INFLARX N.V. UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - JUNE 30, 2022 These unaudited condensed financial statements are consolidated financial statements for the group consisting of InflaRx N.V. and its who

UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS - JUNE 30, 2022

These unaudited condensed financial statements are consolidated financial statements for the group consisting of InflaRx N.V. and its wholly-owned subsidiaries InflaRx GmbH, Jena, Germany, and InflaRx Pharmaceutical Inc., Ann Arbor, Michigan, United States (together, the "Group"). The financial statements are presented in Euro ( ).

InflaRx N.V. is a company limited by shares, incorporated and domiciled in Amsterdam, The Netherlands.

Its registered office and principal place of business is in Germany, Jena, Winzerlaer Str. 2.

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE AND SIX MONTHS ENDED JUNE 30, 2022

InflaRx N.V. and subsidiaries

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

for the three and six months ended June 30, 2022 and 2021

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

InflaRx N.V. and subsidiaries

Unaudited Condensed Consolidated Statements of Financial Position

as of June 30, 2022 and December 31, 2021

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

InflaRx N.V. and subsidiaries

Unaudited Condensed Consolidated Statements of Changes in Shareholders' Equity

for the six months ended June 30, 2022 and 2021

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

InflaRx N.V. and subsidiaries

Unaudited Condensed Consolidated Statements of Cash Flows

for the six months ended June 30, 2022 and 2021

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

InflaRx N.V. and subsidiaries

Notes to the Unaudited Condensed Consolidated Financial Statements

Summary of significant accounting policies and other disclosures

Reporting entity and Group's structure

InflaRx N.V. is a Dutch public company with limited liability (naamloze vennootschap) with its corporate seat in Amsterdam, The Netherlands, and is registered in the Commercial Register of The Netherlands Chamber of Commerce Business Register under CCI number 68904312. The Company's registered office is at Winzerlaer Stra e 2 in 07745 Jena, Germany. Since November 10, 2017, InflaRx N.V.'s common shares have been listed on The NASDAQ Global Select Market under the symbol IFRX.

InflaRx is a clinical-stage biopharmaceutical Group focused on applying its proprietary anti-C5a and C5aR technologies to discover and develop first-in-class, potent and specific inhibitors of the complement activation factor known as C5a and its receptor known as C5aR.

These consolidated financial statements of InflaRx comprise the Company and its wholly-owned subsidiaries InflaRx GmbH, Jena, Germany and InflaRx Pharmaceutical Inc., Ann Arbor, Michigan, United States (together referred to as "the Group").

InflaRx GmbH is a clinical-stage biopharmaceutical company founded in 2008. In 2017, InflaRx N.V. became the sole shareholder of InflaRx GmbH through the contribution of the subsidiary's shares to InflaRx N.V. by its existing shareholders in exchange of new shares issued by InflaRx N.V.

Basis of preparation

These interim condensed consolidated financial statements for the three- and six-month reporting periods ended June 30, 2022 and 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. These condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements. Accordingly, this report is to be read in conjunction with the financial statements in our annual report for the year ended December 31, 2021 on Form 20-F.

The interim condensed consolidated financial statements were authorized for issue by the Board of Directors on August 4, 2022.

The financial statements are presented in Euro ( ). Euro is the functional currency of InflaRx GmbH. The functional currency of InflaRx N.V. and InflaRx Pharmaceutical Inc. is U.S. Dollars. All financial information presented in Euro has been rounded. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them or may deviate from other tables.

The accounting policies adopted are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2021, except for the adoption of new standards effective as of January 1, 2022 as set out below. The Group has not early adopted any other standard, interpretation or amendment that has been issued but is not yet effective.

The following amendments have been adopted effective January 1, 2022 and do not have a material impact on the consolidated financial statements of the Group:

The following standards issued will be adopted in a future period and the potential impact, if any, they will have on the Group's consolidated financial statements is being assessed:

Significant events of the quarter and changes in circumstances

Russian-Ukraine Conflict

The conflict between Russia and Ukraine has resulted, and is expected to further result, in significant disruption, instability and volatility in global markets, as well as higher energy and other commodity prices. Since the Company is not currently conducting any business or receiving any services from vendors located in Russia or Ukraine, it does not expect that the ongoing war will have a direct impact on its operations in the near term. However, the Company may be affected by price increases or certain fiscal policy changes in Germany, where the Company is headquartered, such as new tax legislation, economic sanctions and comparable measures, although at this point, it does not foresee any such macroeconomic changes that are expected to have a direct impact on its business operations.

