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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 read carefully to gain an 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 biotechnology company pioneering the development of immunotherapies for patients with limited treatment options and poor outcomes suffering from cancer and infectious disease. Our proprietary Amphiphile (“AMP”) technology is designed to mobilize the body’s immune response by preferentially targeting our product candidates to the lymph nodes with the goal of generating a robust T cell response.Recent advances have identified T cell responses as a key component of effective cancer immunotherapy and we believe our AMP technology can generate a robust T cell response that can potentially provide meaningful clinical benefit.

We believe the therapeutic utility of currently approved and development stage immunotherapies are limited in many cases due to their inability to sufficiently localize to lymph nodes and adequately engage with the critical immune cells responsible for stimulating adaptive immunity.Our AMP technology is specifically intended to localize

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payloads to lymph nodes leading to the generation of a robust T cell response that we believe is critical to generate an anticancer immune response.

We have developed our cancer vaccine product candidates to target biologically validated tumor mutation drivers using known neoantigens.This strategy results in an “off-the-shelf” therapeutic option allowing patients to receive treatment without delay due to manufacturing timelines and costs associated with personalized vaccine approaches.

Our clinical and preclinical pipeline includes the lymph node targeted therapeutic cancer vaccines ELI-002, currently being evaluated in a Phase 2 clinical program, designed to stimulate an immune response against mutant KRAS cancers, ELI-007, currently being evaluated in a preclinical study for the treatment of mutant v-raf murine sarcoma viral oncogene homolog B1 (“BRAF”)-driven cancers, and ELI-008, currently being evaluated in a preclinical study for use in the treatment of mutated tumor protein p53 (“TP53”) expressing cancers.We believe that each of our cancer vaccine product candidates, if approved, have the potential to improve the lives of patients suffering from solid tumors arising due to specific oncogenic driver mutations.

Our operations to date have been financed primarily by aggregate net proceeds of $106.6 million from the issuance of common stock, convertible preferred stock, convertible notes, and the exercise of stock options and common stock warrants and proceeds from the Merger. Since inception, we have had significant annual operating losses. Our net loss was $35.2 million and $28.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $142.2 million and $12.9 million in cash and cash equivalents.

Elicio Operating Company, Inc. (“Former Elicio”) was incorporated in Delaware as Vedantra Pharmaceuticals Inc. in August 2011. In December 2018, Former Elicio formed a wholly owned subsidiary, Elicio Securities Corporation, a Massachusetts corporation.

On January 17, 2023, Former Elicio entered into a definitive merger agreement (the “Merger Agreement”) with Angion Biomedica Corp (“Angion”), a clinical-stage biotechnology company, and Arkham Merger Sub, Inc., a wholly owned subsidiary of Angion (“Merger Sub”), pursuant to which Merger Sub merged with and into Former Elicio, with Former Elicio surviving the merger as a wholly owned subsidiary of Angion (the “Merger”).

On June 1, 2023, the Merger was completed in accordance with the terms and conditions of the Merger Agreement and Angion changed its name from “Angion Biomedica Corp.” to “Elicio Therapeutics, Inc.” Immediately following the consummation of the Merger, there were approximately 9.7 million shares of our common stock outstanding on a fully-diluted basis, with Former Elicio equity holders collectively owning approximately65.2% of the Company and Angion equity holders collectively owning approximately34.8%of the Company, in each case on a fully diluted basis. The Merger was accounted for as a reverse recapitalization, with Former Elicio being treated as the acquirer for accounting purposes. As a result of the Merger, the net assets of Angion were recorded at their acquisition-date fair value, which approximated book value due to the short-term nature of the instruments, in the financial statements of Former Elicio and the reported operating results prior to the Merger were those of Former Elicio.

We are currently facing substantial doubt about our ability to continue as a going concern, given our cash position and cash runway. We believe that our cash on hand will enable us to fund our operations into the third quarter of 2024 based on our current plan. This period could be shortened if there are any significant increases in planned or actual spending on development programs or more rapid progress of development programs than anticipated. There is no assurance that financing will be available when needed to allow us to continue as a going concern. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. We plan to address this condition through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions, but there is no assurance these plans will be completed successfully or at all.If we are unable to obtain additional capital when and as needed to continue as a going concern, we might have to further reduce or scale back our operations and/or liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Our consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.

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Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our accounts payable and accrued expenses. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses, general and administrative expenses, and capital expenditures will continue to increase. In particular, we expect our expenses to increase as we continue our development of, and seek regulatory approvals for, our product candidates, as well as hire additional personnel, pay fees to outside consultants, attorneys and accountants, and incur other increased costs associated with being a public company. In addition, if and when we seek and obtain regulatory approval to commercialize any product candidate, we will also incur increased expenses in connection with commercialization and marketing of any such product. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities. We anticipate that our expenses will increase significantly in connection with our ongoing activities, as we:

• advance our lead product candidate, ELI-002, to late stage clinical trials;

• advance our preclinical programs to clinical trials;

• expand our pipeline of product candidates;

• seek regulatory approval for our investigational medicines;

• maintain, expand, protect and defend our intellectual property portfolio;

• acquire or in-license technology;

• expand our clinical, scientific, management and administrative teams; and

• operate as a public company.

We believe that our cash on hand will enable us to fund our operations into the third quarter of 2024 based on our current plan. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. To finance our operations beyond that point we will need to raise additional capital, which cannot be assured. Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the consolidated financial statements, raise substantial doubt about our ability to continue as a going concern.

We have not had any products approved for sale. We do not expect to generate any product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. As a result, until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including collaborations, licenses or similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed or on favorable terms, if at all. Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies, including our research and development activities. If we are unable to raise capital, we will need to delay, reduce or terminate planned activities to reduce costs.

Components of Results of Operations

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

Operating Expenses

Our operating expenses since inception have consisted primarily of research and development expenses and general and administrative costs.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred for the development of our product candidates and our drug discovery efforts, which include:

• personnel costs, which include salaries, benefits and equity-based compensation expense;

• expenses incurred under agreements with consultants and contract organizations that conduct research and

development activities on our behalf;

• costs related to sponsored research service agreements;

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• costs related to production of preclinical and clinical materials, including fees paid to contract manufacturers;

• laboratory and vendor expenses related to the execution of preclinical studies and planned clinical trials; and

• laboratory supplies and equipment used for internal research and development activities.

We expense all research and development costs in the periods in which they are incurred. Costs for certain research and development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and service providers.

Our research and development expenses are not currently tracked on a program-by-program basis. We use our personnel and infrastructure resources across multiple research and development programs directed toward identifying and developing product candidates. Substantially all our research and development costs are incurred on the development of ELI-002 and ELI-004, an AMP adjuvant that is a significant component of ELI-002, and our preclinical candidates.

We expect our research and development expenses to increase substantially for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in conducting clinical trials, manufacturing and otherwise advancing our programs. The process of conducting the clinical research necessary to obtain regulatory approval is costly and time-consuming, and the successful development of our product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing and costs of the efforts that will be needed to complete the development of, or the period, if any, in which material net cash inflows may commence from ELI-002 or any of our preclinical candidates. 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 research and development activities;

•clinical trials and early-stage results;

•the terms and timing of regulatory approvals; and

•the ability to market, commercialize and achieve market acceptance for ELI-002, or any of our preclinical candidates that we or our future collaboration partners may develop in the future.

Any of these variables with respect to the development of ELI-002, or any other of our preclinical candidates that we may develop could result in a significant change in the costs and timing associated with the development of such candidates. For example, if the FDA or other regulatory authority were to require us to conduct preclinical and clinical studies beyond those which we currently anticipate will be required for the completion of clinical development or if we experience significant delays in enrollment in any 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

Our general and administrative expenses consist primarily of personnel costs, including equity-based compensation, and other expenses for outside professional services, including marketing, legal, audit and accounting, facility-related costs not otherwise included in research and development expenses, and recruiting. We expect our general and administrative expenses to increase over the next several years to support our continued research and development activities, manufacturing activities, increased costs of expanding our operations and operating as a public company. These increases will likely include increases related to the hiring of additional personnel and legal, regulatory and other fees and services associated with maintaining compliance with Nasdaq Stock Market LLC (“Nasdaq”), Marketplace Rules, or the Nasdaq Listing Rules and Securities and Exchange Commission (“SEC”) requirements, accounting and audit fees, director and officer insurance costs and investor relations costs associated with being a public company.

