What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-28 compared with 2026-08-28 · 116 added, 139 removed, 457 unchanged (36% of the section changed)

221 unchanged sentences

patents, seventeen (17) pending U.S.

patent applications, and numerous Patent Cooperation Treaty (“PCT”)

patents and patent applications relating to our drug candidates, methods associated therewith, and to our research programs.

patent applications, and numerous Patent Cooperation Treaty (PCT) and ex-U.S.

and patent applications relating to our drug candidates, methods associated therewith, and to our research programs.

Of the total, at least one (1) U.S.

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Nasdaq Compliance

As previously disclosed, on May 20, 2026, we received a deficiency notification

letter from the Nasdaq Listing Qualifications Department (the “Nasdaq Staff”) indicating that, as a result of our inability

to timely file our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, we are not in compliance with Nasdaq Listing

Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports with the SEC.

On July 20, 2026,

we timely submitted our plan (“Compliance Plan”) to the Nasdaq Staff to regain compliance with Nasdaq Listing Rule 5250(c)(1).

As previously disclosed, on May 20, 2026, we received

a deficiency notification letter from the Nasdaq Listing Qualifications Department (the “Nasdaq Staff”) indicating that, as

a result of our inability to timely file our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, we are not in

compliance with Nasdaq Listing Rule 5250(c)(1), which requires listed companies to timely file all required periodic financial reports

with the SEC.

On July 20, 2026, we timely submitted our plan (“Compliance Plan”) to the Nasdaq Staff to regain compliance

with Nasdaq Listing Rule 5250(c)(1).

The Compliance Plan is currently under review by the Nasdaq Staff.

We expect the filing of this Quarterly Report on Form

10-Q, and our Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2026, to cure the deficiency.

However, the Nasdaq

Staff will consider multiple factors when reviewing our Compliance Plan, including our past compliance history, the reasons for the late

filing, other corporate events that may occur within our review period, our overall financial condition and our public disclosures.

the Compliance Plan is not accepted by the Nasdaq Staff, the Company will have an opportunity to request a hearing on the Nasdaq Staff’s

determination before an independent Hearings Panel.

We expect the filing of this Quarterly Report on Form 10-Q, and our Quarterly

Report on Form 10-Q for the quarterly period ended June 30, 2026 to cure the deficiency.

However, the Nasdaq Staff will consider multiple

factors when reviewing our Compliance Plan, including our past compliance history, the reasons for the late filing, other corporate events

that may occur within our review period, our overall financial condition and our public disclosures.

If the Compliance Plan is not accepted

by the Nasdaq Staff, the Company will have an opportunity to request a hearing on the Nasdaq Staff’s determination before an independent

Hearings Panel.

Financial Overview

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(CRO) expenses in support of these clinical trials.

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

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

support of our research and development activities.

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

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

research and development activities.

General and administrative expenses consist of personnel

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and other administrative expenses and professional services.

We have incurred increased legal and other professional expenses arising

out of the review by the special committee (“Special Committee”) of our Board of Directors (“Board”), which resulted

in the termination of our former CEO, and related matters, and we anticipate incurring higher legal and other professional expenses in

future quarters in connection with these matters.

Comparison of the three months ended June 30, 2026

Subsequent to the end of the quarterly period ended March 31, 2026, we

incurred increased legal and other professional expenses arising out of the review by the special committee (“Special Committee”)

of our Board of Directors (“Board”), which resulted in the termination of our former CEO, and related matters, and we anticipate

incurring higher legal and other professional expenses in future quarters in connection with these matters.

Comparison of the three months ended March 31,

2026 and 2025

Operating Expenses

Total operating expenses for the three months ended

June 30, 2026 were $(6.7) million, compared to $14.5 million for the comparable three months ended June 30, 2025.

March 31, 2026 were $6.5 million, compared to $12.5 million for the comparable three months ended March 31, 2025.

The primary reason for

the decrease in operating expenses is due to the reversal of $15.5 million in stock-based compensation expense primarily associated with

the termination of our former CEO for Cause.

