the average of the daily share price changes over the expected term.

The Company does

not estimate forfeitures and elects to record actual forfeitures as they occur.

The Company has not paid any dividends on its common

stock historically, therefore no assumption of dividend payments is made in the model.

These assumptions consist of estimates of

future market conditions, which are inherently uncertain, and therefore, are subject to management’s judgment.

these assumptions can materially affect the fair value estimates.

The purchase price

of options or warrants may be paid in cash or, if approved by the Company’s compensation committee in advance, “net settled”

in shares of the Company’s common stock.

In a net settlement of an option or warrant, the Company does not receive payment of the

exercise price from the holder but reduces the number of shares of common stock issued upon the exercise of the stock option or warrant

by the smallest number of whole shares that have an aggregate fair market value equal to or over the aggregate exercise price for the

option shares covered by the option or warrant exercised.

Shares issued pursuant to the exercise of options and warrants are issued from

the Company’s treasury.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 7

Note 2 Summary of Significant Accounting Policies –

Fair Value Measurements

Fair value is defined as the exchange

price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous

market for the asset or liability in an orderly transaction between market participants at the measurement date.

Assets and liabilities

that are measured at fair value are reported using a three-level fair value hierarchy that prioritizes the inputs used to measure

This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs.

The three levels

of inputs used to measure fair value are as follows:

Level 1 - quoted prices (unadjusted) in active markets

for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2 - observable inputs other

than Level 1, quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar

assets and liabilities in markets that are not active, and model-derived prices whose inputs are observable or whose significant

value drivers are observable;

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.

At September 30, 2021 and 2020,

the Company did not have any Level 3 assets or liabilities.

n) Recent Accounting Pronouncements

December 2019, the FASB issued ASU 2019-12, "Simplifying the Accounting for Income Taxes (ASC 740)", which is intended to simplify

various aspects related to accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying

and amending existing guidance to improve consistent application.

ASU 2019-12 will be effective for the Company on October 1, 2021.

Company does not expect such guidance to have a material impact on the Company’s operations, financial condition, or cash flows.

Note 3 Accrued Liabilities

The principal components of accrued liabilities consists

Schedule of components of accrued liabilities

Clinical site costs and patient visits

Accrued compensation and benefits

Fixed contract accruals

All other accrued liabilities

Total accrued liabilities

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 8

Note 4 Other Income

year ended September 30, 2021, the Company received $ 497,931 of a $995,862 research grant awarded by the Michael J.

Fox Foundation

for Parkinson’s Research.

The grant will be used to fund a clinical trial of the Company’s lead compound, ANAVEX ® 2-73

related to Parkinson’s disease.

income is being deferred when received and amortized to other income as the related research and development expenditures are incurred.

During the year ended September 30, 2021, the Company recognized $ 54,100 of this grant on its statements of operations within grant

At September 30, 2021 an amount of $ 443,831 (2020:

$ 0 Nil) of this grant is recorded as deferred grant income, representing

the amount of this grant which has not yet been amortized to other income.

year ended September 30, 2017, the Company was awarded grant funding in the amount of $ 597,886 .

The grant was received in equal

quarterly installments over a period of two years ending during the year ended September 30, 2020, in exchange for a commitment

to complete clinical testing for a therapeutic drug candidate for the treatment of Rett syndrome.

grant income was deferred when received and amortized to other income as the related research and development expenditures were

During the year ended September 30, 2020, the Company recognized $ 149,888 (2019:

$ 298,943 ) of this grant on its statement

of operations as a component of other income.

income was deferred when received and amortized to other income as the related research and development expenditures were incurred.

During the year ended September 30, 2021, the Company recognized $ Nil (2020:

$ 149,888 ) of this grant on its statement of operations

as a component of other income.

At September 30, 2020, the Company had recognized the full amount of grant funding.

