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Item 8. Financial Statements and Supplementary Data

2024-03-20 compared with 2023-03-22 · 234 added, 438 removed, 520 unchanged (56% of the section changed)

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2022 and 2021

Consolidated Statements of Changes in Stockholders’

Equity/Convertible Preferred Units and Members' Deficit for the Years ended December 31, 2022 and 2021

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Comprehensive Loss

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to the Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Rani Therapeutics Holdings, Inc.

(the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, changes in stockholders’

equity / convertible preferred units and members' deficit and cash flows for each of the two years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

The Company's Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from operations, negative cash flows from operating activities, and has stated that substantial doubt exists about the Company’s ability to continue as a going concern.

Management's evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1.

The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

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/s/ Ernst & Young LLP

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

San Francisco, California

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Cash and cash equivalents

Restricted cash equivalents

Marketable securities

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Accounts payable

Related party payable

Accrued expenses

Operating lease liability, current portion

Accrued expenses and other current liabilities

Current portion of long-term debt

Current portion of operating lease liability

Total current liabilities

Long-term debt, less current portion

Operating lease liability, less current portion

Long-term debt

Total liabilities

Commitments and contingencies (Note 12)

Stockholders' equity:

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Class B common stock, $ 0.0001 par value - 40,000 shares authorized;

24,116 and 29,290 issued and outstanding as of December 31, 2022 and December 31, 2021, respectively

24,116 issued and outstanding as of December 31, 2023 and December 31, 2022

Class C common stock, $ 0.0001 par value - 20,000 shares authorized;

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Year Ended December 31,

Contract revenue

Operating expenses

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Interest income and other, net

Loss on extinguishment of debt

Interest expense and other, net

Change in estimated fair value of preferred unit warrant

Loss before income taxes

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Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc., basic and diluted

Weighted-average Class A common shares outstanding—basic and diluted

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

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Other comprehensive loss

Net unrealized loss on marketable securities

Net unrealized gain (loss) on marketable securities

Comprehensive loss

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RANI THERAPEUTICS HOLDINGS, INC.

Consolidated Statements of Changes in STOCKHOLDERS’

Equity/CONVERTIBLE PREFERRED UNITS AND MEMBERS' Deficit

Consolidated Statements of Changes in STOCKHOLDERS’ Equity

(in thousands)

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Balance at December 31, 2022

Class A Common Stock

Class B Common Stock

Convertible Preferred Units

Members’

Additional Paid In Capital

Accumulated Deficit

Non-Controlling Interest

Total Stockholders' Equity/(Members' Deficit)

Balance at December 31, 2020

Activity prior to initial public offering ("IPO") and related Organizational Transactions

Issuance of Series E preferred units

Equity-based compensation from secondary sales transactions

Exercise of warrant for common units

Settlement of preferred unit warrant liability

Equity-based compensation

Effects of the IPO and related Organizational Transactions

Effects of Organizational Transactions

Issuance of Class A common stock in connection with the IPO, net of issuance costs of $ 10,686

Non-controlling interest adjustment for purchase of newly issued Class A units of Rani LLC with proceeds from the IPO

Activity subsequent to the IPO and related Organizational Transactions

Equity-based compensation

Issuance of common stock under employee equity plans, net of shares withheld for tax settlement

Issuance of common stock under employee stock purchase plan

Effect of exchanges of Paired Interests and non-corresponding Class A Units of Rani LLC

Non-controlling interest adjustment for changes in proportionate ownership in Rani LLC

Forfeiture of restricted stock awards

Equity-based compensation

Other comprehensive gain

Balance at December 31, 2023

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

Equity-based compensation expense

Stock-based compensation expense

Depreciation and amortization

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Net accretion and amortization of investments in marketable securities

Change in fair value of preferred unit warrant liability

Loss on extinguishment of debt

Changes in operating assets and liabilities:

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Accounts payable

Accrued expenses

Accrued expenses and other current liabilities

Operating lease liabilities

Related party payable

Deferred revenue

Net cash used in operating activities

Cash flows from investing activities

Purchases of marketable securities

Proceeds from maturities of marketable securities

Purchases of marketable securities

Purchases of property and equipment

Net cash used in investing activities

Net cash provided by (used in) investing activities

Cash flows from financing activities

Proceeds from the issuance of long-term debt and warrants, net of issuance costs

Issuance of common stock under employee stock purchase plan

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Tax withholdings paid on behalf of employees for net share settlement

Proceeds from the issuance of long-term debt and warrants, net of issuance costs

Payment of deferred financing costs

Proceeds from issuance of Class A common stock sold in the IPO, net of issuance costs

Proceeds from issuance of preferred units, net of issuance costs

Proceeds from exercise of warrants for common units

Repayment of the Paycheck Protection Program Loan

Repayment of convertible note

Principal and interest repayments from related party for note receivable

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash equivalents

Cash and cash equivalents, beginning of period

Net decrease in cash, cash equivalents and restricted cash equivalents

Cash, cash equivalents and restricted cash equivalents, beginning of period

Cash, cash equivalents and restricted cash equivalents, end of period

Supplemental disclosures of cash flow information

Cash paid for income taxes

Cash paid for interest

Cash paid for income taxes

Supplemental disclosures of non-cash investing and financing activities

Property and equipment purchases included in accounts payable and accrued expenses

Exchanges of Paired Interests and non-corresponding Class A Units of Rani LLC

Issuance costs deducted from long-term debt proceeds

Right-of-use assets obtained in exchange for new operating lease liabilities

Deferred financing costs included in prepaid expenses

Exchanges of Paired Interests and non-corresponding Class A Units of Rani LLC

Interest income receivable included in prepaid expenses

Exchange of Class A Units of Rani LLC from the Former LLC Owners

Settlement of preferred unit warrant liability

Property and equipment purchases included in accounts payable and accrued expenses and other current liabilities

Issuance of costs deducted from long-term debt proceeds

Deferred financing costs included in prepaid expenses

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

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Rani Therapeutics Holdings, Inc.

(“Rani Holdings”) was formed as a Delaware corporation in April 2021 for the purpose of facilitating an initial public offering (“IPO”) of its Class A common stock, and to facilitate certain organizational transactions and to operate the business of Rani Therapeutics, LLC (“Rani LLC”) and its consolidated subsidiary, Rani Management Services, Inc.

(“RMS”).

Rani Holdings and its consolidated subsidiaries, Rani LLC and, prior to December 15, 2022, RMS are collectively referred to herein as “Rani”

or the “Company.”

RMS was dissolved on December 15, 2022.

Rani Holdings and its consolidated subsidiaries, Rani LLC and RMS (prior to December 15, 2022), are collectively referred to herein as “Rani” or the “Company.” RMS was dissolved on December 15, 2022.

The Company is a clinical stage biotherapeutics company focusing on advancing technologies to enable the administration of biologics and drugs orally, to provide patients, physicians, and healthcare systems with a convenient alternative to painful injections.

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The Company is headquartered in San Jose, California and operates in one segment.

Initial Public Offering and Organizational Transactions

In August 2021, the Company closed its IPO and sold 7,666,667 shares of its Class A common stock, including shares issued pursuant to the exercise in full of the underwriters’

option, for cash consideration of $ 11.00 per share and received approximately $ 73.6 million in net proceeds, after deducting underwriting discounts, offering costs and commissions.

The Company used the proceeds from the IPO to purchase 7,666,667 newly issued economic nonvoting Class A units (“Class A Units”) of Rani LLC.

In connection with the IPO, the Company was party to the following organizational transactions (the “Organizational Transactions”):

Amended and restated Rani LLC’s operating agreement (the “Rani LLC Agreement”) to appoint the Company as the sole managing member of Rani LLC and effectuated an exchange of all outstanding (i) convertible preferred units, automatic or net exercised warrants to purchase preferred units and common units, and common units of Rani LLC, into Class A Units and an equal number of voting noneconomic Class B units (“Class B Units”) and (ii) all non-vested incentive units (“Profits Interests”) into Class A Units.

In connection with the closing of the IPO, each LLC interest was exchanged 1 for 0.5282 as determined and predicated on the initial public offering price of the Company’s Class A common stock ;

Amended and restated the Company’s certificate of incorporation in July 2021, to provide for the issuance of (i) Class A common stock, each share of which entitles its holders to one vote per share , (ii) Class B common stock, each share of which entitles its holders to 10 votes per share on all matters presented to the Company's stockholders , (iii) Class C common stock, which has no voting rights, except as otherwise required by law and (iv) preferred stock;

Exchanged 12,047,925 shares of Class A common stock for existing Class A Units of Rani LLC held by certain individuals and entities (the “Former LLC Owners”) on a one-for-one basis;

Issued 29,290,391 shares of Class B common stock to certain individuals and entities that continued to hold Class A Units in Rani LLC after the IPO (the “Continuing LLC Owners”) in return for an equal amount of Rani LLC Class B Units;

Organizational Transactions

In connection with the IPO in August 2021, the Company was party to the following organizational transactions (the “Organizational Transactions”):

• Amended and restated Rani LLC’s operating agreement (the “Rani LLC Agreement”) to appoint the Company as the sole managing member of Rani LLC and effectuated an exchange of all outstanding (i) convertible preferred units, automatic or net exercised warrants to purchase preferred units and common units, and common units of Rani LLC, into economic nonvoting Class A units (“Class A Units”) and an equal number of voting noneconomic Class B units (“Class B Units”) and (ii) all non-vested incentive units (“Profits Interests”) into Class A Units.

