What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-20 · 133 added, 265 removed, 144 unchanged (73% of the section changed)

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Our technology comprises a drug-agnostic oral delivery platform, the RaniPill capsule, which is designed to deliver a wide variety of drug substances, including antibodies, proteins, peptides, and oligonucleotides.

We are currently developing two configurations of the platform – the RaniPill GO and the RaniPill HC.

We have two configurations of the platform – the RaniPill GO and the RaniPill HC.

The RaniPill GO is designed to deliver up to a 3 mg dose of drug in microtablet form with high bioavailability.

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We have tested preclinically the RaniPill HC with multiple therapeutics, including antibodies and a peptide.

We intend to initiate clinical testing of the RaniPill HC in 2024.

We believe that, together, the RaniPill GO and RaniPill HC could enable us to deliver most biologics currently on the market with convenient, oral dosing.

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

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

Our existing capital resources, including the net proceeds from our initial public offering in 2021 (“IPO”) and term loans we received under a loan and security agreement and related supplement (the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P (the “Lender”), will not be sufficient to enable us to initiate any pivotal clinical trials.

We 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 our product candidates and seek regulatory approval thereof, to expand our manufacturing capabilities, to further develop the RaniPill HC device and to commercialize any of our product candidates.

If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets.

We may receive less than the value at which those assets are carried on our audited financial statements, and investors may lose all or a part of their investment.

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

If we are unable to obtain funding on a timely basis, or to generate sufficient revenues, if at all, from collaboration arrangements or product sales, we may be required to significantly curtail, delay or discontinue one or more of our research or development programs, the development of our oral delivery technology, including the RaniPill HC, the commercialization of any product candidates or cease operations altogether, seek collaborators for one or more of our product candidates at an earlier stage than otherwise would be desirable or on terms that are less favorable than might otherwise be available;

relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves;

or forego expansion of our operations or refrain from pursuing business opportunities;

any of which could have a material adverse effect on our business, financial condition and results of operations.

We intend to initiate clinical testing of the RaniPill HC in mid-2025.

We believe, the RaniPill capsule technology could enable us to deliver most biologics currently on the market with convenient, oral dosing.

We do not have any products approved for sale, and we have not yet generated any revenue from sales of a commercial product.

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Our vertically integrated manufacturing strategy will result in material future capital outlays and fixed costs related to constructing and operating a manufacturing facility.

We have invested and plan to continue to invest in automated manufacturing production lines for the current RaniPill capsule and RaniPill HC.

We have invested and plan to continue to invest in automated manufacturing production lines for the RaniPill capsule.

Those assets deemed to have an alternative future use have been capitalized as property and equipment while those projects related to our assets determined to not have an alternative future use have been expensed as research and development costs.

Clinical Update

As of December 31, 2024, our cash, cash equivalents and marketable securities totaled $27.6 million.

In October 2024, we entered into a securities purchase agreement (the “October Securities Purchase Agreement”) with an institutional investor relating to the issuance and sale of:

(i) 3,000,000 shares of our Class A common stock, (ii) pre-funded warrants to purchase 333,333 shares of Class A common stock, and (iii) Series C common warrants, which accompany the Class A common stock and pre-funded warrants, to purchase an aggregate of 3,333,333 shares of Class A common stock (the “October Offering” and collectively with the July Offering, the “Offerings”).

The aggregate net proceeds from the October Offering totaled $9.4 million, after deducting placement agent fees and other offering expenses payable by us, and excluding potential proceeds, if any, from the exercise of the pre-funded warrants and Series C common warrants issued in the October Offering.

In October 2024, the pre-funded warrants were fully exercised for de minimis proceeds.

In July 2024, we entered into a securities purchase agreement (the “July Securities Purchase Agreement”) with an institutional investor relating to the issuance and sale of:

(i) 2,800,000 shares of its Class A common stock, (ii) pre-funded warrants to purchase 446,753 shares of Class A common stock, (iii) Series A common warrants, which accompany the Class A common stock and pre-funded warrants, to purchase an aggregate of 3,246,753 shares of Class A common stock (the “Series A Warrants”) and (iv) Series B common warrants, which accompany the Class A common stock and pre-funded warrants, to purchase an aggregate of 3,246,753 shares of Class A common stock (the “July Offering”).

Pursuant to the October Securities Purchase Agreement, the Series A Warrants were cancelled.

The aggregate net proceeds from the July Offering totaled $8.9 million, after deducting placement agent fees and other offering expenses, and excluding potential proceeds, if any, from the exercise of the Series B common warrants issued in the July Offering.

In August 2024, the pre-funded warrants were fully exercised for de minimis proceeds.

We expect to continue to incur losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

Our existing capital resources, including the net proceeds from the Offerings, our initial public offering in 2021 (“IPO”) and term loans we received under a loan and security agreement and related supplement (the “Loan Agreement”) with Avenue Venture Opportunities Fund, L.P (the “Lender”), will not be sufficient to enable us to initiate any pivotal clinical trials.

We may seek to raise capital through equity offerings or debt financings, collaboration agreements, or other arrangements with other companies, or through other sources of financing.

Business Update

In November 2023, we announced a strategic program prioritization, expansion of manufacturing and plans to streamline business operations to support near-term value drivers and long-term growth of the RaniPill technology platform.

The plans include strategic prioritization of its key development programs, RT-102, RT-111 and the RaniPill HC and expansion of its manufacturing footprint to support increased scale and partnerships, and cost reduction initiatives that align with our near-term goals, including a reduction in our workforce by approximately 25%.

As part of the strategic focusing of the business, we have paused work on our RT-105 and RT-110 programs and we terminated our RT-101 program, which was the RaniPill capsule containing octreotide.

