Note 10. Contingencies

The Company is, and from time to time, the Company may become, involved in litigation or other legal proceedings and claims, including U.S. government inquiries, investigations and Citizen Petitions submitted to the U.S. Food and Drug Administration (“FDA”). In addition, the Company has received, and from time to time may receive, inquiries from government authorities relating to matters arising from the ordinary course of business. The outcome of these proceedings is inherently uncertain. Regardless of outcome, legal proceedings can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. At this time, no assessment can be made as to their likely outcome or whether the outcome will be material to the Company other than as disclosed below. The Company believes that its total provisions for legal matters are adequate based upon currently available information.

Government Investigations

Beginning in August 2021, the Company received subpoenas and other requests for documents and information from the Department of Justice Fraud Section (the "DOJ Fraud Section”), document requests from the SEC, and a Civil Investigative Demand from the Civil Division of the Department of Justice (the “DOJ Civil Division”). These requests sought corporate information and documents concerning the research and development of simufilam and/or SavaDx, and the Company cooperated fully with each.

On September 26, 2024, the Company announced that it had reached a settlement with the SEC resolving the SEC investigation of the Company’s disclosures regarding its Phase 2b clinical trial of simufilam for the treatment of Alzheimer’s disease (the “Phase 2b Study”) and related matters. The SEC also agreed to a settlement with two former senior employees of the Company. Pursuant to these settlements, the U.S. District Court for the Western District of Texas (the “Texas District Court”) entered final consent judgment on October 18, 2024, on a complaint filed by the SEC against the Company and its two former senior employees. The Company has neither admitted nor denied the allegations of the complaint. The SEC’s complaint alleged that certain disclosures by the Company regarding the Phase 2b Study violated certain federal securities laws and SEC rules, including negligence-based disclosure violations of Sections 17(a)(2) and 17(a)(3) of the Securities Act of 1933, as amended (the “Securities Act”), as well as recordkeeping and reporting requirements under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The complaint alleges that the Company’s SEC reports and other public statements regarding the Phase 2b Study negligently contained materially misleading statements and omissions. The SEC’s allegations with respect to the Company’s two former employees relate to these employees’ roles in such disclosures. Under its settlement, the Company consented to a permanent injunction against future violations of Section 17(a) of the Securities Act, Section 13(a)(1) of the Exchange Act and Rules 12b-20, 13a-1, 13a-11 and 13a-13 under the Exchange Act. In addition, the Company paid a civil monetary penalty of $40 million in November 2024.

On February 18, 2026, the DOJ Fraud Section notified the Company that it had closed its inquiry into the Company regarding allegations of research misconduct as described in the indictment in United States v. Wang, 8:24-cr-000211-TDC (D. Md.). As previously disclosed, that indictment was dismissed with prejudice on  October 23, 2025.

These outcomes end the previously disclosed investigations of the Company by the DOJ Fraud Section and the SEC. The Company is aware, however, that the DOJ Civil Division continues to seek information concerning the research and development of simufilam and SavaDx.

Consolidated Securities Class Actions

Between August 27, 2021 and October 26, 2021, four putative class action lawsuits were filed in the Texas District Court alleging violations of the federal securities laws by the Company and certain named officers. The complaints rely on allegations contained in Citizen Petitions submitted to FDA and allege that various statements made by the defendants regarding simufilam were rendered materially false and misleading. The Citizen Petitions were all subsequently denied by FDA. The complaints seek unspecified compensatory damages and other relief on behalf of a purported class of purchasers of the Company’s securities.

In June 2022, the Texas District Court consolidated the four class action lawsuits into one case (the “Consolidated Securities Action”) and appointed a lead plaintiff and a lead counsel. Lead plaintiff thereafter filed a consolidated amended complaint on behalf of a putative class of purchasers of the Company’s securities between September 14, 2020 and July 26, 2022. In May 2023, the Texas District Court dismissed with prejudice plaintiffs’ claims against defendant Nadav Friedmann, PhD, MD, our former Chief Medical Officer and a Company director, who is now deceased, but otherwise denied defendants’ motion to dismiss.

In June 2024, plaintiffs filed a supplemental complaint extending the putative class period through October 12, 2023.

In February 2024, a putative class action lawsuit was filed in the U.S. District Court for the Northern District of Illinois (“Illinois District Court”) alleging violations of the federal securities law by the Company and certain named officers. The complaint relies on an October 12, 2023, article that describes a purported leaked report of alleged scientific misconduct by a scientific collaborator of the Company at City University of New York (the “CUNY Article”). The complaint alleges that various statements made by the defendants regarding simufilam were rendered materially false and misleading by this article. This action was subsequently transferred to the Texas District Court and consolidated into the Consolidated Securities Action.

