What changed in this filing

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Item 9A. Controls and Procedures

2022-02-24 compared with 2021-02-26 · 168 added, 304 removed, 680 unchanged (41% of the section changed)

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Evaluation of Disclosure Controls and Procedures

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.

Management, with the participation of our Chief Executive Officer and Principal Financial and Accounting Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2021.

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.

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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;

(ii) provide reasonable assurance (a) transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (b) our receipts and expenditures are being made only in accordance with authorizations of our management and directors;

and (c) regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

(ii) provide reasonable assurance (a) that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, (b) that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (c) regarding the prevention or timely detection of the unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

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

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8-K 10.1 November 13, 2020

10.20 Settlement agreement, dated March 31,2021 between Immunic AG and 4SC AG

8-K 10.1 March 31, 2021

10.21+ Addendum No.

2 to Employment Agreement dated April 15, 2021 between Immunic, Inc.

and Duane Nash

8-K 10.1 April 15, 2021

10.22+ Second Addendum to Service Agreement between Immunic AG and Dr.

8-K 10.1 June 10, 2021

10.23+ Second Addendum, dated June 10, 2021 to Service Agreement between Immunic AG and Dr.

Andreas Muehler

8-K 10.2 June 10, 2021

10.24+ Employment Agreement, dated June 10, 2021 between Immunic, Inc.

Andreas Muehler

8-K 10.3 June 10, 2021

10.25+ Employment Agreement, dated June 10, 2021 between Immunic, Inc.

and Glenn Whaley

8-K 10.4 June 10, 2021

10.26+ Underwriting Agreement, dated July 15, 2021, by and between Immunic, Inc.

and Piper Sandler & Co

8-K 1.1 July 15, 2021

10.27+ Employment Agreement, dated October 14, 2021, between Immunic, Inc.

and Patrick Walsh

8-K 10.1 October 14, 2021

21.1* List of subsidiaries of the Registrant.

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8-K 99.4 September 5, 2019

99.4+ Second Addendum, dated June 10, 2021, to Service Agreement between Immunic AG and Dr.

Hella Kohlhof

8-K 99.2 June 10, 2021

101.INS* XBRL Instance Document.

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Report of Baker Tilly U.S.

LLP, Independent Registered Public Accounting Firm

LLP, Independent Registered Public Accounting Firm (PCAOB ID 23 )

Consolidated Balance Sheets

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As described in Notes 2 and 3 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”).

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.

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

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General and administrative 13,300 10,334

4SC Royalty Settlement (See Note 4) 17,250 —

Total operating expenses 91,665 48,971

Loss from operations ( 91,665 ) ( 48,971 )

Other income:

Other income (expense):

Interest income 66 58

Other income, net 4,896 1,992

Total other income 4,954 2,099

Other income (expense), net ( 1,346 ) 4,896

Total other income (expense) ( 1,280 ) 4,954

Net loss $ ( 92,945 ) $ ( 44,017 )

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Net loss $ ( 92,945 ) $ ( 44,017 )

Other comprehensive loss:

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

Other comprehensive income (loss):

Foreign currency translation income (loss), net of tax 3,860 ( 2,739 )

Total comprehensive loss $ ( 89,085 ) $ ( 46,756 )

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(In thousands, except shares)

Series A-2 Preferred Stock Series A-1 Preferred Stock Common Stock Additional

Capital Accumulated

Additional Paid-in Capital Accumulated

Comprehensive

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Equity (Deficit)

Shares Amount Shares Amount Shares Amount

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

Conversion of Series A Preferred Stock to common stock ( 299,456 ) ( 34,313 ) ( 13,541 ) ( 2,879 ) 5,302,029 1 37,192 — — 37,193

Issuance of common stock in pre-closing financing for cash, net of issuance costs of $ 61

— — — — 2,197,742 — 29,935 — — 29,935

Issuance of common stock - Bonus share agreement — — — — 460,336 — 6,014 — — 6,014

Issuance of common stock - settlement of contingent payment — — — — 120,070 — 1,540 — — 1,540

