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

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to the historical financial information, this discussion contains forward-looking statements that involve risk, assumptions and uncertainties, such as statements of our plans, objectives, expectations, intentions, forecasts and projections. Our actual results and the timing of selected events could differ materially from those discussed in these forward-looking statements as a result of several factors, including those set forth under the section of this Annual Report on Form 10-K titled "Risk Factors," which you should carefully read to gain an

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understanding of the important factors that could cause actual results to differ materially from our forward-looking statements. Please also see the section titled "Forward-Looking Statements" at the beginning of this report.

Overview

We are a clinical-stage biopharmaceutical company focused on the discovery, development, and commercialization of novel small molecule therapeutics to address chronic and progressive fibrotic diseases. Our goal is to transform the treatment paradigm for patients suffering from these potentially life-threatening conditions for which there are no approved medicines or where existing approved medicines have limitations. Our lead product candidate, ANG-3070, is a highly selective oral tyrosine kinase receptor inhibitor (TKI) in development as a treatment for fibrotic diseases, particularly in the kidney and lung. Enrollment is ongoing in a dose-finding Phase 2 trial of ANG-3070 in primary proteinuric kidney diseases (PPKD) and we expect to file an IND in idiopathic pulmonary fibrosis (IPF) by the end of 2022. We are also continuing to develop our preclinical programs. Our ROCK2 program is targeted towards the treatment of fibrotic diseases. Our CYP11B2 program is targeted towards diseases related to aldosterone synthase dysregulation.

Prior to January 2022 our lead product was ANG-3777, a hepatocyte growth factor (HGF) mimetic we were evaluating in multiple indications of acute organ injury, including delayed graft function (DGF) and for the treatment of AKI associated with cardiac surgery involving cardiopulmonary bypass (CSA-AKI). In 2021, we also studied ANG-3777 in patients with severe COVID-19 related pneumonia at high risk for acute respiratory distress syndrome (ARDS). On October 26, 2021, we announced the Phase 3 trial of ANG-3777 in DGF did not achieve its primary endpoint and the data were not expected to be sufficient evidence to support an indication in the studied DGF population. On December 9, 2021, we announced the Phase 2 trial of ANG-3777 in CSA-AKI did not achieve its primary endpoint. We do not intend to continue the clinical development plan for ANG-3777 set forth in the Vifor License, which had included a Phase 3 study in CSA-AKI and a Phase 4 confirmatory study in donor kidney transplant patients who were at risk for developing DGF, given we do not believe the earlier Phase 2 and Phase 3 clinical trial results in the respective indications support a regulatory approval. We have no funds budgeted for additional clinical trials for ANG-3777.

We do not have any products approved for sale and have not generated any revenue from product sales since our inception and do not expect to generate revenue from product sales unless we successfully develop and we or our collaborators commercialize our product candidates, which we do not expect to occur for several years, if ever. Our net losses were $54.6 million and $80.1 million for the years ended December 31, 2021 and 2020, respectively. As of December 31, 2021, we had an accumulated deficit of $215.1 million. We expect to continue to incur net losses for the foreseeable future. As we seek to advance ANG-3070 in clinical trials and our other product candidates through preclinical development, our expenses and operating losses may increase over time.

In addition, if we seek regulatory approval for any of our wholly-owned product candidates or those for which we retain the right to commercialize in the future, we would need to incur additional expenses as we expand our clinical, regulatory, quality, manufacturing and commercialization capabilities, incur significant commercialization expenses for marketing, sales, manufacturing and distribution if we obtain marketing approval for such product candidates.

We rely on third parties in the conduct of our preclinical studies and clinical trials and for manufacturing and supply of our product candidates. We have no internal manufacturing capabilities, and we expect to continue to rely on third parties, many of whom are single-source suppliers, for our preclinical study and clinical trial materials. In addition, we do not yet have a marketing or sales organization or commercial infrastructure. Accordingly, we will incur significant expenses to develop a marketing and sales organization and commercial infrastructure in advance of generating any product sales of wholly-owned product candidates or those for which we retain the right to commercialize. Furthermore, we will need to make continued investment in development studies, registration activities and the development of commercial support functions including quality assurance and safety pharmacovigilance before we will be in a position to sell any of our product candidates, if approved.

The Initial Public Offering and Concurrent Private Placement

The Initial Public Offering (IPO) and Concurrent Private Placement, which both closed on February 9, 2021, generated aggregate net proceeds of approximately $107.0 million, after deducting the underwriting discounts and commissions, private placement fee and estimated offering expenses payable by us.

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COVID-19 Update

The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials, enrollment in existing trials and restricting the on-site monitoring of clinical trials. We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data.

The global pandemic of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may continue impact our business, including our clinical trials, and financial condition will depend on future developments, which are highly uncertain due to the continuing emergence of new variants and cannot be predicted with confidence, such as the ultimate duration of the pandemic and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

At this time, we do not expect any disruption in our supply chain of drugs necessary to conduct our clinical trials, and we believe we will be able to supply the drug needs of our clinical trials in 2022. However, we are continuing to evaluate our clinical supply chain in light of the COVID-19 pandemic.

License, Collaboration and Grant Agreements

License Agreement with Vifor Pharma

In November 2020, we granted Vifor Pharma, an exclusive, global (excluding Greater China), royalty-bearing license, for the commercialization of ANG-3777 in all Renal Indications, beginning with DGF and CSA-AKI. The Vifor License also grants Vifor Pharma exclusive rights, with a right to sublicense subject to our consent for certain specified conditions, to develop and manufacture ANG-3777 for commercialization in Renal Indications worldwide (excluding Greater China) in cooperation with us or independently. We retain the right to develop and commercialize combination therapy products combining ANG-3777 with our other proprietary molecules, subject to Vifor Pharma's right of first negotiation with respect to global (excluding Greater China) rights to such combination therapy products in the Renal Indications.

Pursuant to the Vifor License and specifically based upon the clinical development plan for ANG-3777 set forth in the Vifor License, we are entitled to receive $80 million in upfront and near-term clinical milestone payments, including $30 million in up-front cash that was received in November 2020, and a $30 million equity investment, a $5 million convertible note that subsequently converted into common stock with the IPO and $25 million of which was received in the Concurrent Private Placement with our IPO. We are also eligible to receive post-approval milestones of up to approximately $260.0 million and sales-related milestones of up to $1.585 billion, providing a total potential deal value of up to $1.925 billion (subject to certain specified reductions and offsets), plus tiered royalties on net sales of ANG-3777 at royalty rates of up to 40%. Under the Vifor License, we are responsible for executing a pre-specified clinical development plan designed to obtain regulatory approvals of ANG-3777 for DGF and CSA-AKI. For the years ended December 31, 2021 and 2020, we recognized license revenue related to the Vifor License of $27.5 million and $0.2 million, respectively. As of December 31, 2021, we recorded $2.3 million as the current portion of deferred revenue on the consolidated balance sheet related to the Vifor License. As of December 31, 2020, we recorded $29.8 million as deferred revenue on the consolidated balance sheet related to the Vifor License.

On October 26, 2021, we announced that the Phase 3 trial of ANG-3777 in DGF did not achieve its primary endpoint and the data were not expected to be sufficient evidence to support an indication in the studied DGF population. On December 14, 2021, we announced that the Phase 2 trial of ANG-3777 in CSA-AKI did not achieve its primary endpoint. The Vifor License includes additional milestone and royalty objectives related to the clinical development plan for ANG-3777 and we do not expect to receive any clinical, post-approval, or sales milestones, or royalties, as we do not intend to continue to pursue such clinical development plan for ANG-3777, which had included a Phase 3 study for CSA-AKI and a Phase 4 confirmatory study in DGF. In 2022, we and Vifor Pharma continue to work to complete the planned analyses of the results of the clinical trials announced in the fourth quarter of 2021 and to discuss the future of the collaboration based upon such analyses. As of December 31, 2021, we recorded the remaining performance obligation as current deferred revenue of $2.3 million which is expected to be completed by the end of 2022.

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Components of Results of Operations

The following discussion summarizes the key factors our management believes are necessary for an understanding of our financial statements.

Revenue

We do not have any products approved for sale and have not generated any revenue from product sales. Our revenue to date primarily has been derived from government funding consisting of U.S. government grants and contracts, and revenue under our license agreements, specifically the Vifor License.

Grant Revenue

Our grants and contracts reimburse us for direct and indirect costs relating to the grant projects and also provide us with a pre-negotiated profit margin on total direct and indirect costs of the grant award, excluding subcontractor costs, after giving effect to directly attributable costs and allowable overhead costs. Funds received from grants and contracts are generally deemed to be earned and recognized as revenue as allowable costs are incurred during the grant or contract period and the right to payment is realized.