In May 2025, plaintiffs in the Consolidated Securities Action filed a second supplemental complaint. The Texas District Court granted plaintiffs’ motion for class certification in August 2025.

In October 2025, the United States Court of Appeals for the Fifth Circuit (the “Fifth Circuit”) agreed to hear Defendants’ interlocutory appeal challenging the District Court order granting class certification. Oral argument is scheduled for August 3, 2026.

Beginning in May 2025, the parties to the Consolidated Securities Action engaged in mediation with David M. Murphy of Phillips Alternative Dispute Resolutions Enterprises. In December 2025, plaintiffs filed a Final Alternative Dispute Resolution Report with the Texas District Court as required by Local Rule CV-88(g) stating that the Company and one of its officers (the “Settling Defendants”) and plaintiffs had entered a binding term sheet to settle the Consolidated Securities Action.

On June 18, 2026, the Settling Defendants and plaintiffs filed a stipulation of settlement (the “Stipulation”), and plaintiffs filed a motion for preliminary approval of a settlement, pursuant to which the Settling Defendants will pay plaintiffs $31.25 million to achieve a complete settlement of all claims and causes of action that have been or could be asserted by Plaintiffs in exchange for full and complete releases from the plaintiffs. Although defendants Remi Barbier and Lindsay Burns (the “Non-Settling Defendants”) are not parties to the settlement, these individuals are indemnified by the Company and are entitled to receive full and complete releases along with Settling Defendants upon final approval of a settlement by the Texas District Court. The settlement is not an admission of fault or wrongdoing by the Company or any of the other defendants.

On  July 23, 2026, the Company paid into escrow $31.25 million as required by the Stipulation. Following preliminary approval of the proposed settlement by the Texas District Court and a notice and review period for class members, plaintiffs will seek final approval of the proposed settlement from the Texas District Court. If the settlement is approved and the settlement funds are released, the plaintiffs and the class will grant full and complete releases in favor of the Settling Defendants and the Non-Settling Defendants of all of their claims that were or could have been asserted in the Consolidated Securities Action and will dismiss with prejudice the claims asserted against the Non-Settling Defendants.

The Company recorded a loss contingency of $31.25 million in accounts payable and other accrued expenses in the Condensed Consolidated Balance Sheets at June 30, 2026 and December 31, 2025 relating to the Consolidated Securities Action. Subsequent to June 30, 2026, the amount was paid into escrow and will be restricted until final Texas District Court approval.

Shareholder Derivative Actions

On November 4, 2021, a shareholder derivative action related to the initial four class action lawsuits filed in the Texas District Court was filed, purportedly on behalf of the Company, in the Texas District Court, asserting claims under the U.S. securities laws and state fiduciary duty laws against certain named officers and the members of the Company’s Board. This complaint relies on the allegations made in Citizen Petitions that were submitted to (and subsequently denied by) FDA. The complaint alleges, among other things, that the individual defendants exposed the Company to unspecified damages and securities law liability by causing it to make materially false and misleading statements, in violation of the U.S. securities laws and in breach of their fiduciary duties to the Company. The derivative case seeks, among other things, to recover unspecified compensatory damages on behalf of the Company arising out of the individual defendants’ alleged wrongful conduct. Although the plaintiff in this derivative case does not seek relief against the Company, the Company has certain indemnification obligations to the individual defendants. Between November 2021 and November 2023, five additional shareholder derivative actions were filed alleging substantially similar claims, three in the Texas District Court, one in Texas state court (Travis County District Court) (the “Texas State Court Derivative Action”) and one in the Delaware Court of Chancery (the “Delaware Derivative Action”). As of November 2025, the four actions in the Texas District Court were consolidated into a single action (the “Texas Federal Court Derivative Action”).

Beginning on March 18, 2024, two shareholder derivative actions related to the February 2024 class action lawsuit originally filed in the Illinois District Court were filed, purportedly on behalf of the Company, in the Illinois District Court, asserting claims under the U.S. securities laws and state fiduciary duty laws against certain named officers and the members of the Company’s Board. The complaints rely on the CUNY Article. The complaints allege, among other things, that the individual defendants exposed the Company to unspecified damages and securities law liability by causing it to make materially false and misleading statements, in violation of the U.S. securities laws and in breach of their fiduciary duties to the Company. The derivative cases seek, among other things, to recover unspecified compensatory damages on behalf of the Company arising out of the individual defendant’s alleged wrongful conduct. Although the plaintiffs in these derivative cases do not seek relief against the Company, the Company has certain indemnification obligations to the individual defendants. On September 6, 2024, these two cases (the “Illinois Federal Court Derivative Actions”) were consolidated and stayed pending further developments in the shareholder class action initially filed in the Illinois District Court in February 2024.

