What changed in this filing

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Item 9A. Controls and Procedures

2021-02-26 compared with 2020-03-16 · 341 added, 275 removed, 643 unchanged (49% of the section changed)

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Evaluation of Disclosure Controls and Procedures

Management, with the participation of its Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019.

Management, with the participation of its Chief Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020.

The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) of the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2019, our disclosure controls and procedures were effective at the reasonable assurance level.

Based on the evaluation of our disclosure controls and procedures as of December 31, 2020, our Chief Executive Officer and Principal Financial and Accounting Officer have concluded that, as of December 31, 2020, our disclosure controls and procedures were effective at the reasonable assurance level.

Management's Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rule 13a-15(f) under the Exchange Act.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Internal control over financial reporting is a process designed under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial and Accounting Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;

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Based on this evaluation, our management concluded that, as of December 31, 2020, our internal control over financial reporting was effective.

This annual report includes an attestation report of our registered public accounting firm regarding internal control over financial reporting.

Changes in Internal Control over Financial Reporting

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We have filed the following documents as part of this Annual Report:

Report of Baker Tilly Virchow Krause LLP, Independent Registered Public Accounting Firm F-2

Report of Baker Tilly U.S, LLP, Independent Registered Public Accounting Firm F-2

Consolidated Balance Sheets F- 4

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Consolidated Statements of Comprehensive Loss F- 6

Consolidated Statements of Stockholders’ Equity (Deficit) F- 7

Consolidated Statements of Stockholders’ Equity F- 7

Consolidated Statements of Cash Flows F- 8

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S-8 4.1 September 20, 2019

4.2* Description of Registrant's Securities

10-Q 4.2 February 26, 2020

10.1 Sales Agreement, dated July 17, 2019, between Immunic, Inc.

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8-K 10.2 September 5, 2019

10.9+ Employment Agreement between Sanjay Patel and Immunic, Inc.

8-K 10.1 July 17, 2019

10.9+ Employment Agreement dated April 17, 2020, between Immunic, Inc.

and Duane Nash.

8-K 10.2 April 20, 2020

10.10+ Addendum to Employment Agreement dated October 15, 2020, between Immunic, Inc.

and Duane Nash.

10-Q 10.12 November 6, 2020

10.11 Placement Agency Agreement, dated April 23, 2020, between Immunic, Inc.

and Roth Capital Partners, LLC

8-K 10.1 April 20, 2020

10.12 Form of Securities Purchase Agreement, dated April 23, 2020, between Immunic, Inc.

and the investors party thereto.

8-K 10.2 April 20, 2020

10.13 Placement Agency Agreement, dated June 10, 2020, between Immunic, Inc.

and the Roth Partners, LLC

8-K 10.1 June 12, 2020

10.14 Form of Securities Purchase Agreement, dated June 10, 2020, between Immunic, Inc.

and the investors party thereto

8-K 10.2 June 12, 2020

10.15 Underwriting Agreement, dated August 4, 2020, by and between Immunic, Inc.

and SVB Leerink LLC.

8-K 1.1 August 10, 2020

10.16 Finance Contract, dated October 19, 2020, between Immunic, Inc., Immunic AG and European Investment Bank

8-K 10.1 October 20, 2020

10.17 Form of Guarantee Agreement between Immunic, Inc., Immunic AG and European Investment Bank.

8-K 10.2 October 20, 2020

10.18 Sales Agreement, dated December 29, 2020 between Immunic, Inc.

and SVB Leerink LLC

8-K 10.1 January 4, 2021

10.19 Amendment Letter, dated November 11, 2020

8-K 10.1 November 13, 2020

21.1* List of subsidiaries of the Registrant.

23.1* Consent of Baker Tilly Virchow Krause LLP, Independent Registered Public Accounting Firm.

23.1* Consent of Baker Tilly U.S.

LLP, Independent Registered Public Accounting Firm.

24.1* Power of Attorney (included on the signature page).

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101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document.

104* Cover Page Interactive Data File

+ Indicates a management contract or compensatory plan or arrangement.

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Baker Tilly Virchow Krause LLP, Independent Registered Public Accounting Firm

Report of Baker Tilly U.S.

LLP, Independent Registered Public Accounting Firm

Consolidated Balance Sheets

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Consolidated Statements of Comprehensive Loss

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

Consolidated Statements of Cash Flows

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To the shareholders and the board of directors of Immunic, Inc.:

Opinions on the Financial Statements and Internal Control over Financial Reporting

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Immunic, Inc.

(the "Company") as of December 31, 2019 and 2018, the related consolidated statements of operations, comprehensive loss, stockholders' equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated financial statements").

We also have audited the Company’s internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

(the "Company") as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the "consolidated financial statements").

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control – Integrated Framework:

(2013) issued by COSO.

Going concern

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.

As discussed in Note 1 of the consolidated financial statements, the Company has recurring losses from operations, expects to incur losses for the foreseeable future and needs additional working capital.

These are the reasons that raise substantial doubt about their ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The consolidated financial statements do not contain any adjustments that might result from the outcome of this uncertainty.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company's consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

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We conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.

Our audits also included performing such other procedures as we considered necessary in the circumstances.

We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance

with the policies or procedures may deteriorate.

/s/ Baker Tilly Virchow Krause, LLP

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Assessment of accrual for research and development costs related to clinical trial activities

Critical Audit Matter Description

As described in Notes 2 and 5 to the consolidated financial statements, the Company records expenses and accruals for estimated costs of research and development activities, including third party contract services costs for clinical research.

Clinical trial activities performed by third parties are expensed based upon estimates of work completed in accordance with agreements with the respective Clinical Research Organization (“CRO”).

Billing terms and payments are reviewed by management to ensure estimates of outstanding obligations are appropriate as of period end.

Tracking the progress of completion for clinical trial activities performed by third parties allows the Company to record the appropriate expense and accruals under the terms of the agreements.

Auditing the accounting for accrued clinical trial expenses is complex because of the high volume of data used in management’s estimates, the assumptions used by management to develop their estimates and the procedures necessary to verify the cost and extent of unbilled work performed during the reporting period.

How We Addressed the Matter in Our Audit

We obtained an understanding of the Company’s process and evaluated the design and implementation of internal controls related to the completeness and valuation of accrued clinical trial expenses.

To test the clinical trial accrual, our audit procedures included, among others, testing the accuracy and completeness of the underlying data used in the estimates and evaluating and testing the significant assumptions used by management to estimate the accruals.

To test the significant assumptions, we corroborated the progress of clinical trials and other research and development projects with the Company’s research and development personnel that oversee the clinical trials, and obtained information received directly from third parties, which included the third parties’ estimate of costs incurred to date.

We also tested subsequent invoicing received from third parties.

Baker Tilly US, LLP

We have served as the Company's auditor since 2019.

Minneapolis, Minnesota

March 16, 2020

Minneapolis, MN

February 26, 2021

IMMUNIC, INC.

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Total assets $ 167,861 $ 65,955

Liabilities, Preferred Stock and Stockholders’ Equity (Deficit)

Liabilities and Stockholders’ Equity

Current liabilities:

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Commitments and contingencies (note 6)

Series A-2 Convertible preferred stock, € 1.00 par value, 299,456 shares authorized, issued and outstanding at December 31, 2018

Series A-1 Convertible preferred stock, € 1.00 par value, 13,541 shares authorized, issued and outstanding at December 31, 2018

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.0001 par value;

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Common stock, $ 0.0001 par value;

130,000,000 and 846,953 shares authorized and 10,744,806 and 846,953 shares issued and outstanding at December 31, 2019 and 2018, respectively

130,000,000 shares authorized and 21,168,240 and 10,744,806 shares issued and outstanding at December 31, 2020 and 2019, respectively

Additional paid-in capital 266,823 119,646

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Accumulated deficit ( 103,928 ) ( 59,911 )

Total stockholders’ equity (deficit) 58,363 ( 25,741 )

Total liabilities, preferred stock and stockholders’ equity (deficit) $ 65,955 $ 13,371

Total stockholders’ equity 158,785 58,363

Total liabilities and stockholders’ equity $ 167,861 $ 65,955

The accompanying notes are an integral part of these consolidated financial statements.

