vtl-20210630

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 June 30, 2021


☐			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)


Delaware		56-2358443
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1200 Avenue of the Americas
Suite 200
New York,	NY	10036
(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 class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.0001 par value	IMUX	The 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 filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller 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 July 30, 2021, 26,249,439 shares of common stock, $0.0001 par value, were outstanding.

IMMUNIC, INC.

INDEX


		Page No.
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Loss	5
	Condensed Consolidated Statements of Stockholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	36

PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	36
Item 1A.	Risk Factors	36
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	36
Item 3.	Defaults Upon Senior Securities	36
Item 4.	Mine Safety Disclosures	36
Item 5.	Other Information	37
Item 6.	Exhibits	37

IMMUNIC, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)


	June 30, 2021		December 31, 2020
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	87,175	$	127,452
Other current assets and prepaid expenses	14,512		6,293
Total current assets	101,687		133,745
Property and equipment, net	194		203
Goodwill	32,970		32,970
Right-of-use assets, net	1,165		901
Other long-term assets	42		42
Total assets	$	136,058	$	167,861
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	4,182	$	3,700
Accrued expenses	6,175		4,318
Other current liabilities	4,130		379
Total current liabilities	14,487		8,397
Long term liabilities
Operating lease liabilities	829		679
Total long-term liabilities	829		679
Total liabilities	15,316		9,076
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 20,000,000 authorized and no shares issued or outstanding at June 30, 2021 and December 31, 2020	—		—
Common stock, $0.0001 par value; 130,000,000 shares authorized and 21,749,439 and 21,168,240 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	2		2
Additional paid-in capital	278,534		266,823
Accumulated other comprehensive loss	(1,398)		(4,112)
Accumulated deficit	(156,396)		(103,928)
Total stockholders’ equity	120,742		158,785
Total liabilities and stockholders’ equity	$	136,058	$	167,861

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

IMMUNIC, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)


	Three Months Ended June 30,			Six Months Ended June 30,
		2021		2020		2021		2020
Operating expenses:
Research and development		$	15,738	$	9,987	$	27,257	$	16,421
General and administrative		3,432		2,235		7,050		4,815
4SC Royalty Settlement (see Note 4)		—		—		17,250		—
Total operating expenses		19,170		12,222		51,557		21,236
Loss from operations		(19,170)		(12,222)		(51,557)		(21,236)
Other income (expense):
Interest income		13		4		41		28
Other income (expense), net		1,223		760		(952)		1,263
Total other income (expense)		1,236		764		(911)		1,291
Net loss		$	(17,934)	$	(11,458)	$	(52,468)	$	(19,945)

Net loss per share, basic and diluted		$	(0.82)	$	(0.90)	$	(2.44)	$	(1.70)

Weighted-average common shares outstanding, basic and diluted		21,749,439		12,695,989		21,463,656		11,722,725

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

IMMUNIC, INC.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)


	Three Months Ended June 30,			Six Months Ended June 30,
		2021		2020		2021		2020
Net loss		$	(17,934)	$	(11,458)	$	(52,468)	$	(19,945)
Other comprehensive income (loss):
Foreign currency translation		(277)		74		2,714		(235)

Total comprehensive loss		$	(18,211)	$	(11,384)	$	(49,754)	$	(20,180)

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

IMMUNIC, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share amounts)

(Unaudited)


Six Months Ended June 30, 2021
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2021	21,168,240	$	2	$	266,823	$	(4,112)	$	(103,928)	$	158,785
Net loss	—	—		—		—		(34,534)		(34,534)
Stock-based compensation	—	—		1,579		—		—		1,579
Foreign exchange translation adjustment	—	—		—		2,991		—		2,991
Issuance of common stock in connection with the 4SC royalty settlement (see Note 4)	581,199	—		8,625		—		—		8,625

Balance at March 31, 2021	21,749,439	$	2	$	277,027	$	(1,121)	$	(138,462)	$	137,446
Net loss	—	—		—		—		(17,934)		(17,934)
Stock-based compensation	—	—		1,507		—		—		1,507
Foreign exchange translation adjustment	—	—		—		(277)		—		(277)
Balance at June 30, 2021	21,749,439	$	2	$	278,534	$	(1,398)	$	(156,396)	120,742


