Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in “Risk Factors” included elsewhere in this Annual Report. As used in this report, unless the context suggests otherwise, “we,” “us,” our” or “the Company” refer to Immunic, Inc. and its subsidiaries.

Overview

We are a clinical-stage biopharmaceutical company with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases. We are headquartered in New York City with our main operations in Gräfelfing near Munich, Germany. We currently have approximately 66 employees.

We are currently pursuing clinical development of three orally administered, small molecule programs, each of which has unique features intended to directly address the unmet needs of patients with serious chronic inflammatory and autoimmune diseases. These include the vidofludimus calcium (IMU-838) program, which is in Phase 3 clinical development for patients with multiple sclerosis (“MS”); the izumerogant (proposed International Nonproprietary Name (“INN”) for IMU-935) program, which is an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”) that inhibits the interleukin-17 (“IL-17”) pathway in diseases such as psoriasis; and the IMU-856 program, which is targeted to restore intestinal barrier function and regenerate bowel epithelium.

We have incurred net losses since inception of $317.3 million through December 31, 2022. We anticipate that we will continue to incur losses for at least the next several years. Due to the uncertainties involved with therapeutic product development and the clinical trial process, we cannot predict the timing or level of future expenses with certainty, when product approval might occur, if ever, or when profitability may be achieved or sustained.

Recent Events

$60 Million Private Placement Equity Financing

On October 10, 2022, we entered into a Securities Purchase Agreement for a private placement with select accredited investors and certain existing investors. Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers (i) 8,696,552 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a purchase price of $4.35 per Share, and (ii) 5,096,552 pre-funded warrants to purchase Common Stock, at a purchase price of $4.34 per Pre-Funded Warrant. The Pre-Funded Warrants have an exercise price of $0.01 per share of Common Stock, be immediately exercisable and remain exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice to the Company. The Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Pre-Funded Warrants do not provide any guarantee of value or return. All of the pre-funded warrants were exercised in January 2023.

The Private Placement closed on October 12, 2022. The gross proceeds of the Private Placement were approximately $60.0 million, before deducting offering expenses payable by us of approximately $4.0 million. We intend to use the net proceeds from the Private Placement to fund the ongoing clinical development of our three lead product candidates, vidofludimus calcium (IMU-838), izumerogant (IMU-935) and IMU-856, and for other general corporate purposes.

New Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in Relapsing-Remitting Multiple Sclerosis Supporting the Drug’s Neuroprotective Potential

On November 17, 2022, we reported newly available data from the Phase 2 EMPhASIS trial of vidofludimus calcium in patients with relapsing-remitting multiple sclerosis (“RRMS”). The trial includes an optional long-term open-label extension (“OLE”) phase running up to 9.5 years. An interim analysis was performed with data extraction in October 2022, when 209 patients remained on treatment in the OLE phase, some of whom have already received more than 180 continuous weeks (approximately four years) of active treatment with vidofludimus calcium.

Long-term open-label treatment with vidofludimus calcium was associated with a low rate of confirmed disability worsening over time, comparing favorably to historical trial data for currently available MS medications. During the 24-week double-blind main treatment period, 12-week and 24-week Confirmed Disability Worsening (“12w/24wCDW”) events occurred in 1.6% of subjects in the combined vidofludimus calcium treatment arms as compared to 3.7% in the placebo group. In the OLE phase, the proportion of patients free from 12wCDW was 97.6% after 48 weeks and 94.5% after 96 weeks of vidofludimus calcium treatment as compared to the start of the OLE phase. Similar results were observed for 24wCDW and sustained CDW. The OLE phase also showed low relapse activity.

Presentation of Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS at ACTRIMS Forum 2023

On February 22, 2023, we announced that Robert J. Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurologic Institute, Cleveland Clinic, Cleveland, Ohio, will present data from the blinded and OLE parts of our phase 2 EMPhASIS trial of vidofludimus calcium in RRMS at the eighth annual Americas Committee for Treatment and Research in Multiple Sclerosis (ACTRIMS) Forum 2023, taking place February 23-25 in San Diego, California. The poster presentation includes our previously announced data from the trial showing that long-term open-label treatment with vidofludimus calcium was associated with a low rate of confirmed disability worsening over time, comparing favorably to historical trial data for currently available MS medications.

Publication of Data From Phase 2 EMPhASIS Trial of Vidofludimus Calcium in RRMS in Peer Reviewed Journal

On June 15, 2022, we announced that data from our Phase 2 EMPhASIS trial of vidofludimus calcium in patients with RRMS has been published in the peer reviewed journal, Annals of Clinical and Translational Neurology. The paper, authored by coordinating investigator, Robert J. Fox, M.D., Staff Neurologist, Mellen Center for Multiple Sclerosis, Vice-Chair for Research, Neurologic Institute, Cleveland Clinic, Cleveland, Ohio, is entitled, “Safety and efficacy of vidofludimus calcium, a selective dihydroorotate dehydrogenase inhibitor, in relapsing-remitting multiple sclerosis (EMPhASIS): a double-blind, randomized, placebo-controlled Phase 2 trial.”

Results of Phase 1 Trial of Vidofludimus Calcium in Hepatic Impaired Patients

We completed a Phase 1 trial in a total of 24 patients with either no liver function impairment or liver disease of Child-Pugh A Child-Pugh B grade which was designed to explore dose optimization of vidofludimus calcium. The study showed little influence on the PK of vidofludimus calcium in patients with Child-Pugh A Child-Pugh B liver impairment.

Update on the Use of Steroids in the Phase 2 EMPhASIS Trial in RRMS

Based on the observed interaction between vidofludimus calcium and chronic steroid use in the CALDOSE-1 trial in ulcerative colitis patients, we performed a post-hoc analysis of our Phase 2 EMPhASIS data in RRMS patients to explore the potential influence of steroids on these study results. As anticipated, steroid use was rare and among those RRMS patients who received any steroids, the majority received only short steroid courses following relapse events or acute neurological events. Only four patients received any steroids for reasons other than relapse (COVID-19 infection, eczema, acute bronchitis, and contact urticaria, one patient each). Most patients only had one single short course of steroids, and only nine patients had two or more steroid courses. The average duration of steroid treatment in this RRMS trial was 4.4 days with a maximum duration of 10 days. This indicates to us that steroids are rarely used in MS patients and mostly for a very short duration. In conclusion, comparing patients who received at least one dose of corticosteroids with those who did not, we do not see any difference in clinical parameters or any evidence that the rare, short-term use of steroids in RRMS patients has any influence on the effectiveness of vidofludimus calcium in this patient population.

Celiac Disease Research and Development Webcast

On February 9, 2023, we hosted a celiac disease research and development webcast. Our management, including Daniel Vitt, Ph.D., Chief Executive Officer and President; Andreas Muehler, M.D., M.B.A., Chief Medical Officer; and Hella Kohlhof, Ph.D., Chief Scientific Officer, were joined by renowned key opinion leaders to discuss the dynamics of this multifactorial, complex autoimmune disease, immune stimulation and its connection to clinical symptoms, the role of the epithelial barrier in the pathogenesis of the disease, current and potential treatment options, and the continued unmet medical need for effective therapeutics, which is driving an increased focus within the industry.