Contract Revenue

Our license agreements comprise elements of upfront license fees, milestone payments based on development and royalties based on net product sales. The timing of our operating cash flows may vary significantly from the recognition of the related revenue. Income from upfront payments is recognized when we satisfy the performance obligations in the contract, which can result in recognition at either a point in time or over the period of continued involvement. Other revenue, such as milestone payments, are recognized when achieved.

Our revenue to date has been generated from payments received pursuant to the Vifor License Agreement. We recognize revenue from upfront payments over the term of our estimated period of performance using a cost-based input method under Topic 606, Revenue from Contracts with Customers.

In addition to receiving an upfront payment, we may also be entitled to milestones and other contingent payments upon achieving predefined objectives. If a milestone is considered probable of being reached, and if it is probable that a significant revenue reversal would not occur, the associated milestone amount would also be included in the transaction price.

We expect that any license revenue we generate from any future collaboration partners, will fluctuate in the future as a result of the timing and amount of upfront, milestones and other collaboration agreement payments and other factors.

Operating Expenses

Cost of Grant Revenue

Our cost of grant revenue primarily relates to personnel-related costs and expenses for grant projects.

Research and Development Expenses

To date, our research and development expenses have primarily related to discovery efforts and preclinical and clinical development of our product candidates. We recognize research and development expenses as they are incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. Our research and development expenses consist primarily of:

▪personnel costs, including salaries, payroll taxes, employee benefits and stock-based compensation, for personnel in research and development functions;

▪costs associated with medical affairs activities;

▪fees paid to consultants, clinical testing sites and contract research organizations (CROs), including in connection with our preclinical studies and clinical trials, and other related clinical trial fees, such as for investigator grants, patient screening, laboratory work, clinical trial database management, clinical trial material management and statistical compilation, analysis and reporting;

▪contracted research and license agreement fees with no alternative future use;

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▪costs related to acquiring, manufacturing and maintaining clinical trial materials and laboratory supplies;

▪depreciation of equipment and facilities;

▪legal expenses related to clinical trial agreements and material transfer agreements; and

▪costs related to preparation of regulatory submissions and compliance with regulatory requirements.

Other than with respect to reimbursable expenses required to be recorded under our government grants and contracts, we do not allocate our expenses by product candidates. A significant amount of our direct research and development expenses include payroll and other personnel expenses for our departments that support multiple product candidate research and development programs and, other than as specified above, we do not record research and development expenses by product. However, research and development expenses were primarily driven by expenses relating to the development of ANG-3777 and ANG-3070 in 2021 and 2020. Of our total

research and development expenses for the years ended December 31, 2021 and 2020, 62% and 73%, respectively, of such expenses were from external third-party sources and the remaining 38% and 27%, respectively, were from internal sources.

We expect our research and development expenses to be slightly lower in the near term, even though we will continue the development of our product candidates and continue to invest in research and development activities. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing or costs of the efforts that will be necessary to complete the remainder of the development of any of our clinical or preclinical product candidates or the period, if any, in which material net cash inflows from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:

▪the scope, rate of progress and expense of our ongoing, as well as any additional, clinical trials and other research and development activities;

▪future preclinical and clinical trial results;

▪obtaining market access and reimbursement approvals; and

▪the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to require us to conduct preclinical or clinical trials beyond those that we currently anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in enrollment in any of our preclinical or clinical trials, we could be required to expend significant additional financial resources and time on the completion of our clinical development programs.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related expenses, such as salaries, payroll taxes, employee benefits and stock-based compensation, for personnel in executive, operational, finance and human resources functions. Other significant general and administrative expenses include allocation of facilities costs, accounting and legal services and expenses associated with obtaining and maintaining patents. A portion of the general and administrative expenses are reimbursed through the overhead rates contained in our grants with the U.S. Government.

We expect that our general and administrative expenses to be generally consistent in the near term to support our continued research and development activities. We also expect to generally maintain our current level of expenses associated with operating as a public company, including expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, insurance expenses, investor relations activities and other administrative and professional services.

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Other Income (Expense)

Convertible Notes Recorded at Fair Value

We elected the fair value option for recognition of our convertible notes. Our convertible notes were subject to re-measurement each reporting period with gains and losses reported through our consolidated statements of operations. All of our convertible notes were converted into shares of our common stock upon the closing of our initial public offering.

Liability Classified Series C Convertible Preferred Stock Recorded at Fair Value

Series C convertible preferred stock includes settlement features that result in liability classification. The initial carrying value of the Series C convertible preferred stock was accreted to the settlement value, the fair value of the securities to be issued upon the conversion of the Series C Preferred Stock. The discount to the settlement value was accreted to interest expense using the effective interest method. During 2020, certain of the convertible notes were exchanged for Series C convertible preferred stock. As the exchange was accounted for as a modification, the Series C convertible preferred stock that was exchanged for the convertible notes (the Exchanged Series C Shares) continued to be recorded at fair value. The Exchanged Series C Shares were subject to re-measurement each reporting with gains and losses reported through our consolidated statements of operations. All shares of our Series C convertible preferred stock converted into common stock in connection with the IPO.

Warrant Liability

We have accounted for certain of our freestanding warrants to purchase shares of our common stock as liabilities measured at fair value, in accordance with ASC 815, Derivatives and Hedging (ASC 815). The warrants are subject to re-measurement at each reporting period with gains and losses reported through our consolidated statements of operations.

Foreign Exchange Transaction Gain

Foreign currency transaction gains, primarily related to intercompany loans, are recorded as a component of other income (expense) in our consolidated statements of operations.

Earnings in Equity Method Investment

Earnings in equity method investment represents our 10% interest in NovaPark that is accounted for under the equity method.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents.

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Results of Operations

Comparison for the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the periods indicated:

Year Ended December 31,

(In thousands, except percentages)

Revenue:

Operating expenses:

_______________________

*Not meaningful

Contract Revenue

Contract revenue increased by $27.3 million, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase is attributable to revenue recognized related to the upfront payment from Vifor Pharma pursuant to the Vifor License Agreement entered into in 2020. As of December 31, 2021, we have substantially satisfied the performance obligation under the Agreement which caused an acceleration of the deferred revenue. We do not expect to receive any further substantial revenues under the Vifor License Agreement and we expect the remaining unearned revenue under the Vifor License Agreement to be recognized by the end of 2022.

Grant Revenue

Grant revenue decreased by $1.9 million, or 70.0%, from the year ended December 31, 2020 to the year ended December 31, 2021. The decrease is primarily attributable to a decrease in reimbursable costs relating to our grant from the U.S. Department of Defense for the year ended December 31, 2021. We do not expect to receive any further substantial grant revenues for the foreseeable future.

Cost of Grant Revenue

Cost of grant revenue decreased by $0.8 million, or 63.6%, from the year ended December 31, 2020 to the year ended December 31, 2021. The decrease is primarily attributable to a decrease in personnel-related costs and expenses applied for the year ended December 31, 2021.

Research and Development Expenses

Research and development expenses increased by $9.7 million, or 24.9%, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase in research and development expenses was primarily due to an increase of $8.5 million in personnel-related expenses, including salaries, benefits and stock-based compensation expenses, as a result from increases in headcount and an increase of $1.0 million in CRO and CMO expenses from increased clinical and non-clinical trial activities, primarily related to the development of ANG-3777 and ANG-3070. These increases were partially offset by an employee retention credit of $1.2 million received in 2021 as a reduction to payroll taxes.

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General and Administrative Expenses

General and administrative expenses increased by $0.5 million, or 2.8%, from the year ended December 31, 2020 to the year ended December 31, 2021. The increase in general and administrative expenses was primarily due to an increase of $2.5 million of personnel-related expenses, including salaries, benefits and stock-based compensation expenses, resulting from increases in headcount and vesting of performance-based stock units upon IPO, and an increase of $2.7 million of corporate fees mainly due to purchase of business insurance, offset by a reduction of $5.1 million of professional fees for legal, consulting, accounting, tax and other services primarily associated with preparing us for our IPO in 2020.

Other Income (Expense), Net

Other income (expense), net changed by a reduction in expense of $9.6 million, from the year ended December 31, 2020 to the year ended December 31, 2021. This decrease in expense is primarily attributable to a reduction in interest expense of $7.0 million due to interest associated with convertible notes and Series C convertible preferred stock in 2020 that were converted into equity upon our IPO in February 2021 and an increase of $2.6 million in fair value of our warrant liability, convertible notes, and Series C convertible preferred stock for which we have elected the fair value option. The convertible notes and warrants both require re-measurement at each balance sheet date with gains and losses reported through our consolidated statement of operations.

