Elicio Therapeutics, Inc. - Quarter Report: 2021 September (Form 10-Q)

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_____________________________________________

FORM 10-Q

_____________________________________________


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-39990

ANGION BIOMEDICA CORP

(Exact name of registrant as specified in its charter)


Delaware									11-3430072
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

51 Charles Lindbergh Boulevard Uniondale, New York									11553
(Address of Principal Executive Offices)									(Zip Code)

(415) 655-4899

Registrant's telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01	ANGN	The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares of the issuer’s common stock outstanding as of November 5, 2021 was 29,956,483.

TABLE OF CONTENTS


PART I FINANCIAL INFORMATION			Page
Item 1. Financial Statements			3
Condensed Consolidated Balance Sheets (unaudited)			3
Condensed Consolidated Statements of Operations and Comprehensive Income (unaudited)			4
Condensed Consolidated Statements of Stockholders' Equity (Deficit) (unaudited)			5
Condensed Consolidated Statements of Cash Flows (unaudited)			8
Notes to Unaudited Interim Condensed Consolidated Financial Statements			9
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			30
Item 3. Quantitative and Qualitative Disclosures			45
Item 4. Controls and Procedures			45
PART II OTHER INFORMATION
Item 1. Legal Proceedings			47
Item 1A. Risk Factors			47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			97
Item 3. Defaults Upon Senior Securities			97
Item 4. Mine Safety Disclosures			97
Item 5. Other Information			97
Item 6. Exhibits			97
Signature			99

iii

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Any statements contained in this Quarterly Report on Form 10-Q that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•the potential benefits, activity, effectiveness and safety of our product candidates;

•the success and timing of our preclinical studies and clinical trials, including the timing and availability of data from such clinical trials;

•the primary endpoints to be utilized in our clinical trials;

•our and our collaborators' ability to obtain and maintain regulatory approval of ANG-3777 and any other product candidates we may develop, and the labeling under any approval we may obtain;

•the scope, progress, expansion, and costs of developing and commercializing our product candidates;

•our dependence on existing and future collaborators for commercializing product candidates in the collaboration;

•our receipt and timing of any milestone payments or royalties under any existing or future research collaboration and license agreements or arrangements;

•the potential effects of the COVID-19 pandemic on our business and operations, results of operations and financial performance;

•the size and growth of the potential markets for our product candidates and the ability to serve those markets;

•our expectations regarding our expenses and revenue, the sufficiency of our cash resources, and needs for additional financing;

•regulatory developments in the United States and other countries;

•the rate and degree of market acceptance of any future products;

•the implementation of our business model and strategic plans for our business and product candidates, including additional indications for which we may pursue approval;

•our expectations regarding competition;

•our anticipated growth strategies;

•the performance of third-party manufacturers;

•our ability to establish and maintain development partnerships;

•our expectations regarding federal, state, and foreign regulatory requirements;

•our ability to obtain and maintain intellectual property protection for our product candidates;

•the successful development for our sales and marketing capabilities;

•the hiring and retention of key scientific or management personnel; and

•the anticipated trends and challenges in our business and the market in which we operate.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for certain drugs, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on

estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

Trademarks

This Quarterly Report on Form 10-Q includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners.

Part I FINANCIAL INFORMATION

Item 1. Financial Statements

ANGION BIOMEDICA CORP.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)


	September 30,		December 31,
	2021		2020

ASSETS
Current assets
Cash and cash equivalents	$	102,736	$	34,607

Prepaid expenses and other current assets	1,657		7,690
Total current assets	104,393		42,297
Property and equipment, net	475		156
Right of use assets	4,177		4,072
Investments in related parties	862		822
Other assets	33		—
Total assets	$	109,940	$	47,347
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities
Accounts payable	$	7,679	$	5,578
Accrued expenses	5,349		6,665
Lease liability—current	870		611
Deferred revenue—current	3,662		3,942
Warrant liability	386		10,704
Convertible promissory notes payable at fair value	—		51,170
Series C convertible preferred stock at amortized cost	—		26,001
Series C convertible preferred stock at fair value	—		2,518
Other short-term debt	—		260
Total current liabilities	17,946		107,449
Lease liability—noncurrent	3,706		3,847
Deferred revenue—noncurrent	23,774		25,865
Other long-term debt	—		635
Total liabilities	45,426		137,796
Commitments and contingencies—Note 11
Stockholders' equity (deficit)


Common stock, $0.01 par value per share; 300,000,000 and 30,000,000 authorized shares as of September 30, 2021 and December 31, 2020; 30,414,038 and 15,632,809 shares issued as of September 30, 2021 and December 31, 2020, respectively; 29,933,095 and 15,316,721 shares outstanding as of September 30, 2021 and December 31, 2020, respectively	304		156
Treasury stock, 480,943 and 316,088 shares outstanding as of September 30, 2021 and December 31, 2020, respectively	(4,210)		(1,846)
Additional paid-in capital	298,518		72,136
Accumulated other comprehensive loss	(73)		(333)
Accumulated deficit	(230,025)		(160,562)
Total stockholders' equity (deficit)	64,514		(90,449)
Total liabilities and stockholders' equity (deficit)	$	109,940	$	47,347

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

ANGION BIOMEDICA CORP.

Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Revenue:
Contract revenue	$	1,460	$	—	$	2,371	$	—
Grant revenue	—		827		—		2,421
Total revenue	1,460		827		2,371		2,421
Operating expenses:

Cost of grant revenue	—		348		—		1,064
Research and development	13,288		6,086		42,030		27,912
General and administrative	3,930		5,978		14,282		14,868
Total operating expenses	17,218		12,412		56,312		43,844
Loss from operations	(15,758)		(11,585)		(53,941)		(41,423)
Other income (expense)
Change in fair value of warrant liability	128		(513)		(3,191)		(1,261)
Change in fair value of convertible notes	—		(3,339)		(7,469)		(5,711)
Change in fair value of Series C convertible preferred stock	—		10		(3,592)		10
Gain upon debt extinguishment	—		—		905		—
Foreign exchange transaction (loss) gain	(204)		338		(279)		344
(Losses) earnings from equity method investment	20		—		40		56
Interest income (expense), net	110		(2,580)		(1,936)		(3,247)
Total other income (expense)	54		(6,084)		(15,522)		(9,809)
Net loss	(15,704)		(17,669)		(69,463)		(51,232)
Other comprehensive income:
Foreign currency translation adjustment	146		(18)		260		(65)
Comprehensive loss	$	(15,558)	$	(17,687)	$	(69,203)	$	(51,297)
Net loss per common share, basic and diluted	$	(0.53)	$	(1.19)	$	(2.51)	$	(3.51)
Weighted average common shares outstanding, basic and diluted	29,829,577		14,847,534		27,671,310		14,609,213

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

ANGION BIOMEDICA CORP.

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share amounts)

(unaudited)


Three Months Ended September 30, 2021	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of June 30, 2021	30,278,530	$	303	(480,943)	$	(4,210)	$	295,636	$	(219)	$	(214,321)	$	77,189


Exercise of warrants	777	—		—	—		5		—		—		5
Exercise of stock options	126,528	1		—	—		785		—		—		786
Issuance of common stock upon vesting of restricted stock units and performance stock units	8,203	—		—	—		2		—		—		2
Return of common stock to pay withholding taxes on restricted stock	—	—		—	—		(94)		—		—		(94)

Stock-based compensation	—	—		—	—		2,184		—		—		2,184
Foreign currency translation adjustment	—	—		—	—		—		146		—		146
Net loss	—	—		—	—		—		—		(15,704)		(15,704)
Balance as of September 30, 2021	30,414,038	$	304	(480,943)	$	(4,210)	$	298,518	$	(73)	$	(230,025)	$	64,514


Three Months Ended September 30, 2020	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of June 30, 2020	15,259,820	$	152	(312,164)	$	(1,810)	$	66,626	$	(47)	$	(114,018)	$	(49,097)
Issuance of broker warrants	—	—		—	—		1,927		—		—		1,927
Exercise of broker warrants	261,471	3		—	—		(2)		—		—		1
Exercise of stock options	—	—		—	—		37		—		—		37
Stock-based compensation	—	—		—	—		1,627		—		—		1,627
Foreign currency translation adjustment	—	—		—	—		—		(18)		—		(18)
Net loss	—	—		—	—		—		—		(17,669)		(17,669)
Balance as of September 30, 2020	15,521,291	$	155	(312,164)	$	(1,810)	$	70,215	$	(65)	$	(131,687)	$	(63,192)

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

ANGION BIOMEDICA CORP.

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share amounts)

(unaudited)


Nine Months Ended September 30, 2021	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of December 31, 2020	15,632,809	$	156	(316,088)	$	(1,846)	$	72,136	$	(333)	$	(160,562)	$	(90,449)
Issuance of common stock upon initial public offering, net of issuance costs, discount, and commissions of $9.3 million	5,750,000	58		—	—		82,657		—		—		82,715
Issuance of common stock upon Concurrent Private Placement, net of issuance costs of $0.7 million	1,562,500	16		—	—		24,234		—		—		24,250
Conversion of convertible preferred stock into common stock upon initial public offering	2,234,640	22		—	—		35,732		—		—		35,754
Conversion of convertible notes into common stock upon initial public offering	3,636,189	36		—	—		58,143		—		—		58,179
Conversion of convertible notes prior to IPO	33,978	—		—	—		460		—		—		460
Net exercise of warrants upon initial public offering	844,335	9		—	—		13,500		—		—		13,509
Fractional shares paid out related to the forward stock split	—	—		—	—		(10)		—		—		(10)

Exercise of broker warrants	47,188	—		—	—		—		—		—		—
Exercise of warrants	130,529	2		—	—		859		—		—		861
Exercise of stock options	135,178	1		—	—		865		—		—		866
Issuance of common stock upon vesting of restricted stock units and performance stock units	406,692	4		—	—		17		—		—		21
Return of common stock to pay withholding taxes on restricted stock	—	—		(164,855)	(2,364)		(94)		—		—		(2,458)
Retirement of treasury stock	—	—		—	—		—		—		—		—
Stock-based compensation	—	—		—	—		10,019		—		—		10,019
Foreign currency translation adjustment	—	—		—	—		—		260		—		260
Net loss	—	—		—	—		—		—		(69,463)		(69,463)
Balance as of September 30, 2021	30,414,038	$	304	(480,943)	$	(4,210)	$	298,518	$	(73)	$	(230,025)	$	64,514

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

ANGION BIOMEDICA CORP.