Additionally, there were also reversals of $1.9 million in stock-based compensation expense

associated with the determination that previously granted milestone-based stock options, will never vest given the Company’s change

the decrease in operating expenses is due to the decrease in research and development expenses, which is more fully described below.

General and administrative expenses were $2.3 million

for the three months ended June 30, 2026 as compared to $4.5 million for the three months ended June 30, 2025.

for the three months ended March 31, 2026 as compared to $2.6 million for the same quarter of fiscal 2025.

The decrease was primarily

related to the reversal of $7.5 million in stock-based compensation expense during the period.

Of the total, $6.9 million was associated

with the termination of employees, primarily our former CEO and $0.6 million was associated with the determination that previously granted

milestone-based stock options, will never vest.

These decreases were partially offset by an increase in legal and other professional expenses

of approximately $2.2 million arising out of the review by the Special Committee, which resulted in the termination of our former CEO,

and related matters.

related to a decrease in legal and professional fees of approximately $0.4 million.

Our research and development expenses for the three

months ended June 30, 2026 were $(4.7) million, as compared to $10.0 million for the three months ended June 30, 2025.

The decrease was

primarily related to the reversal of $9.9 million in stock-based compensation expense during the period.

Of the total, $8.6 million was

associated with the termination of employees, primarily our former CEO, and $1.3 million was associated with the determination that previously

granted milestone-based stock options will never vest.

months ended March 31, 2026 were $4.2 million as compared to $9.9 million for the three months ended March 31, 2025.

The following table summarizes our research and development

expenses for the three months ended June 30, 2026 and 2025 (in thousands):

expenses for the three months ended March 31, 2026 and 2025 (in thousands):

Cost of external service providers

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Total research and development costs

During the three months ended June 30, 2026 and 2025,

During the three months ended March 31, 2026 and 2025,

external service provider costs by indication and product candidate were as follows (in thousands):

Alzheimer’s disease

Rett syndrome (recovery)

Rett syndrome

Fragile X syndrome

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on Parkinson’s disease relates to residual costs or costs in prior period for this indication that has now been de-prioritized

to patients who have been granted continued access to treatment with ANAVEX 2-73 through the Australian Government Department of Health

– Therapeutic Goods Administration’s compassionate use Special Access Scheme, Health Canada’s Special Access Program

(“SAP”) and the Medicines and Health Care Products Regulatory Agency (“MHRA”) Named Patient Program (“NPP”).

indications may include clinical chemistry, manufacturing and controls (“CMC”) for which the intended use of the resulting

drug product is not necessarily known when the cost is incurred.

to patients who have been granted continued access to treatment with ANAVEX ® 2-73 through the Australian Government Department

of Health – Therapeutic Goods Administration’s compassionate use Special Access Scheme, Health Canada’s Special Access

Program (“SAP”) and the Medicines and Health Care Products Regulatory Agency (“MHRA”) Named Patient Program (“NPP”).

indications may include clinical chemistry, manufacturing and controls (“CMC”) for which the intended use of the resulting drug product

is not necessarily known when the cost is incurred.

The decrease in research and development expenses

during the three-month period is primarily related to the following:

(i) a decrease in stock-based compensation charges of $12.5 million from the comparable period as a result

of the recovery of stock-based compensation expense associated with unvested and forfeited stock options of departing employees, primarily

our former CEO;

(ii) a reduction in personnel costs of $1.2 million as a result of a

reduction in staff, as well as a reduction in consultants engaged in connection with European regulatory affairs activities;

(iii) a decrease of approximately $0.9 million from the comparable period as a result of the completion of the

(i) a decrease of approximately $2.6 million from the comparable period as a result of the completion of the

ANAVEX 3-71 clinical trial for schizophrenia in May 2025;

(iv) a reduction in spending of $0.8 million on the Rett syndrome program,

primarily as a result of the completion of biomarker analysis and CRO involvement associated with the RS-003 clinical trial.

This was partially offset by an increase in spending

on clinical pharmacology studies of $1.1 million, primarily for a DDI study, which commenced in the third quarter of fiscal 2026, and

manufacturing of drug product for our planned ADME study, which is expected to start in the fourth quarter of fiscal 2026.

