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Item 7. Management’s Discussion and Analysis

2024-12-23 compared with 2023-11-27 · 221 added, 247 removed, 38 unchanged (92% of the section changed)

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DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION

The following discussion should be read

in conjunction with our consolidated financial statements and related notes thereto included elsewhere in this report.

Past operating

results are not necessarily indicative of results that may occur in future periods.

This discussion contains forward-looking statements,

which involve a number of risks and uncertainties.

The following discussion should be read in conjunction

with our consolidated financial statements and related notes thereto included elsewhere in this report.

Past operating results are not

necessarily indicative of results that may occur in future periods.

This discussion contains forward-looking statements, which involve

a number of risks and uncertainties.

See Forward Looking Statements included elsewhere in this report.

Financial Operations Overview

are in the development stage and have not earned any revenues since our inception in 2004.

We do not anticipate earning any revenues

until we can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.

operating costs consist primarily of research and development activities including the cost of clinical studies and clinical supplies

as well as clinical drug manufacturing and formulation.

Research and development expenses also include personnel related costs such as

salaries and wages, and third-party contract research organization (CRO) expenses in support of these clinical studies.

Personnel costs

include salaries and wages, benefits, and non-cash stock-based compensation charges associated with options and other equity awards granted

to employees and consultants who are directly engaged in support of our research and development activities.

General and administrative expenses

consist of personnel costs, expenses for outside professional services and expenses associated with operating as a public company.

Personnel costs consist of salaries and wages, benefits and stock-based compensation for general and administrative personnel.

Outside professional services and public company expenses, include expenses related to compliance and reporting, additional insurance

expenses, audit and SOX compliance, expenses associated with patent research, applications and filings, investor and stockholder

relations activities and other administrative expenses and professional services.

Comparison of year ended September 30, 2023 to year

ended September 30, 2022

the development stage and have not earned any revenues since our inception in 2004.

We do not anticipate earning any revenues until we

can establish an alliance with other companies to develop, co-develop, license, acquire or market our products.

Our operating costs consist primarily of research and development

activities including the cost of clinical studies and clinical supplies as well as clinical drug manufacturing and formulation.

and development expenses also include personnel related costs such as salaries and wages, and third-party contract research organization

(CRO) expenses in support of these clinical studies.

Personnel costs include salaries and wages, benefits, and non-cash share-based compensation

charges associated with options and other equity awards granted to employees and consultants who are directly engaged in support of our

research and development activities.

General and administrative expenses consist of personnel costs,

expenses for outside professional services and expenses associated with operating as a public company.

Personnel costs consist of salaries

and wages, benefits and share-based compensation for general and administrative personnel.

Outside professional services and public company

expenses include expenses related to compliance and reporting, additional insurance expenses, audit and SOX compliance, expenses associated

with patent research, applications and filings, investor and stockholder relations activities and other administrative expenses and professional

Comparison of year ended September 30, 2024 to year ended

September 30, 2023

Operating Expenses

Our operating expenses for fiscal 2023 increased to

$55.8 million, from $51.0 million in fiscal 2022.

The increase is attributable to an increase in research and development expenses

of $5.7 million in 2023 to $43.7 million.

The following table summarizes our research and development

expenses for the years ended September 30, 2023, and 2022 (in thousands):

Costs of external service

Our operating expenses for fiscal 2024 decreased to $52.9 million,

from $55.8 million in fiscal 2023.

The decrease is attributable to a modest decrease in research and development expenses of $1.9 million

(4.3%) to $41.8 million in fiscal 2024 as well as a small decrease in general and administrative expenses of $1.0 million (8.3%) to $11.0

million in fiscal 2024, as more fully described below.

During fiscal 2024, we experienced an overall decrease

in total research and development expenses over the comparable fiscal 2023 financial year.

The decreases were largely due to:

(i) a decrease in share-based compensation expense of $5.0 million as a result of the vesting of previous

option awards and a change in estimated vesting dates associated with performance-based option awards;

(ii) a decrease of approximately $3.5 million relating to our Rett syndrome program as a result of the completion

of the EXCELLENCE trial and the respective open label extension;

(iii) a decrease of approximately $1.2 million in expenditures over the comparable period relating to our Alzheimer’s

program, as a result of the completion of the Phase 2b/3 clinical trial and its related open label extension.

