---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

(Mark One)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

[   ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE EXCHANGE ACT

For the transition period from __________ to __________

Commission file number 000-51652

ANAVEX LIFE SCIENCES CORP.(Exact name of small business issuer as specified in its charter)

|Nevada                                                               | 20-8365999                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)

14 Rue Kleberg, CH-1201 Geneva, Switzerland(Address of principal executive offices)

011-41-2271-65-300(Issuer's telephone
number)

N/A(Former name, former address and
former fiscal year, if changed since last report)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after
the distribution of securities under a plan confirmed by a court.Yes
[   ]   No [   ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date:
19,789,722 common shares issued and outstanding as of August 12, 2008

Transitional Small Business Disclosure Format (Check one): Yes
[   ]   No [X]

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

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1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

It is the opinion of management that the interim financial
statements for the quarter ended June 30, 2008 include all adjustments necessary
in order to ensure that the interim financial statements are not misleading.

Our interim financial statements are stated in United States
dollars and are prepared in accordance with United States generally accepted
accounting principles.

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ANAVEX LIFE SCIENCES CORP.

(A Development Stage Company)

INTERIM FINANCIAL STATEMENTS

June 30, 2008

(Stated in US Dollars)

(Unaudited)

---

ANAVEX LIFE SCIENCES CORP.(A Development Stage
  Company) 
  INTERIM BALANCE SHEETS 
  June 30, 2008 and September 30, 2007 
  (Stated in US Dollars) 
  (Unaudited)

|                                                            |   | June 30,   |   |   | September 30, |  
|----------------------------------------------------------- | - | ---------- | - | - | ------------- | -
|ASSETS                                                      |   | 2008       |   |   | 2007          |  
|                                                            |   |            |   |   |               |  
|Current                                                     |   |            |   |   |               |  
|Cash                                                        | $ | 5,799      |   | $ | 25            |  
|Prepaid expense                                             |   | 5,000      |   |   | -             |  
|                                                            |   | 10,799     |   |   | 25            |  
|                                                            |   |            |   |   |               |  
|Equipment  Note 3                                          |   | 952        |   |   | -             |  
|Patents and intellectual property  Note 3                  |   | 99,909     |   |   | -             |  
|                                                            |   |            |   |   |               |  
|                                                            | $ | 111,660    |   | $ | 25            |  
|                                                            |   |            |   |   |               |  
|LIABILITIES                                                 |  
|                                                            |   |            |   |   |               |  
|Current                                                     |   |            |   |   |               |  
|Accounts payable and
      accrued liabilities  Note 5     | $ | 494,790    |   | $ | 462,529       |  
|Promissory notes payable  Note 4                           |   | 1,296,052  |   |   | -             |  
|                                                            |   |            |   |   |               |  
|                                                            |   | 1,790,842  |   |   | 462,529       |  
|                                                            |   |            |   |   |               |  
|STOCKHOLDERS
      DEFICIENCY                              |  
|                                                            |   |            |   |   |               |  
|Capital stock  Notes 6 and 8                               |   |            |   |   |               |  
|Authorized:                                                 |   |            |   |   |               |  
|150,000,000
      common shares, par value $0.001 per share |   |            |   |   |               |  
|Issued and outstanding:                                     |   |            |   |   |               |  
|19,789,722 common shares (September 30, 2007:               |   | 19,790     |   |   | 19,515        |  
|19,514,722)                                                 |   |            |   |   |               |  
|Additional paid-in capital                                  |   | 3,292,200  |   |   | 1,229,526     |  
|Deficit accumulated during the development
      stage      |   | (4,991,172 | ) |   | (1,711,545    | )
|                                                            |   |            |   |   |               |  
|                                                            |   | (1,679,182 | ) |   | (462,504      | )
|                                                            |   |            |   |   |               |  
|                                                            | $ | 111,660    |   | $ | 25            |  

Nature of Operations and Ability to Continue as a Going Concern
   Note 1 
  Commitments  Notes 6 and 8

SEE ACCOMPANYING NOTES

---

ANAVEX LIFE SCIENCES CORP.(A Development Stage
  Company) 
  INTERIM STATEMENTS OF OPERATIONS 
  for the three and nine months
  ended June 30, 2008 and 2007 and 
  for the period from January 23, 2004 (Date
  of Inception) to June 30, 2008 
  (Stated in US Dollars) 
  (Unaudited)

January 23,2004 (Date ofThree Months Ended
      
      
      Nine Months Ended
      
      
      Inception) toJune 30,
      
      
      June 30,
      
      
      June 30,2008
      
      
      2007
      
      
      2008
      
      
      2007
      
      
      2008ExpensesAccounting and audit fees
      $
      22,538
      
      $
      5,745
      
      $
      59,267
      
      $
      14,464
      
      $
      108,898Amortization 
        Note 3
      
      4,816
      
      
      -
      
      
      4,816
      
      
      -
      
      
      4,816Bank charges and interest
      
      22,928
      
      
      1,638
      
      
      36,549
      
      
      2,223
      
      
      40,181Consulting  Note
        5
      
      341,722
      
      
      155,700
      
      
      965,300
      
      
      255,500
      
      
      1,406,223Legal fees (recovery)
      
      (24,385
      )
      
      10,591
      
      
      32,460
      
      
      25,677
      
      
      120,244Management fees 
        Note 5
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      14,625Office and miscellaneous
      
      27,973
      
      
      8,445
      
      
      90,520
      
      
      20,681
      
      
      132,855Registration and filing
        fees
      
      1,883
      
      
      3,497
      
      
      6,602
      
      
      9,522
      
      
      23,415Rent  Note 5
      
      15,000
      
      
      30,000
      
      
      75,000
      
      
      40,000
      
      
      148,750Research and development
      
      248,232
      
      
      39,953
      
      
      694,948
      
      
      65,496
      
      
      1,654,646Stock based compensation  Note
        6
      
      675,349
      
      
      -
      
      
      959,349
      
      
      -
      
      
      959,349Website design and maintenance
      
      1,424
      
      
      -
      
      
      1,424
      
      
      3,586
      
      
      25,270Loss before other items
      
      (1,337,480
      )
      
      (255,569
      )
      
      (2,926,235
      )
      
      (437,149
      )
      
      (4,639,272
      )Severance  Note 8
      
      (342,511
      )
      
      -
      
      
      (342,511
      )
      
      -
      
      
      (342,511
      )Gain (loss) foreign exchange
      
      (323
      )
      
      722
      
      
      (10,881
      )
      
      903
      
      
      (9,389
      )Net loss for the period
      $
      (1,680,314
      )
      $
      (254,847
      )
      $
      (3,279,627
      )
      $
      (436,246
      )
      $
      (4,991,172
      )Basic and diluted loss per share
      $
      (0.09
      )
      $
      (0.01
      )
      $
      (0.17
      )
      $
      (0.02
      )Weighted average shares outstanding
      