(ii) a decrease of approximately $2.0 million from the comparable period relating to increased manufacturing

activities for ANAVEX 2-73 for early AD performed in the comparable period to support the MAA for ANAVEX 2-73 for early AD.

were incurred prior to the withdrawal of the MAA, we plan to use the resulting clinical trial material for planned future Phase 3 trials;

(iii) a decrease in stock-based compensation charges of approximately $1.0 million from the comparable period

as a result of the recovery of stock-based compensation expense associated with unvested and forfeited stock options of departing employees

in the comparable period.

Other income (net)

Net other income for the three months ended June 30,

2026 was $1.1 million, as compared to $1.2 million for the three months ended June 30, 2025.

The decrease is primarily related to a decrease

in research and development incentive income of $0.1 million as a result of the completion of clinical trial activities in Australia that

had been eligible for the Australian research and development credit.

Net income (loss)

Net income for the three months ended June 30, 2026

was $7.8 million, or $0.08 per share, as compared to a net loss of $13.2 million, or $0.16 per share, in the three months ended June 30,

The decrease in net loss is primarily related to the recovery of stock-based compensation expense, as more fully described above.

Comparison of the nine months ended June 30, 2026

Net other income for the three months ended March

31, 2026 was $1.1 million, as compared to $1.3 million for the three months ended March 31, 2025.

The decrease is primarily related to

a decrease in interest income of $0.2 million as a result of lower interest rates during the period.

Net loss for the three months ended March 31, 2026,

was $5.3 million, or $0.06 per share, as compared to $11.2 million, or $0.13 per share, for the three months ended March 31, 2025.

decrease is primarily related to a decrease in research and development expenses, as more fully described above.

Comparison of the six months ended March 31, 2026

Operating Expenses

Total operating expenses for the nine months ended

June 30, 2026 were $6.5 million, compared to $40.6 million for the nine months ended June 30, 2025.

Total operating expenses for the six months ended

March 31, 2026 were $13.3 million, compared to $26.1 million for the six months ended March 31, 2025.

The primary reason for the decrease

in operating expenses is due to the reversal of $16.4 million in stock-based compensation expense primarily associated with the termination

of our former CEO and other personnel.

Additionally, there were also reversals of $1.9 million in stock-based compensation expense associated

with the determination that previously granted milestone-based stock options will never vest given the Company’s change in strategy.

in operating expenses is due to the decrease in research and development expenses, which is more fully described below.

General and administrative expenses were $4.4 million

for the nine months ended June 30, 2026 as compared to $10.3 million for the nine months ended June 30, 2025.

The decrease was primarily

related to the reversal of $7.5 million in stock-based compensation expense during the period.

Of the total, $6.9 million was associated

with the termination of employees, primarily our former CEO, and $0.6 million was associated with the determination that previously granted

milestone-based stock options will never vest.

These decreases were partially offset by an increase in legal and professional fees of

approximately $1.5 million arising out of the review by the Special Committee, which resulted in the termination of our former CEO, and

related matters.

Our research and development expenses for the nine

months ended June 30, 2026 were $4.1 million, as compared to $30.3 million for the nine months ended June 30, 2025.

The decrease was primarily

related to the reversal of $10.8 million in stock-based compensation expense during the period.

Of the total, $9.5 million was associated

with the termination of employees, primarily our former CEO, and $1.3 million was associated with the determination that previously granted

milestone-based stock options will never vest.

for the six months ended March 31, 2026, as compared to $5.8 million for the same period of fiscal 2025.

The decrease was primarily related

to a decrease in legal and professional fees of approximately $0.7 million, as well as a decrease in stock-based compensation expense

of $0.4 million as a result of the vesting of previously issued milestone options, and due to the forfeiture of options by a deceased

director, as well as $0.1 million related to a reduction in accrued cash bonus compensation for existing staff.

Our research and development expenses for the six

months ended March 31, 2026 were $8.8 million, as compared to $20.3 million for the six months ended March 31, 2025.

