ANAVEX LIFE SCIENCES CORP. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, 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. The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “should,” “forecast,” “potential,” “predict,” “could,” “would,” “will,” “suggest,” “plan” and similar expressions, as they relate to us, are intended to identify forward-looking statements. Such forward-looking statements include, without limitation, statements regarding: ● our plans to prioritize the advancement of our lead compound ANAVEX®2-73 (blarcamesine) in our clinical programs for the treatment of mild cognitive impairment (“MCI”) due to Alzheimer’s disease (“AD”) and mild AD (collectively known as “early AD”), and for Rett syndrome and Fragile X syndrome; ● our plans to prioritize engagement with the United States (“U.S.”) Food and Drug Administration (“FDA”) to align on a clear, data-driven regulatory and clinical development strategy; ● our ability to successfully conduct preclinical studies and clinical trials for our product candidates; ● our ability to execute our research and development plans for our product candidates on time and on budget; ● our product candidates’ ability to demonstrate efficacy and an acceptable safety profile; ● our ability, whether alone or with commercial partners, to successfully commercialize any of our product candidates that may be approved for sale; ● the anticipated start dates, durations and completion dates of our ongoing and future clinical trials; ● the anticipated designs of our future clinical trials; ● our anticipated future regulatory submissions and our ability to receive regulatory approvals to develop and market our product candidates, including any orphan drug or Fast Track designations; ● the timing and likelihood of the accomplishment of various scientific, clinical, regulatory filings and approvals and other product development objectives; and ● our anticipated future cash position and ability to obtain funding for our operations. We have based these forward-looking statements largely on our current expectations and projections about future events, including the responses we expect from the FDA, the European Medicines Agency (“EMA”) and other regulatory authorities and financial trends that we believe may affect our financial condition, results of operations, business strategy, preclinical studies and clinical trials, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions including without limitation: ● management’s evaluation that disclosure controls and procedures were not effective and that deficiencies in our internal controls over financial reporting constituted a material weakness as of September 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026; ● our ability to regain, and maintain compliance, with The Nasdaq Stock Market LLC’s (“Nasdaq”) continued listing requirements; ● risks related to previously being delinquent in our Securities and Exchange Commission (“SEC”) reporting obligations and our ability to timely satisfy our SEC reporting obligations in the future; ● the duration and outcome of any current or future litigation related to the termination of our former Chief Executive Officer (“CEO”) and any related matters; ● volatility in our stock price and in the capital markets in general; ● our ability to raise additional capital on favorable terms and the impact of such activities on our stockholders and stock price; 21 ● our ability to generate any revenue in the future; ● challenges seeking, and ultimately obtaining, regulatory approval for our product candidates; ● the ability of Fast Track designation or breakthrough therapy designation to lead to a faster FDA review and approval process; ● our ability to maintain any benefits associated with Orphan Drug Designation, including market exclusivity; ● the impact of any undesirable side effects caused by our product candidates, which could impact our ability to receive regulatory approval of or commercialize such product candidates; ● our ability to successfully attract and retain highly qualified personnel needed to successfully implement our business strategy; ● our reliance on third parties in non-clinical studies and clinical trials; ● our ability to safeguard against cyber security incidents; ● our ability to obtain and maintain sufficient intellectual property protection for our product candidates; ● our ability to comply with our intellectual property licensing agreements; ● our ability to compete in the highly competitive biotechnology and pharmaceutical industries; ● the risks described in “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on November 25, 2025; and ● the risks described in “Risk Factors” in Part II, Item 1A of this Quarterly Report on Form 10-Q. These risks are not exhaustive. Other sections of this Quarterly Report on Form 10-Q include additional factors which could adversely impact our business and financial performance. 