2020Q3FALSE--12-3100012807760.025P3YP5YP3Y00012807762020-01-012020-09-30xbrli:shares00012807762020-10-31iso4217:USD00012807762020-09-3000012807762019-12-31iso4217:USDxbrli:shares00012807762020-07-012020-09-3000012807762019-07-012019-09-3000012807762019-01-012019-09-300001280776us-gaap:CommonStockMember2019-12-310001280776us-gaap:AdditionalPaidInCapitalMember2019-12-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001280776us-gaap:RetainedEarningsMember2019-12-310001280776us-gaap:RetainedEarningsMember2020-01-012020-03-3100012807762020-01-012020-03-310001280776us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-03-310001280776vtl:PublicOfferingMemberus-gaap:CommonStockMember2020-01-012020-03-310001280776vtl:PublicOfferingMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001280776vtl:PublicOfferingMember2020-01-012020-03-310001280776us-gaap:CommonStockMember2020-03-310001280776us-gaap:AdditionalPaidInCapitalMember2020-03-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-03-310001280776us-gaap:RetainedEarningsMember2020-03-3100012807762020-03-310001280776us-gaap:RetainedEarningsMember2020-04-012020-06-3000012807762020-04-012020-06-300001280776us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-04-012020-06-300001280776vtl:April2020EquityIssuancesMember2020-04-012020-06-300001280776vtl:April2020EquityIssuancesMemberus-gaap:CommonStockMember2020-04-012020-06-300001280776us-gaap:AdditionalPaidInCapitalMembervtl:April2020EquityIssuancesMember2020-04-012020-06-300001280776vtl:June2020EquityIssuancesMember2020-04-012020-06-300001280776vtl:June2020EquityIssuancesMemberus-gaap:CommonStockMember2020-04-012020-06-300001280776vtl:June2020EquityIssuancesMemberus-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001280776vtl:PublicOfferingMember2020-04-012020-06-300001280776vtl:PublicOfferingMemberus-gaap:CommonStockMember2020-04-012020-06-300001280776vtl:PublicOfferingMemberus-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001280776us-gaap:CommonStockMember2020-06-300001280776us-gaap:AdditionalPaidInCapitalMember2020-06-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300001280776us-gaap:RetainedEarningsMember2020-06-3000012807762020-06-300001280776us-gaap:RetainedEarningsMember2020-07-012020-09-300001280776us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300001280776vtl:August2020EquityIssuancesMember2020-07-012020-09-300001280776vtl:August2020EquityIssuancesMemberus-gaap:CommonStockMember2020-07-012020-09-300001280776vtl:August2020EquityIssuancesMemberus-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300001280776us-gaap:CommonStockMember2020-09-300001280776us-gaap:AdditionalPaidInCapitalMember2020-09-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300001280776us-gaap:RetainedEarningsMember2020-09-300001280776vtl:SeriesA2ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2018-12-310001280776vtl:SeriesA1ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2018-12-310001280776us-gaap:CommonStockMember2018-12-310001280776us-gaap:AdditionalPaidInCapitalMember2018-12-310001280776vtl:StockSubscriptionNotYetIssuedMember2018-12-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001280776us-gaap:RetainedEarningsMember2018-12-3100012807762018-12-310001280776us-gaap:RetainedEarningsMember2019-01-012019-03-3100012807762019-01-012019-03-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-03-310001280776vtl:StockSubscriptionNotYetIssuedMember2019-01-012019-03-310001280776vtl:SeriesA2ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-03-310001280776vtl:SeriesA1ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-03-310001280776us-gaap:CommonStockMember2019-03-310001280776us-gaap:AdditionalPaidInCapitalMember2019-03-310001280776vtl:StockSubscriptionNotYetIssuedMember2019-03-310001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-03-310001280776us-gaap:RetainedEarningsMember2019-03-3100012807762019-03-310001280776us-gaap:RetainedEarningsMember2019-04-012019-06-3000012807762019-04-012019-06-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-04-012019-06-300001280776vtl:StockSubscriptionNotYetIssuedMember2019-04-012019-06-300001280776vtl:SeriesA2ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-04-012019-06-300001280776vtl:SeriesA1ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-04-012019-06-300001280776us-gaap:CommonStockMember2019-04-012019-06-300001280776us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300001280776us-gaap:CommonStockMemberus-gaap:CommonClassBMember2019-04-012019-06-300001280776us-gaap:AdditionalPaidInCapitalMemberus-gaap:CommonClassBMember2019-04-012019-06-300001280776us-gaap:CommonClassBMember2019-04-012019-06-300001280776vtl:ExecutiveBonusAgreementMemberus-gaap:CommonStockMember2019-04-012019-06-300001280776vtl:ExecutiveBonusAgreementMemberus-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300001280776vtl:ExecutiveBonusAgreementMember2019-04-012019-06-300001280776vtl:A4SCSettlementAgreementMemberus-gaap:CommonStockMember2019-04-012019-06-300001280776us-gaap:AdditionalPaidInCapitalMembervtl:A4SCSettlementAgreementMember2019-04-012019-06-300001280776vtl:A4SCSettlementAgreementMember2019-04-012019-06-300001280776vtl:SeriesA2ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-06-300001280776vtl:SeriesA1ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-06-300001280776us-gaap:CommonStockMember2019-06-300001280776us-gaap:AdditionalPaidInCapitalMember2019-06-300001280776vtl:StockSubscriptionNotYetIssuedMember2019-06-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300001280776us-gaap:RetainedEarningsMember2019-06-3000012807762019-06-300001280776us-gaap:RetainedEarningsMember2019-07-012019-09-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300001280776us-gaap:CommonStockMember2019-07-012019-09-300001280776vtl:PublicOfferingMember2019-07-012019-09-300001280776vtl:PublicOfferingMemberus-gaap:CommonStockMember2019-07-012019-09-300001280776vtl:PublicOfferingMemberus-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300001280776vtl:SeriesA2ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-09-300001280776vtl:SeriesA1ConvertiblePreferredStockMemberus-gaap:PreferredStockMember2019-09-300001280776us-gaap:CommonStockMember2019-09-300001280776us-gaap:AdditionalPaidInCapitalMember2019-09-300001280776vtl:StockSubscriptionNotYetIssuedMember2019-09-300001280776us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300001280776us-gaap:RetainedEarningsMember2019-09-3000012807762019-09-300001280776vtl:PreClosingFinancingMember2020-01-012020-09-300001280776vtl:PreClosingFinancingMember2019-01-012019-09-300001280776vtl:PublicOfferingMember2020-01-012020-09-300001280776vtl:PublicOfferingMember2019-01-012019-09-300001280776vtl:April2020EquityIssuancesMember2020-01-012020-09-300001280776vtl:April2020EquityIssuancesMember2019-01-012019-09-300001280776vtl:June2020EquityIssuancesMember2020-01-012020-09-300001280776vtl:June2020EquityIssuancesMember2019-01-012019-09-300001280776vtl:August2020EquityIssuancesMember2020-01-012020-09-300001280776vtl:August2020EquityIssuancesMember2019-01-012019-09-3000012807762019-04-122020-09-30xbrli:pure0001280776vtl:ImmunicAGMembervtl:VitalTherapiesInc.Member2019-04-110001280776vtl:VitalTherapiesInc.Membervtl:ImmunicAGMember2019-04-122019-04-120001280776vtl:ImmunicAGMember2019-04-120001280776vtl:VitalTherapiesInc.Membervtl:ImmunicAGMember2019-04-120001280776vtl:VitalTherapiesInc.Memberus-gaap:RestrictedStockUnitsRSUMembervtl:ImmunicAGMember2019-04-120001280776vtl:VitalTherapiesInc.Member2019-04-120001280776vtl:ImmunicAGMemberus-gaap:PrivatePlacementMember2019-04-112019-04-11iso4217:EUR00012807762019-04-122019-04-12vtl:financialInstitution0001280776srt:MinimumMember2020-01-012020-09-300001280776srt:MaximumMember2020-01-012020-09-30vtl:developmentProgram0001280776srt:MinimumMember2020-09-300001280776srt:MaximumMember2020-09-30vtl:lease0001280776us-gaap:EmployeeStockOptionMembervtl:TwoThousandNineteenOmnibusEquityIncentivePlanMember2020-09-300001280776us-gaap:StockOptionMember2019-01-012019-09-300001280776us-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001280776us-gaap:RestrictedStockUnitsRSUMember2019-01-012019-09-300001280776us-gaap:EmployeeStockOptionMember2019-04-122019-04-120001280776vtl:ImmunicInc.Membervtl:VitalTherapiesInc.Memberus-gaap:RestrictedStockUnitsRSUMember2019-04-122019-04-120001280776vtl:VitalTherapiesInc.Membervtl:ImmunicAGMember2019-04-110001280776vtl:VitalTherapiesInc.Memberus-gaap:RestrictedStockUnitsRSUMembervtl:ImmunicAGMember2019-04-122019-04-120001280776vtl:VitalTherapiesInc.Memberus-gaap:RestrictedStockUnitsRSUMembervtl:ImmunicAGMember2019-04-110001280776vtl:ImmunicInc.Membervtl:VitalTherapiesInc.Member2019-04-120001280776vtl:ImmunicInc.Member2019-01-012019-12-3100012807762016-05-012016-05-3100012807762019-04-120001280776us-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMemberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300001280776us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-3000012807762018-05-3100012807762019-07-310001280776vtl:AtTheMarketSalesAgreementSixMonthsEndedJune302020Member2020-01-012020-09-300001280776vtl:AtTheMarketSalesAgreementSixMonthsEndedJune302020Member2020-09-300001280776vtl:April2020EquityIssuancesMember2020-04-232020-04-230001280776vtl:April2020EquityIssuancesMember2020-04-230001280776vtl:April2020EquityIssuancesMember2020-04-272020-04-270001280776vtl:June2020EquityIssuancesMember2020-06-102020-06-100001280776vtl:June2020EquityIssuancesMember2020-06-100001280776vtl:June2020EquityIssuancesMember2020-06-122020-06-120001280776vtl:August2020EquityIssuancesMember2020-08-042020-08-040001280776vtl:August2020EquityIssuancesMember2020-08-040001280776vtl:August2020EquityIssuancesMember2020-08-072020-08-0700012807762019-03-27iso4217:EURxbrli:shares0001280776srt:ExecutiveOfficerMember2019-03-270001280776vtl:ImmunicAGMembervtl:SeriesA1ConvertiblePreferredStockMember2018-12-310001280776vtl:ImmunicAGMembervtl:SeriesA2ConvertiblePreferredStockMember2018-12-310001280776vtl:ImmunicAGMember2018-12-310001280776us-gaap:EmployeeStockOptionMember2020-09-300001280776vtl:TwoThousandFourteenEquityIncentivePlanMembervtl:EmployeeStockOptionsforFutureGrantMember2020-09-300001280776vtl:A2017InducementEquityIncentivePlanMembervtl:EmployeeStockOptionsforFutureGrantMember2020-09-300001280776vtl:EmployeeStockOptionsforFutureGrantMembervtl:TwoThousandNineteenOmnibusEquityIncentivePlanMember2020-09-30vtl:numberOfStockOptionPrograms0001280776vtl:VSOPSBMember2020-01-012020-09-300001280776vtl:VSOPMember2020-01-012020-09-300001280776vtl:VSOPAndVSOPSBMember2019-04-122019-04-120001280776vtl:VSOPAndVSOPSBMember2019-07-012019-09-300001280776vtl:VSOPAndVSOPSBMember2019-01-012019-09-300001280776vtl:A2019OmnibusEquityIncentivePlanMember2019-07-310001280776vtl:TwoThousandNineteenOmnibusEquityIncentivePlanEvergreenProvisionMember2019-07-012019-07-310001280776vtl:TwoThousandNineteenOmnibusEquityIncentivePlanEvergreenProvisionMember2020-07-012020-09-300001280776vtl:A2019OmnibusEquityIncentivePlanMembersrt:MaximumMember2020-01-012020-09-300001280776vtl:IncentiveEmployeeStockOptionMembervtl:A2019OmnibusEquityIncentivePlanMember2020-01-012020-09-300001280776vtl:A2019OmnibusEquityIncentivePlanMembervtl:NonStatutoryEmployeeStockOptionMembersrt:MinimumMember2020-01-012020-09-300001280776vtl:A2019OmnibusEquityIncentivePlanMembersrt:MaximumMembervtl:NonStatutoryEmployeeStockOptionMember2020-01-012020-09-300001280776us-gaap:EmployeeStockOptionMembervtl:TwoThousandNineteenOmnibusEquityIncentivePlanMember2019-12-310001280776us-gaap:EmployeeStockOptionMembervtl:TwoThousandNineteenOmnibusEquityIncentivePlanMember2020-01-012020-09-300001280776vtl:A2019OmnibusEquityIncentivePlanMember2020-01-012020-09-300001280776vtl:ExecutiveBonusAgreementMember2019-04-012019-04-300001280776vtl:ExecutiveBonusAgreementMember2019-04-122019-04-120001280776us-gaap:ResearchAndDevelopmentExpenseMembervtl:EmployeeMember2020-07-012020-09-300001280776us-gaap:ResearchAndDevelopmentExpenseMembervtl:EmployeeMember2019-07-012019-09-300001280776us-gaap:ResearchAndDevelopmentExpenseMembervtl:EmployeeMember2020-01-012020-09-300001280776us-gaap:ResearchAndDevelopmentExpenseMembervtl:EmployeeMember2019-01-012019-09-300001280776us-gaap:GeneralAndAdministrativeExpenseMembervtl:EmployeeMember2020-07-012020-09-300001280776us-gaap:GeneralAndAdministrativeExpenseMembervtl:EmployeeMember2019-07-012019-09-300001280776us-gaap:GeneralAndAdministrativeExpenseMembervtl:EmployeeMember2020-01-012020-09-300001280776us-gaap:GeneralAndAdministrativeExpenseMembervtl:EmployeeMember2019-01-012019-09-300001280776vtl:EmployeeMember2020-07-012020-09-300001280776vtl:EmployeeMember2019-07-012019-09-300001280776vtl:EmployeeMember2020-01-012020-09-300001280776vtl:EmployeeMember2019-01-012019-09-300001280776us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-09-300001280776us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-09-300001280776vtl:TwoThousandFourteenEquityIncentivePlanMember2020-09-300001280776vtl:A2017InducementEquityIncentivePlanMember2017-09-300001280776vtl:EmployeeStockOptionsVitalTherapiesInc.Member2019-12-310001280776vtl:EmployeeStockOptionsVitalTherapiesInc.Member2020-01-012020-09-300001280776vtl:EmployeeStockOptionsVitalTherapiesInc.Member2020-09-300001280776vtl:VitalTherapiesInc.Memberus-gaap:RestrictedStockUnitsRSUMember2020-01-012020-09-300001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-03-310001280776vtl:VitalTherapiesInc.Membervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-03-012019-03-310001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-05-282019-05-280001280776us-gaap:NotesReceivableMembervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-05-280001280776us-gaap:NotesReceivableMembervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-05-282019-05-280001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-05-280001280776vtl:ClinicalDevelopmentEquipmentMembervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2020-09-300001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMembervtl:SuppliesAndWorkingCellBanksMember2020-09-300001280776us-gaap:InProcessResearchAndDevelopmentMembervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2020-09-300001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2020-09-300001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-07-012019-09-300001280776us-gaap:NotesReceivableMembervtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-09-040001280776vtl:ELADRelatedAssetsMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2019-09-040001280776srt:BoardOfDirectorsChairmanMember2020-04-172020-04-170001280776us-gaap:LineOfCreditMemberus-gaap:SubsequentEventMember2020-10-190001280776us-gaap:SubsequentEventMembersrt:BoardOfDirectorsChairmanMember2020-10-152020-10-15