The COVID-19 pandemic continues to impact our operations as many governments continue to maintain measures to slow the spread of the outbreak through quarantines, travel restrictions, closure of borders and requiring maintenance of social distancing measures.

During the first six months of 2022, the Company has continued to use a hybrid working model that supports a blend of in-office and remote employees, depending on their role and location. Our service providers have continued at regular operational levels, and the recruitment of patients and new clinical trial sites also continued in the first six months of 2022 through the date of issuance of these interim financial statements. Business travel, however, has been significantly reduced and widely replaced by other means of communication, e.g. through video-conferencing.

Development programs

On May 12, 2022 the Company announced the results of a strategic review of its development programs considering the current financing environment. As a result of this strategic review, the Company decided to halt the clinical development of vilobelimab in HS for the time being. Furthermore, given the resources required and long duration of necessary Phase III studies of vilobelimab in AAV needed to potentially gain regulatory approval in this indication, the Company also decided to halt the clinical development of vilobelimab in AAV for the time being. Moving forward, the development focus will be on the Phase III development of vilobelimab in PG, on gaining regulatory approval for vilobelimab in severe COVID-19 and in starting the clinical development of INF904.

On June 29, 2022, the Company announced that vilobelimab has been granted orphan drug designation for the treatment of PG by both the Food and Drug Administration (FDA) in the US and the European Medicines Agency (EMA) in Europe. In addition, the Company reported about a productive end-of-phase II meeting with the FDA related to its plans for a Phase III development program in PG. The FDA indicated its support for a randomized, controlled Phase III development program during the meeting and offered to review the study protocol, recognizing PG as a serious and rare condition. Based on the FDA's feedback and recommendations, InflaRx is now finalizing the design for a Phase III trial and continues to be in dialogue with the FDA related to this. Subsequently, on July 6, 2022 the Company announced that the FDA has also granted a Fast Track designation to the development of vilobelimab for the treatment of PG.

Following the encouraging Phase III results from the randomized, placebo-controlled, multi-national PANAMO study in mechanically ventilated severe COVID-19 patients announced on March 31, 2022, on July 26, 2022, InflaRx announced its plans to submit a request for Emergency Use Authorization (EUA), following constructive interactions with the US Food and Drug Administration (FDA) at a recently held Type B meeting. The application for EUA is planned to be submitted by end of Q3 2022. In addition, the Company is in ongoing dialogue with the EMA related to next regulatory steps for vilobelimab in mechanically ventilated severe COVID-19 patients towards a potential filing for approval for this indication.

On June 29, 2022, the Company announced the departure of Mr. Jordan Zwick, its Chief Strategy Officer. Mr. Zwick left InflaRx to pursue other professional opportunities. However, Mr. Zwick agreed to continue to serve as an advisor to the Company.

In July, Dr. Korinna Pilz, the Chief Clinical Development Officer informed the Company about her intention to leave InflaRx for personal reasons. The Company subsequently signed a separation agreement with Dr. Pilz, in which the parties mutually agreed that she will continue to provide her services until October 28, 2022. Beyond this date Dr. Pilz will continue to advise us on specific matters on an as needed basis.

Other income increased by 14.4 million. The increase was due to an increase in amounts recognized from grant payments received from the German government.

A portion of this increase is attributable to the recognition of 7.1 million, which was initially deferred in Q4 2021 as a liability as, prior to Q2 2022, there was not reasonable assurance as to whether all grant conditions were fulfilled. With receipt in Q2 2022 of a written confirmation from the agency administering the grant on behalf of the German federal government, reasonable assurance of grant conditions being fulfilled was reached. Further, this confirmation amended the grant, including amending the amounts eligible for each of the various cost categories covered by the grant, with no change to the overall grant amount, and amending the timeline during which eligible costs related to the manufacturing process development activities can be incurred. In addition, reimbursable costs incurred during Q1 and Q2 2022, in the amount of 7.3 million, were also recognized as other income in Q2 2022.

Going forward, the Company will recognize other income as reimbursable costs under the grant are incurred. Grant payments received for the Company's pre-payment of goods and services will be recognized as a liability, while reimbursable amounts for costs incurred but not yet claimed for reimbursement will be recorded as other receivables in "Financial assets in government grants."

Net financial result

The net financial result is comprised of the following items for the three and six months ended June 30:

Interest income results from marketable securities and short-term deposits in U.S. Dollars held by the Company and its subsidiaries.

Foreign exchange income and expense is mainly derived from the translation of the U.S. Dollar cash, cash equivalents and securities held by the Company and its subsidiaries.

