
PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) The unaudited financial statements reflect a significant increase in cash and total assets following the company's August 2021 IPO Condensed Consolidated Balance Sheets The company's financial position strengthened significantly post-IPO, with increased cash, decreased liabilities, and a shift to stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2021 (Unaudited) | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $129,743 | $73,058 | | Total current assets | $132,365 | $74,945 | | Total assets | $136,958 | $79,415 | | Liabilities & Equity | | | | Total liabilities | $5,250 | $8,040 | | Convertible preferred units | $0 | $184,714 | | Total stockholders' equity / (members' deficit) | $131,708 | $(113,339) | | Non-controlling interest | $80,342 | $0 | Condensed Consolidated Statements of Operations and Comprehensive Loss Operating expenses and net losses rose substantially for the period, driven by significant IPO-related equity-based compensation charges Statement of Operations Summary (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Contract revenue | $0 | $108 | $2,717 | $252 | | Research and development | $11,959 | $2,090 | $19,065 | $8,708 | | General and administrative | $15,822 | $845 | $21,889 | $3,144 | | Loss from operations | $(27,781) | $(2,827) | $(38,237) | $(11,600) | | Net loss | $(28,700) | $(2,883) | $(39,783) | $(10,947) | | Net loss attributable to Rani Therapeutics Holdings, Inc | $(3,142) | $0 | $(3,142) | $0 | - Net loss per Class A common share was $(0.16) for both the three and nine months ended September 30, 202115 Condensed Consolidated Statements of Cash Flows Net cash from financing activities, primarily from the IPO, offset increased cash used in operations, resulting in a significant net increase in cash Cash Flow Summary (in thousands) | Metric | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(20,796) | $(8,260) | | Net cash used in investing activities | $(235) | $(944) | | Net cash provided by financing activities | $77,716 | $4,035 | | Net increase (decrease) in cash | $56,685 | $(5,169) | | Cash and cash equivalents, end of period | $129,743 | $11,367 | - Key financing activities in 2021 included receiving $74.2 million in net proceeds from the IPO and repaying a $1.3 million PPP loan and a $3.3 million convertible note19 Notes to Unaudited Condensed Consolidated Financial Statements The notes detail the IPO's impact, including proceeds, corporate reorganization, termination of the Takeda agreement, and significant equity-based compensation - In August 2021, the company closed its IPO, receiving approximately $73.6 million in net proceeds after deductions23 - The company expects its cash and cash equivalents of $129.7 million as of September 30, 2021, to be sufficient to fund operations for at least one year26 - In May 2021, Takeda terminated its evaluation agreement, leading to the recognition of the remaining $2.0 million in deferred revenue79 - Total equity-based compensation expense for the nine months ended September 30, 2021 was $19.0 million, with a significant portion recognized in Q3129131 - In 2021, the company repaid its $3.0 million convertible loan, resulting in a $0.7 million loss, and also repaid its $1.3 million PPP Loan in full140142 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses its clinical-stage status, ongoing operating losses, and the significant impact of IPO-related expenses on recent financial results - The company is a clinical-stage biotherapeutics company developing the RaniPill capsule, an oral alternative to injectable biologics151 - Cash and cash equivalents of $129.7 million are expected to be sufficient to fund operations for at least the next twelve months152 - Net losses were $28.7 million for Q3 2021 and $39.8 million for the first nine months of 2021, a significant increase from the prior year154 Results of Operations Net loss increased substantially in Q3 and the first nine months of 2021 due to higher R&D and G&A expenses driven by IPO-related equity compensation Comparison of Operating Results (in thousands) | Metric | Three Months Ended Sep 30, 2021 | Three Months Ended Sep 30, 2020 | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Contract Revenue | $0 | $108 | $2,717 | $252 | | R&D Expense | $11,959 | $2,090 | $19,065 | $8,708 | | G&A Expense | $15,822 | $845 | $21,889 | $3,144 | | Net Loss | $(28,700) | $(2,883) | $(39,783) | $(10,947) | - The increase in R&D expenses in Q3 2021 was driven by a $1.9 million increase in salaries and a $6.6 million increase in equity-based compensation191 - The increase in G&A expenses in Q3 2021 was primarily due to a $12.1 million increase in equity-based compensation from the IPO192193 Liquidity and Capital Resources The company's liquidity was significantly bolstered by IPO proceeds, providing sufficient capital to fund operations for at least the next twelve months - As of September 30, 2021, the company had cash and cash equivalents of $129.7 million203 - The company raised net proceeds of $73.6 million from its IPO in August 2021203 - During 2021, the company repaid its $1.3 million PPP Loan and a $3.0 million convertible note204205 - The company entered into a Tax Receivable Agreement (TRA), requiring payment of 85% of the tax benefits realized from future exchanges of LLC interests210 Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide information for this item - As a smaller reporting company, Rani Therapeutics is exempt from providing quantitative and qualitative disclosures about market risk233 Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of September 30, 2021234 - No material changes in internal control over financial reporting occurred during the third quarter of 2021235 PART II. OTHER INFORMATION Legal Proceedings The company faces several patent opposition proceedings in Europe but does not expect any current legal matters to have a material adverse effect - The company is currently involved in several opposition proceedings at the European Patent Office, asserted by Novo Nordisk AS135 - Management does not believe any current litigation is likely to have a material adverse effect on the business238 Risk Factors The company faces significant risks related to its limited operating history, dependence on capital, novel technology, and complex organizational structure - The company has a limited operating history, has incurred significant losses since inception, and expects to continue incurring losses240242 - The business is highly dependent on advancing its early-stage product candidates through a lengthy, expensive, and uncertain regulatory approval process240257 - The company's novel RaniPill technology has not yet been approved by the FDA, creating uncertainty in the development timeline and cost240306 - The multi-class stock structure concentrates voting control with existing owners, limiting the influence of new Class A stockholders241506 - As a holding company, it is obligated to make potentially substantial payments under a Tax Receivable Agreement241482490 Unregistered Sales of Equity Securities and Use of Proceeds This section details a warrant exercise and the use of approximately $73.6 million in net proceeds from the company's recent IPO - The company's IPO generated aggregate gross proceeds of approximately $84.3 million, resulting in net proceeds of approximately $73.6 million556 - The IPO proceeds were used to purchase newly issued Class A units of Rani LLC, which then repaid the $1.3 million PPP loan in full558 Defaults Upon Senior Securities The company reports no defaults upon senior securities - None559 Mine Safety Disclosures This item is not applicable to the company - Not applicable560 Other Information The company reports no other information for this item - None561 Exhibits This section lists all exhibits filed with the quarterly report, including governance documents, material agreements, and officer certifications - The report includes exhibits such as the Tax Receivable Agreement, 2021 Equity Incentive Plan, and officer certifications564