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Loss from operations ( 48,971 ) ( 37,032 )

Other income (expense):

Interest income (expense) 107 ( 1 )

Other income:

Interest income 58 107

Other income, net 4,896 1,992

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Net loss $ ( 44,017 ) $ ( 34,933 )

Other comprehensive income (loss):

Foreign currency translation ( 554 ) ( 862 )

Other comprehensive loss:

Foreign currency translation, net of tax ( 2,739 ) ( 554 )

Total comprehensive loss $ ( 46,756 ) $ ( 35,487 )

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IMMUNIC, INC.

Consolidated Statements of Stockholders’ Equity (Deficit)

Consolidated Statements of Stockholders’ Equity

(In thousands, except shares)

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Comprehensive

Income (Loss) Accumulated

Loss Accumulated

Deficit Total

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Foreign exchange translation adjustment — — — — — — — ( 554 ) — ( 554 )

Issuance of preferred stock — 19,256 — — — — — — — —

Balance at December 31, 2018 299,456 34,313 13,541 2,879 846,953 — 56 ( 819 ) ( 24,978 ) ( 25,741 )

Net loss — — — — — — — — ( 34,933 ) ( 34,933 )

Foreign exchange translation adjustment — — — — — — — ( 554 ) — ( 554 )

Stock-based compensation — — — — — — 529 — — 529

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Balance at December 31, 2019 — $ — — $ — 10,744,806 $ 1 $ 119,646 $ ( 1,373 ) $ ( 59,911 ) $ 58,363

Net loss — — — — — — — — ( 44,017 ) ( 44,017 )

Foreign exchange translation adjustment — — — — — — — ( 2,739 ) — ( 2,739 )

Stock-based compensation — — — — — — 2,747 — — 2,747

Issuance of common stock - At The Market Sales Agreement net of issuance costs of $ 339

— — — — 733,728 — 10,925 — — 10,925

Issuance of common stock - April registered direct equity offering net of issuance costs of $ 1,082

— — — — 1,764,706 — 13,918 — — 13,918

Issuance of common stock - June public equity offering net of issuance costs of $ 1,752

— — — — 2,175,000 — 23,048 — — 23,048

Issuance of common stock - August public equity offering net of issuance costs of $ 6,960

— — — — 5,750,000 1 96,539 — — 96,540

Balance at December 31, 2020 — — — — 21,168,240 2 $ 266,823 $ ( 4,112 ) $ ( 103,928 ) $ 158,785

The accompanying notes are an integral part of these consolidated financial statements.

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Gain on sale of ELAD Assets — ( 329 )

(Gain) loss on disposal of equipment ( 26 ) 1

Gain on disposal of equipment — ( 26 )

Stock-based compensation 2,747 6,512

Unrealized foreign currency gain ( 2,528 ) —

Contingent payment settled in common stock — 1,540

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Proceeds from sale of equipment — 40

Net cash provided by (used in) investing activities 10,536 ( 32 )

Net cash (used in) provided by investing activities ( 146 ) 10,536

Cash flows from financing activities:

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Proceeds from issuance of common stock in pre-closing financing, net of issuance costs of $ 61

Proceeds from public offering of common stock, net of commission costs of $ 161

Proceeds from public offering of common stock through At The Market offering, net of issuance costs of $ 339 and $ 161 , respectively

Proceeds from April 2020 registered direct equity offering, net of issuance costs of $ 1,082

Proceeds from June 2020 public equity offering, net of issuance costs of $ 1,752

Proceeds from August 2020 public equity offering, net of issuance costs of $ 6,960

Deferred financing costs — ( 270 )

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Cash and cash equivalents, end of period $ 127,452 $ 29,369

Supplemental disclosure of non-cash investing and financing activities:

Cash paid for interest $ — $ 1

Supplemental disclosure of noncash investing and financing activities:

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Fair value of net assets acquired in the Transaction $ — $ 39,400

Offering costs in accrued expenses $ 114 $ —

Purchases of property and equipment included in accounts payable $ — $ 19

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Immunic, Inc.

(“Immunic” or the “Company”) is a clinical-stage biopharmaceutical company developing a pipeline of selective oral immunology therapies aimed at treating chronic inflammatory and autoimmune diseases, including relapsing-remitting multiple sclerosis, ulcerative colitis, Crohn’s disease and psoriasis.

The Company is developing three small molecule products:

IMU-838 is a selective immune modulator that inhibits the intracellular metabolism of activated immune cells by blocking the enzyme DHODH;

IMU-935 is an inverse agonist of RORgt;

and IMU-856 targets the restoration of the intestinal barrier function.

Immunic’s lead development program, IMU-838, is in Phase 2 clinical development for relapsing-remitting multiple sclerosis and ulcerative colitis, with an additional Phase 2 trial considered in Crohn’s disease.

An investigator-sponsored proof-of-concept clinical trial for IMU-838 in primary sclerosing cholangitis is ongoing at the Mayo Clinic.

IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in September 2019.

("Immunic" or the "Company") a clinical-stage biopharmaceutical company developing a pipeline of selective oral immunology therapies aimed at treating chronic inflammatory and autoimmune diseases, including relapsing-remitting multiple sclerosis ("RRMS"), ulcerative colitis ("UC"), Crohn’s disease ("CD") and psoriasis.

Immunic is headquartered in New York with its main operations in Gräfelfing, Germany.

Immunic currently has 28 employees.

Immunic is currently pursuing three development programs, all orally available small molecule inhibitors in the clinical development phase.

These include the IMU-838 program, which is focused on the development of oral formulations of small molecule inhibitors of the enzyme dihydroorotate dehydrogenase (“DHODH”);

the IMU-935 program, which is focused on an inverse agonist of RORγt, an immune cell-specific isoform of retinoic acid receptor-related orphan nuclear receptor gamma (“RORγ”), and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function.

These product candidates are being developed to address diseases such as RRMS, UC, CD, and psoriasis.

In addition to these large markets, these products are also being developed to address certain rare diseases with high unmet medical needs, such as primary sclerosing cholangitis (“PSC”), and Guillain-Barré syndrome (“GBS”).

Immunic is also investigating IMU-838 as a potential treatment option for coronavirus disease 2019 (“COVID-19”).

The Company’s business, operating results, financial condition and growth prospects are subject to significant risks and uncertainties, including the failure of its clinical trials to meet their endpoints, failure to obtain regulatory approval and needing additional funding to complete the development and commercialization of the Company's three development programs.

Going Concern and Financial Condition

Liquidity and Financial Condition

Immunic has no products approved for commercial sale and has not generated any revenue from product sales.

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Immunic expects to incur significant expenses and increasing operating losses for the foreseeable future as it initiates and continues the preclinical and clinical development of its product candidates and adds personnel necessary to advance its clinical pipeline of product candidates.

In addition, as a result of the reverse acquisition, as explained below, operating as a public company will require hiring additional financial and other personnel, upgrading financial information systems, and incurring other costs associated with operating as a public company.

Immunic expects that its operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs.

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As of December 31, 2020, Immunic had cash and cash equivalents of approximately $ 127.5 million.

With these funds, Immunic expects to be able to fund its operations into but not beyond the first quarter of 2021 based on its available working capital as of the date of this evaluation.

The ability of the Company to continue its operations through the first quarter of 2021 and beyond is dependent on management’s ability to raise capital, which likely includes an equity-based financing.

However, there is no assurance that the Company will be successful in raising sufficient capital.

These factors raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

With these funds, Immunic expects to be able to fund its operations beyond twelve months from the date of the issuance of the accompanying audited consolidated financial statements.

Reverse Acquisition

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changed its name to “Immunic, Inc.” and its ticker symbol to “IMUX”.

Immediately prior to the closing of the Transaction, (i) each Immunic AG preferred share was converted into one Immunic AG ordinary share, and (ii) each Immunic AG ordinary share was converted into the right to receive 17.17 shares of

Vital’s common stock, after giving effect to the Reverse Stock Split (as defined below).

The exchange ratio was determined through arm’s-length negotiations between Vital and Immunic AG.

The aggregate consideration issuable in the Transaction, after giving effect to the Reverse Stock Split, was 8,927,130 shares of Vital’s common stock.

Following the Transaction and after giving effect to the Reverse Stock Split, the former shareholders of Immunic AG owned approximately 88.25 % of the fully diluted common stock of the Company, and the shareholders of Vital immediately prior to the Transaction owned 1,059,269 shares (plus 127,500 restricted stock units (“RSUs”) all of which have been issued to date to former Vital officers) of the common stock of the Company or approximately 11.75 %.

shareholders of Vital immediately prior to the Transaction owned 1,059,269 shares (plus 127,500 restricted stock units (“RSUs”) all of which have been issued to date to former Vital officers) of the common stock of the Company or approximately 11.75 %.