Other Income (Expense)

For the years ended December 31, 2023 and 2022, other income and expense consisted primarily of interest income, foreign exchange transaction losses, loss on sale of equipment, interest expense, changes in fair value of the embedded derivative, gain on extinguishment of promissory notes, and gains and losses related to the re-measurement of our warrant liabilities.

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Results of Operations

Comparison for the Years Ended December 31, 2023 and 2022

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

Year Ended December 31,

(In thousands, except percentages)

Operating expenses:

_______________________

Research and Development Expenses

Research and development expenses increased by $5.7 million, or 31.7%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The net increase in research and development expenses was primarily due to an increase in external costs associated with ELI-002 manufacturing and clinical trials.

General and Administrative Expenses

General and administrative expenses increased by $6.3 million, or 111.3%, for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to higher personnel-related costs in support of organizational growth and higher professional fees incurred in connection with the Merger and operating as a public company.

Other Income (Expense), Net

Other income (expense), increased by $5.0 million for the year ended December 31, 2023 compared to the year ended December 31, 2022. The increase was primarily due to reduced interest expense associated with the promissory notes.

Liquidity and Capital Resources

Sources and Uses of Liquidity

Our operations through December 31, 2023 have been financed primarily by aggregate net proceeds of $106.6 million from the issuance of common stock, convertible preferred stock, convertible notes, the exercise of stock options and common stock warrants and proceeds from the Merger. Since inception, we have had significant operating losses. Our net loss was $35.2 million and $28.2 million for the years ended December 31, 2023 and 2022, respectively. As of December 31, 2023, we had an accumulated deficit of $142.2 million and $12.9 million in cash and cash equivalents. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

Our losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the consolidated financial statements, raise substantial doubt about our ability to continue as a going concern. We expect to incur substantial expenditures in the foreseeable future for the development of our product candidates and will require additional financing to continue this development. The consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K have been prepared on a basis that assumes that we will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern. We plan to address this condition through the sale of common stock in public

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offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. However, there is no assurance that we will be successful in raising additional capital or that such additional funds will be available on acceptable terms, if at all. Should we be unable to raise this amount of capital our operating plans will be limited to the amount of capital that we can access. We may also consider steps to reduce our operating expenses. There can be no assurances that we will be successful in any of the foregoing.

Summary Statement of Cash Flows

The following table sets forth a summary of our net cash flow activity for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31,

Net cash provided by (used in)

Investing activities (32) (654)

Effect of foreign currency on cash — —

Net (decrease) increase in cash $ 5,887 $ (1,631)

Operating activities

For the year ended December 31, 2023, net cash used in operating activities was $32.7 million, which primarily consisted of a net loss of $35.2 million and the change in net operating assets and liabilities of $0.1 million partially offset by the net non-cash charges of $2.6 million. The change in net operating assets and liabilities of $0.1 million was the result of a $0.7 million decrease in the deferred research obligation, $0.8 million decrease in prepaid assets, and $0.8 million decrease in the operating lease liability offset by an increase in accounts payable and accrued expenses of $2.2 million. The $2.6 million of net non-cash charges were related to $1.1 million of interest expense related to the accretion of promissory notes payable, $1.2 million of stock-based compensation, $0.8 million related to the amortization of the right-of-use asset, $0.4 million of depreciation, $0.1 million loss on disposal of property and equipment partially offset by $0.4 million increase in the fair value of the embedded derivative associated with the promissory notes payable and $0.6 million of gain on the extinguishment of the promissory notes payable.

For the year ended December 31, 2022, net cash used in operating activities was $22.2 million, which primarily consisted of a net loss of $28.2 million and a change in net operating assets and liabilities of $0.2 million, partially offset by net non-cash charges of $6.2 million. The change in net operating assets and liabilities of $0.2 million was the result of a $1.8 million decrease in prepaid assets and a $0.5 million decrease in the operating lease liability offset by an increase in accounts payable and accrued expenses of $0.8 million, and an increase of the deferred research obligation of $1.4 million. The net non-cash charges of $6.2 million were primarily related to $3.6 million of non-cash interest expense, $0.9 million of non-cash change in the fair value of the embedded derivative, $0.4 million of depreciation expense, $0.7 million related to amortization of the right-of-use asset associated with our operating leases and $0.6 million of stock-based compensation expense.

Investing activities

For the year ended December 31, 2023, an immaterial amount of cash was provided or used in investing activities, and for the year ended December 31, 2022, net cash used in investing activities was $0.7 million, primarily used to purchase capital equipment.

Financing activities

For the year ended December 31, 2023, net cash provided by financing activities was $38.6 million, comprised of $31.6 million of net proceeds from the Merger and $7.0 million of proceeds from the sale of common stock. For the year ended December 31, 2022, net cash provided by financing activities was $21.2 million, comprised of $21.1 million of net proceeds from the issuance of Series C preferred stock and $0.1 million of proceeds from the exercise of common stock options.

Future Cash Needs and Funding Requirements

Based on our current operating plan, we believe our cash and cash equivalents will be sufficient to fund our planned operations into the third quarter of 2024. 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

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sooner than we expect. 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 product candidates, and conducting preclinical studies and clinical trials;

▪the outcome of any future clinical trials, for any existing or future product candidates;

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

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

▪the costs associated with any delays we may encounter as a result of evolving regulatory requirements or adverse results with respect to any of our product candidates;

▪the number and characteristics of product candidates we pursue, including 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 potentially 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 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 can generate significant revenue from sales of product candidates, if ever, we expect to finance our operations through the sale of common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions. Adequate funding may not be available to us on acceptable terms, or at all. To the extent 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 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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Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Going Concern

Our evaluation of our ability to continue as a going concern requires us to evaluate our future sources and uses of cash sufficient to fund our currently expected operations in conducting research and development activities one year from the date our audited consolidated financial statements are issued. We evaluate the probability associated with each source and use of cash resources in making our going concern determination. The research and development of pharmaceutical products is inherently subject to uncertainty.

Research and Development Costs

We will incur substantial expenses associated with manufacturing and clinical trials. Accounting for clinical trials relating to activities performed by contract research organizations (“CROs”) and other external vendors requires management to exercise significant estimates in regard to the timing and accounting for these expenses. We estimate costs of research and development activities conducted by service providers, which include the conduct of sponsored research, preclinical studies and contract manufacturing activities. The diverse nature of services being provided under CROs and other arrangements, the different compensation arrangements that exist for each type of service and the lack of timely information related to certain clinical activities complicates the estimation of accruals for services rendered by CROs and other vendors in connection with clinical trials. We record the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and include these costs in the accrued expenses or prepaid expenses on the balance sheets and within research and development expense on the consolidated statements of operations and comprehensive loss. In estimating the duration of a clinical study, we evaluate the start-up, treatment and wrap-up periods, compensation arrangements and services rendered attributable to each clinical trial and fluctuations are regularly tested against payment plans and trial completion assumptions.

We estimate these costs based on factors such as estimates of the work completed and budget provided and in accordance with agreements established with our collaboration partners and third-party service providers. We make significant judgments and estimates in determining the accrued liabilities and prepaid expense balances in each reporting period. As actual costs become known, we adjust our accrued liabilities or prepaid expenses. We have not experienced any material differences between accrued costs and actual costs incurred since our inception.

Our expenses related to clinical trials will be based on estimates of patient enrollment and related expenses at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and CROs that may be used to conduct and manage clinical trials on our behalf. We will accrue expenses related to clinical trials based on contracted amounts applied to the level of patient enrollment and activity. If timelines or contracts are modified based upon changes in the clinical trial protocol or scope of work to be performed, we will modify our estimates of accrued expenses accordingly on a prospective basis.