Exchange of common stock in connection with Transaction — — — — 1,059,269 — 39,400 — — 39,400

Issuance of common stock under restricted stock unit agreements — — — — 127,500 — — — — —

Public offering of common stock - net of issuance costs $ 377

— — — — 630,907 — 4,980 — — 4,980

Shares Amount

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

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

Net loss — — — — ( 92,945 ) ( 92,945 )

Foreign exchange translation adjustment — — — 3,860 — 3,860

Stock-based compensation — — 5,949 — — 5,949

Issuance of common stock - July 2021 equity offering net of issuance costs of $ 2,980

4,500,000 1 42,019 — — 42,020

Issuance of common stock - At The Market Sales Agreement net of issuance costs of $ 23

73,221 — 729 — — 729

Shares issued in connection with the Company's employee stock purchase plan 12,758 — 92 — — 92

Issuance of common stock in connection with the 4SC royalty settlement (see note 4) 581,199 — 8,625 — — 8,625

Balance at December 31, 2021 26,335,418 3 $ 324,237 $ ( 252 ) $ ( 196,873 ) $ 127,115

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

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Depreciation and amortization 85 39

Gain on sale of ELAD Assets — ( 329 )

Gain on disposal of equipment — ( 26 )

Stock-based compensation 5,949 2,747

Unrealized foreign currency gain ( 2,528 ) —

Contingent payment settled in common stock — 1,540

Unrealized foreign currency (gain) loss 4,332 ( 2,528 )

Common stock issued in connection with the 4SC royalty settlement (see Note 4) 8,625 —

Changes in operating assets and liabilities:

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Accounts payable 176 1,000

Other current liabilities ( 1,255 ) 1,102

Accrued expenses and other liabilities 669 225

Other liabilities 170 ( 1,255 )

Accrued expenses and other current liabilities 3,175 669

Net cash used in operating activities ( 83,233 ) ( 46,124 )

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Purchases of property and equipment ( 67 ) ( 146 )

Cash distribution in connection with ELAD Assets sale — ( 75 )

Proceeds from sale of ELAD assets — 2,475

Cash acquired in connection with the Transaction — 8,151

Proceeds from sale of equipment — 40

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

Net cash used in investing activities ( 67 ) ( 146 )

Cash flows from financing activities:

Proceeds from issuance of preferred stock —

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

Proceeds from public offering of common stock through At The Market offering, net of issuance costs of $ 23 and $ 339 , respectively

Proceeds from shares issued in connection with the Company's employee stock purchase plan 92 —

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

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

Deferred financing costs — ( 270 )

Proceeds from July 2021 public equity offering, net of issuance costs of $ 2,980

Net cash provided by financing activities 42,841 144,431

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Net change in cash and cash equivalents ( 40,589 ) 98,083

Cash and cash equivalents, beginning of period 29,369 13,072

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

Cash and cash equivalents, beginning of year 127,452 29,369

Cash and cash equivalents, end of year $ 86,863 $ 127,452

Supplemental disclosure of noncash investing and financing activities:

Stock issuance and deferred financing costs included in accounts payable and accrued expenses $ — $ 20

Conversion of convertible preferred stock to common stock $ — $ 37,193

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

Common stock issued in connection with the 4SC royalty settlement (see note 4) $ 8,625 $ —

Operating lease right-of use asset obtained in exchange for lease obligation $ 435 $ —

Offering costs in accrued expenses $ — $ 114

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

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

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Immunic, Inc.

("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”).

("Immunic" or the "Company") is a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases, including relapsing multiple sclerosis (“RMS”), ulcerative colitis (“UC”), Crohn’s disease (“CD”) and psoriasis.

The Company is headquartered in New York City with its main operations in Gräfelfing near Munich, Germany.

The Company currently has approximately 55 employees.

The Company is currently pursuing three development programs.

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

the IMU-935 program, which is focused on an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”), an immune cell-specific isoform of RORγ;

and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function and regeneration of bowel epithelium.

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

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.