Other Income –

and development incentive income

and development incentive income during the years ended September 30, 2020 and 2019 represents the receipt by Anavex Australia,

of the Australia R&D Credit, as well as receipt by the Company of the New York City Biotechnology Credit (“NYC Biotech

the year ended September 30, 2020, the Company recorded research and development incentive income of $ 4,375,025 (AUD 6,392,266 )

$ 2,215,691 (AUD 3,281,300 )) in respect of the Australia R&D Credit for eligible research and development expenses incurred

during the year, or expenditures to which the Company became eligible during the year.

the year ended September 30, 2019, the Company recorded research and development incentive income of $ 250,000 in respect of the

NYC Biotech Credit.

The Company was no longer eligible for the NYC Biotech Credit for the fiscal year ended September 30, 2020.

Equity Offering Agreements

Purchase Agreement

October 21, 2015, the Company entered into a $50,000,000 purchase agreement (the “2015 Purchase Agreement”) with Lincoln

Park Capital Fund, LLC (“Lincoln Park”), pursuant to which the Company could sell and issue to Lincoln Park, and Lincoln

Park was obligated to purchase, up to $50,000,000 in value of its shares of common stock from time to time over a 36-month period.

the year ended September 30, 2019, the Company issued to Lincoln Park an aggregate of 4,872,696 shares of common stock under the

2015 Purchase Agreement, including 4,848,995 shares of common stock for an aggregate purchase price of $ 13,197,604 and 23,701

as commitment shares.

At September 30, 2019, all remaining purchase amounts available for issuance under the 2015 Purchase Agreement

had been utilized and the 2015 Purchase Agreement has expired pursuant to its terms.

As such, no further shares will be sold under

the 2015 Purchase Agreement.

Equity Offering Agreements

- (continued)

and development incentive income represents income earned by the Company’s Australian subsidiary, of the Australian

research and development incentive credit, (the “ATO R&D Credit”).

year ended September 30, 2021, the Company recorded research and development incentive income of $ 4,547,099 (AUD 6,068,993 ) (2020:

$ 4,375,025 (AUD 6,392,266 )) in respect of the ATO R&D Credit for eligible research and development expenses incurred during

a matter of course, the Company may be subject to pre-issue review or audit by the ATO.

The Company was notified that the ATO is performing

a pre-issue review of the 2020 research and development incentive income return.

The Company is responding to questions and requests for

information and does not expect an adverse finding.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 9

Note 5 Equity Offerings

Common shares are voting and are

entitled to dividends as declared at the discretion of the Board of Directors.

Preferred Stock

The Company’s Board of Directors (the

“Board”) has the authority to issue preferred stock in one or more series and to fix the rights, preferences,

privileges, restrictions and the number of shares constituting any series or the designation of the series.

Registered Direct Offering

On June 22, 2021, the Company and

Deep Track Capital entered into a securities purchase agreement pursuant to which the Company sold to Deep Track Capital an aggregate

of 2,380,953 shares of common stock at $ 21 per share in a registered direct offering, for gross proceeds of $ 50,000,013 .

of the offering were $ 46,902,981 after deducting offering fees and expenses.

Sales Agreement

The Company entered into a Controlled

Equity Offering Sales Agreement on July 6, 2018, which was amended and restated on May 1, 2020 (the “Sales Agreement”)

with Cantor Fitzgerald & Co.

and SVB Leerink LLC (together the “Sales Agents”), pursuant to which the Company

may offer and sell shares of common stock registered under an effective registration statement from time to time through the Sales

Agents (the “Offering”).

Upon delivery of a placement notice

based on the Company’s instructions and subject to the terms and conditions of the Sales Agreement, the Sales Agents may

sell the Shares by methods deemed to be an “at the market offering” offering, in negotiated transactions at market

prices prevailing at the time of sale or at prices related to such prevailing market prices, or by any other method permitted by

law, including negotiated transactions, subject to the prior written consent of the Company.

The Company is not obligated to make

any sales of Shares under the Sales Agreement.

The Company or Sales Agents may suspend or terminate the offering of Shares upon

notice to the other party, subject to certain conditions.

The Sales Agents will act as agent on a commercially reasonable efforts

basis consistent with their normal trading and sales practices and applicable state and federal law, rules and regulations

and the rules of Nasdaq.

The Company has agreed to pay

the Sales Agents commissions for their services of up to 3.0 % of the gross proceeds from the sale of the Shares pursuant to the

Sales Agreement.

The Company also agreed to provide the Sales Agents with customary indemnification and contribution rights.

the year ended September 30, 2021, 5,634,576 shares were sold pursuant to the Offering for gross proceeds of $ 79,107,550 (net

proceeds of $ 76,670,027 after deducting offering expenses) (2020:

1,760,429 shares were sold for gross proceeds of $ 7,499,900

(net proceeds of $ 7,096,136 )).

At September 30, 2021, an amount of $ 163,392,550 was registered pursuant to an effective registration

statement and available to be sold under the Sales Agreement.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 10

Note 5 Equity Offering Agreements – (continued)

2019 Purchase Agreement

June 7, 2019, the Company entered into a $ 50,000,000 purchase agreement (the “2019 Purchase Agreement”) with Lincoln

Park, as amended on July 1, 2020 (the “Amendment Date”), 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 from

June 12, 2019, the date a prospectus supplement under which shares of common stock issuable under the 2019 Purchase Agreement

was filed with the SEC, until July 1, 2022, which is the first day of the next month following the 36 -month anniversary of June

Company may direct Lincoln Park, at its sole discretion, and subject to certain conditions, to purchase up to 200,000 shares of

common stock on any business day (a “Regular Purchase”).

The amount of a Regular Purchase may be increased under certain

circumstances up to 250,000 shares, provided that Lincoln Park’s committed obligation for Regular Purchases on any business

day shall not exceed $2,000,000.

In the event the Company purchases the full amount allowed for a Regular Purchase on any given

business day, the Company may also direct Lincoln Park to purchase additional amounts as accelerated and additional accelerated

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 2019 Purchase Agreement.

Company’s sale of shares of Common Stock to Lincoln Park subsequent to the Amendment Date is limited to 12,016,457 shares

of Common Stock, representing 19.99 % of the shares of the Common Stock outstanding on the Amendment Date unless (i) shareholder

approval is obtained to issue more than such amount or (ii) the average price of all applicable sales of Common Stock to Lincoln

Park under the 2019 Purchase Agreement after the Amendment Date equals or exceeds the lower of (A) the closing price of the Common

Stock on the Nasdaq Capital Market immediately preceding the Amendment Date or (B) the average of the closing prices of the Common

Stock on the Nasdaq Capital Market for the five Business Days immediately preceding the Amendment Date, and it also limits the

Company’s sale of shares to Lincoln Park to the extent it would cause Lincoln Park to beneficially own more than 4.99% of

the Company’s outstanding shares of Common Stock at any given time.

consideration for entering into the 2019 Purchase Agreement, the Company issued to Lincoln Park 324,383 shares of common stock

as a commitment fee and agreed to issue up to 162,191 shares pro rata, when and if, Lincoln Park purchases at the Company’s

On June 7, 2019, the Company entered

into a $ 50,000,000 purchase agreement (the “2019 Purchase Agreement”) with Lincoln Park, as amended on July 1, 2020,

pursuant to which the Company had the right to sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to

$ 50,000,000 in value of its shares of common stock from time to time over a three-year period until July 1, 2022.

In consideration for entering into

the 2019 Purchase Agreement, the Company issued to Lincoln Park 324,383 shares of common stock as a commitment fee during the year

ended September 30, 2019 and agreed to issue up to 162,191 shares pro rata, when and if, Lincoln Park purchased, at the Company’s

discretion, the $50,000,000 aggregate commitment.

the year ended September 30, 2020, the Company issued to Lincoln Park an aggregate of 7,633,527 (2019 - 1,839,415 ) shares of common

stock under the 2019 Purchase Agreement, including 7,564,584 (2019:

1,500,000 ) shares of common stock for an aggregate purchase

price of $ 21,254,298 (2019:

During the year ended September

30, 2021, the Company issued to Lincoln Park an aggregate of 4,086,209 (2020 – 7,633,527 ) shares of common stock under the

2019 Purchase Agreement, including 4,007,996 (2020:

7,564,584 ) shares of common stock for an aggregate purchase price of $ 24,111,198

$ 21,254,298 ) and 78,213 (2020:

68,943 ) commitment shares.