Leases

ASU No. 2016-02, Leases (ASC 842) establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and corresponding lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations and comprehensive loss as well as the reduction of the right of use asset.

At the inception of an arrangement, we determine whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and our control over the use of the identified asset(s), if applicable. Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, we will utilize the incremental borrowing rate, which is the

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rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

We have elected to combine lease and non-lease components as a single component. Operating leases are recognized on the consolidated balance sheet as ROU lease assets, current lease liabilities and non-current lease liabilities. Fixed rents are included in the calculation of the lease balances, while variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected term on a straight-line basis.

Stock-based Compensation

Prior to the Merger, we issued equity-based compensation awards through the granting of options, which generally vest over four years. We account for equity-based compensation in accordance with Accounting Standards Codification 718, Compensation - Stock Compensation (“ASC 718”). In accordance with ASC 718, compensation cost is measured at estimated fair value at grant date and is included as compensation expense over the vesting period during which service is provided in exchange for the award. Compensation cost of awards that contain a performance condition are recognized when success is considered probable during the performance period.

We use the Black-Scholes option pricing model (“Black-Scholes”) to determine fair value of our options. Black-Scholes includes various assumptions, including the fair value of common shares, expected life of incentive shares, the expected volatility, expected dividend yield, and the expected risk-free interest rate. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside our control. As a result, if other assumptions had been used, equity-based compensation cost could have been materially impacted. Furthermore, if we use different assumptions for future grants, equity-based compensation cost could be materially impacted in future periods.

The risk-free interest rate is estimated using the weighted average rate of return on U.S. Treasury notes with a life that approximates the expected life of the option. The expected term of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. We use the simplified method because we do not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The contractual life of the option was used for the expected life of options granted to non-employees. Expected volatility is based on the weighted average of the historical volatility of a peer group of publicly traded companies. The assumed dividend yield is based upon our expectation of not paying dividends in the foreseeable future.

We will continue to use judgment in evaluating the assumptions utilized for our equity-based compensation expense calculations on a prospective basis. In addition to the assumptions used in the Black-Scholes model, the amount of equity-based compensation expense we recognize in our consolidated financial statements includes incentive share forfeitures as they occurred.

Subsequent to the effective date of the Merger, we determine the fair value of our common stock based on the closing price of our common stock as reported by Nasdaq on the date of grant.

Derivative Financial Instruments

The convertible notes include an embedded derivative requiring bifurcation in accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging. The valuation of this instrument is determined using widely accepted valuation technique including the probability weighted expected return model. The fair value was determined using a model with the assumptions for equity value proceeds, probability of occurrence of various liquidation scenarios, timeline to liquidity and risk-free interest rate. The fair value of this derivative instrument is measured at each reporting period with changes in fair value reported in earnings. On October 18, 2022, in conjunction with the shares of Series C preferred stock issued on this same date, the convertible notes payable totaling $14.5 million and the related accrued interest totaling $1.1 million automatically converted into 1,370,187 shares of Series C preferred stock at an 80% discount to the Series C preferred stock issuance price per share of $14.23, or $11.39 per share. Just prior to settlement, the fair value of the embedded derivative was marked to market a final time to the aggregate value of $3.9 million. We recorded an immaterial gain on extinguishment related to the difference in the total of convertible notes payable, total accrued interest and the final fair value of the embedded derivative versus the value of the Series C preferred stock shares issued based on the original issuance price of $14.23 per share.

Contractual Obligations and Commitments

The following table summarizes our contractual obligations as of December 31, 2023:

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Payments due by period

We enter into contracts in the normal course of business with third-party service providers for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. We have not included our payment obligations under these contracts in the table as these contracts generally provide for termination upon notice, and therefore, we believe that our non-cancelable obligations under these agreements are not material and we cannot reasonably estimate the timing of if and when they will occur. We could also enter into additional research, manufacturing, supplier and other agreements in the future, which may require up-front payments and even long-term commitments of cash.

In January 2016, we licensed certain intellectual property from MIT on terms that have been amended from time to time. The license term extends until terminated by either party under certain provisions. We are required to pay certain contractual maintenance and milestone payments related to clinical trials and royalties on product sales over the term of the contract, with minimum annual royalty payments commencing in the calendar year after commercialization.

Recent Accounting Pronouncements

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 under 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 $1.235 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 (the “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.

Item 7A. 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 Elicio Therapeutics, Inc., listed below are set forth in Item 8 of this Annual Report for the years ended December 31, 2023 and 2022:

ELICIO THERAPEUTICS, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets 98

Consolidated Statements of Operations and Comprehensive Loss 99

Consolidated Statements of Cash Flows 102

Notes to Consolidated Financial Statements 104

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of Elicio Therapeutics, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Elicio Therapeutics, Inc. (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’ equity (deficit), and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered losses and negative cash flow from operations, and has an accumulated deficit as of December 31, 2023, that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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

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

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures 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/ Baker Tilly US, LLP

We have served as the Company's auditor since 2019.

Tewksbury, Massachusetts

March 29, 2024

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Consolidated Balance Sheets

(in thousands, except share and per share amounts)

December 31,

Assets

Current assets

Prepaid expenses and other current assets 2,732 2,920

Property and equipment, net 717 1,147

Operating lease, right-of-use assets 6,563 7,350

Restricted cash, noncurrent 685 617

Other long-term prepaid assets 2,833 2,833

Liabilities, convertible preferred stock, and stockholders’ equity (deficit)

Current liabilities

Deferred research obligation 694 1,436

Operating lease liability, current 910 692

Unvested option exercise liability, current 25 —

Warrant liability 11 —

Operating lease liability, noncurrent 6,007 6,789

Unvested option exercise liability, noncurrent — 92

Commitments and contingencies—Note 10

Convertible preferred stock:

Total convertible preferred stock — 111,060

Stockholders' equity (deficit):

Accumulated other comprehensive loss (197) —

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

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ELICIO THERAPEUTICS, INC.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

Year Ended December 31,

Operating expenses:

Other income (expense)

Change in fair value of warrant liability (2) —

Change in fair value of embedded derivatives 429 (945)

Gain on extinguishment of promissory notes payable 605 2

Foreign exchange transaction gain 204 —

Total other income (expense) 550 (4,475)

Other comprehensive loss:

Foreign currency translation adjustment (197) —

Net loss per common share, basic and diluted $ (6.96) $ (89.27)

Weighted average common shares outstanding, basic and diluted 5,056,225 315,998

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

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Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share amounts)

Shares Amount Shares Par Value Shares Amount

Vesting of restricted common stock — — 5,310 — — — 67 — — 67

Issuance of common stock related to service agreement — — 11,459 — — — 75 — — 75

Stock-based compensation — — — — — — 1,179 — — 1,179

Foreign currency translation adjustment — — — — — — — (197) — (197)

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

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Consolidated Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit)

(in thousands, except share amounts)

Shares Amount Shares Par Value Shares Amount

Stock-based compensation — — — — — — 579 — — 579

Issuance of common stock upon exercise of options — — 593 — — — 7 — — 7

Vesting of restricted common stock — — 9,488 — — — 13 — — 13

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

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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, operating leases 788 667

Change in fair value of embedded derivative (429) 945

Change in fair value of warrant liability 2 —

Non-cash professional services expense 75 —

Gain on extinguishment of promissory notes (605) (2)

Loss on disposal of property and equipment 105 4

Changes in operating assets and liabilities:

Prepaid expenses and other current assets (729) (1,985)

Other long-term prepaid assets — 114

Accrued expenses and other current liabilities 2,216 (305)

Deferred research obligation (742) 1,436

Operating lease liability (825) (535)

Net cash used in operating activities (32,694) (22,179)

Cash flows from investing activities

Purchases of property and equipment (66) (654)

Proceeds from sale of property and equipment 34 —

Net cash used in investing activities (32) (654)

Cash flows from financing activities

Cash acquired in connection with the reverse merger 24,001 —

Merger transaction costs (2,364) —

Proceeds from issuance of promissory notes payable 10,000 —

Proceeds from issuance of common stock per purchase agreement 6,999

Payment for purchase of treasury stock (150) —

Proceeds from exercise of stock options 127 82

Net cash provided by financing activities 38,613 21,202

Effect of foreign currency on cash — —

Components of cash, cash equivalents and restricted cash:

Total cash, cash equivalents and restricted cash $ 14,301 $ 8,414

Supplemental disclosure of noncash investing and financing activities:

Loss on disposal of property and equipment $ 105 $ 4

Non-cash issuance of Series C convertible preferred stock $ — $ 19,501

Settlement of promissory notes payable $ 10,027 $ —

Accretion of promissory note discount from embedded derivative $ 130 $ —

Accretion of promissory note to face value $ 897 $ —

Non-cash vesting of restricted common stock $ 67 $ 13

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Non-cash issuance of common stock to Angion stockholders $ 19,526 $ —

Non-cash issuance of common stock related to service agreement $ 75 $ —

Accretion of convertible note discount from embedded derivative $ — $ 2,344

Accretion of convertible note discount from issuance costs $ — $ 328

Interest expense from convertible notes payable $ — $ 923

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

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Notes to Consolidated Financial Statements

Note 1—Description of the Business and Financial Condition

Elicio Therapeutics, Inc. (“Elicio” or the “Company”) was incorporated in Delaware as Vedantra Pharmaceuticals Inc., in August 2011. Elicio is a clinical-stage biotechnology company developing a pipeline of novel immunotherapies for the treatment of cancer. In December 2018, Elicio formed a wholly-owned subsidiary, Elicio Securities Corporation (“ESC”), a Massachusetts corporation. ESC is an investment company. Elicio and ESC are collectively referred to as “Elicio” throughout these consolidated financial statements.

Reverse Merger Transaction

On January 17, 2023, the Company entered into a definitive merger agreement (the “Merger Agreement”) with Angion Biomedica Corp. (“Angion”), a clinical-stage biotechnology company, Arkham Merger Sub, Inc., a wholly owned subsidiary of Angion (“Merger Sub”), and Elicio Operating Company, Inc. (“Former Elicio”), pursuant to which Merger Sub merged with and into Former Elicio, with Former Elicio surviving the merger as a wholly owned subsidiary of Angion (the “Merger”).

On June 1, 2023, the Company completed the Merger in accordance with the terms and conditions of the Merger Agreement and Angion changed its name from “Angion Biomedica Corp.” to “Elicio Therapeutics, Inc.” Immediately following the consummation of the Merger, there were approximately 9.7 million shares of the Company’s common stock outstanding on a fully-diluted basis, with Former Elicio equity holders collectively owning approximately 65.2% of the Company and Angion equity holders collectively owning approximately 34.8% of the Company, in each case on a fully diluted basis.

The Merger was accounted for as a reverse recapitalization, with Former Elicio being treated as the acquirer for accounting purposes. See discussions of the transactions in connection with the Merger at Note 3 - Merger and Related Transactions.

Liquidity and Going Concern

The Company has experienced net losses and negative cash flows from operating activities since inception. As of December 31, 2023, the Company had an accumulated deficit of $142.2 million. The Company expects that its operating losses and negative operating cash flows will continue for the foreseeable future as the Company continues to develop its product candidates.

As of December 31, 2023, the Company had $12.9 million in cash and cash equivalents. The Company’s losses from operations, negative operating cash flows and accumulated deficit, as well as the additional capital needed to fund operations for at least twelve months following the issuance of the consolidated financial statements, raise substantial doubt about the Company’s ability to continue as a going concern. The Company expects to incur substantial expenditures in the foreseeable future for the development of its product candidates and will require additional financing to continue this development. The Company plans to address this condition through the sale of Company common stock in public offerings and/or private placements, debt financings, or through other capital sources, including licensing arrangements, partnerships and collaborations with other companies or other strategic transactions, but there is no assurance these plans will be completed successfully or at all.If the Company is unable to obtain additional capital when and as needed to continue as a going concern, it might have to further reduce or scale back its operations and/or liquidate its assets, and the values it receives for its assets in liquidation or dissolution could be significantly lower than the values reflected in its financial statements.

The accompanying consolidated financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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 (“U.S. GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States as found in the Accounting Standard Codification (“ASC”) and Accounting Standards Updates (“ASU”) of the Financial Accounting Standards Board (“FASB”).

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Notes to Consolidated Financial Statements (Continued)

The consolidated financial statements include the accounts of the Company, its wholly owned subsidiary, Elicio Australia Pty Ltd. (“Elicio Pty”), which was established on August 22, 2019, and its wholly-owned subsidiary, ESC, which was established in Massachusetts in December 2018. The Company established Elicio Australia Pty, an Australian subsidiary, for the purpose of qualifying for research credits for studies conducted in Australia and ESC is an investment company. All significant intercompany balances and transactions have been eliminated in consolidation.

Since Former Elicio was determined to be the accounting acquirer in connection with the Merger, for periods prior to the Merger, the consolidated financial statements were prepared on a stand-alone basis for Former Elicio and did not include the combined entities activity or financial position. Subsequent to the Merger, the consolidated financial statements as of and for the year ended December 31, 2023 include the acquired business from June 2, 2023 through December 31, 2023, and assets and liabilities at their acquisition date fair value. Historical share and per share figures of Former Elicio have been retroactively restated to reflect the impact of a reverse stock split completed in connection with and prior to the effective time of the Merger, based on the exchange ratio of 0.0181.

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. The Company has determined that the chief executive officer is the CODM.

Use of Estimates

The Company’s management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could materially differ from those estimates. Significant estimates reflected in these consolidated financial statements include but are not limited to, the accrual of research and development expenses, the valuation of stock-based awards, the operating right of use assets and operating lease liability, and going concern.

Foreign Currency Translation and Transactions

The Australian Dollar (“AUD”) is the functional currency for Elicio Pty. Accordingly, nonmonetary assets and liabilities originally acquired or assumed in other currencies are recorded in AUD at the date they were acquired or assumed. As part of the consolidation process, the Elicio Pty results are translated from AUD into the reporting currency of USD using average rates for profit and loss transactions and applicable spot rates for period-end balances. The effect of translating our functional currency into our reporting currency is reported separately in Accumulated Other Comprehensive Loss.

Concentrations of Credit Risk and Off-Balance Sheet Risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of cash, cash equivalents, and restricted cash. At times, cash balances deposited at major financial banking institutions exceed the federally insured limit. The Company regularly monitors the financial condition of the institutions in which it has depository accounts and believes the risk of loss is minimal. The Company has not experienced any losses in such accounts.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of deposits at major financial banking institutions and highly liquid investments with an original maturity of three months or less at the date of purchase. As of December 31, 2023 and 2022, the Company’s cash equivalents were held in institutions in the United States and include deposits in a money market fund which were unrestricted as to withdrawal or use.

Restricted Cash

Restricted cash consists of cash securing a collateral letter of credit issued in connection with the Company’s facility operating lease and a research grant. See Notes 6 and 11 for further discussion.

Fair Value Measurement

The Company follows the guidance prescribed by ASC Topic 820, Fair Value Measurements, which establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The standard provides a consistent definition of fair value that focuses on an exit price which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the

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Notes to Consolidated Financial Statements (Continued)

measurement date. The standard establishes a three-level hierarchy for fair value measurements based on the nature of inputs used in the valuation of an asset or liability as of the measurement date.

Level 1: Observable inputs such as unadjusted quoted prices in active markets for identical assets or liabilities at measurement.

Level 2: Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts of financial instruments reflected in the consolidated balance sheets for cash and cash equivalents, current and non-current restricted cash, accounts payable, and accrued expenses approximate their respective fair values because of the short-term maturity of those financial instruments.

Property and Equipment

Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful life of the asset. Upon sale or retirement, the cost and accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is recorded in the consolidated statement of operations and comprehensive loss. Repair and maintenance expenditures are expensed as incurred. Construction in process is not depreciated until the asset is placed into service.

