IMMUNIC, INC. 10-K

Item 9A. Controls and Procedures. Evaluation of Disclosure Controls and Procedures 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. 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, 2021, our Chief Executive Officer and Principal Financial and Accounting Officer have concluded that, as of December 31, 2021, 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 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; (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. 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. As of December 31, 2021, our management conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013). Based on this evaluation, our management concluded that, as of December 31, 2021, our internal control over financial reporting was effective. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting that occurred during the quarter ended December 31, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Item 9B. Other Information. None. 80 PART III Item 10. Directors, Executive Officers and Corporate Governance. Information required by this item will be contained in our definitive proxy statement (the “Definitive Proxy Statement”), to be filed with the SEC in connection with our 2022 Annual Meeting of Stockholders, which is expected to be filed not later than 120 days after the end of our fiscal year ended December 31, 2021, under the headings “Election of Directors,” “Corporate Governance,” “Executive Officers,” and “Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by reference. We have a written Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer and our principal accounting officer and every other director, officer and employee of Immunic. The Code of Business Conduct and Ethics is available on our Internet website at www.imux.com. A copy of the Code of Business Conduct and Ethics will be provided free of charge by making a written request and mailing it to our corporate headquarters offices to the attention of the Investor Relations Department. If any amendment to, or a waiver from, a provision of the Code of Business Conduct and Ethics that applies to the principal executive officer, principal financial officer and principal accounting officer is made, such information will be posted on our Internet website within four business days at www.imux.com. Item 11. Executive Compensation. Information required by this item will be found in our Definitive Proxy Statement under the heading "Executive Compensation" and is incorporated herein by reference. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. Information required by this item will be found in our Definitive Proxy Statement under the headings "Securities Authorized for Issuance Under Equity Compensation Plans," "Security Ownership of Certain Beneficial Owners" and "Security Ownership of Directors and Executive Officers" and is incorporated herein by reference. Item 13. Certain Relationships and Related Transactions, and Director Independence. Information required by this item will be found in our Definitive Proxy Statement under the headings "The Board of Directors and Board Committees" and "Certain Relationships and Related-Party Transactions" and is incorporated herein by reference. Item 14. Principal Accounting Fees and Services. Information required by this item will be found in our Definitive Proxy Statement under the heading "Proposal to Ratify the Appointment of Independent Registered Public Accounting Firm" and is incorporated herein by reference. 81 PART IV Item 15. Exhibits, Financial Statement Schedules. Page 1. Financial Statements . We have filed the following documents as part of this Annual Report: Report of Baker Tilly U.S, LLP, Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets F- 4 Consolidated Statements of Operations F- 5 Consolidated Statements of Comprehensive Loss F- 6 Consolidated Statements of Stockholders’ Equity F- 7 Consolidated Statements of Cash Flows F- 8 Notes to Consolidated Financial Statements F- 9 2. Financial Statement Schedules. None. 3. Exhibits. The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the U.S. Securities and Exchange Commission. 82 EXHIBITS Incorporated by Reference Exhibit Number Exhibit Title Form Exhibit Filing Date 3.1 Amended and Restated Articles of Incorporation. 8-K 3.1 July 17, 2019 3.2 Third Amended and Restated Bylaws. 8-K 3.1 July 17, 2019 4.1 2019 Omnibus Equity Incentive Plan. 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. and SVB Leerink LLC. 8-K 10.1 July 17, 2019 10.2 Option and License Agreement, dated September 27, 2018, between Immunic AG and Daiichi Sankyo Company, Ltd. 8-K 10.2 July 17, 2019 10.3 Asset Purchase Agreement, dated May 13, 2016, between Immunic AG and 4SC AG. 8-K 10.3 July 17, 2019 10.4+ Form of Indemnification Agreement. 8-K 10.4 July 17, 2019 10.5+ Employment Agreement between Dr. Daniel Vitt and Immunic AG. 8-K 10.5 July 17, 2019 10.6+ Addendum to Service Agreement between Immunic AG and Dr. Daniel Vitt. 8-K 10.1 September 5, 2019 10.7+ Employment Agreement between Dr. Manfred Groeppel and Immunic AG. 8-K 10.6 July 17, 2019 10.8+ Addendum to Service Agreement between Immunic AG and Dr. Manfred Groeppel. 8-K 10.2 September 5, 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 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. Daniel Vitt 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. and Dr. Andreas Muehler 8-K 10.3 June 10, 2021 83 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. 