10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED APRIL 30, 2018

or

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

Commission File Number: 000-55863

RAFAEL HOLDINGS, INC.

(Exact Name of Registrant as Specified in its Charter)

Delaware	82-2296593
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)
520 Broad Street, Newark, New Jersey	07102
(Address of principal executive offices)	(Zip Code)

(212) 658-1450

(Registrant’s telephone number, including area code)

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

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

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

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☒

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

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

As of June 11, 2018, the registrant had the following shares outstanding:

Class A common stock, $.01 par value:	787,163 shares outstanding
Class B common stock, $.01 par value:	11,752,973 shares outstanding

RAFAEL HOLDINGS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION		1
Item 1.	Financial Statements (Unaudited)	1
	Consolidated and Combined Balance Sheets	1
	Consolidated and Combined Statements of Comprehensive Operations	2
	Consolidated and Combined Statements of Comprehensive (Loss) Income	3
	Consolidated and Combined Statements of Cash Flows	4
	Notes to Consolidated and Combined Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risks	20
Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION		21
Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	21
SIGNATURES		22

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

RAFAEL HOLDINGS, INC.

CONSOLIDATED AND COMBINED BALANCE SHEETS

	April 30, 2018			July 31, 2017
	(Unaudited)			(Note 1)
	(in thousands)
Assets
Current assets:
Cash and cash equivalents	$	10,605		$	11,756
Trade accounts receivable, net of allowance for doubtful accounts of $82 at April 30, 2018 and July 31, 2017		406			264
Marketable securities		30,942			—
Due from Rafael Pharmaceuticals		1,600			—
Prepaid expenses and other current assets		645			147
Total current assets		44,198			12,167
Property and equipment, net		50,554			51,160
Investments - Rafael Pharmaceuticals		11,700			13,478
Investments - Other		5,949			—
Deferred income tax assets, net		8			8,859
Patents		180			—
In-process research and development		1,575			—
Other assets		920			540
Total assets	$	115,084		$	86,204
Liabilities and equity
Current liabilities:
Trade accounts payable	$	362		$	115
Accrued expenses		296			213
Other current liabilities		27			35
Total current liabilities		685			363
(Due from) due to related parties		(621	)		23,693
Other liabilities		70			70
Total liabilities		134			24,126
Commitments and contingencies
Equity:
Rafael Holdings, Inc. stockholders’/members’ equity:
Group equity		—			50,427
Class A common stock, $0.01 par value; authorized shares – 50,000,000; 787,163 and nil shares issued and outstanding as of April 30, 2018 and July 31, 2017, respectively		8			—
Class B common stock, $0.01 par value; authorized shares  – 200,000,000; 11,754,835 and nil shares issued and outstanding as of April 30, 2018 and July 31, 2017, respectively		118			—
Additional paid in capital		103,509			—
Accumulated deficit		(192	)		—
Accumulated other comprehensive income		1,998			2,316
Total Rafael Holdings, Inc. stockholders’/members’ equity		105,441			52,743
Noncontrolling interests		9,509			9,335
Total equity		114,950			62,078
Total liabilities and equity	$	115,084		$	86,204

See accompanying notes to consolidated and combined financial statements.

1

RAFAEL HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2017			2018			2017
	(in thousands, except per share data)
Revenues:
Rental – Third Party	$	400		$	219		$	1,085		$	661
Rental – Related Party		447			854			1,442			2,680
Parking		246			209			630			677
Total revenues		1,093			1,282			3,157			4,018
Costs and expenses:
Selling, general and administrative		1,402			1,035			4,481			2,667
Depreciation and amortization		422			411			1,276			1,233
(Loss) income from operations		(731	)		(164	)		(2,600	)		118
Interest income		(71	)		(1	)		(75	)		(8	)
Net losses (gains) resulting from foreign exchange transactions		28			(136	)		(90	)		(167	)
Net gains on sales of marketable securities		(24	)		—			(24	)		(167	)
Net loss on equity investments		—			—			104			—
Gain on disposal of bonus shares		—			—			(246	)		—
(Loss) income before income taxes		(664	)		(27	)		(2,269	)		293
(Benefit from) provision for income taxes		(5	)		38			8,438			68
Net (loss) income		(659	)		(65	)		(10,707	)		225
Net loss attributable to noncontrolling interests		128			—			304			—
Net (loss) income attributable to Rafael Holdings, Inc.	$	(531	)	$	(65	)	$	(10,403	)	$	225
(Loss) earnings per share attributable to Rafael Holdings, Inc. common stockholders:
Basic	$	(0.04	)	$	(0.01	)	$	(0.83	)	$	0.02
Diluted	$	(0.04	)	$	(0.01	)	$	(0.83	)	$	0.02
Weighted average number of shares used in calculation of (loss) earnings per share:
Basic		12,542			12,542			12,542			12,542
Diluted		12,542			12,542			12,542			12,542

See accompanying notes to consolidated and combined financial statements.