The issuance of shares of Vital’s common stock in the Transaction was registered with the Securities and Exchange Commission (“SEC”) on a Registration Statement on Form S-4 (Registration No.

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(which began operations in 2018) and Vital Therapies (Beijing) Company Limited (“VTL China”), acquired through the Transaction (which began operations in 2005).

VTL China was sold in September 2019 in connection with the sale of ELAD Assets, as described further in Note 4.

VTL China was sold in September 2019 in connection with the sale of certain of Vital's clinical development-related intellectual property rights (the "ELAD Assets").

All intercompany accounts and transactions have been eliminated in consolidation.

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GAAP requires the Company to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements.

The most significant estimates in the Company’s financial statements and accompanying notes relate to the application of the acquisition method of accounting related to the Transaction, clinical trial expenses, share-based compensation and notes related to contractual obligations.

Management believes its estimates to be reasonable under the circumstances.

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During the twelve months ended December 31, 2020 and 2019, Immunic AG and Immunic Research GmbH’s operations were located in Germany with the euro being its functional currency.

Immunic Australia Pty Ltd.’s functional currency is the Australian dollar and VTL China’s functional currency is the

Immunic Australia Pty Ltd.’s functional currency is the Australian dollar.

All amounts in the financial statements where the functional currency is not the U.S.

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Gains and losses from translation of the financial statements into U.S.

dollars are recorded in stockholders’ equity (deficit) as a component of accumulated other comprehensive income (loss).

dollars are recorded in stockholders’ equity as a component of accumulated other comprehensive income (loss).

Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as general and administrative expenses in the Consolidated Statements of Operations.

Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income.

The Consolidated Statements of Cash Flows were prepared by using the average exchange rate in effect during the reporting period which reasonably approximates the timing of the cash flows.

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Management periodically reviews the credit standing of these financial institutions and believes that the Company is not exposed to any significant credit risk.

The Company currently deposits its cash and cash equivalents with two large financial institutions.

Fair Value Measurement

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Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items.

Assets acquired and liabilities assumed are recorded at their estimated fair values.

Assets acquired and liabilities assumed are recorded

at their estimated fair values.

The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

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The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform step 1 of the two-step goodwill impairment test.

If the Company performs step 1 and the carrying amount of the reporting unit exceeds its fair value, it would perform step 2 to measure such impairment.

Impairment testing for goodwill is done at the reporting unit level.

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Research and Development Expenses

Research and development expenses have principally been related to the two development programs, IMU-838 and IMU-935.

These two programs include an orally available, small molecule inhibitor of DHODH (IMU-838 program) and an inverse agonist of RORgt (IMU-935 program) aimed at treating multiple sclerosis, ulcerative colitis, Crohn’s disease, and psoriasis.

IMU-838 is currently being tested in two Phase 2 clinical trials in patients with relapsing-remitting multiple sclerosis and ulcerative colitis.

The Company is also considering conducting a Phase 2 clinical trial in Crohn’s disease.

An investigator-sponsored proof-of-concept clinical trial for IMU-838 in primary sclerosing cholangitis is ongoing at the Mayo Clinic.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, IMU-838, IMU-935 and IMU-856.

Immunic has spent the majority of its research and development resources on IMU-838, the Company's lead development program for clinical trials in RRMS, UC, COVID-19, and PSC.

IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in September 2019.

Research and development expenses consist of expenses incurred in research and development activities including clinical trials, contract research services, salaries and related employee benefits, allocated facility costs and other outsourced services.

IMU-856 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in August 2020.

Research and development expenses consist of expenses incurred in research and development activities, which include clinical trials, contract research services, certain milestone payments, salaries and related employee benefits, allocated facility costs and other outsourced services.

Research and development expenses are charged to operations as incurred.

The Company enters into agreements with contract research organizations (“CROs”) to provide clinical trial services for individual studies and projects by executing individual work orders governed by a Master Service Arrangement (“MSA”).

The MSAs and associated work orders provide for regular recurrent payments and payments upon the completion of certain milestones.

The Company regularly assesses the timing of payments against actual costs incurred to ensure a proper accrual of related expenses in the appropriate accounting period.

Collaboration Arrangements

The MSAs and associated work orders are designed such that certain payments are to be made upon completion of certain milestones.

The Company regularly assesses the timing of payments against actual costs incurred and ensures a proper accrual of related expenses in the appropriate accounting period.

Certain collaboration and license agreements might include payments to or from the Company of one or more of the following:

Certain collaboration and license agreements may include payments to or from the Company of one or more of the following:

non-refundable or partially refundable upfront or license fees;

development, regulatory and commercial milestone payments;

manufacturing supply services;

payment for manufacturing supply services;

partial or complete reimbursement of research and development costs;

and royalties on net sales of licensed products.

The Company assesses whether such contracts are within the scope of Financial Accounting Standards Board (FASB) Accounting Standards Update (“ASU”) 2014-09 “Revenue from Contracts with Customers” (“Topic 606”) and ensures proper accounting treatment.

Currently, the Company has entered into an option agreement (the "Daiichi Sankyo Agreement") with Daiichi Sankyo Co., Ltd.

("Daiichi Sankyo") which grants the Company the right to license a group of compounds, designated by the Company as IMU-856, a potential new oral treatment option for diseases such as inflammatory bowel disease, irritable bowel syndrome with diarrhea, immune checkpoint inhibitor induced colitis and other barrier function associated diseases.

During the option period, the Company performed the agreed upon research and development activities.

The related research and development expenses were reimbursed by Daiichi Sankyo up to a maximum agreed-upon limit.

Such reimbursement is recorded as other

The Company exercised its option right on January 5, 2020 and made a one-time option execution payment.

Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.

See Note 12 - Subsequent Events.

The Company assesses whether such contracts are within the scope of Financial Accounting Standards Board (FASB) Accounting Standards Update (“ASU”) 2014-09 “ Revenue from Contracts with Customers ” and ASU No.

2018-18, “ Collaborative Arrangements”, ("ASU 2018-18").

ASU 2018-18, clarifies that certain elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606.

In October 2018, the Company entered into an option and license agreement (the "Daiichi Sankyo Agreement") with Daiichi Sankyo Co., Ltd.

("Daiichi Sankyo") which granted the Company the right to license a group of compounds, designated by the Company as IMU-856, as a potential new oral treatment option for diseases such as inflammatory bowel disease, irritable bowel syndrome with diarrhea, immune checkpoint inhibitor induced colitis and other barrier function associated diseases.

During the option period, the Company performed agreed upon research and development activities for which it was reimbursed by Daiichi Sankyo up to a maximum agreed-upon limit.

Such reimbursement was recorded as other income.

There are no more research and development reimbursements expected under this agreement.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, business development and other support functions.

Other general and administrative expenses include, but are not limited to, insurance costs, stock-based compensation, professional fees for legal, accounting and tax services, consulting, related facility costs and travel.

Other general and administrative expenses include, but are not limited to, stock-based compensation, insurance costs, professional fees for legal, accounting and tax services, consulting, related facility costs and travel.

Stock-Based Compensation

The Company measures the cost of employee and non-employee services received in exchange for equity awards based on the grant-date fair value of the award recognized generally as an expense (i) on a straight-line basis over the requisite service period for those awards whose vesting is based upon a service condition, and (ii) on an accelerated method for awards whose vesting is based upon a performance condition, but only to the extent it is probable that the performance condition will be met.

Stock-based compensation is estimated at the date of grant based on the award’s fair value for equity classified awards and upon final measurement date for liability classified awards and forfeitures are recorded in the period in which they occur.

The Company estimates the fair value of stock options using the Black-Scholes-Merton, ("BSM"), option-pricing model, which requires the use of estimates.

The BSM option-pricing model requires the input of subjective assumptions, including the risk-free interest rate, the fair value of the underlying common stock, the expected dividend yield of the Company’s common stock, the expected volatility of the price of the Company’s common stock, and the expected term of the option.

Stock-based compensation is (i) estimated at the date of grant based on the award’s fair value for equity classified awards and (ii) final measurement date for liability classified awards.

Forfeitures are recorded in the period in which they occur.