These decreases were largely offset by the following

increases in research and development expenditures over the comparable fiscal 2023 financial year:

(i) an increase in personnel costs of $3.4 million related to the addition of new employees including new

additions to the Company’s leadership team, and expenses related to the engagement of consultants to assist in the preparation of

the submission of our Marketing Authorisation Application (MAA) to the European Medicines Agency (EMA);

(ii) an increase of approximately $3.6 million over the comparable period relating to manufacturing activities

of ANAVEX ® 2-73 for potential commercial use, and to support the MAA;

(iii) an increase of $2.2 million over the comparable period relating to expenditures on the ANAVEX ® 3-71-SZ-001

clinical trial, which trial commenced in the second quarter of fiscal 2024.

The following table summarizes our research and development expenses for

the years ended September 30, 2024, and 2023 (in thousands):

Costs of external service providers

Personnel costs

Stock-based compensation

Share-based compensation

Other common costs

Total research

and development costs

External service providers cost by product

candidate was as follows (in thousands):

Total research and development costs

External service provider cost by product candidate

was as follows (in thousands):

ANAVEX ® 2-73

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All other product candidates

Other external service

provider costs

Total external

service provider costs

increase in external service provider costs from fiscal 2022 to fiscal 2023 is primarily due to (1) an increase in manufacturing

costs for both ANAVEX ® 2-73 and ANAVEX ® 3-71, in preparation for planned clinical trials or studies

and (2) an increase in clinical trial expenditures related to our Rett program in connection with the completed enrollment and

dosing of our Phase 2/3 Excellence pediatric clinical trial.

fiscal 2023, our personnel costs increased to $10.3 million from $8.0 million as a result of our expanded team.

this was offset by a decrease in stock-based compensation expense as a result of the vesting of previously awarded milestone-based

option awards.

General and administrative expenses

for fiscal 2023 decreased to $12.0 million, from $13.1 million in fiscal 2022, most significantly related to a decrease in non-cash

stock option compensation charges as a result of the vesting of previously awarded milestone-based option awards.

fiscal 2023, we utilized cash and cash equivalents of $27.8 million to fund our operations, compared to $24.2 million during fiscal

Our cash position increased slightly to $151.0 million at September 30, 2023, an increase of $1.9 million over the prior

Cash for operations was generated through the issuance of

shares of common stock under the financing arrangements described below.

expect to continue to see an increase in our research and development expenditures as we advance our ANAVEX ® 2-73

clinical studies, including planned advancement of ANAVEX ® 2-73 for Parkinson ’ s

disease program, ongoing extension studies of our current clinical programs, continued advancement of our other pipeline compounds

such as ANAVEX ® 3-71, and as we continue to add additional staffing to manage and support these clinical initiatives.

Other external service provider costs

Total external service provider costs

General and administrative expenses were $11.0 million

for the fiscal 2024 financial year, as compared to $12.0 million in fiscal 2023.

The primary reason for the decrease in general and administrative

expenses was a reduction in share-based compensation charges of $1.9 million, as a result of the vesting of previous option awards and

the extended timeline of milestone based vesting awards.

expect to see our research and development expenditures increase from current levels as we advance our clinical programs, including continuation

of ANAVEX ® 3-71 trial in Schizophrenia and subsequent advancements, planned advancement of ANAVEX ® 2-73 for

Parkinson ’ s disease, planned initiation of an ANAVEX ® 2-73

for a Fragile X clinical trial, and as we continue to grow our staffing to manage and support these clinical initiatives.

Other income (net)

Net other income for the year ended

September 30, 2023 was $8.3 million as compared to $3.4 million for fiscal 2022.

The primary reason for the increase in other

income was due to an increase in interest income earned on cash and cash equivalents, due to an increase in market wide interest

Net other income for the year ended September 30, 2024 was $9.9

million as compared to $8.3 million for fiscal 2023.

The primary reason for the increase in other income was due to a one-time financing

charge of $0.9 million recognized in the comparable year associated with entering into the 2023 Purchase Agreement (as described below),

as well as an increase in interest income in fiscal 2024 earned on cash and cash equivalents, due to an increase in market wide interest

rates year over year.

During fiscal 2023, we recorded

$2.7 million in research and development incentive income, consisting of the Australian research and development incentive credit

administered through the Australian Tax Office, in connection with fiscal 2023 eligible expenditures.