2

RAFAEL HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

(Unaudited)

	Three Months Ended April 30,						Nine Months Ended April 30,
	2018			2017			2018			2017
	(in thousands)
Net (loss) income	$	(659	)	$	(65	)	$	(10,707	)	$	225
Other comprehensive (loss) income:
Unrealized loss on marketable securities		(311	)		—			(311	)		—
Foreign currency translation adjustments		(85	)		22			(10	)		27
Comprehensive (loss) income		(1,055	)		(43	)		(11,028	)		252
Comprehensive loss attributable to noncontrolling interests		29			—			29			—
Comprehensive (loss) income attributable to Rafael Holdings, Inc.	$	(1,026	)	$	(43	)	$	(10,999	)	$	252

See accompanying notes to consolidated and combined financial statements.

3

RAFAEL HOLDINGS, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended April 30,
	2018			2017
	(in thousands)
Operating activities
Net (loss) income	$	(10,403	)	$	225
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization		1,276			1,256
Deferred income taxes		8,851			(72	)
Realized gain on disposal of bonus shares		(246	)		—
Realized gain on marketable securities		(24	)		—
Non-cash compensation		616			—
Interest in the equity of investments		(80	)		—
Change in assets and liabilities:
Accounts and rents receivable		(142	)		(40	)
Other current assets and prepaid expenses		(392	)		(117	)
Other assets		(355	)		(298	)
Accounts payable and accrued expenses		223			155
Other current liabilities		(8	)		(7	)
Due from related parties		(386	)		(1,758	)
Other liabilities		—			178
Net cash used in operating activities		(1,070	)		(478	)
Investing activities
Purchases of property and equipment		(572	)		(1,590	)
Proceeds from sale and maturity of marketable securities		436			—
Purchase of investments		—			(8,300	)
Net cash used in investing activities		(136	)		(9,890	)
Financing activities
Proceeds from sale of member interests in CS Pharma Holdings, LLC		—			10,000
Cash advances from related parties, net of repayments		—			9,767
Net cash used in financing activities		—			19,767
Effect of exchange rate changes on cash and cash equivalents		55			(9	)
Net (decrease) increase in cash and cash equivalents		(1,151	)		9,390
Cash and cash equivalents at beginning of period		11,756			2,339
Cash and cash equivalents at end of period	$	10,605		$	11,729
Supplemental Schedule of Non-Cash Financing and Investing Activities
Cash payments made for taxes	$	—		$	—
Cash payments made for interest	$	—		$	—

See accompanying notes to consolidated and combined financial statements.

4

RAFAEL HOLDINGS, INC.

NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

(Unaudited)

Note 1 — Description of Business and Basis of Presentation

Description of Business

Rafael Holdings, Inc. (“Rafael Holdings”), a Delaware corporation, is comprised of all of the accounts of the following wholly-owned subsidiaries: IDT 225 Old NB Road, LLC, a Delaware Limited Liability Company; IDT Realty LLC, a New Jersey Limited Liability Company; I.D.T. R.E. Holdings, Ltd., an Israeli Company; Broad Atlantic Associates LLC, a Delaware Limited Liability Company; Broad Atlantic Realty LLC, a Delaware Limited Liability Company; Hillview Avenue Realty, a Delaware Limited Liability Company; Hillview Avenue Realty JV, a Delaware Limited Liability Company; IDT Capital Real Estate Holdings LLC, a Delaware Limited Liability Company; and IDT Capital, Inc., a Delaware Corporation. Additionally, it includes the accounts of the 90% owned IDT-Rafael Holdings, LLC, the 50% owned CS Pharma Holdings, LLC, and the majority-owned Lipomedix Pharmaceuticals, Ltd., an Israeli Company.

The “Company” in these financial statements refers to Rafael Holdings on this consolidated and combined basis as if Rafael Holdings existed and owned the above interests in these entities in all periods presented.

All significant intercompany accounts and transactions have been eliminated in consolidation or combination.

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2018. The balance sheet at July 31, 2017 has been derived from the Company’s audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the combined financial statements and footnotes thereto included elsewhere in the Registration Statement on Form 10-12G filed on February 20, 2018.

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal year 2017 refers to the fiscal year ending July 31, 2017).