At September 30, 2020, an amount of $ 24,111,197

$ 45,365,495 ) remained available under the 2019 Purchase Agreement.

Equity Offering Agreements

- (continued)

Company entered into a Controlled Equity Offering Sales Agreement on July 6, 2018, which was amended and restated on May 1, 2020

(the “Sales Agreement”) with Cantor Fitzgerald & Co.

and SVB Leerink LLC (together the “Sales Agents”),

pursuant to which the Company may offer and sell shares of common stock, for aggregate gross sale proceeds of up to $ 50,000,000

from time to time through the Sales Agents (the “Offering”).

delivery of a placement notice based on the Company’s instructions and subject to the terms and conditions of the Sales

Agreement, the Sales Agents may sell the Shares by methods deemed to be an “at the market offering” offering, in negotiated

transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, or by any

other method permitted by law, including negotiated transactions, subject to the prior written consent of the Company.

is not obligated to make any sales of Shares under the Sales Agreement.

The Company or Sales Agents may suspend or terminate the

offering of Shares upon notice to the other party, subject to certain conditions.

The Sales Agents will act as agent on

a commercially reasonable efforts basis consistent with their normal trading and sales practices and applicable state and federal

law, rules and regulations and the rules of Nasdaq.

Company has agreed to pay the Sales Agents commissions for their services of up to 3.0 % of the gross proceeds from the sale of

the Shares pursuant to the Sales Agreement.

The Company also agreed to provide the Sales Agents with customary indemnification

and contribution rights.

During the year ended September 30, 2020, 1,760,429 shares were sold pursuant to the Offering for gross

proceeds of $ 7,499,900 (net proceeds of $ 7,096,136 after deducting offering expenses).

At September 30, 2020, an amount of $ 42,500,100

remained available under the Sales Agreement.

the year ended September 30, 2020 the Company incurred office lease expense of $ 233,423

b) Litigation

At September 30, 2021, no shares

remained available for issuance under the 2019 Purchase Agreement (September 30, 2020:

in value of shares).

Note 6 Commitments and Contingencies

During the year

ended September 30, 2021 the Company incurred office lease expense of $ 130,784 (2020:

b) Employee 401(k) Benefit Plan

The Company has

a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code.

The plan covers all United States based

United States based employees eligible to participate in the plan may contribute up to the current statutory

limits under the Internal Revenue Service regulations.

The 401(k) plan permits the Company to make additional matching contributions

on behalf of contributing employees.

During the year ended September 30, 2021, the Company made $ 128,856 (2020:

in matching contributions under the 401(k) plan.

Company is subject to claims and legal proceedings that arise in the ordinary course of business.

Such matters are inherently

uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that

the resolution of any such matter will not have a material adverse effect upon the Company's consolidated financial statements.

The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its

consolidated financial statements.

Commitments - (continued)

Purchase Warrants

following table summarizes the warrant activity during the years ended September 30, 2020 and 2019:

Such matters are inherently uncertain,

and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution

of any such matter will not have a material adverse effect upon the Company’s consolidated financial statements.

does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its consolidated

financial statements.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 11

Note 6 Commitments and Contingencies – (continued)

Share Purchase Warrants

The following table summarizes

the warrant activity during the years ended September 30, 2021 and 2020:

Schedule of exercisable share purchase warrants outstanding

Weighted Average Exercise

Number of Shares

Exercise Price

Number of Shares

Balance, September 30, 2019

Balance, September 30, 2020

September 30, 2020

the year ended September 30, 2019, the Company issued 4,938 shares in connection with the exercise of 8,750 warrants on a cashless

September 30, 2020 the Company had share purchase warrants outstanding as follows:

Balance, September 30, 2021

30, 2021 the Company had share purchase warrants outstanding as follows:

Schedule of share purchase warrants outstanding

Exercise Price

June 30, 2021

Commitments - (continued)

d) Stock–based

Compensation Plan

April 21, 2026

Stock–based Compensation Plan –(continued)

2015 Stock Option Plan

September 18, 2015, the Company’s board of directors approved a 2015 Omnibus Incentive Plan (the “2015 Plan”),

which provided for the grant of stock options and restricted stock awards to directors, officers, employees and consultants of

maximum number of our common shares reserved for issue under the plan was 6,050,553 shares, subject to adjustment in the event

of a change of the Company’s capitalization.