In connection with the closing of the IPO, each LLC interest was exchanged 1 for 0.5282 as determined and predicated on the initial public offering price of the Company’s Class A common stock ;

• Amended and restated the Company’s certificate of incorporation in July 2021, to provide for the issuance of (i) Class A common stock, each share of which entitles its holders to one vote per share , (ii) Class B common stock, each share of which entitles its holders to 10 votes per share on all matters presented to the Company's stockholders , (iii) Class C common stock, which has no voting rights, except as otherwise required by law and (iv) preferred stock;

• Exchanged 12,047,925 shares of Class A common stock for existing Class A Units of Rani LLC held by certain individuals and entities (the “Former LLC Owners”) on a one-for-one basis;

• Issued 29,290,391 shares of Class B common stock to certain individuals and entities that continued to hold Class A Units in Rani LLC after the IPO (the “Continuing LLC Owners”) in return for an equal amount of Rani LLC Class B Units;

• Entered into a Registration Rights Agreement with certain of the Continuing LLC Owners.

The Continuing LLC Owners are entitled to exchange, subject to the terms of the Rani LLC Agreement, the Class A Units they hold in Rani LLC, together with the shares they hold of the Company Class B common stock (together referred to as a "Paired Interest"), in return for shares of the Company’s Class A common stock on a one-for-one basis provided that, at the Company’s election, the Company has the ability to effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed.

Any shares of Class B common stock will be cancelled on a one-for-one basis if, at the election of the Continuing LLC Owners, the Company redeems or exchanges such Paired Interest pursuant to the terms of the Rani LLC Agreement.

As of December 31, 2022 , certain individuals who continue to own interests in Rani LLC but do not hold shares of the Company’s Class B common stock (“non-corresponding Class A Units”) have the ability to exchange their non-corresponding Class A Units of Rani LLC for 1,387,471 shares of the Company’s Class A common stock.

Any shares of Class B common stock will be canceled on a one-for-one basis if, at the election of the Continuing LLC Owners, the Company redeems or exchanges such Paired Interest pursuant to the terms of the Rani LLC Agreement.

As of December 31, 2023 , certain individuals who continue to own interests in Rani LLC but do not hold shares of the Company’s Class B common stock (“non-corresponding Class A Units”) have the ability to exchange their non-corresponding Class A Units of Rani LLC for 1,345,067 shares of the Company’s Class A common stock.

The Company has incurred recurring losses since its inception, including net losses of $ 67.9 million for the year ended December 31, 2023.

As of December 31, 2023 , the Company had an accumulated deficit of $ 72.9 million and for the year ended December 31, 2023 had negative cash flows from operations of $ 51.2 million.

As of December 31, 2023 , cash, cash equivalents and marketable securities totaled $ 48.5 million.

Based on its available cash resources and current operating plan, there is substantial doubt regarding the Company’s ability to continue as a going concern for a period of one year after the date that its financial statements for the year ended December 31, 2023 are issued.

The Company’s existing capital resources, including the net proceeds from our IPO and Loans, will not be sufficient to enable it to initiate any pivotal clinical trials.

The Company will need to raise substantial additional funds in the future in order to complete the development of the RaniPill platform, to complete the clinical development of its product candidates and seek regulatory approval thereof, to expand its manufacturing capabilities, to further develop the RaniPill HC device and to commercialize any of its product candidates.

In August 2022, the Company entered into a loan and security agreement and related supplement (the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P (the “Lender”).

The Loan Agreement provides for term loans (the “Loans”) in an aggregate principal amount up to $ 45.0 million.

A Loan of $ 30.0 million was committed at closing, with $ 15.0 million funded immediately and $ 15.0 million available to be drawn between October 1, 2022 and December 31, 2022, which was drawn in December 2022.

The remaining $ 15.0 million of Loans (“Tranche 2”) is uncommitted and is subject to certain conditions and approval by the Lender.

In August 2022, the Company entered into a Controlled Equity Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co.

Wainwright & Co., LLC (collectively the "Agents"), pursuant to which the Company may offer and sell from time to time through the Agents up to $ 150 million of shares of its Class A common stock, in such share amounts as the Company may specify by notice to the Agents, in accordance with the terms and conditions set forth in the Sales Agreement.

The potential proceeds from the Sales Agreement are expected to be used for general corporate purposes.

As of December 31, 2023, the Company has no sales under the Sales Agreement.

In November 2023, the Company underwent a reduction in workforce and paused or discontinued certain programs to reduce expenses and focus its financial resources on key priorities.

The Company expects to continue to generate operating losses and negative operating cash flows for the foreseeable future as it continues to develop the RaniPill capsule.

The Company expects that its cash and cash equivalents, and marketable securities of $ 98.5 million as of December 31, 2022 will be sufficient to fund its operations through at least twelve months from the date the consolidated financial statements are issued.

as defined in Rule 415(a)(4) under the Securities Act, collaboration or licensing agreements, or the incurrence of debt.

However, there is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all, and some could be dilutive to existing stockholders and holders of interests in the Company.

The Company will not generate any revenue from product sales unless, and until, it successfully completes clinical development and obtains regulatory approval of its product candidates.

If the Company obtains regulatory approval for the RaniPill capsule, it expects to incur significant expenses related to developing its internal commercialization capability to support manufacturing, product sales, marketing, and distribution.

The Company’s ability to raise additional capital through either the issuance of equity or debt, is dependent on a number of factors including, but not limited to, the market interest of the Company, which itself is subject to a number of development and business risks and uncertainties, as well as the uncertainty that the Company would be able to raise such additional capital at a price or on terms that are favorable to the Company.

Current global economic conditions and market volatility resulting from the novel coronavirus disease (“COVID-19”) pandemic or other factors could also adversely impact the Company’s ability to access capital when and as needed.

The Company expects to finance its future operations with its existing cash and through strategic financing opportunities that could include, but are not limited to, future offerings of its equity, such as “at the market offerings” as defined in Rule 415(a)(4) under the Securities Act, collaboration or licensing agreements, or the incurrence of debt.

However, there is no guarantee that any of these strategic or financing opportunities will be executed or realized on favorable terms, if at all.

As a result, the Company has concluded that management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern.

Summary of Significant Accounting Policies

Basis of Presentation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”).

The Company operates and controls all of the business and affairs of Rani LLC and, through Rani LLC and, prior to December 15, 2022, its subsidiary, conducts its business.

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

Certain prior period amounts have been reclassified to be consistent with current period presentation.

The Company operates and controls all of the business and affairs of Rani LLC and, through Rani LLC conducts its business.

Because the Company manages and operates the business and controls the strategic decisions and day-to-day operations of Rani LLC and also has a substantial financial interest in Rani LLC, the Company consolidates the financial results of Rani LLC, and a portion of its net loss is allocated to the non-controlling interests in Rani LLC held by the Continuing LLC Owners.

All intercompany accounts and transactions have been eliminated in consolidation.

The Organizational Transactions were considered transactions between entities under common control.

As a result, the consolidated financial statements for periods prior to the IPO and the Organizational Transactions have been adjusted to combine the previously separate entities for presentation purposes.

Variable Interest Entities

The Company consolidates all entities that it controls through a majority voting interest or as the primary beneficiary of a variable interest entity (“VIE”).

In determining whether the Company is the primary beneficiary of an entity, the Company applies a qualitative approach that determines whether it has both (1) the power to direct the economically significant activities of the entity and (2) the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to that entity.

The Company’s determination about whether it should consolidate such VIEs is made continuously as changes to existing relationships or future transactions may result in a consolidation event.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes.

We evaluate our estimates on an ongoing basis.

We base our estimates on our historical experience and also on assumptions that we believe are reasonable;

The Company evaluates its estimates on an ongoing basis.

The Company bases its estimates on its historical experience and also on assumptions that we believe are reasonable;

however, actual results may differ materially and adversely from these estimates.

Revenue Recognition

The Company enters into evaluation arrangements with certain pharmaceutical partners, under which the Company performs evaluation services of the partner’s drug molecules using the RaniPill capsule.

Revenue is recognized when control of promised goods or services is transferred to a customer in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

To determine revenue recognition for its arrangements with customers, the Company performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

Revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring these services.

The terms of the evaluation services agreements usually include payments for evaluation services and evaluation milestones based on a decision to extend the agreement.

The transaction price of the evaluation services contracts may include variable consideration.

Application of the constraint for variable consideration requires judgment.

The constraint for variable consideration is applied such that it is probable a significant reversal of revenue will not occur when the uncertainty associated with the contingency is resolved.

Application of the constraint for variable consideration is updated at each reporting period as a revision to the estimated transaction price.

For arrangements where the anticipated period between timing of transfer of services and the timing of payment is one year or less, the Company has elected to not assess whether a significant financing component exists.

The Company recognizes evaluation services revenue over the period in which evaluation services are provided.

Specifically, the Company recognizes revenue using an output method to measure progress, using samples processed relative to total expected samples to be processed as its measure of progress.

For services under these arrangements, costs incurred are included in research and development expenses in the Company’s consolidated statements of operations and comprehensive loss.

Customer options, such as options granted to allow a customer to acquire later stage evaluation services, are evaluated at contract inception in order to determine whether those options provide a material right (i.e., an optional good or service offered for free or at a discount) to the customer.

If the customer options represent a material right, the material right is treated as a separate performance obligation at the outset of the arrangement.

The Company allocates the transaction price to material rights based on the standalone selling price, and revenue is recognized when or as the future goods or services are transferred or when the option expires.

Customer options that are not material rights do not give rise to a separate performance obligation, and as such, the additional consideration that would result from a customer exercising an option in the future is not included in the transaction price for the current contract.

Instead, the option is deemed a marketing offer, and additional option fee payments are recognized or being recognized as revenue when the licensee exercises the option.