The Company’s Spin-Off

The Company was formerly a subsidiary of IDT Corporation (“IDT”). On March 26, 2018, IDT spun-off the Company to IDT’s stockholders and the Company became an independent public company through a pro rata distribution of the Company’s common stock held by IDT to IDT’s stockholders (the “Spin-Off”). As a result of the Spin-Off, each of IDT’s stockholders received: (i) one share of the Company’s Class A common stock for every two shares of IDT’s Class A common stock held of record on March 13, 2018 (the “Record Date”), and (ii) one share of the Company’s Class B common stock for every two shares of IDT’s Class B common stock held of record on the Record Date. On March 26, 2018, 787,163 shares of the Company’s Class A common stock, and 11,754,835 shares of the Company’s Class B common stock were issued and outstanding, which includes 114,945 restricted stock units issued to employees and consultants in connection with the spin.

The Company entered into various agreements with IDT prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with IDT after the Spin-Off, and a Transition Services Agreement, which provides for certain services to be performed by IDT to facilitate the Company’s transition into a separate publicly-traded company. These agreements provide for, among other things, (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the Spin-Off, (2) transitional services to be provided by IDT relating to human resources and employee benefits administration, and (3) finance, accounting, tax, investor relations and legal services to be provided by IDT to the Company following the Spin-Off. In addition, the Company entered into a Tax Separation Agreement with IDT, which sets forth the responsibilities of the Company and IDT with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.

5

Note 2 — Acquisition of Lipomedix Pharmaceuticals Ltd. (“Lipomedix”)-

Lipomedix is a development-stage, privately held Israeli company focused on the development of an innovative, safe and effective cancer therapy based on liposome delivery.

As a result of its initial $100,000 investment, the Company received approximately 3.2% of the common shares outstanding. During the second quarter of fiscal year 2017, the Company made an additional $300,000 investment in Lipomedix, increasing its ownership to 13.95% of the issued and outstanding ordinary shares, as well as providing Lipomedix with an advance of $200,000. During the fourth quarter of fiscal year 2017, the Company made an additional $1.1 million investment, inclusive of the $200,000 advance, in Lipomedix, increasing its ownership to 38.86% of the issued share capital of the issued and outstanding ordinary shares. As such, the Company began accounting for this investment under the equity method as of and for the fourth quarter of fiscal year 2017. During the fourth quarter of fiscal year 2017, the Company recognized approximately $113,000 as its proportionate share of Lipomedix's loss. As of July 31, 2017, Lipomedix had assets totaling $1.2 million and liabilities totaling $77,000.

On November 16, 2017, the Company exercised its option to purchase additional shares in Lipomedix for $900,000, which increased its ownership to 50.6% of the issued and outstanding ordinary shares. As such, the Company began consolidating this investment as of and for the second quarter of fiscal year 2018.

Note 3 — Marketable Securities

The following is a summary of marketable securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale securities:
April 30, 2018:
Certificates of deposit*	$	13,243	$	—	$	(33	)	$	13,210
Federal Government Sponsored Enterprise notes		3,188		—		(28	)		3,160
International agency notes		522		—		(17	)		505
Mutual funds		5,453		—		(70	)		5,383
Corporate bonds		3,068		—		(65	)		3,003
U.S. Treasury notes		5,358		—		(98	)		5,260
Municipal bonds		421		—		—			421
Total	$	31,253	$	—	$	(311	)	$	30,942

* Each of the Company’s certificates of deposit has a CUSIP, was purchased in the secondary market through a broker, and may be sold in the secondary market.

6

Proceeds from maturities and sales of available-for-sale securities were $436,000 and $0 in the three and nine months ended April 30, 2018 and 2017, respectively. The gross realized gains that were included in earnings as a result of sales were $24,000 in the three and nine months ended April 30, 2018, and $0 in the three and nine months ended April 30, 2017. There were no gross realized losses that were included in earnings as a result of sales in the three and nine months ended April 30, 2018 and 2017. The Company uses the specific identification method in computing the gross realized gains and gross realized losses on the sales of marketable securities.

The contractual maturities of the Company’s available-for-sale debt securities at April 30, 2018 were as follows:

	Fair Value
		(in thousands)
Within one year	$	13,465
After one year through five years		12,335
After five years through ten years		—
After ten years		—
Total	$	25,800

The following available-for-sale securities were in an unrealized loss position for which other-than-temporary impairments have not been recognized:

	Unrealized Losses			Fair Value
	(in thousands)
April 30, 2018:
Certificates of deposit	$	(33	)	$	10,403
Federal Government Sponsored Enterprise notes		(28	)		3,160
International agency notes		(17	)		505
Corporate bonds		(70	)		5,369
Equity		(65	)		3,003
U.S. Treasury notes		(98	)		5,260
Municipal bonds		—			421
Total	$	(311	)	$	28,121

The Company did not own any marketable securities as of July 31, 2017.