Condensed Consolidated Statements of Stockholders' Equity (Deficit)

(in thousands, except share amounts)

(unaudited)


Nine Months Ended September 30, 2020	Common Stock			Treasury Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders' Equity (Deficit)
	Shares	Amount		Shares	Amount
Balance as of December 31, 2019	14,758,718	$	148	(312,164)	$	(1,810)	$	63,531	$	—	$	(80,455)	$	(18,586)
Issuance of broker warrants	—	—		—	—		3,095		—		—		3,095
Exercise of broker warrants	569,701	6		—	—		(2)		—		—		4
Exercise of stock options	192,872	1		—	—		37		—		—		38
Stock-based compensation	—	—		—	—		3,554		—		—		3,554
Foreign currency translation adjustment	—	—		—	—		—		(65)		—		(65)
Net loss	—	—		—	—		—		—		(51,232)		(51,232)
Balance as of September 30, 2020	15,521,291	$	155	(312,164)	$	(1,810)	$	70,215	$	(65)	$	(131,687)	$	(63,192)

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

ANGION BIOMEDICA CORP.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2021		2020
Cash flows from operating activities
Net loss	$	(69,463)	$	(51,232)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	59		86
Amortization of right of use assets	519		396
Amortization of debt issuance costs	1,884		2,740
Non-cash placement agent fee	—		1,683
Stock-based compensation	10,019		3,554

PPP Loan forgiveness	(905)		—
Change in fair value of convertible notes	7,469		5,711
Change in fair value of Series C convertible preferred stock	3,592		(10)
Change in fair value of warrant liability	3,191		1,261
Impairment of leased assets	—		58
Earnings from equity investment	(76)		(56)
Distribution from equity investment	36		—
Changes in operating assets and liabilities:
Grants receivable	—		(86)
Prepaid expenses and other current assets	4,050		(2,568)
Other assets	(33)		—
Accounts payable	2,072		(6,530)
Accrued expenses	2,182		1,951
Lease liabilities	(506)		(437)
Deferred revenue	(2,371)		—
Net cash used in operating activities	(38,281)		(43,479)
Cash flows from investing activities
Purchase of fixed assets	(346)		(31)
Net cash used in investing activities	(346)		(31)
Cash flows from financing activities
Proceeds from issuance of convertible notes and warrants	—		31,223
Net proceeds from issuance of common stock upon IPO and Concurrent Private Placement, net of discount and commissions	110,560		—
Proceeds from issuance of Series C convertible preferred stock, net of issuance costs	—		20,047
Proceeds from loan from Paycheck Protection Program of the 2020 CARES Act	—		895
Payment of deferred offering costs	(3,073)		—
Fractional share payments related to the forward stock split	(10)		—
Taxes paid related to net share settlement upon vesting of restricted stock awards	(2,458)		—
Proceeds from RSU settlement	21		—

Exercise of broker warrants	—		4
Exercise of warrants	861		—
Exercise of stock options	866		38
Net cash provided by financing activities	106,767		52,207
Effect of foreign currency on cash	(11)		(157)
Net increase in cash and cash equivalents	68,129		8,540
Cash and cash equivalents at the beginning of the period	34,607		5,571
Cash and cash equivalents at the end of the period	$	102,736	$	14,111


Supplemental disclosure of noncash investing and financing activities:

Conversion of convertible notes into common stock upon IPO	$	58,179	$	—
Conversion of Series C preferred stock into common stock upon IPO	$	35,754	$	—
Net exercise of warrants upon IPO	$	13,509	$	—
Accrued interest premium for Series C convertible preferred stock	$	—	$	127
Right of use assets exchanged for operating lease liabilities	$	624	$	585
Conversion of convertible notes into common stock prior to IPO	$	460	$	—
Conversion of convertible notes to Series C convertible preferred stock	$	—	$	2,254
Issuance of broker warrants with Series C convertible preferred stock	$	—	$	1,412
Fixed assets purchased in accrued expenses or accounts payable	$	32	$	—

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

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ANGION BIOMEDICA CORP.

Notes to Unaudited Interim Condensed Consolidated Financial Statements

Note 1—Description of the Business and Financial Condition

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

Forward Stock Split

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

Initial Public Offering and the Concurrent Private Placement

On February 9, 2021, the Company closed its Initial Public Offering (“IPO”) of 5,750,000 shares of common stock at a public offering price of $16.00 per share, which includes the full exercise by the underwriters of their option to purchase an additional 750,000 shares of common stock. Aggregate net proceeds to Angion were $85.6 million, after deducting underwriting discounts, commissions and offering expenses of $6.4 million. In addition to the shares being sold in the IPO, Angion sold an additional 1,562,500 shares of its common stock at the public offering price of $16.00 per share to entities affiliated with Vifor International, Ltd., an existing stockholder (the “Concurrent Private Placement”), for aggregate net proceeds of $24.3 million, after deducting a 3% private placement agent fee of $0.7 million. Subsequent to the closing of the IPO, all of the outstanding shares of convertible preferred stock and outstanding convertible notes automatically converted into shares of common stock.

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

Liquidity and Capital Resources

Since inception, the Company has devoted substantially all of its efforts and financial resources to conducting research and development activities, including drug discovery and pre-clinical studies and clinical trials, establishing and maintaining its intellectual property portfolio, organizing and staffing the Company, business planning, raising capital and providing general and administrative support for these operations. The Company has incurred losses from operations and negative cash flows from operating activities since inception and expects to continue to incur substantial losses for the next several years as it continues to fully develop and, if approved, commercialize its product candidates. As of September 30, 2021, the Company had $102.7 million in cash and cash equivalents and an accumulated deficit of $230.0 million. Prior to its IPO completed in February 2021, the Company has funded its operations through United States government grants, the issuance of convertible notes (see Note 6), sales of convertible preferred stock and common stock (see Notes 7) and warrants (see Note 10) and licensing agreements (see Note 3).

The planned expansion of the Company's clinical and discovery programs will require significant funds. Management expects to continue to incur significant expenses and to incur operating losses for the foreseeable future. The Company believes that its existing cash and cash equivalents will be sufficient to meet the projected operating requirements for at least 12 months from the date of issuance of its financial statements. The Company has evaluated and concluded there are no conditions or events, considered in the aggregate, that raise substantial

Table of Contents

ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

doubt about its ability to continue as a going concern for a period of one year following the date these condensed consolidated financial statements are issued.

Note 2—Summary of Significant Accounting Policies

Basis of Presentation

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

The Company’s remaining significant accounting policies are described in Note 2 to its consolidated financial statements for the year ended December 31, 2020, included in its Annual Report on Form 10-K. There have been no material changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2021.

Unaudited Interim Financial Information

The condensed consolidated financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements as of and for the year ended December 31, 2020 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position, results of operations and comprehensive loss, and cash flows. The condensed consolidated balance sheet as of December 31, 2020 was derived from the audited financial statements as of that date. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC on March 30, 2021. The results for any interim period are not necessarily indicative of results for any future period.

Segments

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

Use of Estimates

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

Concentrations of Credit Risk and Off-Balance Sheet Risk

Cash and cash equivalents are financial instruments that are potentially subject to concentrations of credit risk. The Company's cash and cash equivalents are deposited in accounts at large financial institutions, and amounts

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

may exceed federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial position of the depository institution in which those deposits are held.

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

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

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

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of September 30, 2021 and December 31, 2020, 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.

Deferred Offering Costs

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

Fair Value Measurement

Certain assets and liabilities are carried at fair value under GAAP. Fair value is determined using the principles of ASC 820, Fair Value Measurement. Fair value is described as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy prioritizes and defines the inputs to valuation techniques as follows:

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

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

Level 3: Unobservable inputs.

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

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

Convertible Notes Payable at Fair Value

As permitted under ASC 825, Financial Instruments ("ASC 825"), the Company has elected the fair value option for recognition of its convertible notes. In accordance with ASC 825, the Company recognizes these convertible notes at fair value with changes in fair value recognized in the condensed consolidated statements of operations. The fair value option may be applied instrument by instrument, but it is irrevocable. As a result of applying the fair value option, direct costs and fees related to the convertible notes were recognized in general and administrative expense in earnings as incurred and not deferred. The estimated fair value of the convertible notes is determined by utilizing a present value cash flow model and the values of the equity underlying the conversion options were estimated using company equity values implied from the Subject Company Transaction Method which

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

includes the back-solve and scenario-based methods (Probability Weighted Expected Return Method). See Note 4. Accrued interest for the notes has been included in the change in fair value of convertible notes in the condensed consolidated statements of operations. All outstanding convertible notes were converted into common stock upon the close of the IPO on February 9, 2021 and no balances remained outstanding as of September 30, 2021. See Note 6.

Convertible Preferred Stock

Series C convertible preferred stock includes settlement features that result in liability classification. The initial carrying value of the Series C convertible preferred stock is accreted to the settlement value, the fair value of the securities to be issued upon the conversion of the Series C Preferred Stock. The discount to the settlement value is accreted to interest expense using the effective interest method. During 2020, certain convertible notes were exchanged for Series C convertible preferred stock. As the exchange was accounted for as a modification, the Series C convertible preferred stock that was exchanged for the convertible notes was recorded at fair value and are subject to re-measurement at each reporting period with gains and losses reported through the Company’s condensed consolidated statements of operations. All outstanding shares of convertible preferred stock were converted into common stock upon the close of the Company’s IPO on February 9, 2021. See Note 7. As of September 30, 2021, there was no convertible preferred stock outstanding.

Revenue

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

Contract Revenue

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

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

(2) Identify the performance obligations in the contract;

(3) Determine the transaction price;

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

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

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

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

Licenses of Intellectual Property: If a license to its intellectual property is determined to be distinct from the other promises or performance obligations identified in the arrangement, the Company recognizes revenue from

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

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

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

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

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

Grant Revenue

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

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

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

Research and Development

Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, preclinical studies, compound manufacturing costs, consulting costs and allocated overhead, including rent, equipment, depreciation and utilities.

The Company has agreements with various Contract Research Organizations ("CROs") and third-party vendors. Research and development accruals of amounts due to the CRO are estimated based on the level of services performed, progress of the studies, including the phase or completion of events, and contracted costs. The estimated costs of research and development provided, but not yet invoiced, are included in accrued expenses on

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

the condensed consolidated balance sheet. Payments made to CROs under such arrangements in advance of the performance of the related services are recorded as prepaid expenses and other current assets until the services are rendered. The Company makes judgments and estimates in determining the accrued expenses balance in each reporting period. As actual costs become known, the Company adjusts its accrued expenses. For the three and nine months ended September 30, 2021 and 2020, the Company has not experienced any material differences between accrued costs and actual costs incurred.