Six Months Ended June 30, 2020
	Common Stock			Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance at January 1, 2020	10,744,806	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, 2020	10,823,551	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, 2020	14,968,340	$	1	$	160,148	$	(1,608)	$	(79,856)	$	78,685

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

IMMUNIC, INC.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended June 30,
	2021		2020
Cash flows from operating activities:
Net loss	$	(52,468)	$	(19,945)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	29		20
Unrealized foreign currency loss	1,905		—

Stock-based compensation	3,086		722
Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	8,625		—
Changes in operating assets and liabilities:
Other current assets and prepaid expenses	(8,683)		(1,452)
Accounts payable	483		(676)
Accrued expenses	2,011		2,082
Other liabilities	3,059		(1,007)
Net cash used in operating activities	(41,953)		(20,256)
Cash flows from investing activities:



Purchases of property and equipment	(28)		(59)

Net cash used in investing activities	(28)		(59)
Cash flows from financing activities:

Proceeds from public offering of common stock through At The Market offering, net of issuance costs of $112	—		2,814
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 $1,747	—		23,048
Net cash provided by financing activities	—		39,780
Effect of exchange rate changes on cash and cash equivalents	1,704		(227)
Net change in cash and cash equivalents	(40,277)		19,238
Cash and cash equivalents, beginning of period	127,452		29,369
Cash and cash equivalents, end of period	$	87,175	$	48,607


Supplemental disclosure of noncash investing and financing activities:

Common Stock issued in connection with the 4SC royalty settlement (see Note 4)	$	8,625	$	—
Operating lease right-of use asset obtained in exchange for lease obligation	$	435	$	—
Offering costs in accrued expenses	$	—	$	75

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

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 with a pipeline of selective oral immunology therapies focused on treating chronic inflammatory and autoimmune diseases, including relapsing-remitting multiple sclerosis (“RRMS”), ulcerative colitis (“UC”), Crohn’s disease (“CD”) and psoriasis. The Company’s main operations are in Gräfelfing near Munich, Germany. Immunic currently has approximately 45 employees.

Immunic is currently pursuing three development programs. These include the IMU-838 program, which is focused on the development of oral formulations of a small molecule inhibitor of the enzyme dihydroorotate dehydrogenase (“DHODH”); the IMU-935 program, which is focused on an inverse agonist of RORγt, an immune cell-specific isoform of retinoic acid receptor-related orphan nuclear receptor gamma (“RORγ”); and the IMU-856 program, which involves the development of a drug targeting the restoration of intestinal barrier function. In addition to these large markets, these products are also being developed to address certain rare diseases with high unmet medical needs, such as primary sclerosing cholangitis (“PSC”) and Guillain-Barré syndrome (“GBS”), as well as metastatic castration-resistant prostate cancer (“mCRPC”).

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

Liquidity and Financial Condition

Immunic has no products approved for commercial sale and has not generated any revenue from product sales. It has never been profitable and has incurred operating losses in each year since inception in 2016. The Company has an accumulated deficit of approximately $156.4 million at June 30, 2021 and $103.9 million as of December 31, 2020. Substantially all of Immunic's operating losses resulted from expenses incurred in connection with its research and development programs and from general and administrative costs associated with its operations.

Immunic expects to incur significant expenses and increasing operating losses for the foreseeable future as it initiates and continues the preclinical and clinical development of its product candidates and adds personnel necessary to advance its clinical pipeline of product candidates. Immunic expects that its operating losses will fluctuate significantly from quarter-to-quarter and year-to-year due to timing of clinical development programs.

From inception through July 31, 2021, Immunic has raised net cash of approximately $258.8 million from private and public offerings of preferred and common stock. As of June 30, 2021, Immunic had cash and cash equivalents of approximately $87.2 million which does not include the approximately $42.2 million raised in the equity offering which closed on July 19, 2021. With these funds, Immunic expects to be able to fund its operations beyond twelve months from the date of the issuance of the accompanying condensed consolidated financial statements.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles, ("U.S. GAAP") and include the accounts of Immunic and its wholly-owned subsidiaries, Immunic AG and Immunic Research GmbH (which both began operations in 2016) and Immunic Australia Pty Ltd. (which began operations in 2018). All intercompany accounts and transactions have been eliminated in consolidation. Immunic manages its operations as a single reportable segment for the purposes of assessing performance and making operating decisions. Certain prior period amounts have been reclassified to conform to the current basis of presentation.