In comparison, research

and development incentive income for fiscal 2022 was $3.3 million in connection with fiscal 2022 eligible expenditures.

to continue to receive support from the Australian government for various clinical trials being conducted within Australia.

Net loss for fiscal 2023 was $47.5 million,

or $0.60 per share, compared to a net loss of approximately $48.0 million, or $0.62 per share for fiscal 2022.

fiscal 2024, we recorded $2.3 million in research and development incentive income, consisting of the Australian research and development

incentive credit administered through the ATO, in connection with fiscal 2024 eligible expenditures.

In comparison, research and development

incentive income for fiscal 2023 was $2.7 million in connection with fiscal 2023 eligible expenditures.

This income is driven by the clinical

trial expenditures incurred in Australia, and the decrease is a result of the completion of the EXCELLENCE trial in Rett Syndrome and

the Phase 2b/3 clinical trial in Alzheimer ’ s disease, as well as

related open label extension trials, which were completed during fiscal 2024.

We expect to continue to receive support from the Australian

government for future clinical trials which we plan to conduct, in part, within Australia.

Net loss for fiscal 2024 was $43.0 million, or $0.52

per share, compared to a net loss of approximately $47.5 million, or $0.60 per share for fiscal 2023.

Liquidity and Capital Resources

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Working Capital

At September 30, 2023, we had $151.0

million in cash and cash equivalents, an increase from $149.2 million at September 30, 2022.

to continue to use our capital resources to advance our clinical trials for ANAVEX ® 2-73 and ANAVEX ® 3-71,

and to perform work necessary to prepare for future development of our pipeline compounds .

is a summary of sources of cash flows for the years ended September 30, 2023 and 2022 (in thousands)

At September 30, 2024, we had $132.2 million in cash and cash

equivalents, a decrease from $151.0 million at September 30, 2023.

We intend to continue to use our capital resources to advance

our clinical trials for ANAVEX ® 2-73 and ANAVEX ® 3-71, and to perform work necessary to prepare for future

development of our pipeline compounds.

Following is a summary

of sources of cash flows for the years ended September 30, 2024 and 2023 (in thousands)

Cash flows used in operating activities

Cash flows provided by financing activities

Increase (decrease) in cash

(Decrease) increase in cash

Cash flow used in operating activities

There was an increase in cash used in operating activities

of $1.9 million during fiscal 2023 primarily due to the collection of incentive and tax receivables in the comparable period.

There was an increase in cash used in operating activities of

$3.0 million during fiscal 2024.

The principal reason for this is an increase in net cash expenses, after taking into account non-cash

share-based compensation, over the comparable period of approximately $3.3 million.

Cash flow provided by financing activities

Cash provided by financing activities in

fiscal 2023 was $29.7 million, primarily attributable to cash received from the issuance of common shares at various market

prices under the 2023 Purchase Agreement (as defined below).

Cash provided by financing activities

in fiscal 2022 was $21.3 million, net of financing costs, primarily attributable to cash received

from the issuance of common shares at various market prices under the Sales Agreement.

Cash provided by financing activities in fiscal 2024 was $12.0

million, comprised of $11.3 attributable to cash received from the issuance of common shares at various market prices under the 2023 Purchase

Agreement (as defined below) and $0.7 million received pursuant to the exercise of stock options.

Cash provided by financing activities in fiscal 2023 was $29.7

million, comprised of $27.9 million attributable to cash received from the issuance of common shares under the 2023 Purchase Agreement

and $1.8 million received pursuant to the exercise of stock options.

Other Financings

2023 Purchase Agreement

On February 3, 2023, the Company entered into

a $150,000,000 purchase agreement (the “2023 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln

Park”), pursuant to which the Company has the right to sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase,

up to $150.0 million in value of its shares of Common Stock from time to time over a three-year period until February 3, 2026.

On any business day and subject to certain

customary conditions, the Company may direct Lincoln Park to purchase up to 200,000 shares of Common Stock (such purchases, “ Regular

Purchases ”).

The amount of a Regular Purchase may increase under certain circumstances based on the market price of the

Common Stock;

provided, however, that Lincoln Park’s committed obligation under any Regular Purchase shall not exceed $4.0

The purchase price of shares of Common Stock will be based on the then prevailing market prices of such shares at the

time of sales as described in the Purchase Agreement.

