---

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended: March 31, 2011or

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

For the transition period from _____ to _____

Commission File Number: 000-51652

ANAVEX LIFE SCIENCES
CORP.(Exact name of registrant as specified in its
charter)

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

50 Harrison Street, Suite 315A, Hoboken, NJ
07030(Address of principal executive offices) (Zip Code)

1-800-689-3939(Registrants telephone number,
including area code)

Not Applicable(Former name, former address and
former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files).
[ ] Yes [ ] No

Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [ ] |                                               | Accelerated filer [ ]        
|--------------------------- | --------------------------------------------- | -----------------------------
|Non-accelerated filer [ ]   | (Do not check if a smaller reporting company) | Smaller reporting company [X]

---

2

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the
issuers classes of common stock, as of the latest practicable date:
25,221,574 shares of common stock outstanding as of May 16,
2011.

---

3

TABLE OF CONTENTS

|PART
      I - FINANCIAL INFORMATION                                                                       | 4 
|---------------------------------------------------------------------------------------------------------- | --
|Item
      1. Financial Statements                                                                         | 4 
|Item
      2. Managements Discussion and Analysis of Financial Condition and Results
      of Operations. | 5 
|Item
      3. Quantitative and Qualitative Disclosures about Market Risks.                                 | 12
|Item
      4T. Controls and Procedures.                                                                    | 13
|PART
      II - OTHER INFORMATION                                                                          | 13
|Item
      1. Legal Proceedings.                                                                           | 13
|Item
      1A. Risk Factors                                                                                | 13
|Item
      2. Unregistered Sales of Equity Securities and Use of Proceeds                                  | 23
|Item
      3. Defaults Upon Senior Securities.                                                             | 23
|Item
      4. (Removed and Reserved).                                                                      | 23
|Item
      5. Other Information                                                                            | 23
|Item
      6. Exhibits.                                                                                    | 23
|SIGNATURES                                                                                                 | 27

---

4

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

---

ANAVEX LIFE SCIENCES CORP.

(A Development Stage Company)

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2011

(Stated in US Dollars)

(Unaudited)

---

|ANAVEX LIFE SCIENCES CORP.           
|-------------------------------------
|(A Development Stage Company)        
|CONSOLIDATED BALANCE SHEETS          
|March 31, 2011 and September 30, 2010
|(Stated in US Dollars)               
|(Unaudited)                          

|ASSETS                                                                                                                  |   | March 31,   |   |   | September 30, |  
|----------------------------------------------------------------------------------------------------------------------- | - | ----------- | - | - | ------------- | -
|                                                                                                                        |   | 2011        |   |   | 2010          |  
|                                                                                                                        |   |             |   |   |               |  
|Current                                                                                                                 |   |             |   |   |               |  
|Cash                                                                                                                    | $ | 3,641       |   | $ | 264,669       |  
|VAT recoverable                                                                                                         |   | 8,658       |   |   | 37,820        |  
|Prepaid expenses                                                                                                        |   | 49,342      |   |   | 23,269        |  
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        |   | 61,641      |   |   | 325,758       |  
|                                                                                                                        |   |             |   |   |               |  
|Equipment                                                                                                               |   | 3,193       |   |   | 4,091         |  
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        | $ | 64,834      |   | $ | 329,849       |  
|                                                                                                                        |   |             |   |   |               |  
|LIABILITIES                                                                                                             |   |             |   |   |               |  
|                                                                                                                        |   |             |   |   |               |  
|Current                                                                                                                 |   |             |   |   |               |  
|Accounts payable and accrued
      liabilities  Note 5                                                                 | $ | 1,093,589   |   | $ | 797,763       |  
|Promissory notes payable  Note 3                                                                                       |   | 200,000     |   |   | 2,492,308     |  
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        |   | 1,293,589   |   |   | 3,290,071     |  
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        |   |             |   |   |               |  
|CAPITAL DEFICIT                                                                                                         |   |             |   |   |               |  
|                                                                                                                        |   |             |   |   |               |  
|Capital stock  Note 4                                                                                                  |   |             |   |   |               |  
|Authorized: 
                        
      150,000,000 common shares, par value $0.001 per share                       |   |             |   |   |               |  
|Issued and outstanding:
      
                        
      25,188,240 common shares (September 30, 2010: 23,516,952) |   | 25,188      |   |   | 23,517        |  
|Additional paid-in capital                                                                                              |   | 24,949,096  |   |   | 18,912,335    |  
|Deficit accumulated during the development
      stage                                                                  |   | (26,203,039 | ) |   | (21,896,074   | )
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        |   | (1,228,755  | ) |   | (2,960,222    | )
|                                                                                                                        |   |             |   |   |               |  
|                                                                                                                        | $ | 64,834      |   | $ | 329,849       |  

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

SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                      
|--------------------------------------------------------------------------------
|(A Development Stage Company)                                                   
|INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS                                   
|for the three and six months ended March 31, 2011 and 2010
      and            
|for the period from January 23, 2004 (Date of Inception)
      to March 31, 2011
|(Stated in US Dollars)                                                          
|(Unaudited)                                                                     

|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   | January 23,   |  
|-------------------------------------------------- | - | ------------------ | - | - | ---------------- | - | - | ------------- | - | - | ---------- | - | - | ------------- | -
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   | 2004 (Date of |  
|                                                   |   | Three months ended |   |   | Six months ended |   |   | Inception) to |  
|                                                   |   | March 31,          |   |   | March 31,        |   |   | March 31,     |  
|                                                   |   | 2011               |   |   | 2010             |   |   | 2011          |   |   | 2010       |   |   | 2011          |  
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Expenses                                           |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Accounting and audit fees                          | $ | 38,380             |   | $ | 66,936           |   | $ | 87,328        |   | $ | 88,795     |   | $ | 451,456       |  
|Amortization and depreciation                      |   | 407                |   |   | 190              |   |   | 898           |   |   | 380        |   |   | 2,438         |  
|Bank charges and interest                          |   | 1,748              |   |   | 1,275            |   |   | 3,791         |   |   | 2,990      |   |   | 31,434        |  
|Consulting fees 
      Note 5                     |   | 1,017,702          |   |   | 568,816          |   |   | 1,669,903     |   |   | 1,022,890  |   |   | 9,500,793     |  
|Insurance                                          |   | 16,107             |   |   | -                |   |   | 20,922        |   |   | -          |   |   | 20,922        |  
|Investor relations                                 |   | 25,000             |   |   | 27,482           |   |   | 79,535        |   |   | 81,993     |   |   | 669,299       |  
|Legal fees                                         |   | 37,600             |   |   | 17,775           |   |   | 57,347        |   |   | 45,683     |   |   | 443,836       |  
|Management fees                                    |   | -                  |   |   | -                |   |   | -             |   |   | -          |   |   | 14,625        |  
|Office and miscellaneous                           |   | 13,151             |   |   | 4,287            |   |   | 19,620        |   |   | 7,978      |   |   | 128,089       |  
|Registration and filing
      fees                 |   | 36,363             |   |   | 3,320            |   |   | 45,425        |   |   | 9,453      |   |   | 114,151       |  
|Rent and administration                            |   | 10,999             |   |   | -                |   |   | 52,818        |   |   | -          |   |   | 214,378       |  
|Research and development                           |   | 730,242            |   |   | 815,609          |   |   | 1,227,532     |   |   | 1,027,088  |   |   | 8,535,342     |  
|Travel                                             |   | 20,026             |   |   | 13,116           |   |   | 51,751        |   |   | 94,153     |   |   | 543,810       |  
|Website design and maintenance                     |   | -                  |   |   | -                |   |   | -             |   |   | -          |   |   | 28,417        |  
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Loss before other income (expenses)                |   | (1,947,725         | ) |   | (1,518,806       | ) |   | (3,316,870    | ) |   | (2,381,403 | ) |   | (20,698,990   | )
|Other income (expenses)                            |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Interest                                           |   | (3,945             | ) |   | (33,157          | ) |   | (11,901       | ) |   | (55,959    | ) |   | (409,335      | )
|Accretion of debt discount                         |   | -                  |   |   | (99,397          | ) |   | -             |   |   | (319,807   | ) |   | (2,007,161    | )
|Change in fair value of
      derivative liability |   | -                  |   |   | (88,824          | ) |   | -             |   |   | 560,214    |   |   | (630,774      | )
|Debt conversion expense  Note 3                   |   | -                  |   |   | -                |   |   | (504,160      | ) |   | -          |   |   | (504,160      | )
|Loss on settlement of accounts
      payable       |   | -                  |   |   | -                |   |   | (249,090      | ) |   | -          |   |   | (693,090      | )
|Loss on extinguishment of debt  Note
      3      |   | -                  |   |   | -                |   |   | (198,738      | ) |   | -          |   |   | (686,207      | )
|Foreign exchange gain (loss)                       |   | (20,716            | ) |   | 26,042           |   |   | (26,206       | ) |   | 34,312     |   |   | (22,518       | )
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Net loss for the period                            | $ | (1,972,386         | ) | $ | (1,714,142       | ) | $ | (4,306,965    | ) | $ | (2,162,643 | ) | $ | (25,652,235   | )
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Basic and diluted loss per share                   | $ | (0.07              | ) | $ | (0.08            | ) | $ | (0.16         | ) | $ | (0.10      | ) |   |               |  
|                                                   |   |                    |   |   |                  |   |   |               |   |   |            |   |   |               |  
|Weighted average number of shares outstanding      |   | 25,166,546         |   |   | 21,044,780       |   |   | 24,711,872    |   |   | 21,026,001 |   |   |               |  

SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                      
|--------------------------------------------------------------------------------
|(A Development Stage Company)                                                   
|INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS                                   
|for the six months ended March 31, 2011 and 2010 and                            
|for the period from January 23, 2004 (Date of Inception)
      to March 31, 2011
|(Stated in US Dollars)                                                          
|(Unaudited)                                                                     

|                                                                          |   |                  |   |   |               |   |   | January 23,   |  
|------------------------------------------------------------------------- | - | ---------------- | - | - | ------------- | - | - | ------------- | -
|                                                                          |   |                  |   |   |               |   |   | 2004 (Date of |  
|                                                                          |   | Six months ended |   |   | Inception) to |  
|                                                                          |   | March 31,        |   |   | March 31,     |  
|                                                                          |   | 2011             |   |   | 2010          |   |   | 2011          |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Cash Flows used in Operating Activities                                   |   |                  |   |   |               |   |   |               |  
|Net loss for the period                                                   | $ | (4,306,965       | ) | $ | (2,162,643    | ) | $ | (25,652,235   | )
|Adjustments to reconcile
      net loss to net cash used in operations:   |   |                  |   |   |               |   |   |               |  
|Amortization
      and depreciation                                       |   | 898              |   |   | 380           |   |   | 2,438         |  
|Accretion
      of debt discount                                          |   | -                |   |   | 319,807       |   |   | 2,007,161     |  
|Stock-based
      compensation                                            |   | 856,229          |   |   | 397,023       |   |   | 4,123,406     |  
|Amortization
      of deferred financing charge                           |   | -                |   |   | 12,669        |   |   | 55,777        |  
|Change in fair
      value of derivative liability                        |   | -                |   |   | (560,214      | ) |   | 630,774       |  
|Consulting
      expense recorded in exchange for shares to be issued     |   | -                |   |   | -             |   |   | 236,337       |  
|Common shares
      issued for consulting expenses                        |   | -                |   |   | -             |   |   | 390,510       |  
|Promissory
      note issued for severance                                |   | -                |   |   | -             |   |   | 71,500        |  
|Common shares
      issued for severance                                  |   | -                |   |   | -             |   |   | 340,600       |  
|Common
      shares issued for research and development expenses          |   | -                |   |   | -             |   |   | 800,000       |  
|Management
      fees contributed                                         |   | -                |   |   | -             |   |   | 14,625        |  
|Debt
      conversion expense                                             |   | 504,160          |   |   | -             |   |   | 504,160       |  
|Loss on settlement
      of accounts payable                              |   | 249,090          |   |   | -             |   |   | 693,090       |  
|Loss
      on extinguishment of debt                                      |   | 198,738          |   |   | -             |   |   | 686,207       |  
|Rent contributed                                                          |   | -                |   |   | -             |   |   | 3,750         |  
|Changes in non-cash working
      capital balances related to operations: |   |                  |   |   | -             |   |   |               |  
|VAT receivable                                                            |   | 29,162           |   |   | -             |   |   | (8,658        | )
|Prepaid expenses                                                          |   | (26,073          | ) |   | 13            |   |   | (49,342       | )
|Accounts payable and
      accrued liabilities                            |   | 821,858          |   |   | 162,011       |   |   | 3,184,061     |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Net cash used in operating activities                                     |   | (1,672,903       | ) |   | (1,830,954    | ) |   | (11,965,839   | )
|                                                                          |   |                  |   |   |               |   |   |               |  
|Cash Flows provided by Financing Activities                               |   |                  |   |   |               |   |   |               |  
|Issuance of common shares                                                 |   | 1,411,875        |   |   | 300,000       |   |   | 7,640,946     |  
|Share Subscriptions received                                              |   | -                |   |   | 149,740       |   |   | -             |  
|Proceeds from promissory
      notes                                      |   | -                |   |   | 1,175,000     |   |   | 4,067,500     |  
|Repayment of promissory note                                              |   | -                |   |   | -             |   |   | (100,000      | )
|Due to related parties                                                    |   | -                |   |   | -             |   |   | 33,665        |  
|Shareholder advances                                                      |   | -                |   |   | -             |   |   | 333,000       |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Net cash provided by financing activities                                 |   | 1,411,875        |   |   | 1,624,470     |   |   | 11,975,111    |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Cash Flows used in Investing Activities                                   |   |                  |   |   |               |   |   |               |  
|Acquisition of equipment                                                  |   | -                |   |   | -             |   |   | (5,631        | )
|                                                                          |   |                  |   |   |               |   |   |               |  
|Net cash used in investing activities                                     |   | -                |   |   | -             |   |   | (5,631        | )
|                                                                          |   |                  |   |   |               |   |   |               |  
|Increase (decrease) in cash during the period                             |   | (261,028         | ) |   | (206,484      | ) |   | 3,641         |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Cash, beginning of period                                                 |   | 264,669          |   |   | 350,994       |   |   | -             |  
|                                                                          |   |                  |   |   |               |   |   |               |  
|Cash, end of period                                                       | $ | 3,641            |   | $ | 144,510       |   | $ | 3,641         |  