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From inception through December 31, 2021, Immunic has raised net cash of approximately $ 259.5 million from private and public offerings of preferred and common stock.

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 beyond twelve months from the date of the issuance of the accompanying audited consolidated financial statements.

Reverse Acquisition

On April 12, 2019, pursuant to the terms of the Agreement, dated as of January 6, 2019, between Vital Therapies, Inc., a Delaware corporation (“Vital”), Immunic AG, and the shareholders of Immunic AG party thereto (the “Agreement”), the holders of Immunic AG ordinary shares exchanged all of their outstanding shares for shares of Vital common stock, resulting in Immunic AG becoming a wholly-owned subsidiary of Vital (the “Transaction”).

Immediately following the Transaction, Vital Therapies, Inc.

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 %.

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.

Immediately prior to the closing of the Transaction, Immunic AG issued, in a private placement transaction (the “Financing”), an aggregate of 2,197,742 ordinary shares to certain of its shareholders for aggregate consideration of € 26.7 million (approximately $ 29.9 million), pursuant to the terms of the Investment and Subscription Agreement, dated as of January 6, 2019, between Immunic and the shareholders and investors party thereto (the “Subscription Agreement”).

The Transaction has been accounted for as a reverse acquisition under the acquisition method of accounting.

Because Immunic AG’s pre-Transaction owners held an 88.25 % economic and voting interest in the combined company immediately following the closing of the Transaction, Immunic AG is considered to be the acquirer of Vital for accounting purposes.

Additionally, Immunic AG is considered to be the predecessor for reporting purposes and the financial results of Immunic AG are reported in the historical comparable periods.

Reverse Stock Split

On April 12, 2019, immediately following the closing of the Transaction, the Company effected a 40-for-1 reverse stock split of its common stock (the “Reverse Stock Split”).

Accordingly, all references to share and per share amounts in the accompanying audited consolidated financial statements and notes have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented.

No fractional shares were issued in connection with the Reverse Stock Split.

Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the exchange ratio of 17.17 .

As of December 31, 2021, the Company had cash and cash equivalents of approximately $ 86.9 million.

The Company is dependent on financing activities to fund ongoing operations and due to the inherent uncertainties in successfully completing financing transactions, and with our forecasted cash reach through the first quarter of 2023, these are indicators of an inability to continue as a going concern.

However, the Company has the ability to manage the amount and timing of expenditures to reduce costs, has limited required fixed spend, and can manage working capital as needed.

These factors coupled with the $ 16.2 million of cash raised so far in 2022 under it's At The Market ("ATM") facility alleviates any uncertainty that the Company will have adequate liquidity to meet its obligations for at least the next 12 months from the financial statement release date.

Basis of Presentation and Consolidation

The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, ("U.S.

GAAP") and include the accounts of Immunic and its wholly-owned subsidiaries, Immunic AG and Immunic Research GmbH (which both began operations in 2016), Immunic Australia Pty Ltd.

(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 certain of Vital's clinical development-related intellectual property rights (the "ELAD Assets").

GAAP") and include the accounts of Immunic and its wholly-owned subsidiaries, Immunic AG and Immunic Research GmbH (which both began operations in 2016) and Immunic Australia Pty Ltd.

(which began operations in 2018).

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.

The most significant estimates in the Company’s financial statements and accompanying notes relate to clinical trial expenses and share-based compensation.

Management believes its estimates to be reasonable under the circumstances.

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The Company’s reporting currency is United States (“U.S.”) dollars.

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 AG and Immunic Research GmbH’s operations are located in Germany with the euro being their functional currency.

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

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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.

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

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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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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Research and Development Expenses

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.

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

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

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

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.

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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.

Leases with terms of 12 months or less at inception are not included in the operating lease right of use asset and operating lease liability.

The Company has two existing leases for office space.

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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 changes in expectations regarding the lease term.

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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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.

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.

Deferred taxes are reduced by a valuation allowance when, in the opinion of management, it is more likely than not some portion or the entire deferred tax asset will not be realized.