Phase 1 Clinical Trial of IMU-856, Results of Parts A and B in Healthy Human Subjects

On September 20, 2022, we announced positive unblinded safety, tolerability and pharmacokinetic (“PK”) results from Part A (single ascending doses) and Part B (multiple ascending doses) of our Phase 1 clinical trial of IMU-856 in healthy human subjects.

In the single ascending doses part, healthy human subjects were randomized in a double-blinded manner to either placebo or active treatment with single ascending doses of IMU-856 at 10 mg, 20 mg, 40 mg, 80 mg, 120 mg and 160 mg. Single ascending doses of IMU-856 were found to be safe and well-tolerated and no maximum tolerated dose was reached. No serious adverse events occurred. Moreover, a dose-linear PK profile was observed across the investigated dose range.

In the multiple ascending doses part, healthy human subjects were dosed for 14 consecutive days with 40 mg, 80 mg or 160 mg once-daily of IMU-856 or placebo in a double-blinded manner. Multiple ascending doses of IMU-856 were found to be safe and well-tolerated and no maximum tolerated dose was reached. Treatment emergent adverse events were mostly mild in severity. No Investigational Medicinal Product-related serious adverse events were reported. No dose-dependent changes in laboratory parameters (including no effects on liver enzymes or in hematological parameters), vital signs, physical examination or electrocardiographic evaluations were found. PK analysis showed a quick achievement of stable steady-state plasma concentrations within the first week and stable steady-state trough levels over the 14-day treatment period with a low accumulation factor for IMU-856, allowing predictable trough levels during daily dosing. PK parameters in steady-state revealed a Tmax (time to reach maximum plasma concentration) of 2 to 3 hours post-dose, a plasma half-life of 17.4 to 21.5 hours and dose proportional increases in Cmax (maximum plasma drug concentration) and AUC (area under the concentration-time curve).

IMU-856 Composition-of-Matter Patent Granted

On August 16, 2022, we announced that we have received a Notice of Allowance from the U.S. Patent and Trademark Office (“USPTO”) for patent application 16/646130, entitled, “Compound Having Cyclic Structure.” The patent covers composition-of-matter of IMU-856 and related pharmaceutical compositions and is expected to provide protection into at least 2038, without accounting for potential PTE.

Start of Patient Cohorts in Phase 1 Clinical Trial of IMU-856 in Celiac Disease

On May 5, 2022, we announced the start of the patient cohorts in our ongoing Phase 1 clinical trial of IMU-856 in patients with celiac disease. Part C is structured as a 28-day, double-blind, placebo-controlled trial designed to assess the safety, tolerability, PK, pharmacodynamic (“PD”) and biomarker responses of IMU-856 in patients with celiac disease during periods of gluten-free diet and gluten challenge. Approximately 42 patients were planned to be enrolled in two consecutive cohorts with IMU-856 given once-daily over 28 days. Secondary objectives include PK and disease markers, including those evaluating gastrointestinal architecture and inflammation. Sites in Australia and New Zealand are participating in Part C. Initial results are expected to be available in mid-2023.

Top-Line Data from Phase 2 CALDOSE-1 Trial of Vidofludimus Calcium in Patients with Moderate-to-Severe Ulcerative Colitis

On June 2, 2022, we reported top-line data from our Phase 2 CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe ulcerative colitis (“UC”). The trial did not achieve the primary endpoint of clinical remission for the pooled 30 and 45 mg/day active dose groups of vidofludimus calcium versus placebo at week 10. In addition, no meaningful differences were observed between the three active dose groups for the overall intent-to-treat patient population (10 mg/day: 14.9%, 30 mg/day: 10.6%, 45 mg/day: 13.6%, placebo: 12.5%) or for the trial’s other secondary endpoints, including symptomatic remission, or endoscopic healing.

Consistent with prior data sets in other patient populations, administration of vidofludimus calcium in this clinical trial was observed to be safe and well-tolerated. No new safety signals were observed. As compared to placebo, there were no increased rates of infections and infestations, no elevated rates of liver events or liver enzyme elevations, and no elevated rates for changes in hematology-related laboratory variables. The most common adverse events in this clinical trial were anemia (15/263 patients, 5.7%), headache (9/263 patients, 3.4%) and COVID-19 (7/263 patients, 2.7%). Most adverse events were generally mild in severity.

As is common for the design of clinical trials in UC, the use of oral systemic corticosteroids (≤20 mg/day prednisolone equivalent) was allowed in CALDOSE-1 in patients who had been treated with corticosteroids for at least four weeks before

randomization. Doses of corticosteroids were required to be kept constant throughout the induction phase (weaning was not allowed in this phase of the clinical trial), and the distribution of patients using corticosteroids was equal throughout all treatment groups. Surprisingly, CALDOSE-1 data suggest a previously unknown treatment interference between the efficacy of vidofludimus calcium and the concurrent use of corticosteroids in the UC patient population. More specifically, the non-steroid patient population showed an 11.4% advantage in clinical remission for vidofludimus calcium over placebo (pooled vidofludimus calcium treatment groups at week 10: 14.7%, placebo: 3.3%). Such a difference in clinical remission between active treatment and placebo would traditionally be considered as confirming therapeutic activity. In contrast, patients concomitantly taking vidofludimus calcium and corticosteroids during induction treatment had a lower rate of clinical remission at week 10 (11.5%) than placebo patients (20.6%) and also lower than the group of vidofludimus calcium monotherapy without concurrent use of steroids (14.7%). This treatment interference between vidofludimus calcium and corticosteroids was not expected based on our analysis of currently available preclinical or clinical data.

Based on these results, we announced that our development programs in the IBD indications will not be continued without a partner.

Investigator-Sponsored Phase 2 IONIC Trial in Moderate-to-Severe COVID-19 Closed Down

On June 23, 2022, sponsor and lead site, University Hospitals Coventry and Warwickshire NHS Trust, London, United Kingdom, informed us that the investigator-sponsored Phase 2 IONIC trial for the treatment of patients with moderate-to-severe COVID-19 is being closed down. Recruitment for the trial ended on May 20, 2022 and the last patient follow-up occurred in September 2022. On September 29, 2022, we were informed that the sponsor submitted the end of trial declaration. The trial was a prospective, randomized, parallel-group, open-label Phase 2b trial, designed to evaluate efficacy and safety of vidofludimus calcium in combination with the neuraminidase inhibitor, Oseltamivir (TamifluR), in approximately 120 adult patients with moderate-to-severe COVID-19.

Pre-Planned Phase 1b Interim Analysis of Izumerogant in Moderate-to-Severe Psoriasis and Goodwill Impairment

On October 20, 2022, we announced the outcome of a pre-planned interim group-level data analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis. The overall trial is ongoing. The pre-planned interim analysis revealed that the group averages for Psoriasis Area and Severity Index ("PASI”) reductions in the two active arms did not separate from placebo at four weeks. Although the active arms performed in line with expectations, based on similarly designed trials, the trial experienced a greater decrease than expected in PASI in the placebo arm. Administration of izumerogant and placebo in this trial were demonstrated to be safe and well-tolerated, and no new safety signals were observed. We plan to provide further updates and guidance on potential next steps for this development program towards the end of the first quarter of 2023.