The Company estimates the fair value of stock options using the Black-Scholes-Merton option-pricing model ("BSM"), which requires the use of estimates and subjective assumptions, including the risk-free interest rate, the fair value of the underlying common stock, the expected dividend yield of the Company’s common stock, the expected volatility of the price of the Company’s common stock, and the expected term of the option.

These estimates involve inherent uncertainties and the application of management’s judgment.

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The Company leases office space and office equipment.

The underlying lease agreements have lease terms of less than twelve months and up to 42 months.

The underlying lease agreements have lease terms of less than 12 months and up to 60 months.

The short-term leases are deemed immaterial and have not been included in the operating lease right of use asset and operating lease liability.

The Company has four existing leases for office space.

At inception of a lease agreement, it is determined whether an agreement represents a lease and at commencement each lease agreement is assessed as to classification as an operating or financing lease.

As described below under “Recently Issued and/or Adopted Accounting Standards - Change in Accounting Principle,” the Company adopted the Financial Accounting Standards Board Accounting Standards Update, ("ASU"), “Leases,” or ASU 2016-02, as of January 1, 2019.

Pursuant to ASU 2016-02, one office lease outstanding on January 1, 2019 continued to be classified as an operating lease.

With the adoption of ASU 2016-02, an operating lease right-of-use asset and an operating lease liability have been recorded on the Company’s balance sheet.

Right-of-use lease assets represent the Company’s right to use the underlying asset for the lease term and the lease obligation represents its commitment to make the lease payments arising from the lease.

The Company has two existing leases for office space.

At inception of a lease agreement, the Company determines whether an agreement represents a lease and at commencement each lease agreement is assessed as to classification as an operating or financing lease.

The Company's two leases have been classified as operating leases and an operating lease right-of-use asset and an operating lease liability have been recorded on the Company’s balance sheet.

A right-of-use lease asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents its commitment to make the lease payments arising from the lease.

Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term.

As the Company’s leases do not provide an implicit rate, an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments has been used.

As the Company’s leases do not provide an implicit rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The right-of-use lease asset includes any lease payments made prior to commencement and excludes any lease incentives.

The lease term used in estimating future lease payments may include options to extend when it is reasonably certain that the Company will exercise that option.

Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the term.

Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or changes in expectations regarding the lease term.

Variable lease costs such as common area costs and property taxes are expensed as incurred.

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Comprehensive income (loss) is defined as the change in equity during a period from transactions and other events and circumstances from non-owner sources.

Accumulated other comprehensive income (loss) has been reflected as a separate component of stockholders’ equity (deficit) in the accompanying Consolidated Balance Sheets.

Accumulated other comprehensive income (loss) has been reflected as a separate component of stockholders’ equity in the accompanying Consolidated Balance Sheets and consists of foreign currency translation adjustments (net of tax).

The Company is subject to corporate income tax laws and regulations in the U.S., Germany and Australia.

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The Company utilizes the asset and liability method of accounting for income taxes which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the audited consolidated financial statements.

Deferred income tax assets and liabilities are determined based on the differences between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

differences are expected to reverse.

The effect of changes in tax rates on deferred tax assets and liabilities is recognized in operations in the period that includes the enactment date.

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Options to purchase common stock 1,117,160 471,048

Recently Issued and/or Adopted Accounting Standards

Recently Adopted Accounting Standards

In February 2016, the Financial Accounting Standards Board, or ("FASB"), issued Accounting Standards Update No.

2016-02, “Leases.

” ASU 2016-02 is intended to improve financial reporting of leasing transactions by requiring organizations that lease assets to recognize assets and liabilities for the rights and obligations created by leases on the balance sheet.

The Company has elected to adopt ASU 2016-02 retrospectively at January 1, 2019 using a simplified transition option that allows companies to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption.

The Company also elected to adopt the package of practical expedients permitted in Accounting Standards Codification Topic 842, ("ASC 842").

Accordingly, the leases outstanding at January 1, 2019 continue to be classified as operating leases under the new guidance, without reassessing whether the contracts contain a lease under ASC 842 or whether classification of the operating leases would be different under ASC Topic 842.

All of the Company’s leases at the adoption date were operating leases for facilities and included both lease and non-lease components.

As a result of the adoption of ASU 2016-02, on January 1, 2019, the Company recognized (a) a lease liability of approximately $ 80,000 , which represents the present value of the remaining lease payments using an estimated incremental borrowing rate of 6 % and (b) a right-of-use asset of approximately $ 80,000 .

(The cumulative-effect adjustment was immaterial) Due to the adoption of the standard using the retrospective cumulative-effect adjustment method, there are no changes to the Company’s previously reported results prior to January 1, 2019.

Operating lease expense is recognized on a straight-line basis

over the lease term, subject to any changes in the lease or expectations regarding the terms.

Lease expense has not changed materially as a result of the adoption of ASU 2016-02.

In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230), Restricted Cash” which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents.

Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows.

ASU 2016-18 is effective for the Company for fiscal years beginning after December 15, 2018.

The adoption of this ASU did not have a significant impact on the Company’s audited consolidated financial statements.

In June 2018, the FASB issued ASU No.

2018-07, “Improvements to Non-Employee Share-Based Payment Accounting,” or ASU 2018-07.

ASU 2018-07, which simplifies the accounting for non-employee share-based payment transactions, specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards.

ASU 2018-07 is effective for public business entities for fiscal years beginning after December 15, 2018, and early adoption is permitted.

The Company adopted ASU 2018-07 in the first quarter of 2019.

The adoption of this standard did not have a significant impact on the Company’s audited consolidated financial statements.

Recently Issued Accounting Standards

In January 2017, the FASB issued ASU 2017-04, " Intangibles-Goodwill and Other (Topic 350):

Simplifying the Test for Goodwill Impairment.

This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value.

This guidance is effective for interim and annual goodwill impairment tests in fiscal years beginning after December 15, 2019, and early adoption is permitted.

This guidance must be applied on a prospective basis.

The Company does not believe the adoption of ASU 2017-04 will have a significant impact on its consolidated financial statements.

In August 2018, the FASB issued ASU No.

2018-13, “ Fair Value Measurement - Disclosure Framework,” or ASU 2018-13.

ASU 2018-13, modifies the disclosure requirements for fair value measurements.

Simplifying the Test for Goodwill Impairment ." This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value.

The Company adopted this ASU, as required, in the quarter ended March 31, 2020 on a prospective basis.

The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.

In August 2018, the FASB issued ASU 2018-13, “ Fair Value Measurement - Disclosure Framework” ("ASU 2018-13.") ASU 2018-13 modifies the disclosure requirements for fair value measurements.

The amendments relate to disclosures regarding unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty, and are to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

All other amendments should be applied retrospectively to all periods presented upon their effective date.

The amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, and early adoption is permitted.

The Company does not believe the adoption of ASU 2018-18 will have a significant impact on its consolidated financial statements.

In November 2018, the FASB issued ASU No.

2018-18, “ Collaborative Arrangements”, ("ASU 2018-18").

All other amendments must be applied retrospectively to all periods presented upon their effective date.

The Company adopted this ASU, as required, in the quarter ended March 31, 2020.

The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.

In November 2018, the FASB issued ASU 2018-18, “ Collaborative Arrangements” ("ASU 2018-18").

ASU 2018-18, clarifies that elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606.

The new guidance is effective for public business entities for fiscal years beginning after December 15, 2019.

The Company does not believe the adoption of ASU 2018-18 will have a significant impact on its consolidated financial statements.

The Company adopted this ASU, as required, in the quarter ended March 31, 2020.

The Company does not have any agreements that meet the definition of a collaboration arrangement at this time.

Accounting for the Transaction

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The fair value of IPR&D was estimated based on the sales price of the ELAD Assets (including the present value of the promissory note issued by the ELAD buyer) less the fair value of the ELAD Assets.

See Note 4 below.

See Note 4 below for a description of the ELAD Assets transaction.

The goodwill of $ 32.97 million is not tax deductible.

Goodwill is mainly attributable to the enhanced value of the combined company, as reflected in the increase in market value of the Vital common shares following the announcement of the Transaction with Immunic AG.

The Company incurred costs directly related to the Transaction of approximately $ 10.0 million for the year ended December 31, 2019, which were expensed as incurred ($ 7.5 M of such costs were non-cash charges related to the Immunic exit bonus shares and 4SC settlement share issuances as described below in Note 6 and Note 9, respectively).