Liquidity and Capital Resources

Sources and Uses of Liquidity

We have incurred losses and negative cash flows from operations since inception, and we anticipate that we will incur losses for at least the next several years. To date, we have not generated any revenue from product sales. We have funded our operations primarily through the receipt of grants, the sale of debt and equity securities, and proceeds from license agreements. In February 2021, we generated aggregate net proceeds of approximately $107.0 million from our IPO and Concurrent Private Placement, after deducting the underwriting discounts and commissions. As of December 31, 2021, we had $88.8 million of cash and cash equivalents and an accumulated deficit of $215.1 million.

Prior to our IPO, we issued $36.2 million in aggregate principal amount of convertible notes to various investors and we also issued 34,928 shares of Series C convertible preferred stock at $642.75 per share for gross proceeds of approximately $22.3 million. Upon the closing of our IPO, all then outstanding convertible notes and shares of convertible preferred stock were converted into 5,870,829 shares of our common stock.

In April 2020, we were approved for and received a loan of approximately $0.9 million from Hanmi Bank under the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) and the Paycheck Protection Program (PPP) offered by the U.S. Small Business Administration (SBA). The loan was evidenced by a promissory note and agreement, dated April 21, 2020 (the PPP Note). The PPP Note proceeds were available to be used to pay for payroll costs, including salaries, commissions, and similar compensation, group health care benefits, and paid leaves; rent; utilities; and interest on certain other outstanding debt, if any. The interest rate on the PPP Note was a fixed rate of 1% per annum. The SBA approved our PPP Loan forgiveness application on May 26, 2021 for the entire principal amount of the PPP Loan and accrued interest.

Future Cash Needs and Funding Requirements

Based on our current operating plan, we believe that our cash and cash equivalents will be sufficient to fund our planned operations for at least 12 months, well into 2023, following the issuance date of our consolidated financial statements. However, we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

▪the scope, progress, results and costs of researching and developing ANG-3070 or any other product candidates, and conducting preclinical studies and clinical trials;

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▪the outcome of our ongoing and future clinical trials, including our Phase 2 clinical trial of ANG-3070 in patients with PPKD;

▪whether we are able to take advantage of any FDA expedited development and approval programs for any of our product candidates;

▪the extent to which COVID-19 may impact our business, including our clinical trials and financial condition;

▪the willingness of the FDA and foreign regulatory authorities to accept the results of our completed, ongoing, and planned clinical trials and preclinical studies and other work, as the basis for review and approval of ANG-3070;

▪the outcome, costs and timing of seeking and obtaining and maintaining FDA and any foreign regulatory approvals;

▪the number and characteristics of product candidates that we pursue, including our product candidates in preclinical development;

▪the ability of our product candidates to progress through clinical development successfully;

▪our need to expand our research and development activities, including to conduct additional clinical trials;

▪market acceptance of our product candidates, including physician adoption, market access, pricing and reimbursement;

▪the costs of acquiring, licensing or investing in businesses, products, product candidates and technologies;

▪our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

▪our need and ability to hire additional personnel, including management, clinical development, medical and commercial personnel;

▪the effect of competing technological, market developments and government policy;

▪the costs associated with being a public company, including our need to implement additional internal systems and infrastructure, including financial and reporting systems;

▪the costs associated with securing and establishing commercialization and manufacturing capabilities, as well as those associated with packaging, warehousing and distribution;

▪the costs associated with being a commercial company with approved products for sale, including our obligation to meet applicable healthcare laws and regulations and implement robust compliance programs;

▪the economic and other terms, timing of and success of our existing licensing arrangements and any collaboration, licensing or other arrangements into which we may enter in the future and timing and amount of payments thereunder; and

▪the timing, receipt and amount of sales and general commercial success of any future approved products, if any.

Until such time as we or our collaborators can generate significant revenue from sales of ANG-3070 or any other product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings or other sources of capital, including collaborations, licenses, credit or loan facilities, receipt of research contributions or grants, tax credit revenue or a combination of one or more of these funding sources. Adequate funding may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

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Summary Statement of Cash Flows

The following table sets forth a summary of our net cash flow activity for the years ended December 31, 2021 and 2020 (in thousands):

Year Ended December 31,

Net cash provided by (used in)

Investing activities (382) (41)

Effect of foreign currency on cash 3 (444)

Operating activities

For the year ended December 31, 2021, net cash used in operating activities was $52.6 million, which primarily consisted of a net loss of $54.6 million and a change in net operating assets and liabilities of $26.0 million, partially offset by net non-cash charges of $27.8 million. The net non-cash charges were primarily related to a $14.0 million change in fair value of convertible notes, Series C convertible preferred stock and warrant liabilities, amortization of debt issuance costs of $1.9 million, and stock-based compensation expense of $12.0 million, partially offset by a gain of $0.9 million from the forgiveness of our PPP loan. The change in net operating assets and liabilities was due to a decrease of $27.5 million in deferred revenue due to substantial satisfaction of our performance obligation under the Vifor License Agreement, a decrease of $0.9 million in accounts payable and accrued expenses due to timing of invoices and an increase of $0.8 million in grants receivable due to the recognition of the qualified Australian tax credit, partially offset by a decrease of $4.0 million in prepaid expenses and other current assets, primarily due to the subsequent receipt of $5.0 million convertible note receivable under Vifor License Agreement in 2021.

For the year ended December 31, 2020, net cash used in operating activities was $22.9 million, which primarily consisted of a net loss of $80.1 million, partially offset by net non-cash charges of $31.5 million and a change in net operating assets and liabilities of $25.8 million. The net non-cash charges were primarily related to a $16.5 million change in fair value of convertible notes, Series C convertible preferred stock and warrant liabilities, amortization of debt issuance costs of $7.7 million, stock-based compensation expense of $4.7 million and placement agent fees of $1.7 million. The change in net operating assets and liabilities was due to an increase of $29.8 million in deferred revenue due to the upfront fee from the Vifor License Agreement and $3.7 million in accrued expenses due to increased clinical-related activities, partially offset by an increase of $2.0 million in prepaid expenses and other current assets and a decrease of $5.6 million in accounts payable due to our overall growth, increased research and development spending and timing of payments.

Investing activities

For the years ended December 31, 2021 and 2020, net cash used in investing activities of $0.4 million and $41,000, respectively, was primarily used to purchase of fixed assets for research activities.

Financing activities

For the year ended December 31, 2021, net cash provided by financing activities was $107.2 million, primarily due to net proceeds of $107.5 million from the IPO and Concurrent Private Placement, $1.8 million from the exercise of warrants and stock options, and $0.3 million from a sale and leaseback arrangement, partially offset by taxes paid related to net share settlement upon vesting of restricted stock awards of $2.5 million.

For the year ended December 31, 2020, net cash provided by financing activities was $52.4 million, primarily due to net proceeds of $31.2 million from the issuance of convertible notes and warrants, $20.0 million from the issuance of liability classified Series C convertible preferred stock net of issuance costs and $0.9 million in proceeds from our PPP loan.

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Contractual Obligations and Other Commitments

The following table summarizes our contractual obligations as of December 31, 2021 (in thousands):

For the Year Ended Payments due by period

Financing obligations $ 94 $ 219 $ — $ — $ 313

Critical Accounting Policies and Significant Judgments and Estimates

A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report.

The critical accounting policies requiring estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.

Contract Revenue

We account for revenue earned from contracts with customers under Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Under ASC 606, we recognize revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, we perform the following five steps:

(1) Identify the contract(s) with a customer;

(2) Identify the performance obligations in the contract;

(3) Determine the transaction price;

(4) Allocate the transaction price to the performance obligations in the contract; and

(5) Recognize revenue when (or as) we satisfy a performance obligation.

At contract inception, we assess the goods or services promised within each contract, whether each promised good or service is distinct, and determine those that are performance obligations. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.

We enter into agreements under which it may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include licenses of intellectual property, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. We assess these promises within the context of the agreements to determine the performance obligations.

Licenses of Intellectual Property: If a license to our intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments. We evaluate the measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

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Milestone payments: We evaluate whether the regulatory and development milestones are considered probable of being reached and estimate the amounts to be included in the transaction price using the most likely amount method. We evaluate factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the end of each reporting period, we re-evaluate the probability of achievement of milestones and any related constraint, and if necessary, adjusts the estimate of the overall transaction price.