Following the announcement of our interim group level data on October 20, 2022, our stock price experienced a significant decline from the prices preceding the announcement and the recent prices raised in our October 10, 2022 Private Placement. We considered these to be triggering events indicating that it is more likely than not that goodwill is impaired. Upon further evaluation we incurred a non-cash full impairment of our goodwill of approximately $33.0 million in the quarter ended December 31, 2022.

Phase 1 Clinical Trial of Izumerogant in mCRPC

The pre-planned dose escalation in the Phase 1 clinical trial of izumerogant in mCRPC with dosing of up to 900 mg daily has been completed. Initial safety data available, to date, show a promising safety profile, with only benign adverse events and no dose limiting toxicities.

Izumerogant Composition-of-Matter Patents Granted

On February 2, 2022, we received a Notice of Allowance from the USPTO for patent application 16/644581, entitled, “IL-17 and IFN-gamma inhibition for the treatment of autoimmune diseases and chronic inflammation”. We also received notice of allowance of patent application EP18762111.5 in Europe, and notice of grant of patent application 2018330633 in Australia. All three patents cover composition-of-matter of izumerogant and related formulations, and are expected to provide protection into at least 2038, without accounting for potential Patent Term Extension ("PTE") in the United States or Supplementary Protection Certificates in Europe, respectively.

Results of Exploratory Phase 1 Drug-Drug Interaction Study of Izumerogant

An exploratory Phase 1 study was completed in 15 evaluable healthy human subjects to assess the drug-drug interaction potential of izumerogant. No relevant signals for drug-drug interaction potential were observed and treatment was safe and well-tolerated.

Phase 1 Clinical Trial of Izumerogant, Results of Parts A and B in Healthy Human Subjects

On July 12, 2021, we provided an update on our izumerogant program, including new preclinical and clinical data. The main result from preclinical investigations was that izumerogant inhibits cytokine production (thought to be a pre-condition for its use in immunological and autoimmune diseases) while maintaining the known and required physiological functions of maturing T lymphocytes. In ex vivo mouse cell differentiation and maturation assays, izumerogant was observed to selectively inhibit RORγt-dependent gene expression during Th17 differentiation without affecting either RORγt-dependent gene regulation relevant to thymocyte development, or the viability of these cells. In third-party research, impairment of thymocyte development has been shown to be associated with serious safety issues, including, among others, T cell malfunction and potential lymphoma formation. We believe that izumerogant's observed selectivity may enable it to inhibit both the generation of Th17 cells and the production of IL-17 cytokines that are responsible for the development of autoimmune diseases, without impairing thymocyte development, which is associated with the potential risk of lymphoma seen with other, third-party RORγt programs.

On December 14, 2021, we provided an update on the preclinical and clinical development of izumerogant, announcing that:

•Unblinded data from the single ascending dose part of the ongoing Phase 1 clinical trial of a new powder-in-capsule formulation of izumerogant, in which healthy human subjects were treated with 100 mg, 200 mg, 300 mg and 400 mg of this new formulation or placebo, found these single ascending daily doses of izumerogant to be safe and well-tolerated, and no maximum tolerated dose was reached. No serious adverse events occurred. A dose-proportional PK profile was observed across the investigated dose range.

•Unblinded data from the multiple ascending dose part of the ongoing Phase 1 clinical trial, in which healthy human subjects were dosed for 14 days with 150 mg either once or twice daily doses of izumerogant or placebo, found these multiple ascending doses of izumerogant to be safe and well-tolerated, and no maximum tolerated dose was reached. Treatment emergent adverse events were generally mild in severity, with moderate treatment emergent adverse events reported in one of eleven izumerogant treated subjects, compared with one of four subjects on placebo. No serious adverse events were reported. No dose-dependent changes in laboratory values (including no effects on liver enzymes or in hematological parameters), vital signs or in electrocardiographic evaluations were found. PK analysis showed that stable steady-state plasma concentrations were achieved within the first week of dosing with an accumulation factor for izumerogant allowing predictable trough levels during daily dosing.

•Based on the favorable safety and tolerability data observed in healthy human subjects, our Phase 1 clinical trial of izumerogant was expanded in October 2021 to include a third portion, part C, in which moderate-to-severe psoriasis patients are randomized to 28-day treatment of izumerogant or placebo. Assessments include safety, tolerability, PK and PD markers, as well as skin evaluations.

•In previous preclinical in vitro data, it was shown that izumerogant selectively inhibits Th17 differentiation and IL-17 production, whereas RORγt was unaffected by izumerogant during thymocyte maturation and, therefore, does not harm normal thymocyte maturation. Data from acute and chronic treatment of mice corroborated in vivo that izumerogant is the first molecule observed to impact neither thymus size, thymocyte numbers, nor the maturation status of thymocytes, in contrast to two other known inhibitors of RORγt.

Changes in Board of Directors

On July 6, 2022, we announced the appointment of Monika Maria Törnsén as a member of our Board of Directors, effective as of July 5, 2022. As a Class III director, Ms. Törnsén’s term lasts until the Company’s 2023 annual meeting of stockholders. Concurrently, we also announced that current Class III director, Jan Van den Bossche, resigned from the Board. The Board accepted Mr. Van den Bossche’s resignation effective July 5, 2022. Mr. Van den Bossche’s decision to resign did not result from any disagreement with the Company on any matter relating to Company operations, policies or practices.

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 Executive 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 with a base salary of $25,417 per month pursuant to which Dr. Nash serves as Executive Chairman and contemplated a term that ends on October 15, 2020. On October 15, 2020, the Company and Dr. Nash entered into an addendum (the “First Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2021. In connection with the First Addendum, the Company made a one-time award to Dr. Nash of an option to purchase 120,000 shares of Company common stock, which vests monthly over six months commencing on November 15, 2020. On April 15, 2021, the Company and Dr. Nash entered into Addendum No. Two (the “Second Addendum”) to extend the term of the Executive Chairman Agreement to April 15, 2022. In connection with the Second Addendum, the Company made a one-time award to Dr. Nash of an option to purchase 90,000 shares of Company common stock, which vests monthly over 12 months commencing on May 15, 2021, and to increase Dr. Nash’s monthly base salary to $27,960 from $25,417. On March 15, 2022, the Company and Dr. Nash entered into Addendum No. Three (the “Third Addendum”), which extended the term of employment from April 15, 2022 to December 31, 2022 with a base salary of $29,358 per month. In connection with the Third Addendum, the Company made a one-time award to Dr. Nash of an option to purchase 75,000 shares of the Company’s common stock, which vests monthly over 12 months commencing on April 10, 2022. On December 28, 2022, the Company and Dr. Nash entered into Addendum No. Four, which extended the term of employment from December 31, 2022 to December 31, 2023 with a base salary of $30,250 per month (which includes the cash retainer payable for serving on the Company’s Board or for acting as the Chairman of the Board). All other terms of the Executive Chairman Agreement remain the same.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States ("US"), or GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. On an on-going basis, management makes its best estimate of the ultimate outcome for these items based on historical trends and other information available when the financial statements are prepared. Changes in estimates are typically recognized in the period when new information regarding estimates becomes available to management. Actual results could differ from those estimates.

Our significant accounting policies are described in more detail in Note 2, "Summary of Significant Accounting Policies," in the notes to the consolidated financial statements. See below for what we believe are our Critical Accounting Policies.

Foreign Currency Translation and Presentation

Our reporting currency is US dollars. During the twelve months ended December 31, 2022 and 2021, Immunic AG’s operations were located in Germany with the euro being its 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 US dollar are translated into US 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 US dollars are recorded in stockholders’ equity net of the anticipated income tax effects 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 (loss). 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.

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, an unfavorable clinical trial result, a significant adverse change in legal or business climate, industry or market conditions, an adverse regulatory action, sustained decrease in stock price or unanticipated competition.

On October 20, 2022, we announced the outcome of a significant interim analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis which was not deemed positive progress. On October 21, 2022, we experienced a significant decrease in our market capitalization. We considered this to be a triggering event as the fair market value of the company was less than its book value indicating that it is more likely than not that goodwill is impaired. Upon further evaluation, we recorded an approximately $33.0 million goodwill impairment charge in the fourth quarter of 2022 which represents a full write down of our previous goodwill balance. We did not have any goodwill impairment during the year ended 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, izumerogant 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, PMS and COVID-19.

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

The Company enters into agreements with contract research organizations (“CROs”) to provide clinical trial services for individual studies and projects by executing individual work orders governed by a Master Service Arrangement (“MSA”). The MSAs and associated work orders provide for regular recurrent payments and payments upon the completion of certain milestones. The Company regularly assesses the timing of payments against actual costs incurred to ensure a proper accrual of related expenses in the appropriate accounting period.

Collaboration Arrangements

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 gastrointestinal diseases such as celiac disease, inflammatory bowel disease, irritable bowel syndrome with diarrhea 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 additional research and development reimbursements expected under this 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, for which the Company received a notice of allowance from the US Patent & Trademark Office in August 2022. 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.

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.

Income Taxes

We are 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.

We utilize 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, 2022 and 2021, respectively, the Company maintained a full valuation allowance against the balance of deferred tax assets.

It is our 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. we recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We are 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 2021 are subject to audit by German and Australian tax authorities. The Company is not currently under examination by any tax jurisdictions.

Components of Results of Operations

Revenue

To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval, we may generate revenue in the future from product sales. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates or achieving market acceptance and commercial success for any product that does receive regulatory approval.

Research and Development Expenses

Research and development expenses consist of costs associated with our research activities, including our product discovery efforts and the development of our product candidates. Our research and development expenses include:

•external research and development expenses and milestone payments incurred under arrangements with third parties, such as CROs, contract manufacturing organizations, collaborations with partners, consultants, and our scientific advisors; and

•internal personnel expenses.

We expense research and development costs as incurred. Non-refundable advance payments for goods and services that will be used in future research and development activities are capitalized as prepaid expenses and expensed when the service has been performed or when the goods have been received.

Since our inception in March 2016, we have spent a total of approximately $214.8 million in research and development expenses through December 31, 2022.

These costs primarily include external development expenses and internal personnel expenses for the three development programs, vidofludimus calcium, izumerogant and IMU-856. We have spent the majority of our research and development resources on vidofludimus calcium, our lead development program, for clinical trials in MS, UC, COVID-19 and PSC.

In August 2019, Immunic AG received a grant of up to approximately $730,000 from the German Federal Ministry of Education and Research, in support of the InnoMuNiCH (Innovations through Munich-Nippon Cooperation in Healthcare) project. The grant funds have been used to fund a three-year research project relating to autoimmune diseases by us and our three project partners. Since the inception of the grant, we have recorded $611,000 of income in total of which $254,000 and $178,000 were recorded in 2022 and 2021, respectively, and were classified in Other Income in the accompanying consolidated statement of operations.

Our research and development expenses are expected to increase in the foreseeable future as we continue to conduct ongoing research and development activities, initiate new preclinical and clinical trials and build our pipeline of product candidates. Our research and development expenses may also increase in the foreseeable future due to the current inflationary environment as well as supply chain shortages, which result in increased costs. The process of conducting clinical trials and preclinical studies necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achieving regulatory approval for any of our product candidates.

Successful development of product candidates is highly uncertain and may not result in approved products. Completion dates and completion costs can vary significantly for each product candidate and are difficult to predict. We anticipate that we will make determinations as to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the development and regulatory success of each product candidate, and ongoing assessments as to each product candidate’s commercial potential.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel expenses, professional fees for legal, accounting, tax and business consulting services, insurance premiums and stock-based compensation.

Other Income (Expense), Net

Interest Income

Interest income consists of interest earned on our money market funds and bank accounts which are a portion of our cash and cash equivalents balance. Our interest income has been increasing throughout 2022 as interest rates in the U.S. have been increasing.

Other Income (Expense), Net

Other income (expense) consists primarily of a research and development tax incentive related to clinical trials performed in Australia and foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the

foreseeable future. The intercompany loan between Immunic Inc. and Immunic AG was settled on September 28, 2022 through an equity infusion from Immunic Inc. to Immunic AG.

Results of Operations

Comparison of Fiscal Years Ended December 31, 2022 and 2021

The following table summarizes our operating expenses for the years ended December 31, 2022 and 2021 (dollars in thousands):

Years Ended December 31, Change

Operating expenses:

Research and development expenses increased by $10.1 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021. The increase reflects (i) a $9.2 million increase in external development costs related to the Phase 3 program of vidofludimus calcium in relapsing multiple sclerosis, (ii) a $3.9 million increase in external development costs related to the clinical trials of izumerogant, (iii) a $3.9 million increase in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in progressive multiple sclerosis, (iv) a $2.5 million increase in personnel expense in research and development, $1.5 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, and (v) a $1.4 million increase in external development costs related to the Phase 1 clinical trial of IMU-856. The increases were partially offset by (i) a decrease of $5.8 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in ulcerative colitis, (ii) a $3.0 million decrease in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in COVID-19, (iii) a decrease of $1.3 million in external development costs related to the Phase 2 clinical trial of vidofludimus calcium in relapsing-remitting multiple sclerosis, and (iv) a decrease of $0.7 million in external development costs across numerous categories.

General and administrative expenses increased by $2.0 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021. The increase was primarily due to (i) a $1.6 million increase in personnel expense in general and administrative, $0.5 million of which is related to non-cash stock compensation expense and the remainder of which is related to an increase in headcount, (ii) a $0.3 million increase in travel expenses, and (iii) a $0.1 million net increase across numerous categories.

On October 20, 2022, we announced the outcome of a significant interim analysis of our Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis, which was not deemed positive progress. On October 21, 2022, we experienced a significant decrease in the Company's market capitalization. The Company considered this to be a triggering event indicating that it is more likely than not that goodwill is impaired. Upon further evaluation, we recorded an approximately $33.0 million non-cash goodwill impairment charge in the fourth quarter of 2022 which represents a full write down of our previous goodwill balance.

On March 31, 2021, Immunic AG 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. No further payment obligations remain between Immunic and 4SC AG.

Other expense decreased by $0.4 million during the twelve months ended December 31, 2022, as compared to the twelve months ended December 31, 2021. The decrease was primarily attributable to (i) a $1.0 million increase in interest income as a

result of higher interest rates, and (ii) a $0.5 million increase in research and development tax incentives for clinical trials in Australia as a result of increased spending on clinical trials in Australia. This was offset by a $1.1 million decrease in grants.

Liquidity and Capital Resources

Overview

We have no products approved for commercial sale and have not generated any revenue from product sales. We have never been profitable and have incurred operating losses in each year since our inception in 2016. Our net losses were approximately $120.4 million and $92.9 million for the years ended December 31, 2022 and 2021, respectively. As of December 31, 2022, we had an accumulated deficit of approximately $317.3 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to incur significant expenses and increasing operating losses for the foreseeable future as we initiate and continue the development of our product candidates and add personnel necessary to operate as a company with an advanced pipeline of product candidates. To the extent additional funds are necessary to meet long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of indebtedness, additional equity financings or a combination of these potential sources of funds, although we can provide no assurance that these sources of funding will be available on reasonable terms.

From inception through December 31, 2022, we have raised net cash of approximately $355.5 million from private and public offerings of preferred and common stock. As of December 31, 2022, we had cash and cash equivalents of approximately $106.7 million and investments - other of $9.6 million. With these funds we expect to be able to fund our operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

In November 2020, we filed a shelf registration statement on Form S-3 (the "2020 Shelf Registration Statement"). 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. As of February 17, 2023, there is $75.0 million remaining on this shelf registration statement.

In December 2020, we filed a 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 an at-the-market sales agreement with SVB Leerink as agent ("December 2020 ATM"). We have used and intend to continue to use the net proceeds from the December 2020 ATM to continue to fund the ongoing clinical development of our 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 us.As of February 17, 2023, $8.4 million in capacity remains under the December 2020 ATM.

In May 2022, we filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("May 2022 ATM") with SVB Securities LLC as agent. We intend to use the net proceeds from the offering to continue to fund the ongoing clinical development of our product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The May 2022 ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Securities LLC on the terms and subject to the conditions set forth in the May 2022 ATM or (ii) termination of the May 2022 ATM as otherwise permitted thereby. The May 2022 ATM may be terminated at any time by either party upon ten days’ prior notice, or by SVB Securities LLC at any time in certain circumstances, including the occurrence of a material adverse effect on the Company.As of February 17, 2023, $80.0 million in capacity remains under the May 2022 ATM.

For the year ended December 31, 2022, we raised gross proceeds of $40.9 million pursuant to the December 2020 ATM through the sale of 4,204,113 shares of common stock at a weighted average price of $9.72 per share. The net proceeds from the December 2020 ATM were $39.6 million after deducting underwriter commissions of $1.2 million.

Equity Offerings

$60 Million Private Placement Equity Financing

On October 10, 2022, we entered into a Securities Purchase Agreement for a private placement with select accredited investors and certain existing investors. Pursuant to the Securities Purchase Agreement, the Company agreed to sell to the Purchasers (i) 8,696,552 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a purchase price of $4.35 per Share, and (ii) 5,096,552 pre-funded warrants to purchase Common Stock, at a purchase price of $4.34 per Pre-Funded Warrant. The Pre-Funded Warrants have an exercise price of $0.01 per share of Common Stock, are immediately exercisable and remain exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice to the Company. All of the Pre-Funded Warrants were exercised in January 2023.

The Private Placement closed on October 12, 2022. The gross proceeds of the Private Placement were approximately $60.0 million, before deducting offering expenses payable by the Company. The Company intends to use the net proceeds from the Private Placement to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), izumerogant (IMU-935) and IMU-856, and for other general corporate purposes.

July 2021 Public Equity Offering

On July 15, 2021, we entered into an underwriting agreement with Piper Sandler & Co., as representative of the several underwriters listed on Schedule A thereto, in connection with our public offering of 4,500,000 shares of our common stock, $0.0001 par value per share, at a public offering price of $10.00 per share. Under the terms of the underwriting agreement, we granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 675,000 shares of common stock at the public offering price, less underwriting discounts and commissions. This option was not exercised.

On July 19, 2021, we closed the offering. The net proceeds to us from the offering were approximately $42.0 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

Future Capital Requirements

As noted above, we have not generated any revenue from product sales and we do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval for and commercialize any of our product candidates. At the same time, we expect our expenses to increase as we continue the ongoing research, development, manufacture and clinical trials of, and seek regulatory approval for, our product candidates. We also incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of any of our product candidates, we anticipate that we will need substantial additional funding in connection with our continuing operations.

Our future expenses and capital requirements are difficult to forecast and will depend on many factors, including, but not limited to:

•the timing and structure of any strategic options and transactions, if any;

•the cost, timing and outcome of any future litigation;

•personnel-related expenses, including salaries, benefits, stock-based compensation expense and other compensation expenses related to retention and termination of personnel;

•the scope, progress, duration, results and costs of research and development and ongoing clinical trials;

•the cost and timing of future regulatory submissions;

•the cost and timing of developing and validating the manufacturing processes for any potential product candidates;

•the cost and timing of any commercialization activities, including reimbursement, marketing, sales and distribution costs;

•our ability to establish new collaborations, licensing or other arrangements and the financial terms of such agreements;

•the number and characteristics of any future product candidates we pursue;

•the costs involved with being a public company;

•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and

•the timing, receipt and amount from the sales of, or royalties on, any future products.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of stock offerings, debt financings, strategic alliances, collaborations and licensing arrangements. Recent developments, however, will make it more difficult and costly for us to obtain funding for our cash needs. We do not expect to achieve revenue from product sales prior to the use of the net proceeds from our public and private offerings to date. We do not have any committed external source of funds. Additional funds may not be available on acceptable terms, if at all. To the extent that we raise additional capital through the sale of equity securities, the ownership interest of our stockholders will be diluted and it may be on terms that are not favorable to us or our stockholders.Sales of equity securities will also be more difficult for at least the foreseeable future because of general volatility in the equity markets for companies like us, as well as the significant decline in the trading price of our stock following our announcement on October 21, 2022 of the Phase 1b interim analysis of izumerogant in moderate-to-severe psoriasis. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt or other terms that are not favorable to us or our stockholders. Also, the cost of debt financing has increased due to the rise in interest rates beginning in March 2022. If we raise additional funds through collaborations and licensing arrangements with third parties, we would expect to relinquish substantial rights to our technologies or our future products, or grant licenses on terms that may not be favorable to us. If we were to complete a merger, we may relinquish all control over the organization and could experience detrimental tax effects.If we are unable to raise adequate funds, we may have to liquidate some or all of our assets. Any of these factors could harm our operating results and could result in substantial declines in the trading price of our common stock.

As of December 31, 2022, we had cash and cash equivalents of approximately $106.7 million.

Cash Flows

The following table shows a summary of our cash flows for the years ended December 31 (in thousands):

Cash (used in) provided by:

Investing activities (9,741) (67)

Net cash used in operating activities

During the year ended December 31, 2022, operating activities used $65.1 million of cash. The use of cash related to our net loss of $120.4 million adjusted for non-cash charges of $45.7 million related to $33.0 million of goodwill impairment, $7.9 million of stock-based compensation and a $4.8 million foreign currency loss as well as a $9.5 million net change in our operating assets and liabilities. Changes in our operating assets and liabilities consisted primarily of an decrease of $7.5 million in prepaid expenses and other current assets combined with a $2.0 million increase in other current liabilities, accrued expenses and accounts payable. The decrease in prepaid expenses and other current assets is primarily due to lower prepaid clinical costs. The increase in liabilities is primarily due to an increase in clinical costs as a result of the start of our Phase 3 clinical studies for RMS and Phase 2 clinical studies for PMS.

During the year ended December 31, 2021, operating activities used $83.2 million of cash. The use of cash related to our net loss of $92.9 million adjusted for non-cash charges of $8.6 million related to common stock issued for the 4SC AG transaction, $5.9 million related to stock-based compensation and a $4.3 million unrealized foreign currency loss as well as a $9.3 million net change in our operating assets and liabilities. Changes in our operating assets and liabilities consisted primarily of an increase of $12.8 million in prepaid expenses and other current assets partially offset by $3.5 million increase in other current liabilities, accrued expenses and accounts payable. The increase in prepaid expenses and other current assets is primarily due to higher prepaid clinical costs and an increased receivable for the Australian research and development credit. The increase in liabilities is primarily due to an increase in clinical costs as a result of the start of our Phase 3 clinical studies for RMS and Phase 2 clinical studies for PMS.

Net cash used in investing activities

During the year ended December 31, 2022, net investing activities used $9.7 million of cash, primarily due to purchase of 9.6 million of time deposits that had an original maturity of greater than three months and the purchase of equipment.

During the year ended December 31, 2021, net investing activities used $0.1 million of cash, primarily due to purchase of equipment.

Net cash provided by financing activities

During the year ended December 31, 2022, financing activities provided $95.8 million of cash of consisting of net cash proceeds from the sale of common stock under the $60 Million Private Placement Equity Financing and the December 2020 ATM.

During the year ended December 31, 2021, financing activities provided $42.8 million of cash of consisting of net cash proceeds from the sale of common stock under the July 2021 equity offering and the December 2020 ATM.

Off-Balance Sheet Arrangements

Through December 31, 2022, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purpose.

Other Commitments and Obligations

In May 2016, the Company entered into a purchase agreement with 4SC whereby the Company acquired certain assets, including the rights to patents and patent applications, trademarks and know-how. This transaction was 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 to 4SC at the time, while keeping the obligation to pay 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 $17.3 million (Tranche III of the purchase agreement). The payment was made 50% in cash and 50% in shares of Immunic’s common stock. 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.

See Note 2 - Collaboration Arrangements of the Notes to the Financial Statements regarding the Company’s obligations under the option agreement with Daiichi Sankyo, which includes the potential payment of future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.

Maturities of the operating lease obligation are as follows as of December 31, 2022 (in thousands):

Thereafter $ —

Total lease payments $ 1,682

Less: interest portion $ 147

Present value of lease obligation $ 1,535

Contractual Obligations

As of December 31, 2022, the Company has non-cancelable contractual obligations under certain agreements related to its development programs for vidofludimus calcium, izumerogant and IMU-856 totaling approximately $4.5 million, all of which is expected to be paid in 2023.

Recently Adopted Accounting Standards

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

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Sensitivity

We had cash and cash equivalents of $106.7 million as of December 31, 2022, which were held for working capital purposes. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in the fair value of these investments as a result of changes in interest rates due to their short-term nature. However, $28.9 million of these funds are held in German bank accounts that were earning between 1%-2.5% interest as of December 31, 2022. Decreases or increases in interest rates, however, will reduce or increase future investment income, respectively, to the extent we have funds available for investment.

Foreign Currency Exchange Risk

Our primary research and development operations are conducted in our facilities in Germany. We have entered into and may continue to enter into international agreements, primarily related to our clinical studies. Accordingly, we have exposure to foreign currency exchange rates and fluctuations between the U.S. dollar and foreign currencies, primarily the euro and the Australian dollar, which could adversely affect our financial results, including income and losses as well as assets and liabilities. To date, we have not entered into, and do not have any current plans to enter into, any foreign currency hedging transactions or derivative financial transactions. Our exposure to foreign currency risk will fluctuate in future periods as our research and clinical development activities in Europe and Australia change. We currently maintain a significant amount of our assets outside of the U.S.

The functional currencies of our foreign subsidiaries are the applicable local currencies. Accordingly, the effects of exchange rate fluctuations on the net assets of these operations are accounted for as translation gains or losses in accumulated other comprehensive income (loss) within stockholders’ equity. 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). Our German subsidiary is currently a significant portion of our business and, accordingly, a change of 10% in the currency exchange rates, primarily the euro, could have a material impact on their financial position or results of operations.

Although operating in local currencies may limit the impact of currency rate fluctuations on the results of operations of our German and Australian subsidiaries, rate fluctuations may impact the consolidated financial position as the assets and liabilities of our foreign operations are translated into U.S. dollars in preparing our consolidated balance sheets. As of December 31, 2022, our German and Australian subsidiaries had net current assets (defined as current assets less current liabilities), subject to foreign currency translation risk, of $27.7 million. A decrease of approximately $2.8 million in net current assets would result as of December 31 2022, from a hypothetical 10% adverse change in quoted foreign currency exchange rates, primarily due to the euro. In addition, a 10% change in the foreign currency exchange rates for the year ended December 31, 2022, would have impacted our net loss by approximately $7.3 million, primarily due to the euro.

Effects of Inflation

We have experienced a general increase in costs as a result of global inflation, however, we do not believe that inflation and changing prices had a material impact on our results of operations for any periods presented herein.

Item 8. Financial Statements and Supplementary Data.

The consolidated financial statements required pursuant to this item are included in Part IV, Item 15 of this Annual Report, and are presented beginning on page F-1.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Management, with the participation of our Chief Executive Officer and Principal Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2022. 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 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, 2022, our Chief Executive Officer and Principal Financial Officer have concluded that, as of December 31, 2022, 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 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, 2022, 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, 2022, 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, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not Applicable

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 2023 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, 2022, under the headings “Election of Directors,” “Board of Directors and 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 heading "Security Ownership" 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 "Board of Directors and Corporate Governance" and "Related Person 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 "Ratification of Appointment of Independent Registered Public Accounting Firm" and is incorporated herein by reference.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

Page

Report of Baker Tilly US, 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.

filed with the U.S. Securities and Exchange Commission.

EXHIBITS

Incorporated by Reference

ExhibitNumber 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

4.2* Description of Registrant's Securities 8-K 4.2 February 26, 2020

21.1* List of subsidiaries of the Registrant

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

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.

IMMUNIC, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

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, 2022 and 2021, 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, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2022, 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 Matter

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 our 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 matters 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 Note 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 23, 2023

F- 3

IMMUNIC, INC.

Consolidated Balance Sheets

(In thousands, except share and per share amounts)

December 31,

Assets

Current assets:

Investments - other 9,629 —

Other current assets and prepaid expenses 9,490 18,125

Property and equipment, net 294 152

Other long-term assets 43 42

Liabilities and Stockholders’ Equity

Current liabilities:

Other current liabilities 810 585

Long-term liabilities:

Operating lease liabilities 992 584

Total long-term liabilities 992 584

Commitments and contingencies (note 4)

Stockholders’ equity:

Accumulated other comprehensive income (loss) 3,035 (252)

Total liabilities and stockholders’ equity $ 127,753 $ 139,100

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,

Operating expenses:

Goodwill impairment (see Note 2) 32,970 —

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

Other income (expense):

Total other expense, net (919) (1,280)

Net loss per share, basic and diluted $ (3.78) $ (3.93)

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,

Other comprehensive income:

Foreign currency translation income, net of tax 3,287 3,860

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)

Shares Amount

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

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

Foreign exchange translation adjustment — — — 3,287 — 3,287

Stock-based compensation — — 7,929 — — 7,929

Shares issued in connection with the Company's stock option plan 852 — 5 — — 5

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,

Cash flows from operating activities:

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization 77 85

Goodwill impairment (see Note 2) 32,970 —

Changes in operating assets and liabilities:

Prepaid expenses and other assets 7,493 (12,800)

Accrued expenses and other current liabilities 1,362 3,175

Net cash used in operating activities (65,144) (83,233)

Cash flows from investing activities:

Purchases of Investments-other (9,629) —

Purchases of property and equipment (112) (67)

Net cash used in investing activities (9,741) (67)

Cash flows from financing activities:

Proceeds from the exercise of stock options 5 —

Net cash provided by financing activities 95,760 42,841

Effect of exchange rate changes on cash and cash equivalents (993) (130)

Net change in cash and cash equivalents 19,882 (40,589)

Cash and cash equivalents, beginning of year 86,863 127,452

Cash and cash equivalents, end of year $ 106,745 $ 86,863

Supplemental disclosure of noncash investing and financing activities:

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. The Company is headquartered in New York City with its main operations in Gräfelfing near Munich, Germany. The Company currently has approximately 66 employees.

The Company is currently pursuing clinical development of three orally administered, small molecule programs, each of which has unique features intended to directly address the unmet needs of patients with serious chronic inflammatory and autoimmune diseases. These include the vidofludimus calcium (IMU-838) program, which is in Phase 3 clinical development for patients with multiple sclerosis (“MS”); the izumerogant (proposed International Nonproprietary Name (“INN”) for IMU-935) program, which is an inverse agonist of retinoic acid receptor-related orphan nuclear receptor gamma truncated (“RORγt”) that inhibits the interleukin-17 (“IL-17”) pathway in diseases such as psoriasis; and the IMU-856 program, which is targeted to restore intestinal barrier function and regenerate bowel epithelium.

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 $317.3 million as of December 31, 2022 and approximately $196.9 million as of December 31, 2021. 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 development of its product candidates and adds personnel necessary to advance its 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 development programs.

From inception through December 31, 2022, Immunic has raised net cash of approximately $355.5 million from private and public offerings of preferred and common stock. As of December 31, 2022, the Company had cash and cash equivalents of approximately $106.7 million and investments - other of $9.6 million. With these funds the Company expects to be able to fund its operations beyond twelve months from the date of the issuance of the accompanying financial statements.

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 (which 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.

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 recoverability of goodwill, 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.

F- 9

Foreign Currency Translation and Presentation

The Company’s reporting currency is United States (“U.S.”) dollars. Immunic AG is located in Germany with the euro being its 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 and Investments- other

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Time Deposits with an original maturity greater than three months are classified as Investments-other

Cash and cash equivalents consist of cash on hand and deposits in banks located in the U.S of approximately $85.7 million, Germany of approximately $19.1 million and Australia of approximately $1.9 million. 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. Our Cash and Cash equivalents in the U.S. is primarily held in a U.S. Government money market fund account and was earning interest at a rate of 4.3%. Our cash and cash equivalents in Germany and Australia were earning interest at a rate of —% to 0.87%

Investments - other consists of the following as of (in thousands):

The time deposit accounts are held in our bank in Germany and are held in Euros and are earning interest at a rate of 0.61% to 0.87% and have a remaining maturity 3-4 months.

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.

F- 10

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.

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 $77,000 and $85,000 for the years ended December 31, 2022 and 2021, 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, 2022 and 2021 other than goodwill which is described below.

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, an unfavorable clinical trial result, a significant adverse change in legal or business climate, industry market conditions, an adverse regulatory action, sustained decrease in stock price or unanticipated competition.

On October 20, 2022, the Company announced the outcome of a significant interim analysis of its Phase 1b clinical trial of izumerogant in patients with moderate-to-severe psoriasis that were not deemed positive progress. On October 21, 2022, the Company experienced a significant decrease in the Company's market capitalization. The Company considered this to be a triggering event indicating that it is more likely than not that goodwill was impaired. The Company performed an analysis of the fair value compared to the Company's book value, utilizing the Company's traded stock price (a level 1 fair value input). As a result of that analysis, the Company recorded an approximately $33.0 million non-cash goodwill impairment charge in the fourth quarter of 2022, which represents a full write down of its previous goodwill balance. The Company did not have any goodwill impairment during the year ended December 31, 2021. The changes in the carrying amount of goodwill for the years presented are as follows (amounts in thousands):

Carrying amount of goodwill at December 31, 2021 $ 32,970

Impairment of goodwill during the year ended December 31, 2022 (32,970)

Carrying amount of goodwill at December 31, 2022 $ —

Research and Development Expenses

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.

Government assistance

Government assistance relating to research and development performed by Immunic Australia is recorded as a component of other (income) expense. Government assistance is recognized at a rate of 43.5% of the qualified research and development expenditures which are incurred. We recognized $2.3 million and $1.7 million of other income related to research activities performed during the years ended December 31, 2022 and 2021, respectively.

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

F- 12

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 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, 2022 and 2021, 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 2021 are subject to audit by German and Australian tax authorities. The Company is not currently under examination by any tax jurisdictions.

Warrants

The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (“ASC 480-10”) or ASC 815-40, Accounting

F- 13

for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock (“ASC 815-40”). Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in the consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or other applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date.

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,

Prefunded stock warrants 5,096,552 —

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- 14

3. Balance Sheet Details

Prepaid Expenses and Other Current Assets

Prepaid Expense and Other Current Assets consist of (in thousands):

December 31,

Prepaid clinical and related costs $ 5,608 $ 14,853

Australian research and development tax incentive 2,361 1,871

Accounts Payable

Accounts Payable consist of (in thousands):

December 31,

Clinical and related costs $ 3,749 $ 3,427

Legal and audit costs 288 72

Accrued Expenses

Accrued Expenses consist of (in thousands):

December 31,

Accrued clinical and related costs $ 6,807 $ 6,214

Accrued legal and audit costs 169 96

Other Current Liabilities

Other Current Liabilities consist of (in thousands):

December 31,

4. Commitments and Contingencies

Operating Lease

The Company leases certain office space under non-cancelable operating leases. The leases terminate on July 31, 2025 for the New York City office and June 30, 2025 for the Gräfelfing, Germany office. The Company formerly leased office space in

F- 15

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 was extended on December 22, 2022 for an additional 27 months resulting in the new lease termination date of July 31, 2025. The New York City lease has a renewal option, but this was 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 and August 1, 2022 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 as well as a three month rent holiday upon the 27 month extension starting May 2023. There were net additions to right of use assets of $435,000 and $642,000 as a result of signing for additional lease space at the Gräfelfing, Germany office in March 2021 and August 2022, respectively. There were net additions to right of use assets of $332,000 as a result of extending the New York City lease in December 2022.

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% for the original leases and 8% for the New York City extension, 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 $727,000 and $503,000 for the years ended December 31, 2022 and 2021, 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, 2022 (in thousands):

Thereafter $ —

Total lease payments $ 1,682

Less: interest portion $ 147

Present value of lease obligation $ 1,535

Contractual Obligations

As of December 31, 2022, the Company has non-cancelable contractual obligations under certain agreements related to its development programs in vidofludimus calcium, izumerogant and IMU-856 totaling approximately $4.5 million, all of which is expected to be paid in 2023.

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

F- 16

(Tranche III of the Agreement). The payment was made 50% in cash and 50% in shares of Immunic’s common stock (the “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.

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, 2022

Fair Value Level 1 Level 2 Level 3

Assets

Total assets at fair value $ 85,521 $ 85,521 $ — $ —

Fair Value Measurement at December 31, 2021

Fair Value Level 1 Level 2 Level 3

Assets

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

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.

Our money market fund account is held in our bank in the U.S. and was earning interest at a rate of 4.3% in a U.S. Government money market fund.

The Company has cash balances in banks in excess of the maximum amount insured by the FDIC and other international agencies as of December 31, 2022. The Company has not historically experienced any credit losses with balances in excess of FDIC limits.

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. For the assessment of the fair value of goodwill and the related impairment of goodwill we used a level one assessment in our testing of goodwill. See Note 2, Summary of significant accounting policies "Goodwill".

6. Common Stock

Shelf Registration Statements

F- 17

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. As of February 17, 2023, there is $75.0 million remaining on this shelf registration statement

In December 2020, the Company filed a 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 an at-the-market sales agreement ("December 2020 ATM") with SVB Leerink as agent. The Company has used, and intends to continue 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.As of February 17, 2023, $8.4 million in capacity remains under the December 2020 ATM.

In May 2022, the Company filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $80.0 million of common stock that may be issued and sold under another at-the-market sales agreement ("May 2022 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 May 2022 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 May 2022 ATM or (ii) termination of the May 2022 ATM as otherwise permitted thereby. The May 2022 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 February 17, 2023, $80.0 million in capacity remains under the May 2022 ATM.

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

For the year ended December 31, 2022, the Company raised gross proceeds of $40.9 million pursuant to the December 2020 ATM through the sale of 4,204,113 shares of common stock at a weighted average price of $9.72 per share. The net proceeds from the December 2020 ATM were $39.6 million after deducting underwriter commissions of $1.2 million.

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.

F- 18

Equity Offerings

$60 Million Private Placement Equity Financing

On October 10, 2022, Immunic entered into a Securities Purchase Agreement (the “Purchase Agreement”) for a private placement (the “Private Placement”) with select accredited investors and certain existing investors (each, a “Purchaser” and collectively, the “Purchasers”). Pursuant to the Purchase Agreement, the Company agreed to sell to the Purchasers (i) 8,696,552 shares of the Company’s common stock, par value $0.0001 per share (the “Shares”), at a purchase price of $4.35 per Share, and (ii) 5,096,552 pre-funded warrants (the “Pre-Funded Warrants”) to purchase Common Stock (the “Warrant Shares” and together with the Shares and the Pre-Funded Warrants, the “Securities”), at a purchase price of $4.34 per Pre-Funded Warrant. The Pre-Funded Warrants have an exercise price of $0.01 per share of Common Stock, be immediately exercisable and remain exercisable until exercised in full. The holders of Pre-Funded Warrants may not exercise a Pre-Funded Warrant if the holder, together with its affiliates, would beneficially own more than 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to such exercise. The holders of Pre-Funded Warrants may increase or decrease such percentages not in excess of 19.99% by providing at least 61 days’ prior notice to the Company. The Pre-Funded Warrants are classified as a component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holders to receive a fixed number of shares of common stock upon exercise. In addition, the Pre-Funded Warrants do not provide any guarantee of value or return. All of the pre-funded warrants were exercised in January of 2023.

The Private Placement closed on October 12, 2022. The gross proceeds of the Private Placement were approximately $60.0 million, before deducting offering expenses payable by the Company of approximately $4.0 million. The Company intends to use the net proceeds from the Private Placement to fund the ongoing clinical development of its three lead product candidates, vidofludimus calcium (IMU-838), izumerogant (IMU-935) and IMU-856, and for other general corporate purposes.

The registration statement for these securities was deemed effective by Securities and Exchange Commission on December 20, 2022.

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.

Common Stock

As of December 31, 2022, 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, 2022, 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, 2022.

F- 19

Stock Reserved for Future Issuance

Shares reserved for future issuance as of December 31, 2022 are as follows:

Number ofShares

Common stock reserved for issuance for:

Common stock options available for future grant:

Total common shares reserved for future issuance 9,283,347

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 ESPP 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 Company has issued 70,351 and 12,758 shares under the ESPP for the twelve months ended December 31, 2022 and 2021, respectively. The Company recognized $96,000 and $46,000 of expense related to the plan in the twelve months ended December 31, 2022 and 2021, respectively.

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 were 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 through 2023 by a total of 4,408,871 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- 20

Movements during the year

The following table summarizes stock option activity for the twelve months ended December 31, 2022 and 2021 under the 2019 Plan:

Exercised — $ —

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 its own stock combined with 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- 21

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, 2022 and 2021 was $6.81 and $10.52, 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:

Risk-free interest rate 2.09% 0.93%

Expected dividend yield 0% 0%

Expected volatility 97.8% 93.0%

Expected term of options (years) 6.0 6.0

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,

As of December 31, 2022 there was $15.6 million in total unrecognized compensation expense relating to the 2019 Plan to be recognized over a weighted average period of 2.74 years.

Summary of Equity Incentive Plans Assumed from Vital

Upon completion of the Transaction with Vital Therapies ("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, 2022.

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, 2022 and 2021, respectively.

F- 22

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,

The rate reconciliation consists of the following:

Years Ended December 31,

Federal statutory rate 21.0 % 21.0 %

Foreign rate differential 2.2 % 3.2 %

Stock options (1.1) % (0.9) %

Tax effect of rate change 0.0 % 0.0 %

Goodwill impairment (5.7) % 0.0 %

Other (0.7) % (0.4) %

Change in valuation allowance (15.7) % (22.9) %

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, 2022 and 2021, respectively.

IMUX US Equity

IMUX · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

IMUX US Equity☆

IMUX · 10-K · period ended 2022-12-31

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

IMUX US Equity