Supplemental Cash Flow Information  Note 7

SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                 
|---------------------------------------------------------------------------
|(A Development Stage Company)                                              
|CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL DEFICIT                       
|for the period January 23, 2004 (Date of Inception) to March
      31, 2011
|(Stated in US Dollars)                                                     
|(Unaudited)                                                                

DeficitCommon Stock
      
      
      AccumulatedAdditional
      
      
      Common
      
      
      During thePaid-in
      
      
      Shares to be
      
      
      DevelopmentShares
      
      
      Par
        Value
      
      
      Capital
      
      
      Issued
      
      
      Stage
      
      
      TotalCapital stock issued for cash on January
        23, 2004  at $0.0033
      
      12,000,000
      
      $
      12,000
      
      $
      28,000
      
      $
      -
      
      $
      -
      
      $
      40,000Net 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
      )
      
      25,605Capital stock issued for cash on December 31,
        2004  at $0.0033
      
      7,200,000
      
      
      7,200
      
      
      16,800
      
      
      -
      
      
      -
      
      
      24,000Management fees contributed
      
      -
      
      
      -
      
      
      13,000
      
      
      -
      
      
      -
      
      
      13,000Rent contributed
      
      -
      
      
      -
      
      
      3,000
      
      
      -
      
      
      -
      
      
      3,000Net 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
      
      
      -
      
      
      -
      
      
      1,625Rent contributed
      
      -
      
      
      -
      
      
      750
      
      
      -
      
      
      -
      
      
      750Debt forgiven by directors
      
      -
      
      
      -
      
      
      33,666
      
      
      -
      
      
      -
      
      
      33,666Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (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 
               September 24, 2007  at $3.60
      
      222,222
      
      
      222
      
      
      799,778
      
      
      -
      
      
      -
      
      
      800,000Capital stock issued for
        settlement of loan payable on September 
               25, 2007  at $3.60
      
      92,500
      
      
      93
      
      
      332,907
      
      
      -
      
      
      -
      
      
      333,000Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (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

---

|ANAVEX LIFE SCIENCES CORP.                                                 
|---------------------------------------------------------------------------
|(A Development Stage Company)                                              
|CONSOLIDATED STATEMENT OF CHANGES IN CAPITAL DEFICIT                       
|for the period January 23, 2004 (Date of Inception) to March
      31, 2011
|(Stated in US Dollars)                                                     
|(Unaudited)                                                                

DeficitCommon Stock
      
      
      
      
      
      AccumulatedAdditional
      
      
      Common
      
      
      During thePaid-in
      
      
      Shares to be
      
      
      DevelopmentShares
      
      
      Par
        Value
      
      
      Capital
      
      
      Issued
      
      
      Stage
      
      
      TotalBalance, 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
      
      
      -
      
      
      -
      
      
      525,000Capital stock issued for consulting services
        on December 18, 2007  at $3.86
      
      50,000
      
      
      50
      
      
      192,950
      
      
      -
      
      
      -
      
      
      193,000Capital stock issued in settlement of debt on December 18,
        2007 - at $4.50
      
      10,000
      
      
      10
      
      
      44,990
      
      
      -
      
      
      -
      
      
      45,000Stock-based compensation for
        shares issued at a discount
      
      -
      
      
      -
      
      
      65,000
      
      
      -
      
      
      -
      
      
      65,000Capital stock issued for severance on May 15,
        2008 - at $5.24
      
      65,000
      
      
      65
      
      
      340,535
      
      
      -
      
      
      -
      
      
      340,600Common shares to be issued for
        consulting services
      
      -
      
      
      
      
      
      -
      
      
      252,599
      
      
      -
      
      
      252,599Capital stock issued for consulting services on August 19,
        2008 - at $5.07
      
      25,000
      
      
      25
      
      
      126,725
      
      
      (126,750
      )
      
      -
      
      
      -Capital stock issued for cash
        on August 19, 2008 - at $4.25
      
      142,698
      
      
      142
      
      
      606,325
      
      
      -
      
      
      -
      
      
      606,467Stock based compensation
      
      -
      
      
      -
      
      
      1,493,937
      
      
      -
      
      
      -
      
      
      1,493,937Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (5,351,269
      )
      
      (5,351,269
      )Balance, September 30, 2008
      
      19,957,420
      
      $
      19,957
      
      $
      4,624,838
      
      $
      125,849
      
      $
      (7,062,814
      )
      $
      (2,292,170
      )


SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                 
|---------------------------------------------------------------------------
|(A Development Stage Company)                                              
|STATEMENT OF CHANGES IN CAPITAL DEFICIT                                    
|for the period January 23, 2004 (Date of Inception) to March
      31, 2011
|(Stated in US Dollars)                                                     
|(Unaudited)                                                                

DeficitCommon Stock
      
      
      AccumulatedAdditional
      
      
      Common
      
      
      During thePaid-in
      
      
      Shares to
      
      
      DevelopmentShares
      
      
      Par
        Value
      
      
      Capital
      
      
      Be
        Issued
      
      
      Stage
      
      
      TotalBalance, September 30, 2008  brought
        forward
      
      19,957,420
      
      $
      19,957
      
      $
      4,624,838
      
      $
      125,849
      
      $
      (7,062,814
      )
      $
      (2,292,170
      )Stock-based compensation  Note 10
      
      -
      
      
      -
      
      
      812,336
      
      
      -
      
      
      -
      
      
      812,336Capital stock issued for consulting services
        on November 20, 2008 - $2.63
      
      25,000
      
      
      25
      
      
      65,725
      
      
      (65,750
      )
      
      -
      
      
      -Capital stock issued for consulting services on February
        20, 2009 - $2.50
      
      25,000
      
      
      25
      
      
      62,475
      
      
      (62,500
      )
      
      -
      
      
      -Capital stock issued for cash on March 6,
        2009 - at $2.25
      
      89,148
      
      
      89
      
      
      200,494
      
      
      -
      
      
      -
      
      
      200,583Capital stock issued for consulting services on March 20,
        2009 - at $2.00
      
      2,500
      
      
      3
      
      
      4,997
      
      
      -
      
      
      -
      
      
      5,000Capital stock issued for cash on March 20,
        2009 - at $2.25
      
      10,800
      
      
      11
      
      
      24,289
      
      
      -
      
      
      -
      
      
      24,300Capital stock issued for cash on June 11, 2009 - at $2.25
      
      36,000
      
      
      36
      
      
      80,964
      
      
      -
      
      
      -
      
      
      81,000Capital stock issued for services on June
        11, 2009 - at $2.25
      
      29,227
      
      
      29
      
      
      65,731
      
      
      -
      
      
      -
      
      
      65,760Capital stock issued for cash on June 19, 2009 - at $2.25
      
      495,556
      
      
      496
      
      
      1,114,504
      
      
      -
      
      
      -
      
      
      1,115,000Capital stock issued for finders fees
        on June 26, 2009  at $2.51
      
      22,222
      
      
      22
      
      
      55,755
      
      
      -
      
      
      -
      
      
      55,777Shares to be issued for consulting services -Note 8
      
      -
      
      
      -
      
      
      -
      
      
      236,337
      
      
      -
      
      
      236,337Capital stock issued for cash on August 19,
        2009  at $2.25
      
      128,888
      
      
      129
      
      
      289,869
      
      
      -
      
      
      -
      
      
      289,998Less: Finders fees
      
      
      
      
      
      
      
      (72,850
      )
      
      -
      
      
      -
      
      
      (72,850
      )Beneficial conversion features on convertible
        debt issuances - Note 4
      
      -
      
      
      -
      
      
      333,056
      
      
      -
      
      
      -
      
      
      333,056Extinguishment of debt - Note 6
      
      -
      
      
      -
      
      
      487,469
      
      
      -
      
      
      -
      
      
      487,469Cancellation of common shares  Note
        8
      
      (75,000
      )
      
      (75
      )
      
      234,011
      
      
      (233,936
      )
      
      -
      
      
      -Share subscriptions received
      
      
      
      
      
      
      
      
      
      
      300,000
      
      
      
      
      
      300,000Net loss for the year
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (5,499,419
      )
      
      (5,499,419
      )Balance, September 30, 2009
      
      20,746,761
      
      $
      20,747
      
      $
      8,383,663
      
      $
      300,000
      
      $
      (12,562,233
      )
      $
      (3,857,823
      )


SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                 
|---------------------------------------------------------------------------
|(A Development Stage Company)                                              
|CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT                            
|for the period January 23, 2004 (Date of Inception) to March
      31, 2011
|(Stated in US Dollars)                                                     
|(Unaudited)                                                                

DeficitCommon Stock
      
      
      AccumulatedAdditional
      
      
      Common
      
      
      During thePaid-in
      
      
      Shares to
      
      
      DevelopmentShares
      
      
      Par
        Value
      
      
      Capital
      
      
      Be
        Issued
      
      
      Stage
      
      
      TotalBalance, September 30, 2009  brought
        forward
      
      20,746,761
      
      $
      20,747
      
      $
      8,383,663
      
      $
      300,000
      
      $
      (12,562,233
      )
      $
      (3,857,823
      )Cumulative effect of accounting changes  Note 4
      
      -
      
      
      -
      
      
      (333,056
      )
      
      -
      
      
      (550,804
      )
      
      (883,860
      )Capital stock issued for cash on October
        2, 2009  at $2.25
      
      266,666
      
      
      267
      
      
      599,733
      
      
      (300,000
      )
      
      -
      
      
      300,000Capital stock issued in settlement of promissory note on
        February 2, 2010  at $2.02
      
      49,505
      
      
      49
      
      
      99,951
      
      
      -
      
      
      -
      
      
      100,000Capital stock issued for cash on April 9,
        2010 - at $2.60
      
      92,499
      
      
      93
      
      
      240,405
      
      
      -
      
      
      -
      
      
      240,498Capital stock issued in settlement of debt on April 30, 2010
        - at $2.85
      
      9,825
      
      
      9
      
      
      27,991
      
      
      -
      
      
      -
      
      
      28,000Finders fees paid in cash
      
      -
      
      
      -
      
      
      (24,050
      )
      
      -
      
      
      -
      
      
      (24,050
      )Capital stock issued for cash on June 29,
        2010 - at $2.50
      
      941,000
      
      
      941
      
      
      2,351,559
      
      
      -
      
      
      -
      
      
      2,352,500Finders fees paid in cash
      
      -
      
      
      -
      
      
      (206,500
      )
      
      -
      
      
      -
      
      
      (206,500
      )Capital stock issued in settlement of debt
        on July 5, 2010  at $2.50
      
      400,000
      
      
      400
      
      
      999,600
      
      
      -
      
      
      -
      
      
      1,000,000Capital stock issued for cash on September 3, 2010 
        at $2.75
      
      163,000
      
      
      163
      
      
      448,087
      
      
      -
      
      
      -
      
      
      448,250Capital stock issued for finders fees
        on September 3, 2010  at $2.75
      
      9,000
      
      
      9
      
      
      (9
      )
      
      -
      
      
      -
      
      
      -Finders fees paid in cash
      
      -
      
      
      -
      
      
      (15,125
      )
      
      -
      
      
      -
      
      
      (15,125
      )Shares issued on conversion of promissory
        note on September 30, 2010  at $2.25
      
      328,058
      
      
      328
      
      
      737,802
      
      
      -
      
      
      -
      
      
      738,130Shares issued on conversion of promissory note on September
        30, 2010  at $2.35
      
      510,638
      
      
      511
      
      
      1,199,489
      
      
      -
      
      
      -
      
      
      1,200,000Reclassification of derivative liability
        on modification of note terms
      
      -
      
      
      -
      
      
      3,144,520
      
      
      -
      
      
      -
      
      
      3,144,520Settlement of accounts payable  Note 7
      
      -
      
      
      -
      
      
      444,000
      
      
      
      
      
      
      
      
      444,000Stock-based compensation  Note 10
      
      -
      
      
      -
      
      
      770,055
      
      
      -
      
      
      -
      
      
      770,055Equity component of convertible promissory note  Note
        6
      
      -
      
      
      -
      
      
      44,220
      
      
      -
      
      
      -
      
      
      44,220Net loss for the year
      
      
      
      
      
      
      
      
      
      
      
      
      
      (8,783,037
      )
      
      (8,783,037
      )Balance, September 30, 2010
      
      23,516,952
      
      $
      23,517
      
      $
      18,912,335
      
      $
      -
      
      $
      (21,896,074
      )
      $
      (2,960,222
      )


SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                                                 
|---------------------------------------------------------------------------
|(A Development Stage Company)                                              
|CONSOLIDATED STATEMENT OF SHAREHOLDERS DEFICIT                            
|for the period January 23, 2004 (Date of Inception) to March
      31, 2011
|(Stated in US Dollars)                                                     
|(Unaudited)                                                                

DeficitCommon Stock
      
      
      AccumulatedAdditional
      
      
      Common
      
      
      During thePaid-in
      
      
      Shares to
      
      
      DevelopmentShares
      
      
      Par
        Value
      
      
      Capital
      
      
      Be
        Issued
      
      
      Stage
      
      
      TotalBalance, September 30, 2010  brought
        forward
      
      23,516,952
      
      $
      23,517
      
      $
      18,912,335
      
      $
      -
      
      $
      (21,896,074
      )
      $
      (2,960,222
      )Capital stock issued for cash on November 18, 2010 
        at $2.75
      
      393,846
      
      
      393
      
      
      1,082,682
      
      
      -
      
      
      -
      
      
      1,083,075Capital stock issued for finders fees
        on November 18, 2010  at $2.75
      
      3,636
      
      
      4
      
      
      (4
      )
      
      -
      
      
      -
      
      
      -Shares issued on the conversion of promissory note on November
        18, 2010  at $2.25  Note 3
      