Sales-based milestones and royalties: For sales-based royalties, including milestone payments based on the level of sales, we determine whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales-based royalty relates, we recognize revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, we have not recognized any sales-based royalty revenue resulting from any license agreement.

Deferred revenue, which is a contract liability, represents amounts received by us for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount expected to be recognized within one year from the consolidated balance sheet date based on the estimated performance period of the underlying performance obligation. The noncurrent portion of deferred revenue represents amounts expected to be recognized after one year through the end of the performance period of the performance obligation.

Using the cost-based input method, we recognize revenue based on actual costs incurred as a percentage of total estimated costs as we complete each performance obligation. As such, we use significant assumptions to determine the total estimated costs for us to complete the performance obligation identified under the Vifor License Agreement as well as the performance period. We reassess the total estimated costs and performance period at each reporting period. We changed the estimated costs significantly from $231.5 million at inception (November 2020) to $26.0 million as of December 31, 2021 and revised the performance period from 9.5 years to 2.2 years due to new information available at each reporting period. As of December 31, 2021, we determined we have substantially completed our performance obligation under the Vifor License Agreement. The effect of this change in estimate was an increase in contract revenue by $24.2 million, a reduction in net loss by $24.2 million and an increase in basic and diluted earnings per share by $0.86 for the year ended December 31, 2021. See Note 3 in this Annual Report on Form 10-K for more information.

Grant Revenue

We concluded that our government grants are not within the scope of ASC 606 as they do not meet the definition of a contract with a customer. We have concluded that the grants meet the definition of a contribution and are non-reciprocal transactions, and have also concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition, does not apply, as we are a business entity and the grants are with governmental agencies.

In the absence of applicable guidance under GAAP, we developed a policy for the recognition of grant revenue when the allowable costs are incurred and the right to payment is realized.

We believe this policy is consistent with the overarching premise in ASC 606, to ensure that revenue recognition reflects the transfer of promised goods or services to customers in an amount that reflects the consideration that we expect to be entitled to in exchange for those goods or services, even though there is no exchange as defined in ASC 606. We believe the recognition of revenue as costs are incurred and amounts become realizable is analogous to the concept of transfer of control of a service over time under ASC 606.

Research and Development

Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, preclinical studies, compound manufacturing costs, consulting costs and allocated overhead, including rent, equipment, depreciation and utilities. Research and development cost may be offset by research and development refundable tax rebates received by our wholly-owned Australian subsidiary.

We have agreements with various Contract Research Organizations ("CROs") and third-party vendors. We estimate research and development accruals of amounts due to the CRO based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. We include the

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estimated costs of research and development provided, but not yet invoiced, in accrued liabilities on the consolidated balance sheet. We record payments made to CROs under this arrangement in advance of the performance of the related services as prepaid expenses and other current assets until the services are rendered. We make judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, we adjust our accrued liabilities. For the years ended December 31, 2021 and 2020, we have not experienced any material differences between accrued costs and actual costs incurred.

Stock-Based Compensation

We account for all stock-based payments to employees and non-employees, including grants of stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), including restricted stock units with non-market performance and service conditions ("PSUs") to be recognized in the financial statements, based on their respective grant date fair values. We estimate the fair value of stock option grants using the Black-Scholes option pricing model. We value the RSAs, RSUs and PSUs based on the fair value of our common stock on the date of grant. The assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. We record expense for stock-based compensation related to stock options, RSAs and RSUs over the requisite service period. As the PSUs have a performance condition, we recognize compensation expense for each vesting tranche over the respective requisite service period of each tranche if and when our management deems probable that the performance conditions will be satisfied. We may recognize a cumulative true-up adjustment related to PSUs once a condition becomes probable of being satisfied if the related service period had commenced in a prior period. We record all stock-based compensation costs in general and administrative or research and development costs in the consolidated statements of operations based upon the respective employee or non-employee's roles within our company. We record forfeitures as they occur.

See Note 9 in this Annual Report on Form 10-K for more information concerning certain of the specific assumptions we used in applying the Black-Scholes option pricing model to determine the estimated fair value of our stock options. Certain of such assumptions involve inherent uncertainties and the application of significant judgment. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our stock-based compensation could be materially different.

Warrant Liability

We account for certain common stock warrants outstanding as a liability, in accordance with ASC 815, at fair value and adjust the instruments to fair value at each reporting period. This liability is subject to re-measurement at each reporting period until exercised, and we recognize any change in fair value in the consolidated statements of operations as a component of other income (expense). We have estimated the fair value of the warrants issued by us using a variant of the Black Scholes option pricing model. We valued the underlying equity included in the Black Scholes option pricing model based on the equity value implied from sales of preferred and common stock.

Income Taxes

We record income taxes in accordance with ASC 740, Income Taxes (ASC 740), which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. We determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which we expect the differences to reverse. We provide valuation allowances if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

We account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Recent Accounting Pronouncements

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See Note 2, “Summary of Significant Accounting Policies” in the Notes to the Consolidated Financial Statements set forth in Item 8 of this Annual Report on Form 10-K for a full description of recent accounting standards.

Emerging Growth Company and Smaller Reporting Company Status

We are a smaller reporting company and an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay the adoption of new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for emerging growth companies include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor's report on internal controls over financial reporting pursuant to Sarbanes-Oxley Act of 2002, as amended (Sarbanes-Oxley) an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation, and less extensive disclosure about our executive compensation arrangements. We have elected to use the extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that (i) we are no longer an emerging growth company or (ii) we affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting standards as of public company effective dates.

We will remain an emerging growth company until the earliest of (i) December 31, 2026, (ii) the last day of our first fiscal year in which we have total annual gross revenue of $1.07 billion or more, (iii) the date on which we are deemed to be a "large accelerated filer," as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (Exchange Act), which means the market value of equity securities that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter and (iv) the date on which we have issued more than $1.0 billion in non-convertible debt securities during the prior three-year period.

Even after we no longer qualify as an emerging growth company, we may still qualify as a "smaller reporting company" and/or “non-accelerated filer” which may allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply for a period of time with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.

Item7A. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

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Item 8. Financial Statements and Supplementary Data.

The financial statements of Angion Biomedica Corp, listed below are set forth in Item 8 of this Annual Report for the years ended December 31, 2021 and 2020:

ANGION BIOMEDICA CORP.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets 81

Consolidated Statements of Operations and Comprehensive Loss 82

Consolidated Statements of Stockholders' Equity (Deficit) 83

Consolidated Statements of Cash Flows 85

Notes to Consolidated Financial Statements 87

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To the Board of Directors and Stockholders of

Angion Biomedica Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Angion Biomedica Corp. (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the consolidated results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Moss Adams LLP

Seattle, Washington

March 30, 2022

We have served as the Company's auditor since 2018.

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ANGION BIOMEDICA CORP.

Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31,

ASSETS

Current assets

Grants receivable 806 —

Prepaid expenses and other current assets 1,685 7,690

Property and equipment, net 451 156

Investments in related parties 723 822

Other assets 106 —

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities

Lease liability—current 894 611

Financing obligation—current 58 —

Convertible promissory notes payable at fair value — 51,170

Series C convertible preferred stock at amortized cost — 26,001

Series C convertible preferred stock at fair value — 2,518

Other short-term debt — 260

Financing obligation—noncurrent 235 —

Deferred revenue—noncurrent — 25,865

Other long-term debt — 635

Commitments and contingencies—Note 11

Stockholders' equity (deficit)

Accumulated other comprehensive loss (103) (333)

Total stockholders' equity (deficit) 81,507 (90,449)

Total liabilities and stockholders' equity (deficit) $ 96,513 $ 47,347

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

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ANGION BIOMEDICA CORP.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Year Ended December 31,

Revenue:

Operating expenses:

Other income (expense)

Change in fair value of warrant liability (2,919) (4,910)

Change in fair value of convertible notes (7,469) (11,353)

Change in fair value of Series C convertible preferred stock (3,592) (264)

Foreign exchange transaction gain (loss) (245) 668

Loss on disposal of fixed assets — (58)

Gain upon debt extinguishment 905 —

Losses in equity method investment (99) (71)

Interest income (expense), net (1,847) (8,846)

Other comprehensive loss:

Foreign currency translation adjustment 230 (333)

Net loss per common share, basic and diluted $ (1.93) $ (5.43)

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

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ANGION BIOMEDICA CORP.

Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share amounts)

Shares Amount Shares Amount

Issuance of broker warrants — — — — 3,095 — — 3,095

Exercise of broker warrants 572,946 6 — — (2) — — 4

Restricted stock units releases 13,369 — — — — — —

Stock-based compensation — — — — 4,716 — — 4,716

Foreign currency translation adjustment — — — — — (333) — (333)

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

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ANGION BIOMEDICA CORP.

Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share amounts)

Shares Amount Shares Amount

Conversion of convertible notes prior to IPO 33,978 — — — 460 — — 460

Exercise of broker warrants 47,188 — — — — — — —

Foreign currency translation adjustment — — — — — 230 — 230

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

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ANGION BIOMEDICA CORP.

Consolidated Statements of Cash Flows

(in thousands)

Year Ended December 31,

Cash flows from operating activities

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

Amortization of right of use assets 710 530

Amortization of debt issuance costs 1,884 7,661

Non-cash placement agent fee — 1,683

PPP Loan forgiveness (905) —

Change in fair value of convertible notes 7,469 11,353

Change in fair value of Series C convertible preferred stock 3,592 264

Change in fair value of warrant liability 2,919 4,910

Impairment of leased assets — 58

Losses from equity investment 96 71

Distribution from equity investment 3 106

Changes in operating assets and liabilities:

Prepaid expenses and other current assets 4,016 (2,020)

Other assets (106) —

Net cash used in operating activities (52,643) (22,888)

Cash flows from investing activities

Purchase of fixed assets (382) (41)

Net cash used in investing activities (382) (41)

Cash flows from financing activities

Proceeds from issuance of convertible notes and warrants — 31,223

Proceeds from loan from PPP — 895

Proceeds from financing obligation 302 —

Proceeds from RSU settlement 18 —

Payment of financing obligation (9)

Fractional share payments related to the forward stock split (10) —

Exercise of broker warrants — 4

Exercise of stock options 980 47

Net cash provided by financing activities 107,171 52,409

Effect of foreign currency on cash 3 (444)

Net increase in cash and cash equivalents 54,149 29,036

Cash and cash equivalents at the beginning of the period 34,607 5,571

Cash and cash equivalents at the end of the period $ 88,756 $ 34,607

Supplemental disclosure of cash flow information:

Cash paid for interest $ 7 $ —

Supplemental disclosure of noncash investing and financing activities:

Retirement of treasury stock $ 4,210 $ —

Conversion of convertible notes into common stock prior to IPO $ 460 $ —

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Conversion of convertible notes to common stock $ 58,639 $ —

Conversion of Series C preferred stock to common stock upon IPO $ 35,754 $ —

Net exercise of warrants upon IPO $ 13,509 $ —

Accrued interest premium for Series C convertible preferred stock $ — $ 295

Right of use assets exchanged for operating lease liabilities $ 624 $ 88

Convertible notes issued in receivable $ — $ 5,000

Deferred offering costs in accrued expenses or accounts payable $ — $ 1,443

Fixed assets purchased in accrued expenses or accounts payable $ 4 $ 4

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

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements

Note 1—Description of the Business and Financial Condition

Angion Biomedica Corp. ("Angion" or", the "Company") is a clinical biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule therapeutics to address acute organ injuries and fibrotic diseases. The Company was incorporated in Delaware in 1998.

Forward Stock Split

On January 25, 2021, the board of directors of the Company approved an amendment to the Company's certificate of incorporation to effect a forward stock split ("Forward Split") of shares of the Company's common stock on a one-for 1.55583 basis, which was effected on February 1, 2021. All references to common stock, convertible preferred stock, warrants to purchase common stock, stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), including restricted stock units with non-market performance and service conditions ("PSUs"), per share amounts and related information contained in the consolidated financial statements have been retroactively adjusted to reflect the effect of the forward stock split for all periods presented. No fractional shares of the Company's common stock were issued in connection with the Forward Split. Any fractional share resulting from the Forward Split was rounded down to the nearest whole share, and any stockholder entitled to fractional shares as a result of the Forward Split will received a cash payment in lieu of receiving fractional shares.

Initial Public Offering and the Concurrent Private Placement

On February 9, 2021, the Company’s registration statement on Form S-1 (File No. 333-252177) relating to its initial public offering (IPO) of common stock became effective. The IPO closed on February 9, 2021 at which time the Company issued 5,750,000 shares of its common stock at a price to the public of $16.00 per share, which includes the full exercise by the underwriters of their option to purchase an additional 750,000 shares of common stock. In addition to the shares being sold in the IPO, the Company sold an additional 1,562,500 shares of its common stock at the public offering price of $16.00 per share to entities affiliated with Vifor International, Ltd., an existing stockholder (the “Concurrent Private Placement”) for gross proceeds of $25.0 million. Subsequent to the closing of the IPO, all of the outstanding shares of convertible preferred stock and outstanding convertible notes automatically converted into shares of common stock.

The IPO and Concurrent Private Placement generated aggregate net proceeds of approximately $107.0 million, after deducting the underwriting discounts and commissions, private placement fee and estimated offering expenses payable by the Company.

Subsequent to the closing of the IPO, there were no shares of convertible preferred stock outstanding and there were no convertible notes outstanding. In connection with the closing of the IPO, the Company restated its Restated Certificate of Incorporation to change the authorized capital stock to 300,000,000 shares designated as common stock, and 10,000,000 shares designated as preferred stock, with a par value of $0.01 per share and $0.01 per share, respectively.

Liquidity and Capital Resources

Since inception, the Company has devoted substantially all of its efforts and financial resources to conducting research and development activities, including drug discovery and pre-clinical studies and clinical trials, establishing and maintaining its intellectual property portfolio, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and, if approved, commercialize its product candidates. As of December 31, 2021, the Company had $88.8 million in cash and cash equivalents and an accumulated deficit of $215.1 million. Prior to its IPO, the Company has funded its operations through United States government grants, the issuance of convertible notes (see Note 6), sales of convertible preferred stock and common stock (see Notes 7) and warrants (see Note 10) and licensing agreements (see Note 12).

The planned expansion of the Company's clinical and discovery programs will require significant funds. Management expects to continue to incur significant expenses and to incur operating losses for the foreseeable

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

future. The Company has evaluated and concluded there are no conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern for a period of one year following the date these consolidated financial statements are issued and believes its existing cash and cash equivalents will be sufficient to meet the projected operating requirements well into 2023.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

The Company's consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") and include the accounts of the Company, its wholly owned subsidiary, Angion Biomedica Europe Limited, which was dissolved on March 16, 2021, and its wholly owned subsidiary, Angion Pty Ltd., which was established on August 22, 2019. The Company established Angion Pty Ltd., an Australian subsidiary, for the purpose of qualifying for research credits for studies conducted in Australia. All significant intercompany balances and transactions have been eliminated in consolidation.

Segments

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker (“CODM”) in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business as one operating segment.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to the useful lives of long-lived assets, the measurement of stock-based compensation, change in fair value of warrant liabilities prior to IPO, accruals for research and development activities, income taxes and revenue recognition. The Company bases its estimates on historical experience and on other relevant assumptions that are reasonable under the circumstances. Actual results could materially differ from those estimates.

Foreign Currency Translation and Transactions

The United States Dollar (“USD”) is the functional currency for the Company’s operations outside the United States. Accordingly, nonmonetary assets and liabilities originally acquired or assumed in other currencies are recorded in USD at the exchange rates in effect at the date they were acquired or assumed. Monetary assets and liabilities denominated in other currencies are translated into USD at the exchange rates in effect at the balance sheet date. Translation adjustments are recorded in other comprehensive income (loss) in the consolidated statements of operations. Gains and losses realized from non-USD transactions, including intercompany balances not considered as permanent investments, denominated in currencies other than an entity’s functional currency are included in other income (expense) in the accompanying consolidated statements of operations.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company's cash and cash equivalents are deposited in accounts at large financial institutions, and amounts may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institution in which those deposits are held.

Additionally, the Company established guidelines regarding approved investments and maturities of investments, which are designed to maintain safety and liquidity.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

The Company maintains its cash equivalents in securities and money market funds with original maturities less than three months.

The Company has no financial instruments with off-balance sheet risk of loss.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2021 and 2020, the Company’s cash equivalents were held in institutions in the United States and included deposits in a money market fund which were unrestricted as to withdrawal or use.

Grants Receivable

Grants receivable is comprised of unbilled amounts due from various grants from the National Institutes of Health ("NIH") and other U.S. government agencies for costs incurred prior to the period end under reimbursement contracts. All amounts are readily available for draw from the Federal Government Payment Management System and, accordingly, no allowance for doubtful amounts has been established. If amounts become uncollectible, they are charged to operations.