As of December 31, 2020, and December 31, 2019, the Company maintained a full valuation allowance against the balance of deferred tax assets.

As of December 31, 2021 and 2020, the Company maintained a full valuation allowance against the balance of deferred tax assets.

It is the Company’s policy to provide for uncertain tax positions and the related interest and penalties based upon management’s assessment of whether a tax benefit is more likely than not to be sustained upon examination by tax authorities.

The Company recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company is subject to U.S.

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 and forward due to the carryforward of NOLs.

Tax years 2016 through 2020 are subject to audit by German and Australian tax authorities.

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

Net Loss Per Share

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Recently Adopted 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.

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 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 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

Based on the exchange ratio of 17.17 shares of Vital common stock for each share of Immunic AG, immediately following the Transaction, former Vital stockholders owned approximately 11.75 % of the capital stock of the combined organization on a fully diluted basis, and former Immunic AG stockholders owned approximately 88.25 % of the capital stock of the combined organization on a fully diluted basis.

At the closing of the Transaction, all shares of Immunic AG common stock then outstanding were exchanged for Vital common stock.

In addition, pursuant to the terms of the Agreement, the Company, for accounting purposes, assumed all outstanding stock options to purchase 16,987 shares of Vital common stock and 127,500 RSUs at the closing of the Transaction, after giving effect to the Reverse Stock Split.

Since the exercise prices of the outstanding options to purchase common stock were less than the trading price on the day of the consummation of the Transaction, they were not included in the formula below in calculating the purchase price.

The tangible and intangible assets and liabilities of Vital acquired in the Transaction are recorded based on their fair values as of the completion of the Transaction, with the excess of the purchase consideration over the fair value of net assets assigned to and recorded as goodwill.

The following summarizes the purchase price paid in the Transaction (amounts in thousands except share and per share amounts):

Number of shares owned by Vital stockholders (1) 1,059,269

RSUs (2) 127,500

Total fully-diluted shares 1,186,769

Multiplied by the fair value per share of Vital common stock (3) $ 33.20

Estimated purchase price $ 39,400

(1) The number of shares of 1,059,269 represents the historical 42,369,694 shares of Vital common stock outstanding immediately prior to the closing of the Transaction, adjusted for the Reverse Stock Split.

(2) The number of RSUs of 127,500 represents the historical 5,100,000 Vital RSUs of which all have been issued to date to Vital former officers in 2019.

(3) Based on the last reported sale price of Vital common stock on the Nasdaq Global Market on April 12, 2019, the closing of the Transaction, adjusted for the Reverse Stock Split.

The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired:

(in thousands)

Cash and cash equivalents $ 8,151

Prepaid expenses and other assets 307

Supplies and working cell banks 1,000

Clinical development equipment 306

Other property and equipment 30

In-process research and development (“IPR&D ” )

Accounts payable, accrued expenses and other liabilities ( 4,128 )

Goodwill 32,970

Purchase price $ 39,400

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 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 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

In March 2019, Vital entered into an asset purchase agreement (the “Vital APA ” ) to sell certain of Vital’s clinical development-related assets and related intellectual property rights to RH Cell Therapeutics (the “Purchaser”) for approximately $ 2.5 million.

The assets sold were clinical development equipment, supplies, intellectual property and working cell banks in addition to the equity interest in VTL China (collectively the “ELAD Assets ” ).

The Purchaser deposited $ 1.1 million into escrow and paid the Company $ 50,000 prior to the Transaction.

The Vital APA was amended and restated on May 28, 2019, to allow for two closings.

In the first closing which occurred on May 28, 2019, the $ 1.1 million was released from escrow to the Company.

In addition, the Purchaser executed a promissory note with a face amount of $ 1.325 million, which accrues simple interest of 10 % per annum.

The fair value of the promissory note was estimated to be $ 920,000 .

Therefore, the fair value of the ELAD Assets was based on the cash in escrow, the $ 50,000 deposit and the fair value of the promissory note.