      853,075
      
      
      853
      
      
      1,918,565
      
      
      -
      
      
      -
      
      
      1,919,418Debt conversion expense
      
      -
      
      
      -
      
      
      504,160
      
      
      -
      
      
      -
      
      
      504,160Shares issued on the conversion of a promissory note on November
        18, 2010  at $4.12  Note 3
      
      145,063
      
      
      145
      
      
      597,515
      
      
      -
      
      
      -
      
      
      597,660Capital stock issued in settlement of debt
        on November 18, 2010  at $4.12
      
      181,818
      
      
      182
      
      
      748,908
      
      
      -
      
      
      -
      
      
      749,090Capital stock issued for cash on November 25, 2010 
        at $3.35
      
      29,851
      
      
      30
      
      
      99,970
      
      
      -
      
      
      -
      
      
      100,000Capital stock issued for finders fees
        on November 25, 2010  at $3.35
      
      2,985
      
      
      3
      
      
      (3
      )
      
      -
      
      
      -
      
      
      -Capital stock issued for cash on February 1, 2011 
        at $3.75
      
      61,014
      
      
      61
      
      
      228,739
      
      
      -
      
      
      -
      
      
      228,800Stock based compensation
      
      -
      
      
      -
      
      
      856,229
      
      
      -
      
      
      -
      
      
      856,229Net loss for the period
      
      -
      
      
      -
      
      
      -
      
      
      -
      
      
      (4,306,965
      )
      
      (4,306,965
      )Balance, March 31, 2011
      
      25,188,240
      
      $
      25,188
      
      $
      24,949,096
      
      $
      -
      
      $
      (26,203,039
      )
      $
      (1,228,755
      )


SEE ACCOMPANYING NOTES

---

|ANAVEX LIFE SCIENCES CORP.                    
|----------------------------------------------
|(A Development Stage Company)                 
|NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
|March 31, 2011                                
|(Stated in US Dollars)                        
|(Unaudited)                                   

|Note 1 | Nature of Operations
|------ | --------------------

The Company is in the development stage
  and has not yet realized any revenues from its planned operations. The Company
  is seeking to develop and market proprietary drug targets for the treatment
  of diseases of the central nervous system and cancer.

These 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 March 31, 2011, the Company had an accumulated deficit
  of $26,203,039 (September 30, 2010 - $21,896,074) since its inception, has a
  working capital deficit of $1,231,948 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
  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 but
  considers obtaining additional funds by equity financing and/or from issuing
  promissory notes. Management expects the Companys cash requirement over
  the next twelve months to be approximately $10,000,000. While the Company is
  expending best efforts to achieve the above plans, there is no assurance that
  any such activity will generate funds for operations.

The Company was incorporated in the
  State of Nevada, United States of America on January 23, 2004 as Thrifty Printing
  Inc. On January 25, 2007, the Company changed its business from developing online
  photofinishing services to its current business and changed its name to Anavex
  Life Sciences Corp.

These unaudited interim financial 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, 2010. The interim results are not necessarily indicative
  of the operating results expected for the fiscal year ending on September 30,
  2011. 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 herein are adequate to make the information
  presented not misleading.

|Note 2 | Recent Accounting Pronouncements
|------ | --------------------------------

In October 2009, the FASB issued ASU
  No. 2009-13, Multiple-Deliverable Revenue Arrangements, which
  amends existing revenue recognition accounting pronouncements that are currently
  within the scope of ASC 605. This guidance eliminates the requirement to establish
  the fair value of undelivered products and services and instead provides for
  separate revenue recognition based upon managements estimate of the selling
  price for an undelivered item when there is no other means to determine the
  fair value of that undelivered item. ASU 2009-13 is effective prospectively
  for revenue arrangements entered into or materially modified in fiscal years
  beginning on or after June 15, 2010. The adoption of this guidance did not have
  a material impact on the Companys consolidated financial statements.

In January 2010, the FASB issued Accounting
  Standards Update 2010-06, Fair Value Measurements and Disclosures (Topic
  820): Improving Disclosures about Fair Value Measurements. The ASU amends
  Subtopic 820-10 with new disclosure requirements and clarification of existing
  disclosure requirements. New disclosures required include the amount of significant
  transfers in and out of levels 1 and 2 fair value measurements and the reasons
  for the transfers. In addition, the reconciliation for level 3 activity will
  be required on a gross rather than net basis. The ASU provides additional guidance
  related to the level of disaggregation in determining classes of assets and
  liabilities and disclosures about inputs and valuation techniques. The amendments
  are effective for annual or interim reporting periods beginning after December
  15, 2009, except for the requirement to provide the reconciliation for level
  3 activities on a gross basis, which will be effective for fiscal years beginning
  after December 15, 2010. The Company is currently assessing the impact of ASU
  2010-6 and does not expect the adoption of this guidance to have a material
  impact on its consolidated financial statements.

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 2                             

|Note 2 | Recent Accounting Pronouncements  (contd)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|       | In April 2010, the FASB issued
        ASU No. 2010-12, Income Taxes (Topic 740): Accounting for Certain Tax
        Effects of the 2010 Health Care Reform Acts(ASU 2010-12).
        This update clarifies questions surrounding the accounting implications
        of the different signing dates of the Health Care and Education Reconciliation
        Act and the Patient Protection and Affordable Care Act (the Acts).
        ASU 2010-12 states that the FASB and the Office of the Chief Accountant
        at the SEC would not be opposed to viewing the two Acts together for accounting
        purposes. The Company evaluated the provisions of this guidance and the
        adoption of this guidance did not have a material impact on its financial
        statements.
|       |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|Note 3 | Promissory Notes Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                                                      |   | March 31, |   |   | September 30, |  
| | -------------------------------------------------------------------- | - | --------- | - | - | ------------- | -
| |                                                                      |   | 2011      |   |   | 2010          |  
| |                                                                      |   |           |   |   |               |  
| | Convertible non-interest bearing promissory
      notes payable      | $ | -         |   | $ | 1,919,418     |  
| | Interest bearing promissory notes payable                            |   | 200,000   |   |   | 572,890       |  
| | Less: fair value of derivative
      liabilities on date of issuance |   | -         |   |   | (2,489,422    | )
| | Less: equity component of convertible note                           |   | -         |   |   | (44,220       | )
| | Add: accumulated accretion                                           |   | -         |   |   | 2,533,642     |  
| |                                                                      |   | 200,000   |   |   | 2,492,308     |  
| | Less: current portion                                                |   | (200,000  | ) |   | (2,492,308    | )
| |                                                                      |   |           |   |   |               |  
| |                                                                      | $ | -         |   | $ | -             |  

Convertible non-interest bearing
  promissory notes

The convertible non-interest bearing
  promissory notes were due on demand and were convertible into units at $2.25
  per unit with respect to $100,000 and at $2.50 per unit with respect to $1,819,418.
  Each unit was comprised of one common share and one common share purchase warrant
  exercisable at $3.00 per share for a period of two years from the conversion
  date.

The embedded conversion features included
  in these promissory notes were recorded as separate derivative liability along
  with a corresponding debt discount and were determined to have a cumulative
  fair value of $1,698,631 at their respective issuance dates. During the year
  ended September 30, 2010, the Company recorded an accretion expense of $1,202,816
  in respect of the debt discount on these notes.

During the year ended September 30,
  2010, the Company and the respective note-holders agreed to amend the notes
  by removing certain dilutive issuance clauses with the result that, as at September
  30, 2010, the embedded conversion features were no longer required to be recorded
  as a separate derivative liability. In accordance with the guidance of ASC 815-15-50-3,
  Embedded Conversion Option that Is No Longer Bifurcated,the
  Company re-measured the fair value of the derivative liability associated with
  the embedded conversion features in these notes on the date the notes were amended
  and determined it to be $3,144,520 which was then reclassified from liabilities
  to additional paid-in capital.

During the year ended September 30,
  2009, the promissory note of $1,669,418 was issued in exchange for a promissory
  note of the same amount that had matured as a result of the Company renegotiating
  this debt. The Company recorded the transaction as a debt extinguishment with
  a loss on extinguishment of $487,469 recorded as a result of recognizing the
  new promissory note as its fair value of $2,156,887. The premium of the fair
  value of the note over its principal balance in the amount of $487,469 was recorded
  as additional paid-in capital.

| | During the six months ended March
        31, 2011, a convertible non-interest bearing promissory note in the amount
        of $100,000 was converted to 44,444 units. Each unit consisted of one
        share of the Companys common stock and one share purchase warrant
        exercisable at $3.00 until November 18, 2012. As well, during the six
        months ended March 31, 2011, the remaining two convertible non-interest
        bearing promissory notes in the amount of $1,819,418 were converted to
        808,631 units. Each unit consisted of one share of the Companys
        common stock and one share purchase warrant exercisable at $3.00 until
        November 18, 2012.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 3                             



|Note 3 | Promissory Notes Payable  (contd)
|------ | -----------------------------------
|       |                                    

The company agreed to convert these
  notes at $2.25 as an inducement to the note holders to convert at that time.
  As a result of the reduction in the conversion price, the Company issued 80,864
  more units than it would have had it converted the notes at the original conversion
  price. The Company recorded the fair value of the additional units as a debt
  conversion expense of $504,160 using a fair value of $4.12 for the shares based
  on their quoted market price on the date of the conversion and $2.09 for each
  warrant based on their fair value using the Black-Scholes model with the following
  assumptions: stock price - $4.12; strike price - $3.00; expected life 
  2 years; expected volatility  78.33%; risk-free discount rate  0.52%
  .

Interest bearing promissory notes

During the year ended September 30,
  2010, the Company issued a promissory note having a principal balance of $200,000
  with terms that included interest at 8% per annum and maturing on May 4, 2011.
  Subsequent to March 31, 2011, this note, including accrued interest of $16,000
  thereon, was exchanged for a new 8% interest bearing promissory note having
  a principal balance of $216,000 maturing one year from the date of its issuance.

During the six months ended March 31,
  2011, the Company exchanged interest bearing promissory notes totaling $398,922
  including accrued interest thereon of $26,032 for 145,063 common shares. Each
  common share had a fair value of $4.12 based on its quoted market price on the
  day of conversion for a total fair value of $597,660. Therefore, as a result
  of this conversion, the Company recorded a loss on debt extinguishment of $198,738.

|Note 4 | Capital Stock
|------ | -------------

On May 24, 2006, the board of directors
  approved a six (6) for one (1) forward split of the authorized issued and outstanding
  common stock. The Companys authorized capital increased from 25,000,000
  shares of common stock to 150,000,000 shares of common stock.

On September 24, 2007, the Company issued
  222,222 common shares common shares at $3.60 per share for a total of $800,000
  for research and development expenses. The common shares were recorded based
  upon the quoted market price of the Companys common stock on the agreement
  date.

On September 25, 2007, the Company settled
  a loan payable in the amount of $333,000 by issuing 92,500 common shares at
  $3.60 per share, being the quoted market price of the Companys common
  stock on the settlement date.

On December 10, 2007, the Company issued
  150,000 units at $3.50 per unit for proceeds of $525,000. Each unit consisted
  of one common share and one common share purchase warrant entitling the holder
  to purchase an additional common share at $5.00 per share until December 10,
  2009.

On December 18, 2007, the Company issued
  10,000 shares at $4.50 per share for a total of $45,000 pursuant to an agreement
  to settle a debt and issued 50,000 shares at $3.86 per share for a total of
  $193,000 pursuant to a consulting agreement. The Company recorded compensation
  expense of $65,000 in respect of these issuances based on the excess of the
  fair value of these shares over the balances at which they were recorded by
  the Company.

On May 15, 2008, the Company issued
  65,000 common shares at $5.24 per share for a total of $340,600 to its former
  CEO in accordance with the terms of a severance agreement upon the termination
  of his services. The common shares were recorded based upon the quoted market
  price of the Companys common stock on the agreement date.

On August 19, 2008, the Company issued
  25,000 common shares at $5.07 per share for a total of $ 126,750 to a director
  of the Company pursuant to an agreement to provide consulting services. The
  common shares were recorded based upon the quoted market price of the Companys
  common stock on the agreement date.

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 4                             

|Note 4 | Capital Stock  (contd)
|------ | ------------------------

On August 19, 2008, the Company issued
  142,698 units at $4.25 per unit for proceeds of $606,467 pursuant to private
  placement agreements. Each unit consisted of one common share and one common
  share purchase warrant entitling the holder to purchase an additional common
  share at $5.00 per share until August 19, 2009.

On November 20, 2008, the Company issued
  25,000 common shares at $2.63 per share for a total of $65,750 to a director
  of the Company pursuant to an agreement to provide consulting services. The
  common shares were recorded based upon the quoted market price of the Companys
  common stock on the issuance date.

On February 20, 2009, the Company issued
  25,000 common shares at $2.50 per share for a total of $62,500 to a director
  of the Company pursuant to an agreement to provide consulting services. The
  common shares were recorded based upon the quoted market price of the Companys
  common stock on the issuance date.

On March 6, 2009, the Company issued
  89,148 units at $2.25 per unit for proceeds of $200,583 pursuant to private
  placement agreements. Each unit consisted of one common share and one common
  share purchase warrant entitling the holder to purchase an additional common
  share at $4.00 per share until March 6, 2010.

On March 20, 2009, the Company issued
  10,800 units at $2.25 per unit for proceeds of $24,300 pursuant to private placement
  agreements. Each unit consisted of one common share and one common share purchase
  warrant entitling the holder to purchase an additional common share at $4.00
  per share until March 20, 2010.

On March 20, 2009, the Company issued
  2,500 common shares at $2.00 per share for a total of $5,000 to a public relations
  consultant pursuant to an agreement to provide consulting services. The common
  shares were recorded based upon the quoted market price of the Companys
  common stock on the issuance date.

On May 14, 2009, the Company entered
  into a revised consulting agreement with a director whereby the consultant returned
  75,000 common shares to the Company for cancellation. The return of shares was
  recorded in the same amount at which they were originally issued.

