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Item 7. Management’s Discussion and Analysis

2025-11-25 compared with 2024-12-23 · 95 added, 83 removed, 176 unchanged (50% of the section changed)

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See “Forward Looking Statements” included elsewhere in this report.

For discussion and

analysis pertaining to 2024 overview and highlights as compared to 2023, please refer to the Company’s Annual Report on Form 10-K,

filed with the Securities and Exchange Commission (“SEC”) on December 23, 2024.

Financial Operations Overview

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

the pre-revenue stage and have not earned any revenues since our inception in 2004.

We do not anticipate earning any revenues until we

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

Comparison of year ended September 30, 2024 to year ended

September 30, 2023

Comparison of fiscal year 2025 to fiscal years 2024

Operating Expenses

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from $52.9 million in fiscal 2024.

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

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

million in fiscal 2024, as more fully described below.

During fiscal 2024, we experienced an overall decrease

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

The decreases were largely due to:

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

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

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

of the EXCELLENCE trial and the respective open label extension;

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

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

These decreases were largely offset by the following

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

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

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

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

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

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

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

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

The decrease is attributable to research and development expenses, as more fully described below.

The following table summarizes our research and development expenses for

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Total external service provider costs

During fiscal 2025, we experienced an overall decrease

in total research and development expenses over the comparable fiscal 2024 financial year.

The main factors driving this decrease were

(i) a decrease of approximately $3.6 million related to the Alzheimer’s program due to the completion

of the ATTENTION-AD trial in the third quarter of fiscal 2024 and an overall decrease in related trial data analysis activities;

(ii) a decrease of approximately $1.7 million associated with the Parkinson’s program related to planning

activities for a future clinical trial in the comparable period;

(iii) a decrease of approximately $1.5 million over the comparable period relating to manufacturing activities

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

(iv) a decrease of approximately $0.9 million related to the completion of a production run of ANAVEX ® 3-71

in fiscal 2024.

(v) a decrease of approximately $0.8 million associated with our Rett syndrome program, due to the completion

of the ANAVEX ® 2-73 EXCELLENCE OLE in the third quarter of fiscal 2024.

The above decreases were partially offset by an increase

of approximately $3.0 million related to completion of Part B of the ANAVEX ® 3-71-SZ-001

trial during fiscal 2025, which was substantially larger in size than the preceding Part A during fiscal 2024.

General and administrative expenses were $13.8 million

for the fiscal 2025 financial year, as compared to $11.0 million in fiscal 2024.

The primary reason for the decrease in general and administrative

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

the extended timeline of milestone based vesting awards.

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

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

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

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

The primary reason for the increase in general and administrative

expenses was an increase in legal fees of $1.7 million, related to legal/regulatory matters, a new shelf registration statement, and various

class action lawsuits.

We expect to see our research and development expenditures increase

from current levels as we continue to advance our pipeline compounds.

Other income (net)

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million as compared to $9.9 million for fiscal 2024.

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

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

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

rates year over year.

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

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

In comparison, research and development

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

This income is driven by the clinical

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

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

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

We expect to continue to receive support from the Australian

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

The primary reason for the decrease in other income was due to a decrease of $2.6

million in interest income as a result of withdrawals in principal balance applied to excess funds invested in a money market as well

as a market wide decrease in interest rates.

During fiscal 2025, we recorded $0.6 million in research and development incentive

income, consisting of the Australian research and development incentive credit administered through the ATO, in connection with fiscal

2025 eligible expenditures.

In comparison, research and development incentive income for fiscal 2024 was $2.3 million in connection with

fiscal 2024 eligible expenditures.

This income is driven by the clinical trial expenditures incurred in Australia, and the decrease year

over year is a result of the completion of eligible R&D clinical trials in Australia.

We expect to continue to receive support from

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

Net loss for fiscal 2025 was $46.4 million, or $0.54

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$8.2 million during fiscal 2025.

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

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

The principal reason for this is due to a large decrease in accounts payable during the year, as compared

to a large increase in the comparable financial year, principally due to timing of payments for a large manufacturing campaign of ANAVEX ® 2-73.