The exercise of an option that does not represent a material right is treated as a separate contract for accounting purposes.

Revenue is recognized for each distinct performance obligation as control is transferred to the customer.

The Company recognizes revenue from its evaluation services over time as services are delivered, using a cost-based input method of revenue recognition over the contract term.

The cost-based input measured is based on an estimate of total costs to be incurred to deliver the services over the contract period compared to costs incurred to date for each contract.

The Company’s evaluation of estimated costs to perform the services typically includes estimates for effort related to contracted research, formulation, and animal testing.

These estimates are based on the Company’s reasonable assumptions and its historical experience.

Actual results may differ materially and adversely from these estimates.

Incremental costs of obtaining contracts are expensed when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less.

To date, none of these costs have been material.

The costs to fulfill the contracts are determined to be immaterial and are recognized as an expense when incurred.

Contract assets are generated when contractual billing schedules differ from revenue recognition timing and the Company records a contract receivable when it has an unconditional right to consideration.

No contract assets balance was recorded as of December 31, 2022 and 2021, respectively.

Contract liabilities are recorded as deferred revenue when cash payments are received or due in advance of performance or where the Company has unsatisfied performance obligations.

The Company had no deferred revenue as of December 31, 2022 and 2021 , respectively.

Concentrations of Credit Risk and Other Risks and Uncertainties

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The Company maintains accounts in federally insured financial institutions in excess of federally insured limits.

Company also holds money market funds that are not federally insured.

The Company also holds money market funds that are not federally insured.

However, management believes the Company is not exposed to significant credit risk due to the financial strength of the depository institutions in which these deposits are held and of the money market funds and other entities in which these investments are made.

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Cash equivalents are carried at cost, which approximates fair value.

The Company’s cash and cash equivalents consist of balances held in demand depositary accounts and money market funds.

Restricted cash equivalents consist of cash collateral required by a bank in connection with the Company's commercial credit cards program.

The Company limits its credit risk associated with cash, cash equivalents and restricted cash equivalents by maintaining its bank accounts at major financial institutions.

The following table provides a reconciliation of cash, cash equivalents and restricted cash equivalents reported within the consolidated balance sheet which, in aggregate, represents the amount reported in the consolidated statements of cash flows for the years ended December 31, 2022 and 2021 (in thousands):

The following table provides a reconciliation of cash and cash equivalents and restricted cash equivalents reported as a component of prepaid expenses and other current assets on the consolidated balance sheet which, in aggregate, represents the amount reported in the consolidated statements of cash flows for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31,

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The Company regularly reviews its investments for declines in fair value below their amortized cost basis to determine whether the impairment is due to credit-related factors or noncredit-related factors.

The Company's review includes the creditworthiness of the security issuers, the severity of the unrealized losses, whether we have the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of their amortized cost bases.

The Company's review includes the creditworthiness of the security issuers, the severity of the unrealized losses, whether the Company has the intent to sell the securities and whether it is more likely than not that the Company will be required to sell the securities before the recovery of its amortized cost bases.

When the Company determines that a portion of the unrealized loss is due to an expected credit loss, the Company recognizes the loss amount in Other income (expense), net, with a corresponding allowance against the carrying value of the security the Company holds.

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The Company has made an accounting policy election to not measure an allowance for credit loss for accrued interest receivables and will recognize a credit loss for accrued interest receivables when the loss becomes probable and estimable.

As of December 31, 2022, interest income receivable recorded as a component of prepaid expenses and other current assets on the consolidated balance sheet was de minimis.

As of December 31, 2023 and 2022 , interest income receivable recorded as a component of prepaid expenses and other current assets on the consolidated balance sheet was $ 0.2 million and de minimis, respectively.

Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use

of unobservable inputs.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

As of December 31, 2022 and 2021, the carrying values of current assets and liabilities approximates fair value due to their short-term nature.

The fair value of the Company’s long-term debt approximated its carrying value based on borrowing rates currently available to the Company for debt with similar terms and maturities (Level 2 inputs).

Level 1—Quoted prices in active markets for identical assets or liabilities.

As of December 31, 2023 and 2022, the carrying values of current assets and liabilities approximates fair value due to their short-term nature, respectively.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.

Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3 (Note 3).

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value of the instrument.

Prior to January 1, 2022, the Company had one cancelable operating lease agreement for its corporate headquarters and recognized related rent expense on a straight-line basis over the term of the lease.

The Company’s lease agreement contained termination and renewal options.

The Company did not assume termination nor renewals options in its determination of the lease term unless they were deemed to be reasonably certain at the renewal of the lease.

The Company began recognizing rent expense on the date that it obtained the legal right to use and control the leased space.

Subsequent to the adoption of the new leasing standard on January 1, 2022, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease.

Accordingly, the degree of judgement exercised by the Company in determining fair value is greatest for instruments categorized in Level 3.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value of the instrument.

The Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present at the inception of the arrangement and if such a lease is classified as a financing lease or operating lease.

The Company has elected not to recognize on the balance sheet leases with terms of one year or less.

For any arrangement that is considered to be a lease with a term greater than one year, the Company recognizes a lease asset for its right to use the underlying asset and a lease liability for the corresponding lease obligation.

Operating leases are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the Company’s consolidated balance sheet as of December 31, 2022.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease contract.

Operating leases are included in operating lease right-of-use ("ROU") assets and operating lease liabilities in the Company’s consolidated balance sheet as of December 31, 2023.

Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the expected lease term.

In determining the net present value of lease payments, the interest rate implicit in lease contracts is typically not readily determinable.

As such, the Company utilizes the appropriate incremental borrowing rate (“IBR”), which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received and impairment charges if the Company determines the ROU asset is impaired.

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The operating lease ROU assets also include any lease payments made and exclude lease incentives.

Lease expense is recognized on a straight-line basis over the expected lease term.

The Company has elected to not separate lease and non-lease components for its leased assets and accounts for all lease and non-lease components of its agreements as a single lease component.

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The Company determines the actual costs through discussions with internal personnel and external service providers as to the progress or stage of completion of services and the agreed-upon fee to be paid for such services.

Equity-Based Compensation

Stock-Based Compensation

In July 2021, the Company adopted and its stockholders approved, the Rani Therapeutics Holdings, Inc.

2021 Equity Incentive Plan (the “2021 Plan”).

The Company has subsequently granted stock options to purchase shares of its Class A common stock as well as restricted stock units (“RSUs”) and restricted stock awards ("RSAs") from the 2021 Plan to both employees and non-employees.

2021 Equity Incentive Plan (the “2021 Plan”).

The Company measures stock-based compensation at fair value on the grant date of the award.

The fair value of employee and nonemployee RSUs is determined based on the number of shares granted and the closing market price of the Company’s Class A common stock on the date of grant.

The fair value of employee RSAs is determined based on the estimated fair value of the Company’s Class A common stock on the grant date and is subject to the Company's reacquisition right which is accounted for as a forfeiture provision (Note 9).

The fair value of employee and nonemployee RSUs is determined based on the number of shares granted and the closing market price of the Company’s Class A common stock on the date of grant.

For awards that vest subject to the satisfaction of service requirements, compensation expense is measured based on the fair value of the award on the date of grant and expense is recognized on a straight-line basis over the requisite service period.

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Stock-based compensation is classified in the accompanying consolidated statements of operations and comprehensive loss based on the function to which the related services are provided.

The Company determines the grant-date fair value of options to purchase common shares using the Black-Scholes option-pricing model which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield.

Such assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

If actual results are not consistent with the Company’s assumptions and judgments used in making these estimates, the Company may be required to increase or decrease compensation expense, which could be material to the Company’s consolidated results of operations.

Unit-Based Compensation

Prior to the IPO, Rani LLC had granted equity-based awards to employees, members of the Board of Managers and nonemployees, including InCube Labs, LLC (“ICL”) employees and consultants, in the form of Profits Interests and/or options to purchase common units.

All awards of Profits Interests and options to purchase common units were measured based on the estimated fair value of the award on the date of grant.

Forfeitures were recognized when they occurred.

All of the Profits Interests were subject to service and performance-based conditions and the Company evaluated the probability of achieving each performance-based condition at each reporting date and recognized equity-based compensation expense for employee and consultant awards and distributions of equity for ICL employee awards in the consolidated financial statements when it was deemed probable that the performance-based condition would be met using the accelerated attribution method over the requisite service period.

The options to purchase common units were subject to service conditions and generally vested over three or four years.

The Company utilized estimates and assumptions in determining the fair value of its Profits Interests and options to purchase common units on the date of grant.

The Company utilized various valuation methodologies in accordance with the framework of the American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately Held Company Equity Securities Issued as Compensation , to estimate the fair value of its preferred units, common units and Profits Interests.

Each valuation methodology includes estimates and assumptions that require the Company’s judgment.

These estimates and assumptions include several objective and subjective factors, including probability weighting of events, volatility, time to an exit event, a risk-free interest rate, the prices at which Rani LLC sold preferred units, the superior rights, and preferences of the preferred units senior to Rani LLC’s common units at the time, and a discount for the lack of marketability.

Changes to the key assumptions used in the valuations could result in different fair values at each valuation date.

Such assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

The Company is the managing member of Rani LLC and, as a result, consolidates the financial results of Rani LLC and, prior to December 15, 2022, its taxable subsidiary RMS in the consolidated financial statements.

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The Company reduces the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that the Company will not realize some or all of the deferred tax asset.

The Company’s tax positions are subject to income tax audits.