The Company does not expect that the purchase price will differ materially from the amounts shown in these financial statements.

The following supplemental unaudited pro forma information presents the Company’s financial results as if the Transaction had occurred on January 1, 2018:

Year Ended December 31,

Revenue $ — $ —

Net loss ( 19,295 ) ( 53,017 )

The above unaudited pro forma information was determined based on the historical U.S.

GAAP results of the Company and Vital.

The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations would have been if the Transaction was completed on January 1, 2018.

The unaudited pro forma consolidated net loss includes pro forma adjustments primarily relating to transaction costs directly related to the closing of the Transaction of $ 16.0 million for the year ended December 31, 2019, as these amounts are not expected to have a continuing effect on the operating results of the combined company.

The Company incurred costs directly related to the Transaction of approximately $ 10.0 million for the year ended December 31, 2019, which were expensed as incurred ($ 7.5 million of such costs were non-cash charges related to the 4SC settlement share issuances and the Immunic exit bonus shares as described below in Note 6 and Note 9, respectively).

ELAD Sales Agreement

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The promissory note was paid in full upon the second closing on September 4, 2019, at which time the Company transferred title to the intellectual property and working cell banks as well as its equity interest in VTL China.

The difference of $ 405,000 between the face value of the promissory note collected, $ 1.325 million, and the fair value of $ 920,000 has been recorded as other income in the accompanying consolidated statements of operations for the year ended December 31, 2019.

The difference of $ 405,000 between the $ 1.325 million face value of the promissory note collected and the fair value of $ 920,000 was recorded as other income in the accompanying consolidated statements of operations for the year ended December 31, 2019.

The Purchaser is not a related party.

Other Financial Information

Balance Sheet Details

Prepaid Expenses and Other Current Assets

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Australian research and development tax incentive 1,348 350

Other 1,234 796

Total $ 6,293 $ 2,861

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Legal and audit costs 139 226

Other 153 216

Total $ 3,700 $ 2,423

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Accrued legal and audit costs 114 211

Accrued compensation 658 —

Accrued other 245 224

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The Company leases certain office space under non-cancelable operating leases.

The leases terminate on June 30, 2020 for the San Diego office, April 30, 2023 for the New York City office, and December 31, 2021 for the Martinsried, Germany lease.

The leases terminate on April 30, 2023 for the New York City office and June 30, 2025 for the Gräfelfing, Germany office.

The Company formerly leased office space in Martinsried, Germany pursuant to a modified lease that terminated on August 31, 2020.

These leases include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs).

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The New York City lease has renewal options but they were not included in calculating the right of use asset and liabilities.

The Martinsried, Germany lease's renewal options until December 31, 2021 were included in calculating the right of use asset and liabilities.

On April 7, 2020, the Company signed a five year lease for its new facility in Gräfelfing, Germany.

Renewal options were not included in calculating the right of use asset and liabilities for this facility.

The leases do not have concessions, leasehold improvement incentives or other build-out clauses.

Further, the leases do not contain contingent rent provisions.

The New York City lease has a six month rent holiday at the beginning of the lease.

There were additions to right of use assets obtained from new operating leases of $ 0.6 million for the year-ended December 31, 2019.

The New York City lease had a six month rent holiday at the beginning of the lease.

There were net additions to right of use assets of $ 427,000 as a result of signing the Gräfelfing lease and shortening the term of the Martinsried lease during the year ended December 31, 2020.

The leases do not provide an implicit rate and, due to the lack of a commercially salable product, the Company is generally considered unable to obtain commercial credit.

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Maturities of the operating lease obligation are as follows as of December 31, 2020 (in thousands):

Thereafter $ —

Total lease payments $ 1,080

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Effective April 12, 2019, the parties agreed to settle Tranche IV by issuing 120,070 shares of the Company’s common stock, immediately following the Transaction, to 4SC AG while keeping Tranche III in effect.

Approximately $ 1.5 million of expense was recorded as a result of the issuance of these shares on April 12, 2019.

Approximately $ 1.5 million of expense was recorded as a result of

the issuance of these shares on April 12, 2019.

No royalties are payable as of December 31, 2020 or 2019 as sales have not commenced.

Daiichi Sankyo Agreement

On January 5, 2020, the Company exercised its option to obtain the exclusive worldwide right to commercialization of IMU-856.

Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856.

In connection with the option exercise, the Company paid a one-time upfront licensing fee to Daiichi Sankyo.

Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.

Legal Proceedings

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Money market funds $ 39,615 $ 39,615 $ — $ —

Fair Value Measurement at December 31, 2019

Fair Value Level 1 Level 2 Level 3

Money market funds $ 4,491 $ 4,491 $ — $ —

There were no transfers between Level 1, Level 2 or Level 3 assets during the periods presented.

Additionally, there were no assets or liabilities measured at fair value on a recurring basis as of December 31, 2018.

For the Company’s money market funds, which are included as a component of cash and cash equivalents on the condensed consolidated balance sheet, unrealized gains and losses are reported as accumulated other comprehensive income (loss), and realized gains and losses are included in interest income (expense) on the condensed consolidated statements of operations.

For the Company’s money market funds, which are included as a component of cash and cash equivalents on the consolidated balance sheet, realized gains and losses are included in interest income (expense) on the consolidated statements of operations.

The carrying amounts of other current assets and prepaid expenses, accounts payable, accrued expenses, and other current liabilities approximate their fair values due to their short-term nature.

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Common Stock and Preferred Stock (Converted into Common Stock)

Shelf Registration Statement

Shelf Registration Statements

In May 2018, Vital filed a shelf registration statement on Form S-3, (the “2018 Shelf Registration Statement”), which became effective in June 2018.

The 2018 Shelf Registration Statement permits:

(i) the offering, issuance and sale of up to $ 200.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination;

(ii) sales of up to 2.5 million shares of common stock by certain selling stockholders;

and (iii) the offering, issuance and sale by the Company of up to a maximum aggregate offering price of $ 60.0 million of common stock that may be issued and sold under an “at-the-market” sales agreement (an “ATM”), with Cantor Fitzgerald & Co (“Cantor”).

In July 2019, the Company terminated the ATM with Cantor and filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $ 40.0 million of common stock that may be issued and sold under an ATM with SVB Leerink LLC (“SVB Leerink”) as agent.

The 2018 Shelf Registration Statement permits the offering, issuance and sale of up to $ 200.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination.

In November 2020, Immunic filed a shelf registration statement on Form S-3.

The 2020 Shelf Registration Statement permits the offering, issuance and sale of up to $ 250.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination of the foregoing.

In July 2019, the Company filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $ 40.0 million of common stock that may be issued and sold under an at-the-market sales agreement ("July 2019 ATM") with SVB Leerink LLC (“SVB Leerink”) as agent.

The Company intends to use the net proceeds from the offering to continue to fund the ongoing clinical development of its product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates.

The ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the ATM or (ii) termination of the ATM as otherwise permitted thereby.

The ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

The Company has agreed to pay SVB Leerink a commission equal to 3.0 % of the gross proceeds from the sales of common shares pursuant to the ATM and has agreed to provide SVB Leerink with customary indemnification and contribution rights.

For the year ended December 31, 2019, the Company raised gross proceeds of $ 5.4 million pursuant to the ATM through the sale of 630,907 shares of common stock at a weighted average price of $ 8.49 per share.

The net proceeds from the ATM were $ 4.9 million after deducting underwriter commissions of $ 161,000 and estimated offering expenses of $ 305,000 .

At December 31, 2019, there was $ 34.6 million available under the ATM.

The July 2019 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the July 2019 ATM or (ii) termination of the July 2019 ATM as otherwise permitted thereby.

The July 2019 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

As of December 31, 2020, $ 23.3 million in capacity remains under the July 2019 ATM.

In December 2020, the Company filed another Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $ 50.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("December 2020 ATM") with SVB Leerink as agent.

The December 2020 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the December 2020 ATM or (ii) termination of the December 2020 ATM as otherwise permitted thereby.

The December 2020 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.

As of December 31, 2020, $ 50.0 million in capacity remains under the December 2020 ATM.

The Company has agreed to pay SVB Leerink a commission equal to 3.0 % of the gross proceeds from the sales of common shares pursuant to both ATM's and has agreed to provide SVB Leerink with customary indemnification and contribution rights.