On September 18, 2015, the Company’s

board of directors approved a 2015 Omnibus Incentive Plan (the “2015 Plan”), which provided for the grant of stock

options and restricted stock awards to directors, officers, employees and consultants of the Company.

The maximum number of our common

shares reserved for issue under the plan was 6,050,553 shares, subject to adjustment in the event of a change of the Company’s

capitalization.

At September 30, 2021, 146,371 (2020:

146,371 ) options remain available for

issue under the 2015 Plan.

133,036 ) options remain available for issue under the 2015 Plan.

2019 Stock Option Plan

January 15, 2019, the Board approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant

of stock options and restricted stock awards to directors, officers, employees, consultants and advisors of the Company.

the terms of the 2019 Plan, 6,000,000 additional shares of Common Stock are available for issuance under the 2019 Plan, in addition

to the shares available under the 2015 Plan.

Any awards outstanding under the 2015 Plan or the Company’s 2007 Stock Option

Plan (the “2007 Plan”) will remain subject to and be paid under the 2015 Plan or the 2007 Plan, respectively, and

any shares subject to outstanding awards under the 2015 Plan or the 2007 Plan that subsequently cease to be subject to such awards

(other than by reason of settlement of the awards in shares) will automatically become available for issuance under the 2019 Plan.

2019 Plan provides that it may be administered by the Board, or the Board may delegate such responsibility to a committee.

exercise price will be determined by the board of directors at the time of grant shall be at least equal to the fair market value

on such date.

If the grantee is a 10% stockholder on the grant date, then the exercise price shall not be less than 110% of fair

market value of the Company’s shares of common stock on the grant date.

Stock options may be granted under the 2019 Plan

for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by

the board, subject to earlier termination in accordance with the terms of the 2019 Plan.

On January 15, 2019, the Board

approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant of stock options and restricted

stock awards to directors, officers, employees, consultants and advisors of the Company.

Under the terms of the 2019 Plan, 6,000,000

additional shares of Common Stock are available for issuance under the 2019 Plan, in addition to the shares available under the

Any awards outstanding under the 2015 Plan or the Company’s 2007 Stock Option Plan (the “2007 Plan”)

will remain subject to and be paid under the 2015 Plan or the 2007 Plan, respectively, and any shares subject to outstanding awards

under the 2015 Plan or the 2007 Plan that subsequently cease to be subject to such awards (other than by reason of settlement of

the awards in shares) will automatically become available for issuance under the 2019 Plan.

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 12

Note 6 Commitments and Contingencies – (continued)

Stock–based Compensation Plan – (continued)

The 2019 Plan provides that it

may be administered by the Board, or the Board may delegate such responsibility to a committee.

The exercise price will be determined

by the board of directors at the time of grant shall be at least equal to the fair market value on such date.

If the grantee is

a 10% stockholder on the grant date, then the exercise price shall not be less than 110% of fair market value of the Company’s

shares of common stock on the grant date.

Stock options may be granted under the 2019 Plan for an exercise period of up to ten

years from the date of grant of the option or such lesser periods as may be determined by the board, subject to earlier termination

in accordance with the terms of the 2019 Plan.

At September 30, 2021, 456,332 (2020:

4,788,333 ) options remain available for issue under the 2019 Plan.

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

3,161,665 ) options remain available for issue

under the 2019 Plan.

A summary of the status of Company’s

outstanding stock purchase option activity during the years ended September 30, 2021 and 2020 is presented below:

Schedule of outstanding stock purchase options

Average Grant

Average Exercise

intrinsic value

Number of Shares

Weighted Average Exercise Price

Weighted Average Grant Date Fair Value ($)

Aggregate intrinsic value ($)

Outstanding, September 30, 2019

Outstanding, September 30, 2020

( 1,421,529 )

Outstanding, September 30, 2021

Exercisable, September 30, 2021

the year ended September 30, 2020, the Company issued 721 shares in connection with the exercise of 13,335 options on a cashless

Commitments - (continued)

d) Stock–based

Compensation Plan – (continued)

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 on the applicable date.