The Company uses a recognition threshold and measurement attribute for the consolidated financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

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In August 2021, in connection with the IPO and Organizational Transactions, the Company entered into a tax receivable agreement ("TRA") with certain of the Continuing LLC Owners.

The TRA provides that the Company pay to such Continuing LLC Owners, 85 % of the amount of tax benefits, if any, it is deemed to realize (calculated using certain assumptions) as a result of (i) increases in the tax basis of assets of Rani LLC resulting from (a) any future redemptions or exchanges of Paired Interests or non-corresponding Class A Units of Rani LLC and (b) payments under the TRA and (ii) certain other benefits arising from payments under the TRA (collectively the “Tax Attributes”).

A liability for the payable to parties subject to the TRA, and a reduction to stockholders’

equity, is accrued when (i) an exchange of a Paired Interest or non-corresponding Class A Units of Rani LLC has occurred and (ii) when it is deemed probable that the Tax Attributes associated with the exchange will be used to reduce the Company’s taxable income based on the contractual percentage of the benefit of Tax Attributes that the Company expects to receive over a period of time (Note 14).

A liability for the payable to parties subject to the TRA, and a reduction to stockholders’ equity, is accrued when (i) an exchange of a Paired Interest or non-corresponding Class A Units of Rani LLC has occurred and (ii) when it is deemed probable that the Tax Attributes associated with the exchange will be used to reduce the Company’s taxable income based on the contractual percentage of the benefit of Tax Attributes that the Company expects to receive over a period of time (Note 13).

Comprehensive Loss

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Future exchanges of Paired Interests and non-corresponding Class A Units of Rani LLC will result in a change in ownership and reduce or increase the amount recorded as NCI and increase or decrease additional paid-in-capital when Rani LLC has positive or negative net assets, respectively.

From the date of the Organizational Transactions to December 31, 2022 , there were 5,173,947 exchanges of Paired Interests and 158,051 exchanges of noncorresponding Class A Units of Rani LLC for an equal number of shares of the Company's Class A common stock.

From the date of the Organizational Transactions to December 31, 2023 , there were 5,173,947 exchanges of Paired Interests and 200,455 exchanges of non-corresponding Class A Units of Rani LLC for an equal number of shares of the Company's Class A common stock.

Property and Equipment, Net

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Management believes that no revision to the remaining useful lives or write-down of long-lived assets is required as of and for the year ended December 31, 2023 .

Related Party Note Receivable

The principal balance on the related party note receivable was recorded on the consolidated balance sheet along with earned and not yet received interest income.

The principal balance was classified on the consolidated balance sheet based upon the expected timing of the repayments by the related party.

Interest income received and receivable on the related party note receivable was recorded as a component of interest income in the consolidated statement of operations and comprehensive loss.

Associated interest earned was recognized using the effective interest method.

In March 2021, the related party repaid in full the $ 1.7 million of principal and interest related to the note receivable.

Preferred Unit Warrant Liability

Outstanding warrants to purchase preferred units of the Company were classified as liabilities in the accompanying consolidated balance sheets due to a contingent redemption right of the holder of the preferred unit warrants that is outside of the

control of the Company that precluded equity classification.

Such preferred unit warrants were subject to re-measurement at the end of each reporting period until they were settled in July 2021.

The Company estimated the fair value of preferred unit warrants at each reporting period, using a hybrid between the probability weighted expected return and option pricing methods, estimating the probability weighted value across multiple scenarios, but using the option pricing method to estimate the allocation of value within one or more of those scenarios, until the earlier of the exercise of the preferred unit warrants, at which time the liability was revalued and reclassified to members’

deficit upon the completion of the Company’s IPO.

Net Loss Per Class A Common Share Attributable to Rani Holdings

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Emerging Growth Company Status

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”).

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.

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As a result, these consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), as subsequently amended, to improve financial reporting and disclosures about leasing transactions.

The Company adopted this standard on January 1, 2022 using the modified retrospective approach and elected the package of practical expedients permitted under transition guidance, which allowed the Company to carry forward its historical assessments of:

1) whether contracts are or contain leases, 2) lease classification and 3) initial direct costs, where applicable.

The Company did not elect the practical expedient allowing the use-of-hindsight which would require the Company to reassess the lease term of its leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.

The Company elected the post-transition practical expedient to not separate lease components from non-lease components for all existing lease classes.

The Company also elected a policy of not recording leases on its balance sheets when the leases have a term of twelve months or less and the Company is not reasonably certain to elect an option to purchase the leased asset.

The adoption of this standard resulted in the recognition of a ROU asset and lease liabilities of $ 1.3 million, respectively.

The adoption of the standard had no impact on the Company’s consolidated statements of operations and comprehensive loss or to its cash flows from or used in operating, financing, or investing activities on its consolidated statements of cash flows.

No cumulative-effect adjustment within accumulated deficit was required to be recorded as a result of adopting this standard.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”), that revises the measurement of credit losses for most financial instruments measured at amortized cost, including trade receivables, from an incurred loss methodology to an expected loss methodology which results in earlier recognition of credit losses.

Under the incurred loss model, a loss is not recognized until it is probable that the loss-causing event has already occurred.

The standard introduces a forward-looking expected credit loss model that requires an estimate of the expected credit losses over the life of the instrument by considering all relevant information including historical experience, current conditions, and reasonable and supportable forecasts that affect collectability.

In addition, the standard also modifies the impairment model for available-for-sale debt securities, which are measured at fair value, by eliminating the consideration for the length of time fair value has been less than amortized cost when assessing credit loss for a debt security and provides for reversals of credit losses through income upon credit improvement.

The Company early adopted this standard on July 1, 2022, for the interim period ended September 30, 2022.

Based on the composition of the Company's investment portfolio, which reflects the Company's primary investment objective of capital preservation, the adoption of this standard did not have a material impact on the Company's consolidated financial statements or related disclosures.

Cash Equivalents, Restricted Cash Equivalents and Marketable Securities

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Marketable securities:

Commercial paper

Treasuries and agencies

Corporate debt securities

International government

Commercial paper

Total marketable securities

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Total cash equivalents

As of December 31, 2022, all marketable securities held have maturity dates within one year or less.

Restricted cash equivalents:

Money market funds

Total cash equivalents and restricted cash equivalents

Marketable securities:

Treasuries and agencies

Commercial paper

Corporate debt securities

International government

Total marketable securities

Total cash equivalents, restricted cash equivalents and marketable securities

All marketable securities are classified as short-term.

The Company regularly reviews its available-for-sale marketable securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as historical experience, market data, issuer-specific factors, and current economic conditions.

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Fair Value Measurements

The following table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of inputs used in such measurements (in thousands):

The following tables detail information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicates the level of inputs used in such measurements (in thousands):

As of December 31, 2023

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Marketable securities

Commercial paper

Treasuries and agencies

Corporate debt securities

International government

Commercial paper

As of December 31, 2022

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Money market funds

Restricted cash equivalents:

Money market funds

Marketable securities

Treasuries and agencies

Commercial paper

Corporate debt securities

International government

Level 1 and Level 2 financial instruments are comprised of investments in money market funds and fixed-income securities.

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There were no transfers between Level 1, Level 2 and Level 3 of the fair value hierarchy for any of the periods presented.

For the year ended December 31, 2022 , as further discussed in Note 13, the Company issued Level 3 equity classified warrants of $ 0.5 million in connection with the loan and security agreement that were estimated on the date of issuance using the Black-Scholes valuation model which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield.

Such assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

In 2021, the Company held a Level 3 liability associated with preferred unit warrants that were issued in conjunction with a loan and security agreement.

These preferred unit warrants were settled with Class A common stock as part of the IPO and Organizational Transactions.

The following tables set forth a summary of the changes in the fair value of the Company’s liability measured using Level 3 inputs (in thousands):

Year Ended December 31,

Balance at beginning of period

Change in estimated fair value of Series E warrants

Settlement of Series E warrants

Balance at end of period

In 2022, as further discussed in Note 8, the Company issued Level 3 equity classified warrants totaling $ 0.5 million in connection with the loan and security agreement that were estimated on the date of issuance using the Black-Scholes valuation model which requires inputs based on certain subjective assumptions, including the expected stock price volatility, the expected term of the option, the risk-free interest rate for a period that approximates the expected term of the option, and the Company’s expected dividend yield.

Such assumptions represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.

Balance Sheet Components

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Total property and equipment, net

Depreciation and amortization expense totaled approximately $ 0.5 million and $ 0.5 million for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2022 and 2021 , all of the Company’s property and equipment was located in the United States, respectively, with the exception of $ 3.5 million of construction-in-progress in 2021 that was located in Germany at a third-party manufacturing facility.

Accrued expenses

Accrued expenses consist of the following (in thousands):

Depreciation and amortization expense totaled $ 0.8 million and $ 0.5 million for the years ended December 31, 2023 and 2022, respectively.

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities consist of the following (in thousands):

Accrued interest

Accrued preclinical and clinical trial costs

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Accrued professional fees

Total accrued expenses

Evaluation Agreements

Takeda Pharmaceutical Company, Limited ("Takeda") was collaborating with the Company to conduct research on the use of the RaniPill capsule for the oral delivery of factor VIII (“FVIII”) therapy for patients with hemophilia A.

The agreement granted Takeda a right of first negotiation to a worldwide, exclusive license under the Company’s intellectual property related to a FVIII-RaniPill therapeutic.

Takeda paid the Company up-front payments of $ 5.9 million upon execution of and subsequent modifications to the agreement.

The Company identified one material promise under the Takeda agreement, the obligation to perform services to evaluate if Takeda’s FVIII therapy can be orally delivered using the RaniPill capsule, which was concluded to be a single performance obligation.