7

Note 4 — Fair Value Measurements

The following table presents the balance of assets measured at fair value on a recurring basis:

(in thousands)	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
April 30, 2018
Available-for-sale securities:
Marketable Securities	$	10,643	$	20,299	$	—	$	30,942
Rafael Pharmaceuticals convertible promissory notes		—		—		6,300		6,300
Total	$	10,643	$	20,299	$	6,300	$	37,242
July 31, 2017
Available-for-sale securities:
Rafael Pharmaceuticals convertible promissory notes	$	—	$	—	$	6,300	$	6,300
Total	$	—	$	—	$	6,300	$	6,300

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

At April 30, 2018 and July 31, 2017, the Company did not have any liabilities measured at fair value on a recurring basis.

At April 30, 2018 and July 31, 2017, the fair value of the Rafael Pharmaceuticals convertible promissory notes, which were classified as Level 3, was estimated based on a valuation of Rafael Pharmaceuticals by reference to recent transactions in its securities, the September 2016 Series D Convertible Note investment, as well as utilizing a discounted cash flow technique under the Income Approach and other factors that could not be corroborated by the market.

The following table summarizes the change in the balance of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3). There were no liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) in the three and nine months ended April 30, 2018 or 2017.

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
	(in thousands)
Balance, beginning of period	$	6,300	$	4,200	$	6,300	$	2,000
Purchases		—		—		—		2,200
Balance, end of period	$	6,300	$	4,200	$	6,300	$	4,200
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period	$	—	$	—	$	—	$	—

At April 30, 2018 and July 31, 2017, the Company had $5.9 million and $0, respectively, in investments in hedge funds and in securities in another entity that are not liquid, which were included in “Investments - Other” in the accompanying consolidated balance sheets. The Company’s related investments are accounted for using the cost method; therefore these investments are not measured at fair value.

Fair Value of Other Financial Instruments

The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting these data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

Cash and cash equivalents, other current assets, customer deposits and other current liabilities. At April 30, 2018 and July 31, 2017, the carrying amount of these assets and liabilities approximated fair value because of the short period of time to maturity. The fair value estimates for cash and cash equivalents were classified as Level 1 and other current assets, customer deposits and other current liabilities were classified as Level 2 of the fair value hierarchy.

Other assets and other liabilities. At April 30, 2018 and July 31, 2017, the carrying amount of these assets and liabilities approximated fair value. The fair values were estimated based on the Company’s assumptions, which were classified as Level 3 of the fair value hierarchy.

8

The Company’s financial instruments include accounts and rents receivable, accounts payable, and due from related parties. The recorded carrying amount of accounts and rents receivable, accounts payable and due from related approximates their fair value due to their short-term nature. Other than noted above, the Company did not have any other assets or liabilities that were measured at fair value on a recurring basis as of April 30, 2018 or July 31, 2017.

Note 5 — (Loss) Earnings Per Share

Basic (loss) earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted (loss) earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and diluted earnings (loss) per share attributable to the Company’s common stockholders consists of the following:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
Basic weighted-average number of shares		12,541,998		12,541,998		12,541,998		12,541,998

In the three and nine months ended April 30, 2018 and in the three months ended April 30, 2017, the diluted loss per share computation equals basic loss per share because the Company had a net loss and the impact of the assumed exercise of stock options and the vesting of restricted stock would have been anti-dilutive. For all periods prior to the Spin-Off, the Company utilized the number of shares distributed in the Spin-Off as the denominator for historical earnings per share for each period presented.

Note 6 — Establishment of Valuation Allowance for Deferred Tax Asset

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the amendments to related party leases effective August 1, 2017, which, in comparison to fiscal year 2017, will reduce revenues by approximately $1.7 million annually through 2025. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, a valuation allowance of $8.4 million was recorded to reserve for the entirety of the Company’s domestic deferred tax asset during the first quarter of fiscal 2018. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased, or if additional weight is given to subjective evidence, such as the Company’s projections for growth.

9

Note 7 — Investment in Rafael Pharmaceuticals, Inc. (“Rafael Pharmaceuticals”)

Rafael Pharmaceuticals is a clinical stage, oncology-focused pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells.