The estimated fair value of the ELAD Assets was included in the purchase accounting allocation as follows (in thousands):

Clinical development equipment 306

Supplies and working cell banks 1,000

In process research & development (“IPR&D”) 764

Total $ 2,070

In the first closing, the Company transferred title of the clinical development equipment and supplies to the Purchaser.

Also, the fair value of the promissory note was recorded as a note receivable and the fair value of the IPR&D and working cell banks assets were removed from the Company’s audited consolidated balance sheet.

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 $ 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.

There are no recently issued accounting standards that would have a significant impact on the Company's consolidated financial statements.

Balance Sheet Details

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Accounts Payable consist of (in thousands):

Clinical costs $ 3,408 $ 1,981

Clinical and related costs $ 3,427 $ 3,408

Legal and audit costs 72 139

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Other Current Liabilities consist of (in thousands):

Deferred income $ — $ 1,008

Other 379 343

Lease liabilities $ 408 $ 297

Total $ 585 $ 379

Deferred income represents cash reimbursement on invoices received from third party billings, prior to the related services being performed.

Commitments and Contingencies

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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.

The Company formerly leased office space

in Planegg-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.

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

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

On March 1, 2021, the Company added additional lease space at the Gräfelfing, Germany office.

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

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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.

There were net additions to right of use assets of $ 427,000 as a result of signing the Gräfelfing, Germany lease and shortening the term of the Planegg-Martinsried, Germany lease during the year ended December 31, 2020 and net additions of $ 435,000 with the signing of additional lease space in March 2021.

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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Contractual Obligations

As of December 31, 2020, the Company has non-cancelable contractual obligations under certain agreements related to its development programs IMU-838, IMU-935 and IMU-856 totaling approximately $ 1.2 million, all of which is expected to be paid in 2021.

As of December 31, 2021, the Company has non-cancelable contractual obligations under certain agreements related to its development programs in vidofludimus calcium, IMU-935 and IMU-856 totaling approximately $ 2.8 million, all of which is expected to be paid in 2022.

Other Commitments and Obligations

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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.

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

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

On March 31, 2021, Immunic AG, a wholly-owned subsidiary of the Company, and 4SC AG entered into a Settlement Agreement, pursuant to which Immunic AG settled its remaining obligation of the 4.4 % royalty on net sales for $ 17.25 million (Tranche III of the Agreement).

The payment was made 50 % in cash and 50 % in shares of Immunic’s common stock (the

Pursuant to the Agreement, the Company filed a resale shelf registration statement on Form S-3 covering the resale of the Shares.

With the execution of the Agreement, no further payment obligations remain between Immunic AG and 4SC AG.

Daiichi Sankyo Agreement

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Money market funds $ 31,630 $ 31,630 $ — $ —

Total assets at fair value $ 31,630 $ 31,630 $ — $ —

Fair Value Measurement at December 31, 2020

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

Total assets at fair value $ 39,615 $ 39,615 $ — $ —

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

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The fair value and book value of the money market funds presented in the table above are the same.

Common Stock and Preferred Stock (Converted into Common Stock)

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 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 May 2018, Vital Therapies 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 permitted 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.

This registration statement expired in June 2021 and is no longer effective.

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

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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 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.

The Company used 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 July 2019 ATM was effectively terminated in June 2021 when the 2018 Shelf Registration Statement expired.

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.

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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.

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, 2021, the Company raised gross proceeds of $ 0.8 million pursuant to the December 2020 ATM through the sale of 73,221 shares of common stock at a weighted average price of $ 10.27 per share.

The net proceeds from the December 2020 ATM were $ 0.7 million after deducting underwriter commissions of $ 22,555 .

During 2022, we raised gross proceeds of $ 16.7 million pursuant to the December 2020 ATM through the sale of 1,568,487 shares of common stock at a weighted average price of $ 10.62 per shared.

The net proceeds were $ 16.2 million after deducting underwriter commissions of $ 0.5 million.

As of February 18, 2022, $ 32.6 million in capacity remains under the December 2020 ATM.

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.