In May 2021, the Company received written notice from Takeda as to their intent to terminate the contract for convenience.

Due to the delivery of the termination notice, the Company determined that there were no further enforceable rights and obligations under the agreement beyond May 2021 and the remaining $ 2.0 million of deferred revenue was recognized in 2021.

For the year ended December 31, 2022 , no contract revenue related to the Takeda agreement was recognized.

For the year ended December 31, 2021 , the Company recognized contract revenue related to the Takeda agreement of $ 2.7 million.

There was no deferred revenue as of December 31, 2022 nor December 31, 2021 .

Related party payable

Total accrued expenses and other current liabilities

Related Party Transactions

InCube Labs, LLC is wholly-owned by the Company’s founder and Chairman and his family.

The founder and Chairman is the father of the Company’s Chief Executive Officer.

The Company’s Chief Scientific Officer is also the brother of the founder and Chairman and thus uncle of the Company’s Chief Executive Officer.

Services agreements

InCube Labs, LLC (“ICL”) is wholly-owned by the Company’s founder and Chairman and his family.

The founder and Chairman is the father of the Company’s Chief Executive Officer.

The Company’s Chief Scientific Officer is also the brother of the founder and Chairman and thus uncle of the Company’s Chief Executive Officer.

Service Agreements

In June 2021, Rani LLC entered into a service agreement with ICL effective retrospectively to January 1, 2021, and subsequently amended such agreement in March 2022 (as amended, the "Rani LLC-ICL Service Agreement"), pursuant to which Rani LLC and ICL agreed to provide personnel services to the other upon requests.

Under the amendment in March 2022, Rani LLC has a right to occupy certain facilities leased by ICL in Milpitas, California and San Antonio, Texas (“Occupancy Services”) for general office, research and development, and light manufacturing.

The Rani LLC-ICL Service Agreement has a twelve-month term and will automatically renew for a successive twelve-month periods unless terminated;

notice of renewal prior to the end of the lease term, and the Occupancy Services in San Antonio, Texas continue until either party gives six months’

notice of termination.

The Rani LLC-ICL Service Agreement has a twelve-month term and will automatically renew for successive twelve-month periods unless terminated;

except that the Occupancy Services in Milpitas, California have a term until February 2024, following an extension granted in July 2022, and the Occupancy Services in San Antonio, Texas continue until either party gives six months’ notice of termination.

Except for the Occupancy Services, Rani LLC or ICL may terminate services under the Rani LLC-ICL Service Agreement upon 60 days' notice to the other party.

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Costs are billed or charged on a monthly basis by ICL or Rani LLC, respectively.

In June 2021, RMS entered into a service agreement with ICL (the “RMS-ICL Service Agreement”) effective retrospectively to January 1, 2021, pursuant to which ICL agreed to rent a specified portion of its facility in San Jose, California to RMS.

Rani LLC provided to ICL notice of termination of the Occupancy Services in San Antonio in December 2023, which termination will take effect in June 2024.

Additionally, RMS and ICL agreed to provide personnel services to the other upon requests based on rates specified in the RMS-ICL Service Agreement.

In April 2022, RMS assigned the RMS-ICL Service Agreement to Rani LLC.

The RMS-ICL Service

Agreement has a twelve-month term and will automatically renew for successive twelve-month periods unless terminated.

Rani LLC or ICL may terminate services under the RMS-ICL Service Agreement upon 60 days' notice to the other party, except for occupancy which requires six months’

The RMS-ICL Service Agreement has a twelve-month term and will automatically renew for successive twelve-month periods unless terminated.

Rani LLC or ICL may terminate services under the RMS-ICL Service Agreement upon 60 days' notice to the other party, except for occupancy which requires six months’ notice.

The RMS-ICL Service Agreement specifies the scope of services to be provided as well as the methods for determining the costs of services.

Costs are billed or charged on a monthly basis by ICL or Rani LLC, respectively, as well as allocations of expenses based upon Rani LLC’s utilization of ICL’s facilities and equipment.

The table below details the amounts charged by ICL for services and rent, net of the amount that the Company charged ICL, which is included in the consolidated statements of operations (in thousands):

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General and administrative

Prior to April 2022, the Company’s eligible employees were permitted to participate in ICL’s 401(k) Plan (“401(k) Plan”).

Participation in the 401(k) Plan was offered for the benefit of the employees, including the Company’s named executive officers, who satisfied certain eligibility requirements.

In April 2022, the Company established its own 401(k) Plan, with participation offered for the benefit of the employees, including the Company’s named executive officers, who satisfy certain eligibility requirements.

As of December 31, 2022, all of the Company's facilities are owned or leased by an entity affiliated with the Company’s Chairman (Note 8).

Prior to April 2022, the Company’s eligible employees were permitted to participate in ICL’s 401(k) Plan (“401(k) Plan”).

Participation in the 401(k) Plan was offered for the benefit of the employees, including the Company’s named executive officers, who satisfied certain eligibility requirements.

As of December 31, 2023, all of the Company's facilities are owned or leased by an entity affiliated with the Company’s Chairman (Note 7).

The Company pays for the use of these facilities through its services agreements with ICL.

Financing activity

From inception to the first half of 2017, the Company advanced funds to ICL, and ICL made payments directly to certain vendors on behalf of Rani, Rani has reimbursed ICL for all such payments at cost on a monthly basis.

In March 2021, an outstanding notes receivable balance totaling $ 1.7 million, including all accrued interest, was fully repaid by ICL.

During 2020 and 2021, a related party of the Company, and its affiliates, purchased 2,100,800 common units of Rani LLC and 7,880,120 Series E Preferred Units of Rani LLC.

As part of the Organizational Transactions the common units and Series E Preferred Units were exchanged for 5,277,729 shares of the Company's Class A common stock.

In connection with the IPO and subsequent thereto, the same related party purchased an additional 6,458,904 shares of the Company’s Class A common stock for total gross proceeds of $ 71.1 million.

Exclusive License, Intellectual Property and Common Unit Purchase Agreement

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ICL also granted the Company a fully-paid, royalty-free, sublicensable, exclusive license under the intellectual property made by ICL during the course of providing services to the Company related to the RaniPill capsule technology.

Such rights were not recorded on the Company’s consolidated balance sheet as the transaction was considered a common control transaction.

In June 2021, ICL and the Company, through Rani LLC, entered into an Amended and Restated Exclusive License Agreement which replaced the 2012 Exclusive License Agreement between ICL and Rani LLC, as amended in 2013, and terminated the 2012 Intellectual Property Agreement between ICL and Rani LLC, as amended in June 2013.

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This payment will not become an obligation until the fifth anniversary of the Amended and Restated Exclusive License Agreement.

The Amended and Restated Exclusive License Agreement will terminate when there are no remaining valid claims of the patents licensed under the Amended and Restated Exclusive License

The Amended and Restated Exclusive License Agreement will terminate when there are no remaining valid claims of the patents licensed under the Amended and Restated Exclusive License Agreement.

Additionally, the Company may terminate the Amended and Restated Exclusive License Agreement in its entirety or as to any particular licensed patent upon notification to ICL of such intent to terminate.

Non-Exclusive License Agreement between Rani and ICL (“Non-Exclusive License Agreement”)

In June 2021, the Company, through Rani LLC, entered into the Non-Exclusive License Agreement with ICL a related party, pursuant to which the Company granted ICL a non-exclusive, fully-paid license under specified patents that were assigned from ICL to the Company.

Additionally, the Company agreed not to license these patents to a third party in a specific field outside the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine, if ICL can prove that it or its sublicensee has been in active development of a product covered by such patents in that specific field.

ICL may grant sublicenses under this license to third parties only with the Company’s prior approval.

The Non-Exclusive License Agreement will continue in perpetuity unless earlier terminated.

Intellectual Property Agreement with Mir Imran (the “Mir Agreement”)

In June 2021, the Company, through Rani LLC, entered into the Mir Agreement, pursuant to which the Company and Mir Imran agreed that the Company would own all intellectual property conceived (i) using any of the Company’s people, equipment, or facilities or (ii) that is within the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine.

Intellectual Property Agreement with Mir Imran (the “Mir Agreement”)

Neither the Company nor Mir Imran may assign the Mir Agreement to any third party without the prior written consent of the other party.

The initial term of the Mir Agreement is three years, which can be extended upon mutual consent of the parties.

The Mir Agreement may be terminated by either party for any reason within the initial three-year term upon providing three months’

notice to the other party.

Board Services

During the year ended December 31, 2021 , the Company made a $ 0.2 million payment to a member of the Board of Managers of Rani LLC for legacy board services provided to the Company.

There were no such payments made in the year ended December 31, 2022.

Secondary Sales Transactions

In February 2021, one of the Company's named executive officer's and then member of the Board of Managers of Rani LLC, and a current member of the Board of Managers of Rani LLC sold a total of 210,000 common units to a third-party investor at $ 7.1471 per unit.

The Company determined that the sales price was above fair value of such units and as a result recorded equity-based compensation expense of $ 0.5 million for which $ 0.2 million was recorded as general and administrative expense and $ 0.3 million was recorded as research and development expense.

The $ 0.5 million represents the difference between the sales price and fair value of the common units.

Equity-Based Compensation

In connection with the IPO and Organizational Transactions, the Company effectuated an exchange of all outstanding Profits Interests into Class A Units including certain Profits Interests related to ICL and its affiliates ("ICL Holders").

Upon the IPO and Organizational Transactions, the performance condition was met for all Profits Interest no longer subject to a service based vesting condition resulting in the recognition of compensation cost associated with these awards.