Cost savings are expected to support our operating plans into 2025.

Program Updates

In February 2024, we announced positive topline results from a Phase 1 study of RT-111, which is being developed for the potential treatment of inflammatory conditions.

The study met all of its endpoints and RT-111 was generally well tolerated with no serious adverse events noted.

In the study, RT-111 orally delivered 0.5 mg and 0.75 mg of our proprietary formulation of ustekinumab biosimilar with high bioavailability.

There was no meaningful difference in incidence of anti-drug antibodies in the groups receiving RT-111 compared to the group that received STELARA® (ustekinumab) via subcutaneous injection.

In January 2023, we announced entering into a License and Supply Agreement with Celltrion under which we receive a license and supply of Celltrion’s ustekinumab biosimilar for development and commercialization of RT-111 worldwide, subject to a right of first negotiation for Celltrion following completion of a Phase 1 clinical trial that meets its primary endpoint(s).

We believe the Phase 1 clinical trial that we completed with RT-111, the topline data of which we announced in February 2024, satisfies the requirements for triggering Celltrion’s right of first negotiation.

We continue to develop the RaniPill HC, a high-capacity RaniPill capsule designed to deliver drug payloads up to 200µL, 500%-plus higher than the payload capacity of the RaniPill GO.

In September 2023, we announced three positive preclinical studies which support the development of the RaniPill HC device.

In October and November 2023, we announced the completion of two preclinical studies of the RaniPill HC with antibodies, adalimumab and an undisclosed anti-interleukin antibody (“Undisclosed MAB”).

In the two studies, the RaniPill HC achieved an oral delivery success rate of 100% (10/10).

In one study, we tracked the serum concentrations of adalimumab, following the oral administration of the enteric-coated RaniPill HC capsule containing 11mg of Humira (adalimumab) to four canine models.

In the second study, we tracked the serum concentrations of the Undisclosed MAB, following the oral administration of the enteric-coated RaniPill HC capsule containing 16.5mg of Undisclosed MAB to six canine models.

In both studies, the RaniPill HC was well tolerated, all animals remained healthy throughout the study period with no clinical findings or adverse events, and all device remnants were excreted normally without sequelae.

Preliminary preclinical testing supports the potential for RaniPill HC to have high reliability, and initial analysis of drug delivery via the RaniPill HC shows a potential for mimicking parenteral (subcutaneous) administration.

We intend for the RaniPill HC to be ready for potential Phase 1 clinical trials in the second half of 2024.

In January 2023, we announced that we completed a pre-IND meeting with the FDA with respect to RT-102.

Following feedback from the meeting, we believe that a 505(b)(2) pathway is suitable for the development of RT-102 in the U.S.

In addition, we obtained guidance from the FDA on its preclinical and clinical development plans for RT-102.

We intend to initiate a Phase 2 clinical trial of RT-102 in 2024.

In June 2023, we entered into a License and Supply Agreement with Celltrion under which we receive an exclusive license and supply of Celltrion’s adalimumab biosimilar for development and commercialization of RT-105 worldwide, subject to a right of first negotiation for Celltrion following completion of a Phase 1 clinical trial that meets its primary endpoint(s).

RT-105 is the RaniPill capsule containing an adalimumab biosimilar, which is intended for the treatment of inflammatory conditions.

In November 2023, we announced the pausing of development of RT-105 as part of a strategic focusing of the business.

In June 2024, we entered into a Collaboration Agreement (the “ProGen Collaboration Agreement”) with ProGen Co., Ltd.

Under the ProGen Collaboration Agreement, the parties will collaborate to manufacture, develop, seek regulatory approvals for and, if approved, commercialize a product (RT-114) combining ProGen’s GLP-1/GLP-2 dual agonist compound, PG-102, and the RaniPill HC oral delivery device (the “Device”) in the field of weight management (including without limitation obesity, weight reduction and weight maintenance) in humans (the “ProGen Collaboration”).

Under the ProGen Collaboration Agreement, development costs, as well as operating profits and losses from the commercialization of the Product, will be equally shared by us and ProGen.

We and ProGen each granted to the other party an exclusive right and license (except with respect to the other party’s affiliates and sublicensees) to certain intellectual property to develop RT-114 for weight management and an exclusive right and license to seek regulatory approval for, and to use, sell, offer to sell, import and commercialize RT-114 in their assigned territories.

The parties share responsibility for the development of RT-114 worldwide, with Rani leading such development for preclinical activities through Phase 1 clinical trials.

After initiation of the first Phase 2 clinical trial, we will lead development and commercialization of RT-114 in the United States, Canada, Europe (including the United Kingdom) and Australia, and ProGen will lead development and commercialization in all other countries.

See “License and Evaluation Agreements – ProGen Co., Ltd.” in the Business section above.

In March 2025, we announced preclinical data demonstrating bioequivalence of RT-114, PG-102 delivered orally via the RaniPill capsule, to subcutaneously administered PG-102.

RT-114 yielded a relative bioavailability of 111% compared to PG-102 delivered subcutaneously with comparable pharmacokinetic profiles.

RT-114 was well tolerated with no changes in drug-related safety profile compared to delivery and was excreted without sequelae in all subjects.

Average peak weight loss was the same in both groups with greater variability with subcutaneous dosing (6.7% ± 0.5% for RT-114 and 6.7% ± 2.2% for subcutaneous PG-102).

In February 2025, we announced preclinical data demonstrating successful oral delivery of the glucagon-like peptide-1 receptor (“GLP-1”) agonist semaglutide via the RaniPill HC (“RT-116”).

In the study, RT-116 demonstrated comparable bioavailability, pharmacokinetics and weight loss to subcutaneous (“SC”) administration of semaglutide.

Further, RT-116 was well tolerated with no serious adverse events.