There are no limits on the price per share that Lincoln Park may pay to purchase

Common Stock under the Purchase Agreement.

In addition, if the Company has directed Lincoln Park to purchase the full amount of

Common Stock available as a Regular Purchase on a given day, it may direct Lincoln Park to purchase additional amounts as “accelerated

purchases” and “additional accelerated purchases,” each as set forth in the Purchase Agreement.

On February 3, 2023, the Company entered into a $150,000,000

purchase agreement (the “2023 Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“Lincoln Park”), pursuant

to which the Company has the right to sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $150.0 million

in value of its shares of Common Stock from time to time over a three-year period until February 3, 2026.

On any business day and subject to certain customary

conditions, the Company may direct Lincoln Park to purchase up to 200,000 shares of Common Stock (such purchases, “Regular Purchases”).

The amount of a Regular Purchase may increase under certain circumstances based on the market price of the Common Stock;

provided, however,

that Lincoln Park’s committed obligation under any Regular Purchase shall not exceed $4.0 million.

The purchase price of shares

of Common Stock will be based on the then prevailing market prices of such shares at the time of sales as described in the 2023 Purchase

There are no limits on the price per share that Lincoln Park may pay to purchase Common Stock under the 2023 Purchase Agreement.

In addition, if the Company has directed Lincoln Park to purchase the full amount of Common Stock available as a Regular Purchase on a

given day, it may direct Lincoln Park to purchase additional amounts as “accelerated purchases” and “additional accelerated

purchases,” each as set forth in the 2023 Purchase Agreement.

The 2023 Purchase Agreement limits the Company’s

sale of shares of Common Stock to Lincoln Park to 15,606,426 shares of Common Stock, representing 19.99% of the shares of the Common

Stock outstanding on the date of the Purchase Agreement unless (i) stockholder 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 Purchase Agreement equals

or exceeds the lower of (A) the closing price of the Common Stock on the Nasdaq Capital Market immediately preceding the Execution

Date or (B) the average of the closing price of the Common Stock on the Nasdaq Capital Market for the five Business Days immediately

preceding the Execution Date.

sale of shares of Common Stock to Lincoln Park to 15,606,426 shares of Common Stock, representing 19.99% of the shares of the Common Stock

outstanding on the date of the 2023 Purchase Agreement unless (i) stockholder 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 2023 Purchase Agreement equals or exceeds the lower

of (A) the closing price of the Common Stock on the Nasdaq Capital Market immediately preceding the Execution Date or (B) the average

of the closing price of the Common Stock on the Nasdaq Capital Market for the five Business Days immediately preceding the Execution Date.

The 2023 Purchase Agreement also prohibits the Company

from directing Lincoln Park to purchase any shares of Common Stock if those shares, when aggregated with all other shares of Common

Stock then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial

ownership, at any single point in time, of more than 4.99% of the then total outstanding shares of Common Stock, as calculated

pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.

In consideration for entering into the 2023

Purchase Agreement, the Company issued to Lincoln Park 75,000 shares of Common Stock as a commitment fee (the “initial commitment

shares”) during the year ended September 30, 2023 and agreed to issue up to 75,000 shares pro rata (collectively with the

initial commitment shares, the “commitment shares”), when and if, Lincoln Park purchased, at the Company’s discretion,

the $150.0 million aggregate commitment.

During the year ended September 30, 2023, the

Company issued to Lincoln Park an aggregate of 3,288,943 (2022:

0) shares of Common Stock under the 2023 Purchase Agreement, including

3,275,000 (2022:

0) shares of Common Stock for aggregate proceeds of $27.9 million (2022:

$0) and 88,943 (2022:

0) commitment shares

(inclusive of the 75,000 initial commitment shares).

As of September 30, 2023, an amount of

$122.1 million in shares of our common stock remain available for purchase by Lincoln Park under the 2023 Purchase Agreement.

Controlled Equity Offering Sales

On May 1, 2020, we entered into an Amended

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

and SVB Leerink LLC (the “Sales

Agents”), pursuant to which we may offer and sell shares of common stock registered under an effective registration statement

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

Upon delivery of a placement notice based on

our instructions and subject to the terms and conditions of the Sales Agreement, the Sales Agents may sell shares of common stock

by methods deemed to be an “at the market 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 our prior written consent.