The following table summarizes the components of equity-based compensation expense recorded in the consolidated statement of operations and comprehensive loss related to awards granted to employees of ICL and its affiliates by the Company (in thousands):

Year Ended December 31,

Research and development

General and administrative

The Mir Agreement may be terminated by either party for any reason within the initial three-year term upon providing three months’ notice to the other party.

Tax Receivable Agreement

Certain parties to the TRA, entered into in August 2021 pursuant to the IPO and Organizational Transactions are related parties of the Company.

The TRA provides that the Company pay to such entities and individuals 85% of the amount of tax benefits,

if any, it is deemed to realize from exchanges of Paired Interests (Note 2).

During the year ended December 31, 2022 , these parties to the TRA exchanged 2,317,184 Paired Interests that resulted in tax benefits subject to the TRA (Note 14).

The TRA provides that the Company pay to ICL and the other Continuing LLC Owners 85% of the amount of tax benefits, if any, it is deemed to realize from exchanges of Paired Interests (Note 2).

During the years ended December 31, 2023 and 2022 , these parties to the TRA exchanged zero and 2,317,184 Paired Interests, respectively, that resulted in tax benefits subject to the TRA (Note 13).

Registration Rights Agreement

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ICL and its affiliates are parties to this agreement.

The Registration Rights Agreement provides certain registration rights whereby, at any time following the IPO and the expiration of any related lock-up period, ICL and its affiliates can require the Company to register under the Securities Act of 1933, as amended (the “Securities Act”) shares of Class A common stock issuable to ICL and its affiliates upon, at the Company’s election, redemption or exchange of their Paired Interests.

The Registration Rights Agreement also provides for piggyback registration rights.

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Rani LLC Agreement

The Company operates its business through Rani LLC and, prior to December 15, 2022, its subsidiary.

The Company operates its business through Rani LLC.

In connection with the IPO, the Company and the Continuing LLC Owners, including ICL and its affiliates, entered into the Rani LLC Agreement.

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As Continuing LLC Owners, ICL and its affiliates are entitled to exchange, subject to the terms of the Rani LLC Agreement, Paired Interests for Class A common stock of the Company;

provided that, at the Company’s election, the Company may effect a direct exchange of such Class A common stock or make a cash payment equal to a volume weighted average market price of one share of Class A common stock for each Paired Interest redeemed.

During the year ended December 31, 2022 , certain parties to the Rani LLC Agreement exchanged 2,317,184 Paired Interests for an equal number of shares of the Company's Class A common stock.

During the years ended December 31, 2023 and 2022 , certain related parties that are party to the Rani LLC Agreement exchanged zero and 2,317,184 Paired Interests, respectively, for an equal number of shares of the Company's Class A common stock.

The Company pays for the use of its office, laboratory and manufacturing facility in San Jose, California as part of the RMS-ICL Service Agreement.

In April 2022, RMS assigned the RMS-ICL Service Agreement to Rani LLC.

The RMS-ICL Service Agreement has a twelve-month term and will automatically renew for successive twelve-month periods unless Rani LLC or ICL terminate occupancy under the RMS-ICL Service Agreement upon six months’

The Company determined it to be reasonably certain that it would exercise its renewal option for a successive twelve-month period and has considered it in the determination of the right-of-use assets and lease liabilities associated with the RMS-ICL Service Agreement as of December 31, 2023.

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The Rani LLC-ICL Service Agreement has a twelve-month term and will automatically renew for a successive twelve-month periods unless terminated;

notice of renewal prior to the end of the lease term, and the Occupancy Services in San Antonio, Texas continue until either party gives six months’

notice of termination.

except that the Occupancy Services in Milpitas, California have a term until February 2024, following an extension granted in July 2022, with the potential for one additional annual renewal, subject to approval by the landlord upon a nine months’ notice of renewal prior to the end of the lease term, and the Occupancy Services in San Antonio, Texas continue until either party gives six months’ notice of termination.

The Company accounted for the lease extension as a lease modification that did not result in a separate contract and recognized the right-of-use asset and lease liabilities associated with the Rani LLC-ICL Service Agreement in the consolidated balance sheet as of December 31, 2023.

As of December 31, 2023, the second renewal option for the facility in Milpitas, California was not deemed reasonably certain to be exercised.

The Company provided to ICL notice of termination of the Occupancy Services in San Antonio in December 2023, which termination will take effect in June 2024.

The Company's leases are accounted for as operating leases and require certain fixed payments of real estate taxes and insurance in addition to future minimum lease payments, and certain variable payments of common area maintenance costs and building utilities.

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These variable lease costs are payments that vary in amount beyond the commencement date, for reasons other than passage of time.

Total operating lease expense incurred with ICL was $ 1.5 million and $ 0.8 million for the years ended December 31, 2022 and 2021, respectively.

Variable lease payments are excluded in the total operating lease expense and immaterial for the periods presented.

Supplemental information on the Company’s consolidated balance sheet and statements of cash flows as of December 31, 2022 related to leases was as follows (in thousands):

Balance sheet

Operating lease right-of-use assets

Operating lease liability, current portion

Operating lease liability, less current portion

Total operating lease liability

Cash paid for amounts included in lease liabilities:

Operating cash flows used for operating leases

Weighted-average remaining lease term

Supplemental information on the Company’s consolidated balance sheet and statements of cash flows as of December 31, 2023 related to leases was as follows (in thousands):

Weighted-average remaining lease term (in years)

Weighted-average discount rate

As of December 31, 2022, minimum annual rental payments under the Company’s operating lease agreements are as follows (in thousands):

As of December 31, 2023, minimum annual rental payments under the Company’s operating lease agreements are as follows (in thousands):

Year ending December 31,

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Total operating lease liability

Operating lease liability, current portion

Operating lease liability, less current portion

Operating leases in the table above exclude future minimum lease payments for Occupancy Services in San Antonio, Texas under the Rani LLC-ICL Service Agreement.

Future minimum lease payments for Occupancy Services in San Antonio for fiscal year 2023 total $ 0.1 million.

Current portion of operating lease liability

Operating lease liability, net current portion

In November 2023, Rani LLC and BKM South Bay 240, LLC (“Landlord”) entered into the Standard Industrial/Commercial Multi-Tenant Lease - Net (the “Lease”).

Pursuant to the terms of the Lease, Rani LLC is leasing approximately 33,000 square feet of space in Fremont, California, which is part of a two-building project (the “Project”).

The initial term of the Lease commenced in February 2024, and the duration of the initial term is 63 months.

Subject to certain conditions, Rani LLC has an option to renew the Lease for one additional 5-year term at the then-prevailing market rate.

The monthly base rent for the initial term of the Lease is approximately $ 95,000 per month, subject to a 4 % increase each year.

Rani LLC is also responsible for the payment of additional rent to cover its share of common area operating expenses, including taxes, insurance, utilities, and repair and maintenance of the premises and common areas of the Project.

The Company will further evaluate the Lease and record its impact on the Company's consolidated financial statements on the commencement date of the Lease in February 2024.

Future minimum lease payments for the Lease total $ 6.5 million through 2029 and are excluded from the table above.

In August 2022, in conjunction with a loan and security agreement (Note 12), the Company issued warrants to purchase 76,336 shares of the Company's Class A common stock.

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As of December 31, 2023 , there were 76,336 warrants outstanding.

Stockholders’

Equity / Members’

Prior to the Organizational Transactions, Rani LLC was authorized to issue 101,000,000 common units, of which 10,850,000 had been reserved for issuance as Profits Interests and 32,620,000 were reserved for six separate classes, the Series A convertible preferred units (the “Series A units”), the Series B convertible preferred units (the “Series B units”), the Series C convertible preferred units (the “Series C units”), the Series C-1 convertible preferred units (the “Series C-1 units”), the Series D convertible preferred units (the “Series D units”), and the Series E convertible preferred units (the “Series E units”), collectively the “Preferred Units”.

The members of the Rani LLC who held these common and Preferred Units were not liable, solely by reason of being a member, for the debts, obligations, or liabilities of the Company whether arising in contract or tort;

under a judgment, decree, or order

or otherwise.

The members were also not obligated to make capital contributions to Rani LLC and Rani LLC would have dissolved only upon a written consent of a majority of the members.

The Company’s Profits Interests were subject to either a combination of service, market, or performance vesting conditions.

Vested Profits Interests were treated as common units for purposes of distributions.

For the year ended December 31, 2022 , certain of the Continuing LLC Owners executed an exchange of 5,173,947 Paired Interests and 158,051 non-corresponding Class A Units of Rani LLC in return for an equal number of shares of the Company’s Class A common stock.

The corresponding shares of the Company’s Class B common stock included in the exchange of Paired Interests were subsequently cancelled and retired pursuant to the terms of the Rani LLC Agreement.

Stockholders’ Equity

For the years ended December 31, 2023 and 2022 , certain of the Continuing LLC Owners executed an exchange of zero and 5,173,947 Paired Interests, respectively, and 42,404 and 158,051 non-corresponding Class A Units of Rani LLC, respectively, in return for an equal number of shares of the Company’s Class A common stock.

The corresponding shares of the Company’s Class B common stock included in the exchange of Paired Interests were subsequently canceled and retired pursuant to the terms of the Rani LLC Agreement.

In August 2022, the Company entered into a Controlled Equity Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co.

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In connection with the Sales Agreement, the Company recognized deferred offering costs totaling $ 0.3 million as a component of prepaid expenses and other current assets in the consolidated balance sheet as of December 31, 2023 which will be offset against proceeds upon a sale under the Sales Agreement within the consolidated statement of changes in stockholders’ equity.