In October 2024, we announced new pharmacokinetic data from a preclinical study evaluating a GLP-1, GIP and glucagon receptors incretin triagonist with a delivery method mimicking the RaniPill route of administration.

The preclinical study evaluated the pharmacokinetic (“PK”) and pharmacodynamic (“PD”) profiles of an incretin triagonist (GLP-1, GIP, glucagon receptors) when delivered via an endoscope-guided transenteric administration to mimic the RaniPill route of administration, versus the traditional administration route of subcutaneous injection.

The study was conducted in canines separated into two groups.

In Group 1 (N=3), 0.12 mg/kg of drug was administered via transenteric delivery by endoscope.

In Group 2 (N=5), 0.12 mg/kg of drug was administered by SC injection.

Blood samples were collected over 2 weeks for analysis of serum drug concentrations and various PD and safety biomarkers.

A single dose of drug delivered via either transenteric or SC routes elicited rapid decreases in body weight and serum lipids.

Weight loss observed following transenteric delivery was 9.7 ± 2.5 % versus 6.9 ± 2.1 % following SC injection and is believed to be due to early satiety leading to reduced caloric intake.

Additionally, the bioavailability of drug delivered via the transenteric route was comparable to that of drug delivered via the SC route at the same dose.

The drug was well tolerated in both groups with no serious adverse events (SAEs) observed or changes in safety markers examined.

Transenteric delivery yielded 80% relative bioavailability versus SC and differences between PK parameters (AUC, C max , T max ) were not statistically significant.

We continue to develop the RaniPill HC, a high-capacity RaniPill capsule designed to deliver drug payloads up to 200µL.

In March 2025, we announced preclinical data demonstrating bioequivalence of RT-114, PG-102 delivered orally via the RaniPill HC, to subcutaneously administered PG-102.

RT-114 yielded a relative bioavailability of 111% compared to PG-102 delivered subcutaneously with comparable pharmacokinetic profiles and weight loss.

The RaniPill capsule was well tolerated with no changes in drug-related safety profile compared to subcutaneous delivery and was excreted without sequelae in all canines.

RT-114 achieved a 90% delivery success rate (9 out of 10 canines).

In February 2025, we announced results from a nonclinical pharmacokinetic and pharmacodynamic study of the GLP-1 agonist semaglutide administered via the RaniPill HC.

The nonclinical pharmacokinetic and pharmacodynamic study was conducted to examine the effects of semaglutide delivered orally via the RaniPill (RT-116) versus a subcutaneous injection comparator group.

The 2x2 crossover study was conducted in two parts with a period of four weeks separating the two groups to evaluate the PK, PD and safety of RT-116.

Eight canines were randomized into two groups who received 0.5mg of semaglutide delivered via oral administration of the RaniPill HC (N=4) or subcutaneous injection (N=4).

Endpoints included plasma drug concentrations, body weight, food intake, lipid profile, and safety.

Data Highlights

Semaglutide was successfully delivered in 7 of 8 canines that received the RaniPill capsule.

Semaglutide administered via the RaniPill capsule was well tolerated with no serious adverse events.

Cmax, Tmax, and AUC were comparable for semglutide administered via RaniPill capsule and subcutaneous administration of semaglutide.

Oral administration via the RaniPill capsule demonstrated bioavailability and biological activity comparable to subcutaneous administration.

The relative bioavailability of oral semaglutide was 107% versus subcutaneous administration.

Both groups saw comparable weight loss which appeared to be driven by decreased food intake that coincided with rises in plasma drug levels thus indicating there is a PD effect to treatment.

Both groups saw comparable moderate decreases in serum triglycerides and cholesterol.

We intend to initiate clinical testing of the RaniPill HC in mid-2025.

60-Day GLP Study

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RT-100 was well-tolerated with no treatment-related adverse events and all animals remained clinically healthy throughout the study.

Financial Update

In August 2022, we entered into the Loan Agreement with the Lender 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 is uncommitted and is subject to certain conditions and approval by the Lender.

The purpose of the Loans is for general corporate purposes.

The Loan Agreement also contains various covenants and restrictive provisions.

As of December 31, 2023, we were in compliance with all applicable debt covenants under the Loan Agreement and had cash, cash equivalents, and marketable securities totaling $48.5 million.

In addition, in August 2022, we entered into a Controlled Equity SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

Wainwright & Co., LLC (collectively, the “Agents”), pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million of shares of our Class A common stock, in such share amounts as we may specify by notice to the Agents, in accordance with the terms and conditions set forth in the Sales Agreement (“ATM Sales”).

As of December 31, 2023, we had not delivered any placement notices to either of the Agents and there had been no ATM Sales.

Reduction in Force

In November 2023, we committed to a plan for strategic prioritization of our programs, expansion of our manufacturing and streamlining of our business operations to support potential near-term value drivers and long-term growth (the “Restructuring”).

The Restructuring includes a reduction of our workforce by approximately 25%.

As a result of the Restructuring, we estimate that we will incur approximately $0.3 million in costs of which nearly all are cash expenditures related to severance and half of which was incurred in the fourth quarter of 2023.

We expect the Restructuring to be substantially completed by the end of the second quarter of 2024.

The estimates of costs that we expect to incur in connection with the Restructuring and the timing thereof are subject to a number of assumptions and actual results may differ materially from estimates.

We may also incur other charges or cash expenditures not currently contemplated in connection with the Restructuring due to unanticipated events that may occur, including in connection with the implementation of the Restructuring.

The Restructuring included a reduction of our workforce and was substantially completed by the end of the second quarter of 2024.