On June 11, 2009 the Company issued
  36,000 units at $2.25 per unit for proceeds of $81,000 pursuant to private placement
  agreements. Each unit consisted of one common share and one common share purchase
  warrant entitling the holder to purchase an additional common share at $4.00
  per share until June 11, 2010. The Company paid finders fees in the amount
  of $8,100 in relation to this private placement.

On June 11, 2009 the Company issued
  29,227 common shares at $2.25 per share for service rendered by consultants.
  The common shares were recorded based upon the fair value of the Companys
  common stock on the issuance date of the shares.

On June 19, 2009, the Company issued
  495,556 units at $2.25 per unit for total proceeds of $1,115,000 pursuant to
  private placement agreements. Each unit consisted on one common share and one
  and one-half of a common share purchase warrant entitling the holder to purchase
  additional common shares at $2.25 per share until June 19, 2011.

On June 26, 2009, the Company issued
  22,222 common shares at $2.51 per share for finders fees related to the
  issuance of a $500,000 note payable. The common shares were recorded based upon
  the quoted market price of the Companys common stock on the issue date.

On August 19, 2009, the Company issued
  128,888 units at $2.25 per unit for total proceeds of $289,998. Of these placements,
  40,000 Units consisted of one common share and one share purchase warrant entitling
  the holder to purchase an additional common share at $4.00 per share until July
  9, 2010 and 88,888 Units consisted on one common share and one and one-eighth
  share purchase warrant entitling the holder to purchase an additional common
  shares at $2.25 per share until August 4, 2011. The Company paid finders
  fees totalling $19,000 in respect of these private placements.

On October 2, 2009 the Company issued
  266,666 units at $2.25 per unit for proceeds of $600,000 pursuant to private
  placement agreement. Each unit consisted of one common share and one and one-eighth
  common share purchase warrant entitling the holder to purchase an additional
  common share at $2.25 per share until October 2, 2011. The Company had received
  $300,000 of this amount in the year ended September 30, 2010.

On February 2, 2010 the Company issued
  49,505 common shares of the Company, at their fair value of $2.02 per share
  pursuant to an agreement with a former officer to settle an outstanding amount
  owed.

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 5                             

|Note 4 | Capital Stock  (contd)
|------ | ------------------------

On April 9, 2010, the Company issued
  92,499 units at $2.60 per unit for proceeds of $240,498 pursuant to private
  placement agreement. Each unit consisted of one common share and one-half common
  share purchase warrant entitling the holder to purchase an additional common
  share at $3.50 per share until April 9, 2011.

On April 30, 2010, the Company issued
  9,825 common shares of the Company, at $2.85 per share as consideration for
  terminating a consulting agreement and for services rendered under the agreement.
  The common shares were recorded based upon the quoted market price of the Companys
  common stock on the date of the termination of the agreement.

On June 29, 2010, the Company issued
  941,000 units at $2.50 per unit for total proceeds of $2,352,500 pursuant to
  private placement agreements. Each unit consisted on one common share and one-half
  of a common share purchase warrant entitling the holder to purchase additional
  common shares at $3.50 per share until December 29, 2011.

On July 5, 2010, the Company issued
  400,000 units in settlement of $1,000,000 owing to a creditor. Each unit consisted
  of one common share and one-half common share purchase warrant entitling the
  holder to purchase an additional common share at 3.50 per share until January
  5, 2012. The fair value of the units issued was determined to be $1,444,000
  on the date they were issued and thus the Company recorded a loss on settlement
  of accounts payable of $444,000 with a corresponding credit to additional paid-in
  capital of the same amount on date of issuance. The fair value of the shares
  included in the units was determined with reference to their quoted market price
  and the value of the warrants was determined using the Black-Scholes model with
  the following assumptions: exercise price - $3.50, stock price - $3.15, expected
  volatility  68.45%, expected life  1.5 years, dividend yield 
  0.00% .

On September 3, 2010, the Company issued
  163,000 units at $2.75 per unit for proceeds of $448,250 pursuant to a private
  placement agreement. Each unit consisted of one common share and one-half common
  share purchase warrant entitling the holder to purchase an additional common
  share at $3.75 per share until March 3, 2012.

On September 3, 2010, the Company issued
  9,000 units at $2.75 per unit for finders fees related to the private
  placement of the same date. Each unit consisted of one common share and one-half
  common share purchase warrant entitling the holder to purchase an additional
  common share at $3.75 per share until March 3, 2012.

On September 30, 2010, the Company issued
  510,638 common shares at $2.35 per share pursuant to the terms of a convertible
  note payable.

On September 30, 2010, the Company issued
  82,310 units at $2.25 per unit pursuant to the terms of the convertible notes
  payable. Each unit consisted of one common share and one-half common share purchase
  warrant entitling the holder to purchase an additional common share at $3.50
  per share until September 30, 2011.

On September 30, 2010, the Company issued
  245,748 units at $2.25 per unit pursuant to the terms of the convertible notes
  payable. Each unit consisted of one common share and one common share purchase
  warrant entitling the holder to purchase an additional common share at $3.00
  per share until September 30, 2012.

On November 18, 2010, the Company issued
  393,846 units at $2.75 per unit for proceeds of $1,083,075 pursuant to a private
  placement agreement. Each unit consisted of one common share and one-half common
  share purchase warrant entitling the holder to purchase an additional common
  share at $4.50 per share until May 18, 2012.

On November 18, 2010, the Company issued
  3,636 units at $2.75 per unit for finders fees related to the private
  placement of the same date. Each unit consisted of one common share and one-half
  common share purchase warrant entitling the holder to purchase an additional
  common share at $4.50 per share until May 18, 2012.

On November 18, 2010, the Company issued
  853,075 units  in respect of the conversion
  of two notes payable originally convertible at $2.50. The Company recorded debt
  conversion expense of $504,160, related to the fair value of the additional
  units issued as a result of converting at the lower conversion price. Each unit
  consisted of one common share and one common share purchase warrant entitling
  the holder to purchase an additional common share at $3.00 per share until November
  18, 2012. The fair value of the shares included in the units was determined
  with reference to their quoted market price and the value of the warrants was
  determined using the Black-Scholes model with the following assumptions: exercise
  price - $3.00, stock price - $4.12, expected volatility  78.33%, expected
  life  2.0 years, dividend yield  0.00% .

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 6                             

|Note 4 | Capital Stock  (contd)
|------ | ------------------------

On November 18, 2010, the Company issued
  145,063 shares of common stock at their fair value of $4.12 per share based
  on their quoted market price pursuant to settling non-convertible interest bearing
  notes payable outstanding in the amount of $398,923, including accrued interest
  of $26,032. The Company recorded a loss on settlement of debt of $198,738 based
  on the difference between the carrying value of the debt settled and the fair
  value of the shares issued. On November 18, 2010, the Company issued 181,818
  shares of common stock at their fair value of $4.12 per share based on the quoted
  value of units issued in a private placement on the same date to one creditor
  in settlement of $500,000 of debt owing. The Company recorded a loss on settlement
  of accounts payable of $249,090 based on the difference of the carrying value
  of the account payable and the fair value of the shares issued.

On November 25, 2010, the Company issued
  29,851 units at $3.35 per unit for proceeds of $100,000 pursuant to a private
  placement agreement. Each unit consisted of one common share and one-half common
  share purchase warrant entitling the holder to purchase an additional common
  share at $4.50 per share until November 25, 2012.

On November 25, 2010, the Company issued
  2,985 units at $3.35 per unit for finders fees related to the private
  placement of the same date. Each unit consisted of one common share and one-half
  common share purchase warrant entitling the holder to purchase an additional
  common share at $4.50 per share until November 25, 2012.

On February 1, 2011, the Company issued
  61,014 units at $3.75 per unit for proceeds of $228,800 pursuant to a private
  placement agreement. Each unit consisted of one common share and one-half common
  share purchase warrant entitling the holder to purchase an additional common
  share at $5.25 per share until August 1, 2012.

|Note 5 | Related Party Transactions
|------ | --------------------------

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

| |                            |   |                  |  |   |                  |  |   | January 23, 2004        | 
| | -------------------------- | - | ---------------- |  | - | ---------------- |  | - | ----------------------- | 
| |                            |   | Six Months ended |  |   | Six Months ended |  |   | (Date of Inception)     | 
| |                            |   | March 31, 2011   |  |   | March 31, 2010   |  |   | to March
      31, 2011 | 
| |                            |   |                  |  |   |                  |  |   |                         | 
| | Management fees            | $ | -                |  | $ | -                |  | $ | 14,625                  | 
| | Rent                       |   | -                |  |   | -                |  |   | 3,750                   | 
| | Debt forgiven by directors |   | -                |  |   | -                |  |   | 33,666                  | 
| |                            | $ | -                |  | $ | -                |  | $ | 52,041                  | 

During the three months and six months
  ended March 31, 2011 and 2010 the Company was charged consulting fees by directors,
  officers and a significant shareholder of the Company as follows:

| |                 |   | Three months ended |  |   | Six months ended | 
| | --------------- | - | ------------------ |  | - | ---------------- | 
| |                 |   | March 31,          |  |   | March 31,        | 
| |                 |   | 2011               |  |   | 2010             | 
| | Consulting fees | $ | 232,897            |  | $ | 188,344          | 

As at March 31, 2011, included in accounts
  payable and accrued liabilities is $146,142 (September 30, 2010: $9,521) owing
  to directors and officers of the Company.

|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    | 
| |                             |  |           |   |   |          | 
| | Balance, September 30, 2009 |  | 983,448   |   | $ | 2.93     | 
| | Expired                     |  | (325,948  | ) | $ | 4.46     | 

| | Issued                      |  | 1,389,651 |  | $ | 3.16 | 
| | --------------------------- |  | --------- |  | - | ---- | 
| | Balance, September 30, 2010 |  | 2,047,151 |  | $ | 2.84 | 
| | Expired                     |  | -         |  |   | -    | 
| | Issued                      |  | 1,098,743 |  | $ | 3.36 | 
| |                             |  |           |  |   |      | 
| | Balance, March 31, 2011     |  | 3,145,894 |  | $ | 3.02 | 

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 7                             

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

| | a) | Share Purchase Warrants  (contd)                                                                                       
| | -- | -------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                          
| |    | At March 31, 2011 the Company has 3,145,894 currently
        exercisable share purchase warrants outstanding as follows:

| | Number    | Exercise Price | Expiry Date       
| | --------- | -------------- | ------------------
| | 46,249    | $3.50          | April 9, 2011     
| | 557,501   | $2.25          | June 19, 2011     
| | 99,999    | $2.25          | August 4, 2011    
| | 41,155    | $3.50          | September 30, 2011
| | 299,999   | $2.25          | October 2, 2011   
| | 470,500   | $3.50          | December 29, 2011 
| | 200,000   | $3.50          | January 5, 2012   
| | 86,000    | $3.75          | March 3, 2012     
| | 198,741   | $4.50          | May 18, 2012      
| | 30,508    | $5.25          | August 1, 2012    
| | 245,748   | $3.00          | September 30, 2012
| | 853,075   | $3.00          | November 18, 2012 
| | 16,419    | $4.50          | November 25, 2012 
| | 3,145,894 |                |                   

Subsequent to March 31, 2011, the warrants
  exercisable at $3.50 per share until April 9, 2011 expired unexercised.

A summary of the status of the companys
  outstanding stock purchase options for the six months ended March 31, 2011 is
  as follows:

| |                                         |  |           |   |   | Weighted | 
| | --------------------------------------- |  | --------- | - | - | -------- | 
| |                                         |  |           |   |   | Average  | 
| |                                         |  | Number of |   |   | Exercise | 
| |                                         |  | Shares    |   |   | Price    | 
| | Outstanding at September 30, 2009       |  | 3,195,000 |   | $ | 3.37     | 
| | Cancelled                               |  | (820,000  | ) | $ | 2.50     | 
| | Granted                                 |  | 400,000   |   | $ | 3.48     | 
| | Outstanding at September 30, 2010       |  | 2,775,000 |   | $ | 3.29     | 
| | Granted                                 |  | 650,000   |   | $ | 4.06     | 
| |                                         |  |           |   |   |          | 
| | Outstanding at March 31, 2011           |  | 3,425,000 |   | $ | 3.44     | 
| | Exercisable at March 31, 2011           |  | 1,779,998 |   | $ | 3.52     | 
| | Exercisable at September
      30, 2010 |  | 1,613,333 |   | $ | 3.52     | 

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 8                             

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

| | b) | Stock-based Compensation Plan
| | -- | -----------------------------

At March 31, 2011, the following stock
  options were outstanding:

Number of Shares
      
      
      
      
      
      
      
      
      
      
      AggregateIntrinsicAggregate
      
      
      value ofNumber
      
      Exercise
      
      
      
      
      
      Intrinsic
      
      
      VestedTotal
      
      Vested
      
      Price
      
      
      Expiry Date
      
      
      Value
      
      
      options50,000 (1)
      
      50,000
      
      $ 3.75
      
      
      November 1, 2012
      
      $
      2,000
      
      $
      2,000100,000 (2)
      
      -
      
      $ 3.86
      
      
      December 1, 2012
      
      
      -
      
      
      -150,000 (3)
      
      150,000
      
      $ 3.10
      
      
      December 3, 2012
      
      
      103,500
      
      
      103,500400,000 (4)
      
      400,000
      
      $ 5.25
      
      
      May 20, 2013
      
      
      -
      
      
      -450,000 (5)
      
      450,000
      
      $ 3.10
      
      
      June 3, 2013
      
      
      310,500
      
      
      310,50050,000 (6)
      
      50,000
      
      $ 2.75
      
      
      January 14, 2014
      
      
      52,000
      
      
      52,0005,000 (7)
      
      5,000
      
      $ 2.50
      
      
      March 2, 2014
      
      
      6,450
      
      
      6,450400,000 (8)
      
      400,000
      
      $ 2.50
      
      
      May 12, 2012
      
      
      516,000
      
      
      516,000500,000 (9)
      
      -
      
      $ 2.50
      
      
      June 11, 2014
      
      
      645,000
      
      
      -200,000 (10)
      
      200,000
      
      $ 3.50
      
      
      June 29, 2015
      
      
      58,000
      
      
      58,000200,000 (11)
      