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. We cannot assure you that the events and circumstances reflected in the forward-looking statements will be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. Except as required by applicable laws including the securities laws of the U.S., we assume no obligation to update or supplement forward-looking statements. As used in this Quarterly Report on Form 10-Q, the terms “we,” “us,” “our,” “Company” and “Anavex” mean Anavex Life Sciences Corp., unless the context clearly indicates otherwise. Overview and Strategy We are a clinical stage biopharmaceutical company engaged in the development of novel therapeutics for the treatment of central nervous system (“CNS”) diseases with high unmet medical needs. Our primary focus is on advancing our lead compound ANAVEX 2-73 (blarcamesine) for the treatment of mild cognitive impairment (“MCI”) due to Alzheimer’s disease (“AD”) and mild AD (collectively known as “early AD”), and for Rett syndrome and Fragile X syndrome, both of which are neurodevelopmental rare diseases. Under new leadership, we are currently prioritizing engagement with the U.S. FDA to align on a clear, data-driven regulatory and clinical development strategy for ANAVEX 2-73 for the above indications. We do not have any products approved for commercial sale and have not generated any revenue to date. We have a portfolio of compounds in various stages of development targeting different sigma-1 receptor (“SIGMAR1”) binding activities. The SIGMAR1 gene encodes the SIGMAR1 protein, which is an intracellular chaperone protein with important roles in cellular communication. SIGMAR1 is also involved in transcriptional regulation at the nuclear envelope and restores homeostasis and stimulates recovery of cell function when activated. SIGMAR1 may be a target for therapeutics to combat many human diseases, both of a neurodegenerative nature, including AD, as well as of a neurodevelopmental nature, like Rett syndrome and Fragile X syndrome. When bound by the appropriate ligands, we believe SIGMAR1 influences the functioning of multiple biochemical signals that are involved in the pathogenesis (origin or development) of disease. 22 Clinical Development Pipeline Our lead compound is ANAVEX 2-73 (blarcamesine). Below is our clinical development pipeline for ANAVEX 2-73 (blarcamesine) across CNS indications: Progress bars show the most advanced phase per indication for ANAVEX 2-73 (blarcamesine), an investigational oral SIGMA-1 receptor agonist. Regulatory goals are planned and are subject to change, including as a result of ongoing and future discussions with the FDA. Following a review of our clinical development strategy under new leadership, we have de-prioritized our other assets, including ANAVEX ® 3-71, currently in the clinical stage, and ANAVEX ® 1-41 and ANAVEX ® 1066, currently in preclinical development. Development work on these de-prioritized assets has been paused, and future development work will be contingent on additional funding for such assets or the signing of a strategic partnership for such assets. It is also possible that we may license or sell one or more of our assets. Following the previously disclosed termination of our former CEO in April 2026, management has determined that our disclosure controls and procedures and our internal controls over financial reporting were not effective as of September 30, 2025, December 31, 2025, March 31, 2026 and June 30, 2026, which is further described in Part II, Item 4 of this Quarterly Report on Form 10-Q. As we align with the FDA on a clear, data-driven regulatory and clinical development strategy for ANAVEX 2-73 for early AD, Rett syndrome and Fragile X syndrome, we will obtain guidance from the FDA on the extent to which the efficacy data from our past clinical trials can be applied to our clinical development strategy, and, to the extent such guidance is relevant to our ongoing development plans, we expect to provide information on how this efficacy data is viewed by the FDA. In light of the foregoing, investors should rely only on the descriptions of our clinical trials, including for our de-prioritized assets, contained in this Quarterly Report on Form 10-Q (including the description below of the CHMP’s Withdrawal Assessment Report on our submission to the EMA relating to ANAVEX 2-73 as an add-on therapy for early Alzheimer’s disease) and on any future updated information. 23 We will seek to identify potential strategic and commercial partners to most effectively advance our programs and increase shareholder value. Further, we may acquire or develop new intellectual property and assign, license, or otherwise transfer our intellectual property to further our business strategy. ANAVEX 2-73 (blarcamesine) We believe ANAVEX 2-73 may offer a disease-modifying approach in neurodegenerative and neurodevelopmental diseases by activation of SIGMAR1. ANAVEX 2-73 is being developed as an oral once-daily capsule formulation for early AD, and in an oral liquid formulation for Rett syndrome and Fragile X syndrome. We plan to prioritize the advancement of our ANAVEX 2-73 clinical development pipeline in early AD, Rett syndrome and Fragile X syndrome in the U.S. EMA In November 2024, we announced the submission of a Marketing Authorisation Application (“MAA”) to the EMA, under the centralized procedure, for ANAVEX 2-73 for the treatment of AD. In December 2025, we announced that the Committee for Medicinal Products for Human Use (“CHMP”) of the EMA rendered a negative opinion on the MAA and that we had requested a re-examination of the opinion. In March 2026, before the re-examination was complete, we announced that the MAA had been withdrawn