Advertising Costs

Advertising costs are expensed as incurred. For the three and nine months ended September 30, 2021 and 2020, advertising costs were not significant.

Net Loss Per Share

Basic net loss per share of common stock is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per share excludes the potential impact of convertible preferred stock, common stock options, warrants and unvested shares of restricted stock and restricted stock units because their effect would be anti-dilutive due to the Company's net loss. Since the Company had net losses for the three and nine months ended September 30, 2021 and 2020, basic and diluted net loss per common share are the same.

Recently Adopted Accounting Pronouncements

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

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

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

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in this ASU provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this ASU apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. LIBOR is expected to phased out by 2021. The amendments in this ASU are effective as of

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

March 12, 2020 through December 31, 2022. The Company adopted this standard as of January 1, 2021, which did not have material impact on its condensed consolidated financial statements and related disclosures.

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

Note 3—Revenue and Deferred Revenue

Grant Revenue

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

Contract Revenue

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

Vifor License Agreement

In November 2020, the Company entered into a license agreement with Vifor Pharma, granting Vifor Pharma global rights (excluding China, Taiwan, Hong Kong and Macau) to develop, manufacture and commercialize ANG-3777 in all therapeutic, prophylactic and diagnostic uses for renal indications, including forms of acute kidney injury (AKI), and congestive heart failure (collectively, the Renal Indications). Pursuant to the Vifor License, the Company is entitled to receive $80.0 million in upfront and near-term clinical milestone payments, including $30.0 million in up-front cash that was received in November 2020, and a $30.0 million equity investment, $5.0 million of which was a convertible note that subsequently converted into common stock with the IPO and $25.0 million of which was received in the Concurrent Private Placement with the Company’s IPO. At the time of signing, the Company is also eligible to receive post-approval milestones of up to approximately $260.0 million and sales-related milestones of up to $1.585 billion, providing a total potential deal value of up to $1.925 billion (subject to certain specified reductions and offsets), plus tiered royalties on net sales of ANG-3777 at royalty rates of up to 40%. Under the Vifor License, the Company is responsible for executing a pre-specified clinical development plan

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

designed to obtain regulatory approvals of ANG-3777 for delayed graft function (DGF) and AKI associated with cardiac surgery involving cardiopulmonary bypass (CSA-AKI).

On October 26, 2021, the Company announced that its Phase 3 trial of ANG-3777 in DGF did not achieve its primary endpoint and the data from the Phase 3 trial was not expected to provide sufficient evidence to support an indication in the studied DGF population. Given that a DGF indication is not supported by the Phase 3 data and thus it is unlikely that it will receive regulatory approval or achieve commercial sales, the total value of post-approval milestones under the Vifor license Agreement would be reduced to $130.0 million and the total achievable sales milestones would be $1.795 billion.

The Vifor License will continue until the expiration of the last royalty term for a licensed product in the licensed territory, unless earlier terminated. The royalty term for a licensed product is, on a country-by-country basis, shall start with the first commercial sale of such licensed product in such country and expire at the latest of (i) expiration of all licensed patents covering the composition of matter of such licensed product or method of use for such licensed product that has obtained regulatory approval in such country, (ii) expiration of all regulatory and data exclusivity applicable to such licensed product in such country, or (iii) the tenth (10th) anniversary of the date of the first commercial sale of such licensed product in such country.

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

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

In order to determine the transaction price, the Company evaluated all the payments to be received during the duration of the contract. Certain milestones and additional fees were considered variable consideration, which were not included in the transaction price as of September 30, 2021. The Company determined that the transaction price at the inception of the Vifor License is $15.0 million, which is 50% of the $30.0 million upfront payment due to the potential setoff defined in the contract. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The transaction price is recognized as license revenue using the cost-based input method over the estimated performance period, beginning on November 6, 2020, through the estimated completion of the identified performance obligation.

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

The Company reassessed the performance period as the Company does not intend to continue perform the confirmatory study for DGF given the negative clinical results in DGF. As such, the estimated date of FDA approval for the AKI indication in 2026 was determined to represent the completion of the Company’s performance obligation under the Vifor agreement. Additionally, the Company revised the total estimated costs for completion of the performance obligation to reflect the winding down of DGF-related studies. The performance period is expected to end in the fourth quarter of 2026 instead of the second quarter of 2030. The effect of this change in estimate was an increase in contract revenue by $1.0 million, a reduction in net loss by $1.0 million and an increase in basic and

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

diluted earnings per share by $0.03 and $0.04 for the three and nine months ended September 30, 2021, respectively.

For the three and nine months ended September 30, 2021, the Company recognized contract revenue related to the Vifor License of $1.5 million and $2.4 million, respectively. As of September 30, 2021, $27.4 million was recorded as deferred revenue, of which $3.7 million was current, on the condensed consolidated balance sheets related to the Vifor License.

Note 4—Fair Value Measurements

The following table classifies the Company's financial assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of September 30, 2021 and December 31, 2020 (in thousands):


	Fair Value Measured at September 30, 2021
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets included in:
Cash and cash equivalents—Money market securities(1)	$	101,252	$	—	$	—	$	101,252
Total fair value	$	101,252	$	—	$	—	$	101,252
Liabilities included in:
Warrants	$	—	$	—	$	386	$	386
Total fair value	$	—	$	—	$	386	$	386


	Fair Value Measured at December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets included in:
Cash and cash equivalents—Money market securities(1)	$	1	$	—	$	—	$	1
Total fair value	$	1	$	—	$	—	$	1
Liabilities included in:
Convertible notes	$	—	$	—	$	51,170	$	51,170
Warrants	—		—		10,704		10,704
Series C convertible preferred stock	—		—		2,518		2,518
Total fair value	$	—	$	—	$	64,392	$	64,392

_________________

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

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

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

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


	Warrant Liability		Convertible Notes		Series C Convertible Preferred Stock at Fair Value		Total




Balance—December 31, 2020	10,704		51,170		2,518		64,392


Conversion of convertible notes into common stock	—		(58,639)		—		(58,639)
Conversion of convertible Series C convertible preferred stock into common stock	—		—		(6,110)		(6,110)
Net exercise of warrants	(13,509)		—		—		(13,509)
Change in fair value	3,191		7,469		3,592		14,252
Balance—September 30, 2021	$	386	$	—	$	—	$	386

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

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

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

Convertible Notes

The fair value adjustment during the nine months ended September 30, 2021 is based on the final settlement amount using a conversion price of $11.57 per share on February 9, 2021. Subsequent to the closing of the IPO, there were no convertible notes outstanding.

Series C Preferred Stock

Warrant Liability

The fair value adjustment for the net exercise of warrants with an exercise price of $6.43 during the nine months ended September 30, 2021 is based on the final settlement amount using the IPO price on February 9, 2021. Subsequent to the closing of the IPO, the fair value of the warrants issued by the Company has been estimated using a variant of the Black Scholes option pricing model. The underlying equity included in the Black Scholes option pricing model was valued based on the closing price of common stock at each measurement date.

During the three months ended September 30, 2021 and 2020, the fair value of the warrants decreased by $0.1 million and increased by $0.5 million, respectively. The change in fair value of warrant liability in both periods are recognized in the condensed consolidated statements of operations. During the nine months ended September

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

30, 2021 and 2020, the increase in the fair value of the warrants of $3.2 million and $1.3 million, respectively, are recognized in change in fair value of warrant liability in the condensed consolidated statements of operations.

A summary of the weighted average (in aggregate) significant unobservable inputs (Level 3 inputs) used in measuring the Company's warrant liabilities that are categorized within Level 3 of the fair value hierarchy as of September 30, 2021 and December 31, 2020 was as follows:


	September 30,			December 31,
	2021			2020
Weighted average strike price	$	8.01		9.18
Contractual term (years)	1.2			4.9
Volatility (annual)	74.7		%	86.8	%
Risk-free rate	0.7		%	0.1	%
Dividend yield (per share)	0.0		%	0.0	%

Note 5—Balance Sheet Components

Property and Equipment, Net

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


	September 30,		December 31,
	2021		2020
Equipment	$	859	$	512
Furniture and fixtures	33		27
Leasehold improvements	68		43
Total property and equipment	960		582
Less: accumulated depreciation	(485)		(426)
Property and equipment, net	$	475	$	156

Depreciation expense for the three months ended September 30, 2021 and 2020 was $23 thousand and $47 thousand, respectively. Depreciation expense for the nine months ended September 30, 2021 and 2020 was $59 thousand and $86 thousand, respectively.

Prepaid and Other Current Assets

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


	September 30,		December 31,
	2021		2020
Deferred offering costs	$	—	$	1,978
Convertible note receivable	—		5,000
Angion Pty tax	—		352
Prepaid insurance	1,018		—
Security deposit	90		—
Other	549		360
Total prepaid and other current assets	$	1,657	$	7,690

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ANGION BIOMEDICA CORP.

Notes to Consolidated Financial Statements (Continued)

Accrued Expenses

Accrued expenses comprised the following (in thousands):


	September 30,		December 31,
	2021		2020
Accrued compensation	$	3,286	$	3,154
Accrued direct research costs	2,060		1,321
Accrued operating expenses	3		707
Accrued interest	—		1,483
Total accrued expenses	$	5,349	$	6,665

Note 6—Convertible Notes Payable

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

Conversion of Convertible Notes Payable

In January 2021, the Company issued 33,978 shares of common stock upon the conversion of certain of the outstanding 2020 Notes. In connection with the IPO in February 2021, with an IPO price of $16.00 per share, the remaining outstanding Additional Convertible Notes and Vifor Convertible Note were converted into 3,636,189 shares of the Company’s common stock based on a conversion price of $11.57 per share. There were no convertible notes outstanding as of September 30, 2021.

Note 7— Series C Convertible Preferred Stock

The following table summarizes the aggregate values recorded for the Series C Preferred Stock as of December 31, 2020 (in thousands):


	At issuance		December 31, 2020
Series C convertible preferred stock recorded at amortized cost
Principal	$	22,308	$	22,308
Settlement premium	5,577		5,577
Unamortized discounts and fees	(9,250)		(1,884)
Net carrying amount	$	18,635	$	26,001
Series C convertible preferred stock recorded at fair value
Series C convertible preferred stock issued in exchange for convertible notes			2,254
Change in fair value of Series C convertible preferred stock exchanged for convertible notes			264
Total Series C convertible preferred stock			$	28,519

Conversion of Series C Convertible Preferred Stock

In connection with the IPO in February 2021, with an initial public offering price of $16.00 per share, all Series C convertible preferred stock outstanding plus accrued dividends were automatically converted into an aggregate of 2,234,640 shares of common stock on February 9, 2021 with a conversion price of $11.57 per share. There were no shares of convertible preferred stock outstanding as of September 30, 2021.