Amendment and Restatement of Certificate of Incorporation

In connection with the Organizational Transactions, the Company’s certificate of incorporation was amended and restated to, among other things, provide for the (i) authorization of 800,000,000 shares of Class A common stock with a par value of $ 0.0001 per share;

(ii) authorization of 40,000,000 shares of Class B common stock with a par value of $ 0.0001 per share;

(iii) authorization of 20,000,000 shares Class C common stock with a par value of $ 0.0001 per share;

and (iv) authorization of 20,000,000 shares of preferred stock with a par value of $ 0.0001 per share.

Holders of Class A common stock are entitled to one vote per share;

holders of Class B common stock are entitled to ten votes per share;

and holders of Class C common stock have no voting rights.

Except as otherwise expressly provided in the Amended and Restated Certificate of Incorporation or as required by law, the holders of Class A common stock and Class B common stock (and, on any matter on which the Class C common stock or the holders of preferred stock are entitled to vote with the Class A common stock and the Class B common stock, the Class C common stock and the preferred stock) will vote together as a single class and not as separate series or classes.

The Company is required to, at all times, maintain (i) a one-to-one ratio between the number of shares of Class A common stock outstanding and the number of Class A Units owned by Company and (ii) a one-to-one ratio between the number of shares of Class B common stock owned by the Continuing LLC Owners and the number of Class A Units owned by the Continuing LLC Owners.

The Company may issue shares of Class B common stock only to the extent necessary to maintain these ratios.

Shares of Class B common stock are not transferable except (a) to the Company for no consideration (in which case the shares will be cancelled automatically) or (b) together with an equal number of Class A Units to a transferee in compliance with the LLC Agreement and the provisions set forth in the Company’s amended and restated certificate of incorporation.

All Class B common stock that is exchanged as part of a Paired Interest for Class A common stock shall be automatically retired and cancelled and shall no longer be outstanding.

In August 2021, the Company received 29,290,391 Class B Units of Rani LLC as consideration for the issuance of Class B common stock on a one -for-one basis.

Management of Rani LLC

In August 2021, Rani LLC’s members and Board of Managers adopted the amended and restated Rani LLC Agreement to, among other things, appoint the Company as Rani LLC’s sole managing member and provide that, except where the approval of one or more members is specifically required by the express terms of the Rani LLC Agreement, all management powers over the business and affairs of Rani LLC are vested exclusively in the Company as the sole managing member.

Initial Public Offering

In July 2021, the Company completed an IPO of 7,666,667 shares of common stock, inclusive of the 1,000,000 shares of Class A common stock purchased by underwriters pursuant to the underwriters’

option to purchase additional shares at the offering

price, less underwriting discounts and commissions.

The Company received net proceeds from the IPO of approximately $ 73.6 million after deducting underwriting discounts and commissions, which was used to purchase 7,666,667 newly-issued Class A Units of Rani LLC.

In March 2022, certain holders of the Company's Class A common stock considered to be related parties were made parties to the Registration Rights Agreement.

Registration Rights Agreement

In connection with the IPO, the Company entered into a Registration Rights Agreement with the Continuing LLC Owners, including ICL.

The Registration Rights Agreement provides the Continuing LLC Owners certain registration rights whereby, at any time following the IPO and the expiration of any related lock-up period, the Continuing LLC Owners can require the Company to register under the Securities Act shares of Class A common stock issuable to them upon, at the Company’s election, redemption or exchange of their Paired Interests.

The Registration Rights Agreement also provides for piggyback registration rights for the Continuing LLC Owners.

As a result of certain stockholders exercising their registration rights under the Registration Rights Agreement, in December 2022 the Company filed a registration statement on Form S-3 to register 6,009,542 shares of Class A common stock of the Company held by certain of its stockholders.

Equity-Based Compensation

As of December 31, 2023 , the Company reserved 0.5 million shares of Class A Common Stock for issuance under the Rani Therapeutics Holdings, Inc.

2021 Employee Stock Purchase Plan (the “ESPP”) and 3.0 million shares of Class A common stock for future issuance under the 2021 Plan.

Stock-Based Compensation

Stock Option Repricing

On December 16, 2023 (the “Repricing Date”), the Company's Board of Directors approved a stock option award repricing whereby certain previously granted and still outstanding unvested stock option awards issued under the 2021 Plan and the 2016 Equity Incentive Plan, were reduced to $ 2.84 per share, which represented the most recent closing market price of the Company’s Class A common stock to the Repricing Date (the “Option Repricing”).

These stock option awards are held by employees, including the Company’s named executive officers, certain consultants, and non-employee members of the Board of Directors.

No other terms of the options were modified, and the stock option awards will continue to vest according to their original vesting schedules, remain subject to the same service requirements and will retain their original expiration dates.

The Option Repricing was fair valued using the Black-Scholes option pricing model, which approximated the Lattice model, resulting in $ 1.8 million of incremental stock-based compensation expense and is expected to be recognized over a weighted-average period of approximately 2.3 years.

Stock Options

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Treasury yield curve in effect at the date of grant for zero-coupon U.S.

Treasury notes with maturities approximately equal to the stock option awards’

expected term.

Treasury notes with maturities approximately equal to the stock option awards’ expected term.

• Expected dividend yield - The expected dividend yield is zero as the Company has no plans to make dividend payments.

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Expected dividend yield

As of December 31, 2022 , there was $ 22.9 million of unrecognized equity-based compensation expense related to stock options which is expected to be recognized over a weighted-average period of approximately 2.5 years.

As of December 31, 2023 , there was $ 21.4 million of unrecognized stock-based compensation expense related to stock options which is expected to be recognized over a weighted-average period of approximately 2.3 years.

Restricted Stock Units

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Balance at December 31, 2023

As of December 31, 2022 , there was $ 7.8 million of unrecognized equity-based compensation expense related to RSUs which is expected to be recognized over a weighted-average period of approximately 2.3 years.

As of December 31, 2023 , there was $ 8.1 million of unrecognized stock-based compensation expense related to RSUs which is expected to be recognized over a weighted-average period of approximately 3.0 years.

The total fair value of RSUs vested was $ 2.2 million for the year ended December 31, 2023.

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Balance at December 31, 2023

As of December 31, 2022 , there was $ 0.1 million of unrecognized equity-based compensation expense related to RSAs which is expected to be recognized over a weighted-average period of approximately 1.0 years.

As of December 31, 2023 , unrecognized stock-based compensation expense related to RSAs was de minimis which is expected to be recognized over a weighted-average period of approximately 0.5 years.

The total fair value of RSAs vested was $ 0.1 million for the year ended December 31, 2023.

2021 Employee Stock Purchase Plan

As of December 31, 2022 , 38,435 shares of Class A common stock have been issued under the Rani Therapeutics Holdings, Inc.

2021 Employee Stock Purchase Plan (the “ESPP”).

During the year ended December 31, 2022 , the Company recognized $ 0.2 million of stock-based compensation expense related to the ESPP.

There was no stock-based compensation expense related to the ESPP recognized during the year ended December 31, 2021.

As of December 31, 2022, contributions withheld from employees were de minimis and recorded as a component of accrued expenses in the consolidated balance sheet.

As of December 31, 2022 , total unrecognized compensation costs related to the ESPP totaled $ 0.2 million and will be amortized over a weighted average vesting term of 0.4 years.

As of December 31, 2022 , the Company reserved 561,565 shares of Class A Common Stock for issuance under the ESPP and 4,511,017 shares of Class A common stock for future issuance under the 2021 Plan.

Equity-Based Compensation Expense

The following table summarizes the components of equity-based compensation expense resulting from the grant of stock options, RSUs, RSAs, the ESPP, and a secondary sales transaction entered into in February 2021, recorded in the Company’s consolidated statement of operations and comprehensive loss (in thousands):

As of December 31, 2023 , 0.2 million shares of Class A common stock have been issued under the ESPP.

During the years ended December 31, 2023 and 2022 , the Company recognized $ 0.3 million and $ 0.2 million, respectively, of stock-based compensation expense related to the ESPP.

As of December 31, 2023, contributions withheld from employees were de minimis and recorded as a component of accrued expenses and other current liabilities in the consolidated balance sheet.

As of December 31, 2023 , there was $ 0.1 million of unrecognized stock-based compensation expense related to the ESPP which is expected to be recognized over a weighted-average period of approximately 0.4 years.

Stock-Based Compensation Expense

The following table summarizes the components of stock-based compensation expense resulting from the grant of stock options, RSUs, RSAs, and the ESPP, recorded in the Company’s consolidated statement of operations and comprehensive loss (in thousands):

Year Ended December 31,

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General and administrative

Total equity-based compensation

Total stock-based compensation

Commitments and Contingencies

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Legal costs associated with these matters are expensed when incurred.

The Company is currently involved in several opposition proceedings at the European Patent Office, all of which were asserted against us by Novo Nordisk AS.

The Company is currently involved in several opposition proceedings at the European Patent Office, all of which were asserted against us by Novo Nordisk A/S.

The ultimate outcome of this matter as a loss is not probable nor is there any amount that is reasonably estimable.

However, the outcome of the opposition proceedings could impact the Company’s ability to prevent third parties from commercializing in Europe products with characteristics similar to those of the Company’s RaniPill technology.

Tax Receivable Agreement

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Long-Term Debt

In August 2022, the Company entered into a loan and security agreement and related supplement (the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P (the “Lender”).

The Loan Agreement provides for term loans (the “Loans”) in an aggregate principal amount up to $ 45.0 million.

In August 2022, the Company entered into a loan and security agreement and related supplement (the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P (the “Lender”).

