Item 1. Legal Proceedings
ITEM 1. LEGAL PROCEEDINGS
We are subject to claims and legal proceedings that
arise during the course of business. We are currently subject to the following lawsuits:
Shareholder
Class Action
On March 13,
2024, a shareholder class action complaint was filed in the U.S. District Court for the Southern District of New York, and it named us
and one of our officers as defendants. The complaint was amended on July 12, 2024 (the “Initial Action”). The complaint alleged
violations of the Exchange Act associated with disclosures and statements made with respect to certain clinical trials for ANAVEX 2-73
related to Rett syndrome. This lawsuit was dismissed by the U.S. District Court for the Southern District of New York on June 18, 2025.
The plaintiff filed a notice of appeal on July 17, 2025. Briefing on the appeal concluded October 30, 2025, and an oral argument occurred
on February 12, 2026. On June 26, 2026, the Second Circuit issued an opinion affirming the district court’s dismissal, including
denial of leave to further amend the complaint. Plaintiff did not petition for rehearing within the applicable deadline. The period for
plaintiff to file a petition for writ of certiorari has not yet passed. No amount has been recorded in these condensed consolidated interim
financial statements for any loss contingencies associated with this lawsuit as we believe that it is not probable that any loss will
occur.
Derivative
Lawsuits
On or about
May 13, 2024, a derivative lawsuit was filed against us (as nominal defendant), one of our officers, and members of our Board in the U.S.
District Court for the District of Nevada by another purported shareholder. The complaint asserts various common law claims (including
breach of fiduciary duty) and violation of Section 14(a) of the Exchange Act regarding the same or similar allegations at issue in the
purported class action lawsuit related to disclosures and statements made about certain clinical trials related to Rett syndrome. On January
22, 2025, pursuant to a stipulation of the parties, the Court entered an order staying this purported derivative lawsuit until the motion
to dismiss filed by defendants in the Initial Action is decided by the U.S. District Court for the Southern District of New York. The
stay was later extended throughout the appeal. On August 17, 2026, after disposition of the appeal in the Initial Action, a stipulation
of dismissal of the derivative lawsuit was approved by the judge.
On February
14, 2025, another derivative lawsuit asserting state law breach of fiduciary duty and unjust enrichment claims based upon similar allegations
was filed against us (as nominal defendant), one of our officers, and members of our Board in the Supreme Court for the State of New York,
County of New York, by another purported shareholder. On August 18, 2025, pursuant to a stipulation of the parties, the Court entered
an order staying this purported derivative lawsuit until the appeal in the Initial Action is resolved On August 10, 2026, after disposition
of the appeal in the Initial Action, a stipulation of dismissal of the derivative lawsuit was approved by the judge.
Matters Relating
to the Former CEO
On April 30,
2026, the Special Committee terminated the employment of Christopher Missling, PhD, as our CEO, for Cause (as defined in the Former CEO
Employment Agreement). Dr. Missling remains a member of our Board after his termination of employment.
In June 2026,
we received a Demand for Arbitration (“Demand”) filed by Dr. Missling with the American Arbitration Association (“AAA”).
In the Demand, Dr. Missling asserts he was wrongfully terminated for Cause under the Former CEO Employment Agreement and seeks relief
for alleged breach of contract, declaratory relief, and defamation. Dr. Missling seeks severance and other compensation allegedly owed
under the Former CEO Employment Agreement, including cash severance, acceleration of equity awards, accrued compensation and benefits,
reimbursement and advancement of legal fees and expenses, damages for purported defamatory statements, and attorneys’ fees, costs,
and interest. Dr. Missling subsequently served and attempted to file an amended demand removing certain allegations, but otherwise maintaining
all previously asserted causes of action. We categorically deny any wrongdoing and intend to vigorously defend against the claims. At
this early stage of the proceedings, we cannot reasonably estimate any potential loss, or range of loss, that may arise from Dr. Missling’s
claims.
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On July 6, 2026,
Dr. Missling, filed a Summons With Notice in his individual capacity and derivatively on behalf of our Company in New York Supreme Court,
New York County, alleging “breach of fiduciary duty as independent board members” against Dr. Jiong Ma, Dr. Claus van der
Velden, Dr. Peter Donhauser and Dr. Axel Paeger, who are independent directors on our Board, seeking money damages. We anticipate being
named as a nominal defendant in this lawsuit. We believe that this lawsuit is without merit and intend to vigorously defend against it.
This lawsuit is in the early stages, and, at this time, no assessment can be made as to the likely outcome or whether the outcome will
be material to us.
We know of no
other material pending legal or governmental proceedings, other than ordinary routine litigation incidental to our business, to which
our Company or our subsidiaries are a party or of which any of their property is subject. There are no other proceedings in which any
of our directors, officers or affiliates, or any registered or beneficial stockholder holding more than 5% of our shares, or any associate
of such persons, is an adverse party or has a material interest adverse to our or our subsidiaries’ interest.
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