      19,757,579
      
      
      19,200,000
      
      
      19,679,466
      
      
      19,200,000


SEE ACCOMPANYING NOTES

---

ANAVEX LIFE SCIENCES CORP.(A Development Stage
  Company) 
  INTERIM STATEMENTS OF CASH FLOWS 
  for the nine months ended June
  30, 2008, 2007 and 
  for the period from January 23, 2004 (Date of Inception) to
  June 30, 2008 
  (Stated in US Dollars)
  (Unaudited)

|                                                         |   |                   |   |   |               |   |   | January 23, |  
|-------------------------------------------------------- | - | ----------------- | - | - | ------------- | - | - | ----------- | -
|                                                         |   |                   |   |   |               |   |   | 2004        |  
|                                                         |   |                   |   |   |               |   |   | (Date of    |  
|                                                         |   | Nine months ended |   |   | Inception) to |  
|                                                         |   | June 30,          |   |   | June 30,      |  
|                                                         |   | 2008              |   |   | 2007          |   |   | 2008        |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Cash Flows used in Operating Activities                  |   |                   |   |   |               |   |   |             |  
|Net loss for the period                                  | $ | (3,279,627        | ) | $ | (436,246      | ) | $ | (4,991,172  | )
|Add items not involving
      cash:                      |   |                   |   |   |               |   |   |             |  
|Amortization                                             |   | 4,816             |   |   | -             |   |   | 4,816       |  
|Stock-based
      compensation                           |   | 959,349           |   |   | -             |   |   | 959,349     |  
|Common shares issued
      for research and              |   |                   |   |   |               |   |   |             |  
|development
      expenses and severance fees            |   | 533,600           |   |   | -             |   |   | 1,333,600   |  
|Management fees contributed                              |   | -                 |   |   | -             |   |   | 14,625      |  
|Rent
      contributed                                   |   | -                 |   |   | -             |   |   | 3,750       |  
|Adjustments to reconcile net loss to net
      cash used |   |                   |   |   |               |   |   |             |  
|in operating activities:                                 |   |                   |   |   |               |   |   |             |  
|Prepaid expenses                                         |   | (5,000            | ) |   | 220           |   |   | (5,000      | )
|Accounts
      payable and accrued liabilities           |   | 77,261            |   |   | 170,869       |   |   | 539,791     |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Net cash used in operating activities                    |   | (1,709,601        | ) |   | (265,157      | ) |   | (2,140,241  | )
|                                                         |   |                   |   |   |               |   |   |             |  
|Cash Flows from Financing Activities                     |   |                   |   |   |               |   |   |             |  
|Promissory notes                                         |   | 1,296,052         |   |   | -             |   |   | 1,296,052   |  
|Issuance of common shares                                |   | 525,000           |   |   | -             |   |   | 589,000     |  
|Due to related parties                                   |   | -                 |   |   | -             |   |   | 33,665      |  
|Shareholder advances                                     |   | -                 |   |   | 253,000       |   |   | 333,000     |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Net cash provided by financing activities                |   | 1,821,052         |   |   | 253,000       |   |   | 2,251,717   |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Cash Flows from Investing Activities                     |   |                   |   |   |               |   |   |             |  
|Acquisition of patents and intellectual
      property   |   | (104,595          | ) |   | -             |   |   | (104,595    | )
|Acquisition of equipment                                 |   | (1,082            | ) |   | -             |   |   | (1,082      | )
|                                                         |   |                   |   |   |               |   |   |             |  
|                                                         |   | (105,677          | ) |   | -             |   |   | (105,677    | )
|                                                         |   |                   |   |   |               |   |   |             |  
|Increase (decrease) in cash during the period            |   | 5,774             |   |   | (12,157       | ) |   | 5,799       |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Cash, beginning of period                                |   | 25                |   |   | 12,275        |   |   | -           |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Cash, end of period                                      | $ | 5,799             |   | $ | 118           |   | $ | 5,799       |  
|                                                         |   |                   |   |   |               |   |   |             |  
|Non-cash transactions  Note 7                           |   |                   |   |   |               |   |   |             |  

SEE ACCOMPANYING NOTES

---

ANAVEXLIFESCIENCESCORP.(A Development Stage Company) 
  INTERIM STATEMENT OF STOCKHOLDERS
  EQUITY (DEFICIENCY) 
  for the period January 23, 2004 (Date of Inception) to
  June 30, 2008 
  (Stated in US Dollars) 
  (Unaudited )

|                                                                     |  |                    |  |   |             |  |   |            |  |   | Deficit     |   |   |            |  
|-------------------------------------------------------------------- |  | ------------------ |  | - | ----------- |  | - | ---------- |  | - | ----------- | - | - | ---------- | -
|                                                                     |  | Common
      Stock |  |   | Accumulated |  |   |            | 
|                                                                     |  |                    |  |   |             |  |   | Additional |  |   | During the  |   |   |            |  
|                                                                     |  |                    |  |   |             |  |   | Paid-in    |  |   | Development |   |   |            |  
|                                                                     |  | Shares*            |  |   | Par Value*  |  |   | Capital*   |  |   | Stage       |   |   | Total      |  
|                                                                     |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Capital stock issued for cash- at $0.0033                            |  | 12,000,000         |  | $ | 12,000      |  | $ | 28,000     |  | $ | -           |   | $ | 40,000     |  
|Net loss from January 23, 2004 to September 30, 2004                 |  | -                  |  |   | -           |  |   | -          |  |   | (14,395     | ) |   | (14,395    | )
|                                                                     |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, September 30, 2004                                          |  | 12,000,000         |  |   | 12,000      |  |   | 28,000     |  |   | (14,395     | ) |   | 25,605     |  
|Capital stock issued for cash - at $0.0033                           |  | 7,200,000          |  |   | 7,200       |  |   | 16,800     |  |   | -           |   |   | 24,000     |  
|Management fees contributed                                          |  | -                  |  |   | -           |  |   | 13,000     |  |   | -           |   |   | 13,000     |  
|Rent contributed                                                     |  | -                  |  |   | -           |  |   | 3,000      |  |   | -           |   |   | 3,000      |  
|Net loss for the year                                                |  | -                  |  |   | -           |  |   | -          |  |   | (91,625     | ) |   | (91,625    | )
|                                                                     |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, September 30, 2005                                          |  | 19,200,000         |  |   | 19,200      |  |   | 60,800     |  |   | (106,020    | ) |   | (26,020    | )
|Management fees contributed                                          |  | -                  |  |   | -           |  |   | 1,625      |  |   | -           |   |   | 1,625      |  
|Rent contributed                                                     |  | -                  |  |   | -           |  |   | 750        |  |   | -           |   |   | 750        |  
|Debt forgiven by directors                                           |  | -                  |  |   | -           |  |   | 33,666     |  |   | -           |   |   | 33,666     |  
|Net (loss) for the period                                            |  | -                  |  |   | -           |  |   | -          |  |   | (25,532     | ) |   | (25,532    | )
|                                                                     |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, September 30, 2006                                          |  | 19,200,000         |  |   | 19,200      |  |   | 96,841     |  |   | (131,552    | ) |   | (15,511    | )
|Capital stock issued for research and development
      services, on |  | 222,222            |  |   | 222         |  |   | 799,778    |  |   | -           |   |   | 800,000    |  
|September 24, 2007  at $3.60                                        |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Capital stock issued for research and development
      services, on |  | 92,500             |  |   | 93          |  |   | 332,907    |  |   | -           |   |   | 333,000    |  
|September 25, 2007  at $3.60                                        |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Net loss for the period                                              |  | -                  |  |   | -           |  |   | -          |  |   | (1,579,993  | ) |   | (1,579,993 | )
|                                                                     |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, September 30, 2007  Carried
      forward                  |  | 19,514,722         |  | $ | 19,515      |  | $ | 1,229,526  |  | $ | (1,711,545  | ) | $ | (462,504   | )

SEE ACCOMPANYING NOTES

---

ANAVEXLIFESCIENCESCORP.(A Development Stage Company) 
  INTERIM STATEMENT OF STOCKHOLDERS
  EQUITY (DEFICIENCY) 
  for the period January 23, 2004 (Date of Inception) to
  June 30, 2008 
  (Stated in US Dollars) 
  (Unaudited )