following feedback from the CHMP indicating that the MAA was not currently approvable. In April 2026, we requested scientific advice from the EMA regarding the design of our proposed pivotal Phase 3 clinical trial of blarcamesine in early AD, and the CHMP adopted its advice in June 2026. The advice addressed the overall design of the proposed Phase 3 trial, including matters such as study population, endpoint hierarchy, treatment duration, statistical framework and subgroup strategy. We intend to incorporate this feedback into our ongoing discussions with the FDA regarding future study design and the overall development program for blarcamesine. In June 2026, the CHMP published a Withdrawal Assessment Report documenting the completion of its review of the MAA for ANAVEX 2-73, concluding that the overall benefit-risk balance was negative and recommending refusal of a conditional marketing authorization. The CHMP determined that our single pivotal Phase 2b/3 trial (ANAVEX2-73-AD-004) did not meet its co-primary endpoints. As reported by the CHMP, while the ADAS-Cog13 cognitive endpoint showed a nominally significant result under our primary analysis, the ADCS-ADL functional endpoint did not reach statistical significance, which the CHMP concluded rendered the trial formally negative. The CHMP further found that the statistical analysis underlying the nominally significant ADAS-Cog13 result was not the analysis pre-specified in the study’s protocol or statistical analysis plan, but reflected changes to the analysis model, choice of covariates, and covariance structure made after the study was unblinded. Therefore, the CHMP concluded that this modified analysis constituted a post-hoc analysis that could not render the failed study successful. FDA In March 2026, we submitted an Investigational New Drug (“IND”) application to the FDA for ANAVEX 2-73 for the treatment of early AD (the “AD IND”). The submission included cross-referenced information from an existing IND for Rett syndrome that we submitted to the FDA in October 2017 (the “Rett IND”). We are currently proceeding with nonclinical and two foundational clinical pharmacology studies under the AD IND to support and strengthen our regulatory strategy for ANAVEX 2-73 – an absorption, distribution, metabolism, and excretion (“ADME”) study and a drug-drug interaction (“DDI”) study. The first participant visit in the ADME study occurred in August 2026. Dosing in the DDI study is underway and the last participant completing dosing is targeted for the end of September 2026. These studies are not sequential requirements. Rather, these studies support the overall FDA regulatory requirements for ANAVEX 2-73 while we continue to advance our early AD program in parallel. Such studies are not indication-specific and would apply across all of our ANAVEX 2-73 programs. 24 We have submitted clinical trial data under the AD IND from our Phase 2a clinical trial in mild-to-moderate AD (ANAVEX 2-73-002), the related open label extension trial (ANAVEX 2-73-003), the ANAVEX2-73-AD-004 trial and the related open-label extension trial (ANAVEX2-73-AD-EP-004). Data from these studies will form the basis of planned discussions with the FDA on a U.S. clinical development program and a Phase 3 protocol design. The FDA has previously granted Orphan Drug Designation for ANAVEX 2-73 for the treatment of Rett syndrome and for the treatment of Fragile X syndrome. Additionally, the FDA has granted the Rare Pediatric Disease designation and Fast Track designation for ANAVEX 2-73 for the treatment of Rett syndrome. We are moving forward with initiating a Phase 3 clinical trial for Rett syndrome (ANAVEX2-73-RS-005) in adults while working with the FDA in parallel to align on inclusion of pediatric patients in this trial. We submitted a meeting request to the FDA in August 2026 to discuss adding pediatric patients to the protocol. ANAVEX2-73-RS-005 study is a randomized, double-blind, placebo-controlled trial evaluating the safety, tolerability and efficacy of once-daily oral blarcamesine in approximately 170 participants with Rett syndrome. Following a 12-week double-blind treatment period and a 4-week safety follow-up, eligible participants may continue into an open-label extension. We plan to submit an IND for ANAVEX 2-73 for the treatment of Fragile X syndrome in September 2026. In summary, we plan to align with the FDA on our three prioritized clinical development programs, including obtaining guidance from the FDA on all of our past clinical trials for these programs and the extent to which they can support our clinical development plan. Specifically, we plan to align on three prioritized programs including (i) a clinical development strategy for the treatment of early AD, (ii) a Phase 3 trial protocol for the treatment of Rett syndrome that includes pediatrics and (iii) a clinical development strategy for the treatment of Fragile X syndrome. We plan to provide updates on the status of these programs in future filings as we receive guidance from the FDA. ANAVEX 3-71 ANAVEX 3-71 is an orally administered clinical drug candidate with a novel mechanism of action through SIGMAR1 activation and M1 muscarinic allosteric modulation. ANAVEX 3-71 has been studied as a CNS-penetrable potential disease modifying treatment for cognitive impairments. 