Company recognized stock-based compensation expense of $ 4,876,906 during the year ended September 30, 2020 (2019:

$ 6,430,873 )

in connection with the issuance and vesting of stock options and warrants in exchange for services.

These amounts have been

included in general and administrative expenses and research and development expenses on the Company’s consolidated

statements of operations as follows:

The following summarizes information about

stock options at September 30, 2021 by a range of exercise prices:

Summarizes information about

stock options

Weighted average remaining

Weighted average

Range of exercise prices

contractual life

The weighted average grant date

fair value of options vested during the year ended September 30, 2021 was $ 2.54 (2020:

At September 30, 2021, the weighted

average contractual life of options outstanding was 6.79 years (2020:

6.96 years) and for options exercisable was 5.51 years (2020:

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, 2021.

The Company recognized stock-based

compensation expense of $ 8,231,403 during the year ended September 30, 2021 (2020:

$ 4,876,906 ) in connection with the issuance

and vesting of stock options and warrants in exchange for services.

These amounts have been included in general and administrative

expenses and research and development expenses on the Company’s consolidated statements of operations as follows:

Schedule of general and administrative expenses and research and development expenses

1 unchanged sentence

Research and development

Total share based compensation

amount of approximately $ 4,040,812 in stock-based compensation is expected to be recorded over the remaining term of such

options and warrants through 2023.

fair value of each option and warrant award is estimated on the date of grant using the Black Scholes option pricing model based

on the following weighted average assumptions:

Total stock-based compensation

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 13

Note 6 Commitments – (continued)

Stock–based Compensation Plan – (continued)

An amount of approximately $ 21,650,000

in stock-based compensation is expected to be recorded over the remaining term of such options and warrants through fiscal

The fair value

of each option and warrant award is estimated on the date of grant using the Black Scholes option pricing model based on the following

weighted average assumptions:

Schedule of weighted average assumptions for fair value of each option award

Risk-free interest rate

Expected life of option (years)

Expected life of options (years)

Annualized volatility

Dividend rate

fair value of stock compensation charges recognized during the years ended September 30, 2020 and 2019 was determined with reference

to the quoted market price of the Company’s shares on the grant date.

Company’s U.S.

The fair value of stock compensation

charges recognized during the years ended September 30, 2021 and 2020 was determined with reference to the quoted market price

of the Company’s shares on the grant date.

Note 7 Income Taxes

The Company’s U.S.

and foreign loss before income taxes are set forth below:

7 unchanged sentences

$ ( 26,257,806 )

components of net deferred income tax assets as of September 30, 2020 and 2019 are as follows:

The components of net deferred income tax assets as

of September 30, 2021 and 2020 are as follows:

Schedule of deferred tax asset and liabilities

Net operating loss carryforwards

Research and development tax credit carry forwards

Research and development tax credit carryforwards

Stock-based compensation

6 unchanged sentences

Net deferred tax assets

reconciliation of income tax expense at the statutory federal income tax rate and income taxes as reflected in the consolidated

financial statements for the years ended September 30, 2020 and 2019 is as follows:

Schedule of Effective Income Tax Rate Reconciliation

Anavex Life Sciences Corp.

Notes to the Consolidated Financial Statements

September 30, 2021 – Page 14

Note 7 Income Taxes – (Continued)

A reconciliation of income tax

expense at the statutory federal income tax rate and income taxes as reflected in the consolidated financial statements for the

years ended September 30, 2021 and 2020 is as follows:

Income tax benefit at statutory federal rate

$ ( 5,519,000 )

$ ( 5,505,000 )

Foreign income taxed at other rates

Permanent differences relating to stock based compensation

Permanent differences relating to Section 162(m)

Other permanent differences

Research and development credit benefit

Adjustment to tax assets based on Section 382

Research and development credits, net

State and local taxes

( 2,911,000 )

( 1,487,000 )

Adjustment and true up to prior year tax provision

Adjustment and true up to prior years' tax provision

Effect of change in statutory rates

State minimum and excise taxes

State minimum and exise taxes

Change in valuation allowances

Income tax expense

of September 30, 2020, the Company had U.S.