23.1* Consent of Baker Tilly U.S. LLP, Independent Registered Public Accounting Firm. 24.1* Power of Attorney (included on the signature page). 31.1* Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1** Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2** Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 99.1+ Employment Agreement, dated September 4, 2019, between Immunic, Inc. and Dr. Andreas Muehler. 8-K 99.3 September 5, 2019 99.2+ Addendum, dated September 4, 2019, to Service Agreement between Immunic AG and Dr. Andreas Muehler. 8-K 99.2 September 5, 2019 99.3+ Addendum, dated September 4, 2019, to Service Agreement between Immunic AG and Dr. Hella Kohlhof. 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. 101.SCH* XBRL Taxonomy Extension Schema Document. 101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document. 101.DEF* XBRL Taxonomy Extension Definition Linkbase Database. 101.LAB* XBRL Taxonomy Extension Label Linkbase Document. 101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document. 104* Cover Page Interactive Data File + Indicates a management contract or compensatory plan or arrangement. * Filed herewith. ** In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished in Exhibits 32.1 and 32.2 hereto are deemed to accompany this Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Exchange Act. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference. 84 IMMUNIC, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of Baker Tilly U.S. LLP, Independent Registered Public Accounting Firm (PCAOB ID 23 ) F-2 Consolidated Balance Sheets F-4 Consolidated Statements of Operations F-5 Consolidated Statements of Comprehensive Loss F-6 Consolidated Statements of Stockholders’ Equity F-7 Consolidated Statements of Cash Flows F-8 Notes to Consolidated Financial Statements F-9 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the board of directors of Immunic, Inc.: Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Immunic, Inc. (the "Company") as of December 31, 2021 and 2020, 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, 2021, 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, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. 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. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. 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. 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 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. 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. F- 2 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, MN February 24, 2022 F- 3 IMMUNIC, INC. Consolidated Balance Sheets (In thousands, except share and per share amounts) December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 86,863 $ 127,452 Other current assets and prepaid expenses 18,125 6,293 Total current assets 104,988 133,745 Property and equipment, net 152 203 Goodwill 32,970 32,970 Right of use asset, net 948 901 Other long-term assets 42 42 Total assets $ 139,100 $ 167,861 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 3,745 $ 3,700 Accrued expenses 7,071 4,318 Other current liabilities 585 379 Total current liabilities 11,401 8,397 Long-term liabilities: Operating lease liabilities 584 679 Total long-term liabilities 584 679 Total liabilities 11,985 9,076 Commitments and contingencies (note 4) Stockholders’ equity: Preferred stock, $ 0.0001 par value; 20,000,000 authorized and no shares issued or outstanding at December 31, 2021 and 2020 — — Common stock, $ 0.0001 par value; 130,000,000 shares authorized and 26,335,418 and 21,168,240 shares issued and outstanding at December 31, 2021 and 2020, respectively 3 2 Additional paid-in capital 324,237 266,823 Accumulated other comprehensive loss ( 252 ) ( 4,112 ) Accumulated deficit ( 196,873 ) ( 103,928 ) Total stockholders’ equity 127,115 158,785 Total liabilities and stockholders’ equity $ 139,100 $ 167,861 The accompanying notes are an integral part of these consolidated financial statements. F- 4 IMMUNIC, INC. Consolidated Statements of Operations (In thousands, except share and per share amounts) Years Ended December 31, 2021 2020 Operating expenses: Research and development $ 61,115 $ 38,637 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 (expense): Interest income 66 58 Other income (expense), net ( 1,346 ) 4,896 Total other income (expense) ( 1,280 ) 4,954 Net loss $ ( 92,945 ) $ ( 44,017 ) Net loss per share, basic and diluted $ ( 3.93 ) $ ( 2.81 ) Weighted-average common shares outstanding, basic and diluted 23,652,779 15,663,826 The accompanying notes are an integral part of these consolidated financial statements. F- 5 IMMUNIC, INC. Consolidated Statements of Comprehensive Loss (In thousands) Years Ended December 31, 2021 2020 Net loss $ ( 92,945 ) $ ( 44,017 ) Other comprehensive income (loss): Foreign currency translation income (loss), net of tax 3,860 ( 2,739 ) Total comprehensive loss $ ( 89,085 ) $ ( 46,756 ) The accompanying notes are an integral part of these consolidated financial statements. F- 6 IMMUNIC, INC. Consolidated Statements of Stockholders’ Equity (In thousands, except shares) Additional Paid-in Capital Accumulated Other Comprehensive Loss Accumulated Deficit Total Stockholders’ Equity (Deficit) Shares Amount 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 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. F- 7 IMMUNIC, INC. Consolidated Statements of Cash Flows (In thousands) Years Ended December 31, 2021 2020 Cash flows from operating