On July 21, 2026, the Company and all individual defendants entered into a settlement term sheet (the “Derivative Term Sheet”) agreeing to resolve the Texas State Court Derivative Action, the Texas Federal Court Derivative Action, the Delaware Derivative Action, and the Illinois Federal Court Derivative Action (collectively, the “Derivative Actions”). Under the Derivative Term Sheet, the parties agreed to work in good faith to negotiate and execute a final settlement stipulation and related settlement documents within 60 days following execution of the term sheet, subject to approval by the Company’s Board of Directors and the court. The Derivative Term Sheet provides for the implementation and maintenance of specified corporate governance enhancements for a period of four years. The Derivative Term Sheet also provides for customary mutual releases and dismissal with prejudice of the Derivative Actions following final approval. The Derivative Term Sheet is not an admission of fault or wrongdoing by the Company or any of the other defendants.

2024 Securities Class Action

On December 13, 2024, a putative class action lawsuit (the “2024 Securities Class Action”) was filed in Texas District Court alleging violations of the federal securities law by the Company and certain named officers. The complaint alleged that various statements made by the defendants regarding simufilam were revealed to be materially false and misleading by the release of top-line results for the Company’s RETHINK-ALZ Phase 3 clinical trial on November 25, 2024. The complaint sought unspecified compensatory damages and other relief on behalf of a purported class of purchasers of the Company’s securities between February 7, 2024, and November 24, 2024.

In May 2025, the Court appointed a lead plaintiff and lead counsel for the 2024 Securities Class Action. Lead plaintiff filed an amended complaint in August 2025, on behalf of a putative class of purchasers of the Company’s securities between October 13, 2023, and March 25, 2025. The amended complaint added new officer defendants and additional allegations that various statements made by the defendants regarding simufilam were revealed to be materially false and misleading by disclosures between June 2024 and September 2024.

On September 19, 2025, defendants filed a motion to consolidate the 2024 Securities Class Action into the Consolidated Securities Action based upon the allegations made in the amended complaint. On June 29, 2026, the magistrate judge assigned to the matter denied the motion to consolidate. On July 13, 2026, defendants filed an objection to the order with the Texas District Court.

On November 6, 2025, Defendants moved to dismiss the 2024 Securities Class Action. On July 24, 2026, the Texas District Court denied the pending motions to dismiss without prejudice, with leave to refile. The Texas District Court further directed the parties to propose a schedule for the briefing and disposition of the pending matters that accounts for the resolution of the pending Fifth Circuit appeal, the interrelated matters before the court, and any refiled motions to dismiss.

Due to the stage and procedural posture of the 2024 Securities Class Action, the Company is unable to predict the likelihood of an unfavorable outcome in the 2024 Securities Class Action. It is reasonably possible, however, that the Company may incur a loss. The Company is unable to reasonably estimate the amount or range of potential loss at this time.

Subject to the Stipulation in the Consolidated Securities Action and the Derivative Term Sheet, the Company intends to defend all pending shareholder derivative actions and securities class actions vigorously.

Anti-SLAPP Lawsuit

On August 6, 2024, a lawsuit was filed in the District Court for the Southern District of New York which, as amended and as joined by intervenor plaintiffs, asserts claims, including a claim under the New York Anti-SLAPP Law, against the Company and against two former officers to whom the Company has certain indemnification obligations. The amended complaint and the complaint in intervention seek costs and damages relating to a defamation action filed by the Company against the plaintiffs and subsequently dismissed voluntarily by the Company. The Company and its two former officers named as defendants have entered comprehensive settlement agreements with the intervenor plaintiffs and another potential plaintiff under which the parties provided mutual releases and the Company paid approximately $2.5 million in October 2025. The Company intends to defend vigorously the claims brought by the remaining plaintiffs.

Litigation Contingencies

In connection with ongoing litigation, the Company has reserved an amount of $32.75 million, including the $31.25 million loss contingency for the Consolidated Securities Action, for potential settlements at June 30, 2026 and December 31, 2025 which was recorded in accounts payable and other accrued expenses. Subsequent to June 30, 2026, the Company paid the accrued securities litigation loss contingency liability of $31.25 million into a plaintiff's escrow account pursuant to the terms of the Stipulation discussed above. There was no loss contingency expense recorded during the three and six months ended June 30, 2026. The Company recorded loss contingencies totaling $32.25 million during the three months ended June 30, 2025. The Company recorded loss contingencies totaling $35.25 million during the six months ended June 30, 2025. The Company believes that the likelihood of an unfavorable outcome is reasonably possible and has accrued this amount as the best estimate of potential loss. The final outcome of the litigation in which the Company is involved may differ from the reserved amount, and additional losses may be incurred.