On December 7, 2015, IDT approved an investment of up to $10 million in Rafael Pharmaceuticals. $2 million of this investment was funded as of July 31, 2016, as follows: $500,000 funded upon signing the Subscription and Loan Agreement during the second quarter of fiscal year 2016; and $1.5 million funded during the third quarter of fiscal year 2016. The initial $2 million investment was in exchange for Rafael Pharmaceuticals 3.5% convertible promissory notes due in fiscal year 2018. To date, the Company has not accrued interest on this note, as collection cannot be reasonably assured; however, the Company has received an independent appraisal indicating the fair value of its investment in Rafael Pharmaceuticals exceeds the carrying value. On September 16, 2016, the Company made an additional $8 million investment in exchange for Rafael Pharmaceuticals' 3.5% convertible promissory notes due in fiscal year 2018.

The Company owns its interests/rights in Rafael Pharmaceuticals through a 90%-owned non-operating subsidiary, IDT-Rafael Holdings, LLC. (“IDT-Rafael Holdings”). IDT-Rafael Holdings holds warrants to purchase a significant stake in Rafael Pharmaceuticals, as well as other equity and governance rights in Rafael Pharmaceuticals, and owns 50% of CS Pharma Holdings, LLC (“CS Pharma”), a non-operating entity which holds the convertible debt and other rights to purchase equity interests in Rafael Pharmaceuticals.

Those interests/rights include:

1. $10,000,000 of Series D Convertible Notes of Rafael Pharmaceuticals held by CS Pharma;

2. A warrant to purchase 56% of the capital stock of Rafael Pharmaceuticals — the right to exercise the first $10,000,000 worth of the warrant is held by CS Pharma; and the remainder is held directly by IDT-Rafael Holdings; and

3. Certain governance rights, including appointment of directors.

On March 2, 2017, Howard Jonas, IDT’s Chairman of the Board, and Chairman of the Board of Rafael Pharmaceuticals, purchased 10% of IDT-Rafael Holdings for a purchase price of $1 million, which represented 10% of the Company’s cost basis in IDT-Rafael Holdings. Accordingly, we hold an effective 45% indirect interest in the assets held by CS Pharma, including its cash. Separately, Howard Jonas and Deborah Jonas jointly own $525,000 of Series C Convertible Notes of Rafael Pharmaceuticals, and The Howard S. and Deborah Jonas Foundation owns $525,000 of Series C Notes of Rafael Pharmaceuticals.

Additionally, the Company previously owned the contractual right to receive "Bonus Shares" for an additional 10% of the outstanding capital stock of Rafael Pharmaceuticals that are issued only upon achieving certain milestones. If the milestones are met, Bonus Shares are to be issued without any additional payment.

On September 12, 2017, IDT’s Compensation Committee, Corporate Governance Committee and Board of Directors approved a compensatory arrangement with Howard S. Jonas related to this right to receive additional Rafael Pharmaceutical shares. In connection with this arrangement, IDT-Rafael Holdings distributed this right to its members such that the Company received the right to 9% of the outstanding capital stock of Rafael Pharmaceuticals and Mr. Jonas received the right to 1% of the outstanding capital stock of Rafael Pharmaceuticals. In addition, as compensation for assuming the role of Chairman of the Board of the Company, and to create additional incentive to contribute to its success, on September 19, 2017, the Company assigned its right to receive 9% of the outstanding capital stock of Rafael Pharmaceuticals to Mr. Jonas. The right is further transferable by Mr. Jonas, in his discretion.

The Rafael Pharmaceuticals Series D Note earns interest at 3.5% per annum, with principal and accrued interest due and payable on September 16, 2018. The Series D Note is convertible at the holder’s option into shares of Rafael Pharmaceuticals’ Series D Preferred Stock. The Series D Note also includes a mandatory conversion into Rafael Pharmaceuticals common stock upon a qualified initial public offering, and conversion at the holder’s option upon an unqualified financing event. In all cases, the Series D Note conversion price is based on the applicable financing purchase price. IDT-Rafael Holdings and CS Pharma were issued warrants to purchase shares of capital stock of Rafael Pharmaceuticals representing up to 56% of the then issued and outstanding capital stock of Rafael Pharmaceuticals, on an as-converted and fully diluted basis. The right to exercise warrants as to the first $10 million thereof is held by CS Pharma and the remainder is owned by IDT-Rafael Holdings. The warrant expires on December 31, 2020. Currently, if the Company desires to raise additional financing from unaffiliated parties in connection with its exercise of its warrant or other current rights to invest in Rafael Pharmaceuticals (but not including the Rafael Pharmaceuticals rights held by CS Pharma), it first must give the other CS Pharma holders the opportunity to provide such financing on a pro rata basis. The exercise price of the warrant is the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments. The minimum initial and subsequent exercises of the warrant shall be for such number of shares that will result in at least $5 million of gross proceeds to Rafael Pharmaceuticals, or such lesser amount as represents 5% of the outstanding capital stock of Rafael Pharmaceuticals, or such lesser amount as may then remain unexercised. The warrant will expire upon the earlier of December 31, 2020 or a qualified initial public offering or liquidation event of Rafael Pharmaceuticals.