Asset Classification Estimated Useful Life

Equipment 5 years

Furniture and fixtures 3 years

Leasehold improvements Shorter of useful life or lease term

Impairment of Long-Lived Assets

Periodically, the Company evaluates its long-lived assets, which consist primarily of property and equipment, and right of use asset, for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. During the years ended December 31, 2023 and 2022, no impairments have occurred.

Derivative Financial Instruments

The convertible and promissory notes included embedded derivatives requiring bifurcation in accordance with ASC 815, Derivatives and Hedging. The valuation of the instruments was determined using widely accepted valuation techniques including the probability weighted expected return model. The fair value was determined using a model with the assumptions for equity value proceeds, probability of occurrence of various liquidation scenarios, timeline to liquidity and risk-free interest rate. The fair value of the derivative instruments was measured at each reporting period prior to settlement on October 18, 2022, with changes in fair value reported in earnings (loss).

Convertible Preferred Stock

Former Elicio had classified convertible preferred stock, par value $0.06 per share, (the “Preferred Stock”) as temporary equity in the accompanying consolidated balance sheets due to certain changes in control events that were outside of the Former Elicio’s control, including sale or transfer of control of Former Elicio, as holders of the Preferred Stock could cause redemption of the shares in these situations. Former Elicio did not accrete the carrying values of the Preferred Stock to the redemption values since a liquidation event was not considered probable as of December 31, 2022. Subsequent adjustments of the carrying values to the ultimate redemption values would be made only if it becomes probable that such a liquidation event will occur. During the year ended December 31, 2023 an immaterial error was discovered in Former Elicio's 2022 audited financial statements whereas the amount of

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Notes to Consolidated Financial Statements (Continued)

Series A and Series B Preferred Stock did not include 41,887 and 609,755 shares, respectively, that were deemed to be issued due to the antidilutive protection triggered by the Series C shares issued in October 2022 at a price below $1.00. As a result of the Merger, all Former Elicio preferred stock were converted into Company common stock on June 1, 2023. See Note 7.

Income Taxes

The Company provides for income taxes in accordance with ASC Topic 740, Income Taxes. Deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates and laws in effect in the years in which the differences are expected to reverse. A valuation allowance is provided if, based upon the weighted available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company provides reserves for potential payments of tax to various tax authorities related to uncertain tax positions when the Company management determines that it is probable that a loss will be incurred related to these matters and the amount of the loss is reasonably determinable. The Company has not identified any significant uncertain tax positions as of December 31, 2023.

Research and Development

Research and development costs are charged to expense as incurred and consist of expenses incurred in performing research and development activities, including salaries and benefits, materials and supplies, preclinical expenses, stock-based compensation expense, depreciation of equipment, contract services, and other outside expenses. The Company accrues for costs incurred by external service providers, based on estimates of services performed and costs.These estimates include the level of services performed by the third parties, and other indicators of the services completed.Based on the timing of payments to service providers, the Company may also record prepaid expenses for those service providers that will be recognized as expenses in future periods as the related services are rendered. Research and development costs may be offset by research and development refundable tax rebates received by the Company’s wholly-owned Australian subsidiary.

Leases

ASU No. 2016-02, Leases (“ASC 842”) establishes a right-of-use model (“ROU”) that requires a lessee to recognize a ROU asset and corresponding lease liability on the balance sheet for all leases with a term longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the consolidated statements of operations as well as the reduction of the ROU asset.

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on specific facts and circumstances, the existence of an identified asset(s), if any, and the Company’s control over the use of the identified asset(s), if applicable. Operating lease liabilities and their corresponding ROU assets are recorded based on the present value of future lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company will utilize the incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

The Company has elected to combine lease and non-lease components as a single component. Operating leases are recognized on the consolidated balance sheet as ROU lease assets, current lease liabilities and non-current lease liabilities. Fixed rents are included in the calculation of the lease balances, while variable costs paid for certain operating and pass-through costs are excluded. Lease expense is recognized over the expected term on a straight-line basis.

Research Grant

The Company analogizes to the guidance provided by International Accounting Standards 20, Accounting for Government Grants and Disclosure of Government Assistance (“IAS 20”) for funds received from grants from entities that are not customers nor government agencies. The Company recognizes the amount of grant income based on the activity in allowable expenses covered under the grant and has elected to recognize the funds earned as an offset to the related research expenses recorded in operations. Advances from the grant that have yet to be recognized are recorded as restricted cash if the grant requires the funds to be isolated from general cash and cash equivalents. The Company records a liability for any research activity that is required under the grant but has not yet been performed. The liability is recorded as deferred research obligation on the consolidated balance sheets.

Stock-Based Compensation

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Notes to Consolidated Financial Statements (Continued)

The Company issues stock-based awards to employees and non-employees, generally in the form of stock options. The Company accounts for stock-based awards in accordance with ASC 718, Compensation—Stock Compensation, which requires all stock-based payments, to be recognized in the consolidated statements of operations based on their fair values. The expense is recognized on a straight line basis over the requisite service period, which is generally the vesting period. The Company has elected to account for option forfeitures as they occur.

The Company uses the Black-Scholes option-pricing model (“Black-Scholes”) to determine the weighted-average fair value of options granted, which uses as inputs the fair value of the Company common stock, assumptions the Company makes for the volatility of its Company common stock, the expected term of its stock options, the risk-free interest rate for a period that approximates the expected term of its stock options and its expected dividend yield.

Compensation cost of awards that contain a performance condition are recognized when success is considered probable during the performance period.

Prior to the Merger, there was no public market for Former Elicio’s common stock. The estimated fair value of the Company’s common stock underlying Former Elicio’s stock-based awards was determined by Former Elicio’s board of directors as of the grant date of each option grant. To determine the fair value of Former Elicio’s common stock underlying option grants, Former Elicio’s board of directors considered, among other things, input from management and valuations of Former Elicio's common stock prepared by third-party valuation firms performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants' Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Following the Merger, the fair value of Company’s common stock is based on the closing stock price on the date of grant as reported on the Nasdaq Global Select Market.

Net Loss Per Share

Basic net loss per share of Company common stock is computed by dividing net loss attributable to Company common stockholders by the weighted average number of shares of Company common stock outstanding for the period. Diluted net loss per share excludes the potential impact of Company common stock options, warrants and unvested shares of restricted stock 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, 2023 and 2022, basic and diluted net loss per common share are the same.

Comprehensive Loss

Comprehensive loss is defined as a change in equity during a period from transactions and other events and circumstances from non-owner sources.

Recently Adopted Accounting Pronouncements

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. The Company adopted ASU No. 2016-13 on January 1, 2023 and the adoption of the standard had no material impact on its consolidated financial statements.

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 (“ASU No. 2020-16”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The Company adopted ASU No. 2020-06 on January 1, 2023 and the adoption of the standard had no material impact on its consolidated financial statements.

Recently Issued Accounting Standards Not Yet Adopted

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Except as noted below, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its consolidated financial statements and disclosures.

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Notes to Consolidated Financial Statements (Continued)

In November 2023, the FASB issued No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. This ASU broadens the disclosure requirements by requiring disclosures of significant segment expenses that are regularly provided to the CODM and included within each reported measure of segment profit or loss. The standard also requires entities to disclose, on an interim and annual basis, the amount and description, including the nature and type, of the other segment items. Additionally, entities are required to disclose the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. These enhanced disclosure obligations apply to entities that operate with one reportable segment as well. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024 on a retrospective basis. Early adoption is permitted. We are currently assessing the impact that this new accounting standard will have on our consolidated financial statements and disclosures.

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The standard requires entities to disclose federal, state, and foreign income taxes in their rate reconciliation tables and elaborate on reconciling items that exceed a quantitative threshold. Additionally, it requires an annual disclosure of income taxes paid, net of refunds, categorized by jurisdiction based on a quantitative threshold. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. Early adoption is permitted. This ASU will result in the required additional disclosures being included in our consolidated financial statements, once adopted.