      49,998
      
      $ 3.45
      
      
      September 1, 2015
      
      
      68,000
      
      
      17,000400,000 (12)
      
      -
      
      $ 4.28
      
      
      February 1, 2016
      
      
      -
      
      
      -150,000 (13)
      
      -
      
      $ 3.72
      
      
      February 24, 2016
      
      
      10,500
      
      
      -100,000 (14)
      
      25,000
      
      $ 3.67
      
      
      March 30, 2016
      
      
      12,000
      
      
      3,000270,000 (15)
      
      -
      
      $ 3.00
      
      
      February 8, 2017
      
      
      213,300
      
      
      -3,425,000
      
      1,779,998
      
      
      
      
      
      
      $
      1,997,250
      
      $
      1,068,450


The aggregate intrinsic value is calculated
  as the difference between the exercise price of the underlying awards and the
  quoted market price of the Companys stock for the options that were in-the-money
  at March 31, 2011.

| | (1) | As at March 31, 2011 and September 30, 2010, these
      options had fully vested. The Company did not recognize any stock- based
      compensation for these options during the six month period ended March 31,
      2011 (six months ended March 31, 2010: $nil).                                                                                                                                                                                                                                            
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (2) | As at March 31, 2011 and September 30, 2010, 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, 2012 or in the event of a change of control a listing
      on a nationally recognized stock exchange is not required. No stock-based
      compensation has been recorded in the financial statements as the performance
      condition has not yet been met.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (3) | As at March 31, 2011 and September 30, 2010, these
      options had fully vested. The Company did not recognize any stock- based
      compensation for these options during the six month period ended March 31,
      2011 (six months ended March 31, 2010: $31,035).                                                                                                                                                                                                                                         
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (4) | As at March 31, 2011 and September 30, 2010, these
      options had fully vested. On February 2, 2011, the expiration date on these
      options was extended until May 20, 2013. The fair value of this expiry extension
      was calculated to be $392,000. The Company recognized the full fair value
      of the extension as stock based compensation in the six month period ended
      March 31, 2011 (six months ended March 31, 2010: $nil).                                                        
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (5) | As at March 31, 2011 and September 30, 2010, these
      options had fully vested. The Company did not recognize any stock- based
      compensation during the six month period ended March 31, 2011. As a result
      of re-pricing these options on March 26, 2010, the Company recognized stock-based
      compensation of $196,425 during the six month period ended March 31, 2010.                                                                                                                       
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (6) | As at March 31, 2011 and September 30, 2010, these
      options had fully vested. The Company did not recognize any stock- based
      compensation for these options during the six month period ended March 31,
      2011 (six months ended March 31, 2010: $10,135).                                                                                                                                                                                                                                         

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 9                             

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

| | b) | Stockbased Compensation Plan 
        (contd)
| | -- | ------------------------------------------------
| |    |                                                 
| |    | (7)                                             
| |    |                                                 
| |    | (8)                                             
| |    |                                                 
| |    | (9)                                             
| |    |                                                 
| |    | (10)                                            
| |    |                                                 
| |    | (11)                                            
| |    |                                                 
| |    | (12)                                            
| |    |                                                 
| |    | (13)                                            
| |    |                                                 
| |    | (14)                                            
| |    |                                                 
| |    | (15)                                            

The fair value of stock options granted
  has been determined using the Black-Scholes option pricing model using the following
  weighted average assumptions applied to stock options granted or re-priced during
  the periods:

| |                          |  | March 31,  |  |  | September 30,   | 
| | ------------------------ |  | ---------- |  |  | --------------- | 
| |                          |  | 2011       |  |  | 2010            | 
| |                          |  |            |  |  |                 | 
| | Risk-free interest rate  |  | 1.60%      |  |  | 0.79% - 2.2%    | 
| | Expected life of options |  | 3.97 years |  |  | 5.00 years      | 
| | Annualized volatility    |  | 79.81%     |  |  | 88-54% - 95.45% | 
| | Dividend rate            |  | 0%         |  |  | 0%              | 

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 10                            

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

| | b) | Stockbased Compensation Plan  (contd)
| | -- | ----------------------------------------

The volatility in the past was determined
  based on an index of volatility from comparable companies with the exception
  of the valuation of the expiration extension on February 2, 2011. In that case
  the volatility of the Companys stock was used as the period involved was
  an extension of only 2.3 years and sufficient data with the Companys own
  stock was available. In the future, the Company expects to calculate volatility
  based on historical fluctuations in its own stock whenever sufficient stock
  information is available. The expected term of the options granted to employees
  is derived from the simplified method as prescribed by SEC Staff Accounting
  Bulletin No. 110 given that the Company has no historical experience with the
  exercise of options for which to base an estimate of the expected term of options
  granted. The Company anticipates it will discontinue the use of the simplified
  method of SAB 110 once sufficient historical option exercise behavior becomes
  apparent. The expected term of options granted to non-employees was determined
  to be the option term.

At March 31, 2011, the following summarizes
  the unvested stock options:

| |                                        |  |           |   |   | Weighted |  |   | Weighted   | 
| | -------------------------------------- |  | --------- | - | - | -------- |  | - | ---------- | 
| |                                        |  |           |   |   | Average  |  |   | Average    | 
| |                                        |  | Number of |   |   | Exercise |  |   | Grant-date | 
| |                                        |  | Shares    |   |   | Price    |  |   | Fair value | 
| | Unvested options at September 30, 2010 |  | 1,161,667 |   | $ | 2.98     |  | $ | 1.80       | 
| | Granted                                |  | 650,000   |   | $ | 4.06     |  | $ | 2.95       | 
| | Vested                                 |  | (166,665  | ) | $ | 3.51     |  | $ | 2.53       | 
| | Unvested options at March 31, 2011     |  | 1,645,002 |   | $ | 3.35     |  | $ | 2.33       | 

At March 31, 2011, there was a total
  of $923,354 of unrecognized compensation cost associated with unvested share-based
  compensation awards that will become vested exclusive of achieving any performance
  milestones. This unrecognized compensation cost is expected to be recognized
  in the years ended September 30, 2011 and 2012. During the six month period
  ended March 31, 2011, the Company recognized a total of $748,229 (March 31,
  2010: $397,023) in stock based compensation included in the financial statements
  with consulting fees. There has been no stock-based compensation recognized
  in the financial statements for the period ended March 31, 2011 for options
  that vest upon the achievement of performance milestones because the Company
  has determined that satisfaction of the performance milestones was not probable.
  Compensation relating to stock options exercisable upon achieving performance
  milestones will be recognized in the period the milestones are achieved.

|Note 7 | Supplemental Cash flow Information
|------ | ----------------------------------

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

During the six month period ended March
  31, 2011:

| | a) | The Company issued 3,636 units at $2.75 per unit for
        finders fees related to the private placement. Each unit consists
        of one common share and one-half common share purchase warrant entitling
        the holder to purchase an additional common share at $4.50 per share until
        May 18, 2012.                                                                                                                                                                                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | The Company issued 853,065 units at the calculated fair
        value of $6.24 per unit in the conversion of two notes payable. The Company
        recorded debt conversion expense of $504,160, related to the fair value
        of the additional units issued based on the difference between the fair
        value of the units issued and the carrying value of the debt. Each unit
        consisted of one common share and one common share purchase warrant entitling
        the holder to purchase an additional common share at $3.00 per share until
        November 18, 2012.

---

|Anavex Life Sciences Corp.                    
|----------------------------------------------
|(A Development Stage Company)                 
|Notes to the Consolidated Financial Statements
|March 31, 2011                                
|(Stated in US Dollars)                        
|Unaudited Page 11                            

|Note 7 | Supplemental Cash flow Information  (contd)
|------ | ---------------------------------------------

| | c) | The Company issued 145,063 shares of common stock at
        their fair value of $4.12 per share to settle non- convertible interest
        bearing notes payable outstanding in the amount of $398,923, including
        accrued interest of $26,032 (included in accounts  payable and accrued liabilities). The Company recorded a loss on debt settlement
    of $198,738 as a result of this transaction.                     
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | d) | The Company issued 181,818 shares of common stock at
        their fair value of $4.12 per share based on their quoted market price
        to one creditor in settlement of $500,000 of accounts payable. The Company
        recorded a loss on settlement of accounts payable of $249,090 as a result
        of the difference between the carrying value of the account payable and
        the fair value of the shares issued.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | e) | The Company issued 2,985 units at $3.35 per unit for
        finders fees related to the private placement of the same date.
        Each unit consisted of one common share and one-half common share purchase
        warrant entitling the holder to purchase an additional common share at
        $4.50 per share until November 25, 2012.                                                                                     

|Note 8 | Subsequent Events
|------ | -----------------

Subsequent to March 31, 2011, the Company:

| | a) | On April 19, 2011, the Company entered into a subscription
        agreement for the issuance of convertible debentures in the amount of
        $1,000,000 with closings in three tranches of up to $250,000 not later
        than April 20, 2011, up to $500,000 not later than May 3, 2011 and up
        to $250,000 not later than May 20, 2011. The first tranche closed on April
        20, 2011 and the Company issued one $250,000 convertible debenture. The
        second tranche closed on May 4, 2011 and the Company issued one $500,000
        convertible debenture. The debentures bear interest at 8% per annum and
        will mature on April 20, 2012 or may be retired earlier under circumstances
        agreeable to both the issuer and the investor. The Company can convert
        or redeem the debentures upon the closing of aggregate equity financings
        of $2,000,000 or more within any 30 consecutive days during the term of
        the investment, or at the election of the Investor. The debentures are
        convertible at $3.00 per share, adjusted for splits and common stock issuances
        of greater than 10% of the number of shares outstanding at the closing
        of the investment. For each common share issued one two year common share
        purchase warrant will be issued, exercisable at $4.00 and adjusted for
        splits and common stock issuances of greater than 10% of the number of
        outstanding shares at the closing of the investment. In the event of early
        retirement, interest paid will be the greater of six months interest on
        the principal amount of the investment or the actual accumulated interest
        on the principal amount of the investment. A $100,000 fee was paid to
        the investor on the closing of the first tranche for arranging the investment.
        For the five consecutive days subsequent to the closing of the first tranche,
        the investor, or its agent, had the right to purchase 33,334 common shares
        and 33,334 common share purchase warrants for an aggregate price of $100,000.
        Each common share purchase warrant will be exercisable for two years from
        the initial closing at an exercise price of $4.00 per share.
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | b) | On May 4, 2011, the Company issued 33,334 common shares
        and 33,334 common share purchase warrants for total proceeds of $100,000,
        pursuant to the subscription agreement entered into on April 19, 2011.
        Each common share purchase warrant will be exercisable for two years from
        the initial closing at an exercise price of $4.00 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

---

5

Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

Forward-Looking Statements

This quarterly report contains forward-looking statements. All
statements other than statements of historical facts contained in this quarterly
report, including statements regarding our anticipated future clinical and
regulatory milestone events, future financial position, business strategy and
plans and objectives of management for future operations, are forward looking
statements. These statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking statements by
terminology such as may, should, expect, plan, anticipate, believe,
estimate, predict, potential or continue or the negative of these terms
or other comparable terminology. Such forward-looking statements include,
without limitation, statements regarding the anticipated start dates, durations
and completion dates of our ongoing and future clinical studies, statements
regarding the anticipated designs of our future clinical studies, statements
regarding our anticipated future regulatory submissions and statements regarding
our anticipated future cash position. We have based these forward-looking
statements largely on our current expectations and projections about future
events, including the responses we expect from pharmaceutical regulatory
authorities, including the U.S. Food and Drug Administration, or FDA, and other
regulatory authorities and financial trends that we believe may affect our
financial condition, results of operations, business strategy, preclinical and
clinical trials and financial needs. These statements are only predictions and
involve known and unknown risks, uncertainties and other factors, including the
risks in the section entitled Risk Factors that may cause our companys 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.

Moreover, we operate in a very competitive and rapidly changing
environment. New risk factors emerge from time to time and it is not possible
for our management to predict all risk factors, nor can we assess the impact of
all factors on our business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements. You should not rely upon forward-looking
statements as predictions of future events. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Except as required by applicable law, including the securities
laws of the United States and Canada, we do not intend to update any of the
forward-looking statements to conform these statements to actual results.

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

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

As used in this quarterly report, the terms we, us, our,
and Anavex mean Anavex Life Sciences Corp., unless the context clearly
requires otherwise.

Our Current Business

We are a biopharmaceutical company engaged in the discovery and
development of novel drug targets to treat serious diseases for which there are
urgent unmet medical needs. The ANAVEX portfolio involves new sigma receptor
compounds (ligands) in the preclinical and clinical stages that target
neurodegenerative diseases and cancer. Our lead drug candidate ANAVEX 2-73,
targeting Alzheimers disease (AD), entered first Human Clinical Trials (HCT) in
the first quarter of 2011. Preclinical development of ANAVEX 2-73 and
manufacturing scale-up for clinical trials has been completed. ABX-CRO Advanced
Pharmaceutical Services have been contracted to carry out the phase I and phase
IIa clinical trials. We plan to continue preclinical work on other CNS
compounds, including backup compounds to ANAVEX 2-73 for AD, as well as those
targeting epilepsy, depression and neuropathic pain, provided sufficient capital
is available. Additionally, we intend to further develop compounds in earlier
preclinical phases, which target various types of cancer and continue to develop
and expand our SIGMACEPTORTMDiscovery platform.

---

6

Our Pipeline

Our proprietary SIGMACEPTOR Discovery Platform has resulted in
and continues to generate small molecule drug candidates with unique modes of
action, by making use of our leading understanding of sigma receptors, which
represent potential targets for therapeutics to potentially combat many human
diseases (such as AD, depression, epilepsy, pain and cancer). When activated by
the appropriate ligands, these receptors influence the functioning of multiple
biochemical signals that are involved in the pathogenesis (origin or
development) of disease.