Other financial result includes an allowance for expected credit loss on marketable securities.

Prepaid expense mainly consisted of prepaid insurance expense.

As of June 30, 2022, prepayments on research & development (R&D) projects amounted to 8.8 million compared to 10.6 million as of December 31, 2021, and consisted of prepayments on clinical and R&D material production contracts.

Financial assets and financial liabilities

Set out below is an overview of financial assets and liabilities, other than cash and cash equivalents, held by the Group as of June 30, 2022 and December 31, 2021:

As of June 30, 2022, financial assets from government grants amount to 8.3 million. Thereof 1.6 million are claims for which a request for payment has already been submitted. 6.7 million of the financial assets are claims for eligible costs incurred as of Q2 2022, but for which we expect a request for payment to be submitted in future periods (also see Note 2).

As of June 30, 2022, the fair value of current and non-current financial assets (primarily quoted debt securities) amounted to 84.3 million (Level 1). The Group's debt instruments at amortized cost consist solely of quoted securities that are graded highly by credit rating agencies such as S&P Global and, therefore, are considered low credit risk investments.

Liabilities from government grants partly comprise funds received for advance payments to third parties. If goods or services from such third parties have not been received, corresponding amounts are not recognized as other income. Our right to retain these funds is contingent on meeting all grant conditions.

Cash and cash equivalents

On July 8, 2020, the Company filed a Form F-3 (Registration Statement) with the United States Securities and Exchange Commission (SEC) with respect to the offer and sale of securities of the Company. The Company also filed a prospectus supplement (Prospectus Supplement) with the SEC relating to an at-the-market program providing for the sale of up to $50.0 million of its common shares over time pursuant to a Sales Agreement with SVB Leerink LLC. The remaining value authorized for sale under the Sales Agreement amounts to $35.2 million.

On February 25, 2021, the Company sold an aggregate of 15,000,000 common shares through a public offering. The common shares were sold at a price of $5.00 per share and have a nominal value of 0.12 per share. For each common share purchased, an investor also received a warrant to purchase a common share at an exercise price of $5.80. The shares and warrants were issued and the transaction closed on March 1, 2021 with gross offering proceeds to the Group from this offering being $75.0 million ( 62.2 million), before deducting $4.5 million ( 3.7 million) in underwriting discounts and other offering expenses of $0.4 million ( 0.3 million). The warrants were exercisable immediately and expired on March 1, 2022. No warrants were exercised.

Share-based payments

Equity settled share-based payment arrangements

During its historical financing rounds prior to 2016, InflaRx GmbH granted stock options under the 2012 Stock Option Plan. Those InflaRx GmbH options were converted into options for common shares of InflaRx N.V. in November 2017:

Under the terms and conditions of the Share Option Plan 2016, InflaRx GmbH granted rights to subscribe for InflaRx GmbH's common shares to directors, senior management and key employees. Those InflaRx GmbH options were converted into options for common shares of InflaRx N.V. in November 2017:

In conjunction with the closing of its initial public offering, InflaRx N.V. established a new incentive plan, the 2017 Long-Term Incentive Plan ("LTIP"). The initial maximum number of options to common shares available for issuance pursuant to the LTIP amounted to 2,341,097 common shares.

At the annual general meeting on July 16, 2020, the Company's shareholders approved an amendment to the LTIP with effect from January 1, 2021:

On April 13, 2022, following the significant and persistent decrease of the stock price of the Company's common shares during the first half year 2022 and especially after March 31, 2022, the Board of Directors assessed its impact on the value of the options to purchase common shares in the Company's capital awarded under the LTIP and concluded that due to the extraordinary situation and in order to ensure that the options continue to be an appropriate performance incentive for the Company's management, employees and directors, the exercise price of all outstanding and unexercised options held by active employees or directors of the Company or its affiliates would be adjusted to $1.86 per share.

The repricing decision on April 13, 2022 affected the 2016 Plan and the LTIP. 888,632 share options from the 2016 Plan and 4,544,248 share options from the LTIP were affected. The valuation of past grants with the new exercise price of $1.86 resulted in incremental fair values of the outstanding options (i.e., additional compensation expense had to be recognized).

The number of share options granted during the six months ended June 30, 2022 under the LTIP was as follows:

The number of share options granted during the six months ended June 30, 2022 under the LTIP, considering the repricing decision on April 13, 2022 was as follows:

Share-based payment expense recognized

For the six months ended June 30, 2022, the Company recognized 4,668 thousand of share-based payment expense, which included an expense of 651 thousand for the valuation of past grants with the new exercise price as a result of the repricing of options.