The following table summarizes our research and development

expenses for the nine months ended June 30, 2026 and 2025 (in thousands):

expenses for the six months ended March 31, 2026 and 2025 (in thousands):

Cost of external service providers

Personnel costs

Share based compensation expense (recovery)

Share based compensation

Other common costs

Total research and development costs

During the nine months ended June 30, 2026 and 2025,

During the six months ended March 31, 2026 and 2025,

external service provider costs by product candidate were as follows (in thousands):

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that has now been de-prioritized.

to patients who have been granted continued access to treatment with ANAVEX 2-73 through the Australian Government Department of Health

– Therapeutic Goods Administration’s compassionate use Special Access Scheme, Health Canada’s SAP and the MHRA NPP.

indications may include CMC for which the intended use of the resulting drug product is not necessarily known when the cost is incurred.

to patients who have been granted continued access to treatment with ANAVEX 2-73 through the Australian Government Department

of Health – Therapeutic Goods Administration’s compassionate use Special Access Scheme, Health Canada’s SAP and the

indications may include CMC for which the intended use of the resulting

drug product is not necessarily known when the cost is incurred.

The decrease in research and development expenses

during the nine-month period is primarily related to the following:

(i) a decrease in stock-based compensation charges of approximately $14.1 million from the comparable period

as a result of the recovery of stock-based compensation expense resulting from the forfeiture of unvested stock options;

(ii) a decrease of approximately $5.0 million from the comparable period as a result of the completion of the

during the six-month period is primarily related to the following:

(i) a decrease of approximately $4.1 million from the comparable period as a result of the completion of the

ANAVEX 3-71 clinical trial for the treatment of schizophrenia in the comparable period ;

(iii) a decrease of approximately $4.0 million from the comparable period related to increased manufacturing

(ii) a decrease of approximately $3.7 million from the comparable period related to increased manufacturing

activities in the comparable period for ANAVEX 2-73 for early AD for potential commercial use and increased activities in the comparable

period to support the MAA for ANAVEX 2-73 for the treatment of early AD, which has now been withdrawn;

(iii) a decrease in stock-based compensation charges of approximately $1.7 million from the comparable period

associated with the vesting of previously issued milestone options and as a result of the recovery of stock-based compensation expense

resulting from the forfeiture of unvested stock options;

(iv) a decrease of approximately $1.6 million in personnel and consultant costs from the comparable period

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and an overall reduction in accrued cash bonus pool compensation for existing staff;

(v) a reduction of $1.3 million in spending on the Rett syndrome program,

as a result of the completion of biomarker and additional statistical programming analysis and CRO involvement associated with the RS-003

clinical trial in the comparable period.

(v) a decrease of approximately $0.5 million related to biomarker and additional statistical programming of

ANAVEX 2-73 for the treatment of Rett syndrome in the comparable period.

Other income (net)

Net other income for the nine months ended June 30,

2026 was $3.4 million, as compared to $4.0 million for the nine months ended June 30, 2025.

Net other income for the six months ended March 31,

2026 was $2.3 million, as compared to $2.8 million for the six months ended March 31, 2025.

The decrease is primarily related to a decrease

in research and development incentive income of $0.5 million as a result of the completion of clinical trial activities in Australia that

had been eligible for the Australian research and development credit.

Net loss for the nine months ended June 30, 2026 was

$3.2 million, or $0.03 per share, as compared to $36.6 million, or $0.43 per share, for the nine months ended June 30, 2025.

in net loss is primarily related to the recovery of stock-based compensation expense, as more fully described above.

in interest income of $0.5 million as a result of lower interest rates.

Net loss for the six months ended March 31, 2026,

was $11.0 million, or $0.12 per share, as compared to $23.3 million, or $0.27 per share for the six months ended March 31, 2025.

is primarily related to a decrease in research and development expenses, as more fully described above.

Liquidity and Capital Resources

Working Capital (in thousands)

June 30, 2026

March 31, 2026

September 30, 2025

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Working Capital

On June 30, 2026, we had net current assets of $112.4

On March 31, 2026, we had net current assets of $121.7

million, an increase of approximately $26.8 million from our fiscal year ended September 30, 2025.