With our SIGMACEPTOR-N program, we are focused on developing
disease-modifying treatments for CNS conditions using sigma-1 receptor ligands.
Among our lead CNS drug candidates, we have made significant progress with
ANAVEX 2-73, our lead drug candidate for the treatment of Alzheimers disease,
and ANAVEX 19-144, an Alzheimers disease back-up compound and potential lead
drug candidate for epilepsy. Preclinical data reveals that these compounds
exhibit significant anti-amnesic, neuroprotective and anticonvulsant properties
in a variety of in vitro systems and specialized animal models. These activities
involve sigma-1, muscarinic and NMDA receptor components as well as ion
channels, indicating a unique mode of action. In AD animal models , ANAVEX 2-73
has shown pharmacological, histological and behavioral evidence as a potential
neuroprotective, anti-amnesic, anticonvulsive and anti depressive therapeutic
agent, due to its potent affinity to sigma-1 receptors and moderate affinities
to M1-4 type muscarinic receptors and may offer a disease-modifying approach in
AD. In epilepsy, ANAVEX 19-144 controls seizures and the epileptogenesis process
in animal models. Moreover, its neuroprotective properties may prevent the
process that causes long-term damage to tissue and cells as well as biochemical
and physiological alterations to the brain from epileptic seizures. We also have reported promising developments with ANAVEX 1-41,
which is a sigma-1 agonist and a lead compound for depression and a back up
compound for AD. Preclinical tests revealed significant neuroprotective benefits
(i.e. protects nerve cells from degeneration or death) through the modulation of
endoplasmic reticulum, mitochondrial and oxidative stress, which damages and
destroys cells and is believed by some scientists to be a primary cause of AD.
In addition, in animal models, ANAVEX 1-41 prevented the expression of
caspase-3, an enzyme that plays a key role in apoptosis (programmed cell death)
and in the loss of cells in the hippocampus, the part of the brain that
regulates learning, emotion and memory. These activities involve both muscarinic
and sigma-1 receptor systems through a novel mechanism of action. ANAVEX 1-41
may offer disease-modifying options that reverse memory and learning deficits
and protect nerve cells from death through its anti-amnesic and neuroprotective
actions. ANAVEX 1-41 may slow the progression of AD.

Our SIGMACEPTOR-C program
  leverages the unique properties of sigma-1 and/or sigma-2 receptor ligands,
  which may allow for the development of a new class of promising drug candidates
  designed to combat various types of solid tumors. Sigma receptors are highly
  expressed in different tumor cell types and binding by appropriate sigma-1
  and/or sigma-2 ligands can induce selective apoptosis. In addition, through
  tumor cell membrane reorganization and interactions with ion channels, our drug
  candidates are believed to play an important role in inhibiting the processes of
  metastasis (spreading of cancer cells from the original site to other parts of
  the body), angiogenesis (the formation of new blood vessels) and tumor cell
  proliferation. The compounds in our oncology program are in pre-clinical
  testing, and there is no guarantee that the activity demonstrated in
  pre-clinical models will be shown in human testing.

ANAVEX 7-1037, our lead drug candidate for the treatment of
prostate cancer, is a low molecular weight, synthetic compound exhibiting high
affinity for sigma-1receptors at nanomolar levels and moderate affinity for
sigma-2 receptors and sodium channels at micromolar levels. In advanced
preclinical studies, this compound revealed antitumor potential with no toxic
side effects. It has also been shown to selectively kill human cancer cells
without affecting normal/healthy cells and also to significantly suppress tumor
growth in immune-deficient mice models. Scientific publications emphasize the
promise of sigma receptor ligands, highlighting the fact that these ligands may
stop tumor growth and induce selective cell death in various tumor cell lines,
including leukemia, melanoma and cancers of the colon, breast, prostate, lung,
brain, ovary and kidney.

Numerous additional compounds are currently in the early
discovery and lead optimization stages of our SIGMACEPTOR-N and SIGMACEPTOR-C
programs.

---

7

Results of Operations

Revenue

We have not earned any revenues since our inception on January
23, 2004. We are still in the development stage and do not anticipate earning
any revenues until we can establish an alliance with other companies to develop,
co-develop, license, acquire or market our products.

Expenses

Our expenses for the three and six months ended March 31, 2011
and 2010 were as follows:

|                             |   | Three Months |   |   | Three Months |   |   | Six Months |   |   | Six Months |  
|---------------------------- | - | ------------ | - | - | ------------ | - | - | ---------- | - | - | ---------- | -
|                             |   | Ended        |   |   | Ended        |   |   | Ended      |   |   | Ended      |  
|                             |   | March 31,    |   |   | March 31,    |   |   | March 31,  |   |   | March 31,  |  
|                             |   | 2011         |   |   | 2010         |   |   | 2011       |   |   | 2010       |  
|Accounting and audit fees    | $ | 38,380       |   | $ | 66,936       |   | $ | 87,328     |   | $ | 88,795     |  
|Amortization                 |   | 407          |   |   | 190          |   |   | 898        |   |   | 380        |  
|Bank charges and interest    |   | 1,748        |   |   | 1,275        |   |   | 3,791      |   |   | 2,990      |  
|Consulting                   |   | 1,017,702    |   |   | 568,816      |   |   | 1,669,903  |   |   | 1,022,890  |  
|Investor relations           |   | 25,000       |   |   | 27,482       |   |   | 79,535     |   |   | 81,993     |  
|Legal fees                   |   | 37,600       |   |   | 17,775       |   |   | 57,347     |   |   | 45,683     |  
|Office and miscellaneous     |   | 13,151       |   |   | 4,287        |   |   | 19,620     |   |   | 7,978      |  
|Insurance                    |   | 16,107       |   |   | -            |   |   | 20,922     |   |   | -          |  
|Registration and filing fees |   | 36,363       |   |   | 3,320        |   |   | 45,425     |   |   | 9,453      |  
|Rent                         |   | 10,999       |   |   | -            |   |   | 52,818     |   |   | -          |  
|Research and development     |   | 730,242      |   |   | 815,609      |   |   | 1,227,532  |   |   | 1,027,088  |  
|Travel                       |   | 20,026       |   |   | 13,116       |   |   | 51,751     |   |   | 94,153     |  
|Total expenses               | $ | (1,947,725   | ) | $ | (1,518,806   | ) | $ | (3,316,870 | ) | $ | (2,381,403 | )

Three Months Ended March 31, 2011 and 2010

Expenses for the three months ended March 31,  2011 increased by $428,919 over the same period in 2010. Consulting fees increased by $448,886 from $568,816 for the three  months ended March 31, 2010 to $1,017,702 for the same period in 2011 primarily  as a result of increased management infrastructure and an increase in stock  based compensation from additional option issuances resulting therefrom.  Insurance expense increased by $16,107 from  $nil for the three months ended March 31, 2010 to $16,107 for the same period  in 2011 primarily related to the addition of a clinical trial liability  insurance policy.  Registration and  filing fees increased by $33,043 from $3,320 for the three months ended March  31, 2010 to $36,363 for the same period in 2011 primarily related to the  acceleration of expenses related to costs associated with preparing and issuing  the proxy and the annual meeting.  Rent  and administration expenses increased by $10,999 from $nil for the three months  ended March 31, 2010 to $10,999 for the same period in 2011 primarily as a  result of establishing office and infrastructure in North America.  Legal fees increased by $19,825 from $17,775  for the three months ended March 31, 2010 to $37,600 for the same period in  2011 primarily related to increased patent and general counsel activity.  Research and Development charges decreased by $85,367 from $815,609 for the  three months ended March 31, 2010 to $730,242 for the same period in 2011  primarily related to decreased preclinical activity related to ANAVEX 2-73.

Six Months Ended March 31, 2011 and 2010

Expenses for the six months ended March 31, 2011  increased by $935,467 over the same period in 2010.  Consulting fees increased by $647,013  from $1,022,890 for the six months ended March 31, 2010 to $1,669,903 for the  same period in 2011 primarily as a result of increased management infrastructure  and an increase in stock based compensation from additional option issuances  resulting therefrom.  Insurance expense  increased by $20,922 from $nil for the six months ended March 31, 2010 to  $20,922 for the same period in 2011 primarily related to the addition of a  clinical trial liability insurance policy. Registration and filing fees  increased by $35,972 from $9,453 for the six months ended March 31, 2010 to  $45,425 for the same period in 2011 primarily related to the acceleration of  expenses related to costs associated with preparing and issuing the proxy and  the annual meeting.  Rent and  administration expenses increased by $52,818 from $nil for the six months ended  March 31, 2010 to $52,818 for the same period in 2011 primarily as a result of  establishing office and infrastructure in North America.  Legal fees increased by $11,664 from $45,683  for the six months ended March 31, 2010 to $57,347 for the same period in 2011  primarily related to increased patent and general counsel activity. Research  and Development charges increased by $200,444 from $1,027,088 for the three  months ended March 31, 2010 to $1,227,532 for the same period in 2011 primarily  related to increased clinical trial preparation activity related to ANAVEX 2-73.  Travel expense decreased by $42,402 from  $94,153 for the six months ended March 31, 2010 to $51,751 for the same period  in 2011 due to the establishment of office infrastructure in North America and  a resulting decrease in international travel.



---

8

Other Income and loss

Other income and (loss) for the three month period ended March
31, 2011, amounted to $(24,661) as compared to $(195,336) for the comparable
three month period ended March 31, 2010. The decrease in loss of $(170,675) is
primarily attributable to a) the loss from accretion of debt discount of
$(99,397) recognized in the three month period ended March 31, 2010 with no
corresponding loss recognized in the same period in 2011, b) the change in fair
value of derivative liabilities of $(88,824) recognized in the three month
period ended March 31, 2010 with no corresponding expense recognized in the same
period in 2011, c) interest expense of $(33,157) recognized in the three month
period ended March 31, 2010 as compared to lower interest expense of $(3,945)
recognized in the same period in 2011 as a result of debt conversions that
occurred in the six month period ended March 31, 2011, and d) offset by the
foreign exchange gain of $26,042 recognized in the three month period ended
March 31, 2010 as compared with a loss of $(20,716) recognized in the same
period in 2011.

Other  income and (loss) for the six month period ended March 31, 2011, amounted to $(990,095)  as compared to a gain of $218,760 for the comparable six month period ended  March 31, 2010. The increase in loss of $(1,208,805) is primarily  attributable to a)  debt conversion  expense of $(504,160) recognized in the six month period ended March 31, 2011  compared with no similar expense for the same period in 2010,  b) the foreign exchange loss of  $(26,206) recognized in the six month period  ended March 31, 2011 as compared with a gain of $34,312 recognized in the same  period in 2010,  c) the gain in fair  value of derivative liability of   $560,214 recognized in the six month period ended March 31, 2010 with no  corresponding gain  recognized in the  same period in 2011, offset by d) the loss from accretion of debt discount  of  $(319,807) recognized in the six  month period ended March 31, 2010 with no corresponding loss recognized in the  same period in 2011, e) interest expense of $(55,959) recognized in the six  month period ended March 31, 2010 as compared to lower interest expense of  $(11,901) recognized in the same period in 2011 as a result of debt conversions  that occurred in the six month period ended March 31, 2011, f) loss on  settlement of accounts payable of $(249,090) recognized in the six month period  ended March 31, 2011 with no corresponding loss in the six months ended March  31, 2010 , g) the loss on extinguishment of debt of $(198,738) recognized in  the six months ended March 31, 2011 with no corresponding loss in the six  months ended March 31, 2010 and h) debt conversion expense incurred on the  induced conversion of convertible promissory notes totaling $(504,160) in the  six months ended March 31, 2011 with no corresponding charge in the six months  ended March 31, 2010.

Change in fair value of derivative liability

We recognized no gain or (loss) on derivative financial
instruments for the three months ended March 31, 2011, as compared to $(88,824)
for the prior years comparable period. We recognized no gain or (loss) on
derivative financial instruments for the six month period ended March 31, 2011,
as compared to a gain of $560,214 for the prior years comparable period. The
related convertible promissory notes were amended as of September 30, 2010 to
remove the embedded conversion feature.

The non-cash gain in the prior year arose from adjusting the
embedded conversion feature of our convertible promissory notes payable to fair
value at each reporting period in accordance with current accounting standards.
The embedded conversion features of the convertible promissory notes were
treated as derivative liabilities because the conversion price could be adjusted
in certain circumstances. We used the Black-Scholes option pricing model to
estimate the fair value of this derivative. The promissory notes were amended as
of September 30, 2010 and as a result, the derivative liabilities were reversed
to additional paid-in capital during the same period.

---

9

Liquidity and Capital Resources

Working Capital

March 31, 2011
    
    
    September 30, 2010Current Assets
    
    61,641
    
    
    325,758Current Liabilities
    
    1,293,589
    
    
    3,290,071Working Capital (Deficit)
    $
    (1,231,948
    )
    $
    (2,964,313
    )


As of March 31, 2011, we had $3,641 in cash, a decrease of
$261,028 from September 30, 2010. The principal component of this decrease in
cash was increased consulting fees and R&D expenditures. As of March 31,
2011, we had a working capital deficit of $1,231,948, a decrease of $1,732,365
from September 30, 2010. The principal component of this decrease in working
capital deficit was the reduction in our current liabilities due to a) the
conversion of promissory notes of $2,292,308, offset by b) the increase in
accounts payable and accrued liabilities of $295,826 and c) the decrease in cash
of $261,028.

On November 18, 2010 we issued an aggregate of 393,846 units of
our securities at a purchase price of $2.75 per unit for total proceeds of
$1,083,075. Each unit consists of one share of common stock in the capital of
our company and one-half of one common share purchase warrant. One full warrant
entitles the holder to purchase one additional share of common stock at a price
of $4.50 per warrant share for a period of two years.

On November 25, 2010 we issued an aggregate of 29,851 units of
our securities at a purchase price of $2.75 per unit for total proceeds of
$100,000. Each unit consists of one share of common stock in the capital of our
company and one-half of one common share purchase warrant. One full warrant
entitles the holder to purchase one additional share of common stock at a price
of $4.50 per warrant share for a period of two years.

On February 1, 2011, we issued 61,014 units of our securities
at a purchase price of $3.75 per unit for total proceeds of $228,800. Each unit
consists of one share of common stock in the capital of our company and one-half
common share purchase warrant. One full warrant entitles the holder to purchase
one additional share of common stock at a price of $5.25 per warrant share for a
period of one and one-half year.