|                                                    |  |            |  |  |                    |  |   |             |  |   |            |  |   | Deficit     |   |   |            |  
|--------------------------------------------------- |  | ---------- |  |  | ------------------ |  | - | ----------- |  | - | ---------- |  | - | ----------- | - | - | ---------- | -
|                                                    |  |            |  |  | Common
      Stock |  |   | Accumulated |  |   |            | 
|                                                    |  |            |  |  |                    |  |   |             |  |   | Additional |  |   | During the  |   |   |            |  
|                                                    |  |            |  |  |                    |  |   |             |  |   | Paid-in    |  |   | Development |   |   |            |  
|                                                    |  |            |  |  | Shares*            |  |   | Par Value*  |  |   | Capital*   |  |   | Stage       |   |   | Total      |  
|                                                    |  |            |  |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, September 30, 2007  brought
      forward |  |            |  |  | 19,514,722         |  |   | 19,515      |  |   | 1,229,526  |  |   | (1,711,545  | ) |   | (462,504   | )
|Capital stock issued for cash on December 10, 2007  |  | - at $3.50 |  |  | 150,000            |  |   | 150         |  |   | 524,850    |  |   | -           |   |   | 525,000    |  
|Capital stock issued for consulting fees on         |  |            |  |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|December 8, 2007                                    |  | - at $3.86 |  |  | 50,000             |  |   | 50          |  |   | 192,950    |  |   | -           |   |   | 193,000    |  
|Capital stock issued debt settlement                |  | - at $4.50 |  |  | 10,000             |  |   | 10          |  |   | 44,990     |  |   | -           |   |   | 45,000     |  
|Capital stock issued for severance on June 9, 2008  |  | - at $5.24 |  |  | 65,000             |  |   | 65          |  |   | 340,535    |  |   | -           |   |   | 340,600    |  
|Stock-based compensation  Note 6                   |  |            |  |  | -                  |  |   | -           |  |   | 959,349    |  |   | -           |   |   | 959,349    |  
|Net loss for the period                             |  |            |  |  | -                  |  |   | -           |  |   | -          |  |   | (3,279,627  | ) |   | (3,279,627 | )
|                                                    |  |            |  |  |                    |  |   |             |  |   |            |  |   |             |   |   |            |  
|Balance, June 30, 2008                              |  |            |  |  | 19,789,722         |  | $ | 19,790      |  | $ | 3,292,200  |  | $ | (4,991,172  | ) | $ | (1,679,182 | )

SEE ACCOMPANYING NOTES

---

ANAVEX LIFE SCIENCES CORP.(A Development Stage
  Company) 
  NOTES TO THE INTERIM FINANCIAL STATEMENTS 
  June 30, 2008 
  (Stated in US Dollars) 
  (Unaudited)

|Note 1 | Nature of Operations and Ability to Continue as a
      Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | The Company is in the development stage and has not yet
      realized revenues from its planned operations. The Company is seeking to
      develop and market proprietary drug targets for the development of cancer
      and diseases of the central nervous system.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | These accompanying unaudited financial statements have
      been prepared in accordance with generally accepted accounting principles
      in the United States of America on a going concern basis, which assumes
      that the Company will continue to realize its assets and discharge its
      obligations and commitments in the normal course of operations.
      Realization values may be substantially different from carrying values as
      shown and these financial statements do not give effect to adjustments
      that would be necessary to the carrying values and classification of
      assets and liabilities should the Company be unable to continue as a going
      concern. At June 30, 2008, the Company had not yet achieved profitable
      operations, had an accumulated deficit of $4,991,172 (September 30, 2007 -
      $1,711,545) since its inception and incurred a net loss for the nine
      months ended June 30, 2008 of $3,279,627 (2007 - $436,246) and expects to
      incur further losses in the development of its business, all of which
      casts substantial doubt about the Companys ability to continue as a going
      concern. The Companys ability to continue as a going concern is dependent
      upon its ability to generate and maintain future profitable operations
      and/or to obtain the necessary financing to meet its obligations and repay
      its liabilities arising from normal business operations when they come
      due. Management has no formal plan in place to address this concern but
      considers obtaining additional funds by equity financing and/or from
      related party advances. While the Company is expending its best efforts to
      achieve the above plans, there is no assurance that any such activity will
      generate funds for operations.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | These statements reflect all adjustments, consisting of
      normal recurring adjustments, which in the opinion of management are
      necessary for fair presentation of the information contained therein. It
      is suggested that these interim financial statements be read in
      conjunction with the audited financial statements of the Company for the
      year ended September 30, 2007. The interim results are not necessarily
      indicative of the operating results expected for the full fiscal year
      ending on September 30, 2008. Certain information and footnote disclosures
      normally included in financial statements prepared in accordance with
      generally accepted accounting principles have been condensed or omitted
      pursuant to such rules and regulations, although the Company believes that
      the disclosures are adequate to make the information presented not
      misleading.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Note 2 | Significant Accounting Policy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | Patents and intellectual property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | Patents and intellectual property are recorded at cost
      and are amortized on a straight-line basis over their useful life of 10
      years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 2

|Note 3 | Equipment, Patents and
      Intellectual Property
|------ | --------------------------------------------------

| |                                   |   |         |  |   | Accumulated  |  |   | Net Book | 
| | --------------------------------- | - | ------- |  | - | ------------ |  | - | -------- | 
| |                                   |   | Cost    |  |   | Amortization |  |   | Value    | 
| |                                   |   |         |  |   |              |  |   |          | 
| | Equipment                         | $ | 1,082   |  | $ | 130          |  | $ | 952      | 
| |                                   |   |         |  |   |              |  |   |          | 
| | Patents and intellectual property | $ | 104,595 |  | $ | 4,686        |  | $ | 99,909   | 

|Note 4 | Promissory Notes Payable
|------ | ------------------------

| |                                                                   |   | June 30,  |  |   | September 30, | 
| | ----------------------------------------------------------------- | - | --------- |  | - | ------------- | 
| |                                                                   |   | 2008      |  |   | 2007          | 
| |                                                                   |   |           |  |   |               | 
| | Promissory notes payable, unsecured,
      bearing interest at    |   |           |  |   |               | 
| | the rate of 8% per annum with repayment terms on or               |   |           |  |   |               | 
| | before December 31, 2008                                          | $ | 200,000   |  | $ | -             | 
| |                                                                   |   | 100,000   |  |   | -             | 
| |                                                                   |   | 175,000   |  |   | -             | 
| |                                                                   |   | 200,000   |  |   | -             | 
| |                                                                   |   | 150,000   |  |   | -             | 
| |                                                                   |   | 200,000   |  |   | -             | 
| |                                                                   |   | 175,000   |  |   | -             | 
| |                                                                   |   |           |  |   |               | 
| |                                                                   |   | 1,200,000 |  |   | -             | 
| | A $100,000 promissory note payable, unsecured, bearing            |   |           |  |   |               | 
| | interest at the rate of 0% per annum has
      been discounted to |   |           |  |   |               | 
| | its fair market value. It is repayable in four monthly            |   |           |  |   |               | 
| | instalments of $25,000 due on July 4, 2008,
      August 1,       |   |           |  |   |               | 
| | 2008, September 5, 2008 and October 3, 2008.                      |   | 96,052    |  |   | -             | 
| |                                                                   |   |           |  |   |               | 
| | Total promissory notes payable                                    | $ | 1,296,052 |  | $ | -             | 

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 3

|Note 5 | Related Party Transactions                                                                       
|------ | -------------------------------------------------------------------------------------------------
|       |                                                                                                  
|       | The following amounts were charged to the Company by
      directors and officers of the Company:

| |            |   |                    |  |   |                   |  |   |               |  |   |         |  |   | January 23,   | 
| | ---------- | - | ------------------ |  | - | ----------------- |  | - | ------------- |  | - | ------- |  | - | ------------- | 
| |            |   |                    |  |   |                   |  |   |               |  |   |         |  |   | 2004 (Date of | 
| |            |   | Three months ended |  |   | Nine months ended |  |   | Inception) to | 
| |            |   | June 30,           |  |   | June 30,          |  |   | June 30,      | 
| |            |   | 2008               |  |   | 2007              |  |   | 2008          |  |   | 2007    |  |   | 2008          | 
| |            |   |                    |  |   |                   |  |   |               |  |   |         |  |   |               | 
| | Consulting | $ | 94,198             |  | $ | 90,000            |  | $ | 285,961       |  | $ | 150,000 |  | $ | 563,961       | 

The following amounts were contributed
  to the Company by the directors and officers of the Company:

January 23,2004 (Date ofThree months ended
      
      
      Nine months ended
      
      
      Inception) toJune 30,
      
      
      June 30,
      
      
      June 30,2008
      
      
      2007
      
      
      2008
      
      
      2007
      
      
      2008Management fees
      $
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      
      14,625Rent
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      3,750Debt forgiven by directors
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      33,666$
      -
      
