Note 6 Commitments and Contingencies

Lease

The Company leases office space under an operating lease with an initial term of 12 months or less. Under the terms of the office lease, the Company is required to pay its proportionate share of operating costs.

The operating lease costs were as follows (in thousands):

Employee 401(k) Benefit Plan

The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. The plan covers all United States based employees. United States based employees eligible to participate in the plan may contribute up to the current statutory limits under the Internal Revenue Service regulations. The 401(k) plan permits the Company to make additional matching contributions on behalf of contributing employees.

The Company made matching contributions under the 401(k) plan as follows (in thousands):

Litigation

The Company is subject to claims and legal proceedings that arise in the ordinary course of business. Such matters are inherently uncertain, and there can be no guarantee that the outcome of any such matter will be decided favorably to the Company or that the resolution of any such matter will not have a material adverse effect upon the Company’s unaudited condensed consolidated interim financial statements. The Company does not believe that any of such pending claims and legal proceedings will have a material adverse effect on its unaudited condensed consolidated interim financial statements.

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 the Company and an officer of the Company as Defendants. The complaint was amended on July 12, 2024 (the “Initial Action”). The complaint alleged violations of the Securities and Exchange Act of 1934 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 unaudited condensed consolidated interim financial statements for any loss contingencies associated with this lawsuit as the Company believes that it is not probable that any loss will occur.

Derivative Lawsuits

On or about May 13, 2024, a derivative lawsuit was filed against the Company (as nominal defendant), an officer of the Company, and members of the 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 Securities 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 through 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 the Company (as nominal defendant), an officer of the Company, and members of the 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 Former CEO

On April 30, 2026, a special committee (the “Special Committee”) composed of independent members of the Board terminated the employment of Christopher Missling, PhD, as the Company’s Chief Executive Officer, for Cause (as defined in the Employment Agreement, dated as of June 27, 2013, between Dr. Missling and the Company, as amended and restated). Dr. Missling remains a member of the Board after his termination.

In June 2026, the Company received a AAA Demand for Arbitration filed by Dr. Missling. In the Demand, Dr. Missling asserts he was wrongfully terminated for Cause under his 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 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. The Company categorically denies any wrongdoing and intends to vigorously defend against the claims. At this early stage of the proceedings, the Company cannot reasonably estimate any potential loss, or range of loss, that may arise from Dr. Missling’s claims.

On July 6, 2026, Dr. Missling filed a Summons With Notice in his individual capacity and derivatively on behalf of the 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 the Board, seeking money damages. The Company anticipates being named as a nominal defendant in this lawsuit. The Company believes that this lawsuit is without merit and intends 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.

Share Purchase Warrants

At March 31, 2026 and September 30, 2025, the Company had 10,000 share purchase warrants outstanding exercisable at $12.00 per share until April 21, 2026. On April 21, 2026, these warrants expired unexercised.

Share–based Compensation Plan

2015 Stock Option Plan

On September 18, 2015, the Company’s Board approved a 2015 Omnibus Incentive Plan (the “2015 Plan”), which provided for the grant of stock options and restricted stock awards to directors, officers, employees and consultants of the Company.

The maximum number of shares of common stock reserved for issue under the 2015 Plan was 6,050,553 shares, subject to adjustment in the event of a change of the Company’s capitalization.

No additional awards will be granted under the 2015 Plan.

2019 Stock Option Plan

On January 15, 2019, the Board approved the 2019 Omnibus Incentive Plan (the “2019 Plan”), which provides for the grant of stock options and restricted stock awards to directors, officers, employees, consultants and advisors of the Company.

The maximum number of shares of common stock reserved for issue under the 2019 Plan was 6,000,000 shares, subject to adjustment in the event of a change of the Company’s capitalization.

No additional awards will be granted under the 2019 Plan.

2022 Stock Option Plan

On March 25, 2022, the Board approved the 2022 Omnibus Incentive Plan (the “2022 Plan”). The 2022 Plan was approved by stockholders on May 24, 2022. Under the terms of the 2022 Plan, 10,000,000 additional shares of common stock will be available for issuance under the 2022 Plan, in addition to the shares of common stock available under the 2019 Plan and the 2015 Plan. Any awards outstanding under a previous stock option plan will remain subject to and will be paid under such plan, and any shares subject to outstanding awards under a previous plan that subsequently cease to be subject to such awards (other than by reason of settlement of the awards in shares) will automatically become available for issuance under the 2022 Plan.

The 2022 Plan provides that it may be administered by the Board, or the Board may delegate such responsibility to a committee. The exercise price will be determined by the Board at the time of grant shall be at least equal to the fair market value on such date. If the grantee is a 10% stockholder on the grant date, then the exercise price shall not be less than 110% of fair market value of the Company’s shares of common stock on the grant date. Stock options may be granted under the 2022 Plan for an exercise period of up to ten years from the date of grant of the option or such lesser periods as may be determined by the Board, subject to earlier termination in accordance with the terms of the 2022 Plan.

On April 17, 2025, the Board approved an amendment to the 2022 Plan (the “Amendment”). The Amendment was approved by the stockholders on June 10, 2025. The Amendment increased the number of shares of common stock reserved for issuance under the 2022 Plan by 4,000,000 shares for a total of 14,000,000. In addition, the Amendment established a minimum vesting period of one year for all awards granted under the 2022 Plan and limited the discretion to accelerate the vesting of awards upon a separation from service, with limited exceptions permitted. Finally, the Amendment prohibited liberal share recycling provisions.

As at March 31, 2026, 6,243,496 stock options were outstanding under the 2022 Plan and 8,629,678 awards were available for issue under the 2022 Plan.

The following summarizes information about stock option activity during the six months ended March 31, 2026:

The following summarizes information about stock options at March 31, 2026 by a range of exercise prices:

The weighted average per share fair value of stock options vested at March 31, 2026 was $4.52 (September 30, 2025: $4.83). At March 31, 2026, the weighted average contractual life of stock options outstanding was 4.74 years (September 30, 2025: 5.22 years) and for stock options exercisable was 3.94 years (September 30, 2025: 4.11 years).

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted market price of the Company’s common stock for the stock options that were in-the-money at March 31, 2026.

The Company recognized share-based compensation expense of $0.3 and $1.4 million during the three and six months ended March 31, 2026 respectively (three and six months ended March 31, 2025: $1.4 and 3.5 million respectively) in connection with the issuance and vesting  of stock options in exchange for services. These amounts have been included in general and  administrative expenses and research and development expenses on the Company’s condensed consolidated interim statements of  operations as follows (in thousands):

An amount of approximately $4.7 million in share-based compensation is expected to be recorded over the remaining term of such stock options through fiscal 2029.

The fair value of each stock option award is estimated on the date of grant using the Black Scholes option pricing model. The fair value of share-based compensation charges recognized during the three and six months ended March 31, 2026 was determined with reference to the quoted market price of the Company’s common stock on the grant date and based on the following weighted average assumptions:

The fair value of stock compensation charges recognized during the three and six months ended March 31, 2026 and 2025 was determined with reference to the quoted market price of the Company’s common stock on the grant date.

Prior to October 1, 2025, the expected life was based on the estimated average life of stock options using the “simplified method”, as prescribed in FASB ASC 718, due to insufficient historical exercise activity during recent years. Starting on October 1, 2025, the expected life is based on the historical exercise activity of previously granted and exercised stock options.