activities: Net loss $ ( 92,945 ) $ ( 44,017 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 85 39 Stock-based compensation 5,949 2,747 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: Prepaid expenses and other assets ( 12,800 ) ( 2,779 ) Accounts payable 176 1,000 Other liabilities 170 ( 1,255 ) Accrued expenses and other current liabilities 3,175 669 Net cash used in operating activities ( 83,233 ) ( 46,124 ) Cash flows from investing activities: Purchases of property and equipment ( 67 ) ( 146 ) Net cash used in investing activities ( 67 ) ( 146 ) Cash flows from financing activities: Proceeds from public offering of common stock through At The Market offering, net of issuance costs of $ 23 and $ 339 , respectively 729 10,925 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 — 13,918 Proceeds from June 2020 public equity offering, net of issuance costs of $ 1,752 — 23,048 Proceeds from August 2020 public equity offering, net of issuance costs of $ 6,960 — 96,540 Proceeds from July 2021 public equity offering, net of issuance costs of $ 2,980 42,020 — Net cash provided by financing activities 42,841 144,431 Effect of exchange rate changes on cash and cash equivalents ( 130 ) ( 78 ) Net change in cash and cash equivalents ( 40,589 ) 98,083 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: 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 The accompanying notes are an integral part of these consolidated financial statements. F- 8 Notes to Consolidated Financial Statements 1. Description of Business and Basis of Financial Statements Description of Business Immunic, Inc. ("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. 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”), as well as metastatic castration-resistant prostate cancer (“mCRPC”). 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. Liquidity and Financial Condition Immunic has no products approved for commercial sale and has not generated any revenue from product sales. Immunic has never been profitable and has incurred operating losses in each year since inception (2016). Immunic has an accumulated deficit of approximately $ 196.9 million as of December 31, 2021 and approximately $ 103.9 million as of December 31, 2020. Substantially all of Immunic’s operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations. 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. Immunic expects that its operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs. 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, 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) and Immunic Australia Pty Ltd. (which began operations in 2018). All intercompany accounts and transactions have been eliminated in consolidation. Immunic manages its operations as a single reportable segment for the purposes of assessing performance and making operating decisions. Certain prior period amounts have been reclassified to conform to the current basis of presentation. F- 9 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with U.S. 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 clinical trial expenses and share-based compensation. Management believes its estimates to be reasonable under the circumstances. Actual results could differ materially from those estimates and assumptions. Foreign Currency Translation and Presentation The Company’s reporting currency is United States (“U.S.”) dollars. 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. All amounts in the financial statements where the functional currency is not the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows: • assets and liabilities at reporting period-end rates; • income statement accounts at average exchange rates for the reporting period; and • components of equity at historical rates. Gains and losses from translation of the financial statements into U.S. 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 (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. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents consist of cash on hand and deposits in banks located in the U.S., Germany and Australia. The Company maintains cash and cash equivalent balances denominated in Euro and U.S. dollars with major financial institutions in the U.S. and Germany in excess of the deposit limits insured by the government. 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 Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1—Quoted prices in active markets for identical assets or liabilities. Level 1 assets consisted of money market funds for the periods presented. The Company had no Level 1 liabilities for the periods presented. Level 2— Inputs other than observable quoted prices for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. The Company had no Level 2 assets or liabilities for the periods presented. Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities for the periods presented. F- 10 The carrying value of cash and cash equivalents, other current assets and prepaid expenses, accounts payable, accrued expenses, and other current liabilities approximates fair value due to the short period of time to maturity. Property and Equipment Property and equipment is stated at cost. Depreciation is computed using the straight-line method based on the estimated service lives of the assets which range from three years to thirteen years . Depreciation and amortization expense was $ 85,000 and $ 39,000 for the years ended December 31, 2021 and 2020, respectively. Impairment of Long-Lived Assets The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impaired assets are then recorded at their estimated fair value. There were no impairment losses during the years ended December 31, 2021 and 2020. Goodwill Business combinations are accounted for under the acquisition method. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. 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. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill. Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition. 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 a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment. Impairment testing for goodwill is done at the reporting unit level. The Company has determined that it operates in a single operating segment and has a single reporting unit. The Company has determined there was no goodwill impairment as of December 31, 2021. Research and Development Expenses 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. 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. F- 11 Collaboration Arrangements 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; 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 ” 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, 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 (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. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future. Leases The Company leases office space and office equipment. The underlying lease agreements have lease terms of less than 12 months and up to 60 months. 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. 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, 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 F- 12 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. Leases with an initial term of twelve months or less are not recorded on the balance sheet. Comprehensive Income (Loss) 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 in the accompanying Consolidated Balance Sheets and consists of foreign currency translation adjustments (net of tax). Income Taxes The Company is subject to corporate income tax laws and regulations in the U.S., Germany and Australia. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment in their application. 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, 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 Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares and, if dilutive, common stock equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position. Potentially dilutive securities, not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive, are as follows: As of December 31, 2021 2020 Options to purchase common stock 2,157,460 1,117,160 Recently Adopted Accounting Standards There are no recently issued accounting standards that would have a significant impact on the Company's consolidated financial statements. F- 13 3. Balance Sheet Details Prepaid Expenses and Other Current Assets Prepaid Expense and Other Current Assets consist of (in thousands): December 31, 2021 2020 Prepaid clinical and related costs $ 14,853 $ 3,416 VAT receivable 279 295 Australian research and development tax incentive 1,871 1,348 Other 1,122 1,234 Total $ 18,125 $ 6,293 Accounts Payable Accounts Payable consist of (in thousands): December 31, 2021 2020 Clinical and related costs $ 3,427 $ 3,408 Legal and audit costs 72 139 Other 246 153 Total $ 3,745 $ 3,700 Accrued Expenses Accrued Expenses consist of (in thousands): December 31, 2021 2020 Accrued clinical and related costs $ 6,214 $ 3,301 Accrued legal and audit costs 96 114 Accrued compensation 674 658 Accrued other 87 245 Total $ 7,071 $ 4,318 Other Current Liabilities Other Current Liabilities consist of (in thousands): December 31, 2021 2020 Lease liabilities $ 408 $ 297 Other 177 82 Total $ 585 $ 379 4. Commitments and Contingencies Operating Lease The Company leases certain office space under non-cancelable operating leases. 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 F- 14 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). The non-lease components are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset. 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 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. 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 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, 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. Therefore, the Company estimated its incremental interest rate to be 6 %, considering the quoted rates for the lowest investment-grade debt and the interest rates implicit in recent financing leases. Immunic used its estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the lease payments. Immunic’s operating lease costs and variable lease costs were $ 503,000 and $ 354,000 for the years ended December 31, 2021 and 2020, respectively. Variable lease costs consist primarily of common area maintenance costs, insurance and taxes which are paid based upon actual costs incurred by the lessor. Maturities of the operating lease obligation are as follows as of December 31, 2021 (in thousands): 2022 $ 457 2023 $ 307 2024 $ 233 2025 $ 116 2026 $ — Thereafter $ — Total lease payments $ 1,113 Less: interest portion $ 95 Present value of lease obligation $ 1,018 Contractual Obligations 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 In May 2016, the Company entered into a purchase agreement (the “Agreement”) with 4SC AG, whereby the Company acquired certain assets, including the rights to patents and patent applications, trademarks and know-how. This transaction has been accounted for as an asset acquisition under Accounting Standards Update 2017-01 - Business Combinations (Topic 805): Clarifying the Definition of a Business. The Agreement included payments (Tranches III and IV) that were contingent upon the occurrence of certain events and required the Company to pay royalties equal to 4.4 % of the aggregated net sales for a certain period as defined in the Agreement (Tranche III) upon commercialization of the acquired assets. 