      $
      -
      
      $
      -
      
      $
      -
      
      $
      52,041


|       | Included in accounts payable and accrued liabilities at
      June 30, 2008 is $23,524 (September 30, 2007 - $167,824) owing to
      directors and officers of the Company for unpaid consulting fees.
|------ | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                        
|Note 6 | Commitments                                                                                                                                                                                            

| | a) | Share Purchase Warrants                                                                 
| | -- | ----------------------------------------------------------------------------------------
| |    |                                                                                         
| |    | A summary of the Companys share purchase warrants
      outstanding is presented below:

| |                                 | Number of | Exercise
| | ------------------------------- | --------- | --------
| |                                 | Shares    | Price   
| |                                 |           |         
| | Outstanding, September 30, 2007 | -         | -       
| | Issued                          | 150,000   | $5.00   
| |                                 |           |         
| | Balance, June 30, 2008          | 150,000   |         

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 4

|Note 6 | Commitments (contd)
|------ | ---------------------

| | a) | Share Purchase Warrants (contd)                                                                                                                                                                                                    
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                      
| |    | At June 30, 2008, the Company has 150,000 share purchase
      warrants outstanding entitling the holder thereof the right to purchase
      one common share for each warrant held at $5.00 per share until December
      21, 2009.
| |    |                                                                                                                                                                                                                                      
| | b) | Stock Options                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                      
| |    | At June 30,  2008, the Company has stock purchase options outstanding entitling a director of the Company and consultants to purchase a total of 1,220,000 common shares of the Company.                                             
| |    |                                                                                                                                                                                                                                      
| |    | A summary of the status of companys outstanding stock
      purchase options for the six months ended June 30, 2008 is presented
      below:                                                                                       

| |                                   |  |           |   |  | Weighted | 
| | --------------------------------- |  | --------- | - |  | -------- | 
| |                                   |  |           |   |  | Average  | 
| |                                   |  | Number of |   |  | Exercise | 
| |                                   |  | Shares    |   |  | Price    | 
| |                                   |  |           |   |  |          | 
| | Outstanding at September 30, 2007 |  | 770,000   |   |  | $3.00    | 
| | Expired                           |  | (300,000  | ) |  | $3.00    | 
| | Granted                           |  | 750,000   |   |  | $4.53    | 
| |                                   |  |           |   |  |          | 
| | Outstanding at June 30, 2008      |  | 1,220,000 |   |  | $3.94    | 

At June 30, 2008, the following stock
  options were outstanding and exercisable:

Number
        of SharesTotal
      
      Number
      ExerciseNumber
      
      Vested
      Price
      Expiry Date100,000
      (1)
      -
      $3.86
      December 1, 201050,000
      
      50,000
      $3.75
      November 1, 2012150,000
      (2)
      75,000
      $3.85
      December 3, 2012450,000
      (3)
      225,000
      $5.00
      June 3, 2013470,000
      (4)
      -
      $3.00
      February 8, 20171,220,000
      
      350,000


| | 1. | As at June 30, 2008, these options have not vested. The
      options vest upon the Company listing its shares on the American Stock
      Exchange or any other nationally recognized stock exchange by December 1,
      2008 or in the event of a change of control and a listing on a nationally
      recognized stock exchange is not required. The fair value of the stock
      options at the date of the grant was calculated to be $177,000. No
      stock-based compensation has been recorded in the financial statements as
      the performance conditions have not yet been
      met.
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 5

|Note 6 | Commitments (contd)
|------ | ---------------------

| | b) | Stock Options
      (contd)
| | -- | -----------------------------

| | 2. | As at June 30, 2008, 75,000 of these options have vested.
      The remaining 75,000 shares vest on December 3, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 3. | As at June 30, 2008, 225,000 of these options have
      vested. The remaining 225,000 shares vest on June 3, 2008.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | 4. | As at June 30, 2008, these options have not vested. The
      options vest upon one or more compounds: entering Phase 2 Trial  155,000
      options; entering Phase 3 Trial  155,000 options; and receiving FDA
      approval  160,000 options. The fair value of the stock options at the
      date of the grant was calculated to be $1,708,000. The fair value of the
      options that have not expired as at June 30, 2008 is $1,043,000. No
      stock-base compensation has been recorded in the financial statements as
      none of the performance conditions have yet been
      met.

At June 30, 2008, the weighted average
  remaining contractual life of the outstanding share purchase options is 6.06
  years.

The fair value of stock options
  granted during the nine months ended June 30, 2008 was $2,867,200 (2007 -
  $1,708,000) which is being recognized over the options vesting periods. Total
  stock-based compensation recognized during the nine month ended June 30, 2008
  was $959,349 (2007 - $NIL). Stock-based compensation has been recorded in the
  statements of operations as stock-based compensation expense with corresponding
  additional paid-in capital recorded in stockholders' equity:

The fair value of stock-based
  compensation charges have been determined using the Black-Scholes option
  valuation model using the following weighted average assumptions applied to
  stock options granted during the period:

| |                          | Nine Months Ended
| | ------------------------ | -----------------
| |                          | June 30,         
| |                          | 2008             
| |                          |                  
| | Risk-free interest rate  | 0.85% - 3.785%   
| | Expected life of options | 2.42  8.62 years
| | Annualized volatility    | 82.93%           
| | Dividend rate            | 0                

The volatility was determined based on
  an index of volatility from comparable companies. The expected term of the
  options granted is derived from the simplified method as prescribed by SEC Staff
  Accounting Bulletin No. 107.

The aggregate intrinsic value of stock
  options outstanding and exercisable, at June 30, 2008 is $133,750.

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 6

|Note 6 | Commitments (contd)
|------ | ---------------------

| | c) | Patent and Collaboration Agreement                                                                                                                                                                                                                                              
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                 
| |    | On February 1, 2007, the Company signed a contract with a
      director to acquire property for the development of a new drug compounds
      including three (3) patents and one (1) patent application. Pursuant to
      the agreement, the Company agreed to the following:
| |    |                                                                                                                                                                                                                                                                                 
| |    | i)                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                 
| |    | ii)                                                                                                                                                                                                                                                                             
| |    |                                                                                                                                                                                                                                                                                 
| |    | iii)                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                 
| |    | iv)                                                                                                                                                                                                                                                                             

|Note 7 | Non-cash Transactions                                                                                                                                                                                   
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                         
|       | Investing and financing activities that do not have an
      impact on current cash flows are excluded from the statements of cash
      flows. During the nine months ended June 30, 2008, the Company:

| | a) | Issued 10,000 shares at $4.50 per share for a total of
      $45,000 pursuant to an agreement to issue shares to settle debt;
| | -- | -----------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                              
| | b) | Issued 50,000 shares at $3.86 per share for a total of
      $193,000 in payment of consulting fees; and                     
| |    |                                                                                                                              
| | c) | Issued 65,000 shares at $5.24 per share for a total of
      $340,600 as a severance payment to a director and
      officer.

These transactions were excluded from
  the statements of cash flows.

---

Anavex Life Sciences Corp. 
  (A Development Stage Company) 
  Notes to the Interim Financial Statements 
  June 30, 2008 
  (Stated in
  US Dollars) 
  (Unaudited)  Page 7

|Note 8 | Severance                                                                                                                                                                                                                                                                                                                                 
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                           
|       | The Companys CEO resigned on May 15, 2008. In connection
      with the CEOs employment agreement, the Company negotiated a settlement
      for fair value consideration that approximated the value he would have
      received for termination without due cause. The negotiated settlement with
      the former CEO is as follows:

| | a) | Issue 65,000 common shares of the Company
      (issued);
| | -- | ---------------------------------------------------------
| |    |                                                          
| | b) | Payment of $100,000 by June 6, 2008 (paid);              
| |    |                                                          
| | c) | Payment of $25,000 by July 4, 2008;                      
| |    |                                                          
| | d) | Payment of $25,000 by August 1, 2008;                    
| |    |                                                          
| | e) | Payment of $25,000 by September 5, 2008;                 
| |    |                                                          
| | f) | Payment of $25,000 by October 3,
      2008.             

|Note 9 | Subsequent Events                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|       | Subsequent to June 30, 2008, pursuant to private
      placement agreements to issue units at $4.25 each, the Company raised
      $606,000. Each unit consists of one common share and one common share
      purchase warrant entitling the holder to purchase an additional common
      share for $5.00 for each warrant held for a period of up to one year from
      the date of closing. The Company intends to issue a total of 150,000 units
      for total proceeds of $637,500.