10

As of April 30, 2018, and based on current shares issued and outstanding of Rafael Pharmaceuticals, the Company would need to pay approximately $71 million to exercise the warrant in full and approximately $56 million to purchase a 51% controlling stake. On an as-converted and fully diluted basis (for all convertible securities of Rafael Pharmaceuticals outstanding), the Company would need approximately $122 million to exercise the warrant in full and approximately $98 million to purchase a 51% controlling stake in Rafael Pharmaceuticals. Given the Company’s anticipated available cash upon the Spin-Off, the Company would not be able to exercise the warrant in its entirety and the Company may never be able to exercise the warrant in full.

The Company serves as the managing member of IDT-Rafael Holdings and IDT-Rafael Holdings serves as the managing member of CS Pharma, with broad authority to make all key decisions regarding their respective holdings. Any distributions that are made to CS Pharma from Rafael Pharmaceuticals that are in turn distributed by CS Pharma, will need to be made pro rata to all members, which would entitle IDT-Rafael Holdings to 50% (based on current ownership) of such distributions. Similarly, if IDT-Rafael Holdings were to distribute proceeds it receives from CS Pharma, it would do so on a pro rata basis, entitled the Company to 90% (based on current ownership) of such distributions.

The Company’s investment in Rafael Pharmaceuticals, which is included in “Investments – Rafael Pharmaceuticals” in the accompanying consolidated and combined balance sheets, consists of the following:

(in thousands)	(Unaudited) April 30, 2018		July 31, 2017
Convertible promissory note (at fair value)	$	6,300	$	6,300
Warrants (at cost)		5,400		5,400
Right to receive additional shares (at cost)		—		400
Total investment in Rafael Pharmaceuticals	$	11,700	$	12,100

As of March 26, 2017, IDT had provided Rafael Pharmaceuticals with $1.6 million in working capital financing that remained outstanding. The related receivable from Rafael Pharmaceutical was transferred by IDT to the Company as of the Spin-Off.

Rafael Pharmaceuticals is a variable interest entity; however, the Company has determined that it is not the primary beneficiary as is does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance.

On May 18, 2018, the Company entered into an arrangement with Rafael Pharmaceuticals to lend Rafael Pharmaceuticals up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals’ request, and in the Company’s discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million in the aggregate. This loan is due and payable with 30 days’ notice at the lender’s demand, not to occur before June 30, 2018. As of June 11, 2018, $800,000 had been advanced to Rafael Pharmaceuticals under this arrangement.

Note 8 — Related Party Transactions

The Company maintains a balance due from/to related parties, which relate to rental income paid by various companies under common control to IDT to the Company, partially offset by charges for services provided to the Company by IDT and payroll costs for the Company's personnel that are paid by IDT. Historically, this also related to cash advances for investments. On March 26, 2018, IDT transferred assets to Rafael such that, at the time of the Spin-Off, we had approximately $44 million in cash and cash equivalents and liquid marketable securities and approximately $4.0 million in interests in hedge funds. Additionally, IDT transferred approximately $2.0 million in securities in another entity that are not liquid. The cash and cash equivalents and liquid marketable securities figure includes $10 million held in CS Pharma, a controlled entity of which we are an effective 45% owner. Additionally, $23.6 million in outstanding intercompany debt between IDT and Rafael Holdings as of the distribution date was converted to equity and there was no indebtedness from Rafael Holdings to IDT immediately following the Spin-Off. Prior to the Spin-Off, IDT advanced $900,000 and $9.4 million to the Company during the nine months ended April 30, 2018 and April 30, 2017, respectively to invest in Rafael Pharmaceuticals and Lipomedix. Prior to the Spin-Off and in conjunction with a Transition Services Agreement subsequent to the Spin-Off, IDT charges the Company for certain transactions and allocates routine expenses for, among other things: (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations; (2) services provided by IDT relating to human resources and employee benefits administration; (3) the allocation of responsibilities relating to employee compensation and benefit plans and programs and other related matters; and (4) finance, accounting, tax and legal services provided by IDT to the Company.

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In all periods presented prior to the Spin-Off, the Company was included in IDTs consolidated federal income tax return.