CEO Compensation Reduction

In November 2023, our Board of Directors (the “Board”) approved a reduction in the annual salary of Talat Imran, our Chief Executive Officer, from $520,000 to $100,000, effective November 1, 2023 through December 31, 2024 or until such time as we receive gross proceeds of $50,000,000 or more, in the aggregate, from equity financing and/or one or more non-dilutive strategic, licensing or partnering transactions.

The decreased base salary amends the Amended and Restated Employment Agreement, dated August 31, 2022, by and between Rani LLC and Mr.

In November 2024, the Board approved to extend the reduction in annual salary of Talat Imran through December 31, 2025 or until the Financing Threshold is met.

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

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We are also responsible for the payment of additional rent to cover our share of common area operating expenses, including taxes, insurance, utilities, and repair and maintenance of the premises and common areas of the Project.

Organizational Transactions

The Company was incorporated in April 2021 and formed for the purpose of facilitating an IPO of its Class A common stock, and to facilitate certain organizational transactions (“Organizational Transactions”) and to operate the business of Rani LLC and its consolidated subsidiary at such time, Rani Management Services, Inc.

In connection with the IPO, we established a holding company structure with the Company as the holding company and its principal asset being the Class A common units (“Class A Units”) of Rani LLC that it owns.

As the sole managing member of Rani LLC, the Company operates and controls all of Rani LLC’s operations, and through Rani LLC, conducts all of Rani LLC’s business and the financial results of Rani LLC and RMS (prior to December 15, 2022) are included in the consolidated financial statements of the Company.

RMS was dissolved as of December 15, 2022

Rani LLC has been, and after the IPO continues to be, treated as a pass-through entity for U.S.

federal and state income tax purposes and accordingly has not been subject to U.S.

federal or state income tax.

The wholly owned subsidiary of Rani LLC, RMS, which was incorporated in 2019 and dissolved in December 2022, was taxed as a corporation for U.S.

federal and most applicable state, local income tax and foreign tax purposes.

As a result of its ownership of interests in Rani LLC ("LLC Interests"), the Company is subject to U.S.

federal, state and local income taxes with respect to its allocable share of any taxable income of Rani LLC and will be taxed at the prevailing corporate tax rates.

In addition to tax expenses, we also incur expenses related to our operations and may be required to make payments under the Tax Receivable Agreement with certain of the individuals and entities that continue to hold interests in Rani LLC after the IPO (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 our Class B common stock (together referred to as a "Paired Interest"), in return for shares of our Class A common stock on a one-for-one basis provided that, at our election, we 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.

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, we redeem or exchange such Paired Interest pursuant to the terms of the Rani LLC Agreement.

These exchanges and redemptions may result in increases in the tax basis of the assets of Rani LLC that otherwise would not have been available.

Increases in tax basis resulting from such

exchanges may reduce the amount of income tax that the Company would otherwise be required to pay in the future.

This tax basis may also decrease the gains (or increase the losses) on future dispositions of certain assets to the extent tax basis is allocated to those assets.

Due to the uncertainty of various factors, we cannot estimate the likely tax benefits we will realize as a result of exchanges, and the resulting amounts we will likely pay out to the Continuing LLC Owners pursuant to the Tax Receivable Agreement;

however, we estimate that such payments may be substantial in the event we are profitable.

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.

Components of Results of Operations

Operating Expenses

Our operating expenses consisted of research and development and general and administrative activities.

Research and Development Expense

Research and development expense consists primarily of direct and indirect costs incurred in connection with our research and development activities to develop the RaniPill platform.

These expenses include:

External expenses, consisting of:

• expenses associated with contract research organizations ("CROs,"), for managing and conducting clinical trials;

• expenses associated with laboratory supplies, drug material for clinical trials, developing and manufacturing of the RaniPill GO, RaniPill HC and other materials;

• expenses associated with preclinical studies performed by third parties;

• expenses associated with consulting, advisors, and other external services;

• other research and development costs related to compliance with quality and regulatory requirements.

Internal expenses, consisting of:

• expenses including salaries, bonuses, stock-based compensation and benefits for personnel engaged in the research and development functions;

• expenses associated with equipment depreciation and allocated facility costs for research and development.

We expense research and development costs as incurred.

Costs for external development activities are recognized based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors.

Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our financial statements as prepaid or accrued research and development expenses.

Nonrefundable advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses.

Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered, or the services rendered.

Until future commercialization is considered probable and the future economic benefit is expected to be realized, we do not capitalize pre-launch inventory costs.

Costs of property and equipment related to scaling-up our manufacturing capacity for clinical trials and to support commercialization are capitalized as property and equipment unless the related asset does not have an alternative future use.

The historical focus of our research and development has been on the RaniPill delivery platform and not tracked costs on a project-by-project basis associated with different drug compounds.

At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete development of the RaniPill GO and RaniPill HC and complete the development of, and obtain regulatory approval for, our product candidates.

We expect our research and development expenses to increase significantly for the foreseeable future as we continue to invest in activities related to testing and developing the RaniPill GO and RaniPill HC and the development of our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for our product candidates upon successful completion of clinical trials, and incur expenses associated with hiring additional personnel to support the research and development efforts.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of the RaniPill platform and our product candidates is highly uncertain, and we may never succeed in successfully developing the RaniPill GO and/or RaniPill HC or achieve the development of, and regulatory approval for, our product candidates.

General and Administrative Expenses

General and administrative expenses consist primarily of personnel-related costs (including salaries, bonuses, stock-based compensation, and benefits) for personnel in executive, finance, accounting, legal, corporate and business development, and other administrative functions.

General and administrative expenses also include legal fees relating to corporate matters, professional fees paid for accounting, auditing, consulting, tax, and administrative consulting services, insurance costs, travel, and facilities, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs.