We are not obligated to make any sales of shares under the Sales Agreement.

We or the Sales Agents may suspend or terminate the At-the-Market Offering upon notice to the other party, subject to certain conditions.

The Sales Agents will act as agents on a commercially reasonable efforts basis consistent with their normal trading and sales practices,

applicable state and federal law, and rules and regulations and the rules of Nasdaq.

We have agreed to pay the Sales Agents’

commissions for their services of 3.0% of the gross proceeds from the sale of shares of Common Stock pursuant to the Sales Agreement.

We have also agreed to provide the Sales Agents with customary indemnification and contribution rights.

No shares were sold during the year ended September

30, 2023 under the Sales Agreement.

The Company currently does not have access to sell shares of common stock with the Sales Agents.

from directing Lincoln Park to purchase any shares of Common Stock if those shares, when aggregated with all other shares of Common Stock

then beneficially owned by Lincoln Park and its affiliates, would result in Lincoln Park and its affiliates having beneficial ownership,

at any single point in time, of more than 4.99% of the then total outstanding shares of Common Stock, as calculated pursuant to Section

13(d) of the Securities Exchange Act of 1934, as amended, and Rule 13d-3 thereunder.

In consideration for entering into the 2023 Purchase

Agreement, the Company issued to Lincoln Park 75,000 shares of Common Stock as a commitment fee (the “initial commitment shares”)

during the year ended September 30, 2023 and agreed to issue up to 75,000 shares pro rata (collectively with the initial commitment shares,

the “commitment shares”), when and if, Lincoln Park purchased, at the Company’s discretion, the $150.0 million aggregate

During the year ended September 30, 2024, the Company

issued to Lincoln Park an aggregate of 2,455,646 shares of Common Stock under the 2023 Purchase Agreement, including 2,450,000 shares

of Common Stock for an aggregate purchase price of $11.3 million and 5,646 commitment shares.

During the year ended September 30, 2023,

shares were sold under the Sales Agreement for gross proceeds of $21.0 million (net proceeds of $20.3 million after deducting commissions

and offering expenses).

2019 Purchase Agreement

On June 7, 2019, we

entered into a Purchase Agreement (the “2019 Purchase Agreement”) with Lincoln Park, as amended on July 1, 2020, pursuant

to which Lincoln Park committed to purchase up to $50.0 million of our common stock.

Concurrently with the execution of the 2019

Purchase Agreement in 2019, we issued 324,383 shares of our common stock to Lincoln Park as a fee for its commitment to purchase

shares of our common stock under the 2019 Purchase Agreement and became obligated to issue up to 162,191 shares pro rata, when

and if Lincoln Park purchased, at our discretion, the $50.0 million aggregate commitment.

During fiscal year 2021, the Company

issued to Lincoln Park an aggregate of 4,086,209 shares of common stock under the 2019 Purchase Agreement, including 4,007,996

shares of common stock for an aggregate purchase price of $24.1 million and 78,213 commitment shares.

September 30, 2023 and 2022, no shares of our common stock remained available for purchase by Lincoln Park under the 2019 Purchase

the Company issued to Lincoln Park an aggregate of 3,288,943 shares of Common Stock under the 2023 Purchase Agreement, including 3,275,000

shares of Common Stock for an aggregate purchase price of $27.9 million and 13,943 commitment shares as well as the 75,000 initial commitment

On September 30, 2024, an amount of $110.8 million

remained available under the 2023 Purchase Agreement.

Controlled Equity Offering Sales Agreement

On May 1, 2020, we entered into an Amended and Restated

Sales Agreement (the “2020 Sales Agreement”) with Cantor Fitzgerald & Co.

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

pursuant to which we could offer and sell shares of Common Stock registered under an effective registration statement from time to time

through the Sales Agents (the “At-the-Market Offering”).

No shares were sold during the years ended September

30, 2024 and 2023 under the 2020 Sales Agreement.

The Company terminated the 2020 Sales Agreement on July 24, 2024.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements

that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,

revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

We have no off-balance sheet arrangements that have

or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses,

results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders.

of Critical Accounting Policies

financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts

of assets, liabilities, revenue and expenses.

financial statements and accompanying notes are prepared in accordance with generally accepted accounting principles in the United States.