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2020
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-36201
Immunic, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware56-2358443
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
1200 Avenue of the Americas
Suite 200
New York, NY10036
(Address of principal executive offices)(Zip Code)
(332) 255-9818
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.0001 par valueIMUXThe Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No  

On October 31, 2020, 20,718,340 shares of common stock, $0.0001 par value, were outstanding.



IMMUNIC, INC.
INDEX
 
  Page No.
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.

2


EXPLANATORY NOTE

Immunic, Inc. is a clinical-stage biopharmaceutical company focused on the development of selective oral therapies in immunology with the goal of becoming a leader in treatments for chronic inflammatory and autoimmune diseases. On April 12, 2019, Vital Therapies, Inc. (“Vital”) completed a transaction with Immunic AG in accordance with the terms of an agreement, dated as of January 6, 2019 (the “Agreement”). Pursuant to the terms of the Agreement, the holders of Immunic AG ordinary shares exchanged all of their outstanding shares for shares of Vital common stock (the “Transaction”), resulting in Immunic AG becoming a wholly-owned subsidiary of Vital. Immediately prior to the Transaction, Vital effected a 40-for-1 reverse split of its common stock (the “Reverse Stock Split”). Immediately after the Transaction, Vital changed its name to Immunic, Inc. and adopted the business priorities of Immunic AG.
Unless otherwise noted, all references to common stock share amounts and per share amounts in this Quarterly Report on Form 10-Q (the “Quarterly Report”) have been retroactively adjusted to reflect the Reverse Stock Split.
As used herein, the words “the Company,” “we,” “us,” and “our” refer to, for periods following the Exchange, Immunic, Inc. (formerly Vital Therapies, Inc.) and its direct and indirect subsidiaries, and for periods prior to the Exchange, Immunic AG and its direct and indirect subsidiaries, as applicable.

3


IMMUNIC, INC.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share amounts)

 
September 30, 2020December 31, 2019
(Unaudited)
Assets
Current assets:
Cash and cash equivalents$133,183 $29,369 
Other current assets and prepaid expenses4,358 2,861 
Total current assets137,541 32,230 
Property and equipment, net147 80 
Goodwill32,970 32,970 
Right-of-use assets, net940 633 
Other long-term assets42 42 
Total assets$171,640 $65,955 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$3,419 $2,423 
Accrued expenses4,253 3,298 
Other current liabilities358 1,351 
Total current liabilities8,030 7,072 
Long term liabilities
Operating lease liabilities735 520 
Total long-term liabilities735 520 
Total liabilities8,765 7,592 
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 20,000,000 authorized and no shares issued or outstanding at September 30, 2020 and December 31, 2019
  
Common stock, $0.0001 par value; 130,000,000 shares authorized and 20,718,340 and 10,744,806 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively
2 1 
Additional paid-in capital257,394 119,646 
Accumulated other comprehensive loss(1,752)(1,373)
Accumulated deficit(92,769)(59,911)
Total stockholders’ equity162,875 58,363 
Total liabilities and stockholders’ equity$171,640 $65,955 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4


IMMUNIC, INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
 
 Three Months
Ended September 30,
Nine Months
Ended September 30,
 2020201920202019
Operating expenses:
Research and development$11,040 $7,102 $27,461 $16,486 
General and administrative2,505 2,075 7,320 12,360 
Total operating expenses13,545 9,177 34,781 28,846 
Loss from operations(13,545)(9,177)(34,781)(28,846)
Other income:
Interest income20 58 48 92 
Other income, net612 904 1,875 1,512 
Total other income632 962 1,923 1,604 
Net loss$(12,913)$(8,215)$(32,858)$(27,242)
Net loss per share, basic and diluted$(0.70)$(0.82)$(2.35)$(3.96)
Weighted-average common shares outstanding, basic and diluted18,405,840 10,022,856 13,966,690 6,880,057 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5


IMMUNIC, INC.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
 
 Three Months
Ended September 30,
Nine Months
Ended September 30,
 2020201920202019
Net loss$(12,913)$(8,215)$(32,858)$(27,242)
Other comprehensive loss:
Foreign currency translation$(144)$(1,082)(379)(985)
Total comprehensive loss$(13,057)$(9,297)$(33,237)$(28,227)
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6


IMMUNIC, INC.
Condensed Consolidated Statements of Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands, except shares)
(Unaudited)
Nine Months Ended September 30, 2020
 Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
 SharesAmount
Balance at January 1, 202010,744,806 $1 $119,646 $(1,373)$(59,911)$58,363 
Net loss— — — — (8,487)(8,487)
Stock-based compensation— — 353 — — 353 
Foreign exchange translation adjustment— — — (309)— (309)
Issuance of common stock - At The Market Sales Agreement net of issuance costs of $37
78,745 — 568 — — 568 
Balance at March 31, 202010,823,551 $1 $120,567 $(1,682)$(68,398)$50,488 
Net loss— — — — (11,458)(11,458)
 Stock-based compensation— — 369 — — 369 
Foreign exchange translation adjustment— — — 74 — 74 
Issuance of common stock - April registered direct equity offering net of issuance costs of $1,082
1,764,706 — 13,918 — — 13,918 
Issuance of common stock - June public equity offering net of issuance costs of $1,752
2,175,000 — 23,048 — — 23,048 
Issuance of common stock - At The Market Sales Agreement net of issuance costs of $75
205,083 — 2,246 — — 2,246 
Balance at June 30, 202014,968,340 $1 $160,148 $(1,608)$(79,856)$78,685 
Net loss— $— — — (12,913)(12,913)
Stock-based compensation— $— 707 — — 707 
Foreign exchange translation adjustment— $— — (144)— (144)
Issuance of common stock - August public equity offering net of issuance costs of $6,960
5,750,000 $1 96,539 — — 96,540 
Balance at September 30, 202020,718,340 $2 $257,394 $(1,752)$(92,769)$162,875 