On April 19, 2011, we entered into a subscription agreement for
the issuance of convertible debentures in the amount of $1,000,000 with closings
in three tranches of up to $250,000 not later than April 20, 2011, up to
$500,000 not later than May 3, 2011 and up to $250,000 not later than May 20,
2011. The first tranche closed on April 20, 2011 and we issued one $250,000
convertible debenture. The second tranche closed on May 4, 2011 and we issued
one $500,000 convertible debenture. The debentures bear interest at 8% per annum
and will mature on April 20, 2012 or may be retired earlier under circumstances
agreeable to both the issuer and the investor. We can convert or redeem the
debentures upon the closing of aggregate equity financings of $2,000,000 or more
within any 30 consecutive days during the term of the investment, or at the
election of the investor. The debentures are convertible at $3.00 per share,
adjusted for splits and common stock issuances of greater than 10% of the number
of shares outstanding at the closing of the investment. For each common share
issued one two year common share purchase warrant will be issued, exercisable at
$4.00 and adjusted for splits and common stock issuances of greater than 10% of
the number of outstanding shares at the closing of the investment. In the event
of early retirement, interest paid will be the greater of six months interest on
the principal amount of the investment or the actual accumulated interest on the
principal amount of the investment. A $100,000 fee was paid to the investor on
the closing of the first tranche for arranging the investment. For the five
consecutive days subsequent to the closing of the first tranche, the investor,
or its agent, had the right to purchase 33,334 common shares and 33,334 common
share purchase warrants for an aggregate price of $100,000. Each common share
purchase warrant will be exercisable for two years from the initial closing at
an exercise price of $4.00 per share.

On May 4, 2011, we issued 33,334 common shares and 33,334
common share purchase warrants for total proceeds of $100,000, pursuant to the
subscription agreement entered into on April 19, 2011. Each common share
purchase warrant will be exercisable for two years from the initial closing at
an exercise price of $4.00 per share.

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10

Anticipated Expenses

We anticipate that we will require up to $10 million for the 12
month period ending March 31, 2012 to implement our plan of operation of
researching and developing our patents, the related compounds and any further
intellectual property we may acquire. The majority of our capital resources
requirement is needed to continue the clinical trial for ANAVEX 2-73, and to
perform work necessary to enter other compounds into clinical trials. If we are
not able to secure additional financing, we will not be able to implement and
fund these trials.

Cash Flows

Six Months Ended
    
    
    Six Months EndedMarch 31, 2011
    
    
    March 31, 2010Cash flows used in operating activities
    $
    (1,672,903
    )
    $
    (1,830,954
    )Cash flows from financing activities
    
    1,411,875
    
    
    1,624,470Cash flows from investing activities
    
    -
    
    
    -Increase (decrease) in cash
    $
    (261,028
    )
    $
    (206,484
    )


Cash flow used in operating activities

Our cash used in operating activities for the six month period
ended March 31, 2011was $1,672,903 compared to $1,830,954 used in operating
activities for the six month period ended March 31, 2010.

Cash flow provided by financing activities

Our cash provided by financing activities for the six month
period ended March 31, 2011 was $1,411,875 compared to $1,624,470h provided by
financing activities for the six month period ended March 31, 2010.

Cash Provided by Investing Activities

No cash was used in or provided by investing activities for the
six months ended March 31, 2011 or 2010.

Going Concern

At March 31, 2011, we had an accumulated deficit of $26,203,039
since our inception and incurred a net loss of $4,306,965 for the six month
period ended March 31, 2011. We expect to incur further losses in the
development of our business, all of which casts substantial doubt about our
ability to continue as a going concern. Our ability to continue as a going
concern is dependent upon our ability to generate future profitable operations
and/or to obtain the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they come due. Our
independent auditors included an explanatory paragraph regarding substantial
doubt about our ability to continue as a going concern in their report on our
annual financial statements for the year ended September 30, 2010.

Future Financing

We will require additional financing to fund our planned
operations, including further strengthening our patents, securing patents for
other compounds and any further intellectual property that we may acquire and
entering some of our current compounds into clinical trials. We currently do not
have committed sources of additional financing and may not be able to obtain
additional financing, particularly, if the volatile conditions in the stock and
financial markets, and especially the market for early development stage
pharmaceutical and biotechnology research and development company stocks
persist.

There can be no assurance that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. If we are not able to obtain the additional
financing on a timely basis, if and when it is needed, we will be forced to
delay or scale down some or all of our research and development activities or
perhaps even cease the operation of our business.

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11

Since inception we have funded our operations primarily through
equity and debt financings and we expect that we will continue to fund our
operations through the equity and debt financing. If we raise additional
financing by issuing equity securities, our existing stockholders ownership
will be diluted. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.

There is no assurance that we will be able to maintain
operations at a level sufficient for investors to obtain a return on their
investment in our common stock. Further, we may continue to be unprofitable.

Off-Balance Sheet Arrangements

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

Application of Critical Accounting Policies

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

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

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

Research and Development Expenses

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

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

Stock-based Compensation

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

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

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12

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

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

The summary of significant accounting policies should be read
in conjunction with our consolidated financial statements and related notes and
managements discussion and analysis of financial condition and results of
operations.

Recent accounting pronouncements

In October 2009, the FASB issued ASU No. 2009-13,
Multiple-Deliverable Revenue Arrangements, or ASU 2009-13, which amends
existing revenue recognition accounting pronouncements that are currently within
the scope of ASC 605. This guidance eliminates the requirement to establish the
fair value of undelivered products and services and instead provides for
separate revenue recognition based upon managements estimate of the selling
price for an undelivered item when there is no other means to determine the fair
value of that undelivered item. ASU 2009-13 is effective prospectively for
revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The adoption of this guidance did not have
a material impact on our consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update
2010-06, Fair Value Measurements and Disclosures (Topic 820): Improving
Disclosures about Fair Value Measurements. The ASU amends Subtopic 820-10
with new disclosure requirements and clarification of existing disclosure
requirements. New disclosures required include the amount of significant
transfers in and out of levels 1 and 2 fair value measurements and the reasons
for the transfers. In addition, the reconciliation for level 3 activity will be
required on a gross rather than net basis. The ASU provides additional guidance
related to the level of disaggregation in determining classes of assets and
liabilities and disclosures about inputs and valuation techniques. The
amendments are effective for annual or interim reporting periods beginning after
December 15, 2009, except for the requirement to provide the reconciliation for
level 3 activities on a gross basis, which will be effective for fiscal years
beginning after December 15, 2010. We are currently assessing the impact of ASU
2010-6 and do not expect the adoption of this guidance to have a material impact
on our consolidated financial statements.

In April 2010, the FASB issued ASU No. 2010-12, Income Taxes
(Topic 740): Accounting for Certain Tax Effects of the 2010 Health Care Reform
Acts(ASU 2010-12). This update clarifies questions surrounding the
accounting implications of the different signing dates of the Health Care and
Education Reconciliation Act and the Patient Protection and Affordable Care Act
(the Acts). ASU 2010-12 states that the FASB and the Office of the Chief
Accountant at the SEC would not be opposed to viewing the two Acts together for
accounting purposes. We have evaluated the provisions of this guidance and the
adoption of this guidance did not have a material impact on our financial
statements.

Item 3. Quantitative and Qualitative Disclosures about
Market Risks.

Not Applicable.

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Item 4T. Controls and Procedures.

Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of
1934, our management, with the participation of our principal executive officer
and our principal financial officer, evaluated our disclosure controls and
procedures (as defined in Rules 13a-15(e) of the Securities Exchange Act of
1934) as of the end of the period covered by this quarterly report on Form 10-Q.
Disclosure controls and procedures are controls and other procedures that are
designed to ensure that information required to be disclosed in our reports
filed or submitted under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commissions rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934 is accumulated and communicated to our principal executive officer and
our principal financial officer to allow timely decisions regarding required
disclosure.

Based on that evaluation, our management, with the
participation of our principal executive officer and our principal financial
officer, concluded that as of the end of the period covered by this quarterly
report on Form 10-Q, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial
Reporting

There were no changes in our internal control over financial
reporting during the fiscal quarter ended March 31, 2011 that have materially
affected, or are reasonably likely to materially affect our internal control
over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors.

In addition to other information in this quarterly report, the
following risk factors should be carefully considered in evaluating our business
because such factors may have a significant impact on our business, operating
results, liquidity and financial condition. As a result of the risk factors set
forth below, actual results could differ materially from those projected in any
forward-looking statements. Additional risks and uncertainties not presently
known to us, or that we currently consider to be immaterial, may also impact our
business, operating results, liquidity and financial condition. If any such
risks occur, our business, operating results, liquidity and financial condition
could be materially affected in an adverse manner. Under such circumstances, the
trading price of our securities could decline, and you may lose all or part of
your investment.

Risks Related to our Company

We have had a history of losses and no revenue, which raise
substantial doubt about our ability to continue as a going concern.

Since inception on January 23, 2004, we have incurred aggregate
net losses of $26,203,039 from operations. We can offer no assurance that we
will ever operate profitably or that we will generate positive cash flow in the
future. To date, we have not generated any revenues from our operations. Our
history of losses and no revenues raise substantial doubt about our ability to
continue as a going concern. As a result, our management expects the business
to continue to experience negative cash flow for the
foreseeable future and cannot predict when, if ever, our business might become
profitable. We will need to raise additional funds, and such funds may not be
available on commercially acceptable terms, if at all. If we are unable to raise
funds on acceptable terms, we may not be able to execute our business plan, take
advantage of future opportunities, or respond to competitive pressures or
unanticipated requirements. This may seriously harm our business, financial
condition and results of operations.

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14

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

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

We will need additional funding and may be unable to raise
additional capital when needed, which would force us to delay, reduce or
eliminate our research and development activities.

We will need to raise additional funding, but the current
economic condition will most likely have a negative impact on our ability to
raise additional needed capital on terms that are favorable to our company or at
all. We do not anticipate that we will generate significant revenues for several
years, if at all. Until we can generate significant revenues, if ever, we expect
to satisfy our future cash needs through equity or debt financing. We cannot be
certain that additional funding will be available on acceptable terms, or at
all. If adequate funds are not available, we may be required to delay, reduce
the scope of, or eliminate one or more of our research and development
activities.

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 for the fiscal year ended September 30, 2010
that we have incurred substantial losses since inception, which raises
substantial doubt about 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.

Risks Related to our Business

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

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15

- 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
potentially marketable products. if at all. Our research and development plans
will require substantial additional capital, arising from costs to:

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

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

- the pace of scientific progress in our research and development programs
  and the magnitude of these programs;
- the scope and results of 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.

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

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

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

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

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

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 for certain
compounds.

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

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

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

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17

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

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

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

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

- If our competitors receive regulatory approvals for and begin marketing
  similar products in the United States, the European Union, Japan and other
  territories before we do, greater awareness of their products as compared to
  ours will cause our competitive position to suffer;
- Information from our competitors or the academic community indicating that
  current products or new products are more effective or offer compelling other
  benefits than our future products could impede our market penetration or
  decrease our future market share; and,
- The pricing and reimbursement environment for our future products, as well
  as pricing and reimbursement decisions by our competitors and by payers, may
  have an effect on our revenues.

If this happens, our business will be adversely affected.

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

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

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

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

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18

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
partnering, licensing, mergers, acquisitions, joint venture and other
collaboration opportunities, we may be limited in our ability to research and
develop our potential drug compounds.

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

Universities and public and private research institutions also
compete with us. While these organizations primarily have educational or basic
research objectives, they may develop proprietary technology and acquire 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.

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19

The use of any of our products 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 products. We
currently have one drug compound in clinical trials, however, when any of our
products enter into clinical trials or become marketed products they could
potentially harm people or allegedly harm people and we may be subject to costly
and damaging product liability claims. Some of the patients who participate in
clinical trials are already ill when they enter a trial or may intentionally or
unintentionally fail to meet the exclusion criteria The waivers we obtain may
not be enforceable and may not protect us from liability or the costs of product
liability litigation. Although we intend to obtain product liability insurance
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 defence or
payment of liabilities above the amount of coverage could cost us significant
amounts of money and management distraction from other elements of the business,
causing our business to suffer.

The patent positions of biopharmaceutical products 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 patents related to 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 restrict our freedom to operate 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. | Our patents are not issued in all possible geographies
      where our products may be marketed. Currently, we have submitted for
      patent protection and have been issued patents for certain claims is
      Greece. We have submitted for patent protection on all of the major
      markets in the world. We may not necessarily be successful in securing
      patents for further claims and products in Greece, nor may we necessarily
      be successful in securing the existing claims and product patents in
      countries and jurisdictions where we have applied but have not yet had
      those patents issued. If we do not receive issued patents in these other
      key markets, our ability to advance our compounds will be severely
      hampered and we will be much less attractive to potential
  partners.                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | 5. | 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:                                                                                                                                                                                                             

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20

| | (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.                                                                                                                                                             

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 wilfully 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 incur substantial costs as a result of laws and
regulations and proposed changes in laws and regulations and we cannot predict
the impact of any future changes in law.

We face burdens relating to corporate governance and financial
reporting standards. Legislations or regulations such as Section 404 of the
Sarbanes-Oxley Act of 2002follow impose strict corporate governance and
financial reporting standards and have led to substantial costs of compliance
including consulting, auditing and legal fees. Any 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.

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

As of March 31, 2011, we had total liabilities of $1.3 million
and debt of $200,000. Our substantial indebtedness and other current financial
obligations and any that we may become a party to in the future could:

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

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21

- have a material adverse effect on us if we fail to comply with financial
  and affirmative and restrictive covenants in debt agreements and an event of
  default occurs as a result of a failure that is not cured or waived;
- require us to dedicate a substantial portion of our cash flow for interest
  payments on our indebtedness and other financial obligations, thereby reducing
  the availability of our cash flow to fund working capital and capital
  expenditures;
- limit our flexibility in planning for, or reacting to, changes in our
  business and the industry in which we operate; and
- place us at a competitive disadvantage compared to our competitors that
  have proportionally less debt.