---

2

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.

FORWARD-LOOKING STATEMENTS

This quarterly report contains forward-looking statements.
Forward-looking statements are projections of events, revenues, income, future
economic performance or managements plans and objectives for our future
operations. In some cases, you can identify forward-looking statements by
terminology such as may, should, expects, plans, anticipates,
believes, estimates, predicts, potential or continue or the negative
of these terms or other comparable terminology. These statements are only
predictions and involve known and unknown risks, uncertainties and other
factors, including the risks in the section entitled Risk Factors and the
risks set out below, any of which may cause our or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Our interim financial statements are stated in United States
Dollars (US$) and are prepared in accordance with United States Generally
Accepted Accounting Principles. The following discussion should be read in
conjunction with our interim financial statements and the related notes that
appear elsewhere in this quarterly report. The following discussion contains
forward-looking statements that reflect our plans, estimates and beliefs. Our
actual results could differ materially from those discussed in the forward
looking statements. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below and elsewhere in this
quarterly report, particularly in the section entitled Risk Factors of this
quarterly report.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars. All references to common
shares refer to the common shares in our capital stock.

As used in this quarterly report, the terms we, us, our
and Anavex mean Anavex Life Sciences Corp., unless otherwise indicated. We
have no subsidiaries.

Corporate History

We were incorporated in the State of Nevada on January 24,
2004, under the name Thrifty Printing, Inc. On January 25, 2007, we changed
our name to Anavex Life Sciences Corp. We effected this name change by merging
with our wholly owned subsidiary, named Anavex Life Sciences Corp., a Nevada
corporation that we formed specifically for this purpose. We changed the name of
our company to better reflect the direction and business of our company. Our
name change was effected with NASDAQ on January 25, 2007 and our common shares
became quoted on the OTC Bulletin Board on January 25, 2007 under the new stock
symbol of AVXL.

Our principal business office is located at 14 Rue Kleberg,
CH-1201 Geneva, Switzerland. Our registered office for service in the State of
Nevada is located at 3990 Warren Way, Reno, NV 89509.

Our Current Business

We are an emerging biopharmaceutical company engaged in the
discovery and development of novel drug targets for the treatment of cancer and
neurological diseases. Our proprietary SIGMACEPTOR discovery Platform involves
the rational drug design of compounds that fulfill specific criteria based on
unmet market needs and new scientific advances.

---

3

Our SIGMACEPTOR-N program involves the development of novel
and original drug candidates, targeting neurological and neurodegenerative
diseases (Alzheimers disease, epilepsy, depression, etc.). Our lead drug
candidates exhibit high, non-exclusive affinity for sigma receptors with strong
evidence for anti-amnesic, neuroprotective, anti-apoptotic, anti-oxidative,
anti-inflammatory, anti-convulsive, anti-depressant and anxiolytic properties.

Our SIGMACEPTOR-C program involves the development of novel
and original drug candidates targeting cancer. Our lead drug candidates exhibit
high, non-exclusive affinity for sigma receptors with strong evidence for
selective pro-apoptotic, anti-metastatic and low toxicity properties in various
types of solid cancers such as colon, prostate, breast, lung, etc.

Plan of Operation

The following discussion and analysis summarizes our plan of
operation for the next 12 months, our results of operations for the nine months
ended June 30, 2008, and changes in our financial condition from our year ended
September 30, 2007.

Overview

This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.

Over the next 12 months, we will continue to develop our proprietary SIGMACEPTORTM Discovery Platform to determine which compounds, if any, are ready for the next stage of research, be it pre-clinical or clinical trials. We will also, through the direction of our Chief Scientific Officer Dr. Vamvakides, engage certain research institutions and laboratories for the conduct of specific research and reports.

Anticipated Cash Requirements

For the next 12 months we plan to expend a total of approximately $7,185,000 to continue the development of our proprietary SIGMACEPTORTM Discovery Platforms. The majority of our capital resources requirement is needed to enter one or more of our current compounds into clinical trials. Specifically, we estimate our operating expenses and working capital requirements for the next 12 months to be as follows:

Expense
    
    CostResearch and Development Activities
    $
    5,200,000Officer and Employee Compensation
    
    800,000Sales and Marketing
    
    175,000Legal, Accounting and Professional Fees
    
    110,000General and
      Administrative
    
    900,000Total
    $
    7,185,000


Research and Development Activities

ANAVEX's SIGMACEPTOR(TM)-N program pipeline is focused on
developing disease-modifying treatments for neurological conditions.

Considerable advancements have been made with ANAVEX 2-73 and
its optimized derivative ANAVEX 19-144. ANAVEX 2-73 is expected to be the first
compound to enter clinical trials in 2009 for Alzheimers disease. Moreover,
ANAVEX 2-73 or its optimized derivative ANAVEX 19-144 is intended

---

4

to enter clinical trials for epilepsy treatment later in the
future. Results from animal models reveal that these compounds have significant
anti-amnesic, neuroprotective and anticonvulsant properties. These activities
involve muscarinic and sigma-1 receptor components, which is significant because
it indicates a unique synergistic mode of action that may help provide disease
modifying potential for Alzheimers and protect the neurons from oxidative
stress. Moreover, such potential can provide control for epilepsy and prevent
the process that causes long-term damage to tissue and cells as well as
biochemical and physiological alterations to the brain. Published results were
presented at the Neuroscience 2007 conference in San Diego. Ongoing pre-clinical
studies are being conducted in collaboration with Universite Montpellier.

Promising developments have also been made with ANAVEX's ANAVEX 1-41. In recent pre-clinical animal studies, the compound demonstrated significant neuroprotective benefits through the prevention of oxidative stress, which damages and destroys cells and is believed to be a primary cause of Alzheimer's disease. The novel mechanism of action of ANAVEX 1-41 demonstrates that the compound may influence the course of Alzheimer's disease and prevent or limit the creation of plaques that destroy brain cells in the hippocampus, the part of the brain that regulates learning, emotion and memory. Published results were presented at the Neuroscience 2007 conference in San Diego, California. Most recent results were presented in the ICAD 2008 conference in Chicago, where the neuroprotective profile of the candidate drug was highlighted with accompanying results. Testing on ANAVEX 1-41 is being conducted in cooperation with Universite Montpellier in France. Phase 1 trials of ANAVEX 1-41 on humans are expected to commence late in 2009.

SIGMACEPTOR(TM)-C program pipeline involves the development of
novel and original drug candidates targeting cancer. To date we have identified
over 50 compounds that have exhibited growth inhibiting activity at a low
micromolar and two of them even lower at a nanomolar range concentration.

ANAVEX 7-1037, the company's lead drug candidate for the
treatment of colorectal cancer and other types of solid tumours, recently
revealed chemotherapeutic potential without toxic side effects in advanced
pre-clinical studies. The compound has been shown to kill human colon cancer
cells and also significantly suppress tumour growth in immune-deficient mice.
Published results were presented at the 15th Euroconference on Apoptosis in
Portoroz, Slovenia. Testing on ANAVEX 7-1037 is being conducted in cooperation
with the Academy of Athens' Institute of Biomedical Research.

Published results for ANAVEX 1-41, ANAVEX 2-73 and ANAVEX
7-1037 are available at www.anavex.com/publications.html.

Officer and Employee Compensation

We currently employ two executive officers including a
president, and a chief scientific officer. Additionally we have three employees
to assist in product research, strategic planning and business development. On
February 1, 2008 we hired 19 consulting laboratory staff to work in our research
facilities. We anticipate we may spend up to approximately $800,000 in
compensation to our officers, employees and consultants during the next 12
months.

General Administration

We anticipate spending approximately $900,000 on general and
administration costs in the next 12 months. These costs will consist primarily
of rent and facility support expenses as well as finance and administrative
support compensation but excluding legal fees and auditors fees.