Note 8—Stockholders' Equity

Common Stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Common stockholders are not entitled to receive dividends, unless declared by the board of directors.

On February 9, 2021, in connection with the IPO, the Company filed a restated Certificate of Incorporation, which, among other things, restated the number of shares of all classes of stock that the Company had authority to issue to 310,000,000 shares, of which (i) 300,000,000 shares shall be a class designated as common stock, par value $0.01 per share, and (ii) 10,000,000 shares shall be a class designated as undesignated preferred stock, par value $0.01 per share.

Treasury Stock

At September 30, 2021 and December 31, 2020, the balance on the treasury stock was approximately $4.2 million and $1.8 million, respectively.

Note 9—Stock-Based Compensation

2015 Plan

In June 2019, the Company 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 Equity Incentive Plan ("2021 Plan"), the Company 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

On January 25, 2021, the Company'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. On January 25, 2021, shares of common stock equal to 11% of the post-IPO capitalization, with annual increases, up to a maximum of 60,000,000 shares of common stock were authorized for issuance under the 2021 Plan.

Stock Options

The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company determines the estimated fair value of its common stock using the Subject Company Transaction Method which includes the back-solve and scenario-based methods (Probability Weighted Expected Return Method) to arrive at estimated fair values. Prior to the IPO, the Company was a private company and lacked company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies. Due to the lack of historical exercise history, the expected term of the Company's stock options for employees has been determined utilizing the "simplified" method for awards. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Subsequent to the IPO, the Company determines the fair value and exercise price using the market closing price of the Company’s common stock on the date of grant.

The following assumptions were used to estimate the fair value of stock option awards:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Risk-free interest rate	0.9%	0.3%	0.7%	0.7%
Expected dividend yield	—	—	—	—
Expected term in years	6.03	5.44	5.99	5.93
Expected volatility	74.6%-74.9%	72.8%-73.2%	73.8%-86.8%	76.7%-82.9%

The following table summarizes information activity related to the Company’s share option plans:


	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Total Intrinsic Value (in thousands)



Outstanding as of December 31, 2020	3,479,731	$	6.97	8.4	$	15,140
Options granted	1,087,721	15.60
Options forfeited	(33,185)	9.50
Options exercised	(135,178)	6.41
Options expired	(191)	7.77
Outstanding as of September 30, 2021	4,398,898	$	9.10	8.1	$	25,278
Options vested and exercisable	2,278,300	$	6.91	7.3	$	17,397

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. The weighted average grant date fair value per share for the stock option grants during the three months ended September 30, 2021 and 2020 was $10.13 and $5.10, respectively. The weighted average grant date fair value per share for the stock option grants during the nine months ended September 30, 2021 and 2020 was $8.97 and $5.45, respectively. As of September 30, 2021, the total unrecognized compensation related to unvested stock option awards granted was $7.9 million, which the Company expects to recognize over a weighted-average period of approximately 2.6 years.

Restricted Stock and Restricted Stock Units

The Company's RSA and RSU activity was as follows:


	Shares of Restricted Stock	Weighted Average Grant Date Fair Value Per Share		Restricted Stock Units	Weighted Average Grant Date Fair Value Per Share



Outstanding at December 31, 2020	14,585	$	6.05	74,144	$	6.50

Released	(10,940)	6.05		(35,672)	6.09
Outstanding at September 30, 2021	3,645	$	6.05	38,472	$	8.02
Vested as of September 30, 2021	—			35,672	$	8.25

Performance-based Restricted Stock Units

The Company had 556,530 PSUs outstanding that were granted in June 2019. Vesting of the PSUs is dependent upon the satisfaction of both a service condition and a performance condition, an initial public offering or a change of control, as defined in the 2015 Plan. As the IPO occurred in February 2021, the performance condition was met and 185,510 PSUs vested and were released upon the closing of the IPO. Another 185,510 PSUs vested and released were in June 2021 upon the second anniversary of the grants. As of September 30, 2021, the Company had 185,510 PSUs outstanding.

The following table summarizes the total stock-based compensation expense for the stock options, RSUs (including PSUs), RSAs and compensation issued in shares recorded in the condensed consolidated statements of operations (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Research and development	$	1,152	$	794	$	5,104	$	1,620
General and administrative	1,032		833		4,915		1,934
Total	$	2,184	$	1,627	$	10,019	$	3,554

Employee Stock Purchase Plan

In January 2021, the board of directors of the Company approved the Employee Stock Purchase Plan (the "ESPP"). The ESPP was effective on the date immediately prior to the effectiveness of the Company's registration statement relating to the IPO. A total of 390,000 shares of common stock were initially reserved for issuance under the ESPP. The offering period and purchase period will be determined by the Board of Directors. As of September 30, 2021, 390,000 shares under the ESPP remain available for purchase and no offerings had been authorized.

Note 10—Warrants

As of September 30, 2021 and December 31, 2020, the outstanding warrants to purchase the Company's common stock comprised the following:


	Classification	Exercise Price		Expiration Date
					September 30, 2021	December 31, 2020
Warrants issued with 2015 Notes	Liability	$	6.43	7/5/28	—	388,396
Warrants issued with 2016 Notes	Liability	$	6.43	7/5/28	—	538,933
Warrants issued with 2017 Notes	Liability	$	6.43	7/5/28	—	79,265
Warrants issued with 2018 Notes	Liability	$	6.43	7/5/28	—	498,567
Warrants issued with Conversion of Notes to Common Stock	Equity	$	8.03	8/31/23	232,287	238,779
Warrants issued with Units in the Equity Offering	Equity	$	8.03	8/31/23	875,034	907,860
Broker Warrants issued with Equity Offering	Equity	$	0.01	8/31/25	1,297	48,485


Consultant Warrants	Liability	$	7.60	8/31/28	39,505	39,506
Total Warrants					1,148,123	2,739,791

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 condensed 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 (deficit) in the condensed consolidated balance sheets.

The Company's warrant activity for the nine months ended September 30, 2021 was as follows:


	Warrants	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)




Balance—December 31, 2020	2,739,791	$	7.00	4.9
Granted	—
Exercised	(1,588,756)	7.37
Returned/cancelled	(2,912)	8.03
Balance—September 30, 2021	1,148,123	$	8.01	1.2

Conversion of Warrants

In February 2021, all warrants outstanding issued with 2015 Notes, 2016 Notes, 2017 Notes, and 2018 Notes with a $6.43 exercise price were net exercised into an aggregate of 844,335 shares of common stock upon the IPO with a conversion price of $11.57 per share.

Note 11—Commitments and Contingencies

Operating Leases

The Company leases office and laboratory space in Uniondale, New York from NovaPark, a related party, under an agreement classified as an operating lease that expires June 20, 2026. The Company's lease does not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Variable expenses generally represent the Company's share of the landlord's operating expenses, including management fees. The Company does not act as a lessor or have any leases classified as financing leases.

The Company leases office space in Fort Lee, New Jersey, comprising approximately 2,105 square feet for approximately $0.1 million per year, under a non-cancelable operating lease through March 31, 2022 however, this arrangement is excluded from the calculation of lease liabilities and right of use assets as its term is less than one year. The lease is subject to charges for common area maintenance and other costs.

In July 2020, the Company entered into a lease for office furniture in San Francisco, California set to expire in July 2025, with an annual lease payment of approximately $13 thousand.

In February 2021, the Company entered into 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. Pursuant to the Newton lease, the Company had 4 months of free rent starting from February 15, 2021 to June 14, 2021. The Company has one option to extend the term of the lease for 3 years with 9 months’ notice.

The following table provides the components of the Company's rent expense (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Operating leases
Operating lease cost	$	325	$	325	$	914	$	906
Variable cost	67		264		282		413
Operating lease expense	392		589		1,196		1,319
Short-term lease rent expense	16		31		58		95
Total rent expense	$	408	$	620	$	1,254	$	1,414

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


	Nine Months Ended September 30,
	2021			2020
Operating cash flows from operating leases	$	861		$	820
Right-of-use assets exchanged for operating lease liabilities	$	624		$	585
Weighted-average remaining lease term—operating leases (in years)	3.5			5.6
Weighted-average discount rate—operating leases	4.9		%	10.9		%

As of September 30, 2021, maturities of lease liabilities were as follows (in thousands):


Years Ended December 31,	Amounts
2021 (remaining three months)	$	318
2022	1,289
2023	1,305
2024	1,209
2025	1,104
Thereafter	516
Total	5,741
Less present value discount	(1,165)
Operating lease liabilities	$	4,576

Litigation

The Company is not a party to any material legal proceedings and is not aware of any pending or threatened claims. From time to time, the Company may be subject to various legal proceedings and claims that arise in the ordinary course of its business activities.

Indemnification

The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for losses suffered or incurred by the indemnified party, in connection with any trade secret, copyright, patent or other intellectual property infringement claim by any third party with respect to its technology. The term of these indemnification agreements is generally perpetual any time after the execution of the agreement. The maximum potential amount of future payments the Company could be required to make under these arrangements is not determinable. The Company has never incurred costs to defend lawsuits or settle claims related to these indemnification agreements. As a result, the Company believes the fair value of these agreements is minimal.

Paycheck Protection Program

In April 2020, the Company received funds in the amount of $0.9 million pursuant to a loan under the Paycheck Protection Program of the 2020 CARES Act ("PPP") administered by the Small Business Association. The loan has an interest rate of 1.0% and a term of 24 months. No payments are due for the first 16 months, although interest accrues, and monthly payments are due over the next 8 months to retire the loan plus accrued interest. Funds from the loan may only be used for certain purposes, including payroll, benefits, rent and utilities, and a portion of the loan used to pay certain costs may be forgivable, all as provided by the terms of the PPP. The loan is evidenced by a promissory note, which contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties. The SBA approved the Company's PPP Loan forgiveness application on May 26, 2021 for the entire principal amount of the PPP Loan and accrued interest. As a result, the Company recorded a gain on the forgiveness of the loan in the amount of $0.9 million.