25 We are party to an exclusive license agreement with Life Science Research Israel Ltd. (“LSRI”) pursuant to which we license certain intellectual property related to ANAVEX 3-71 in exchange for certain payments upon the accomplishment of certain regulatory milestones and a royalty applicable to net sales of any approved product using the intellectual property licensed from LSRI. The FDA has granted Orphan Drug Designation to ANAVEX 3-71 for the treatment of Frontotemporal Dementia (“FTD”). Development work on ANAVEX 3-71 has been paused and further development work will be contingent on additional funding for ANAVEX 3-71 or the signing of a strategic partnership. It is also possible that we may sub-license ANAVEX 3-71. ANAVEX 1-41 ANAVEX 1-41 is a sigma-1 agonist and a selective allosteric M1 muscarinic agonist believed to have the potential to demonstrate protective effects of mitochondrial enzyme complexes during pathological conditions, which, if impaired, are believed to play a role in the pathogenesis of neurodegenerative diseases. Development work on ANAVEX 1-41 has been paused and further development work will be contingent on additional funding for ANAVEX 1-41 or the signing of a strategic partnership. It is also possible that we may license or sell ANAVEX 1-41. ANAVEX 1066 ANAVEX 1066, a mixed sigma-1/sigma-2 ligand, is designed for the potential treatment of neuropathic and visceral pain. Development work on ANAVEX 1066 has been paused and further development work will be contingent on additional funding for ANAVEX 1066 or the signing of a strategic partnership. It is also possible that we may license or sell ANAVEX 1066. Patents, Trademarks and Intellectual Property We hold ownership or exclusive rights to thirty-three (33) issued U.S. patents, seventeen (17) pending U.S. patent applications, and numerous Patent Cooperation Treaty (“PCT”) and ex-U.S. patents 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. patent relates to crystalline forms of ANAVEX 2-73. This patent expires in 2036. At least seven (7) of the issued U.S. patents relate to ANAVEX 2-73 for the treatment of AD. These patents expire in 2034 as to one patent, 2036 as to one patent, 2037 as to four patents, and 2040 as to one patent. At least four (4) of the issued U.S. patents relate to ANAVEX 2-73 for the treatment of Rett syndrome. These patents expire in 2037 as to three patents, and 2040 as to one patent. Additionally, at least one (1) of the issued U.S. patents relates to ANAVEX 2-73 for the treatment of Fragile X syndrome and expires in 2040. Our intellectual property position, like that of many biomedical companies, is uncertain and involves complex legal and technical questions. For more information regarding our patents, patent applications, and challenges to our existing or future patents, see “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K filed with the SEC on November 25, 2025. Recent Developments 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). The Compliance Plan is currently under review by the Nasdaq Staff. 26 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. 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 The following discussion should be read in conjunction with our condensed consolidated interim financial statements and related notes thereto contained elsewhere in this report. Past operating results are not necessarily indicative of results that may occur in future periods. The following discussion contains forward-looking statements, which involve a number of risks and uncertainties. See “Forward-Looking Statements” included elsewhere in this Quarterly Report on Form 10-Q. We are in the development stage and have not earned any revenue since our inception. We do not anticipate earning any revenue until one or more of our product candidates is approved and commercial sales commence or we can establish one or more partnerships to develop, co-develop, license, acquire or market one or more product candidates, if approved. Our operating costs consist primarily of research and development activities including the cost of clinical trials and clinical supplies as well as clinical drug manufacturing and formulation. Research and development expenses also include personnel-related costs such as salaries and wages, and third-party contract research organization (“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. General and administrative expenses consist of personnel costs, expenses for outside professional services and expenses associated with operating as a public company. Personnel costs consist of salaries and wages, benefits and share-based compensation for general and administrative personnel. Outside professional services and public company expenses include expenses related to compliance and reporting, additional insurance expenses, audit and Sarbanes-Oxley Act of 2002 compliance, expenses associated with patent research, applications and filings, investor and shareholder relations activities 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 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. 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 in strategy. General and administrative expenses were $(2.0) million for the three months ended June 30, 2026 as compared to $4.5 million for the three 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 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. 