Deferred Offering Costs

Deferred offering costs consist of legal and accounting fees incurred through the balance sheet date that were directly related to the Company's IPO and were reflected as issuance costs upon the completion of the offering. Subsequent to the closing of the IPO, $2.8 million of deferred costs previously included in prepaid expenses and other current assets were netted with additional paid in capital in the consolidated balance sheets. As of December 31, 2021 and 2020, the Company recorded deferred offering costs of zero and $2.0 million, respectively.

Property and Equipment

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is computed using the straight-line method over their estimated useful lives as follows:

Asset Classification Estimated Useful Life

Equipment 5 years

Furniture and fixtures 3 years

Leasehold improvements Shorter of useful life or lease term

Normal repairs and maintenance costs are expensed as incurred.

Impairment of Long-Lived Assets

Long-lived assets, such as property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset or asset group to be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by that asset or asset group to its carrying value. If the carrying value of the long-lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. The impairment losses as of December 31, 2021 and 2020 were zero and $58 thousand, respectively.

Fair Value Measurement

Certain assets and liabilities are carried at fair value under GAAP. Fair value is determined using the principles of ASC 820, Fair Value Measurement. Fair value is described as the price that would be received to sell an asset or

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes and defines the inputs to valuation techniques as follows:

Level 1: Observable inputs such as quoted prices in active markets.

Level 2: Inputs are observable for the asset or liability either directly or through corroboration with observable market data.

Level 3: Unobservable inputs.

The inputs used to measure the fair value of an asset or a liability are categorized within levels of the fair value hierarchy. The fair value measurement is categorized in its entirety in the same level of the fair value hierarchy as the lowest level input that is significant to the measurement.

The Company's cash and cash equivalents, accounts payable and accrued expenses are carried at cost, which approximates fair value due to the short-term nature of these instruments.

Leases

The Company accounts for its leases under ASC 842, Leases. Under this guidance, arrangements meeting the definition of a lease are classified as operating or finance leases, and are recorded on the consolidated balance sheets as both a right of use asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company's incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset results in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use assets and lease liabilities, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

Investments in Related Party Entities

The Company holds a 10% and a 2.4% interest in two entities, NovaPark, LLC ("NovaPark") and Ohr Cosmetics, LLC ("Ohr"), respectively. There is common ownership between the Director and Chairman Emeritus of the Company and each entity, and our Chief Executive Officer is also owns approximately 0.80% of the membership interests in Ohr. See Note 15. In accordance with ASC 323, Investments —Equity Method and Joint Ventures, the Company has significant influence but not control over NovaPark as its ownership in the limited liability company exceeds 3-5%. Accordingly, the Company records the NovaPark investment under the equity method of accounting. The Ohr investment is recorded at cost.

Warrant Liability

The Company accounts for certain common stock warrants outstanding as a liability, in accordance with ASC 815, Derivatives and Hedging, at fair value and adjusts the instruments to fair value at each reporting period. This liability is subject to re-measurement at each reporting period until exercised, and any change in fair value is recognized in the consolidated statements of operations as a component of other income (expense). The fair value of the warrants issued by the Company has been estimated using a variant of the Black Scholes option pricing model. The underlying equity included in the Black Scholes option pricing model was valued based on the closing price of common stock at each measurement date.

Convertible Notes Payable at Fair Value

As permitted under ASC 825, Financial Instruments ("ASC 825"), the Company has elected the fair value option for recognition of its convertible notes. In accordance with ASC 825, the Company recognizes these convertible notes at fair value with changes in fair value recognized in the consolidated statements of operations. The fair value option may be applied instrument by instrument, but it is irrevocable. As a result of applying the fair value option, direct costs and fees related to the convertible notes were recognized in general and administrative

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

expense in earnings as incurred and not deferred. The estimated fair value of the convertible notes was determined by utilizing a present value cash flow model and the values of the equity underlying the conversion options were estimated using company equity values implied from the Subject Company Transaction Method which includes the back-solve and scenario-based methods (Probability Weighted Expected Return Method). See Note 4. Accrued interest for the notes has been included in the change in fair value of convertible notes in the consolidated statements of operations. All outstanding convertible notes were converted into common stock upon the close of the IPO on February 9, 2021 and no balances remained outstanding as of December 31, 2021. See Note 6.

Convertible Preferred Stock

Series C convertible preferred stock included settlement features that result in liability classification. The initial carrying value of the Series C convertible preferred stock was accreted to the settlement value, the fair value of the securities issued upon the conversion of the Series C convertible preferred stock. The discount to the settlement value was accreted to interest expense using the effective interest method. During 2020, certain convertible notes were exchanged for Series C convertible preferred stock. As the exchange was accounted for as a modification, the Series C convertible preferred stock that was exchanged for the convertible notes was recorded at fair value and subject to re-measurement at each reporting period with gains and losses reported through our consolidated statements of operations. All outstanding shares of convertible preferred stock were converted into common stock upon the close of the Company’s IPO on February 9, 2021. See Note 7. As of December 31, 2021, there was no convertible preferred stock outstanding.

Treasury Stock

The Company records the repurchase of shares of common stock at cost based on the settlement date of the transaction. These shares are classified as treasury stock, which is a reduction to stockholders' equity. Treasury stock is included in authorized and issued shares but excluded from outstanding shares. As of December 31, 2021, all outstanding treasury shares were retired in October 2021 upon approval by the Board of Directors.

Revenue

The Company does not have any products approved for sale and has not generated any revenue from product sales. The Company’s revenue to date has been primarily derived from government funding consisting of U.S. government grants and contracts, and revenue under its license agreements.

Contract Revenue

The Company accounts for revenue earned from contracts with customers under Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606) ("ASC 606"). Under ASC 606, the Company recognizes revenue when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements within the scope of ASC 606, the Company performs the following five steps:

(1) Identify the contract(s) with a customer;

(2) Identify the performance obligations in the contract;

(3) Determine the transaction price;

(4) Allocate the transaction price to the performance obligations in the contract; and

(5) Recognize revenue when (or as) the Company satisfies a performance obligation.

At contract inception, the Company assesses the goods or services promised within each contract, whether each promised good or service is distinct, and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when or as the performance obligation is satisfied.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

The Company enters into agreements under which it may obtain upfront payments, milestone payments, royalty payments and other fees. Promises under these arrangements may include research licenses, research services, including selection campaign research services for certain replacement targets, the obligation to share information during the research and the participation of alliance managers and in joint research committees, joint patent committees and joint steering committees. The Company assesses these promises within the context of the agreements to determine the performance obligations.

Licenses of Intellectual Property: If a license to its intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront payments. The Company evaluates the measure of proportional performance each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

Milestone payments: The Company evaluates whether the regulatory and development milestones are considered probable of being reached and estimate the amounts to be included in the transaction price using the most likely amount method. The Company evaluates factors such as the scientific, clinical, regulatory, commercial and other risks that must be overcome to achieve the particular milestone in making this assessment. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. At the end of each reporting period, the Company re-evaluates the probability of achievement of milestones and any related constraint, and if necessary, adjust the estimate of the overall transaction price.

Sales-based milestones and royalties: For sales-based royalties, including milestone payments based on the level of sales, the Company determines whether the sole or predominant item to which the royalties relate is a license. When the license is the sole or predominant item to which the sales-based royalty relates, the Company recognize revenue at the later of: (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any sales-based royalty revenue resulting from any license agreement.

Deferred revenue, which is a contract liability, represents amounts received by the Company for which the related revenues have not been recognized because one or more of the revenue recognition criteria have not been met. The current portion of deferred revenue represents the amount expected to be recognized within one year from the consolidated balance sheet date based on the estimated performance period of the underlying performance obligation. The noncurrent portion of deferred revenue represents amounts expected to be recognized after one year through the end of the performance period of the performance obligation.

Grant Revenue

The Company concluded that the Company's government grants are not within the scope of ASC Topic 606 as they do not meet the definition of a contract with a customer. The Company has concluded that the grants meet the definition of a contribution and are non-reciprocal transactions, and has also concluded that Subtopic 958-605, Not-for-Profit-Entities-Revenue Recognition, does not apply, as the Company is a business entity and the grants are with governmental agencies.

In the absence of applicable guidance under GAAP, the Company developed a policy for the recognition of grant revenue when the allowable costs are incurred and the right to payment is realized.

