ANAVEX LIFE SCIENCES CORP. — Form 10-Q Summary
Reporting period: First quarter of fiscal 2013, three months ended December 31, 2012. The unaudited statements are presented in U.S. dollars. Anavex is a development-stage pharmaceutical company with no product revenue.
Financial results and position
| Metric | Q1 FY2013 / Dec. 31, 2012 | Comparable period / prior date |
|---|---|---|
| Revenue | None since inception | None |
| Total expenses | $415,867 | $2,188,617 in Q1 FY2012 |
| Net loss | $453,517 | $2,174,656 in Q1 FY2012 |
| Basic and diluted loss per share | $0.01 | $0.08 in Q1 FY2012 |
| Operating cash flow | $(131,573) | $(1,088,123) in Q1 FY2012 |
| Cash and cash equivalents | $79,789 | $11,362 at Sept. 30, 2012 |
| Current liabilities | $3,408,588 | $2,888,324 at Sept. 30, 2012 |
| Working capital | Deficit of $3,328,799 | Deficit of $2,875,747 at Sept. 30, 2012 |
Current liabilities included $2,809,588 of accounts payable and accrued liabilities and $599,000 of promissory notes, all classified as current. Total assets were $79,900, including $79,789 cash. The accumulated deficit was $37,958,443. Profit margins are not applicable because the company reported no revenue.
Changes versus the prior comparable quarter
- Total expenses fell 81%, chiefly because research and development expense declined to $127,003 from $1,717,333 as clinical activity was suspended pending financing.
- Consulting expense decreased to $135,411 from $307,212, which management attributed in part to reduced infrastructure and lower stock-based compensation. Legal expense rose to $57,544 from $28,011, primarily related to intellectual-property matters.
- Net loss narrowed, but the comparison also reflects different other-income and expense items. The current quarter included a $27,425 foreign-exchange loss; the prior quarter included a $55,000 gain from remeasurement of derivative liabilities, which had expired by the current period.
- Cash from financing was $200,000, versus $962,500 in the prior-year quarter. The company also converted $100,000 of consulting-fee payables into a note without a cash payment.
Outlook, risks and notable items
- ANAVEX 2-73, the company’s lead Alzheimer’s candidate, completed a Phase 1 single-ascending-dose study in 2011 and was reported as tolerated below the protocol-defined maximum single dose of 55–60 mg. Management planned a multiple-ascending-dose study in the first quarter of 2013, conditional on adequate capital.
- Management said approximately $5 million would be needed over the next 12 months for planned research and development, including the next ANAVEX 2-73 clinical trial. No committed financing source was identified; the company warned it might delay or reduce research, or cease operations, if funds could not be obtained.
- The filing states that the working-capital deficit, accumulated losses and expected further losses raise substantial doubt about the company’s ability to continue as a going concern. Management cited possible equity or promissory-note financing but disclosed no formal plan in place.
- After quarter-end, the president, secretary, treasurer, CFO and director, Robert Chisholm, and director Sean Lowry resigned. The company disclosed secured notes issued to them for unpaid consulting fees: approximately $86,946 and $27,725, respectively, bearing 12% interest and due June 30, 2013.
- Disclosure controls and procedures were assessed as ineffective because of material weaknesses previously reported. Management said it intended to pursue remediation; no material changes in internal control were reported for the quarter.
- The filing identifies substantial development, clinical and regulatory, intellectual-property, financing, competition, and dilution risks. It reports no material pending legal proceedings and no material off-balance-sheet arrangements.
Important facts for investors to verify
- Whether the planned multiple-ascending-dose trial began, and whether the company obtained enough financing to conduct it and meet the stated $5 million cash requirement.
- The terms and maturity of the December 31, 2012 $100,000 promissory note: Note 4 describes a U.S.-dollar note bearing 12% interest and due March 31, 2013, while the later disclosures describe a CDN$100,000 note with interest accruing after March 31 and a June 30, 2013 maturity.
- Current status and settlement of the $599,000 promissory-note balance, including the $49,000 note due on demand and notes stated to mature March 31, 2013.
- The consequences of the post-quarter executive and director resignations, related-party notes, and the previously identified material weaknesses in disclosure controls.
- Whether reduced quarterly research spending reflects a sustainable cost base or continued suspension of clinical development for lack of funds.