Unaudited Interim Financial Information

Immunic has prepared the accompanying interim unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles, (“US GAAP”), for interim financial information and with the instructions to Form 10-Q and Regulation S-X of the SEC. 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 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, 2020 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 February 26, 2021. 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.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires the Company to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements. The most significant estimates in the Company’s financial statements and accompanying notes relate to clinical trial expenses and share-based compensation. Management believes its estimates to be reasonable under the circumstances. Actual results could differ materially from those estimates and assumptions.

Foreign Currency Translation and Presentation

The Company’s reporting currency is United States (“U.S.”) dollars. Immunic AG and Immunic Research GmbH’s operations are located in Germany with the euro being their functional currency. Immunic Australia Pty Ltd.’s functional currency is the Australian dollar. All amounts in the financial statements where the functional currency is not the U.S. dollar are translated into U.S. dollar equivalents at exchange rates as follows:

• assets and liabilities at reporting period-end rates;

• income statement accounts at average exchange rates for the reporting period; and

• components of equity at historical rates.

Gains and losses from translation of the financial statements into U.S. dollars are recorded in stockholders’ equity as a component of accumulated other comprehensive income (loss). Realized and unrealized gains and losses resulting from foreign currency transactions denominated in currencies other than the functional currency are reflected as general and administrative expenses in the Consolidated Statements of Operations. Foreign currency transaction gains and losses related to long-term intercompany loans that are payable in the foreseeable future are recorded in Other Income (Expense). The Consolidated Statements of Cash Flows were prepared by using the average exchange rate in effect during the reporting period which reasonably approximates the timing of the cash flows.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Cash and cash equivalents consist of cash on hand and deposits in banks located in the U.S., Germany and Australia. The Company maintains cash and cash equivalent balances denominated in Euro and U.S. dollars with major financial institutions in the U.S. and Germany in excess of the deposit limits insured by the government. Management periodically reviews the credit standing of these financial institutions and believes that the Company is not exposed to any significant credit risk. The Company currently deposits its cash and cash equivalents with two large financial institutions

Fair Value Measurement

Fair value is defined as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1—Quoted prices in active markets for identical assets or liabilities. Level 1 assets consisted of money market funds for the periods presented. The Company had no Level 1 liabilities for the periods presented.

Level 2— Inputs other than observable quoted prices for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active. The Company had no Level 2 assets or liabilities for the periods presented.

Level 3—Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of assets or liabilities. The Company had no Level 3 assets or liabilities for the periods presented.

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 $15,000 and $6,000 for the three months ended June 30, 2021 and 2020, respectively. Depreciation expense was $29,000 and $20,000 for the six months ended June 30, 2021 and 2020, respectively

Impairment of Long-Lived Assets

The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. Impaired assets are then recorded at their estimated fair value. There were no impairment losses during the three and six months ended June 30, 2021 and 2020.

Goodwill

Business combinations are accounted for under the acquisition method. The total purchase price of an acquisition is allocated to the underlying identifiable net assets, based on their respective estimated fair values as of the acquisition date. Determining the fair value of assets acquired and liabilities assumed requires management’s judgment and often involves the use of significant estimates and assumptions, including assumptions with respect to future cash inflows and outflows, probabilities of success, discount rates, and asset lives, among other items. Assets acquired and liabilities assumed are recorded at their estimated fair values. The excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.

Goodwill is tested for impairment at the reporting unit level annually in the fourth quarter, or more frequently when events or changes in circumstances indicate that the asset might be impaired. Examples of such events or circumstances include, but are not limited to, a significant adverse change in legal or business climate, an adverse regulatory action or unanticipated competition.

The Company assesses qualitative factors to determine whether the existence of events or circumstances would indicate that it is more likely than not that the fair value of the reporting unit is less than its carrying amount. If after assessing the totality of events or circumstances, the Company were to determine that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, then the Company would perform a quantitative test that compares the fair value to its carrying value to determine the amount of any impairment. Impairment testing for goodwill is done at the reporting unit level. The Company has determined that it operates in a single operating segment and has a single reporting unit. The Company has determined there was no goodwill impairment as of June 30, 2021.