The Loan Agreement provides for term loans (the “Loans”) in an aggregate principal amount up to $ 45.0 million.

The remaining $ 15.0 million of Loans (“Tranche 2”) is uncommitted and is subject to certain conditions and approval by the Lender.

The purpose of the Loans is for general corporate purposes.

In exchange for access to this facility, the Company agreed to issue warrants exercisable into 76,336 shares of the Company's Class A common stock, as may be adjusted for certain anti-dilution adjustments, dividends, stock splits, and reverse stock splits, at an exercise price per share equal to $ 11.79 (Note 9).

Pursuant to the Loan Agreement, the maturity date for the Loans is August 1, 2026 (the “Maturity Date”).

In exchange for access to this facility, the Company agreed to issue warrants (Note 8).

Pursuant to the Loan Agreement, the maturity date for the Loans is August 1, 2026 (the “Maturity Date”).

The Loan principal is repayable in equal monthly installments beginning September 2024 extendable to March 2025 under certain conditions.

The Loans bear interest at a variable rate per annum equal to the greater of (A) the prime rate, as published by the Wall Street Journal from time to time plus 5.60 % or (B) 10.35 %.

The Loan Agreement is collateralized by substantially all of the Company’s assets, in which the Lender is granted continuing security interests.

The Loans includes customary events of default, including instances of a material adverse change in the Company’s operations, which may require prepayment of the outstanding Loans.

The Loan Agreement is collateralized by substantially all of the Company’s assets, in which the Lender is granted continuing security interests.

The Loans includes customary events of default, including instances of a material adverse change in the Company’s operations, which may require prepayment of the outstanding Loans.

At December 31, 2023 , the effective interest rate on the Loans was 15.70 % and there were no events of default during the year ended December 31, 2023.

The Loans contain a contingent interest feature in the event of default that is not clearly and closely related to the underlying note and meets the definition of a derivative.

The Company concluded that the fair value of this derivative was insignificant at December 31, 2022.

Pursuant to the Loan Agreement, beginning on the first anniversary of the closing, the Company is subject to a financial covenant that requires the Company to have at least two drug products utilizing its oral delivery technology in clinical development at all times.

The financial covenant does not apply if the Company has a market capitalization above $ 650.0 million.

The Loan Agreement also contains various covenants and restrictive provisions that, among other things, limit the Company’s ability to (i) incur additional debt, guarantees or liens;

(ii) pay any dividends;

(iii) enter into certain change of control transactions;

(iv) sell, transfer, lease, license, or otherwise dispose of certain assets;

(v) make certain investments or loans;

and (vi) engage in certain transactions with related persons.

As of December 31, 2022, the Company was in compliance with all applicable debt covenants under the Loan Agreement.

As of December 31, 2022, future principal payments for the Company’s debt are as follows (in thousands):

The Company is also subject to certain covenants.

There have been no material adverse events in connection with the Loan Agreement and the substantial doubt regarding our ability to continue as a going concern does not currently constitute a material adverse event under the terms of the Loan Agreement.

As of December 31, 2023, the Company was in compliance with all applicable covenants under the Loan Agreement.

As of December 31, 2023, future principal payments for the Company’s debt are as follows (in thousands):

Year ending December 31,

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Total long-term debt

Income tax expense consisted of the following for the years ended (in thousands):

Total current tax expense

Total deferred tax expense

Income tax expense

current portion of long-term debt

Total long-term debt, less current portion

There was no income tax expense for the year ended December 31, 2023 .

Income tax expense totaled $ 0.1 million for the year ended December 31, 2022.

The effective tax rate for the years ended December 31, 2023 and 2022 is different from the federal statutory rate primarily due to the valuation allowance against deferred tax assets as a result of insufficient sources of income and pass-through loss not subject to income tax.

A reconciliation between the Company’s effective tax rate and the applicable U.S.

federal statutory income tax rate is summarized as follows:

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Non-controlling interest

Pass-through loss not subject to tax

Permanent items

Research and development credits

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Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes.

The components that comprise the Company’s net deferred taxes consist of the following (in thousands):

Year Ended December 31,

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Total deferred tax assets, net of valuation allowance

Deferred tax liability

Prepaid expenses

Net deferred tax asset

The Company determines its valuation allowance on deferred tax assets by considering both positive and negative evidence in order to ascertain whether it is more likely than not that deferred tax assets will be realized.

Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of which are uncertain.

Because of the Company’s recent history of operating losses, the Company believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has recognized a full valuation allowance on its deferred tax assets.

The valuation allowance increased by $ 24.1 million and $ 28.3 million for the years ended December 31, 2022 and 2021, respectively, primarily due to the increase in the Company’s net operating losses (“NOL”) during the period.

The valuation allowance increased by $ 8.2 million and $ 24.1 million for the years ended December 31, 2023 and 2022, respectively, primarily due to the increase in the Company’s net operating losses (“NOL”) during the period.

As of December 31, 2023, the Company had the following tax attribute carryforwards that will expire on various dates as follows:

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Research and development tax credits, state

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s research and development credit carryforwards may be limited in the event cumulative change in ownership of more than 50% occurs within a three-year period.

As of December 31, 2023, the Company has not performed an IRC Section 382 or 383 analysis.

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Balance at the end of the year

Included in the balance of unrecognized tax benefits at December 31, 2022 is $ 0.2 million that if recognized would impact the Company’s income tax benefit and effective tax rate.

Included in the balance of unrecognized tax benefits at December 31, 2023 is $ 0.5 million that if recognized would impact the Company’s income tax benefit and effective tax rate.

The Company does not expect any significant increases or decreases in its unrecognized tax benefits within the next twelve months.

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Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc.

Weighted average Class A common share outstanding—basic and diluted

Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc.—basic and diluted

The following table shows the total outstanding securities considered anti-dilutive and therefore excluded from the computation of diluted net loss per Class A common share attributable to Rani Holdings:

Year Ended December 31,

Weighted average Class A common share outstanding—basic and diluted

Net loss per Class A common share attributable to Rani Therapeutics Holdings, Inc.—basic and diluted

As of December 31,

Paired Interests

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Restricted stock units

Restricted stock awards

Shares issuable pursuant to the ESPP

Shares of Class B Common Stock do not share in the Company’s earnings and are not participating securities.

Restricted stock awards

Shares of Class B Common Stock do not share in the Company’s earnings and are not participating securities.

Accordingly, separate presentation of loss per share of Class B common stock under the two-class method has not been provided.

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Subsequent Events

Celltrion License and Supply Agreement

In January 2023, the Company entered into a License and Supply Agreement (“Celltrion Agreement”) with Celltrion, Inc.

(“Celltrion”).

Under the Celltrion Agreement, Celltrion grants the Company an exclusive, worldwide, royalty-free license to certain intellectual property to make, use, sell, offer for sale, import and otherwise exploit RT-111 and to use certain information to support the manufacture, development and commercialization of RT-111.

Celltrion will provide, and Rani will purchase, supply of ustekinumab biosimilar at supply prices set forth in the Celltrion Agreement.

Under the Celltrion Agreement, the Company has sole right to manufacture, develop and commercialize RT-111 worldwide, subject to an exclusive right of first negotiation (“ROFN”) granted to Celltrion.

Following delivery to Celltrion of a data package consisting of data related to topline results from a Phase 1 clinical trial of RT-111 that meets its primary endpoint(s), Celltrion will have a certain period to exercise its ROFN.

If Celltrion timely exercises the ROFN, then Celltrion will have an exclusive period to negotiate in good faith a definitive agreement with the Company for rights to clinically develop and commercialize RT-111 in territories selected by Celltrion.

In the event Celltrion does not timely exercise the ROFN or Celltrion notifies us that it does not intend to exercise the ROFN or, after timely exercising the ROFN, notifies us that Celltrion withdraws its exercise of the ROFN, or the parties fail to enter into a definitive agreement for the development and commercialization of RT-111 within the exclusive negotiation period, then the ROFN will terminate and we will have no further obligations under the Celltrion Agreement related to a ROFN.

The Celltrion Agreement allocates rights between the parties with respect to inventions generated in performance of the agreement for the manufacture, development and commercialization of RT-111.

Celltrion will own intellectual property generated in the program solely related to its ustekinumab biosimilar.

The Company will own all other intellectual property generated in the program, and the Company grants Celltrion an exclusive, worldwide license under such intellectual property solely for use with its ustekinumab biosimilar.

The Company will own all data related to the research, development, manufacture, regulatory activities and commercialization of RT-111 conducted by the Company.

The Company has a right to terminate the agreement for convenience subject to certain notice periods.

Celltrion has a right to terminate the agreement if the Company does not achieve certain development milestones, and each party has certain rights to terminate for material breach or safety concerns regarding the ustekinumab biosimilar or RT-111.

The Failure of Silicon Valley Bank

On March 10, 2023, Silicon Valley Bank (“SVB”) was closed by the California Department of Financial Protection and Innovation, which appointed the Federal Deposit Insurance Corporation as receiver.

At the time of the closure, the Company held limited assets in deposit and money market accounts with SVB.

Because a substantial majority of the Company's cash, cash equivalents and marketable securities were not maintained at SVB and in light of actions taken by the federal government to fully protect deposit accounts, the closure of SVB has had no material impact on the Company's operations.

Amended Service Agreements

In March 2024, the Company entered into an amendment to the RMS-ICL Service Agreement to increase the Occupancy Services from 23,000 square feet to 24,000 square feet.

In March 2024, the Company also entered into an amendment to the Rani LLC-ICL Service Agreement to extend the term of the Occupancy Services in Milpitas, California from February 2024 to August 2024 and to increase the payment for such Occupancy Services during the extension period.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data