For the year ended December 31, 2020, the Company raised gross proceeds of $ 11.3 million pursuant to the July 2019 ATM through the sale of 733,728 shares of common stock at a weighted average price of $ 15.42 per share.

The net proceeds from the July 2019 ATM were $ 11.0 million after deducting underwriter commissions of $ 339,356 .

For the year ended December 31, 2019, the Company raised gross proceeds of $ 5.4 million pursuant to the July 2019 ATM through the sale of 630,907 shares of common stock at a weighted average price of $ 8.49 per share.

The net proceeds from the July 2019 ATM were $ 4.9 million after deducting underwriter commissions of $ 161,000 and estimated offering expenses of $ 305,000 .

As of December 31, 2019, there was $ 34.6 million available under the July 2019 ATM.

Public Equity Offerings

April 2020 Registered Direct Offering

On April 23, 2020, the Company entered into an engagement letter with ROTH Capital Partners, LLC ("RCP") relating to the Company’s registered direct offering of common stock to select institutional investors.

Pursuant to this agreement, the Company agreed to pay RCP a cash fee of 6.5 % of the gross proceeds from the offering raised from investors and to reimburse RCP for certain costs incurred in connection therewith.

In addition, on April 23, 2020, the Company and the investors entered into a securities purchase agreement relating to the issuance and sale of an aggregate of 1,764,706 shares of common stock.

The purchase price per share was $ 8.50 for aggregate gross proceeds to the Company of approximately $ 15.0 million.

The net proceeds to the Company from this offering, after deducting the Company’s offering expenses, were approximately $ 13.9 million.

June 2020 Offering

On June 10, 2020, the Company entered into a placement agency agreement with RCP and Ladenburg Thalmann & Co.

relating to the Company’s public offering of 2,175,000 shares of common stock.

Pursuant to this agreement, the Company agreed to pay the placement agents a cash fee of 6.5 % of the gross proceeds from the offering raised from investors and to reimburse the placement agents for certain costs incurred in connection therewith.

In addition, on June 10, 2020, the Company and certain institutional investors entered into securities purchase agreements relating to the issuance and sale of an aggregate of 2,175,000 shares of the Company’s common stock.

The purchase price per share in the Offering was $ 11.40 for aggregate gross proceeds to the Company of approximately $ 25.0 million.

The net proceeds to the Company from this offering, after deducting the Company’s offering expenses, were approximately $ 23.0 million.

August 2020 Offering

On August 4, 2020, the Company entered into an underwriting agreement with SVB Leerink LLC, as representative of the several underwriters in connection with the Company’s public offering of 5,000,000 shares of common stock, at a public offering price of $ 18.00 per share.

Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable for 30 days, to purchase up to an additional 750,000 shares of Common Stock at the public offering price, less underwriting discounts and commissions, which was exercised in full on August 6, 2020.

On August 7, 2020, the Company closed the Offering.

The net proceeds to the Company from the Offering, after giving effect to the exercise in full by the Underwriters of their option to purchase the Option Shares, was approximately $ 96.5 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.

Stock Subscription Not Yet Issued

On March 27, 2019, stockholders of the Company resolved to increase the Company’s share capital by an additional 156,920 ordinary shares, par value € 1.00 per share, of which 27,176 shares related to bonuses for executive officers of the Company.

Under German law a capital increase is valid as soon as the consummation of the capital increase has been officially registered with the commercial register, which occurred on April 3, 2019.

Therefore, the capital increase became effective subsequent to March 31, 2019.

Immunic AG, a non-public company as of December 31, 2018, had authorized 846,953 shares of common stock, par value € 1.00 per share, which were issued in March 2016 for approximately $ 56,000 .

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Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any.

Through December 31, 2019 and 2018, no cash dividends had been declared or paid.

Through December 31, 2020, no cash dividends had been declared or paid.

Preferred Stock

Immunic AG issued 13,541 Series A-1 Convertible and 299,456 Series A-2 Convertible preferred shares, par value € 1.00 per share, to investors as part of its growth financing plan in the total amount of € 31.7 million (approximately $ 37.2 million) from inception (2016) through 2018.

From inception (2016) through 2018, Immunic AG issued 13,541 Series A-1 Convertible and 299,456 Series A-2 Convertible preferred shares, par value € 1.00 per share, to investors as part of its growth financing plan in the total amount of € 31.7 million (approximately $ 37.2 million).

Series A-1 Convertible and Series A-2 Convertible preferred shares were converted into Immunic AG’s ordinary shares immediately prior to the Transaction and were then exchanged for Immunic (former Vital) common shares at the consummation of the Transaction.

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Stock Reserved for Future Issuance

Shares reserved for future issuance at December 31, 2019 are as follows:

Shares reserved for future issuance as of December 31, 2020 are as follows:

Common stock reserved for issuance for:

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Under two stock option programs, the Company granted stock options to the members of the Immunic AG supervisory board (the “Supervisory Board”) and to key employees in 2018 and in 2019 prior to the Transaction.

The programs were intended to incentivize the beneficiaries to dedicate their working capabilities in the best

manner possible to the benefit of the Company.

The programs were intended to incentivize the beneficiaries to dedicate their working capabilities in the best manner possible to the benefit of the Company.

The stock options vest if and when an exit event occurs.

An exit event is defined as a direct initial public offering has taken place, or an indirect initial public offering has taken place, or a trade sale has been consummated, or a disposal of the Company’s assets has been consummated, or another financially equivalent realization event has occurred.

Under the stock option program for the members of the Supervisory Board (the “VSOP SB”), the Company may grant stock options of the Company to members of the Company’s Supervisory Board for the time period of their service as members of the Supervisory Board.

Under the stock option program for the members of the Supervisory Board (the “VSOP SB”), the Company granted stock options of the Company to members of the Company’s Supervisory Board for the time period of their service as members of the Supervisory Board.

The shareholders’ approved the VSOP SB with a total of 31,593 stock options, corresponding to approximately 0.5 % of the Company’s issued share capital at the time of the decision.

Under the stock option program for key employees (the “VSOP”), the Company may grant stock options of the Company to certain key employees.

With the approval of the Supervisory Board, Immunic AG’s management board shall determine how many stock options shall be granted and how they shall be allocated to the respective beneficiaries up to a total of 31,593 .

Further terms and conditions of both programs, the VSOP SB and the VSOP, are substantially similar.

Under the stock option program for key employees (the “VSOP”), the Company granted stock options of the Company to certain key employees.

With the approval of the Supervisory Board, Immunic AG’s management board determined how many stock options were granted and how they were allocated to the respective beneficiaries up to a total of 31,593 .

Further terms and conditions of both programs, the VSOP SB and the VSOP, were substantially similar.

The following information is therefore shown aggregated for both programs.

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As a result, the Company recorded $ 508,000 in compensation expense related to these stock options in the twelve months ended December 31, 2019.

In July 2019, the Company’s stockholders approved the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which was adopted by the Company’s board of directors with an effective date of June 14, 2019.

In July 2019, the Company’s stockholders approved the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which was adopted by the Board with an effective date of June 14, 2019.

The 2019 Plan allows for the grant of equity awards to employees, consultants and non-employee directors.

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The 2019 Plan includes an evergreen provision that allows for the annual addition of up to 4 % of the Company’s fully-diluted outstanding stock, with a maximum allowable increase of 4,900,000 shares over the term of the 2019 Plan.

The 2019 Plan is currently administered by the Board, which determines the exercise prices, vesting schedules and other restrictions of awards under the 2019 Plan at its discretion.

In accordance with this provision, the shares available for grant were increased by 448,634 shares effective April 1, 2020.

The 2019 Plan is currently administered by the Board, or, at the discretion of the Board, by a committee of the Board, which determines the exercise prices, vesting schedules and other restrictions of awards under the 2019 Plan at its discretion.

Options to purchase stock may not have an exercise price that is less than the fair market value of underlying shares on the date of grant, and may not have a term greater than ten years .

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Shares that are expired, terminated, surrendered or canceled under the 2019 Plan without having been fully exercised will be available for future awards.

Movements during the year The following table illustrates the number and weighted average exercise prices of, and movements in, stock options for the VSOP SB and VSOP during the year ended:

Unvested Awards Weighted-Average Fair Value Unvested Awards Weighted-Average Fair Value

Movements during the year

The following table illustrates the number and weighted average exercise prices of, and movements in, stock options for the VSOP SB and VSOP during the year ended December 31, 2019.