Note 12—Income Taxes

For the three months ended September 30, 2021, the Company’s income tax provision was $0. For the nine months ended September 30, 2021, the Company’s income tax provision was $800 and the effective tax rate was 0%. For the three and nine months ended September 30, 2020, the Company recognized an income tax expense of $800, which is an effective tax rate of 0%. The difference between the Company's effective tax rate of 0% and the U.S. federal statutory tax rate of 21% is primarily due to net operating losses in this period which are offset by the corresponding valuation allowance. The Company has provided a full valuation allowance against its net deferred tax assets as it is more likely than not that such assets would not be realized.

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income in which those temporary differences become deductible. Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets at September 30, 2021 will not be realizable. Accordingly, management has maintained a full valuation allowance against its net deferred tax assets at September 30, 2021. Each reporting period, management evaluates the need for a valuation allowance on the Company’s deferred tax assets by jurisdiction and adjust the Company’s estimates as more information becomes available.

The Company is required to recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Tax years starting from 2015 and forward are subject to examination by the U.S. federal and state tax authorities. These years are open due to net operating losses and tax credits remain unutilized from such years. The Company's policy is to recognize interest expense and penalties related to income tax matters as a component of income tax expense. As of September 30, 2021, there were no accruals for interest and penalties related to uncertain tax positions.

Note 13—Employee Benefit Plan

Employee Benefit Plan

The Company sponsors a retirement savings plan that is intended to qualify for favorable tax treatment under Section 401(a) of the Code, and contains a cash or deferred feature that is intended to meet the requirements of Section 401(k) of the Code. Participants may make pre-tax and certain after-tax (Roth) salary deferral contributions to the plan from their eligible earnings up to the statutorily prescribed annual limit under the Code. Participants who are 50 years of age or older may contribute additional amounts based on the statutory limits for catch-up contributions. Participant contributions are held in trust as required by law. No minimum benefit is provided under the plan. An employee’s interest in his or her salary deferral contributions is 100% vested when contributed. Contributions, subject to established limits, are matched at a dollar for dollar rate up to 3% of an individual’s earnings and fifty cents on the dollar on the next 4-5% of earnings.

Note 14—Net Loss Per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share attributable to common stockholders, which excludes shares which are legally outstanding but subject to repurchase by the Company (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Numerator
Net loss attributable to common stockholders	$	(15,704)	$	(17,669)	$	(69,463)	$	(51,232)
Denominator:
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted	29,829,577		14,847,534		27,671,310		14,609,213
Net loss per share attributable to common stockholders, basic and diluted	$	(0.53)	$	(1.19)	$	(2.51)	$	(3.51)

The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per share because to do so would be anti-dilutive:


	Nine Months Ended September 30,
	2021	2020
Shares issuable upon exercise of stock options	4,398,898	3,337,481
Shares issuable upon the exercise of warrants	1,148,123	2,836,351
Shares issuable upon conversion of the convertible notes(1)	—	5,620,493
Shares issuable upon conversion of the Series C preferred stock(1)	—	4,470,308
Non-vested shares under restricted stock unit grants	38,472	77,789
Non-vested shares under restricted stock grants	3,645	8,509
Total	5,589,138	16,350,931

___________________________________

(1)The number of shares issuable upon conversion of the 2019 Notes and 2020 Notes has been estimated using the Company's common stock fair value at September 30, 2020, discounted by 20%.

Note 15—Related Party Transactions

Ohr Investment

In a series of investments in November 2013 and July 2017, the Company invested a total of $150,000 to acquire a membership interest in Ohr Cosmetics, LLC ("Ohr"), an affiliated company.

The Company owns and the family of the Company's Executive Chairman owns approximately 2.4% and 81.3%, respectively, of the membership interests in Ohr. The Executive Chairman's son is the manager of Ohr.

In November 2013, the Company granted Ohr an exclusive worldwide license, with the right to sublicense, under the Company's patent rights covering one of the Company's CYP26 inhibitors, ANG-3522, for the use in treating conditions of the skin or hair. Sublicensees may not grant further sublicenses under the Company's patent rights other than to affiliates of such sublicensees and entities with which sublicensees are collaborating for the research, development, manufacture and commercialization of the products. Ohr will pay the Company a royalty at a rate in the low single digits on gross revenue of products incorporating ANG-3522, and milestone payments potentially totaling up to $9.0 million based on achievement of sales milestones. Royalties and milestone payments will be paid until the later of 15 years from the first commercial sale of a licensed product or the last to expire licensed patent rights. The royalty rate is subject to adjustments under certain circumstances. The Company

believes that the Ohr License was made on terms no less favorable to the Company than those that the Company could obtain from unaffiliated third parties.

No revenue from this license agreement was recognized for the periods presented.

NovaPark Investment and Lease

As of September 30, 2021, the Company had a 10% interest in NovaPark. Members of the Company's Executive Chairman's immediate family own a majority of the membership interests of NovaPark. The Company accounts for its aggregate 10% investment in NovaPark under the equity method. The following table provides the activity for the NovaPark investment for the three and nine months ended September 30, 2021 and 2020 (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Beginning balance	$	693	$	905	$	672	$	849
Earnings from equity method investment	31		—		76		56
Distribution from NovaPark	(12)		—		(36)		—
Ending balance	$	712	$	905	$	712	$	905

The Company rents office and laboratory space in Uniondale, New York from NovaPark under a lease that expires June 20, 2026. The Company recorded rent expense for fixed lease payments of $0.3 million in each of the three months ended September 30, 2021 and 2020. The Company recorded rent expense for variable expenses related to the lease of $0.1 million for the three months ended September 30, 2021 and 2020. The Company recorded rent expense for fixed lease payments of $0.9 million in each of the nine months ended September 30, 2021 and 2020. The Company recorded rent expense for variable expenses related to the lease of $0.3 million and $0.2 million for the nine months ended September 30, 2021 and 2020, respectively. See Note 11.

Convertible Notes

In connection with the IPO in February 2021, Victor Ganzi, Gilbert Omenn and Karen Wilson, directors of the Company, and Raj Venkatesan, brother of the Chief Executive Officer and director of the Company, converted all their outstanding convertible notes into an aggregate of 149,500 shares of common stock with a conversion price of $11.57. As of September 30, 2021, there were no convertible notes outstanding.

Series C Convertible Preferred Stock

In connection with the IPO in February 2021, Jay Venkatesan, M.D., the Chief Executive Officer and director of the Company converted all his outstanding preferred stock into an aggregate of 165,094 shares of common stock with a conversion price of $11.57 per share. As of September 30, 2021, there were no shares of convertible preferred stock outstanding.

Consultant Fees

Angion pays consulting fees under an agreement with the wife of the Executive Chairman of the Company for Company management services. Consultant fees paid to the wife were approximately $33 thousand and $32 thousand during the three months ended September 30, 2021 and 2020, respectively. Consultant fees paid to the wife were approximately $92 thousand and $62 thousand during the nine months ended September 30, 2021 and 2020, respectively.

Other

Dr. Michael Yamin, a former member of the Board of Directors of the Company, is a Scientific Advisor for Pearl Cohen Zedek Latzer Baratz LLP (Pearl Cohen). During the three and nine months ended September 30, 2021 and 2020, the Company paid Pearl Cohen approximately zero and $0.2 million in legal fees, respectively.

In January 2018, the Company also entered into a consulting agreement with Dr. Yamin pursuant to which he agreed to provide consulting services to the Company in the areas of biomedical research and development. Pursuant to the terms of the consulting agreement, Dr. Yamin, in his capacity as a consultant, received $27 thousand and $36 thousand during the three months ended September 30, 2021 and 2020, respectively. Dr. Yamin received $72 thousand and $81 thousand during the nine months ended September 30, 2021 and 2020. Dr. Yamin resigned from the Company's Board of Directors in March 2020. Dr. Yamin's resignation was not due to any disagreement with the Company, the Board or management of the Company.

Item 2. 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 condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2020. 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 Quarterly Report on Form 10-Q titled "Risk Factors" and elsewhere in this report. You should carefully read the section of this Quarterly Report on Form 10-Q titled "Risk Factors" 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 of this report titled "Special Note Regarding Forward-Looking Statements.

Overview

We are a late-stage biopharmaceutical company focused on the discovery, development and commercialization of novel small molecule therapeutics to address acute organ injuries and fibrotic diseases. Our goal is to transform the treatment paradigm for patients suffering from these potentially life-threatening conditions for which there are no approved medicines or where existing approved medicines have limitations. Our lead product candidate, ANG-3777, is a hepatocyte growth factor (HGF) mimetic that we are currently evaluating in multiple acute organ injuries and related indications, including acute kidney injury (AKI) and injuries to other major organs, such as the lungs, central nervous system (CNS) and heart. Within AKI, we have studied in ANG-3777 in delayed graft function (DGF) and are currently studying ANG-3777 for the treatment of AKI associated with cardiac surgery involving cardiopulmonary bypass (CSA-AKI). We have also studied ANG-3777 in patients with severe COVID-19 related pneumonia at high risk for acute respiratory distress syndrome (ARDS) and are also evaluating ANG-3777 for other indications within acute lung injury (ALI), with our primary focus on acute respiratory distress syndrome (ARDS), as well as acute CNS injuries. We are advancing multiple programs for the treatment of fibrotic diseases, leading with ANG-3070, a tyrosine kinase inhibitor (TKI), and our inhibitor of rho kinase 2 (ROCK2). We also continue develop other preclinical product candidates, including our CYP11B2 (aldosterone synthase) inhibitors, which we are investigating for the purpose of targeting aldosterone-related fibrotic diseases.

In our lead ANG-3777 clinical development program, we have completed enrollment of all currently ongoing clinical trials. On October 26, 2021, we announced that the Phase 3 trial of ANG-3777 in DGF did not achieve its primary endpoint and the data were not expected to be sufficient evidence to support an indication in the studied DGF population. The overall safety profile of ANG-3777 in this trial was consistent with the overall experience in the program and consistent with the published literature in this patient population. A total of 248 patients received at least one dose in the trial, randomized evenly between ANG-3777 and placebo. On June 29, 2021, we announced that our exploratory Phase 2 ALI-201 trial of ANG-3777 in patients with severe COVID-19 related pneumonia at high risk for acute respiratory distress syndrome (ARDS) did not meet its primary or secondary efficacy endpoints. The adverse events and overall safety of the trial was consistent with previously published reports in patients hospitalized with severe COVID-19 pneumonia. A total of 120 patients were randomized 1:1 in the trial, with 59 patients in the active treatment arm and 61 patients in the standard of care arm.