The Company believes this policy is consistent with the overarching premise in ASC Topic 606, to ensure that revenue recognition reflects the transfer of promised goods or services to customers in an amount that reflects the consideration that the Company expects to be entitled to in exchange for those goods or services, even though there is no exchange as defined in ASC Topic 606. The Company believes the recognition of revenue as costs are incurred and amounts become realizable is analogous to the concept of transfer of control of a service over time under ASC Topic 606.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

Research and Development

Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, preclinical studies, compound manufacturing costs, consulting costs and allocated overhead, including rent, equipment, depreciation and utilities. Research and development cost maybe offset by research and development refundable tax rebates received by our wholly-owned Australian subsidiary.

The Company has agreements with various Contract Research Organizations ("CROs") and third-party vendors. Research and development accruals of amounts due to the CRO are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued liabilities on the consolidated balance sheet. Payments made to CROs under such arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. The Company makes judgments and estimates in determining the accrued expenses balance in each reporting period. As actual costs become known, the Company adjusts its accrued expenses. For the years ended December 31, 2021 and 2020, the Company has not experienced any material differences between accrued costs and actual costs incurred.

Advertising Costs

Advertising costs are expensed as incurred. For the years ended December 31, 2021 and 2020, advertising costs were not significant.

Stock-Based Compensation

The Company accounts for all stock-based payments to employees and non-employees, including grants of stock options, RSAs, RSUs, including "PSUs" to be recognized in the financial statements, based on their respective grant date fair values. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The RSAs, RSUs and PSUs are valued based on the fair value of the Company's common stock on the date of grant. The assumptions used in calculating the fair value of stock-based awards represent management's best estimates and involve inherent uncertainties and the application of management's judgment. The Company records expense for stock-based compensation related to stock options, RSAs and RSUs over the requisite service period. As the PSUs have a performance condition, compensation expense is recognized for each vesting tranche over the respective requisite service period of each tranche if and when the Company's management deems probable that the performance conditions will be satisfied. The Company may recognize a cumulative true-up adjustment related to PSUs once a condition becomes probable of being satisfied if the related service period had commenced in a prior period. All share-based compensation costs are recorded in general and administrative or research and development costs in the consolidated statements of operations based upon the respective employees or non-employee's roles within the Company. Forfeitures are recorded as they occur.

Income Taxes

Income taxes are recorded in accordance with ASC 740, Income Taxes ("ASC 740"), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.

Net Loss Per Share

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of convertible preferred stock, common stock options, warrants and unvested shares of restricted stock and restricted stock units because their effect would be anti-dilutive due to the Company's net loss. Since the Company had net losses for the years ended December 31, 2021 and 2020, basic and diluted net loss per common share are the same.

Comprehensive Loss

Comprehensive loss represents the net loss for the period and other comprehensive income. Other comprehensive income reflects certain gains and losses that are recorded as a component of stockholders’ deficit and are not reflected in the statements of operations. The Company’s other comprehensive income consists of foreign currency translation adjustments.

Recently Adopted Accounting Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt-Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity's Own Equity, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU No. 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2021. Early adoption is permitted for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021, which did not have material impact on its consolidated financial statements and related disclosures.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740)-Simplifying the Accounting for Income Taxes (ASU 2019-12), which is intended to simplify accounting for income taxes. It removes certain exceptions to the general principles in Topic 740 and amends existing guidance to improve consistent application. ASU 2019-12 was effective for the Company for fiscal years beginning after December 15, 2020, including interim periods therein. The Company adopted this standard as of January 1, 2021, which did not have material impact on its consolidated financial statements and related disclosures.

In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815)-Clarifying the Interactions between Topic 321, Topic 323, and Topic 815 (a consensus of the Emerging Issues Task Force). This update clarifies whether an entity should consider observable transactions that require it to either apply or discontinue the equity method of accounting for the purposes of applying the measurement alternative and how to account for certain forward contracts and purchased options to purchase securities. For public entities, this guidance was effective for fiscal years beginning after December 15, 2020. The Company adopted this standard as of January 1, 2021, which did not have material impact on its consolidated financial statements and related disclosures.

In October 2020, the FASB issued ASU No. 2020-10, Codification Improvements. ASU 2020-10 provides amendments to a wide variety of topics in the FASB’s Accounting Standards Codification, which applies to all reporting entities within the scope of the affected accounting guidance. ASU 2020-10 was effective for the Company for fiscal years beginning after December 15, 2020, including interim periods therein. The Company adopted this standard as of January 1, 2021, which did not have material impact on its consolidated financial statements and related disclosures.

In November 2021, the FASB issued Accounting Standards Update (ASU) 2021-10, Government Assistance (Topic 832): Disclosures by Business Entities about Government Assistance. ASU 2021-10 requires business entities to disclose, in notes to their financial statements, information about certain types of government assistance they receive. ASU 2021-10 also adds a new Topic 832, Government Assistance, to the FASB’s Codification. ASU 2021-10 is effective for financial statements of all entities, including private companies, for annual periods beginning

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

after December 15, 2021, with early application permitted. The Company adopted this standard as of January 1, 2021, which did not have material impact on its consolidated financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326) Measurement of Credit Losses on Financial Instruments (ASU No. 2016-13), which requires an entity to utilize a new impairment model known as the current expected credit loss (“CECL”) model to estimate its lifetime “expected credit loss” and record an allowance that, when deducted from the amortized cost basis of the financial assets and certain other instruments, including but not limited to available-for-sale debt securities. Credit losses relating to available-for-sale debt securities will be recorded through an allowance for credit losses rather than as a direct write-down to the security. As an emerging growth company, ASU No. 2016-13 is effective for the Company for fiscal years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on its consolidated financial statements.

Note 3—Revenue and Deferred Revenue

Grant Revenue

For the years ended December 31, 2021 and 2020, the Company recognized grant revenue of $0.8 million and $2.7 million, respectively.

Contract Revenue

The Company’s contract revenue has been generated from payments received pursuant to a license agreement (the "Vifor License") with Vifor International, Ltd. ("Vifor Pharma") with headquarters located in Switzerland. The Company recognized revenue from upfront payments over the term of our estimated period of performance using a cost-based input method under Topic 606. The Company expects to continue recognizing revenue from upfront payments related to the Vifor License using the cost-based input method.

Vifor License Agreement

In November 2020, the Company entered into a license agreement with Vifor Pharma, granting Vifor Pharma global rights (excluding China, Taiwan, Hong Kong and Macau) to develop, manufacture and commercialize ANG-3777 in all therapeutic, prophylactic and diagnostic uses for renal indications, including forms of acute kidney injury (AKI), and congestive heart failure (collectively, the Renal Indications). Pursuant to the Vifor License, the Company received $60 million in upfront and equity payments, including $30 million in up-front cash received in November 2020, and a $30 million equity investment, $5 million of which was a convertible note that subsequently converted into common stock with the IPO and $25 million of which was received in the Concurrent Private Placement with the Company’s IPO. The Company is also eligible to receive post-approval milestones of up to approximately $260.0 million and sales-related milestones of up to $1.585 billion, providing a total potential deal value of up to $1.925 billion (subject to certain specified reductions and offsets), plus tiered royalties on net sales of ANG-3777 at royalty rates of up to 40%. Under the Vifor License, the Company is responsible for executing a pre-specified clinical development plan designed to obtain regulatory approvals of ANG-3777 for delayed graft function (DGF) and AKI associated with cardiac surgery involving cardiopulmonary bypass (CSA-AKI). Based on the ANG-3777 clinical trial data disclosed in the fourth quarter of 2021, the Company does not expect to receive any

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

additional clinical, post-approval, or sales milestones, or royalties, as it does not intend to continue to pursue the clinical development plan for ANG-3777 set forth in the Vifor License.

On October 26, 2021, the Company announced that its Phase 3 trial of ANG-3777 in DGF did not achieve its primary endpoint and the data from the Phase 3 trial was not expected to provide sufficient evidence to support an indication in the studied DGF population. On December 9, 2021, the Company announced its Phase 2 trial of ANG-3777 in CSA-AKI did not achieve its primary endpoint and the data from the Phase 2 trial was not expected to provide sufficient evidence to support a Phase 3 trial in the studied CSA-AKI population. Angion and Vifor continue to analyze data from the CSA-AKI trial. The Company does not intend to continue the clinical development plan for ANG-3777 set forth in the Vifor License, which had included a Phase 3 study in CSA-AKI and a Phase 4 confirmatory study in DGF. In 2022, we and Vifor Pharma continue to work to complete the planned analyses of the results of the clinical trials announced in the fourth quarter of 2021 and to discuss the future of the collaboration based upon such analyses.