---

5

Results of Operations

Third Quarter and Nine Months Summary

|                             |   | Three Months ended |  |   | Nine Months ended | 
|---------------------------- | - | ------------------ |  | - | ----------------- | 
|                             |   | June
      30      |  |   | June
      30     | 
|                             |   | 2008               |  |   | 2007              | 
|Revenue                      | $ | 0                  |  | $ | 0                 | 
|Expenses                     |   | 1,680,314          |  |   | 254,847           | 
|Interest and Dividend Income |   | 0                  |  |   | 0                 | 
|Net Loss                     | $ | 1,680,314          |  | $ | 254,847           | 

Revenue

We are presently in the exploration stage of our business. We
have not earned any revenues to date, and do not anticipate earning revenues
until we further develop our compound candidates and market them to
pharmaceutical companies, which could take up to several years or more. Our
company will not likely generate cash flow sufficient to meet our capital
expenditure requirements for many years to come, if ever. We will require
additional monies during the next 12 month period to execute our business plan.
We plan to obtain this additional money through the sale of our equity
securities or through borrowing the money from existing shareholders or third
parties.

Expenses

Our operating expenses for the period ended June 30, 2008 and
2007 are outlined in the table below:

|                                  |   | Three Months Ended June 30 |   |   | Nine Months Ended June 30 | 
|--------------------------------- | - | -------------------------- | - | - | ------------------------- | 
|Expenses                          |   | 2008                       |   |   | 2007                      | 
|Accounting and audit fees         | $ | 22,538                     |   | $ | 5,745                     | 
|Amortization                      |   | 4,816                      |   |   | -                         | 
|Bank charges and interest         |   | 22,928                     |   |   | 1,638                     | 
|Consulting  Note 5               |   | 341,722                    |   |   | 155,700                   | 
|Legal fees                        |   | (24,385                    | ) |   | 10,591                    | 
|Management fees  Note 5          |   | -                          |   |   | -                         | 
|Office and miscellaneous          |   | 27,973                     |   |   | 8,445                     | 
|Registration and filing fees      |   | 1,883                      |   |   | 3,497                     | 
|Rent  Note 5                     |   | 15,000                     |   |   | 30,000                    | 
|Research and development          |   | 248,232                    |   |   | 39,953                    | 
|Stock based compensation  Note 6 |   | 675,349                    |   |   | -                         | 
|Website design and maintenance    |   | 1,424                      |   |   | -                         | 
|                                  | $ | 1,337,480                  |   | $ | 255,569                   | 

Total operating expenses during the quarter ended June 30, 2008
  increased by 171% compared to the same period in 2007 primarily due to increased
  research and development costs and increased consulting fees relating to the
  hire of our lab consultants.

Equity Compensation

On June 3, 2008, we approved a compensation package for company directors, under our 2007 Stock Option Plan, to issue 150,000 stock options to each director, exercisable into shares of common stock at an exercise price of US $5.00 per share until June 3, 2013. The options will vest in  50% increments with the first 50% vesting  immediately and the second 50% vesting on June 3, 2009. We issued a total of 450,000 options to three of our directors.

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6

We have not adopted any other equity compensation plan other
than our 2007 Stock Option Plan. There were no issuances of common stock, stock
options, or other equity securities  awarded to our executive officers
during the quarter ended June 30, 2008.

Liquidity and Capital Resources

Working Capital

At June 30, 2008
    At March 31, 2008Current Assets
    10,799
    14,188Current Liabilities
    1,790,842
    1,107,709Working Capital Surplus
      (Deficit)
    (1,780,043)
    (1,093,521)


Cash Flows

|                                              | Nine Months Ended
|--------------------------------------------- | -----------------
|                                              | June 30          
|                                              | 2008             
|Net cash used in operating activities         | (1,709,601)      
|Net cash provided by financing activities     | 1,821,052        
|Net cash used by investing activities         | (105,677)        
|Increase (decrease) in cash during the period | 5,774            

Future Financing

We had cash in the amount of $5,799 as of June 30, 2008 and
cash on hand as of the date of filing this quarterly report on Form 10-QSB is
not sufficient to fund our current estimates of our operating expenses and
working capital requirements for the next 12 months.

We anticipate that we will not be able to generate revenues
until we further develop our compound candidates and market them to
pharmaceutical companies, which could take up to several years or more. Our
company will not likely generate cash flow sufficient to meet our capital
expenditure requirements for many years to come, if ever. We will require
additional monies during the next 12 month period to execute our business plan.
We plan to obtain this additional money through the sale of our equity
securities or through borrowing the money from existing shareholders or third
parties.

It is possible that we may not be able to obtain funds required
for our continued operation through the sale of our equity securities or through
borrowing the money from existing shareholders or third parties. The additional
financing we seek may not be available to us when needed or, if available, that
it can be obtained on commercially reasonable terms. If we are not able to
obtain the additional financing on a timely basis, we will not be able to meet
our other obligations as they become due and we will be forced to scale down or
perhaps even cease the operation of our business.

There is substantial risk regarding our ability to continue as a going concern as the continuation of our business is dependent upon obtaining further financing and the eventual success of our research and development program in discovering and developing a compound to the point where it can be marketed to pharmaceutical companies. Then, we will be dependant on the market acceptance of any product we may offer and the continuing successful development of our product offerings and related technologies. Finally, we will be required to achieve a profitable level of operations. However, these steps are a long way off for our company at its present stage and we must focus for the time being on raising funds and conducting our planned research and development. Because we intend to raise the additional funds through the sale of our equity securities, the issuance of additional equity securities by us could result in a

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7

significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

Off-Balance Sheet Arrangements

Our company has no outstanding derivative financial
instruments, off-balance sheet guarantees, interest rate swap transactions or
foreign currency contracts. Our company does not engage in trading activities
involving non-exchange traded contracts.

RISK FACTORS

Much of the information included in this quarterly report
includes or is based upon estimates, projections or other forward looking
statements. Such forward looking statements include any projections or
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein.

Such estimates, projections or other forward looking
statements involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other forward looking statements. Prospective investors should consider
carefully the risk factors set out below.

Risks Related To Our Business

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

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

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8

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

All of our potential drug compounds will require extensive
additional research and development, including non-clinical testing and clinical
trials, as well as regulatory approvals, before we can market them. We cannot
predict if or when any of the potential drug compounds we intend to develop will
be approved for marketing. There are many reasons that we may fail in our
efforts to develop our potential drug compounds. These include:

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

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

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

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

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

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

- the pace of scientific progress in our research and development programs
  and the magnitude of these programs;
- the scope and results of preclinical testing and human studies;
- the time and costs involved in obtaining regulatory approvals;
- the time and costs involved in preparing, filing, prosecuting, maintaining
  and enforcing patent claims;
- competing technological and market developments;
- our ability to establish additional collaborations;
- changes in our existing collaborations;
- the cost of manufacturing scale-up; and
- the effectiveness of our commercialization activities.

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

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

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

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

Moreover, success in non-clinical testing and early clinical
  trials does not ensure that later clinical trials will be successful, and we
  cannot be sure that the results of later clinical trials will replicate the
  results of prior clinical trials and non-clinical testing. The clinical trial
  process may fail to demonstrate that our potential drug compounds are safe for
  humans and effective for indicated uses. This failure would cause us to abandon
  a drug candidate and may delay development of other potential drug compounds.
  Any delay in, or termination of, our non-clinical testing or clinical trials
  will delay the filing of an Investigational New Drug application and New Drug
  Application with the FDA and, ultimately, our ability to commercialize our potential
  drug compounds and generate product revenues. In addition, our clinical trials
  will involve small patient populations. Because of the small sample size, the
  results of these early clinical trials may not be indicative of future results.

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10

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

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

- efficacy or safety concerns with the potential drug compounds, even if not
  justified;
- unexpected side-effects;
- regulatory proceedings subjecting the potential drug compounds to
  potential recall;
- publicity affecting doctor prescription or patient use of the potential
  drug compounds;
- pressure from competitive products; or
- introduction of more effective treatments.