We expect the next data readout from our ANG-3777 clinical development program will be from our Phase 2 CSA-AKI trial in the fourth quarter of 2021.

On August 3, 2021, we announced positive results from our Phase 1 clinical trial in healthy volunteers for ANG-3070, a novel oral TKI being developed for the treatment of fibrotic diseases. We also announced the FDA’s acceptance of an IND application supporting the initiation of a Phase 2 trial of ANG-3070 in patients with primary proteinuric diseases in 2021. We expect to enroll the first patient in this trial in the fourth quarter of 2021.

medicinal chemistry expertise towards creating potential therapeutics to address the unmet medical needs of patients. During this time period, our operations were funded primarily through the receipt of U.S. government grants and contracts. In 2014, we began raising capital through the sale of debt and equity securities as well as licenses, and since that time have significantly expanded our operations, with a focus on advancing our lead product candidate, ANG-3777, into and through multiple clinical programs and accelerating our other development programs, including our second product candidate, ANG-3070.

From our inception through September 30, 2021, we have received an aggregate of $292.9 million in funding, which includes approximately net proceeds of $110.6 million from the initial public offering of our common stock in February 2021 (IPO), and concurrent private placement of shares of our common stock to an existing stockholder at the same price per share (Concurrent Private Placement), approximately $68.8 million from U.S. government grants, and contracts and aggregate gross proceeds of $113.5 million through the issuance and sale of our debt and equity securities. As of September 30, 2021, we had cash and cash equivalents of $102.7 million.

We do not have any products approved for sale and have not generated any revenue from product sales since our inception and do not expect to generate revenue from product sales unless we successfully develop and we or our collaborators commercialize our product candidates, which we do not expect to occur for several years, if ever. In addition, we expect a significant portion of our future revenue and cash resources to be derived from our license agreement with Vifor Pharma. Our net losses were $15.7 million and $17.7 million for the three months ended September 30, 2021 and 2020, respectively, and $69.5 million and $51.2 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, we had an accumulated deficit of $230.0 million. We expect to continue to incur net losses for the foreseeable future. As we seek to advance ANG-3777 in CSA-AKI, ANG-3070 in additional clinical trials and our other product candidates through preclinical development, our expenses and operating losses may increase over time.

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

Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical development activities, other research and development activities and pre-commercialization activities.

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

COVID-19 Update

The COVID-19 pandemic has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical trials, enrollment in existing trials and restricting the on-site monitoring of clinical trials. For example, our Phase 2 clinical trial of ANG-3777 in patients at risk for developing AKI following cardiac surgery involving cardiopulmonary bypass has been impacted due to restrictions related to on-site monitoring of clinical trials. We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data.

The global pandemic of COVID-19 continues to rapidly evolve. The extent to which COVID-19 may impact our business, including our clinical trials, and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

At this time, we do not expect any disruption in our supply chain of drugs necessary to conduct our clinical trials and given our drug inventories, and we believe we will be able to supply the drug needs of our clinical trials in 2021 and 2022. However, we are continuing to evaluate our clinical supply chain in light of the COVID-19 pandemic.

License, Collaboration and Grant Agreements

License Agreement with Vifor Pharma

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

Pursuant to the Vifor License, we received $30.0 million in upfront cash in November 2020 and a $30.0 million equity investment, and are entitled to receive $20.0 million due upon enrolling the first patient in a Phase 3 trial of ANG-3777 for CSA-AKI. The equity investment was in the form of a convertible promissory note we issued to Vifor Pharma in aggregate principal amount of $5.0 million with a maturity date of three years, 2% interest and a conversion price of $11.57 per share, which was automatically converted into shares of our common stock upon the consummation of our initial public offering on February 9, 2021, and one or more entities affiliated with Vifor Pharma purchased $25.0 million of shares of our common stock in the Concurrent Private Placement at a price per share equal to the initial public offering price, $16.00 per share. We are also eligible to receive post-approval milestones of up to approximately $260.0 million, of which $130.0 million is associated with the commercialization of DGF and $130.0 million is associated with the commercialization of CSA-AKI. Further, we are eligible to receive milestone payments based upon global net sales: in the United States, the milestone payments range from $100 million to $450 million, based upon annual U.S. net sales tiers between $300 million and $1 billion, and outside the United States, the milestone payments range from $75 million to $200 million, based upon annual net sales tiers between $250 million and $550 million. In aggregate, we are eligible for sales milestone payments totaling $1.585 billion and a total potential deal value of up to $1.925 billion (subject to certain reductions and offsets). We are also eligible to receive tiered royalties on global net sales of ANG-3777 at royalty rates of 10% for annual U.S. net sales below $100 million, mid-teens to low twenties for annual U.S. net sales between $100 million and $500 million and 40% for annual U.S. net sales above $500 million. Outside the United States, we are eligible to receive tiered royalties on annual ex-U.S. net sales of ANG-3777 at royalty rates of 10% for annual ex-U.S. net sales below $50 million, mid-teens to low twenties for annual ex-U.S. net sales between $50 million and $250 million and 40% for annual ex-U.S. net sales above $250 million. Such milestones and royalties are subject to certain specified reductions and offsets. We recognized revenue of $1.5 million and $2.4 million for the upfront cash payment during three and nine months ended September 30, 2021 as contract revenue. We had deferred revenue under this agreement of $27.4 million at September 30, 2021.

On October 26, 2021, we announced that our Phase 3 trial of ANG-3777 in DGF did not achieve our primary endpoint and the data from the Phase 3 trial were not expected to provide sufficient evidence to support an indication in the studied DGF population.Given that a DGF indication is not supported by the Phase 3 data and thus it is unlikely that it will receive regulatory approval or achieve commercial sales, the total value of post-approval milestones under the Vifor license Agreement would be reduced to $130.0 million and the total achievable sales milestones would be $1.795 billion.

Under the Vifor License, we retain responsibility at our own cost for executing a pre-specified clinical development plan, which has been designed to obtain regulatory approvals of ANG-3777 for the CSA-AKI indications in the United States, the European Union, Switzerland and the United Kingdom. The plan includes the completion of our ongoing and currently planned clinical trials and other clinical development activities in such indications. We will be responsible for regulatory interactions and filings relating to such indications in the United States, and Vifor Pharma will be responsible for such matters outside the United States. We will share equally with Vifor Pharma the cost of related post-approval clinical development activities for such indications. We will conduct drug substance and drug product development for ANG-3777 for CSA-AKI until commercial scale at our cost. Prior to the first regulatory approval of ANG-3777 for CSA-AKI in the United States or the European Union, Vifor Pharma will assume responsibility of the commercial manufacture of ANG-3777 for such indications in accordance with a supply agreement to be negotiated in good faith between Vifor Pharma and us. In addition, Vifor Pharma will be solely responsible at its own cost for the commercialization of the CSA-AKI indication and any other Renal Indications, both within and outside of the United States (excluding Greater China). Pursuant to the Vifor License, we expect to collaborate with Vifor Pharma through the operation of joint governance committees, with each party having final determination authority in their respective areas of responsibility and other specific matters, subject to certain exceptions.

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

Components of Results of Operations

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

Revenue

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

Grant Revenue

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

Contract Revenue

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

Our revenue to date has been generated from payments received pursuant to the Vifor License Agreement. As of September 30, 2021, we recognized revenue from upfront payments over the term of our estimated period of performance using a cost-based input method under Topic 606, Revenue from Contracts with Customers. We expect to continue recognizing revenue from upfront payments related to the Vifor License Agreement using the cost-based input method in the foreseeable future.

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

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

Operating Expenses

Cost of Grant Revenue

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

Research and Development Expenses

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

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

▪costs associated with medical affairs activities;

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

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

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

▪depreciation of equipment and facilities;

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

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

Other than with respect to reimbursable expenses required to be recorded under our government grants and contracts, we do not allocate our expenses by product candidates. A significant amount of our direct research and development expenses include payroll and other personnel expenses for our departments that support multiple product candidate research and development programs and, other than as specified above, we do not record research and development expenses by product. However, research and development expenses were primarily driven by expenses relating to the development of ANG-3777 and ANG-3070 during the three and nine months ended September 30, 2021 and 2020. Of our total research and development expenses for the three months ended September 30, 2021 and 2020, 69% and 52%, respectively, of such expenses were from external third-party sources and the remaining 31% and 48%, respectively, were from internal sources. Of our total research and development expenses for the nine months ended September 30, 2021 and 2020, 63% and 70%, respectively, of such expenses were from external third-party sources and the remaining 37% and 30%, respectively, were from internal sources.

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

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

▪future preclinical and clinical trial results;

▪obtaining market access and reimbursement approvals; and

▪the timing and receipt of any regulatory approvals.

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

General and Administrative Expenses

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

We expect that our general and administrative expenses to be generally consistent in the near term as we continue to support our continued research, but to increase for commercialization activities if any future product candidate receives marketing approval. We will continue incurring expenses associated with operating as a public company, including expenses related to audit, legal, regulatory, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange, additional insurance expenses, investor relations activities and other administrative and professional services.

Other Income (Expense)

Convertible Notes Recorded at Fair Value

We have elected the fair value option for recognition of our convertible notes. Our convertible notes are subject to re-measurement each reporting period with gains and losses reported through our condensed consolidated statements of operations. All outstanding convertible notes were converted into common stock upon the close of the IPO in February 2021 and there were no convertible notes outstanding as of September 30, 2021.

Liability Classified Series C Convertible Preferred Stock Recorded at Fair Value

Our Series C convertible preferred stock included settlement features that resulted in liability classification. The initial carrying value of the Series C convertible preferred stock was accreted to the settlement value, the fair value of the securities to be issued upon the conversion of the Series C Preferred Stock. The discount to the settlement value was accreted to interest expense using the effective interest method. During 2020, certain of the convertible notes were exchanged for Series C convertible preferred stock. As the exchange was accounted for as a modification, the Series C convertible preferred stock that was exchanged for the convertible notes (the Exchanged Series C Shares) was recorded at fair value. The Exchanged Series C Shares were subject to re-measurement each reporting period with gains and losses reported through our condensed consolidated statements of operations. All outstanding convertible preferred stock was converted into common stock upon the close of the IPO in February 2021 and there was no convertible preferred stock outstanding as of September 30, 2021.