27 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. The following table summarizes our research and development expenses for the three months ended June 30, 2026 and 2025 (in thousands): 2026 2025 Cost of external service providers $ 2,656 $ 3,378 Personnel costs 2,450 3,654 Share based compensation (recovery) (9,880 ) 2,607 Other common costs 69 320 Total research and development costs $ (4,705 ) $ 9,959 During the three months ended June 30, 2026 and 2025, external service provider costs by indication and product candidate were as follows (in thousands): 2026 2025 Alzheimer’s disease $ 1,114 $ 1,248 Rett syndrome (recovery) (8 ) 780 Fragile X syndrome — 17 Parkinson’s disease (1) 28 73 Expanded access programs (2) 130 139 All indications (3) 1,233 77 Total ANAVEX 2-73 2,497 2,334 Phase 1 (FTD) 3 4 Schizophrenia 3 883 All indications 9 41 Total ANAVEX 3-71 15 928 Preclinical on all other product candidates 7 6 Other external service provider costs 137 110 Total external service provider costs $ 2,656 $ 3,378 (1) Spending on Parkinson’s disease relates to residual costs or costs in prior period for this indication that has now been de-prioritized. (2) Relates 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”). (3) All 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. 28 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 ANAVEX 3-71 clinical trial for schizophrenia in May 2025; and (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. 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, 2025. 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 and 2025 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. 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. General and administrative expenses were $2.4 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. 29 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. The following table summarizes our research and development expenses for the nine months ended June 30, 2026 and 2025 (in thousands): 2026 2025 Cost of external service providers $ 5,396 $ 14,872 Personnel costs 7,572 10,328 Share based compensation expense (recovery) (9,436 ) 4,704 Other common costs 612 394 Total research and development costs $ 4,144 $ 30,298 During the nine months ended June 30, 2026 and 2025, external service provider costs by product candidate were as follows (in thousands): 2026 2025 Alzheimer’s disease $ 2,435 $ 6,904 Rett syndrome 173 1,510 Fragile X syndrome 70 17 Parkinson’s disease (1) 95 113 Expanded access programs (2) 296 192 All indications (3) 1,953 350 Total ANAVEX 2-73 5,022 9,086 Phase 1 (FTD) 12 31 Schizophrenia 50 5,033 All indications 23 146 Total ANAVEX 3-71 85 5,210 Preclinical on all other product candidates 10 292 Other external service provider costs 279 284 Total external service provider costs $ 5,396 $ 14,872 (1) Spending on Parkinson’s disease relates to residual costs or costs in prior period for this indication that has now been de-prioritized. (2) Relates 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. (3) All indications may include CMC for which the intended use of the resulting drug product is not necessarily known when the cost is incurred. 30 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 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 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; (iv) a decrease of approximately $2.8 million in personnel and consultant costs from the comparable period relating to personnel engaged to support the MAA submitted in November 2025, an overall reduction in staffing over the comparable period, and an overall reduction in accrued cash bonus pool compensation for existing staff; and (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. 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. 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 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. The decrease in net loss is primarily related to the recovery of stock-based compensation expense, as more fully described above. Liquidity and Capital Resources Working Capital (in thousands) June 30, 2026 September 30, 2025 Current Assets $ 120,139 $ 103,815 Current Liabilities 7,692 8,946 Working Capital $ 112,447 $ 94,869 On June 30, 2026, we had net current assets of $112.4 million, an increase of approximately $17.5 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. We had cash and cash equivalents of $118.3 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. 31 We intend to continue to use our capital resources to advance our clinical development of ANAVEX 2-73. Cash Flows The following table summarizes cash flows during the nine months ended June 30, 2026 and 2025 (in thousands): 2026 2025 Net cash flows used in operating activities $ (20,687 ) $ (30,440 ) Net cash flows provided by (used in) financing activities 36,436 (583 ) Increase (decrease) in cash and cash equivalents $ 15,749 $ (31,023 ) 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. 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. 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. 