The change in the Company’s liability to IDT was as follows:

	Nine Months Ended April 30,
(in thousands)	2018 (unaudited)			2017 (unaudited)
Balance at beginning of period	$	23,693		$	15,145
Payments by IDT on behalf of the Company		385			703
Rental revenues earned from IDT		(1,468	)		(2,461	)
Cash repayments, net of advances		885			19,767
Capitalized investment by IDT		(24,116	)		—
Balance at end of period	$	(621	)	$	33,154

The Company amended all of its related party leases as of August 1, 2017. The related party leases expire in April 2025 and are for 88,631 square feet and include two parking spots per thousand square feet of space leased at 520 Broad Street and for 12,400 square feet in Israel. The annual rent will be approximately $2.0 million. The related parties have the right to terminate theses leases upon four months’ notice, and upon early termination will pay a termination penalty equal to 25% of the portion of the rent due over the course of the remaining term. Related parties will have the right to lease an additional 25,000 square feet in the building located at 520 Broad Street on the same terms as the base lease, and other rights to a further 25,000 square feet should all available space be leased to other tenants. Upon expiration of the lease, these related parties have the right to renew the leases for another five years.

On April 26, 2018, the Board of Directors of Rafael Holdings, Inc. (the “Company”) and its Corporate Governance Committee approved an arrangement with Howard S. Jonas, the Chairman of the Board, Chief Executive Officer and controlling stockholder of the Company, related to the purchase of shares of Class B common stock of the Company by Mr. Jonas. Under the arrangement, subject to approval of the stockholders of the Company, Mr. Jonas has agreed to purchase 1,254,200 shares of Class B common stock (representing ten percent of the issued and outstanding equity of the Company) at a price per share of $6.89, which was the closing price for the Class B common stock on the New York Stock Exchange on April 26, 2018 (the last closing price before approval of the arrangement) for an aggregate purchase price of $8,641,438.

The investment is intended to provide the Company with working capital and to support growth initiatives, including additional investments in the real estate and pharmaceutical industries and in companies in which we own interests.

The arrangement is subject to approval of the stockholders of the Company, and no shares will be issued unless such approval is obtained. Mr. Jonas has agreed to vote in favor of the arrangement when it is submitted to the stockholders. The Company has agreed to present the matter to its stockholders at the next meeting of stockholders to be held.

Mr. Jonas paid $864,144 of the purchase price (10.0% of the total purchase price) on May 31, 2018. The remainder of the purchase price will be payable following approval of the stockholders of the Company, and the shares will be issued upon payment of in full.

On May 18, 2018, the Company entered into an arrangement with Rafael Pharmaceuticals to lend Rafael Pharmaceuticals up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals’ request, and in the Company’s discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million in the aggregate. This loan is due and payable with 30 days’ notice at the lender’s demand, not to occur before June 30, 2018. As of June 11, 2018, $800,000 had been advanced to Rafael Pharmaceuticals under this arrangement.

Note 9 — Income Taxes

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, which is commonly referred to as “The Tax Cuts and Jobs Act” (the “Tax Act”). The Tax Act reduces the U.S. federal statutory corporate tax rate from 35.0% to 21.0% effective January 1, 2018, requires companies to pay a one-time repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred (“transition tax”), and makes other changes to the U.S. income tax code. Due to the Company’s July 31 fiscal year-end, the lower corporate income tax rate is phased in, resulting in a blended U.S. federal statutory tax rate of approximately 26.9% for the Company’s fiscal year ending July 31, 2018, and 21.0% for the Company’s fiscal years thereafter.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), expressing its views regarding the Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification 740, Income Taxes, in the reporting period that includes the enactment date of the Tax Act. SAB 118 recognizes that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. Specifically, SAB 118 allows a company to report provisional estimates in the reporting period that includes the enactment date if the company does not have the necessary information available, prepared, or fully analyzed for certain income tax effects of the Tax Act. The provisional estimates would be adjusted during a measurement period not to exceed 12 months from the enactment date of the Tax Act, at which time the accounting for the income tax effects of the Tax Act is required to be completed.

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As of April 30, 2018, the Company had not completed its accounting for the income tax effects of the Tax Act. The reduction in the corporate tax rate is not expected to impact the Company’s results of operations or financial position in the foreseeable future because the income tax benefit from the reduced tax rate will be offset by the valuation allowance.

The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S. income taxes. The Company expects to utilize net operating loss carryforwards to offset any transition tax that it may incur. Therefore, the Company did not record any provisional income tax expense for the transition tax for its foreign subsidiaries. At April 30, 2018, the undistributed earnings of the Company’s foreign subsidiaries continued to be permanently reinvested. The Company is currently reevaluating the need to repatriate future earnings of its foreign subsidiaries due to the reduction in cash, cash equivalents, and marketable securities because of the Rafael Spin-Off. The Company has not provided for additional income or withholding taxes for the undistributed earnings or for any additional outside basis differences with respect to the foreign entities. The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until August 1, 2018. The Company has not recorded any impact associated with either GILTI or BEAT in the nine months ended April 30, 2018.