7


Nine Months Ended September 30, 2019
Series A-2 Preferred StockSeries A-1 Preferred StockCommon StockAdditional
Paid-In
Capital
Stock subscription not yet issuedAccumulated
Other
Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity (Deficit)
SharesAmountSharesAmountSharesAmount
Balance at January 1, 2019299,456 $34,313 13,541 $2,879 846,953 $ $56 $ $(819)$(24,978)$(25,741)
Net loss— — — — — — — — — (4,313)(4,313)
Foreign exchange translation adjustment— — — — — — — — (247)— (247)
Stock subscription not yet issued— $— — $— — $— $— $20,531 $— $— $20,531 
Balance at March 31, 2019299,456 $34,313 13,541 $2,879 846,953 $ $56 $20,531 $(1,066)$(29,291)$(9,770)
Net loss— — — — — — — — — (14,714)(14,714)
Other comprehensive income— — — — — — — — 344 — 344 
Stock subscription not yet issued— — — — — — — (20,531)— — (20,531)
Conversion of Series A Preferred Stock to common stock(299,456)(34,313)(13,541)(2,879)5,302,029 1 37,192 — — — 37,193 
Issuance of common stock in pre-closing financing for cash, net of issuance costs of $61
— — — — 2,197,742 — 29,935 — — — 29,935 
Issuance of common stock - Executive bonus agreement— — — — 460,336 — 6,014 — — — 6,014 
Issuance of common stock - settlement of contingent payment— — — — 120,070 — 1,540 — — — 1,540 
Exchange of common stock in connection with Transaction— — — — 1,059,269 — 39,400 — — — 39,400 
Balance at June 30, 2019 $  $ 9,986,399 $1 $114,137 $ $(722)$(44,005)$69,411 
Net loss— — — — — — — — (8,215)(8,215)
Stock-based compensation— — — — — — 199 — — 199 
Foreign exchange translation adjustment— — — — — — — (1,082)— (1,082)
Issuance of common stock under restricted stock unit agreements— — — — 58,981 — — — —  
Public offering of common stock - net of issuance costs of $144
— — — — 25,300 — 214 — — 214 
Balance at September 30, 2019 $  $ 10,070,680 $1 $114,550 $ $(1,804)$(52,220)$60,527 


The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8


IMMUNIC, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
 
 Nine Months
Ended September 30,
 20202019
Cash flows from operating activities:
Net loss$(32,858)$(27,242)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization63 38 
Gain on sale of ELAD Assets (329)
Gain on disposal of equipment (26)
Stock-based compensation1,429 6,182 
Contingent payment settled in common stock 1,540 
Changes in operating assets and liabilities:
Other current assets and prepaid expenses(1,234)(3,458)
Accounts payable875 918 
Other current liabilities(1,208)(49)
Accrued expenses772 146 
Net cash used in operating activities(32,161)(22,280)
Cash flows from investing activities:
Cash distribution in connection with ELAD Assets sale (75)
Proceeds from sale of ELAD Assets 2,475 
Cash acquired in connection with the Transaction 8,151 
Purchases of property and equipment(122)(30)
Proceeds from sale of equipment 40 
Net cash (used in) provided by investing activities(122)10,561 
Cash flows from financing activities:
Proceeds from issuance of common stock in pre-closing financing, net of issuance costs of $61
 29,965 
Proceeds from public offering of common stock through At The Market offering, net of issuance costs of $112 and $53, respectively
2,814 305 
Proceeds from April 2020 registered direct equity offering, net of issuance costs of $1,082
13,918  
Proceeds from June 2020 public equity offering, net of issuance costs of $1,752
23,048  
Proceeds from August 2020 public equity offering, net of issuance costs of $6,960
96,540  
Deferred financing costs (82)
Net cash provided by financing activities136,320 30,188 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(223)(1,081)
Net change in cash, cash equivalents and restricted cash103,814 17,388 
Cash, cash equivalents and restricted cash, beginning of period29,369 13,072 
Cash, cash equivalents and restricted cash, end of period$133,183 $30,460 
Supplemental disclosures for cash flow information:
Cash paid for interest$ $2 
Supplemental disclosure of noncash investing and financing activities:
Conversion of convertible preferred stock to common stock$ $37,193 
Fair value of net assets acquired in the Transaction$ $39,400 
Offering costs in accrued expenses$25 $140 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9


IMMUNIC, INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Description of Business and Basis of Financial Statements
Description of Business
Immunic, Inc. (“Immunic” or the “Company”) is a clinical-stage biopharmaceutical company developing a pipeline of selective oral immunology therapies aimed at treating chronic inflammatory and autoimmune diseases, including relapsing-remitting multiple sclerosis, ulcerative colitis, Crohn’s disease and psoriasis. The Company is developing three small molecule products: its lead development program, IMU-838, is a selective immune modulator that inhibits the intracellular metabolism of activated immune cells by blocking the enzyme DHODH and exhibits a host-based antiviral effect; IMU-935 is an inverse agonist of RORgt; and IMU-856 targets the restoration of the intestinal barrier function. IMU-838 is in Phase 2 clinical development for relapsing-remitting multiple sclerosis, ulcerative colitis and COVID-19, with an additional Phase 2 trial considered in Crohn’s disease. An investigator-sponsored proof-of-concept clinical trial for IMU-838 in primary sclerosing cholangitis is ongoing at the Mayo Clinic. IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in September 2019. IMU-856 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in August 2020.

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 $92.8 million as of September 30, 2020 and $59.9 million as of December 31, 2019. Substantially all of Immunic’s operating losses have resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations.
Immunic expects to incur significant expenses and increasing operating losses for the foreseeable future as it initiates and continues the preclinical and clinical development of its product candidates and adds personnel necessary to advance its clinical pipeline of product candidates. Immunic expects that its operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs.
From inception through September 30, 2020, Immunic has raised net cash of approximately $208.6 million from private and public offerings of preferred and common stock. As of September 30, 2020, Immunic had cash and cash equivalents of approximately $133.2 million. With these funds, Immunic expects to be able to fund its operations beyond twelve months from the date of the issuance of the accompanying unaudited condensed consolidated financial statements.
Reverse Acquisition
On April 12, 2019, pursuant to the terms of the Agreement, the holders of Immunic AG ordinary shares exchanged all of their outstanding shares for shares of Vital common stock, resulting in Immunic AG becoming a wholly-owned subsidiary of Vital (the “Transaction”). Immediately following the Transaction, Vital Therapies, Inc. changed its name to “Immunic, Inc.” and its ticker symbol to “IMUX”.
Immediately prior to the closing of the Transaction, (i) each Immunic AG preferred share was converted into one Immunic AG ordinary share, and (ii) each Immunic AG ordinary share was converted into the right to receive 17.17 shares of Vital’s common stock, after giving effect to the Reverse Stock Split (as defined below). The exchange ratio was determined through arm’s-length negotiations between Vital and Immunic AG.
The aggregate consideration issuable in the Transaction, after giving effect to the Reverse Stock Split, was 8,927,130 shares of Vital’s common stock. Following the Transaction and after giving effect to the Reverse Stock Split, the former
10


shareholders of Immunic AG owned approximately 88.25% of the fully diluted common stock of the Company, and the shareholders of Vital immediately prior to the Transaction owned 1,059,269 shares (plus 127,500 restricted stock units (“RSUs”) all of which have been issued to date to former Vital officers) of the common stock of the Company or approximately 11.75%. The issuance of shares of Vital’s common stock in the Transaction was registered with the Securities and Exchange Commission (“SEC”) on a Registration Statement on Form S-4 (Registration No. 333-229510).
Immediately prior to the closing of the Transaction, Immunic AG issued, in a private placement transaction (the “Financing”), an aggregate of 2,197,742 ordinary shares to certain of its shareholders for aggregate consideration of €26.7 million (approximately $29.9 million), pursuant to the terms of the Investment and Subscription Agreement, dated as of January 6, 2019, between Immunic and the shareholders and investors party thereto.
The Transaction has been accounted for as a reverse acquisition under the acquisition method of accounting. Because Immunic AG’s pre-Transaction owners held an 88.25% economic and voting interest in the combined company immediately following the closing of the Transaction, Immunic AG is considered to be the acquirer of Vital for accounting purposes. Additionally, Immunic AG is considered to be the predecessor for reporting purposes and the financial results of Immunic AG are reported in the historical comparable periods.
Reverse Stock Split
On April 12, 2019, immediately following the closing of the Transaction, the Company effected a 40-for-1 reverse stock split of its common stock (the “Reverse Stock Split”). Accordingly, all references to share and per share amounts in the accompanying unaudited consolidated financial statements and notes have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented. No fractional shares were issued in connection with the Reverse Stock Split. Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the exchange ratio of 17.17.
Basis of Presentation and Consolidation
The accompanying consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, ("U.S. GAAP") and include the accounts of Immunic and its wholly-owned subsidiaries, Immunic AG and Immunic Research GmbH (which both began operations in 2016), Immunic Australia Pty Ltd. (which began operations in 2018) and Vital Therapies (Beijing) Company Limited (“VTL China”), acquired through the Transaction (which began operations in 2005). VTL China was sold in September 2019 in connection with the sale of certain of Vital's clinical development-related intellectual property rights (the "ELAD Assets"). All intercompany accounts and transactions have been eliminated in consolidation. Immunic manages its operations as a single reportable segment for the purposes of assessing performance and making operating decisions. Certain prior period amounts have been reclassified to conform to the current basis of presentation.

Unaudited Interim Financial Information
Immunic has prepared the accompanying interim unaudited condensed consolidated financial statements in accordance with US GAAP and in accordance with the instructions to Form 10-Q and Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. These interim unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring accruals which, in the opinion of management, are necessary to present fairly Immunic’s consolidated financial position, consolidated results of operations, consolidated statement of stockholders’ equity (deficit) and consolidated cash flows for the periods and as of the dates presented. The Company’s fiscal year ends on December 31. The condensed consolidated balance sheet as of December 31, 2019 was derived from audited consolidated financial statements but does not include all disclosures required by U.S. GAAP. These condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and the notes thereto included on the Company's Annual Report on Form 10-K filed on March 16, 2020. The nature of Immunic’s business is such that the results of any interim period may not be indicative of the results to be expected for the entire year. Certain prior period amounts have been reclassified to conform to the current basis of presentation.

11




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 the application of the acquisition method of accounting related to the Transaction, clinical trial expenses and share-based compensation. Management believes its estimates to be reasonable under the circumstances. Actual results could differ materially from those estimates and assumptions.
Foreign Currency Translation and Presentation
The Company’s reporting currency is United States (“U.S.”) dollars. During the three and nine months ended September 30, 2020 and 2019, Immunic AG and Immunic Research GmbH’s operations were located in Germany with the euro being their functional currency. Immunic Australia Pty Ltd.’s functional currency is the Australian dollar. All amounts in the financial statements where the functional currency is not the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows:
• assets and liabilities at reporting period-end rates;
• income statement accounts at average exchange rates for the reporting period; and
• components of equity at historical rates.
Gains and losses from translation of the financial statements into U.S. dollars are recorded in the statement of comprehensive income (loss) and in stockholders’ equity (deficit) 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. The Consolidated Statements of Cash Flows were prepared by using the average exchange rate in effect during the reporting period which reasonably approximates the timing of the cash flows.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.
Cash and cash equivalents consist of cash on hand and deposits in banks located in the U.S., Germany and Australia. The Company maintains cash and cash equivalent balances denominated in Euro and U.S. dollars with major financial institutions in the U.S. and Germany in excess of the deposit limits insured by the government. Management periodically reviews the credit standing of these financial institutions and believes that the Company is not exposed to any significant credit risk. The Company currently has the majority of its cash and cash equivalents invested with one large financial institution.
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.
12


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 to thirteen years. Depreciation expense was $43,000 and $9,000 during the three months ended September 30, 2020 and 2019, respectively and $63,000 and $38,000 during the nine months ended September 30, 2020 and 2019, 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 amounts. Impaired assets are then recorded at their estimated fair value. There were no impairment losses during the three and nine months ended September 30, 2020 and 2019, respectively.
Goodwill
Business combinations are accounted for under the acquisition method. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition.
The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment. Impairment testing for goodwill is done at the reporting unit level. The Company has determined that it operates in a single operating segment and has a single reporting unit. The Company has determined there was no goodwill impairment as of September 30, 2020.
Research and Development Expenses
Research and development expenses have principally been related to the three development programs, IMU-838, IMU-935 and IMU-856. These three programs include an orally available, small molecule inhibitor of DHODH (IMU-838 program), an inverse agonist of RORgt (IMU-935 program) and an orally available, small molecule modulator targeting the restoration of the intestinal barrier function (IMU-856 program) aimed at treating multiple sclerosis, ulcerative colitis, Crohn’s disease, COVID-19, psoriasis and diarrhea-predominant irritable bowel syndrome. IMU-838 is currently being tested in Phase 2 clinical trials in patients with relapsing-remitting multiple sclerosis, ulcerative colitis and COVID-19. The Company is also considering conducting a Phase 2 clinical trial in Crohn’s disease. An investigator-sponsored proof-of-concept clinical trial for IMU-838 in primary sclerosing cholangitis is ongoing at the Mayo Clinic. IMU-935 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in September 2019. IMU-856 is currently being tested in a Phase 1 clinical trial in healthy volunteers, which was initiated in August 2020.
13


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 is in the scope of ASC 606.
In October 2018, the Company entered into an option and license agreement (the "Daiichi Sankyo Agreement") with Daiichi Sankyo Co., Ltd. ("Daiichi Sankyo") which granted the Company the right to license a group of compounds, designated by the Company as IMU-856, as a potential new oral treatment option for diseases such as inflammatory bowel disease, irritable bowel syndrome with diarrhea, immune checkpoint inhibitor induced colitis and other barrier function associated diseases. During the option period, the Company performed agreed upon research and development activities for which it was reimbursed by Daiichi Sankyo up to a maximum agreed-upon limit. Such reimbursement is recorded as other income.
On January 5, 2020, the Company exercised its option to obtain the exclusive worldwide right to commercialization of IMU-856. Among other things, the option exercise grants Immunic AG the rights to Daiichi Sankyo’s patent application related to IMU-856. In connection with the option exercise, the Company paid a one-time upfront licensing fee to Daiichi Sankyo. Under the Daiichi Sankyo Agreement, Daiichi Sankyo is also eligible to receive future development, regulatory and sales milestone payments, as well as royalties related to IMU-856.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, business development and other support functions. Other general and administrative expenses include, but are not limited to, insurance costs, stock-based compensation, professional fees for legal, accounting and tax services, consulting, related facility costs and travel.
Stock-Based Compensation 
The Company measures the cost of employee and non-employee services received in exchange for equity awards based on the grant-date fair value of the award recognized generally as an expense (i) on a straight-line basis over the requisite service period for those awards whose vesting is based upon a service condition, and (ii) on an accelerated method for awards whose vesting is based upon a performance condition, but only to the extent it is probable that the performance condition will be met. Stock-based compensation is estimated at the date of grant based on (i) 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.

14


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. The short-term leases are deemed immaterial and have not been included in the operating lease right of use asset and operating lease liability.
The Company has 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 (deficit) in the accompanying unaudited Condensed Consolidated Balance Sheets.
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 its consolidated financial statements. Deferred income tax assets and liabilities are determined based on the differences between the financial statements 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 September 30, 2020 and December 31, 2019, 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, Florida, German and Australian income taxes. Due to the carryforward of NOLs, the Company is subject to U.S. federal or state income tax examination by tax authorities for tax returns filed for the years 2003 through 2018. Tax years 2016 through 2018 are subject to audit by German and Australian tax authorities. The Company is not currently under examination by any U.S. state or federal or foreign jurisdictions.
Net Loss Per Share
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares outstanding for the period 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.
15


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 September 30,
20202019
Options to purchase common stock969,822 384,130 
Restricted Stock Units 68,519 
Recently Issued and/or Adopted Accounting Standards
Recently Adopted Accounting Standards
In January 2017, the FASB issued ASU 2017-04, "Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment." This guidance eliminates Step 2 from the goodwill impairment test, instead requiring an entity to recognize a goodwill impairment charge for the amount by which the goodwill carrying amount exceeds the reporting unit’s fair value. The Company adopted this ASU, as required, in the quarter ended March 31, 2020 on a prospective basis. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement - Disclosure Framework” ("ASU 2018-13.") ASU 2018-13 modifies the disclosure requirements for fair value measurements. The amendments relate to disclosures regarding unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty, and are to be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments must be applied retrospectively to all periods presented upon their effective date. The Company adopted this ASU, as required, in the quarter ended March 31, 2020. The adoption of this ASU did not have a significant impact on the Company's consolidated financial statements.
In November 2018, the FASB issued ASU 2018-18, “Collaborative Arrangements” ("ASU 2018-18"). ASU 2018-18, clarifies that elements of collaborative arrangements could qualify as transactions with customers in the scope of ASC 606. The Company adopted this ASU, as required, in the quarter ended March 31, 2020. The Company has a collaboration agreement with Daiichi Sankyo, however, the adoption of this ASU did not have an impact on the Company's financial statements as Daiichi Sankyo does not meet the definition of a customer.

3. Accounting for the Transaction
Based on the exchange ratio of 17.17 shares of Vital common stock for each share of Immunic AG, immediately following the Transaction, former Vital stockholders owned approximately 11.75% of the capital stock of the combined company on a fully diluted basis, and former Immunic AG stockholders owned approximately 88.25% of the capital stock of the combined company on a fully diluted basis. At the closing of the Transaction, all shares of Immunic AG common stock then outstanding were exchanged for Vital common stock.
In addition, pursuant to the terms of the Agreement, the Company, for accounting purposes, assumed all outstanding stock options to purchase 16,987 shares of Vital common stock and 127,500 RSUs at the closing of the Transaction, after giving effect to the Reverse Stock Split. Since the exercise prices of the outstanding options to purchase common stock were less than the trading price on the day of the consummation of the Transaction, they were not included in the formula below in calculating the purchase price.
The tangible and intangible assets and liabilities of Vital acquired in the Transaction are recorded based on their fair values as of the completion of the Transaction, with the excess of the purchase consideration over the fair value of net assets assigned to and recorded as goodwill. The following summarizes the purchase price paid in the Transaction (amounts in thousands except share and per share amounts):
16


Number of shares owned by Vital stockholders (1)1,059,269 
RSUs (2)127,500 
Total fully-diluted shares1,186,769 
Multiplied by the fair value per share of Vital common stock (3)$33.20 
Estimated purchase price$39,400 
(1)The number of shares of 1,059,269 represents the historical 42,369,694 shares of Vital common stock outstanding immediately prior to the closing of the Transaction, adjusted for the Reverse Stock Split.
(2)The number of RSUs of 127,500 represents the historical 5,100,000 Vital RSUs, all of which were issued in 2019 to former Vital officers.
(3)Based on the last reported sale price of Vital common stock on the Nasdaq Global Market on April 12, 2019, the closing date of the Transaction, adjusted for the Reverse Stock Split.
The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired:
(in thousands)
Cash and cash equivalents$8,151 
Prepaid expenses and other assets307 
Supplies and working cell banks1,000 
Clinical development equipment306 
Other property and equipment30 
In-process research and development (“IPR&D)
764 
Accounts payable, accrued expenses and other liabilities(4,128)
Goodwill32,970 
       Purchase price$39,400 

The fair value of IPR&D was estimated based on the sales price of the ELAD Assets (including the present value of the promissory note issued by the ELAD buyer) less the fair value of the ELAD Assets. See Note 9 for a description of the ELAD Assets transaction.
The goodwill of $32.97 million is not tax deductible. Goodwill is mainly attributable to the enhanced value of the combined company, as reflected in the increase in market value of the Vital common shares following the announcement of the Transaction with Immunic AG. The Company incurred costs directly related to the Transaction of approximately $10.0 million for the year ended December 31, 2019, which were expensed as incurred ($7.5 million of such costs were non-cash charges related to the 4SC settlement and Immunic exit bonus share issuances, as described below in Note 5 and Note 8, respectively).

4. Balance Sheet Details
Other Current Assets and Prepaid Expenses
Prepaid Expense and Other Current Assets consist of (in thousands):
17


September 30, 2020December 31, 2019
Prepaid clinical and related costs$2,244 $1,307 
VAT receivable245 408 
Australian research and development tax incentive863 350 
Prepaid insurance costs409 179 
Other597 617 
Total$4,358 $2,861 
Accounts Payable
Accounts Payable consist of (in thousands):
September 30, 2020December 31, 2019
Clinical costs$2,991 $1,981 
Legal and audit costs168 226 
Other260 216 
Total$3,419 $2,423 
Accrued Expenses
Accrued expenses consist of (in thousands):
September 30, 2020December 31, 2019
Accrued clinical and related costs$3,676 $2,863 
Accrued legal and audit costs75 211 
Accrued compensation372  
Accrued other130 224 
Total$4,253 $3,298 
Other Current Liabilities
Other Current Liabilities consist of (in thousands):
September 30, 2020December 31, 2019
Deferred income$ $1,008 
Other358 343 
Total$358 $1,351 
Deferred income represents cash reimbursement on invoices received from third party billings prior to the related services being performed.

18



5. Commitments and Contingencies
Operating Lease
The Company leases certain office space under non-cancelable operating leases. The leases terminate on April 30, 2023 for the New York City office and June 30, 2025 for the Gräfelfing, Germany office. The Company formerly leased office space in Martinsried, Germany pursuant to a modified lease that terminated on August 31, 2020. These leases include both lease (e.g., fixed rent) and non-lease components (e.g., common-area and other maintenance costs). The non-lease components are deemed to be executory costs and are therefore excluded from the minimum lease payments used to determine the present value of the operating lease obligation and related right-of-use asset. The New York City lease has renewal options but they were not included in calculating the right of use asset and liabilities. On April 7, 2020, the Company signed a five year lease for its new facility in Gräfelfing, Germany. Renewal options were not included in calculating the right of use asset and liabilities for this facility. The leases do not have concessions, leasehold improvement incentives or other build-out clauses. Further, the leases do not contain contingent rent provisions. The New York City lease had a six month rent holiday at the beginning of the lease. There were net additions to right of use assets of $0 and $427,000 as a result of signing the Gräfelfing lease and shortening the Martinsried lease during the three and nine months ended September 30, 2020, respectively.
 The leases do not provide an implicit rate and, due to the lack of a commercially salable product, the Company is generally considered unable to obtain commercial credit. Therefore, the Company estimated its incremental interest rate to be 6%, considering the quoted rates for the lowest investment-grade debt and the interest rates implicit in recent financing leases. Immunic used its estimated incremental borrowing rate and other information available at the lease commencement date in determining the present value of the lease payments.
 Immunic’s operating lease costs and variable lease costs were $108,000 and $23,000 for the three months ended September 30, 2020 and 2019, respectively, and $267,000 and $78,000, for the nine months ended September 30, 2020 and 2019, 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 September 30, 2020 (in thousands):
202084 
2021337 
2022337 
2023188 
2024113 
202556 
Total1,115 
Interest115 
PV of obligation1,000 

Contractual Obligations
As of September 30, 2020, the Company has non-cancelable contractual obligations under certain agreements related to its development programs IMU-838, IMU-935 and IMU-856 totaling approximately $0.8 million, most of which is expected to be paid in the next six months.
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 ASU 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
19


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. No royalties are payable as of September 30, 2020, as sales have not commenced.
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.

6. Fair Value
The following fair value hierarchy tables 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 September 30, 2020
 Fair ValueLevel 1Level 2Level 3
Assets
Money market funds$117,111 $117,111 $ $ 
Total assets at fair value$117,111 $117,111 $ $ 

There were no transfers between Level 1, Level 2 or Level 3 assets during the periods presented. Additionally, there were no assets or liabilities measured at fair value on a recurring basis as of September 30, 2020 and 2019.
For the Company’s money market funds, which are included as a component of cash and cash equivalents on the condensed consolidated balance sheet, unrealized gains and losses are reported as accumulated other comprehensive income (loss), and realized gains and losses are included in interest income (expense) on the unaudited condensed consolidated statements of operations.
The carrying amounts of other current assets and prepaid expenses, accounts payable, accrued expenses, and other current liabilities approximate their fair values due to their short-term nature. The fair value and book value of the money market funds presented in the table above are the same.

7. Common Stock and Preferred Stock (Converted into Common Stock)
Shelf Registration Statement
In May 2018, Vital filed a shelf registration statement on Form S-3, (the “2018 Shelf Registration Statement”), which became effective in June 2018. The 2018 Shelf Registration Statement permits: (i) the offering, issuance and sale of up to $200.0 million of common stock, preferred stock, warrants, debt securities, and/or units in one or more offerings and in any combination; (ii) sales of up to 2.5 million shares of common stock by certain selling stockholders; and (iii) the offering, issuance and sale by the Company of up to $60.0 million of common stock under an “at-the-market” sales agreement with Cantor Fitzgerald & Co (“Cantor”).
In July 2019, the Company terminated the agreement with Cantor and filed a Prospectus Supplement for the offering, issuance and sale of up to a maximum aggregate offering price of $40.0 million of common stock that may be issued and sold under a Sales Agreement (an "ATM") with SVB Leerink LLC (“SVB Leerink”) as agent. The Company intends to use the net
20


proceeds from any offering under the ATM to continue to fund the ongoing clinical development of its product candidates and for other general corporate purposes, including funding existing and potential new clinical programs and product candidates. The ATM will terminate upon the earlier of (i) the issuance and sale of all of the shares through SVB Leerink on the terms and subject to the conditions set forth in the ATM or (ii) termination of the ATM as otherwise permitted thereby. The ATM may be terminated at any time by either party upon ten days prior notice, or by SVB Leerink at any time in certain circumstances, including the occurrence of a material adverse effect on the Company. As of September 30, 2020, $31.7 million in capacity remains under the 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 the ATM and has agreed to provide SVB Leerink with customary indemnification and contribution rights.
The Company did not use the ATM in the three months ended September 30, 2020. In the nine months ended September 30, 2020, the Company raised gross proceeds of $2.9 million pursuant to the ATM through the sale of 283,828 shares of common stock at a weighted average price of $10.31 per share. The net proceeds from the ATM were $2.8 million after deducting agent commissions of $87,766 and estimated offering expenses of $23,996.
April 2020 Registered Direct Offering
On April 23, 2020, the Company entered into an engagement letter with ROTH Capital Partners, LLC ("RCP") relating to the Company’s registered direct offering of common stock to select institutional investors. Pursuant to this agreement, the Company agreed to pay RCP a cash fee of 6.5% of the gross proceeds from the offering raised from investors and to reimburse RCP for certain costs incurred in connection therewith.
In addition, on April 23, 2020, the Company and the investors entered into a securities purchase agreement relating to the issuance and sale of an aggregate of 1,764,706 shares of common stock. The purchase price per share was $8.50 for aggregate gross proceeds to the Company of approximately $15.0 million.
The net proceeds to the Company from this offering, after deducting the Company’s offering expenses, were approximately $13.9 million.
Public Equity Offerings
June 2020 Offering
On June 10, 2020, the Company entered into a placement agency agreement with RCP and Ladenburg Thalmann & Co. Inc. relating to the Company’s public offering of 2,175,000 shares of common stock. Pursuant to this agreement, the Company agreed to pay the placement agents a cash fee of 6.5% of the gross proceeds from the offering raised from investors and to reimburse the placement agents for certain costs incurred in connection therewith.
In addition, on June 10, 2020, the Company and certain institutional investors entered into securities purchase agreements relating to the issuance and sale of an aggregate of 2,175,000 shares of the Company’s common stock. The purchase price per share in the Offering was $11.40 for aggregate gross proceeds to the Company of approximately $25.0 million.

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

August 2020 Offering
On August 4, 2020, the Company entered into an underwriting agreement with SVB Leerink LLC, as representative of the several underwriters in connection with the Company’s public offering of 5,000,000 shares of common stock, at a public offering price of $18.00 per share. Under the terms of the Underwriting Agreement, the Company granted the Underwriters an option, exercisable for 30 days, to purchase up to an additional 750,000 shares of Common Stock at the public offering price, less underwriting discounts and commissions, which was exercised in full on August 6, 2020.

On August 7, 2020, the Company closed the Offering. The net proceeds to the Company from the Offering, after giving effect to the exercise in full by the Underwriters of their option to purchase the Option Shares, was approximately $96.5 million, after deducting underwriting discounts and commissions and offering expenses payable by the Company.
21


Common Stock
As of September 30, 2020, 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 per share. 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 (the "Board"), if any. Through September 30, 2020, no cash dividends had been declared or paid.
Stock Subscription Not Yet Issued

On March 27, 2019, stockholders of the Company resolved to increase the Company’s share capital by an additional 156,920 ordinary shares, par value €1.00 per share, of which 27,176 shares related to bonuses for executive officers of the Company. Under German law a capital increase is valid as soon as the consummation of the capital increase has been officially registered with the commercial register, which occurred on April 3, 2019. Therefore, the capital increase became effective subsequent to March 31, 2019.
Preferred Stock
From inception (2016) through 2018, Immunic AG issued 13,541 Series A-1 Convertible and 299,456 Series A-2 Convertible preferred shares, par value €1.00 per share, to investors as part of its growth financing plan in a total amount of €31.7 million (approximately $37.2 million). Series A-1 Convertible and Series A-2 Convertible preferred shares were converted into Immunic AG’s ordinary shares immediately prior to the Transaction and were then exchanged for Immunic (former Vital) common shares at the consummation of the Transaction.
The Company’s certificate of incorporation, as amended and restated, authorizes the Company to issue 20 million shares of $0.0001 par value preferred stock, rights and preferences to be set by the Board. No preferred shares were outstanding as of September 30, 2020.
Stock Reserved for Future Issuance
Shares reserved for future issuance at September 30, 2020 are as follows:
 Number of
Shares
Common stock reserved for issuance for:
Outstanding stock options969,822 
Common stock options available for future grant:
2014 Equity Incentive Plan43,311 
2017 Inducement Equity Incentive Plan46,250 
2019 Omnibus Equity Incentive Plan978,812 
Total common shares reserved for future issuance2,038,195 


8. Stock-Based Compensation Plans
Stock Option Programs
Under German law, (i) a company’s management board consists of employee members and is responsible for overseeing
its daily business, and (ii) a company’s supervisory board supervises the management board and serves a role equivalent to the board of directors of an American corporation. Under two stock option programs, the Company granted stock options to the members of the Immunic AG supervisory board (the “Supervisory Board”) and to key employees in 2018 and in 2019 prior to the Transaction. The programs were intended to incentivize the beneficiaries to dedicate their working capabilities in the best manner possible to the benefit of the Company. The stock options vest if and when an exit event occurs. An exit event is defined as a direct initial public offering has taken place, or an indirect initial public offering has taken place, or a trade sale has
22


been consummated, or a disposal of the Company’s assets has been consummated, or another financially equivalent realization event has occurred.
Under the stock option program for the members of the Supervisory Board (the “VSOP SB”), the Company may grant stock options of the Company to members of the Company’s Supervisory Board for the time period of their service as members of the Supervisory Board. The shareholders’ approved the VSOP SB with a total of 31,593 stock options, corresponding to approximately 0.5% of the Company’s issued share capital at the time of the decision. Under the stock option program for key employees (the “VSOP”), the Company may grant stock options of the Company to certain key employees. With the approval of the Supervisory Board, Immunic AG’s management board shall determine how many stock options shall be granted and how they shall be allocated to the respective beneficiaries up to a total of 31,593.
Further terms and conditions of both programs, the VSOP SB and the VSOP, are substantially similar. The following information is therefore shown aggregated for both programs. The Company accounts for both programs as cash-settled options and classifies their fair value as a liability upon vesting. Vesting of options granted under the VSOP SB and VSOP was contingent upon an exit event. Upon consummation of the Transaction, which occurred on April 12, 2019, all of the awards vested and were settled in cash of $508,000 based on their fair value. The Company also recorded $508,000 in compensation expense related to these stock options in the three and nine months ended September 30, 2019.
In July 2019, the Company’s stockholders approved the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) which was adopted by the Board with an effective date of June 14, 2019. The 2019 Plan allows for the grant of equity awards to employees, consultants and non-employee directors. An initial maximum of 1,500,000 shares of the Company’s common stock are available for grant under the 2019 Plan. The 2019 Plan includes an evergreen provision that allows for the annual addition of up to 4% of the Company’s fully-diluted outstanding stock, with a maximum allowable increase of 4,900,000 shares over the term of the 2019 Plan. In accordance with this provision, the shares available for grant were automatically increased by 448,634 shares effective April 1, 2020. The 2019 Plan is currently administered by the Board, or, at the discretion of the Board, by a committee of the Board, which determines the exercise prices, vesting schedules and other restrictions of awards under the 2019 Plan at its discretion. Options to purchase stock may not have an exercise price that is less than the fair market value of underlying shares on the date of grant, and may not have a term greater than ten years. 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 underlying awards that are expired, terminated, surrendered or canceled under the 2019 Plan without having been fully exercised will be available for future awards.
Movements during the year
The following table summarizes stock option activity since January 1, 2020 for the 2019 Plan:
OptionsWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Outstanding as of January 1, 2020456,645 $12.57 
Granted597,068 $12.24 
Exercised $ 
Forfeited or expired(83,891)$13.32 
Outstanding as of September 30, 2020969,822 $12.31 9.41$6,075,771 
Options vested and expected to vest as of September 30, 2020969,822 $12.31 9.41$6,075,771 
Options exercisable as of September 30, 2020167,515 $12.51 8.90$1,015,048 
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
23


The risk-free rate assumption is based on U.S. Treasury instruments with maturities similar to the expected term of the stock options.
Expected Dividend Yield
The Company has not issued any dividends and does not expect to issue dividends over the life of the options. As a result, the Company has estimated the dividend yield to be zero.
Expected Volatility
Due to the Company’s limited operating history and a lack of company specific historical and implied volatility data, the Company estimates expected volatility based on the historical volatility of a group of publicly traded peer companies. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.
Expected Term
The Company uses the simplified method for estimating the expected term of employee and non-employee options, whereby the expected term equals the arithmetic average of the vesting term and the original contractual term of the option.
The weighted-average grant date fair value of stock options granted under the 2019 Plan during the nine months ended September 30, 2020 was $8.75. The following are the underlying assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted to employees and to non-employees under this stock plan:
Nine Months
Ended September 30,
2020
Risk-free interest rate0.43%
Expected dividend yield0%
Expected volatility87.1%
Expected term of options (years)5.93
Early Exit Bonus Share Agreement (Anti-Dilution Adjustment)
In accordance with an Early Exit Bonus Share Agreement (Anti-Dilution Adjustment) between the shareholders of Immunic AG dated August 2017, each of the four members of the Management Board of Immunic AG, through a limited liability company controlled by the respective board member, received new shares in Immunic AG as a form of anti-dilution protection. The AG shares were subscribed by the Management Board members at a price corresponding to their nominal value in the course of the Additional Financing of Immunic AG, which was carried out in March 2019. As part of the closing of the share exchange with Vital Therapies, Inc., now Immunic, Inc., in April 2019, the AG shares were exchanged for 460,336 restricted shares in Vital Therapies, Inc., now Immunic, Inc., which were issued to the members of the management Board. Upon consummation of the Transaction, compensation cost of €5.3 million (approximately $6.0 million) was recognized in the second quarter of 2019.
Stock-Based Compensation Expense
Total stock-based compensation expense for all stock awards recognized in the accompanying unaudited condensed consolidated statements of operations is as follows (in thousands):

 Three Months
Ended September 30,
Nine Months
Ended September 30,
 2020201920202019
Research and development$254 $57 $450 $1,727 
General and administrative453 142 979 6,503 
Total$707 $199 $1,429 $8,230 
24


As of September 30, 2020, there was $6.5 million in total unrecognized compensation expense relating to the 2019 Plan to be recognized over a weighted average period of 3.07 years. General and administrative expenses for the nine months ended September 2019 include $6.0 million of stock compensation expense related to the Early Exit Bonus Share Agreement disclosed above. Research and development expense for the nine months ended 2019 includes $1.5 million of stock compensation expense as a result of the settlement of Tranche IV with 4SC AG as explained in Note 5.
Summary of Equity Incentive Plans Assumed from Vital
Upon completion of the Transaction with Vital on April 12, 2019, Vital’s 2012 Stock Option Plan (the “2012 Plan”), Vital’s 2014 Equity Incentive Plan (the “2014 Plan”) and Vital’s 2017 Inducement Equity Incentive Plan (the “Inducement Plan”), were assumed by the Company. All awards granted under these plans have either been forfeited or expired.
There remain 43,311 shares available for grant under the 2014 Plan as of September 30, 2020.
In September 2017, Vital’s Board of Directors approved the Inducement Plan, which was amended and restated in November 2017. Under the Inducement Plan 46,250 shares of Vital’s common stock were reserved to be used exclusively for non-qualified grants to individuals who were not previously employees or directors as an inducement material to a grantee's entry into employment within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.
No expense was recorded for the plans assumed from Vital during the three and nine months ended September 30, 2020 and 2019.
The following table summarizes stock option activity since January 1, 2020 for the Plans assumed from Vital:
OptionsWeighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Outstanding as of January 1, 202014,403 $306.01 
Granted $ 
Exercised $ 
Forfeited or expired(14,403)$306.01 
Outstanding as of September 30, 2020 $ 0$ 
Options vested and expected to vest as of September 30, 2020 $ 0$ 
Options exercisable as of September 30, 2020 $ 0$ 
In an effort to maximize the cash on Vital’s