Note 3—Merger and Related Transactions

As described in Note 1, Former Elicio merged with a wholly owned subsidiary of Angion on June 1, 2023. The Merger was accounted for as a reverse recapitalization under U.S. GAAP. Former Elicio was considered the accounting acquirer for financial reporting purposes. This determination was based on the facts that, immediately following the Merger: (i) Former Elicio stockholders own a substantial majority of the voting rights; (ii) Former Elicio designated a majority (six of nine) of the initial members of the Company’s board of directors of the combined company; (iii) Former Elicio’s executive management team became the management team of the combined company; and (iv) the Company was named Elicio Therapeutics, Inc. and is headquartered in Boston, Massachusetts. Accordingly, for accounting purposes, the Merger was treated as the equivalent of Former Elicio issuing stock to acquire the net assets of Angion. As a result of the Merger, the net assets of Angion were recorded at their acquisition-date fair value, which approximated book value due to the short-term nature of the instruments, in the financial statements of Former Elicio and the reported operating results prior to the Merger were those of Former Elicio. Historical common share amounts of Former Elicio have been retroactively restated based on the exchange ratio of 0.0181 (the “Exchange Ratio”). It was concluded that any in-process research and development assets that remained as of the Merger would be de minimis when compared to the cash and investments obtained through the Merger.

Prior to the effective time of the Merger, on June 1, 2023, in connection with the transactions contemplated by the Merger Agreement, the Company effected a reverse stock split of Angion’s common stock, par value $0.01 per share (“Angion common stock”), at a ratio of 10:1 (the “Reverse Stock Split”). At the effective time of the Merger, each outstanding share of Former Elicio capital stock (after giving effect to the automatic conversion of all shares of Former Elicio preferred stock into shares of Former Elicio common stock and excluding any shares held as treasury stock by Former Elicio or held or owned by Angion or any subsidiary of Angion or Former Elicio and any dissenting shares) was converted into the right to receive 0.0181 shares of Angion common stock, which resulted in the issuance by Angion of an aggregate of 5,375,751 shares of Angion common stock to the stockholders of Former Elicio (the “Exchange Shares”), and a total of 8,387,025 shares of the Company common stock being issued and outstanding immediately following the effective time of the Merger. In addition, Angion assumed the Elicio 2022 Equity Incentive Plan and the Elicio 2012 Equity Incentive Plan (the “Elicio Plans”) and each outstanding and unexercised option to purchase Former Elicio common stock and each outstanding and unexercised warrant to purchase Former Elicio capital stock were adjusted with such stock options and warrants henceforth representing the right to purchase a number of shares of the Company’s common stock equal to the Exchange Ratio multiplied by the number of shares of Former Elicio common stock previously represented by such options, and warrants at an exercise price equal to the exercise price of Former Elicio capital stock divided by the Exchange Ratio.

In connection with execution of the Merger Agreement, Angion made a bridge loan to Former Elicio pursuant to a note purchase agreement and promissory notes up to an aggregate principal amount of $12.5 million, issued with a 20% original issue discount, with an initial closing held substantially concurrently with the execution of the Merger Agreement for a principal amount of $6.25 million on account of a $5.0 million loan and an additional closing for a

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Notes to Consolidated Financial Statements (Continued)

principal amount of $6.25 million on account of a $5.0 million loan upon delivery by Former Elicio to Angion of Former Elicio’s audited financial statements for the year ended December 31, 2022.

As part of the recapitalization, the Company obtained the assets and liabilities listed below (in thousands):

Cash and cash equivalents $ 24,001

Other current assets 540

Accrued liabilities (2,438)

Net assets acquired $ 32,130

Per the terms of the Merger Agreement, upon completion of the Merger, all obligations owed by Former Elicio related to the promissory notes were automatically forgiven and the amount advanced by Angion, along with any accrued and unpaid interest, was credited towards the net cash balance used to calculate the assets and liabilities listed above. Upon settlement of the promissory notes, the Company recognized a gain of $0.6 million related to extinguishment of the promissory notes.

The Company recognized the net assets acquired, excluding the promissory notes and transaction costs of $2.9 million, as an increase to additional paid-in capital in the consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the year ended December 31, 2023.

Note 4—Fair Value Measurements

The following tables present the Company's financial assets and liabilities measured at fair value on a recurring basis and their assigned levels within the fair value hierarchy (in thousands):

Fair Value Measured at December 31, 2023

Money market funds (1) $ 5,973 $ — $ — $ 5,973

Warrant liabilities $ — $ — $ 11 $ 11

Total Liabilities $ — $ — $ 11 $ 11

Fair Value Measured at December 31, 2022

Money market funds (1) $ 5,340 $ — $ — $ 5,340

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Notes to Consolidated Financial Statements (Continued)

___________________

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

Cash equivalents at December 31, 2023 and 2022 were held in U.S. Treasury Securities.

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

As part of the Merger transaction, Former Elicio adopted Angion’s warrant liabilities. The following table presents a summary of changes in Level 3 in the fair value of the Company’s common stock warrant liability (in thousands):

Balance, beginning of year $ — $ —

Existing Angion Warrant Liability 9 —

Change in fair value 2 —

Balance, end of year $ 11 $ —

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 assets and 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 fair value of the warrants issued by the Company has been estimated using a variant of Black-Scholes. The underlying equity included in Black-Scholes 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.

The Company records the change in the fair value of common stock warrants in change in fair value of warrant liability in the consolidated statements of operations.

The fair value of the common stock warrant liability was estimated using the following assumptions:

Contractual term (years) 4.7 5.2

Risk-free rate 3.9 % 3.9 %

Dividend yield (per share) 0.0 % 0.0 %

Note 5—Balance Sheet Components

Prepaid and Other Current Assets

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

December 31,

Prepaid research and development contract services $ 1,883 $ 2,132

Advanced professional fees 300 648

Other prepaid expenses and other current assets 173 36

Total prepaid and other current assets $ 2,732 $ 2,920

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Notes to Consolidated Financial Statements (Continued)

Property and Equipment, Net

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

December 31,

Less: accumulated depreciation (1,231) (1,123)

Property and equipment, net $ 717 $ 1,147

Depreciation expense for the years ended December 31, 2023 and 2022 was $0.4 million and $0.4 million, respectively.

Other Long-term Prepaid Assets

Other long-term prepaid assets consisted of the advanced payments for clinical trial services, totaling $2.8 million for the years ended December 31, 2023 and 2022.

Accrued Expenses

Accrued expenses consisted of the following (in thousands):

December 31,

Accrued professional fees $ 945 $ 180

Accrued compensation and benefits 1,849 1,491

Accrued research and development 912 260

Other accrued expenses 51 4

Note 6—Research Grant

In September 2022, Former Elicio entered into a grant agreement with the Gastro-Intestinal (“GI”) Research Foundation, a not-for-profit organization focused on supporting research to treat, cure and prevent digestive diseases. Of the $2.8 million award, $2.3 million was received in September 2022 and the remaining $0.5 million was received in June 2023 with the completion of the development efforts as defined in the agreement. The final $0.5 million payment was applied as a credit to the second grant agreement described below. For the years ended December 31, 2023 and 2022, the Company incurred $1.9 million and $0.9 million in research and development expenses related to this project.

In September 2023, the Company entered into a second grant agreement with the GI Research Foundation for $3.1 million, with such amount received net of a $0.5 million credit. The grant funds available as of December 31, 2023 are $0.7 million, which are reflected in restricted cash and the deferred research obligation in the accompanying consolidated balance sheets. For the year ended December 31, 2023, the Company incurred $1.9 million in research and development expenses related to this project.

The award money for both agreements was earned and recognized as a contra research and development expense as the expenses were incurred.

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Notes to Consolidated Financial Statements (Continued)

Note 7—Convertible Preferred Stock, Common Stock and Stockholders' Equity

Authorized Shares

The Company's current Amended and Restated Certificate of Incorporation, as amended, authorizes 300,000,000 shares of common stock, par value $0.01 per share, and 10,000,000 shares of preferred stock, par value $0.01 per share.

Convertible Preferred Stock of Former Elicio

Former Elicio’s convertible preferred stock consisted of Series A preferred stock (“Series A Preferred Shares”), Series B preferred stock (“Series B Preferred Shares”) and Series C preferred stock (“Series C Preferred Shares”).