Research and Development Expenses

These costs primarily include external development expenses and internal personnel expenses for the three development programs, IMU-838, IMU-935 and IMU-856. Immunic has spent the majority of its research and development resources on IMU-838, the Company's lead development program for clinical trials in RRMS, UC, COVID-19, and PSC.

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 diseases such as inflammatory bowel disease, irritable bowel syndrome with diarrhea, immune checkpoint inhibitor induced colitis and other barrier function associated diseases. During the option period, the Company performed agreed upon research and development activities for which it was reimbursed by Daiichi Sankyo up to a maximum agreed-upon limit. Such reimbursement was recorded as other income. There are no more research and development reimbursements expected under this agreement.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, business development and other support functions. Other general and administrative expenses include, but are not limited to, stock-based compensation, insurance costs, professional fees for legal, accounting and tax services, consulting, related facility costs and travel.

Stock-Based Compensation

The Company measures the cost of employee and non-employee services received in exchange for equity awards based on the grant-date fair value of the award recognized generally as an expense (i) on a straight-line basis over the requisite service period for those awards whose vesting is based upon a service condition, and (ii) on an accelerated method for awards whose vesting is based upon a performance condition, but only to the extent it is probable that the performance condition will be met. Stock-based compensation is (i) estimated at the date of grant based on the award’s fair value for equity classified awards and (ii) final measurement date for liability classified awards. Forfeitures are recorded in the period in which they occur.

The Company estimates the fair value of stock options using the Black-Scholes-Merton option-pricing model ("BSM"), which requires the use of estimates and subjective assumptions, including the risk-free interest rate, the fair value of the underlying common stock, the expected dividend yield of the Company’s common stock, the expected volatility of the price of the Company’s common stock, and the expected term of the option. These estimates involve inherent uncertainties and the application of management’s judgment. If factors change and different assumptions are used, the Company’s stock-based compensation expense could be materially different in the future.

Leases

The Company leases office space and office equipment. The underlying lease agreements have lease terms of less than 12 months and up to 60 months. Leases with terms of 12 months or less at inception are not included in the operating lease right of use asset and operating lease liability.

The Company has two existing leases for office space. At inception of a lease agreement, the Company determines whether an agreement represents a lease and at commencement each lease agreement is assessed as to classification as an operating or financing lease. The Company's two leases have been classified as operating leases and an operating lease right-of-use asset and an operating lease liability have been recorded on the Company’s balance sheet. A right-of-use lease asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents its commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company has used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The right-of-use lease asset includes any lease payments made prior to commencement and excludes any lease incentives. The lease term used in estimating future lease payments may include options to extend when it is reasonably certain that the Company will exercise that option. Operating 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 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 June 30, 2021 and 2020, respectively, 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 2019 are subject to audit by German and Australian tax authorities. The Company is not currently under examination by any tax jurisdictions.

Net Loss Per Share

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss by the weighted-average number of common shares and, if dilutive, common stock equivalents outstanding for the period determined using the treasury-stock method. For all periods presented, there is no difference in the number of shares used to calculate basic and diluted shares outstanding due to the Company’s net loss position.

Potentially dilutive securities, not included in the calculation of diluted net loss per share attributable to common stockholders because to do so would be anti-dilutive, are as follows:


	As of June 30,
	2021	2020
Options to purchase common stock	2,064,839	434,248

Recently Issued and/or Adopted Accounting Standards

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

3. Balance Sheet Details

Other Current Assets and Prepaid Expenses

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



	June 30, 2021		December 31, 2020
Prepaid clinical and related costs	$	6,610	$	3,416
VAT receivable	4,119		295
Australian research and development tax incentive	2,287		1,348
Other	1,496		1,234
Total	$	14,512	$	6,293

Accounts Payable

Accounts Payable consist of (in thousands):



	June 30, 2021		December 31, 2020
Clinical costs	$	3,861	$	3,408
Legal and audit costs	115		139

Other	206

SEC Form 10-Q filed by Immunic, Inc.