The increase in net current assets

is primarily related to cash received from the issuance of our common stock pursuant to the 2025 Sales Agreement (as defined below) during

the first quarter of fiscal 2026.

is primarily related to cash received from the issuance of common stock pursuant to the 2025 Sales Agreement (as defined below).

We had cash and cash equivalents of $127.4 million

as of June 30, 2026, compared to $102.6 million as of September 30, 2025.

We expect our cash balance at the end of the third quarter of

2026 to fund operations and planned development activities until mid to late fiscal 2028.

as of March 31, 2026, compared to $131.7 million as of December 31, 2025.

We expect our cash balance at the end of the second quarter

of 2026 to fund operations and planned development activities until mid to late fiscal 2028.

continue to use our capital resources to advance our clinical development of ANAVEX 2-73.

The following

table summarizes cash flows during the nine months ended June 30, 2026 and 2025 (in thousands):

table summarizes cash flows during the six months ended March 31, 2026 and 2025 (in thousands):

Net cash flows used in operating activities

Net cash flows provided by (used in) financing activities

Net cash flows provided by financing activities

Increase (decrease) in cash and cash equivalents

Cash flow used in operating activities

Net cash used in operating activities for the nine

months ended June 30, 2026 was $20.7 million, compared to $30.4 million during the comparable period ended June 30, 2025.

Net cash used in operating activities for the six

months ended March 31, 2026 was $11.6 million, compared to $18.0 million during the comparable period ended March 31, 2025.

The principal

reason for this change is due to the decrease in net loss due to the decrease in research and development expenditures, net of stock-based

compensation reversals, as more fully described above.

reason for this change is due to the decrease in net loss due to the decrease in operating expenditures, as described above.

Cash flow provided by financing activities

Cash flows provided by financing activities for the

nine months ended June 30, 2026 was $36.4 million, compared to cash utilized in financing activities of $0.6 million during the comparable

nine months ended June 30, 2025.

During the nine months ended June 30, 2026, cash provided

by financing activities was related to cash received from the issuance of our common stock pursuant to the 2025 Sales Agreement.

During the nine months ended June 30, 2025, we received

$1.7 million in cash from the exercise of stock options by our employees.

We utilized $2.3 million to satisfy tax withholding obligations

associated with the net exercise of an employee stock option by our former CEO, in exchange for the withholding of shares of our common

stock that would have been received upon exercise of the employee stock option.

six month period ended March 31, 2026, was $36.4 million, compared to $1.6 million during the comparable six-month period ended March

During the six months ended March 31, 2026, cash provided

by financing activities was related to cash received from the issuance of common stock pursuant to the 2025 Sales Agreement.

During the six months ended March 31, 2025, cash provided

by financing activities was primarily attributable to cash received from the exercise of stock options by our employees.

Cash flows used in investing activities

There were no cash flows from investing activities

for the nine-month periods ended June 30, 2026 and 2025.

for the six-month periods ended March 31, 2026 and 2025.

2025 Sales Agreement

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

During the nine months ended June 30, 2026, we issued

During the six months ended March 31, 2026, we issued

an aggregate of 6,026,237 shares of Common Stock under the 2025 Sales Agreement for net proceeds of $37.2 million, after deducting commissions.

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under Form S-3 for the preceding 12 calendar months.

At June 30, 2026, there was an unused amount of $103.2

At March 31, 2026, there was an unused amount of $103.2

million under the 2025 Sales Agreement.

2023 Purchase Agreement

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 we had the right to sell and issue to Lincoln Park, and Lincoln Park was obligated to purchase, up to $150.0 million in value

of shares of our Common Stock from time to time over a three-year period.

In consideration for entering into the 2023 Purchase

Agreement, we issued to Lincoln Park 75,000 shares of Common Stock as a commitment fee during the fiscal year ended September 30, 2023

and agreed to issue up to 75,000 shares of Common Stock pro rata, when and if, Lincoln Park purchased, at the our discretion, the $150.0

million aggregate commitment.

During the six-month period ended March 31, 2026 and

2025, we did not issue any shares of Common Stock under the 2023 Purchase Agreement.

The 2023 Purchase Agreement expired on February 3,

Funding Requirements

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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-Q

Item 2. Management’s Discussion and Analysis