July 2021 Public Equity Offering

On July 15, 2021, the Company entered into an underwriting agreement with Piper Sandler & Co., in connection with the Company’s public offering of 4,500,000 shares of the Company’s common stock, $ 0.0001 par value per share, at a public offering price of $ 10.00 per share.

On July 19, 2021, the Company closed the Offering.

The net proceeds to the Company from the Offering was approximately $ 42.0 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company.

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.

June 2020 Offering

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

On June 10, 2020, the Company entered into a placement agency agreement with ROTH Capital Partners, LLC ("RCP") and Ladenburg Thalmann & Co.

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

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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 7, 2020, the Company closed the Offering.

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 .

April 2020 Registered Direct Offering

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

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 the Company’s common stock.

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

This securities purchase agreement restricted the Company from issuing additional common stock for a period of 75 days from April 27, 2020, subject to certain exceptions.

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

As of December 31, 2021, the Company’s certificate of incorporation, as amended and restated, authorized the Company to issue 130,000,000 shares of common stock, par value of $ 0.0001 .

The voting, dividend and liquidation rights of the holders of the Company’s common stock are subject to and qualified by the rights, powers and preferences of any holders of preferred stock.

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders.

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Preferred Stock

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.

The Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue 20,000,000 shares of $ 0.0001 par value preferred stock, rights and preferences to be set by the board of directors.

No preferred shares were outstanding as of December 31, 2021.

Stock Warrants

The Company issued warrants to purchase common stock in connection with financing activities and for consulting services in 2011.

Warrants for 6,015 shares of common stock at an exercise price of $ 3,719.60 expired on September 25, 2019.

Stock Reserved for Future Issuance

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Common stock reserved for issuance for:

2021 Employee stock purchase plan 187,242

Outstanding stock options 2,157,460

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Total common shares reserved for future issuance 3,116,853

Stock Compensation Plans

Stock-based Compensation Plans

2021 Employee Stock Purchase Plan

On April 25, 2021, the Company adopted the 2021 Employee Stock Purchase Plan ("ESPP"), which was approved by stockholder vote at the 2021 Annual Meeting of Stockholders held on June 10, 2021.

The plan provides eligible employees of the Company with an opportunity to purchase common stock of the Company through accumulated payroll deductions, which are included in other current liabilities until they are used to purchase Company shares.

Eligible employees participating in the bi-annual offering period can choose to have up to the lesser of 15% of their annual base earnings or the IRS annual share purchase limit of $25,000 in aggregate market value to purchase shares of the Company’s common stock.

The purchase price of the stock is the lesser of (i) 85% of the closing market price on the date of purchase and (ii) the closing market price at the beginning of the bi-annual offering period.

The maximum number of shares reserved for delivery under the plan is 200,000 shares.

The first enrollment period under the plan commenced on August 1, 2021 and the Company recognized $ 46,000 of expense related to the plan in the twelve months ended December 31, 2021.

The Company has issued 12,758 shares under the ESPP for the twelve months ended December 31, 2021.

Stock Option Programs

Under German law, (i) a company’s management board consists of employee members and is responsible for overseeing its daily business, and (ii) a company’s supervisory board supervises the management board and serves a role equivalent to the board of directors of an American corporation.

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 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 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 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.

The Company accounts for both programs as cash-settled options and classifies their fair value as a liability upon vesting.

Vesting of options granted under the VSOP SB and VSOP was contingent upon an exit event.

Upon consummation of the Transaction, which occurred on April 12, 2019, all of the awards vested and were settled for cash of $ 508,000 based on their fair value.

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 Board with an effective date of June 14, 2019.

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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.

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

In accordance with this provision, the shares available for grant were increased in 2020 and 2021 by a total of 1,340,050 shares.

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.

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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

Granted during the period 32,177 $ 12.87

Forfeited during the period — $ —

Settled in cash during the period ( 39,114 ) $ 12.87

Expired during the period — $ —

Outstanding at December 31 — $ —

Exercisable at December 31 — $ —

No expense was recognized during the year ended December 31, 2020.

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.