There were no awards granted or outstanding after the awards settled in 2019:

Unvested Awards Weighted-Average Fair Value

Outstanding as of January 1 6,937 $ 12.87

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There was $ 508,000 of expense recognized in 2019 upon the vesting of the awards as a result of closing the Transaction.

There were no cancellations or modifications to the awards in 2019 or 2018.

There were no cancellations or modifications to the awards in 2019.

The following table summarizes stock option activity since January 1, 2019 under the 2019 Plan:

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Options exercisable as of December 31, 2019 31,956 $ 13.00 9.59 $ 3,382

The fair value of the Company’s stock was $ 12.87 which was determined based on prices negotiated with investors participating in the Financing as noted above.

Options Weighted-

Price Weighted-

Term (Years) Aggregate

Outstanding as of January 1, 2020 456,645 $ 12.57

Granted 744,406 $ 13.24

Exercised — $ —

Forfeited or expired ( 83,891 ) $ 13.32

Outstanding as of December 31, 2020 1,117,160 $ 12.96 9.24 $ 2,894,754

Options vested and expected to vest as of December 31, 2020 1,117,160 $ 12.96 9.24 $ 2,894,754

Options exercisable as of December 31, 2020 263,507 $ 13.04 8.92 $ 661,952

The fair value of the Company’s stock for purposes of determining the exercise price of options granted under the VSOP for the year ended December 31, 2019 was $ 12.87 , which was determined based on prices negotiated with investors participating in the Financing as noted above.

The fair value of the zero-cost VSOP SB and the VSOP options was equal to the fair value of the underlying stock.

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Expected Volatility

Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of a group of comparable companies that are publicly traded.

The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

Expected Term

The Company uses the simplified method for estimating the expected term of employee and non-employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.

The weighted-average grant date fair value of stock options granted under the 2019 Plan during the year ended December 31, 2019 was $ 8.28 .

The expected term of options is estimated considering the vesting period at the grant date, the life of the option and the average length of time similar grants have remained outstanding in the past.

The weighted-average grant date fair value of stock options granted under the 2019 Plan during the years ended December 31, 2020 and 2019 was $ 9.50 and $ 8.28 , respectively.

The following are the underlying assumptions used in the Black-Scholes-Merton option pricing model to determine the fair value of stock options granted to employees and to non-employees under this stock plan:

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As of December 31, 2020 there was $ 7.0 million in total unrecognized compensation expense relating to the 2019 Plan to be recognized over a weighted average period of 2.72 years.

General and administrative expenses for the year ended December 31, 2019 include $ 6.0 million of stock compensation expense related to the Early Exit Bonus Share Agreement disclosed above.

Research and development expense for the year ended December 31, 2019 includes $ 1.5 million of stock compensation expense as a result of the settlement of Tranche IV with 4SC AG as explained in Note 6.

Summary of Equity Incentive Plans Assumed from Vital

Upon completion of the Transaction with Vital on April 12, 2019, Vital’s 2012 Stock Option Plan (the “2012 Plan”), Vital’s 2014 Equity Incentive Plan (the “2014 Plan”) and Vital’s 2017 Inducement Equity Incentive Plan (the “Inducement Plan”), were assumed by the Company.

These plans are administered by the Board or, at the discretion of the Board, by a committee of the Board.

The exercise prices, vesting and other restrictions are determined at the discretion of the Board, or its committee if so delegated, except that the exercise price per share of stock options may not be less than 100% of the fair market value of the share of common stock on the date of grant and the term of the stock option may not be greater than ten years .

Incentive stock options granted to employees and restricted stock awards granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over four years .

Non-statutory options granted to employees, officers, members of the Board, advisors, and consultants of the Company typically vest over three or four years .

Shares that are expired, terminated, surrendered or canceled under the plans without having been fully exercised will be available for future awards.

The Company’s 2014 Equity Incentive Plan, became effective in April 2014 and replaced the 2012 Stock Option Plan, with respect to future awards.

The 2014 Plan provides for the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance awards and performance units to employees, directors and consultants.

The 2012 Plan provided for the grant of stock options, restricted stock, restricted stock units, stock purchase rights and performance awards to employees, directors and consultants.

Shares available for grant under the 2014 Plan include any shares remaining available or becoming available in the future under the 2012 Plan due to cancellation or forfeiture.

In addition, the 2014 Plan provides for annual increases in the number of shares available for issuance thereunder beginning upon its effective date in April 2014, and on each annual anniversary, equal to the lower of 1,200,000 shares of the Company’s common stock or an amount as the Board may determine.

Shares available for grant under the 2014 Plan totaled 43,311 shares as of December 31, 2019.

In September 2017, Vital’s board of directors approved the 2017 Inducement Equity Incentive Plan and amended and restated the plan in November 2017.

which has terms and conditions substantially similar to the 2014 Plan.

Under the Inducement Plan, 46,250 shares of Vital’s common stock were reserved to be used exclusively for non-qualified grants to individuals who were not previously employees or directors as an inducement material to the individual’s entry into employment within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

No expense was recorded for the plans assumed from Vital during the year ended December 31, 2019.

All awards granted under these plans have either been forfeited or expired.

There remain 43,311 shares available for grant under the 2014 Plan as of December 31, 2020.

In September 2017, Vital’s board of directors approved the Inducement Plan, which was amended and restated in November 2017.

Under the Inducement Plan 46,250 shares of Vital’s common stock were reserved to be used exclusively for non-qualified grants to individuals who were not previously employees or directors as an inducement material to a grantee's entry into employment within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

No expense was recorded for the plans assumed from Vital during the years ended December 31, 2020 and 2019.

The following table summarizes stock option activity since January 1, 2019 under the plans assumed from Vital:

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Options exercisable as of December 31, 2019 14,403 $ 306.01 2.58 $ —

Options Weighted-

Price Weighted-

Term (Years) Aggregate

Outstanding as of January 1, 2020 14,403 $ 306.01

Granted — $ —

Exercised — $ —

Forfeited or expired ( 14,403 ) $ 306.01

Outstanding as of December 31, 2020 — $ —

Options vested and expected to vest as of December 31, 2020 — $ — 0.00 $ —

Options exercisable as of December 31, 2020 — $ — 0.00 $ —

— $ — 0.00 $ —

In an effort to maximize the cash on Vital’s balance sheet for the Transaction, Vital restructured existing change of control and severance agreements with certain of its executive officers in January 2019.

At the same time, Vital canceled options granted to such officers and granted them a total of 127,500 RSUs.

The purpose of the amendments and the RSU grants was to substitute stock awards for cash payments owed upon a change of control.

The primary effect of the amendments and the RSU grants was to substitute stock awards for cash payments owed upon a change of control.

The RSUs vested in full upon consummation of the Transaction.

At December 31, 2019, all RSUs were settled.

As of December 31, 2019, all RSUs were settled.

Net loss before income tax was subject to tax in the following jurisdictions for the following periods (in thousands):

Year Ended December 31,

Years Ended December 31,

United States $ ( 8,681 ) $ ( 20,258 )

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The rate reconciliation consists of the following:

Year Ended December 31,

Years Ended December 31,

Federal statutory rate 21.0 % 21.0 %

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Stock options ( 0.9 ) % ( 1.1 ) %

Tax effect of rate change ( 1.9 ) % 0.0 %

Other ( 0.9 ) % ( 3.0 ) %

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Effective tax rate 0.0 % 0.0 %

The statutory rate for 2018 is based on the German federal income tax rate and the statutory rate for 2019 is based on the U.S.

federal tax rate due to the reverse merger transaction.

Deferred income taxes result from temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary

differences are expected to be recovered or settled.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in years in which those temporary differences are expected to be recovered or settled.

As tax laws and rates change, deferred tax assets and liabilities are adjusted through income tax expense.

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Total deferred tax assets 36,522 28,666

Deferred tax liabilities:

Property, plant and equipment ( 5 ) ( 311 )

Total deferred tax liability ( 5 ) ( 311 )

Net deferred tax assets 36,517 28,355

Less valuation allowance ( 36,517 ) ( 28,355 )

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The valuation allowance has increased by $ 6.8 million and $ 23.7 million for the years ended December 31, 2020 and 2019, respectively.