Other Income (Expense), Net

Other income (expense), net primarily consists of interest income earned on our cash equivalents and marketable securities and interest expense from our long-term debt and amortization of debt discount and issuance costs.

Non-Controlling Interest

Non-controlling interest ("NCI") represents the portion of income or loss, net assets and comprehensive loss of our consolidated subsidiary that is not allocable to the Company based on its percentage of ownership of Rani LLC.

In August 2021, based on the Organizational Transactions, the Company became the sole managing member of Rani LLC.

As of December 31, 2023, the Company held approximately 51% of the Class A Units of Rani LLC, and approximately 49% of the outstanding Class A Units of Rani LLC are held by the Continuing LLC Owners.

Therefore, we report NCI based on the Class A Units of Rani LLC held by the Continuing LLC Owners on our consolidated balance sheet as of December 31, 2023.

Income or loss attributed to the NCI in Rani LLC is based on the Class A Units outstanding during the period for which the income or loss is generated and is presented on the consolidated statements of operations and comprehensive income or loss.

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, 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 our Class A common stock.

Tax Receivable Agreement

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

The TRA provides that we 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 our taxable income based on the contractual percentage of the benefit of Tax Attributes that we expect to receive over a period of time.

Relationship with InCube Labs, LLC

Service Agreements

In June 2021, Rani LLC entered into a service agreement with InCube Labs, LLC (“ICL”) effective retrospectively to January 1, 2021, and subsequently amended such agreement in March 2022 and March 2024 (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.

In March 2024, Rani LLC entered into an amendment 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.

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

except that the Occupancy Services in Milpitas, California have a term until August 2024, 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.

The Rani LLC-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.

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

In June 2021, RMS entered into a service agreement with ICL effective retrospectively to January 1, 2021.

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

In March 2024, Rani LLC entered into an amendment to increase the Occupancy Services from 23,000 square feet to 24,000 square feet (such agreement, as assigned and amended, the “RMS-ICL Service Agreement”).

Pursuant to the RMS-ICL Service Agreement, ICL agreed to rent a specified portion of its facility in San Jose, California to RMS.

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

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 charged to ICL under the RMS-ICL Service Agreement, which is included in the consolidated statements of operations and comprehensive loss (in thousands):

Year Ended December 31,

Research and development

General and administrative

Prior to April 2022, our 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 our employees, including our 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, 2023, all of our facilities are owned or leased by an entity affiliated with our Chairman.

Rani LLC pays for the use of these facilities through our services agreements with ICL.

Exclusive License Agreement

In June 2021, we and ICL entered into an Amended and Restated Exclusive License Agreement which replaces the 2012 Exclusive License Agreement, as amended in 2013, and terminates the Intellectual Property Agreement, as amended in June 2013.

Under the Amended and Restated Exclusive License Agreement, we have a fully paid, exclusive license under certain scheduled patents related to optional features of the device and certain other scheduled patents to exploit products covered by those patents in the field of oral delivery of sensors, small molecule drugs or biologic drugs including, any peptide, antibody, protein, cell therapy, gene therapy or vaccine.

We will cover patent-related expenses and, after a certain period, we will have the right to acquire four specified United States patent families from ICL by making a one-time payment of $0.3 million to ICL for each United States patent family that we desire to acquire, up to $1.0 million in the aggregate.

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 Agreement.

Additionally, we 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, we entered into the Non-Exclusive License Agreement with ICL, pursuant to which we granted ICL a non-exclusive, fully-paid license under specified patents that were assigned from ICL to us.

Additionally, we 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 our prior approval.

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

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

In June 2021, we entered into the Mir Agreement, pursuant to which we and Mir Imran agreed that we would own all intellectual property conceived (i) using any of our 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.

Neither us 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.

Tax Receivable Agreement

ICL is party to the TRA, entered into in August 2021 pursuant to the IPO and Organizational Transactions.

The TRA provides that we 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.

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.

Registration Rights Agreement

In connection with the IPO, we 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 us to register under the Securities Act shares of Class A common stock issuable to them upon, at our election, redemption or exchange of their LLC 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 we filed a registration statement on Form S-3 to register 6,009,542 shares of our Class A common stock held by certain of our stockholders.

Rani LLC Agreement

We operate our business through Rani LLC and, prior to December 15, 2022, its subsidiary, RMS.

RMS was dissolved on December 15, 2022.

In connection with the IPO, we and the Continuing LLC Owners, including ICL, entered into the Fifth Amended and Restated LLC Agreement of Rani LLC (the “Rani LLC Agreement”).

The governance of Rani LLC, and the rights and obligations of the holders of LLC Interests, are set forth in the Rani LLC Agreement.

As a Continuing LLC Owner, ICL is entitled to exchange, subject to the terms of the Rani LLC Agreement, Paired Interests for our Class A common stock;

provided that, at our election, we 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 years ended December 31, 2023 and 2022, these related parties that are party to the Rani LLC Agreement exchanged zero and 2,317,184 Paired Interests, respectively, for the Company's Class A common stock.

See Note 7 to the consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.

For information with respect to recent accounting pronouncements that are of significance or potential significance to us, see “Note 2.

Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 of this Annual Report on Form 10-K.

The following table summarizes our results of operations (in thousands):

Year Ended December 31,

Contract revenue

Operating expenses

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General and administrative

Impairment loss

Total operating expenses

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Interest expense and other, net

Loss before income taxes

Income tax expense

Net loss attributable to non-controlling interest

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*Not meaningful

Contract Revenue

Contract revenue of $1.0 million for the year ended December 31, 2024, was attributable to evaluation services performed for a customer.

There was no contract revenue for the same period in 2023.