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

The following table summarizes stock option activity for the twelve months ended December 31, 2021 and 2020 under the 2019 Plan:

Options Weighted-

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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.

The weighted-average assumptions used in the BSM option pricing model to determine the fair value of the employee and non-employee stock option grants relating to the 2019 Plan were as follows:

Risk-Free Interest Rate

The risk-free rate assumption is based on the U.S.

The risk-free rate assumption is based on U.S.

Treasury instruments with maturities similar to the expected term of the stock options.

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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

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.

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Expected term of options (years) 6.0 5.8

Early Exit Bonus Share Agreement (Anti-Dilution Adjustment)

In accordance with an Early Exit Bonus Share Agreement (Anti-Dilution Adjustment) between the shareholders of Immunic AG dated August 2017, each of the four members of the Management Board of Immunic AG, through a limited liability company controlled by the respective board member, received new shares in Immunic AG as a form of anti-dilution protection.

The AG shares were subscribed by the Management Board members at a price corresponding to their nominal value in the course of the Additional Financing of Immunic AG, which was carried out in March 2019.

As part of the closing of the share exchange with Vital, Therapies, Inc., now Immunic, Inc., in April 2019, the AG shares were exchanged for 460,336 restricted shares in with Vital, Therapies, Inc., now Immunic, Inc., which were issued to the members of the management Board.

Upon consummation of the Transaction, compensation cost of € 5.3 million (approximately $ 6.0 million) was recognized.

Stock-Based Compensation Expense

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As of December 31, 2021 there was $ 12.2 million in total unrecognized compensation expense relating to the 2019 Plan to be recognized over a weighted average period of 2.89 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

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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:

Options Weighted-

Price Weighted-

Term (Years) Aggregate

Outstanding as of January 1, 2019 — $ —

Assumed in the Transaction with Vital 17,117 $ 306.99

Granted — $ —

Exercised — $ —

Forfeited or expired ( 2,714 ) $ 312.18

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

Options vested and expected to vest as of December 31, 2019 14,403 $ 306.01 2.58 $ —

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 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.

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

No expense was recorded for the plans assumed from Vital during the twelve months ended December 31, 2021 and 2020, respectively.

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

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Federal statutory rate 21.0 % 21.0 %

State tax (net of federal benefit) 0.0 % 0.0 %

Foreign rate differential 3.2 % 3.0 %

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Net operating loss carryforwards $ 18,437 $ 17,369

Federal and state tax credits — —

Stock-based compensation 576 125

Intangible Assets 3,848 —

Foreign net operating loss carryforwards 34,819 18,998

Unrealized gain or loss 1,130 —

Other, net 9 30

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As a result, the Company has maintained a full valuation allowance against the entire balance of its net deferred tax assets since the date of inception.

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

The valuation allowance has increased by $ 22.3 million and $ 6.8 million and for the years ended December 31, 2021 and 20, respectively.

As of December 31, 2021, Immunic had available NOLs of approximately $ 139.9 million in Germany and Australia.

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The $ 72.2 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.

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

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

The Company did no t have any uncertain tax positions for the years ended December 31, 2021 and 2020, respectively.

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.

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

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”).

On October 19, 2020, 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, vidofludimus calcium, 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.

Effective October 20, 2021 the Company terminated this agreement with the EIB and no funds were drawn under this arrangement.

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.

Executive Chairman Agreement with Duane Nash

On April 15, 2020, the compensation committee of the Board of Directors of the Company independently reviewed and approved entering into an employment agreement with the 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 Dr.

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.

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

Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020, which was subsequently extended to April 15, 2021.

On April 15, 2021, the Company and Dr.

Nash entered into an addendum (the “Agreement”) to extend the term of the Executive Chairman Agreement to April 15, 2022.

In connection with the Agreement, the Company made a one-time award to Dr.

Nash of an option to purchase 90,000 shares of Company common stock, which will vest monthly commencing on May 15, 2021, and to increase Dr.

Nash’s monthly base salary to $ 27,960 from $ 25,417 .

Selected Quarterly Data (unaudited)

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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