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. 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 F- 15 “Shares”). 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 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 The Company is not currently a party to any litigation, nor is it aware of any pending or threatened litigation, that it believes would materially affect its business, operating results, financial condition or cash flows. However, its industry is characterized by frequent claims and litigation including securities litigation, claims regarding patent and other intellectual property rights and claims for product liability. As a result, in the future, the Company may be involved in various legal proceedings from time to time. 5. Fair Value The following fair value hierarchy table present information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis (in thousands): Fair Value Measurement at December 31, 2021 Fair Value Level 1 Level 2 Level 3 Assets Money market funds $ 31,630 $ 31,630 $ — $ — Total assets at fair value $ 31,630 $ 31,630 $ — $ — Fair Value Measurement at December 31, 2020 Fair Value Level 1 Level 2 Level 3 Assets 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. 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. The fair value and book value of the money market funds presented in the table above are the same. 6. Common Stock Shelf Registration Statements 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. F- 16 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 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. 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 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. 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 . Public Equity Offerings 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. F- 17 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 ROTH Capital Partners, LLC ("RCP") and Ladenburg Thalmann & Co. Inc. 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. 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. 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 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. Common Stock 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. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any. Through December 31, 2021, no cash dividends had been declared or paid. Preferred Stock 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. F- 18 Stock Reserved for Future Issuance Shares reserved for future issuance as of December 31, 2021 are as follows: Number of Shares Common stock reserved for issuance for: 2021 Employee stock purchase plan 187,242 Outstanding stock options 2,157,460 Common stock options available for future grant: 2014 Equity Incentive Plan 43,311 2017 Inducement Equity Incentive Plan 46,250 2019 Omnibus Equity Incentive Plan 682,590 Total common shares reserved for future issuance 3,116,853 7. 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 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. An initial maximum of 1,500,000 shares of the Company’s common stock are available for grant under the 2019 Plan. 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 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. 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 . Incentive stock options granted to employees 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 2019 Plan without having been fully exercised will be available for future awards. F- 19 Movements during the year The following table summarizes stock option activity for the twelve months ended December 31, 2021 and 2020 under the 2019 Plan: Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Aggregate Intrinsic Value Outstanding as of January 1, 2021 1,117,160 $ 12.96 Granted 1,193,809 $ 14.08 Exercised — $ — Forfeited or expired ( 153,509 ) $ 13.50 Outstanding as of December 31, 2021 2,157,460 $ 13.54 8.74 $ 302,155 Options vested and expected to vest as of December 31, 2021 2,157,460 $ 13.54 8.74 $ 302,155 Options exercisable as of December 31, 2021 752,954 $ 13.48 8.15 $ 79,431 Options Weighted- Average Exercise Price Weighted- Average Remaining Contractual Term (Years) Aggregate Intrinsic Value 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 Measurement 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 U.S. Treasury instruments with maturities similar to the expected term of the stock options. Expected Dividend Yield The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero . 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. F- 20 Expected Term 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, 2021 and 2020 was $ 10.52 and $ 9.50 , 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: 2021 2020 Risk-free interest rate 0.93 % 0.42 % Expected dividend yield 0 % 0 % Expected volatility 93.0 % 88.5 % Expected term of options (years) 6.0 5.8 Stock-Based Compensation Expense Total stock-based compensation expense for all stock awards recognized in the accompanying audited consolidated statements of operations is as follows (in thousands): Year Ended December 31, 2021 2020 Research and development $ 1,760 $ 731 General and administrative 4,189 2,016 Total $ 5,949 $ 2,747 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. 