Warrant Liability

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

Foreign Exchange Transaction Gain

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

Earnings in Equity Method Investment

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

Interest Income

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

Results of Operations

Comparison of the Three Months Ended September 30, 2021 and 2020

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


	Three Months Ended September 30,
	2021		2020		$ Change		% Change
	(In thousands, except percentages)
Revenue:
Contract revenue	$	1,460	$	—	$	1,460	*
Grant revenue	—		827		(827)		(100)	%
Total revenue	1,460		827		633		77	%
Operating expenses:
Cost of grant revenue	—		348		(348)		(100)	%
Research and development	13,288		6,086		7,202		118	%
General and administrative	3,930		5,978		(2,048)		(34)	%
Total operating expenses	17,218		12,412		4,806		39	%
Loss from operations	(15,758)		(11,585)		(4,173)		36	%
Other income (expense), net	54		(6,084)		6,138		*
Net loss	$	(15,704)	$	(17,669)	$	1,965

_______________________

*Not meaningful

Contract Revenue

Contract revenue increased by $1.5 million from the three months ended September 30, 2020 to the three months ended September 30, 2021. The increase was attributable to revenue recognized related to the upfront payment from Vifor Pharma pursuant to the Vifor License Agreement entered into in November 2020.

Grant Revenue

Grant revenue decreased by $0.8 million, or 100.0%, from the three months ended September 30, 2020 to the three months ended September 30, 2021. The decrease was attributable to the timing of grant cost reimbursement requests relating to our grant from the U.S. Department of Defense (DOD).

Cost of Grant Revenue

Cost of grant revenue decreased by $0.3 million, or 100.0%, from the three months ended September 30, 2020 to the three months ended September 30, 2021. The decrease was attributable to the timing of grant cost reimbursement requests relating to our grant from the DOD.

Research and Development Expenses

Research and development expenses increased by $7.2 million, or 118.3%, from the three months ended September 30, 2020 to the three months ended September 30, 2021. The increase in research and development expenses was primarily due to an increase of $5.8 million in clinical and preclinical costs attributable to the development of ANG-3777 and ANG-3070. There was also an increase of $1.2 million in personnel-related expenses, including salaries, benefits and stock-based compensation expenses, due to higher headcount.

General and Administrative Expenses

General and administrative expenses decreased by $2.0 million, or 34.3%, from the three months ended September 30, 2020 to the three months ended September 30, 2021. The decrease in general and administrative

expenses was primarily due to a net decrease of $2.2 million of professional fees for legal, consulting, accounting, tax and other services due to the completion of the IPO in February 2021 which started in January 2020.

Other Income (Expense)

Other income (expense) changed from an expense of $6.1 million for the three months ended September 30, 2020 to nominal income of $0.1 million for the three months ended September 30, 2021. The change is primarily attributable to a decrease in expense of $4.0 million primarily from the change in fair value related to our warrant liability, convertible notes, and Series C convertible preferred stock for which we have elected the fair value option as most of these instruments were no longer outstanding after our IPO. There was also a decrease of $2.7 million in interest expense, net primarily related to $2.6 million of amortization of debt issuance costs from the issuance of Series C convertible preferred stock issued during the three months ended September 30, 2020. These expense reduction were offset by $0.5 million loss in foreign exchange transactions.

Comparison of the Nine Months Ended September 30, 2021 and 2020

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


	Nine Months Ended September 30,
	2021		2020		$ Change		% Change
	(In thousands, except percentages)
Revenue:
Contract revenue	$	2,371	$	—	$	2,371	*
Grant revenue	—		2,421		(2,421)		(100)	%
Total revenue	2,371		2,421		(50)		(2)	%
Operating expenses:
Cost of grant revenue	—		1,064		(1,064)		(100)	%
Research and development	42,030		27,912		14,118		51	%
General and administrative	14,282		14,868		(586)		(4)	%
Total operating expenses	56,312		43,844		12,468		28	%
Loss from operations	(53,941)		(41,423)		(12,518)		30	%
Other income (expense), net	(15,522)		(9,809)		(5,713)		58	%
Net loss	$	(69,463)	$	(51,232)	$	(18,231)

______________________

*Not meaningful

Contract Revenue

Contract revenue increased by $2.4 million from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The increase was attributable to revenue recognized related to the upfront payment from Vifor Pharma pursuant to the Vifor License Agreement entered into in November 2020.

Grant Revenue

Grant revenue decreased by $2.4 million, or 100.0%, from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The decrease was attributable to the timing of grant cost reimbursement requests relating to our grant from the DOD.

Cost of Grant Revenue

Cost of grant revenue decreased by $1.1 million, or 100.0%, from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The decrease was attributable to the timing of grant cost reimbursement requests relating to our grant from the DOD.

Research and Development Expenses

Research and development expenses increased by $14.1 million, or 50.6%, from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The increase in research and development expenses was primarily due to an increase of $7.0 million in personnel-related expenses, including salaries, benefits and stock-based compensation expenses, due to higher headcount, and an increase of $6.3 million in various clinical and preclinical projects attributable to the development of ANG-3777 and ANG-3070.

General and Administrative Expenses

General and administrative expenses decreased by $0.6 million, or 3.9%, from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. The decrease in general and administrative expenses was primarily due to a net decrease of $2.6 million of professional fees for legal, consulting, accounting, tax and other services due to the completion of the IPO in February 2021 which started in January 2020, partially offset by a net increase of $2.2 million of personnel-related expenses due to higher headcount.

Other Income (Expense)

Other expenses increased by $5.7 million from the nine months ended September 30, 2020 to the nine months ended September 30, 2021. This increase was attributable to an increased expense of $7.3 million in fair value related to our warrant liability, convertible notes, and Series C convertible preferred stock for which we have elected the fair value option, offset by a decreased expense of $1.3 million in interest expense related to our convertible notes and Series C convertible preferred stock issued during the three months ended September 30, 2020 and a $0.9 million gain upon PPP loan forgiveness.

Liquidity and Capital Resources

Sources and Uses of Liquidity

We have incurred losses and negative cash flows from operations since inception, and we anticipate that we will incur losses for at least the next several years. To date, we have not generated any revenue from product sales. We have funded our operations primarily through the receipt of grants, the sale of debt and equity securities, and proceeds from license agreements. In February 2021, we generated aggregate net proceeds of approximately $110.6 million from our IPO and Concurrent Private Placement, after deducting the underwriting discounts and commissions. As of September 30, 2021, we had $102.7 million of cash and cash equivalents and an accumulated deficit of $230.0 million.

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

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

Future Funding Requirements

Based on our current operating plan, we believe that our cash and cash equivalents will be sufficient to fund our planned operations for at least 12 months following the issuance date of our condensed consolidated financial statements. However, we have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology

products, we are unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

▪the scope, progress, results and costs of researching and developing ANG-3777, ANG-3070 or any other product candidates, and conducting preclinical studies and clinical trials;

▪the outcome of our ongoing and future clinical trials, including our Phase 2 clinical trial of ANG-3777 for CSA-AKI and our Phase 2 clinical trial of ANG-3070 in in patients with primary proteinuric kidney diseases;

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

▪the clinical development of ANG-3777 for potential indications in addition to CSA-AKI, including ALI and central nervous system (CNS) injuries;

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

▪the willingness of the FDA and foreign regulatory authorities to accept the results of our completed, ongoing, and planned clinical trials and preclinical studies and other work, as the basis for review and approval of ANG-3777 for CSA-AKI and any other indication;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Until such time as we or our collaborators can generate significant revenue from sales of ANG-3777 or we can generate sufficient revenue from sales of ANG-3070 or any other product candidate, if ever, we expect to finance our operations through public or private equity offerings or debt financings or other sources of capital, including collaborations, licenses, credit or loan facilities, receipt of research contributions or grants, tax credit revenue or a combination of one or more of these funding sources. Adequate funding may not be available to us on acceptable terms, or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and

equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through additional collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.

Summary Statement of Cash Flows

The following table sets forth a summary of our net cash flow activity for the nine months ended September 30, 2021 and 2020 (in thousands):


	Nine Months Ended September 30,
	2021		2020

Net cash provided by (used in)
Operating activities	$	(38,281)	$	(43,479)
Investing activities	(346)		(31)
Financing activities	106,767		52,207
Effect of foreign currency on cash	(11)		(157)
Net increase (decrease) in cash	$	68,129	$	8,540

Operating activities

For the nine months ended September 30, 2021, net cash used in operating activities was $38.3 million, which primarily consisted of a net loss of $69.5 million, partially offset by net non-cash charges of $25.8 million and a change in net operating assets and liabilities of $5.4 million. The net non-cash charges were primarily related to a change in fair value of $14.3 million in convertible notes, Series C preferred stock and warrant liabilities, stock-based compensation expense of $10.0 million and amortization of debt issuance costs of $1.9 million, partially offset by a gain of $0.9 million from the forgiveness of our PPP loan. The change in net operating assets and liabilities was due to a decrease of $4.1 million in prepaid expenses and other current assets, an increase of $2.1 million in accounts payable due to our overall growth and an increase of $2.2 million in accrued expenses due to timing of invoices, partially offset by a decrease in deferred revenue of $2.4 million due to revenue recognized in the period.

For the nine months ended September 30, 2020, net cash used in operating activities was $43.5 million, which primarily consisted of a net loss of $51.2 million and a change in net operating assets and liabilities of $7.7 million, partially offset by net non-cash charges of $15.4 million. The net non-cash charges were primarily related to a change in fair value of $7.0 million in convertible notes and warrant liabilities and stock-based compensation expense of $3.6 million. The change in net operating assets and liabilities was due to a decrease of $6.5 million in accounts payable due to payments made for clinical and research development activities and an increase of $2.6 million in prepaid expenses and other current assets due to increased deferred offering costs related to the planned IPO and prepaid CRO fees, partially offset by an increase of $2.0 million in accrued expenses due to timing of payments.

Investing activities

For the nine months ended September 30, 2021 and 2020, net cash used in investing activities of $0.3 million and $31 thousand, respectively, was primarily related to purchases of fixed assets for research activities.

Financing activities

For the nine months ended September 30, 2021, net cash provided by financing activities was $106.8 million, primarily due to net proceeds of $110.6 million from the IPO and Concurrent Private Placement and $1.7 million

from the exercise of warrants and stock options, partially offset by the payment of the deferred offering costs of $3.1 million and taxes paid related to net share settlement upon vesting of restricted stock awards of $2.5 million.

For the nine months ended September 30, 2020, net cash provided by financing activities was $52.2 million, primarily due to net proceeds of $31.2 million from the issuance of convertible notes and warrants, $20.0 million in net proceeds from the issuance of our Series C convertible preferred stock, and $0.9 million in proceeds from our PPP loan.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements as defined under SEC rules.