Series C Convertible Preferred Stock

In May 2022, Former Elicio authorized the sale and issuance of up to 760,200 shares of $0.06 par value Series C Preferred Shares at an original issuance price of $66.30 per share and up to 325,800 shares of Series C Preferred for the settlement of the convertible notes payable. The Series C Preferred Shares financing was structured to be issued in rolling closes in 2022.

In October 2022, Elicio increased the authorized number of Series C Preferred Shares to 3,513,198 shares at an issuance price of $14.23 per share and 1,375,600 shares of Series C Preferred for the settlement of the Convertible Notes Payable.

From the period May through December 2022, Former Elicio issued 3,589,820 shares of Series C Preferred Shares for gross proceeds of approximately $41.8 million inclusive of the conversion of the outstanding amount of the Convertible Notes (as described in Note 12). Former Elicio incurred cash issuance costs of approximately $1.2 million in connection with these shares.

Conversion of Convertible Preferred Stock

On June 1, 2023, Former Elicio completed the Merger with Angion in accordance with the Merger Agreement. Under the terms of the Merger Agreement, immediately prior to the effective time of the Merger, each share of Former Elicio’s preferred stock was converted into a share of Former Elicio’s common stock. At the closing of the Merger, the Company issued an aggregate of 5,375,751 shares of its common stock to Former Elicio stockholders, based on an exchange ratio of 0.0181 shares of the Company’s common stock for each share of Former Elicio’s common stock outstanding immediately prior to the Merger, including those shares of common stock issued upon conversion of the Former Elicio preferred stock. No shares and 3,589,820 shares of convertible preferred stock were issued during the years ended December 31, 2023 and 2022, respectively.

The authorized, issued and outstanding shares of the convertible preferred stock and liquidation preferences of Former Elicio as of December 31, 2022 were as follows (in thousands, except share and per share amounts):

The Series A and Series B Preferred Shares were deemed changed as of October 18, 2022 into 132,387 and 1,927,375 preferred shares (retroactively restated for the reverse recapitalization as described in Note 3) due to the antidilutive protection triggered by the Series C Preferred Shares issued in October 2022 at a price below $1.00.

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Notes to Consolidated Financial Statements (Continued)

As a result of the Merger, the aggregate amount of 4,997,920 shares of Former Elicio preferred stock (retroactively restated for the reverse recapitalization as described in Note 3) were converted into 4,997,920shares of Former Elicio's common stock to be exchanged for the same number of shares of the Company’s common stock.

At-The-Market Equity Program

In May 2022, the Company filed an automatically effective registration statement on Form S-3 (the “Registration Statement”) with the SEC that registers the offering, issuance, and sale of an amount of common stock, preferred stock, debt securities, and warrants to purchase common stock, preferred stock and/or debt securities, not to exceed an aggregate initial offering price of $100 million. Simultaneously, the Company entered into an At-the-Market Equity Offering Sales Agreement with Stifel, Nicolaus & Company, Incorporated and Virtu Americas LLC, as sales agents, pursuant to which the Company may offer, issue or sell shares of its common stock having an aggregate offering price of up to $21 million from time to time in “at-the-market” offerings under the Registration Statement and related prospectus filed with the Registration Statement (the “ATM Program"). No sales were made under the ATM Program for the years ended December 31, 2023 and 2022.

Private Placement

In December 2023, the Company entered into a Subscription Agreement (the “Subscription Agreement”) with GKCC, LLC (the “Purchaser”), an entity controlled by a director of the Company, providing for the issuance and sale by the Company to the Purchaser of an aggregate of 1,213,000 shares of the Company’s common stock, par value $0.01 per share, at a purchase price per share of $5.81 (the “Offering”). See Note 16 - Related Party Transactions for a discussion of the Offering.

Note 8—Stock-Based Compensation

2012 Plan and 2022 Plan

Pursuant to the Merger Agreement, the Company assumed the Former Elicio 2022 Equity Incentive Plan and the Former Elicio 2012 Equity Incentive Plan (the “Former Elicio Plans”) and all stock options issued and outstanding under the Former Elicio Plans. Each outstanding and unexercised option to purchase Former Elicio common stock was adjusted with such Company stock options henceforth representing the right to purchase a number of shares of the Company’s common stock based on an exchange ratio of 0.0181. Any restriction on the exercise of any Former Elicio stock options assumed by the Company continued in full force and effect and the term, exercisability, vesting schedule, accelerated vesting provisions, and any other provisions of such Former Elicio stock option otherwise remained unchanged; provided, however, that the Compensation Committee of the Company’s board of directors assumed the responsibility and the authority of Former Elicio’s board of directors or any committee thereof with respect to each Former Elicio stock option assumed by the Company.

2015 Plan

In June 2019, Angion approved an Amended and Restated 2015 Equity Incentive Plan (the “2015 Plan”) permitting the granting of incentive stock options, non-statutory stock options, restricted stock and other stock-based awards. Following the effectiveness of the 2021 Incentive Award Plan (“2021 Plan”), Angion ceased making grants under the 2015 Plan. However, the 2015 Plan continues to govern the terms and conditions of the outstanding awards granted under it. Shares of common stock subject to awards granted under the 2015 Plan that cease to be subject to such awards by forfeiture or otherwise after the termination of the 2015 Plan will be available for issuance under the 2021 Plan.

2021 Plan and Amendment to 2021 Plan

On January 25, 2021, Angion’s board of directors approved the 2021 Plan which permits the granting of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors, officers and consultants. The 2021 Plan provides that the number of shares reserved and available for issuance will automatically increase each January 1 by the lesser of 5% of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser number of shares as determined by the Company’s board of directors. On March 17, 2023, Angion’s board of directors approved an amendment to the 2021 Plan to increase the cumulative number of shares of common stock reserved for issuance thereunder by 30,113 shares.

As of December 31, 2023, 540,171 shares and 153,243 shares remain available for future grants under the 2021 Plan and Former Elicio 2022 Equity Incentive Plan, respectively.

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Notes to Consolidated Financial Statements (Continued)

Stock Options

The following table summarizes information and activity related to the Company’s stock options:

The aggregate intrinsic value in the above table is calculated as the difference between the estimated fair value of the Company's common stock price and the exercise price of the stock options. 219,672 stock options were granted in the year ended December 31, 2023. The weighted average grant date fair value per share for the stock option grants during the year ended December 31, 2023 was $9.68. As of December 31, 2023, the total unrecognized compensation related to unvested stock option awards granted was $2.4 million, which the Company expects to recognize over a weighted-average period of approximately 1.8 years years.

The following table summarizes total stock-based compensation expense recorded in the consolidated statements of operations (in thousands):

For the Year Ended December 31,

Research and development $ 552 $ 291

General and administrative 627 288

The fair value of each option is estimated on the date of grant using Black-Scholes with the assumptions noted in the table below. The fair value of an award with only a service condition is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. Compensation cost of awards that contain a performance condition are recognized when success is considered probable during the performance period. The Company has elected to account for forfeitures as they occur, rather than estimating the number of awards that are expected to vest. The risk-free interest rate is estimated using the weighted average rate of return on U.S. Treasury notes with a life that approximates the expected life of the option. The expected term of options granted to employees was calculated using the simplified method, which represents the average of the contractual term of the option and the weighted-average vesting period of the option. The Company uses the simplified method because it does not have sufficient historical option exercise data to provide a reasonable basis upon which to estimate expected term. The contractual life of the option was used for the expected life of options granted to non-employees. Expected volatility is based on the weighted average of the historical volatility of a peer group of publicly traded companies. The assumed dividend yield is based upon the Company's expectation of not paying dividends in the foreseeable future.

The fair value of each employee and non-employee stock option grant was estimated on the date of grant using Black-Scholes based on the following assumptions.

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Options December 31,

Expected dividend yield 0.0% 0.0%

Expected term in years (employees) 5.5 - 6.1 5.5 - 10

In March 2021 and June 2022, certain employees of the Company early exercised options to purchase shares of the Company’s common stock. The shares had not fully vested at the time of exercise and were recorded as an unvested option exercise liability. As the shares vest, the Company recognizes the shares and related expense as issuance of common stock upon settlement of restricted stock on the consolidated statements of convertible preferred stock and stockholders’ equity (deficit) for the years ended December 31, 2023 and 2022.