Preparing financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,

revenue and expenses.

These estimates and assumptions are affected by management ’ s

application of accounting policies.

We believe that understanding the basis and nature of the estimates and assumptions involved

with the following aspects of our financial statements is critical to an understanding of our financial statements.

We base our assumptions and estimates

on historical experience and other sources that we believe to be reasonable at the time.

Actual results may vary from our estimates

due to changes in circumstances, politics, global economics, general business conditions and other factors.

Our significant estimates

are related to the valuation of warrants and options.

There are accounting policies that

we believe are significant to the presentation of our financial statements.

The most significant of these accounting policies

relates to the accounting for our research and development expenses and stock-based compensation expense.

We believe that understanding the basis and nature of the estimates and assumptions involved with

the following aspects of our financial statements is critical to an understanding of our financial statements.

We base our assumptions and estimates on historical experience

and other sources that we believe to be reasonable at the time.

Actual results may vary from our estimates due to changes in circumstances,

politics, global economics, general business conditions and other factors.

Our significant estimates are related to the valuation of warrants

There are accounting policies that we believe are significant

to the presentation of our financial statements.

The most significant of these accounting policies relates to the accounting for our research

and development expenses and share-based compensation expense.

Research and Development Expenses

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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 ” ),

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

benefits and share-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.

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 ” )

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

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.

The Company 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.

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.

The Company 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.

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.

Revisions 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.

Revisions 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 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

trial contract.

In addition, we incur expenses

in respect of the acquisition of intellectual property relating to patents and trademarks.

The probability of success and length

of time to develop commercial applications of the drugs subject to the acquired patents and trademarks is difficult to determine

and numerous risks and uncertainties exist with respect to the timely completion of the development projects.

There is no assurance

the acquired patents and trademarks will ever be successfully commercialized.

Due to these risks and uncertainties, we expense

the acquisition of patents and trademarks

Stock-based Compensation

We account for all stock-based payments and awards under

the fair value-based method.

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

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.

We have granted share purchase

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

We estimate 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 we conclude that achieving the performance criteria is probable.

We periodically review and update as appropriate

our estimates of implicit service periods and conclusions on achieving the performance criteria.

Performance awards vest upon

achievement of the performance criteria.

use the Black-Scholes option valuation model to calculate the fair value of share purchase options and warrants at the date of

This model requires the input of subjective assumptions, including the expected price volatility, and expected life

of each award.

These assumptions consist of estimates of future market conditions, which are inherently uncertain, and therefore,

are subject to management ’ s judgment.

Changes in these assumptions

can materially affect the fair value estimates.

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 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 trial contract.

In addition, we incur expenses in respect of the acquisition

of intellectual property relating to patents and trademarks.

The probability of success and length of time to develop commercial applications

of the drugs subject to the acquired patents and trademarks is difficult to determine and numerous risks and uncertainties exist with

respect to the timely completion of the development projects.

There is no assurance the acquired patents and trademarks will ever be successfully

commercialized.

Due to these risks and uncertainties, we expense the acquisition of patents and trademarks.

Share-based Compensation

We account for all share-based payments and awards under the

fair value-based 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 share-based payments with graded vesting

are recognized on a straight-line basis.

Share-based compensation expense is adjusted for actual forfeitures of unvested awards as they

We have granted share purchase option awards that vest upon

achievement of certain performance criteria, or milestone-based awards.

We estimate 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 we conclude that achieving

the performance criteria is probable.

We periodically review and update as appropriate our estimates of implicit service periods and conclusions

on achieving the performance criteria.

Performance awards vest upon achievement of the performance criteria.

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

This model requires the input of subjective assumptions, including the expected price volatility, and expected life of each award.

These assumptions consist of estimates of future market conditions, which are inherently uncertain, and therefore, are subject to management ’ s

Changes in these assumptions can materially affect the fair value estimates.

RECENT ACCOUNTING PRONOUNCEMENTS

For a discussion of recent accounting

pronouncements and their possible effect on our results, see Note 2 to our Consolidated Financial Statements found elsewhere in

this Annual Report.

For a discussion of recent accounting pronouncements and their

possible effect on our results, see Note 2 to our Consolidated Financial Statements found elsewhere in this Annual Report.

ITEM 7A QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

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 7. Management’s Discussion and Analysis