Research and Development Expenses

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Payroll, stock-based compensation and related benefits

Third-party services

Facilities, materials and supplies

The increase of $3.0 million in research and development expenses was primarily attributed to higher compensation costs of $1.4 million, an increase of $1.2 million in third-party services and an increase of $0.6 million in facilities, materials and supplies expense related to preclinical and clinical development activities, offset by a decrease in other costs of $0.2 million.

Third-party services

The decrease of $12.9 million in research and development expenses for the year ended December 31, 2024, as compared to the same period in 2023, was primarily attributed to lower compensation costs of $6.3 million due to reduction in workforce, $5.6 million reduction in third-party services and $0.9 million reduction in materials and supplies due to the timing of certain preclinical and clinical studies.

General and Administrative Expenses

The decrease of $0.3 million in general and administrative expenses was primarily attributed to lower third-party services of $1.8 million related to support for compliance with public company requirements and lower facilities, material and supplies and other costs of $0.3 million, offset by higher compensation costs of $1.8 million.

The decrease of $2.5 million in general and administrative expenses in the year ended December 31, 2024, as compared to the same period in 2023, was primarily attributed to lower compensation costs of $2.0 million due to reduction in workforce, $1.2 million reduction in third-party services and other costs primarily due to lower insurance premiums, offset by an increase in facility costs of $0.7 million due to the lease in Fremont, California.

Impairment Loss

The impairment loss of $3.7 million was attributable to construction-in-progress property and equipment.

Rani considers many factors in evaluating whether the value of its construction-in-progress property and equipment may not be recoverable, including, but not limited to, alternative use, cost-savings and strategic considerations.

As a result, it was determined that the carrying amount of the construction-in-progress property and equipment exceeded its fair value and was written down to its salvage value.

There was no impairment loss for the same period in 2023.

Other Income (Expense), Net

The increase of $1.9 million in other expense, net, was primarily attributed to an increase in interest expense of $4.0 million from our debt, partially offset by an increase in interest income of $2.1 million from our investment in marketable securities.

The decrease of $1.5 million in interest income and other, net, in the year ended December 31, 2024, as compared to the same period in 2023, was primarily attributed to a decrease in interest income from our investment in marketable securities.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred recurring losses and negative cash flows from operations since inception, including net loss of $56.6 million for the year ended December 31, 2024.

As of December 31, 2024, we had an accumulated deficit of $102.9 million and for the year ended December 31, 2024, had negative cash flows from operations of $35.5 million.

As of December 31, 2024, our cash, cash equivalents and marketable securities totaled $27.6 million.

Our existing capital resources, including the net proceeds from our IPO and term loans we received under the Loan Agreement and the Offerings, will not be sufficient to enable us to initiate any pivotal clinical trials.

Our existing capital resources, including the net proceeds from our IPO and Loans, will not be sufficient to enable us to initiate any pivotal clinical trials.

If we are unable to continue as a going concern, we may have to cease operations and liquidate our assets.

We may receive less than the value at which those assets are carried on our audited financial statements, and investors may lose all or a part of their investment.

We may not be able to obtain additional funding on acceptable terms, or at all.

As a result of geopolitical events, including the conflicts in Ukraine and Gaza, inflation, rising interest rates and other conditions, the global credit and financial markets have experienced volatility and disruptions.

In addition, the report from our independent registered public accounting firm issued in connection with this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern.

If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.

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

relinquish or license on unfavorable terms our rights to technologies or product candidates that we otherwise would seek to develop or commercialize ourselves;

or forego expansion of our operations or refrain from pursuing business opportunities;

any of which could have a material adverse effect on our business, financial condition and results of operations.

Moreover, the terms of any financing may adversely affect the holdings or the rights of our stockholders and the issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance, may cause the market price of our Common Stock to decline.

The sale of additional equity or convertible securities would dilute all of our stockholders.

The incurrence of indebtedness would result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants and other operating restrictions that could adversely impact our ability to conduct our business.

The Lender already has a security interest in substantially all of our assets, including our intellectual property, which may prevent or limit our ability to incur additional indebtedness.

We have not generated any revenue from commercial product sales and have incurred significant operating losses and negative cash flows from operations.

We have not yet commercialized any products, and we do not expect to generate revenue from sales of commercial products for several years, if at all.

We anticipate that we will continue to incur net losses for the foreseeable future.

Since our inception, we have devoted substantially all of our resources on organizing and staffing our company, business planning, research and development activities, including the RaniPill platform design, drug formulation, preclinical studies, clinical trials, manufacturing automation and scale up, establishing our intellectual property portfolio, and providing general and administrative support for these operations.

To date, we have financed our operations primarily through an IPO, private placements of Rani LLC preferred units, the issuance of convertible promissory notes, and long-term debt, as well as contract revenue generated from evaluation agreements.

Financial Update

In October 2024, we entered into the October Securities Purchase Agreement with an institutional investor relating to the October Offering.

The aggregate net proceeds from the October Offering totaled $9.4 million, after deducting placement agent fees and other offering expenses payable by us, and excluding potential proceeds, if any, from the exercise of the Series C common warrants issued in the October Offering.

Pursuant to the October Offering, the Series A Warrants were cancelled.

In October 2024, the pre-funded warrants were fully exercised for de minimis proceeds.

In July 2024, we entered into the July Securities Purchase Agreement with an institutional investor relating to the July Offering.

In August 2024, the pre-funded warrants were fully exercised for de minimis proceeds.

In August 2022, we entered into the Loan Agreement with the Lender.

The Loan Agreement provides for Loans in an aggregate principal amount up to $45.0 million.

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 is uncommitted and is subject to certain conditions and approval by the Lender.

The purpose of the Loans is for general corporate purposes.

The remaining $15.0 million of Loans was uncommitted and subject to certain conditions and is no longer available under the Loan Agreement.