Critical Accounting Policies and Significant Judgements and Estimates

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our condensed consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations- Critical Accounting Policies and Use of Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 30, 2021. During the three and nine months ended September 30, 2021, except as described in Note 1 to the unaudited interim condensed financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, there were no material changes to our critical accounting policies from those previously discussed.

Emerging growth company and smaller reporting company status

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

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

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

Item 3. 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.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our President and Chief Executive Officer and our Interim Chief Financial Officer, our principal executive officer and principal accounting and financial officer, respectively, have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2021.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our President and Chief Executive Officer and our Interim Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures, our President and Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2021 due to the material weaknesses in our internal control over financial reporting described below. In light of this fact, our management has performed additional analyses, reconciliations, and other post-closing procedures and has concluded that, notwithstanding the material weaknesses in our internal control over financial reporting, the condensed consolidated financial statements for the periods covered by and included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with U.S. GAAP.

Changes in Internal Control Over Financial Reporting

Except for the changes in connection with the ongoing remediation of the previously identified material weakness discussed below, there has been no change in our internal control over financial reporting during the quarter ended September 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

In connection with the preparation of our consolidated financial statements for the years ended December 31, 2020 and 2019, we identified control deficiencies in the design and operation of our internal control over financial reporting that constituted material weaknesses, which remain unremediated as of September 30, 2021. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

•engaging SEC compliance and technical accounting consultants to assist in evaluating transactions for conformity with the U.S. GAAP;

•hired additional finance and accounting personnel to augment accounting staff and to provide more resources for complex accounting matters and financial reporting; and

•strengthening our financial reporting and close relating to incurred expenses by ensuring our data capture procedures are clearly defined and that responsible personnel, including supervisory personnel, have adequate training regarding the process and expectation.

We are still in the process of implementing these controls. We intend to continue to take steps to remediate the material weaknesses through formalizing documentation of policies and procedures and further evolving our accounting processes.

While we believe that these efforts will improve our internal control over financial reporting, the design and implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles. The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness.

Inherent Limitation on the Effectiveness Over Financial Reporting

The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but there can be no assurance that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Part II OTHER INFORMATION

Item 1. Legal Proceedings

We are not currently a party to any material legal proceedings. From time to time, we may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and related notes, before deciding whether to invest in shares of our common stock. Many of the following risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the global business and economic environment as a result. The occurrence of any of the adverse developments described in the following risk factors could materially and adversely harm our business, financial condition, results of operations or prospects. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risk Factors Summary

The following is a summary of the principal factors that cause an investment in the company to be speculative or risky:

Risks Relating to Our Financial Position and Need for Additional Capital

•We are a late-stage biopharmaceutical company with no products approved for sale and we have not generated any product revenue to date. We have incurred significant losses since our inception, and we anticipate that we will continue to incur losses for the foreseeable future, which makes it difficult to assess our future viability.

•To achieve our goals we will require substantial additional funding, for which capital may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our clinical trials or operations.

Risks Relating to the Development and Regulatory Approval of Our Product Candidates

•COVID-19 could adversely impact our business, including our clinical trials, and financial condition.

•Product development and regulatory approval involve a lengthy and expensive process with uncertain outcomes. We cannot be certain ANG-3777, ANG-3070 or any of our other product candidates will receive or maintain regulatory approval and, without regulatory approval, we and our collaborators will not be able to market our product candidates.

Risks Relating to the Commercialization of Our Product Candidates

•Our business currently depends substantially on the commercial success of ANG-3777, if approved. Our business will be materially harmed if we or our collaborators are unable to successfully commercialize ANG-3777.

•Our existing collaborations as well as additional collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.

Risks Relating to Our Business and Strategy

•We face competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.

•We currently depend on single third-party suppliers for the manufacture and supply of drug substance and potential future commercial product supplies for our product candidates, and any

performance failure on the part of our supplier could delay the development and potential commercialization of our product candidates.

Risks Relating to Our Intellectual Property

•It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If our patent position and potential regulatory exclusivity do not adequately protect our product candidates, others could compete against us more directly, which would harm our business, possibly materially.

•If we do not obtain protection under the Hatch-Waxman Act and similar legislation outside of the United States by extending the patent terms and obtaining data exclusivity for our product candidates, our business may be materially harmed.

Risks Relating to Our Common Stock

•Our stock price may be volatile and you may not be able to resell shares of our common stock at or above the price you paid.

•An active, liquid and orderly market for our common stock may not be sustained.

General Risk Factors

•Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

•Any claims relating to improper handling, storage or disposal of hazardous materials used in our business could be costly and delay our research and development efforts.

Risks Relating to Our Financial Position and Need for Additional Capital

We are a late-stage biopharmaceutical company with no products approved for sale and we have not generated any product revenue to date. We have incurred significant losses since our inception, and we anticipate that we will continue to incur losses for the foreseeable future, which makes it difficult to assess our future viability.

We are a late-stage biopharmaceutical company. Drug development is a highly speculative undertaking and involves a substantial degree of risk. We have not yet submitted any product candidates for approval or received approval of any product candidate, including for ANG-3777, by regulatory authorities in any jurisdiction, including the United States Food and Drug Administration (FDA).

Since our inception, we have devoted substantially all of our efforts and financial resources to conducting research and development activities, including drug discovery and preclinical studies and clinical trials, establishing and maintaining our intellectual property portfolio, organizing and staffing our business, business planning, raising capital and providing general and administrative support for these operations. Prior to 2014, our efforts were primarily focused on researching a number of pathways related to serious organ diseases, applying our medicinal chemistry expertise towards creating potential therapeutics to address the unmet medical needs of patients and conducting preclinical and initial clinical development of ANG-3777. During this time period, our operations were funded primarily through the receipt of U.S. government grants and contracts. In 2014, we began raising capital through the sale of debt and equity securities as well as licenses, and since that time have significantly expanded our operations with a focus on advancing our lead product candidate, ANG-3777, into and through multiple clinical trials and accelerating our other development programs, including our second product candidate, ANG-3070. From our inception through September 30, 2021, we have received an aggregate of $292.9 million in funding, which includes approximately net proceeds of $110.6 million from the initial public offering of our common stock in February 2021 (IPO), and concurrent private placement of shares of our common stock to an existing stockholder at the same price per share (Concurrent Private Placement), approximately $68.8 million from U.S. government grants, and contracts and aggregate gross proceeds of $113.5 million through the issuance and sale of our debt and equity securities. As of September 30, 2021, we had cash and cash equivalents of $102.7 million.

our collaborators commercialize our product candidates, which we do not expect to occur for several years, if ever. In addition, we expect a significant portion of our future revenue and cash resources to be derived from our license agreement with Vifor Pharma. Our net losses were $15.7 million and $17.7 million for the three months ended September 30, 2021 and 2020, respectively. Our net losses were $69.5 million and $51.2 million for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, we had an accumulated deficit of $230.0 million. We expect to continue to incur net losses for the foreseeable future, and we expect our expenses and operating losses to be generally consistent or slightly lower in the near term as we advance ANG-3777, ANG-3070 and our other product candidates through clinical trials and preclinical development, and as we seek regulatory approval for ANG-3777, ANG-3070 or any of our other product candidates. In addition, if we seek approval for any of our product candidates or indications for which we retain commercialization rights, we expect to incur additional expenses as we expand our clinical, regulatory, quality, manufacturing and commercialization capabilities, incur significant commercialization expenses for marketing, sales, manufacturing and distribution if we obtain marketing approval for such product candidates. Finally, we expect to incur generally consistent expenses to protect our intellectual property and for our general and administrative support functions, including hiring personnel, as well as costs associated with operating as a public company.

If ANG-3777, ANG-3070 or any of our other product candidates fail in ongoing clinical trials or do not gain regulatory approval, or if our product candidates, if approved, do not achieve market acceptance, we may never become profitable. These net losses and negative cash flows could have an adverse effect on our stockholders' equity and working capital.

In addition, while we have a license agreement with Vifor Pharma relating to renal indications for ANG-3777 that contemplate upfront, regulatory and commercial milestone payments as well as royalties on sales of ANG-3777, there can be no assurance that we will be able to successfully advance ANG-3777 through approval, that Vifor Pharma will be able to successfully commercialize ANG-3777 for any renal indications following any approval or that any substantial revenue stream from milestone or royalty payments will be forthcoming under the Vifor license agreement.

To achieve our goals we will require substantial additional funding, for which capital may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our clinical trials or operations.

Since our inception, we have invested a significant portion of our efforts and financial resources in research and development activities. We are currently in the process of advancing ANG-3777 through clinical development, preparing ANG-3070 for a Phase 2 clinical trial in primary proteinuric kidney diseases, and moving other candidates through preclinical development. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. We will require substantial additional future capital in order to complete clinical development and seek regulatory approval for ANG-3777 for any indication as well as to conduct the research, clinical and regulatory activities necessary to bring our other product candidates, including ANG-3070, to market. Regulatory authorities in the United States and elsewhere could also require that we perform additional preclinical studies or clinical trials to receive or maintain regulatory approval of our product candidates, including ANG-3777, and our expenses would further increase beyond what we currently expect and the anticipated timing of any potential regulatory approval could be delayed. Because successful development of our product candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development of such product candidates as well as the costs of commercializing any of our wholly-owned product candidates and those for which we retain the right to commercialize.

We estimate that our current cash and cash equivalents are sufficient for us to fund our operating expenses and capital expenditure requirements through at least the next 12 months. However, we will continue to require substantial additional capital to continue our clinical development activities as well as any commercialization activities we undertake with respect to our wholly-owned product candidates and those for which we retain the right to commercialize.

We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of biotechnology products, we are

unable to estimate the exact amount of our operating capital requirements. The amount and timing of our future funding requirements will depend on many factors, including, but not limited to:

▪the scope, progress, results and costs of researching and developing ANG-3777, ANG-3070 or any other product candidates, and conducting preclinical studies and clinical trials;

▪the outcome of our ongoing and future clinical trials, including our Phase 2 clinical trial of ANG-3777 for CSA-AKI and our Phase 2 clinical trial of ANG-3070 in patients with primary proteinuric kidney diseases;

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

▪the clinical development of ANG-3777 for potential indications in addition to CSA-AKI, including ALI and central nervous system (CNS) injuries;

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

▪the willingness of the FDA and foreign regulatory authorities to accept the results of our completed, ongoing and planned clinical trials and preclinical studies and other work, as the basis for review and approval of ANG-3777 for CSA-AKI and any other indication;