A portion of the increase in the valuation allowance was due to the acquired attributes as a result of the “Transaction” in April 2019 in the amount of $ 16.4 million.

Sections 382 and 383 of the Internal Revenue Code ("IRC"), limit a company’s ability to utilize certain net operating losses and tax credit carryforwards in the event of a cumulative change in ownership in excess of 50%, as defined.

The acquired company experienced changes in ownership, as defined in Section 382, as a result of the "Transaction" in April 2019.

As a result, the deferred tax asset associated with the Company's U.S.

federal and state net operating loss carryforwards have been reduced based on the Section 382 limitations.

The amount of the reduction in the Company's U.S.

deferred tax assets is based on the estimated amount of the net operating loss ("NOL") carryforwards the Company believes cannot be used based on the estimated amount of the Company's Section 382 annual limitation.

As of December 31, 2019, the Company had available U.S.

NOL carryforwards of approximately $ 77.9 million.

$ 61.8 million of these NOLs relate to pre-Transaction NOLs and are restricted under our Section 382 annual limitation of $ 0.8 million per year.

As of December 31, 2020, Immunic had available NOLs of approximately $ 75.7 million in Germany and Australia.

These NOLs do not expire.

federal NOL carryforwards of $ 15.6 million were generated prior to 2018 and expire over 20 years.

The $ 62.3 million of 2018 and 2019 federal NOL carryforwards do not expire.

federal NOL carryforwards of $ 15.6 million were generated prior to 2018 and expire over 20 years beginning in 2023.

The $ 67.1 million of post 2017 federal NOL carryforwards do not expire.

Section 382 of the Internal Revenue Code of 1986, as amended, subject the future utilization of net operating losses, to an annual limitation in the event of certain ownership changes, as defined thereunder.

The Company may have undergone such an ownership change and therefore may be limited in the amount of net operating losses available for utilization in the future.

The Company did not have any uncertain tax positions for the years ended December 31, 2020 and 2019, respectively.

The Company does not anticipate any significant changes in the amount of uncertain tax positions as of December 31, 2019 over the next twelve months.

Due to the full valuation allowance that the Company has on its net deferred tax asset balance, there are no uncertain tax positions that would impact the effective tax rate if recognized.

The Company is subject to U.S.

federal, New York, German and Australian income taxes.

federal, New York, California, Texas, German and Australian income taxes.

The Company is subject to U.S.

federal or state income tax examination by tax authorities for tax returns filed for the years 2003 through 2018 due to the carryforward of NOLs.

federal or state income tax examination by tax authorities for tax returns filed for the years 2003 and forward due to the carryforward of NOLs.

Tax years 2016 through 2019 are subject to audit by German and Australian tax authorities.

The Company is not currently under examination by any federal or state jurisdictions.

Immunic recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

The Company is not currently under examination by any tax jurisdictions.

Immunic, Inc.

recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations.

Accrued interest and penalties are included on the related tax liability line in the consolidated balance sheet.

There were no such interest or penalties for any of the years presented.

The Company is not currently under examination by any tax jurisdictions.

On October 19, 2020, Immunic, Inc.

(the “Company”) and Immunic AG, its wholly-owned subsidiary, entered into a Finance Contract (the “Loan Agreement”) with the European Investment Bank (“EIB”), pursuant to which EIB agreed to provide Immunic AG with a term loan in an aggregate amount of up to € 24.5 million to support the development of Immunic’s lead asset, IMU-838, in moderate coronavirus disease 2019 (“COVID-19”), to be made available to be drawn in three tranches,

with the second and third tranches subject to the completion of certain pre-defined milestones.

The Company has the right to defer payment of principal and interest on the first and second tranches until five years after the respective borrowing dates, at which point such tranches must be repaid in full.

The third tranche is repayable in annual installments commencing one year after its respective borrowing date and must be repaid in full no later than five years after such date.

Any outstanding borrowings under the Loan Agreement will accrue interest as provided in the Loan Agreement.

From January 1, 2021 until December 31, 2030, the Company and Immunic AG are also obligated to pay EIB a very low single digit percentage of their revenue, as set forth in the Loan Agreement, subject to certain conditions and limitations tied to the total amount drawn under the Loan Agreement and subject to a cap of € 8.6 million if only the first tranche is drawn and subject to a cap of € 30 million if the full loan amount is drawn.

The Loan Agreement also includes certain prepayment penalties that may be triggered by certain prepayments prior to the maturity date.

As of December 31, 2020, nothing was drawn down under this loan agreement.

The Company will guarantee Immunic AG’s obligations to EIB pursuant to a Guarantee Agreement to be executed by the Company, Immunic AG and EIB (the “Guarantee Agreement”, and together with the Loan Agreement, the “Agreements”).

Related Party Transactions

As previously disclosed, on April 15, 2020, the compensation committee of the Company’s Board independently reviewed and approved entering into an employment agreement with the Company’s current Chairman of the Board, Duane Nash, MD, JD, MBA (the “Executive Chairman Agreement”) and pursuant to such approval, on April 17, 2020, the Company and Mr.

Nash entered into the Executive Chairman Agreement.

Pursuant to the Executive Chairman Agreement, Mr.

Nash serves as the Executive Chairman of the Board as long as he is a member of the Board, or until termination of the Executive Chairman Agreement (as described below) or upon his earlier death, incapacity, removal, or resignation.

Pursuant to the Executive Chairman Agreement, Mr.

Nash is entitled to receive:

(i) a monthly base salary of $ 25,417 (it being agreed that such fee is inclusive of any fees associated with Mr.

Nash’s services as both a director of the Company and in the capacity of Executive Chairman), (ii) employee benefits including, health insurance, dental insurance, basic life and accidental death and dismemberment insurance, long and short term disability insurance and participation in the Company’s 401(k) Plan, and (iii) reimbursements for pre-approved reasonable business-related expenses incurred in good faith in the performance of the Mr.

Nash’s duties for the Company.

The Executive Chairman Agreement establishes an “at will” employment relationship pursuant to which Mr.

Nash serves as Executive Chairman.

The Executive Chairman Agreement contemplated a term that ended on October 15, 2020 and was subsequently extend.

On October 15, 2020, the Company and Mr.

Nash entered into an addendum to the Executive Chairman Agreement, pursuant to which the term of the agreement was extended to April 15, 2021.

The Company made a one-time award to Mr.

Nash of 120,000 stock options, which vest monthly starting on November 15, 2020.

All other terms of the employment agreement remained the same.

Selected Quarterly Data (unaudited)

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Therefore, the sum of the quarterly per share calculations will not necessarily equal the annual per share calculation.

Subsequent Event

On January 5, 2020, Immunic AG, under the terms of the Daiichi Sankyo Agreement, exercised its option to obtain the exclusive worldwide right to commercialization of IMU-856.

Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856.

In connection with the option exercise, Immunic, Inc.

paid a one-time upfront licensing fee to Daiichi Sankyo.

Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized.

Immunic, Inc.

March 16, 2020 By:

February 26, 2021 By:

/s/ DANIEL VITT

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POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel Vitt and Sanjay S.

Patel, and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Daniel Vitt and Glenn Whaley, and each of them, his or her true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ DANIEL VITT Director, Chief Executive Officer March 16, 2020

/s/ SANJAY S.

PATEL Chief Financial Officer March 16, 2020

/s/ GLENN WHALEY Principal Accounting Officer March 16, 2020

NASH Chairman March 16, 2020

/s/ TAMAR HOWSON Director March 16, 2020

/s/ JOERG NEERMANN Director March 16, 2020

/s/ DANIEL VITT Director, Chief Executive Officer and President February 26, 2021

/s/ GLENN WHALEY Principal Financial and Accounting Officer February 26, 2021

NASH Executive Chairman February 26, 2021

/s/ TAMAR HOWSON Director February 26, 2021

/s/ JOERG NEERMANN Director February 26, 2021

Joerg Neermann

/s/ VINCENT OSSIPOW Director March 16, 2020

/s/ VINCENT OSSIPOW Director February 26, 2021

Vincent Ossipow

/s/ BARCLAY A.

PHILLIPS Director March 16, 2020

/s/ JAN VAN DEN BOSSCHE Director March 16, 2020

PHILLIPS Director February 26, 2021

/s/ JAN VAN DEN BOSSCHE Director February 26, 2021

Jan Van den Bossche

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-K

Item 9A. Controls and Procedures