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

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

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

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

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

- If our competitors receive regulatory approvals for and begin marketing
  similar products in the United States, the European Union, Japan and other
  territories before we do, greater awareness of their products as compared to
  ours will cause our competitive position to suffer;
- Information from our competitors or the academic community indicating that
  current products or new products are more effective than our future products
  could be, if and when they are generated, impede our market penetration or
  decrease our future market share; and,

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11

- The price for our future products, as well as pricing decisions by our
  competitors, may have an effect on our revenues.

If this happens, our business will be adversely affected.

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

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

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

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

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

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

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

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

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

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

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

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

We own four patents related to certain of our potential drug
compounds. However, these patents do not ensure the protection of our
intellectual property for a number of reasons, including the following:

| | 1. | Competitors may interfere with our patent process in a
      variety of ways. Competitors may claim that they invented the claimed
      invention prior to us. Competitors may also claim that we are infringing
      on their patents and therefore cannot practice our technology as claimed
      under our patents and patent applications. Competitors may also contest
      our patents and patent application, if issued, by showing the patent
      examiner that the invention was not original, was not novel or was
      obvious. In litigation, a competitor could claim that our patents and
      patent application are not valid for a number of reasons. If a court
      agrees, we would lose that patents or patent application. As a company, we
      have no meaningful experience with competitors interfering with our
      patents or patent applications.
| | -- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2. | Because of the time, money and effort involved in
      obtaining and enforcing patents, our management may spend less time and
      resources on developing potential drug compounds than they otherwise
      would, which could increase our operating expenses and delay product
      programs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 3. | Receipt of a patent may not provide much practical
      protection. If we receive a patent with a narrow scope, then it will be
      easier for competitors to design products that do not infringe on our
      patent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 4. | In addition, competitors also seek patent protection for
      their inventions. Due to the number of patents in our field, we cannot be
      certain that we do not infringe on existing patents or that we will not
      infringe on patents granted in the future. If a patent holder believes our
      potential drug compound infringes on their patent, the patent holder may
      sue us even if we have received patent protection for our technology. If
      someone else claims we infringe on their patent, we would face a number of
      issues which could cause a slow down or cessation of our research and
      development, including the following:                                                                                                                                                                                                            

| | (a) | Defending a lawsuit takes significant time and can be
      very expensive.                                                                                                                                                                                                                                                     
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                 
| | (b) | If the court decides that our potential drug compound
      infringes on the competitors patent, we may have to pay substantial
      damages for past infringement.                                                                                                                                                           
| |     |                                                                                                                                                                                                                                                                                                                                 
| | (c) | The court may prohibit us from selling or licensing the
      potential drug compound unless the patent holder licenses the patent to
      us. The patent holder is not required to grant us a license. If a license
      is available, we may have to pay substantial royalties or grant cross
      licenses to our patents.
| |     |                                                                                                                                                                                                                                                                                                                                 
| | (d) | Redesigning our potential drug compounds so that they do
      not infringe on other patents may not be possible or could require
      substantial funds and time.                                                                                                                                                             

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14

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

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

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

We will incur increased costs as a result of recently
enacted and proposed changes in laws and regulations and we cannot predict the
impact of any future changes in law.

We face burdens relating to the recent trend toward stricter
  corporate governance and financial reporting standards. New legislation or regulations
  such as Section 404 of the Sarbanes-Oxley Act of 2002 follow the trend of imposing
  stricter corporate governance and financial reporting standards have led to
  an increase in our costs of compliance including increases in consulting, auditing
  and legal fees. The new rules could make it more difficult or more costly for
  us to obtain certain types of insurance, including directors and officers
  liability insurance, and we may be forced to accept reduced policy limits and
  coverage or incur substantially higher costs to obtain the same or similar coverage.
  The impact of these events could also make it more difficult for us to attract
  and retain qualified persons to serve on our board of directors, our board committees
  or as executive officers. A failure to comply with these new laws and regulations
  may impact market perception of our financial condition and could materially
  harm our business. Additionally, it is unclear what additional laws or regulations
  may develop, and we cannot predict the ultimate impact of any future changes
  in law.

Risks Related to Our Common Stock

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our
operations.

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

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15

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

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

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

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

If a market for our shares of common stock does not develop,
shareholders may be unable to sell their shares of common stock.

There is currently a limited market for our common stock, which
trades through the Over-the-Counter Bulletin Board quotation system. Trading of
stock through the Over-the-Counter Bulletin Board is frequently thin and highly
volatile. There is no assurance that a sufficient market will develop in the
stock, in which case it could be difficult for shareholders to sell their
stock.

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

Our common stock is quoted on the OTC Bulletin Board service of
the Financial Industry Regulatory Authority (FINRA). Trading in stock quoted on
the OTC Bulletin Board is often thin and characterized by wide fluctuations in
trading prices, due to many factors that may have little to do with our
operations or business prospects. This volatility could depress the market price
of our common stock for reasons unrelated to operating performance. Moreover,
the OTC Bulletin Board is not a stock exchange, and trading of securities on the
OTC Bulletin Board is often more sporadic than the trading of securities listed
on a quotation system like Nasdaq or a stock exchange like Amex. Accordingly,
shareholders may have difficulty reselling any of the shares.

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16

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations and FINRAs sales practice
requirements, which may limit a stockholders ability to buy and sell our stock.

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

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, FINRA has adopted rules that require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customers financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock.

Other Risks

Trends, Risks and Uncertainties.

We have sought to identify what we believe to be the most
significant risks to our business, but we cannot predict whether, or to what
extent, any such risks may be realized nor can we guarantee that we have
identified all possible risks that might arise. Investors should carefully
consider all of the risk factors before making an investment decision with
respect to our common stock.

We may be unable to continue as a going concern in which
case our securities will have little or no value.

Our independent auditors have noted in their report concerning
our annual financial statements as of September 30, 2007 that we have incurred
substantial losses since inception, which raises substantial

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17

doubt abut our ability to continue as a going concern. In the
event we are not able to continue operations you will likely suffer a complete
loss of your investment in our securities. See our auditors report on our
consolidated financial statements elsewhere in this Form 10-KSB.

ITEM 3. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Exchange Act, we have
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures at June 30, 2008, which is the end of the period covered
by this report. This evaluation was carried out under the supervision and with
the participation of our principal executive officer and principal financial
officer. Based on this evaluation, our principal executive officer and principal
financial officer have concluded that the design and operation of our disclosure
controls and procedures are effective as at the end of the period covered by
this report. There were no changes in our internal control over financial
reporting or in other factors that have materially affected, or are reasonably
likely to materially affect, our internal control over financial reporting in
our most recent fiscal quarter.

Disclosure controls and procedures are controls and other
procedures that are designed to ensure that information required to be disclosed
by our company in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the SEC's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by our company in the reports that we file or submit
under the Exchange Act is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required disclosure.

Management's Report on Internal Control over Financial
Reporting

Management of our company is responsible for establishing and maintaining adequate internal control over financial reporting for the company, as such term is defined in the Securities Exchange Act Rule 13a-15(f). Our principal financial officer and principal executive officer conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2008 as required by the Securities Exchange Act of 1934 Rule 13a-15(c). In making this assessment, our principal financial officer and principal executive officer used the criteria set forth in the framework in “Internal Control – Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on the evaluation conducted under the framework in “Internal Control – Integrated Framework”, our principal financial officer and principal executive officer concluded that our company’s internal control over financial reporting was effective, as of June 30, 2008, in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

This report does not include an attestation report of our
registered public accounting firm regarding internal control over financial
reporting. Managements report was not subject to attestation by our companys
registered public accounting firm pursuant to temporary rules of the SEC that
permit our company to provide only management's report in this quarterly report
on Form 10-QSB.