Employee Stock Purchase Plan

In January 2021, the board of directors of Angion approved the Employee Stock Purchase Plan (the “ESPP”). The ESPP was effective on the date immediately prior to the effectiveness of the Angion's registration statement relating to the IPO. The offering period and purchase period was determined by Angion’s board of directors. No offering periods or purchasing periods were active as of December 31, 2023. As of December 31, 2023, 68,958 shares under the ESPP remain available for purchase and no offerings have been authorized.

Restricted Stock Units

In March 2021, Former Elicio granted restricted stock units (“RSUs”) with service and performance vesting conditions to an employee. The completion of the Merger satisfied the performance vesting criteria and triggered accelerated vesting for all unvested RSUs. As a result, the employee received 41,005 shares on June 1, 2023. To pay for the tax withholdings that were due upon vesting of the RSUs, the employee sold 14,455 shares to the Company, which are held in treasury stock as of December 31, 2023. As of December 31, 2023, there are no RSUs outstanding.

Note 9—Warrants

In accordance with ASC 815, the warrants classified as liabilities are recorded at fair value at the issuance date, with changes in the fair value recognized in the consolidated statements of operations at the end of each reporting period. Refer to Note 4 for changes in the fair value recognized during the periods reported.

In accordance with ASC 815, the warrants classified as equity do not meet the definition of a derivative and are classified in stockholders' equity in the consolidated balance sheets.

There was no warrant activity during the year ended December 31, 2023, other than the assumption of the previously issued Angion warrants by the Company.

The following table summarizes information regarding common stock warrants outstanding at December 31, 2023:

Warrants Weighted Average Exercise Price Weighted Average Life (years)

Note 10—Commitments and Contingencies

Legal Proceedings

From time to time, the Company may be involved in legal proceedings, as well as demands, claims and threatened litigation, which arise in the normal course of its business or otherwise.

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Notes to Consolidated Financial Statements (Continued)

The outcome of any future litigation is uncertain. Such litigation, if not resolved, could result in substantial costs to the Company, including any costs associated with the indemnification of directors and officers.

The Company may be exposed to litigation in connection with its products under development and operations. The Company’s policy is to assess the likelihood of any adverse judgments or outcomes related to legal matters, as well as ranges of probable losses. The Company is not aware of any material legal matters.

License Agreements

In July 2012 and January 2016, Former Elicio licensed certain intellectual property from a university, of which the January 2016 agreement has been amended from time to time. The Company is required to pay certain contractual maintenance and milestone payments related to clinical trials and royalties on product sales over the term of the contract, with minimum annual royalty payments commencing in the calendar year after commercialization. In January 2019, Former Elicio licensed additional intellectual property and terminated a license obtained in July 2012 from the university. The license term for January 2016 license extends until terminated by either party under certain provisions. No commercialization royalties have been achieved.

Future minimum annual maintenance payments are $0.1 million for the year ended December 31, 2023 and for each year thereafter. Future minimum annual payments are due until the termination of the agreement.

Note 11—Leases

Operating Leases

In July 2021, the Company signed an operating lease for office and laboratory space in Boston, Massachusetts (the “Boston Lease”).The Boston Lease commenced in February 2022 with the term set to expire in February 2030. The Boston Lease has rent payments escalating annually, which total $11.1 million in the aggregate. As a result, at the commencement of the Boston Lease, the Company recognized a right-of-use lease asset of $8.0 million with a corresponding lease liability of $8.0 million based on the present value of the minimum rental payments. In addition, the Company will make payments for operating expenses and real estate taxes. In June 2023, the Company secured a letter of credit for the deposit on the Boston Lease and has a deposit in the amount of $0.7 million, which was reported as Restricted Cash on the consolidated balance sheets as of December 31, 2023.

As part of the Merger Agreement, the Company also assumed a lease for clinical and regulatory space in Newton, Massachusetts (the “Newton lease”), comprising approximately 6,157 square feet for approximately $0.2 million per year, under a non-cancelable operating lease through June 30, 2024.

Lease expense for all leases for the years ended December 31, 2023 and 2022 was $1.5 million and $1.2 million, respectively. All expenses are included in operating expenses in the accompanying consolidated statements of operations.

The following table summarizes quantitative information about the Company's operating leases (dollars in thousands):

For the year ended December 31,

Operating cash flows from operating leases $ 1,380 $ 1,106

Right-of-use assets exchanged for operating lease liabilities $ — $ 8,017

Weighted-average remaining lease term—operating leases (in years) 5.6 7.2

Weighted-average discount rate—operating leases 7.5 % 8.0 %

As of December 31, 2023, maturities of lease liabilities were as follows (in thousands):

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Notes to Consolidated Financial Statements (Continued)

Year Ended December 31, Amounts

Less present value discount (1,900)

Operating lease liabilities 6,917

Less: operating lease liability, current portion 910

Operating lease liability, noncurrent portion $ 6,007

Note 12—Convertible Notes Payable

In October and November 2021, Former Elicio entered into convertible promissory note agreements for an aggregate amount of $14.5 million (the “Convertible Notes”). The Convertible Notes accrue interest at 8% per annum and are payable upon demand at any time on or after October 4, 2022 (the “Demand date”). Interest expense for the year ended December 31, 2022 was $0.9 million.

There were $0.4 million of issuance costs incurred in 2021 and was initially recorded as a discount to the carrying value of the convertible note. Former Elicio recorded interest expense for the year ended December 31, 2022 related to the accretion of the discount to the Convertible Notes due to issuance costs of $0.3 million.

The Convertible Notes included multiple conversion features. Former Elicio evaluated all the conversion features included within the Convertible Note agreements, noting that none of the features was considered to be predominant. Former Elicio also evaluated all conversion features under FASB ASC Topic 815, Derivatives and Hedging, and determined conversion features associated with the qualified and non-qualified financings met the definition of a derivative and require bifurcation from the Convertible Notes. The bifurcated embedded derivative of $2.9 million was recorded as a liability at fair value at the date of issuance based on the probability of occurrence of a triggering event taking place during the term of the Convertible Notes and was recorded as a discount to the carrying value of the Convertible Note. Former Elicio recorded interest expense for the year ended December 31, 2022 related to the accretion of the discount to the Convertible Notes due to the bifurcated embedded derivative of $2.3 million.

During the year ended December 31, 2022, the increase in the fair value of the embedded derivative was determined to be $0.9 million and was recorded as interest expense in the accompanying consolidated statements of operations.

On October 18, 2022, in conjunction with the Series C Preferred Shares issued on this same date, the Convertible Notes Payable totaling $14.5 million and the related accrued interest totaling $1.1 million automatically converted into 1,370,187 Series C Preferred Shares at an 80% discount to the Series C Preferred Share issuance price per share of $14.23, or $11.39 per share. Just prior to settlement, the fair value of the embedded derivative was marked to market a final time to the aggregate value of $3.9 million. Former Elicio recorded an immaterial gain on extinguishment related to the difference in the total of Convertible Notes Payable, total accrued interest and the final fair value of the embedded derivative versus the value of the Series C Preferred Shares issued based on the original issuance price of $14.23 per share.

Note 13—Income Taxes

The components of the Company’s provision for income taxes for the years ended December 31, 2023 and 2022 consists of the following (in thousands):

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Notes to Consolidated Financial Statements (Continued)

December 31,

Current:

Federal $ — $ —

United States — —

Foreign — —

Total Current — —

Deferred

Foreign — —

Change in valuation allowance (10,859) (7,264)

Total Deferred — —

Total tax provision $ — $ —

The reconciliations between the federal statutory income tax rate and the Company's effective income tax rate were as follows:

Year Ended December 31,

Statutory federal income tax rate 21.0 % 21.0 %

State tax, net of federal benefits 6.2 % 5.1 %

Permanent differences (0.3) % (4.6) %

Federal research and development credits 3.1 % 2.6 %