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. Financings 2025 Sales Agreement On July 25, 2025, we entered into a Sales Agreement (the “2025 Sales Agreement”) with TD Securities (USA) LLC (the “Sales Agent”). Pursuant to the 2025 Sales Agreement, we may offer and sell up to an aggregate offering price of $150 million (the “Offering”) in shares of our common stock (“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 2025 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 consent. We are not obligated to make any sales of shares of Common Stock under the 2025 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. 32 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. We have also agreed to provide the Sales Agent with customary indemnification and contribution rights. During the nine months ended June 30, 2026, we issued an aggregate of 6,026,237 shares of Common Stock under the 2025 Sales Agreement for net proceeds of $36.4 million, after deducting commissions. We suspended sales under the 2025 Sales Agreement following the formation of the Special Committee described above under “—Financial Overview.” We will be unable to make sales under the 2025 Sales Agreement after we file our next Annual Report on Form 10-K due to our loss of Form S-3 eligibility for the untimely filing of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026 with the SEC. We will be unable to regain eligibility to use Form S-3 until we have timely filed all reports specified under Form S-3 for the preceding 12 calendar months. At June 30, 2026, there was an unused amount of $103.2 million under the 2025 Sales Agreement. Funding Requirements We will require substantial additional capital to develop our ANAVEX 2-73 programs and to fund operations for the foreseeable future. Moreover, we expect our expenses to increase in connection with our planned clinical development activities of ANAVEX 2-73. Further, we are subject to all of the risks incidental to the development of new pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. Our expenses will increase if, and as, we: · advance our ANAVEX 2-73 programs through preclinical and clinical development; · seek regulatory approval for any ANAVEX 2-73 programs that successfully complete clinical trials; · seek to successfully commercialize any of our product candidates that may be approved for sale, either alone or through commercial partners; and · expand our operational, financial and management systems and increase personnel, including personnel to support our development, manufacturing and commercialization efforts and our operations as a public company. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we may seek to raise any necessary additional capital through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our common stock, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through collaborations, strategic partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or enter into such agreements or arrangements on favorable terms, or at all. As a result of the un-timely filing of our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2026 and June 30, 2026 with the SEC, we will be ineligible to utilize our effective Form S-3 registration statement or to file a new Form S-3 registration statement after we file our next Annual Report on Form 10-K. We will be unable to regain eligibility to use Form S-3 until we have timely filed all reports specified under Form S-3 for the preceding 12 calendar months. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We have based our projections of operating capital requirements on our new operating plan, which is based on several assumptions that may prove to be incorrect, and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including but not limited to: 33 · the scope, progress, results and costs of advancing our ANAVEX 2-73 programs, and conducting preclinical studies and clinical trials; · the costs, timing and outcome of regulatory review of our ANAVEX 2-73 programs, and any delays we may encounter; · the costs of manufacturing clinical supply of ANAVEX 2-73; · the cost and timing of hiring new employees to support our growth; · the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; · changes in our operating plan, resulting in increases or decreases in our need for capital; and · the costs of future activities, including building a commercial organization, product sales, medical affairs, sales and marketing capabilities, manufacturing and distribution, for any of our product candidates for which we receive marketing approval. 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, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our stockholders. CRITICAL ACCOUNTING POLICIES We prepare our condensed consolidated interim financial statements in accordance with accounting principles generally accepted in the U.S. and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates. There have been no significant changes in the critical accounting policies and estimates described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as filed with the SEC on November 25, 2025. RECENT ACCOUNTING PRONOUNCEMENTS Please refer to Note 2 “Recent Accounting Pronouncements” in notes to our Condensed Consolidated Interim Financial Statements included in this Quarterly Report on Form 10-Q. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS. As a “smaller reporting company”, we are not required to provide the information required by this item.