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18

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

We know of no material, existing or pending legal proceedings
against our company, nor are we involved as a plaintiff in any material
proceeding or pending litigation. There are no proceedings in which any of our
directors, officers or affiliates, or any registered or beneficial shareholder,
is an adverse party or has a material interest adverse to our interest.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS

|1. | On May 16, 2008 Dr. Panagiotis Kontzalis resigned as CEO
      and from our board of directors. As settlement of consideration for
      services provided by and in termination of Dr. Kontzalis contract we
      issued 65,000 common shares to Dr. Kontzalis.                                                                                                                                                                                      
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | We issued the common shares to one non-U.S. person (as
      that term is defined in Regulation S of the Securities Act of 1933) in an
      offshore transaction relying on Regulation S and/or Section 4(2) of the
      Securities Act of 1933.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|2. | On May 20, 2008 we entered into a consulting agreement
      with Cameron Durrant to provide management services to our company.
      Consideration for Mr. Durrants services is as follows:                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (a)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|3. | On June 3, 2008 we approved a compensation package for
      company directors. We issued 450,000 stock options to three directors to
      purchase shares of common stock at an exercise price of $5.00 expiring on
      June 3, 2013. The options are subject to vesting provisions.                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   | We issued the securities to three non-U.S. persons (as
      that term is defined in Regulation S of the Securities Act of 1933) in an
      offshore transaction relying on Regulation S and/or Section 4(2) of the
      Securities Act of 1933.                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|4. | Subsequent to June 30, 2008, pursuant to private placement agreements to issue units at $4.25 each, the Company raised $606,000. Each unit consists of one common share and one common share purchase warrant entitling the holder to purchase an additional common share for $5.00 for each warrant held for a period of up to one year from the date of closing. The Company intends to issue a total of 150,000 units for total proceeds of $637,500.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

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19

ITEM 5. OTHER INFORMATION

|1. | Effective May 20, 2008, we appointed Alison Ayers to our
      board of directors. Also effective May 20, 2008, Alex Vamvakides and Panos
      Kontzalis resigned from our board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Previously, Ms. Ayers was Commercial Head, Infectious
      Disease, Worldwide Marketing for Pfizer, responsible for strategic
      leadership for the company's infectious disease portfolio. Under her
      leadership, Pfizer's infectious disease portfolio exceeded $3 billion in
      sales in 2005, with two compounds achieving sales growth of
  20-30%.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Before joining Pfizer Ms. Ayers was Vice President of
      Portfolio Management for Pharmacia, where she developed and implemented
      strategies to maximize earnings from the company's complex global $2.5
      billion diversified products portfolio, which is comprised of more than
      600 mature, non- promoted products. In her earlier role as Vice President,
      Commercial Development, Oncology for Pharmacia, Ms. Ayers was responsible
      for providing commercial leadership for the company's oncology pipeline,
      and held a pivotal role in the acquisition of biotech company Sugen, which
      delivered Pfizer's leading angiogenesis inhibitor, Sutent. Pharmacia was
      acquired by Pfizer in 2003.                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Ms. Ayers' background also includes senior positions in
      business and product planning for numerous bioscience and pharmaceutical
      companies, including Merck, The Health Care Group, US Bioscience,
      Bristol-Myers Squibb and Lederle Laboratories. She holds a Master of
      Science with distinction in biopharmacy and a Diploma in Business Studies,
      both from the University of London, UK, as well as a Bachelor of Science
      with honors in physiology and biochemistry from the University of
      Southampton, UK.                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|2. | On May 20, 2008, we announced a change in our board of
      directors and the appointment of Alex Vamvakides to our Scientific
      Advisory Board.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|3. | On May 20, 2008 we appointed Cameron Durrant as Chairman
      of the Board of Directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|4. | Effective June 3, 2008, we appointed David L. Tousley to
      our board of directors.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Mr. Tousley has over 25 years of senior-level experience
      in biotech, specialty pharmaceuticals and full-phase pharmaceutical
      companies. He has held the position of President, COO and CFO at companies
      including airPharma, PediaMed Pharmaceuticals, AVAX Technologies, and
      Pasteur, Merieux, Connaught, (known today as Sanofi-Pasteur). During his
      career, Mr. Tousley has led all aspects of operations, including
      pharmaceutical development, in both the private and public company
      environment. His accomplishments include the raising over $90 million in
      debt and equity financings and he has led key business development
      activities, including joint ventures, partnerships, acquisitions and
      divestitures in the U.S., Europe and Australia.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Mr. Tousley currently serves as a director of
      ImmunoGenetix Therapeutics, a biotech company that is developing advanced
      DNA immunotherapies for HIV infection. He holds an MBA in accounting from
      Rutgers Graduate School of Business and a B.A. in English from Rutgers
      College, both in New Jersey. Mr. Tousley belongs to the New Jersey Society
      of Certified Public Accountants and the American Institute of Certified
      Public Accountants.                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   | Our board of directors now includes Cameron Durant,
      Harvey Lalach, Alison Ayers and David L.
Tousley.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

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20

|5. | On June 3, 2008 we approved a compensation package for
      company directors. We issued 150,000 stock options to each director to
      purchase shares of common stock at an exercise price of $5.00 expiring on
      June 3, 2013. The options are subject to vesting
  provisions.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 6. EXHIBITS.

Exhibit Number
    Description(3)
    (i) Articles of Incorporation; and (ii) Bylaws3.1
    Articles of Incorporation (incorporated by reference from
      our Registration Statement on Form SB-2, filed on January 13, 2005).3.2
    Bylaws (incorporated by reference from our Registration
      Statement on Form SB-2, filed on January 13, 2005).3.3
    Articles of Merger filed with the Secretary of State of
      Nevada on January 10, 2007 and which is effective January 25, 2007
      (incorporated by reference from our Current Report on Form 8-K, filed on
      January 25, 2007).(4)
    Instruments defining rights of security holders,
      including indentures4.1
    Specimen Stock Certificate (incorporated by reference
      from our Registration Statement on Form SB-2, filed on January 13, 2005).4.2
    2007 Stock Option Plan (incorporated by reference from
      our Current Report on Form 8-K, filed September 28, 2007).(10)
    Material Contracts10.1
    Agreement between Anavex Life Sciences Corp. and Dr.
      Alexandre Vamvakides, dated January 31, 2007 (incorporated by reference
      from our Current Report on Form 8-K, filed February 7, 2007).10.2
    Abstract of Disclosure of Greek Patent Number 1002616
      (incorporated by reference from our Current Report on Form 8-K, filed
      February 7, 2007).10.3
    Abstract of Disclosure of Greek Patent Number 1004208
      (incorporated by reference from our Current Report on Form 8-K, filed
      February 7, 2007).10.4
    Abstract of Disclosure of Greek Patent Number 1004868
      (incorporated by reference from our Current Report on Form 8-K, filed
      February 7, 2007).10.5
    Written description of Greek Patent Application Number
      20070100020 (incorporated by reference from our Current Report on Form
      8-K, filed February 7, 2007).10.6
    Form of Stock Option Agreement (incorporated by reference
      from our Current Report on Form 8-K, filed February 22, 2007).10.7
    Shares for Services and Subscription Agreement dated
      September 11, 2007 between our company and Eurogenet Labs S.A.
      (incorporated by reference from our Current Report on Form 8-K, filed
      September 27, 2007).10.8*
    Consulting Agreement with Cameron
          Durrant dated May 20, 2008(14)
    Code of Ethics14.1
    Code of Conduct (incorporated by reference from our
      Current Report on Form 8-K, filed September 28, 2007).


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21

Exhibit Number
      Description(16)
      Letter re Change in Certifying Accountant16.1
      Letter from Amisano Hanson
          regarding change in certifying accountant. (incorporated by reference
          from our Current Report on Form 8-K, filed March 4, 2008)(31)
      Rule 13a-14(a)/15d-14(a) Certifications31.1*
      Certification Pursuant to Section
          302 of the Sarbanes-Oxley Act of 2002(32)
      Section 1350 Certifications32.1*
      Certification
          Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906
          of the Sarbanes-Oxley Act of 2002


* Filed herewith.

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22

SIGNATURES

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

ANAVEX LIFE SCIENCES CORP.

By:

/s/ Harvey LalachHarvey Lalach,
President, Chief Financial Officer and Secretary (Principal Executive
Officer, Principal Financial Officer and Principal Accounting Officer)

August 18, 2008

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