The Loan Agreement also contains various covenants and restrictive provisions.

As of December 31, 2023, we were in compliance with all applicable debt covenants under the Loan Agreement and had cash, cash equivalents and marketable securities totaling $48.5 million.

In August 2022, we entered into the Sales Agreement with the Agents, pursuant to which we may offer and sell from time to time through the Agents up to $150.0 million of shares of our Class A common stock in ATM Sales.

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.

The Loan principal is repayable in equal monthly installments which began in September 2024.

As of December 31, 2024, we were in compliance with all applicable debt covenants under the Loan Agreement.

In addition, in August 2022, we entered into a Controlled EquitySM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.

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

As of December 31, 2024, we had not delivered any placement notices to either of the Agents and there had been no ATM Sales.

Since our inception, we have incurred significant losses and negative cash flows from operations.

Our net losses were $67.9 million and $63.3 million for the year ended December 31, 2023 and 2022, respectively.

As of December 31, 2023, we had an accumulated deficit of $72.9 million.

We expect to continue to incur significant losses for the foreseeable future, and our net losses may fluctuate significantly from period to period, depending on the timing of and expenditures on our planned research and development activities.

Until such time as we can generate sufficient revenue from commercial product sales, if ever, we expect to finance our operations through a combination of equity offerings and debt financings, which may include ATM Sales, or other capital sources, which may include strategic collaborations or other arrangements with third parties.

We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all.

Tax Receivable Agreement

We entered into a Tax Receivable Agreement with certain of the Continuing LLC Owners in August 2021 in connection with the IPO.

The Tax Receivable Agreement provides for our payment to certain of the Continuing LLC Owners of 85% of the amount of tax benefits, if any, that we are deemed to realize as a result of any basis adjustments and certain other tax benefits arising from payments under the Tax Receivable Agreement.

We will have in effect an election under Section 754 of the Code effective for each taxable year in which a redemption or exchange (including deemed exchange) of LLC Interests for shares of our Class A common stock or cash occurs.

These Tax Receivable Agreement payments are not conditioned upon any continued ownership interest in either the Company or Rani LLC by such Continuing LLC Owners.

The rights of such Continuing LLC Owners under the Tax Receivable Agreement are assignable to transferees of their LLC Interests (other than us as transferee pursuant to subsequent redemptions (or exchanges) of the transferred LLC Interests).

We expect to benefit from the remaining 15% of tax benefits, if any, that we may realize.

As of December 31, 2023, we have not recorded a liability under the TRA related to the income tax benefits originating from the exchanges of Paired Interest or non-corresponding Class A Units of Rani LLC as it is not probable that the Company will realize such tax benefits.

To the extent the Company is able to realize the income tax benefits associated with the exchanges of Paired Interest or non-corresponding Class A Units of Rani LLC subject to the TRA, the TRA payable would range from zero to $22.9 million at December 31, 2023.

The amounts payable under the TRA will vary depending upon a number of factors, including the amount, character, and timing of the taxable income of the Company in the future.

Should the Company determine that the payment of the TRA liability becomes probable at a future date based on new information, any changes will be recorded on the Company's consolidated statement of operations and comprehensive loss at that time.

Future Funding Requirements and Going Concern

Our existing capital resources, including the net proceeds from our IPO and Loans, will not be sufficient to fund our projected operating requirements for a twelve-month period and will not enable us to initiate any pivotal clinical trials.

See Note 12 to the consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

Future Funding Requirements

Notwithstanding the sharing of development costs for the RT-114 program under the ProGen Agreement, our existing capital resources, including the net proceeds from our IPO, the Loans and the Offerings, will not be sufficient to enable us to initiate any pivotal clinical trials with respect to any of our product candidates.

We 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 our product candidates and seek regulatory approval thereof, to expand our manufacturing capabilities, to further develop the RaniPill technology and to commercialize any of our product candidates.

To date, we have not generated any commercial product revenue.

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Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our programs, manufacturing automation and scaleup, and general and administrative expenses.

We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance the RaniPill GO, RaniPill HC and our product candidates.

We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance the RaniPill technology and our product candidates.

We may seek to raise capital through equity offerings or debt financings, which may include ATM Sales, collaboration agreements, or other arrangements with other companies, or through other sources of financing.

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• the progress, costs, and results of our research pipeline;

• the willingness of the FDA, or other regulatory authorities to accept data from our clinical trials, as well as data from our completed and planned clinical trials and preclinical studies and other work, as the basis for review and approval of our product candidates or collaborator drugs or biologics paired with the RaniPill GO and/or RaniPill HC for various indications;

• the outcome, costs, and timing of seeking and obtaining FDA, and any other regulatory approvals;

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• security breaches, data losses or other disruptions affecting our information systems;

• our ability to realize savings from any restructuring plans or cost-containment measures we have implemented or additional measures we may implement;

• our ability to realize savings from any restructuring plans or cost-containment measures we may implement;

• the economic and other terms, timing of and success of any collaboration, licensing, or other arrangements which we may enter in the future.

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In addition, our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets.

Furthermore, this Annual Report on Form 10-K contains statements expressing substantial doubt about our ability to continue as a going concern.

The following table summarizes our cash, cash equivalents, and marketable securities:

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Our existing capital resources, including the net proceeds from our IPO, Loans and the Offerings, will not be sufficient to fund our projected operating requirements for a twelve-month period from the issuance of our financial statements.

The following table summarizes our cash flows for the periods presented (in thousands):

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Net cash used in operating activities

Net cash provided by (used in) investing activities

Net cash provided by investing activities

Net cash provided by financing activities

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Operating Activities

Net cash used in operating activities for the year ended December 31, 2024 was $35.5 million, which was primarily attributable to a net loss of $56.6 million and net accretion and amortization of investments in marketable securities of $1.2 million, partially offset by stock-based compensation expense of $16.0 million, impairment loss of $3.7 million, and depreciation and amortization expense of $1.0 million.

Additionally, there was an increase in accounts receivable of $0.4 million, an increase in accounts payable of $0.7 million, and an increase in accrued expenses and other current liabilities of $0.4 million and a decrease of $0.6 million in prepaid expenses and other current assets for the year ended December 31, 2024.

Net cash used in operating activities for the year ended December 31, 2023 was $51.2 million, which was primarily attributable to a net loss of $67.9 million and net accretion and amortization of investments in marketable securities of $2.3 million, partially offset by the stock-based compensation expense of $19.0 million and depreciation and amortization expense of $0.8 million Additionally, there was a combined decrease in accounts payable and accrued expenses and other current liabilities of $1.1 million.

Net cash used in operating activities for the year ended December 31, 2022 was $46.5 million, which was primarily attributable to a net loss of $63.3 million and net accretion and amortization of investments in marketable securities of $0.9 million, partially offset by the equity-based compensation expense of $15.8 million and depreciation and amortization expense of $0.5 million.

Additionally, there was a decrease in prepaid expenses and other current assets of $0.5 million and an increase in accrued expenses of $0.7 million.

Investing Activities

For the year ended December 31, 2024, net cash provided by investing activities was $19.8 million, which primarily consisted of $77.6 million in proceeds from maturities of marketable securities partially offset by $57.5 million in purchases of marketable securities and $0.3 million in purchases of property and equipment, respectively.

For the year ended December 31, 2023, net cash provided by investing activities was $29.9 million consisting of $104.4 million in proceeds from maturities of marketable securities partially offset by $73.3 million and $1.2 million in purchases of marketable securities and property and equipment, respectively.

For the year ended December 31, 2022, net cash used in investing activities was $72.4 million consisting of $73.8 million in purchases of marketable securities, $3.0 million in proceeds from maturities of marketable securities and $1.6 million in purchases of property and equipment.

Financing Activities

For the year ended December 31, 2024, net cash provided by financing activities was $13.6 million, which primarily consisted of net proceeds of $9.4 million from the October Offering, net proceeds of $8.9 million from the July Offering, and $0.3 million from the issuance of common stock under employee stock purchase plan, partially offset by $5.0 million repayment of debt.

For the year ended December 31, 2023, there were no significant financing activities.

For the year ended December 31, 2022, net cash provided by financing activities was $29.0 million, which was primarily attributable to proceeds from the issuance of long-term debt and warrants, net of issuance costs of $29.6 million.

These items were partially offset by a $0.6 million decrease for employee taxes paid on net share settlement on the vesting of restricted stock units and payment of deferred financing costs of $0.3 million.

Contractual Obligations and Other Commitments

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In addition, we enter into agreements in the normal course of business with contract research organizations for clinical trials and with vendors for preclinical studies and other services and products for operating purposes, which are generally cancelable upon written notice.

Critical Accounting Policies and Estimates

This discussion and analysis of financial condition and results of operation is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of expenses during the reporting period.

On an ongoing basis, management evaluates its estimates and assumptions.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are described in the notes to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K, we believe that the following critical accounting policies are most important to understanding and evaluating our reported financial results.

Research and Development Costs

Research and development costs are expensed as incurred.

Research and development expenses consist primarily of contract research fees and process development, outsourced labor and related expenses for personnel, facilities cost, fees paid to consultants and advisors, depreciation and supplies used in research and development and costs incurred under our evaluation agreements.

Payments made prior to the receipt of goods or services to be used in research and development activities are recorded as prepaid expenses until the related goods or services are received.

Until future commercialization is considered probable and the future economic benefit is expected to be realized, we do not capitalize pre-launch inventory costs.

Costs of property and equipment related to scaling-up of the manufacturing capacity for clinical trials and to support commercialization are capitalized as property and equipment unless the related asset does not have an alternative future use.

Clinical and preclinical costs are a component of research and development expense.

We accrue and expense clinical and pre-clinical trial activities performed by third parties based upon actual work completed in accordance with agreements established with its service providers.

We determine 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.

Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with U.S.

generally accepted accounting principles, which require our management to make estimates that affect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reported amounts of revenues and expenses during the reporting periods.

We base our estimates on our own historical experience and other assumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on available information.

To the extent that there are material differences between these estimates and actual results, our financial condition or results of operations would be affected.

Our significant accounting policies are described in more detail in Note 2 to the consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K.

We believe the following discussion addresses our most critical accounting estimates used in the preparation of our consolidated financial statements, which require subjective and complex judgments.

Impairment of Long-Lived Assets

We review the carrying amounts of our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable.

If indicators of impairment exist, an impairment loss would be recognized when the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount.

The impairment charge is determined based upon the excess of the carrying value of the asset over its estimated fair value, with estimated fair value determined based upon an estimate of discounted future cash flows or other appropriate measures of estimated fair value.

As of December 31, 2024, we assessed the recoverability of the long-lived assets relating to construction-in-progress property and equipment.

We considered many factors in evaluating whether the value of its construction-in-progress property and equipment may not be recoverable, including, but not limited to, alternative use, cost-savings and strategic considerations.

As a result, we determined the carrying amount of the construction-in-progress property and equipment exceeded its fair value, and was written down to its salvage value.

Therefore, an impairment loss of $3.7 million was recognized as of December 31, 2024, related to construction-in-progress property and equipment.

Recently Adopted Accounting Standards

See Note 2 to the consolidated financial statements contained in Part II, Item 8 of this Annual Report on Form 10-K for additional information.

Other Information

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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 7. Management’s Discussion and Analysis