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. 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, 2021. 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 twelve months ended December 31, 2021 and 2020, respectively. F- 21 8. Income Taxes Net loss before income tax was subject to tax in the following jurisdictions for the following periods (in thousands): Years Ended December 31, 2021 2020 United States $ ( 11,222 ) $ ( 8,681 ) Germany ( 78,869 ) ( 33,617 ) Foreign ( 2,854 ) ( 1,719 ) $ ( 92,945 ) $ ( 44,017 ) The rate reconciliation consists of the following: Years Ended December 31, 2021 2020 Federal statutory rate 21.0 % 21.0 % Foreign rate differential 3.2 % 3.0 % Stock options ( 0.9 ) % ( 0.9 ) % Tax effect of rate change 0.0 % ( 1.9 ) % Other ( 0.4 ) % ( 0.9 ) % Change in valuation allowance ( 22.9 ) % ( 20.3 ) % Effective tax rate 0.0 % 0.0 % 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. As tax laws and rates change, deferred tax assets and liabilities are adjusted through income tax expense. There is no current or deferred income tax expense in the years ended December 31, 2021 and 2020, respectively. Significant components of the Company's net deferred tax assets are shown below. A valuation allowance has been established as realization of such net deferred tax assets has not met the more likely-than-not threshold requirement. If the Company's judgment changes and it is determined that the Company will be able to realize these net deferred tax assets, the tax benefits relating to any reversal of the valuation allowance on the net deferred tax assets will be accounted for as a reduction to income tax expense. F- 22 December 31, 2021 2020 (in thousands) Deferred tax assets: Net operating loss carryforwards $ 18,437 $ 17,369 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 Total deferred tax assets 58,819 36,522 Deferred tax liabilities: Property, plant and equipment ( 2 ) ( 5 ) Total deferred tax liability ( 2 ) ( 5 ) Net deferred tax assets 58,817 36,517 Less valuation allowance ( 58,817 ) ( 36,517 ) $ — $ — The Company has incurred net operating losses each year since inception due to its history as a development stage company with no realized revenues from its planned principal operations. These cumulative operating losses provide significant negative evidence in the determination of whether or not the Company will be able to realize deferred tax assets such as net operating losses and other favorable temporary differences. There can be no assurance that it will ever generate taxable income. 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 $ 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. These NOLs do not expire. The U.S. federal NOL carryforwards of $ 15.6 million were generated prior to 2018 and expire over 20 years beginning in 2023. The $ 72.2 million of post 2017 federal NOL carryforwards do not expire. 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. 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 2017 through 2020 are subject to audit by German and Australian tax authorities. 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. 9. EIB Loan 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 F- 23 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. 10. Related Party Transactions 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. 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 . F- 24 11. Selected Quarterly Data (unaudited) The following financial information reflects all normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods. Summarized quarterly data for 2021 and 2020 are as follows (in thousands, except per share data): For the Quarters Ended March 31 June 30 September 30 December 31 Total Year 2021 Operating expenses $ 32,387 $ 19,170 $ 18,387 $ 21,721 $ 91,665 Net loss $ ( 34,534 ) $ ( 17,934 ) $ ( 19,292 ) $ ( 21,185 ) $ ( 92,945 ) Basic and diluted net loss per share (1) $ ( 1.63 ) $ ( 0.82 ) $ ( 0.76 ) $ ( 0.81 ) $ ( 3.93 ) 2020 Operating expenses $ 9,014 $ 12,222 $ 13,545 $ 14,190 $ 48,971 Net loss $ ( 8,487 ) $ ( 11,458 ) $ ( 12,913 ) $ ( 11,159 ) $ ( 44,017 ) Basic and diluted net loss per share (1) $ ( 0.79 ) $ ( 0.90 ) $ ( 0.70 ) $ ( 0.53 ) $ ( 2.81 ) (1) Net loss per share is computed independently for each of the quarters presented. Therefore, the sum of the quarterly per share calculations will not necessarily equal the annual per share calculation. F- 25 SIGNATURES 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. Date: February 24, 2022 By: /s/ DANIEL VITT Daniel Vitt Chief Executive Officer and President POWER OF ATTORNEY 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 and President February 24, 2022 Daniel Vitt /s/ GLENN WHALEY Principal Financial and Accounting Officer February 24, 2022 Glenn Whaley /s/ DUANE D. NASH Executive Chairman February 24, 2022 Duane D. Nash /s/ TAMAR HOWSON Director February 24, 2022 Tamar Howson /s/ JOERG NEERMANN Director February 24, 2022 Joerg Neermann /s/ VINCENT OSSIPOW Director February 24, 2022 Vincent Ossipow /s/ BARCLAY A. PHILLIPS Director February 24, 2022 Barclay A. Phillips /s/ JAN VAN DEN BOSSCHE Director February 24, 2022 Jan Van den Bossche