Vifor Pharma may terminate the Vifor License at its sole discretion upon the earlier of (i) the acceptance for filing of an NDA covering products incorporating ANG-3777 filed with the FDA (after completion of the relevant Phase 3 clinical trial for such products), or (ii) the third anniversary of the effective date of the Vifor License. Both the Company and Vifor Pharma may terminate the Vifor License in its entirety if the other is in material breach of the Vifor License and has not cured the breach (if curable) within 60 days, or 90 days for incurable breach. In certain circumstances, in the event of the Company’s material breach of the Vifor License, Vifor Pharma may terminate the Vifor License with respect to certain major markets. In addition, both parties have the right to terminate the Vifor License upon insolvency of the other party.

The Company identified the following performance obligations in the Vifor License based upon the clinical development plan for ANG-3777: (1) the global license (excluding greater China), (2) the development services, including the clinical development services including a post-approval confirmatory study, the technical development services and regulatory services and (3) the required participation on Joint Committees for coordination and oversight. The Company determined that the license is not capable of being distinct due to the specialized nature of the development services to be provided by the Company, and, accordingly, this promise was combined with the development services and participation in the joint committees as one single performance obligation.

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract. Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price at contract inception. The Company determined that the transaction price at the inception of the Vifor License is $15.0 million, which is 50% of the $30.0 million upfront payment due to the potential setoff defined in the contract. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

In the fourth quarter of 2021, the Company reported topline results from two ANG-3777 clinical trials under the Vifor License. The Company determined it will no longer continue the current clinical development plan for ANG 3777 DGF and CSA-AKI, which had included a Phase 3 study for CSA-AKI and a Phase 4 confirmatory study in DGF, given neither trial achieved statistical significance on its primary endpoint. In connection therewith, the Company adjusted the transaction price to include $15.0 million in previously constrained variable consideration. As of December 31, 2021, the Company concluded that it has significantly satisfied the performance obligation under Vifor License and will fully conclude the ANG-3777 project by the end of 2022.

Using the cost-based input method, the Company recognizes revenue based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligation. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. These actual costs consist primarily of internal full time equivalent (FTE) efforts and third-party contract costs related to the Vifor License.

The Company reassessed the performance period as the Company is currently closing out the planned analyses from both trials but does not intend to continue the clinical development plan for ANG-3777 set forth in the Vifor License, which had included a Phase 3 study for CSA-AKI and a Phase 4 confirmatory study in DGF, given these clinical results. As such, the estimated date to fully conclude ANG-3777 by the end of December 2022 was determined to represent the completion of the Company’s performance obligation under the Vifor License. Additionally, the Company revised the total estimated costs for completion of the performance obligation to reflect

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

the winding down of ANG-3777-related studies. The performance period is expected to end in the fourth quarter of 2022 instead of the fourth quarter of 2026. The effect of this change in estimate was an increase in contract revenue by $24.2 million, a reduction in net loss by $24.2 million and an increase in basic and diluted earnings per share by $0.86 for the year ended December 31, 2021.

For the years ended December 31, 2021 and 2020, the Company recognized license revenue related to the Vifor License of $27.5 million and $0.2 million. As of December 31, 2021, $2.3 million was recorded as the current portion of deferred revenue on the consolidated balance sheet related to the Vifor License. As of December 31, 2020, $29.8 million was recorded as deferred revenue on the consolidated balance sheet related to the Vifor License.

Note 4—Fair Value Measurements

The following table classifies the Company's financial assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of December 31, 2021 and 2020 (in thousands):

Fair Value Measured at December 31, 2021

Assets included in:

Cash and cash equivalents—Money market securities (1) $ 87,252 $ — $ — $ 87,252

Liabilities included in:

Total fair value $ — $ — $ 114 $ 114

Fair Value Measured at December 31, 2020

Assets included in:

Cash and cash equivalents—Money market securities (1) $ 1 $ — $ — $ 1

Total fair value $ 1 $ — $ — $ 1

Liabilities included in:

Series C convertible preferred stock — — 2,518 2,518

___________________

(1) Included in cash and cash equivalents on the consolidated balance sheets. This balance includes cash requirements settled on a nightly basis.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

There were no transfers made among the three levels in the fair value hierarchy during periods presented.

The following table presents changes in Level 3 liabilities measured at fair value (in thousands):

Conversion of convertible notes into common stock (58,639) (58,639)

Both observable and unobservable inputs were used to determine the fair value of positions that the Company has classified within the Level 3 category. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

The Company used an option model to measure the fair value of the Notes (on conversion date). The values of the equity underlying the conversion options in the model were estimated using equity values implied from sales of convertible preferred stock. The fair value of the Notes was impacted by the model selected as well as assumptions surrounding unobservable inputs. Key unobservable inputs include the expected volatility of the underlying equity, and the timing of an expected liquidity event.

The fair value of the warrants issued by the Company has been estimated using a variant of the Black Scholes option pricing model. The underlying equity included in the Black Scholes option pricing model was valued based on the equity value implied from sales of preferred and common stock at each measurement date. The fair value of the warrants was impacted by the model selected as well as assumptions surrounding unobservable inputs including the underlying equity value, expected volatility of the underlying equity, risk free interest rate and the expected term.

Convertible Notes

The fair value adjustment during the year ended December 31, 2021 was based on the final settlement amount using a conversion price of $11.57 per share on February 9, 2021. Subsequent to the closing of the IPO, there were no convertible notes outstanding.

Series C Preferred Stock

Warrant Liability

The fair value adjustment for the net exercise of warrants with an exercise price of $6.43 during the year ended December 31, 2021 was based on the final settlement amount using the IPO price on February 9, 2021. Subsequent to the closing of the IPO, the fair value of the warrants issued by the Company were estimated using a variant of the Black Scholes option pricing model. The underlying equity included in the Black Scholes option pricing model was valued based on the closing price of common stock at each measurement date.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

During the years ended December 31, 2021 and 2020, the fair value of the warrants increased by $2.9 million and $4.9 million, respectively. The change in fair value of warrant liability in both periods was recognized in the consolidated statements of operations.

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company's warrant liabilities that were categorized within Level 3 of the fair value hierarchy as of December 31, 2021 and 2020 was as follows:

December 31,

Contractual term (years) 1.2 4.9

Volatility (annual) 74.6 % 86.8 %

Risk-free rate 0.7 % 0.1 %

Dividend yield (per share) 0.0 % 0.0 %

Note 5—Balance Sheet Components

R&D tax credit receivable

The Company also recorded an Australian tax credit as provided by the Australian Taxation Office for qualified research and development expenditures incurred through its subsidiary, Savara Australia Pty. Limited. Under Australian tax law, Australia remits a research and development tax credit equal to 43.5% of qualified research and development expenditures, not to exceed established thresholds. During the year ended December 31, 2021, the Company generated an Australian tax credit of $0.8 million which was included in prepaid expenses and other current assets on the consolidated balance sheets and the Company received the tax credit in January 2022.

Property and Equipment, Net

The Company's property and equipment, net was comprised of the following (in thousands):

December 31,

Furniture and fixtures 34 27

Leasehold improvements 68 43

Total property and equipment 968 582

Less: accumulated depreciation (517) (426)

Property and equipment, net $ 451 $ 156

Depreciation expense for the years ended December 31, 2021 and 2020 was $0.1 million.

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

Prepaid and Other Current Assets

Prepaid and other current assets were comprised of the following (in thousands):

December 31,

Deferred Offering costs $ — $ 1,978

Prepaid clinical fees 168 —

Business insurance 275 —

Security deposit 131 —

Convertible note receivable — 5,000

Total prepaid and other current assets $ 1,685 $ 7,690

Accrued Expenses

Accrued expenses were comprised of the following (in thousands):

December 31,

Accrued direct research costs 1,196 1,321

Accrued operating expenses 749 707

Accrued interest — 1,483

Note 6—Convertible Notes Payable

As of December 31, 2020, the Company had convertible notes with an aggregate principal amount of $39.8 million and $1.8 million accrued interest outstanding.

Conversion of Convertible Notes Payable

In January 2021, the Company issued 33,978 shares of common stock upon the conversion of certain of the outstanding 2020 Notes. In connection with the IPO in February 2021, with an IPO price of $16.00 per share, the remaining outstanding convertible notes were converted into 3,636,189 shares of the Company’s common stock based on a conversion price of $11.57 per share. There were no convertible notes outstanding as of December 31, 2021.

Note 7— Series C Convertible Preferred Stock

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ELTX · 10-K · period ended 2021-12-31

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

Item7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

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ELTX · 10-K · period ended 2021-12-31

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

Item7A. Quantitative and Qualitative Disclosures About Market Risk

Item 8. Financial Statements and Supplementary Data.

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