Cash flow provided by financing activities

Cash provided by financing activities in fiscal 2025 was $9.4

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

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

million, comprised primarily of net cash received of $9.2 million related to the issuance of common shares pursuant to the at-the-market

offering and $2.9 million in cash from the exercise of stock options by our employees.

We utilized $2.7 million to satisfy tax withholding

obligations associated with the net exercise of two expiring employee stock options to our CEO, in exchange for the withholding of shares.

Cash provided by financing activities in fiscal 2024 was $12.0

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Other Financings

Sales Agreement

On July 25, 2025, we entered into a Sales Agreement

(the “Sales Agreement”) with TD Securities (USA) LLC (the “Sales Agent”).

Pursuant to the Sales Agreement, the

Company may offer and sell up to an aggregate offering price of $150 million (the “Offering”) in shares of common stock from

time to time through the Sales Agent.

Upon delivery of a placement notice based on our instructions

and subject to the terms and conditions of the Sales Agreement, the Sales Agent may sell shares of common stock by methods deemed to be

an “at the market offering”, in negotiated transactions at market prices prevailing at the time of sale or at prices related

to such prevailing market prices, or by any other method permitted by law, including negotiated transactions, subject to our prior written

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

We or the Sales Agent may suspend or terminate the

Offering upon notice to the other party, subject to certain conditions.

The Sales Agent will act as sales agent on a commercially reasonable

efforts basis consistent with its normal trading and sales practices, applicable state and federal law, rules and regulations and the

rules of Nasdaq.

We have agreed to pay the Sales Agent commissions

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

also agreed to provide the Sales Agent with customary indemnification and contribution rights.

During the year ended September 30, 2025, the Company

issued an aggregate of 927,910 shares of Common Stock under the Sales Agreement for net proceeds of $9.2 million, after deducting commissions

and offering expenses.

At September 30, 2025, there was an unused amount

of $140.4 million under the Sales Agreement.

2023 Purchase Agreement

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

On February 3, 2023, we entered into a $150,000,000

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

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

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

On any business day and subject to certain customary

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

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

provided, however,

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

The purchase price of shares

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

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

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

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

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

to which we have the right to sell and issue to Lincoln Park, and Lincoln Park is obligated to purchase, up to $150.0 million in value

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

On any business day and subject to having an effective

registration statement and subject to certain customary conditions, we may direct Lincoln Park to purchase up to 200,000 shares of Common

Stock (such purchases, “Regular Purchases”).

The amount of a Regular Purchase may increase under certain circumstances based

on the market price of the Common Stock;

provided, however, that Lincoln Park’s committed obligation under any Regular Purchase

shall not exceed $4.0 million.

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

shares at the time of sales as described in the 2023 Purchase Agreement.

There are no limits on the price per share that Lincoln Park

may pay to purchase Common Stock under the 2023 Purchase Agreement.

In addition, if we have directed Lincoln Park to purchase the full

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

purchases” and “additional accelerated purchases,” each as set forth in the 2023 Purchase Agreement.

The 2023 Purchase Agreement limits the Company’s

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During the year ended September 30, 2025, the Company

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

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

During the year ended September 30, 2023,

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

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

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

remained available under the 2023 Purchase Agreement.

Controlled Equity Offering Sales Agreement

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

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

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

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

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

No shares were sold during the years ended September

30, 2024 and 2023 under the 2020 Sales Agreement.

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

did not issue any shares of common stock under the 2023 Purchase Agreement.

During the year ended September 30, 2024, the Company issued

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

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

On September 30, 2025, there was an unused amount

of $110.8 million under the 2023 Purchase Agreement.

The Company will need to file a prospectus supplement in order to access funds under

the 2023 Purchase Agreement.

Off-Balance Sheet Arrangements

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We estimate an implicit service period for achieving performance

criteria for each award and recognizes the resulting fair value as expense over the implicit service period when we conclude that achieving

criteria for each award and recognize the resulting fair value as expense over the implicit service period when we conclude that achieving

the performance criteria is probable.

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

ITEM 7A QUANTITATIVE AND QUALITATIVE

DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting companies.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis