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Equity Based Compensation
 12 Months Ended
Dec. 31, 2022
Share-Based Payment Arrangement [Abstract]  
Equity-Based Compensation . Equity-Based Compensation

Stock Options

A summary of stock option activity during the periods indicated is as follows:

 

 

 

Number of Stock Option Awards

 

 

Weighted Average Exercise Price

 

 

Weighted
Average
Remaining Contractual Term (in years)

 

 

Aggregate Intrinsic Value (in thousands)

 

Balance at December 31, 2021

 

 

2,300,819

 

 

$

14.12

 

 

 

9.55

 

 

$

976

 

Granted

 

 

1,599,785

 

 

$

12.38

 

 

 

9.31

 

 

$

—

 

Cancelled

 

 

(112,018

)

 

$

13.57

 

 

 

 

 

 

 

Balance at December 31, 2022

 

 

3,788,586

 

 

$

13.40

 

 

 

8.81

 

 

$

—

 

Exercisable at December 31, 2022

 

 

1,088,706

 

 

$

13.50

 

 

 

8.48

 

 

$

—

 

Nonvested at December 31, 2022

 

 

2,699,880

 

 

$

13.36

 

 

 

8.89

 

 

$

—

 

The Company uses the Black-Scholes option pricing model to estimate the fair value of each stock option award on the date of grant. The assumptions and estimates are as follows:

•
Expected term - The expected term represents the period of time that stock option awards are expected to remain outstanding. The Company estimates the expected term as the midpoint between actual or expected vesting date and the contractual term.
•
Expected volatility - The expected volatility was derived from the historical stock volatilities of peer public companies within the Company's industry that are considered to be comparable businesses over a period equivalent to the expected term of the stock option awards, since there has been limited trading history of the Company's stock.
•
Risk-free interest rate - The risk-free interest rate is based on the U.S. 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.
•
Expected dividend yield - The expected dividend yield is zero as the Company has no plans to make dividend payments.

The following table sets forth the weighted average assumptions used in estimating the fair value of stock option awards on the grant date:

 

 

 

Year Ended December 31,

 

 

2022

 

 

 

2021

 

 

Expected volatility

 

 

77.2

 

%

 

 

81.7

 

%

Risk-free interest rate

 

 

2.44

 

%

 

 

1.07

 

%

Expected term (in years)

 

 

5.9

 

 

 

 

6.2

 

 

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.

Restricted Stock Units

A summary of RSU activity during the periods indicated is as follows:

 

 

 

Number of Restricted Stock Units

 

 

Weighted Average Grant-Date Fair Value per Share

 

Balance at December 31, 2021

 

 

596,500

 

 

$

19.56

 

Granted

 

 

443,400

 

 

$

13.21

 

Vested

 

 

(267,650

)

 

$

19.56

 

Forfeited

 

 

(106,750

)

 

$

17.63

 

Balance at December 31, 2022

 

 

665,500

 

 

$

15.64

 

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. The total fair value of RSUs vested was $2.6 million for the year ended December 31, 2022.

Restricted Stock Awards

A summary of RSA activity during the periods indicated is as follows:

 

 

 

Number of Restricted Stock Awards

 

 

Weighted Average Grant-Date Fair Value per Share

 

Balance at December 31, 2021

 

 

113,173

 

 

$

6.15

 

Vested

 

 

(41,236

)

 

$

6.15

 

Forfeited

 

 

(4,548

)

 

$

6.25

 

Balance at December 31, 2022

 

 

67,389

 

 

$

6.14

 

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. The total fair value of RSAs vested was $0.5 million for the year ended December 31, 2022.

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):

 

 

 

Year Ended December 31,

 

 

 

2022

 

 

2021

 

Research and development

 

$

6,237

 

 

$

8,156

 

General and administrative

 

 

9,545

 

 

 

14,439

 

Total equity-based compensation

 

$

15,782

 

 

$

22,595