As of September 30, 2021, the

Company had U.S.

federal net operating loss carryforwards of approximately $ 101.6 million

million) which will begin to expire in 2027 and state and local net operating loss carryforwards of approximately $ 103.1 million

$ 64.0 million) which will begin to expire in 2036, The Company had approximately $ 4.3 million (Approximately AUD$ 6.0 million)

$ 3.5 million) of net operating loss carryforwards in Australia, which have an indefinite life, available to offset future

taxable income in those jurisdictions.

Income taxes - (continued)

Company evaluates its valuation allowance requirements based on available evidence.

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 has been established at September 30,

2020 and 2019.

Tax Positions

Company files income tax returns in the U.S.

$ 77.0 million)

of which $37.7 will begin to expire in 2025 and $63.9 can be carried forward indefinitely , state and local net operating loss carryforwards of approximately $ 177.7 million

$ 103.1 million)

which will begin to expire in 2036 ,

and Research and Development tax credits of $ 1.6

million (2020:

million) which will begin to expire in 2029.

The Company had approximately $ 7.9 million

(approximately AU$ 11.2 million)

$ 4.3 million)

of net operating loss carryforwards in Australia, which have an indefinite life, available to offset future taxable income in those

jurisdictions.

The Company evaluates its valuation

allowance requirements based on available evidence.

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 has been established at September 30, 2021 and 2020.

Uncertain Tax Positions

The Company files income tax returns

federal jurisdiction and various state and local 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 2013.

the provisions of the Internal Revenue Code, the net operating loss (“NOL”) carryforwards are subject to review and

possible adjustment by the Internal Revenue Service and state tax authorities.

NOL and tax credit carryforwards may become subject

to an annual limitation in the event of an over 50% cumulative change in the ownership interest of significant stockholders over

a three-year period, as defined under Sections 382 and 383 of the Internal Revenue Code, as well as similar state tax provisions.

This could limit the amount of NOLs that the Company could be entitled to utilize annually to offset future taxable income or

tax liabilities.

The amount of the annual limitation, if any, would be determined based on the value of the Company immediately

prior to the ownership change.

Subsequent ownership changes may affect the limitation in future years .

The Company completed a Section 382 analysis through the fiscal year ended September 30, 2020 and currently does not believe Section

382 will apply to limit the utilization of available NOLs.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS

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 2014.

Under the provisions of the Internal

Revenue Code, the net operating loss (“NOL”) carryforwards are subject to review and possible adjustment by the Internal

Revenue Service and state tax authorities.

Under Section 382 of the Internal Revenue Code, NOL and tax credit carryforwards may

become subject to an annual limitation in the event of an over 50% cumulative change in the ownership interest of significant stockholders

over a three-year, as well as similar state tax provisions.

Company conducted a Section 382 study during the year ended September 30, 2021 and determined that, during the year ended September

30, 2015, there was a change in ownership which resulted in $25.8 million of federal NOLs being subject to an annual limitation.

During the year ended September 30, 2021, the Company reduced its federal NOLs by $12.1 million and its Research and development tax

credit carryforwards by $0.8 million, which are the amount of tax assets that will expire unutilized pursuant to the Section 382

This resulted in a reduction of $2.5 million of NOLs and $0.8 million of research and development credits

and a corresponding reduction in the valuation allowance of $ 3.3

million, which was recorded in the current fiscal year.

Subsequent ownership changes in future years could trigger additional

limitations of the Company’s NOLs.

of September 30, 2021, the Company did not provide any foreign withholding taxes related to its foreign subsidiaries’

undistributed earnings, as such earnings have been retained and are intended to be indefinitely reinvested to fund ongoing

operations of the foreign subsidiaries.

It is not practicable to estimate the amount of taxes that would be payable upon remittance

of these earnings, because such tax, if any, is dependent upon circumstances existing if and when remittance occur.

IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL MATTERS

Not Applicable

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data