If we are unable to meet our debt service obligations and other
financial obligations, we could be forced to restructure or refinance our
indebtedness and other financial transactions, seek additional equity capital or
sell our assets. We might then be unable to obtain such financing or capital or
sell our assets on satisfactory terms, if at all. Any refinancing of our
indebtedness could be at significantly higher interest rates, and/or incur
significant transaction fees.

Our Principal Executive Officer is employed elsewhere and
his time and effort will not be devoted to our company full-time.

Though our president is contracted in full-time service to the
company, our Principal Executive Officer is employed in other positions with
other companies. As a result, our company is and will continue to be managed on
a part-time basis. Our business could be adversely impacted by the lack of a
full time management team.

Risks Related to our Common Stock

A decline in the price of our common stock could affect our
ability to raise further working capital and adversely impact our operations and
would severely dilute existing or future investors if we were to raise funds at
lower prices.

A prolonged decline in the price of our common stock could
result in a reduction in 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:

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

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

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22

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

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

Trading 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.

There is currently a limited market for our common stock. Our
common stock is quoted on the OTC Bulletin Board. 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 stock exchange like NASDAQ. There is no assurance that a sufficient market
will develop in the stock, in which case it could be difficult for our
stockholders to resell their stock.

Our stock is classed as a penny stock. Trading of our
stock may be restricted by the Securities and Exchange Commissions penny stock
regulations 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 (excluding
the value of the primary residence of such individuals) 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 Securities and Exchange Commission 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.

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23

The Financial Industry Regulatory Authority sales practice
requirements may also limit a stockholders ability to buy and sell our stock.

In addition to the penny stock rules described above, the
Financial Industry Regulatory Authority or 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. The 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 and have an
adverse effect on the market for shares of our common stock.

Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. (Removed and Reserved).

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit Number
    Description(3)
    Articles of Incorporation and Bylaws3.1
    Articles of Incorporation (incorporated by reference to
      an exhibit to our Registration Statement on Form SB-2 filed on January 13,
      2005)3.2
    Bylaws (incorporated by reference to an exhibit to our
      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 to an exhibit to 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 to
      an exhibit to our Registration Statement on Form SB-2 filed on January 13,
      2005)4.2
    Form of Convertible Loan Agreement (incorporated by
      reference to an exhibit to our Form 8-K filed on April 3, 2009)4.3
    8% Convertible Loan Agreement dated June 3, 2009
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on June 23, 2009)4.4
    8% Convertible Loan Agreement dated June 19, 2009
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on June 26, 2009)(10)
    Material Contracts10.1
    Agreement between Anavex Life Sciences Corp. and Dr.
      Alexandre Vamvakides dated January 31, 2007 (incorporated by reference to
      an exhibit to our Current Report on Form 8-K filed on February 7, 2007)10.2
    Abstract of Disclosure of Greek Patent Number 1002616
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on February 7, 2007)


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24

Exhibit Number
    Description10.3
    Abstract of Disclosure of Greek Patent Number 1004208
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on February 7, 2007)10.4
    Abstract of Disclosure of Greek Patent Number 1004868
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on February 7, 2007)10.5
    Written description of Greek Patent Application Number
      20070100020 (incorporated by reference to an exhibit to our Current Report
      on Form 8-K filed on February 7, 2007)10.6
    Form of Stock Option Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on February 22,
      2007)10.7
    Shares for Services and Subscription Agreement dated
      September 11, 2007 between our company and Eurogenet Labs S.A.
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on September 27, 2007)10.8
    2007 Stock Option Plan (incorporated by reference to an
      exhibit to our Current Report on Form 8-K filed on September 28, 2007)10.9
    Consulting Agreement with Dr. Cameron Durrant dated May 20,
      2008 (incorporated by reference to an exhibit to our Quarterly Report on
      Form 10-QSB filed on August 18, 200810.10
    Form of Convertible Loan Agreement (incorporated by
      reference to an exhibit to our Current Report on Form 8-K filed on April
      3, 2009)10.11
    Consulting Agreement with Dr. Tariq Arshad dated March 2,
      2009 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on April 3, 2009)10.13
    Consulting Agreement with Dr. Mark Smith dated January
      13, 2009 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on April 3, 2009)10.14
    Form of Subscription Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on April 3, 2009)10.15
    Form of Warrant Certificate (incorporated by reference to
      an exhibit to our Current Report on Form 8-K filed on April 3, 2009)10.16
    Amended Consulting Agreement with Dr.Cameron Durrant dated
      May 14, 2009 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on June 23, 2009)10.17
    CEO Consulting Agreement with Dr. Herve de Kergrohen
      dated June 12, 2009 (incorporated by reference to an exhibit to our
      Current Report on Form 8-K filed on June 23, 2009)10.18
    Form of Private Placement subscription agreement dated
      June 15, 2009 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on June 23, 2009)10.19
    Shares for Services Agreement with Andreas Eleuthariadis
      dated June 10, 2009 (incorporated by reference to an exhibit to our
      Current Report on Form 8-K filed on June 23, 2009)10.20
    Shares for Services Agreement with Vasileios Kourafalos
      dated June 10, 2009 (incorporated by reference to an exhibit to our
      Current Report on Form 8-K filed on June 23, 2009)10.21
    Shares for Services Agreement with George Kalkanis dated
      June 10, 2009 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on June 23, 2009)10.22
    Stock Option Agreement with Dr. Alexandre Vamvakides dated
      June 11, 2009 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on June 23, 2009)10.23
    Form of Private Placement Subscription Agreement
      Convertible Loan (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on June 26, 2009)10.24
    Form of Private Placement Subscription Agreement for
      Units (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on June 26, 2009)10.25
    Consultant Services Agreement with NAD Ltd. dated July 1,
      2009 (incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on November 24, 2009)10.26
    Form of Subscription Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on November 24,
      2009)10.27
    Form of Warrant Certificate (incorporated by reference to
      an exhibit to our Current Report on Form 8-K filed on August 12, 2009)10.28
    Stock Option Agreement with Dr. Alexander Vamvakides dated
      October 19, 2009 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on November 24, 2009)


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25

Exhibit Number
    Description10.29
    Promissory note issued to Stonehedge Limited on January
      1, 2010 (incorporated by reference to an exhibit to our Quarterly Report
      on Form 10-Q filed on March 31, 2010)10.30
    Second Amended Consulting Agreement with Dr. Cameron
      Durrant dated January 2, 2010 (incorporated by reference to an exhibit to
      our Current Report on Form 8-K filed on April 9, 2010)10.31
    Contract Lease Agreement with Euro Genet Labs SA dated
      February 1, 2010 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on April 9, 2010)10.32
    Form of Subscription Agreement (incorporated by reference
      to an exhibit to our Current Report on Form 8-K filed on April 9, 2010)10.33
    Form of Warrant Certificate (incorporated by reference to
      an exhibit to our Current Report on Form 8-K filed on April 9, 2010)10.34
    Form of Convertible Loan Agreement (incorporated by
      reference to an exhibit to our Current Report on Form 8-K filed on April
      9, 2010)10.35
    Form of Subscription Agreement for US subscribers
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on July 6, 2010)10.36
    Form of Subscription Agreement for non-US subscribers
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on July 6, 2010)10.37
    Form of Warrant Certificate for US warrant holders
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on July 6, 2010)10.38
    Form of Warrant Certificate for non-US warrant holders
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on July 6, 2010)10.39
    Shares for Services Agreement dated July 5, 2010 with
      Eurogenet Labs SA (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on July 9, 2010)10.40
    Form of Warrant Certificate for non-US warrant holders
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on July 9, 2010)10.41
    Agreement for Services with Genesis Biopharma Group LLC
      dated August 10, 2010 (incorporated by reference to an exhibit of our
      Current Report on Form 8-K filed on August 18, 2010) (portions of
      the exhibit have been omitted pursuant to a request for
      confidential treatment)10.42
    Agreement for Services with ABX-CRO Advanced
      Pharmaceutical Services dated August 10, 2010 (incorporated by reference
      to an exhibit of our Current Report on Form 8-K filed on August 18, 2010)
      *(portions of the exhibit have been omitted pursuant to a request for
      confidential treatment)*10.43
    Form of Subscription Agreement (US Purchasers)
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on September 9, 2010)10.44
    Form of Subscription Agreement (Canadian and Offshore
      Purchasers) (incorporated by reference to an exhibit to our Current Report
      on Form 8-K filed on September 9, 2010)10.45
    Form of Warrant Certificate (US warrant
      holders)(incorporated by reference to an exhibit to our Current Report on
      Form 8-K filed on September 9, 2010)10.46
    Form of Warrant Certificate (Canadian and Offshore
      warrant holders) (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on September 9, 2010)10.47
    Consulting Agreement dated August 2, 2010 with Tom
      Skarpelos (incorporated by reference to an exhibit to our Current Report
      on Form 8-K filed on September 27, 2010)10.48
    Independent Contractor Agreement dated September 1, 2010
      with David Tousley (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on September 27, 2010)10.49
    Sublease Contract with Genesis Research LLC dated
      September 15, 2010 (incorporated by reference to an exhibit to our Current
      Report on Form 8-K filed on September 27, 2010)10.50
    Form of Subscription Agreement (US Purchasers)
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on November 22, 2010)10.51
    Form of Subscription Agreement (non-US Purchasers)
      (incorporated by reference to an exhibit to our Current Report on Form 8-K
      filed on November 22, 2010)10.52
    Form of Warrant Certificate (US Warrant Holders) (US
      Purchasers) (incorporated by reference to an exhibit to our Current Report
      on Form 8-K filed on November 22, 2010)10.53
    Form of Warrant Certificate (non-US Warrant Holders) (US
      Purchasers) (incorporated by reference to an exhibit to our Current Report
      on Form 8-K filed on November 22, 2010)


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26

Exhibit Number
      Description10.54
      Shares for Service and Subscription
          Agreement dated November 1, 2010 with Eurogenet Labs SA (incorporated
          by reference to an exhibit to our Current Report on Form 8-K filed on
          November 22, 2010)10.55
      Subscription Agreement with
          Stonehedge Limited dated November 17, 2010 (incorporated by reference
          to an exhibit to our Current Report on Form 8-K filed on November 22,
          2010)10.56
      Form of Subscription Agreement
          (incorporated by reference to an exhibit to our Current Report on Form
          8-K filed on November 30, 2010)10.57
      Form of Warrant Certificate
          Form of Subscription Agreement (incorporated by reference to an exhibit
          to our Current Report on Form 8-K filed on November 30, 2010)10.58
      Shares for Services Agreement
          Form of Subscription Agreement (incorporated by reference to an exhibit
          to our Current Report on Form 8-K filed on November 30, 2010)10.59
      Form of Subscription Agreement
          (non-US Purchasers) (incorporated by reference to an exhibit to our
          Current Report on Form 8-K filed on February 7, 2011)10.60
      Form of Warrant Certificate
          (non-US Warrant Holders) (incorporated by reference to an exhibit to
          our Current Report on Form 8-K filed on February 7, 2011)10.61
      Termination Agreement dated
          February 2, 2011 with Genesis BioPharma Group, LLC (incorporated by
          reference to an exhibit to our Current Report on Form 8-K filed on February
          7, 2011)10.62
      Independent Contractor Agreement
          with Harvey Lalach dated February 1, 2011 (incorporated by reference
          to an exhibit to our Current Report on Form 8-K filed on February 7,
          2011)10.63
      Independent Contractor Agreement
          with Dr. Angelos Stergiou dated February 1, 2011 (incorporated by reference
          to an exhibit to our Current Report on Form 8-K filed on February 7,
          2011)10.64
      Amended and Restated 2007 Stock
          Option Plan (incorporated by reference to an exhibit to our Current
          Report on Form 8-K filed on February 8, 2011)10.65
      Form of Advisory Board Consulting
          Agreement (incorporated by reference to an exhibit to our Current Report
          on Form 8-K filed on February 28, 2011)10.66
      Consulting Agreement dated
          March 30, 2011 with Shackleton Consulting Corp. (incorporated by reference
          to an exhibit to our Current Report on Form 8-K filed on April 13, 2011)10.67
      Form of subscription agreement
          for convertible debenture (incorporated by reference to an exhibit to
          our Current Report on Form 8-K filed on April 26, 2011)10.68
      Form of subscription agreement
          for convertible debenture (incorporated by reference to an exhibit to
          our Current Report on Form 8-K filed on May 9, 2011)10.69
      Form of warrant certificate
          (incorporated by reference to an exhibit to our Current Report on Form
          8-K filed on May 9, 2011)(14)
      Code of Ethics14.1
      Code of Conduct (incorporated
          by reference to an exhibit to our Current Report on Form 8-K filed on
          September 28, 2007)(21)
      Subsidiaries21.1
      Anavex Life Sciences (France)
          SA, incorporated under the laws of France(31)
      Section 302 Certifications31.1*
      Section
      302 Certification of Dr. Cameron Durrant31.2*
      Section
          302 Certification of Harvey Lalach(32)
      Section 906 Certifications32.1*
      Section
          906 Certification of Dr. Cameron Durrant32.2*
      Section
          906 Certification of Harvey Lalach(99)
      Additional Exhibits99.1
      Insider Trading Policy Adopted
          August 27, 2010 (incorporated by reference to an exhibit to our Current
          Report on Form 8-K filed on September 27, 2010)


* Filed herewith.

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27

SIGNATURES

Pursuant to the requirements 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/ Dr. Cameron Durant                                           | 
|-------------------------------------------------------------------- | 
|                                                                     | 
|Dr. Cameron Durrant                                                  | 
|Executive Chairman and Director                                      | 
|(Principal Executive Officer)                                        | 
|Date: May 16, 2011                                                   | 
|                                                                     | 
|                                                                     | 
|                                                                     | 
|/s/ Harvey Lalach                                                    | 
|Harvey Lalach                                                        | 
|President, Chief Operating Officer, Secretary and Director           | 
|(Principal Financial Officer and Principal Accounting
      Officer) | 
|Date: May 16, 2011                                                   | 

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