The Company anticipates that its assumptions and estimates may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, the FASB, and various other taxing jurisdictions. In particular, the Company anticipates that the U.S. state jurisdictions will continue to determine and announce their conformity or decoupling from the Tax Act, either in its entirety or with respect to specific provisions. Legislative and interpretive actions could result in adjustments to the Company’s provisional estimates when the accounting for the income tax effects of the Tax Act is completed. The Company will continue to evaluate the impact of the Tax Act on its financial statements, and will record the effect of any reasonable changes in its estimates and adjustments.

Note 10 — Business Segment Information

The Company conducts business as two operating segments, Pharmaceuticals and Real Estate. The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker. Beginning in the second quarter of fiscal 2018, the Pharmaceuticals segment is comprised of debt interests and warrants in Rafael Pharmaceuticals and a majority equity interest in Lipomedix Pharmaceuticals. Comparative results have been reclassified and restated as if the Pharmaceuticals segment existed for all periods presented. To date, the Pharmaceuticals segment has not generated any revenues.

The Real Estate segment includes the Company’s real estate holdings, including the building at 520 Broad Street in Newark, New Jersey that houses IDT’s headquarters and its associated public garage, an office/data center building in Piscataway, New Jersey and a portion of a building in Israel that hosts offices for IDT and certain affiliates.

The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its Real Estate segment based primarily on income (loss) from operations and its Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials. All investments in Rafael Pharmaceuticals and assets, expenses and expenses associated with Lipomedix are tracked separately in the Pharmaceuticals segment. All corporate costs are allocated to the Real Estate segment.

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Operating results for the business segments of the Company are as follows:

(in thousands)	Pharmaceuticals			Real Estate			Total
Three Months Ended April 30, 2018
Revenues	$	—		$	1,093		$	1,093
(Loss) income from operations		(258	)		(473	)		(731	)
Three Months Ended April 30, 2017
Revenues	$	—		$	1,282		$	1,282
Loss from operations		—			(164	)		(164	)
Nine Months Ended April 30, 2018
Revenues	$	—		$	3,157		$	3,157
(Loss) income from operations		(631	)		(1,969	)		(2,600	)
Nine Months Ended April 30, 2017
Revenues	$	—		$	4,018		$	4,018
Income from operations		—			118			118

Geographic Information

Revenues from tenants located outside of the United States were generated entirely from related parties located in Israel. Revenues from these non-United States customers as a percentage of total revenues were as follows (revenues by country are determined based on the location of the related facility):

Nine months ended	April 30, 2018 (unaudited)			April 30, 2017 (unaudited)
Revenue from tenants located in Israel		3	%		5	%

Net long-lived assets and total assets held by the Company were located as follows:

(in thousands)	United States		Foreign		Total
April 30, 2018 (unaudited)
Long-lived assets, net	$	67,270	$	3,616	$	70,886
Total assets		110,699		4,385		115,084
July 31, 2017
Long-lived assets, net	$	71,674	$	2,363	$	74,037
Total assets		83,675		2,529		86,204

Note 11 — Commitments and Contingencies

Legal Proceedings

The Company may from time to time be subject to legal proceedings that may arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the accompanying consolidated and combined financial statements and the associated notes thereto of this Quarterly Report, and the audited combined financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Registration Statement on Form 10-12G for the year ended July 31, 2017, as filed with the U.S. Securities and Exchange Commission (or SEC).

As used below, unless the context otherwise requires, the terms “the Company,” “Rafael,” “we,” “us,” and “our” refer to Rafael Holdings, Inc., a Delaware corporation, and its subsidiaries, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in our Registration Statement on Form 10-12G for the year ended July 31, 2017 and in Item 1A to Part II “Risk Factors” in this Form 10-Q. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Registration Statement on Form 10-12G for the year ended July 31, 2017.

Overview

On March 26, 2018, IDT Corporation (“IDT”) completed a tax-free spinoff (the “Spin-Off”) of our capital stock, through a pro rata distribution of our common stock to its stockholders of record as of the close of business on March 13, 2018 (the “Spin-Off record date”). As a result of the Spin-Off, each of IDT’s stockholders received: (i) one share of our Class A common stock for every two shares of IDT’s Class A common stock held on the Spin-Off record date; (ii) one share of our Class B common stock for every two shares of IDT’s Class B common stock held on the Spin-Off record date; and (iv) cash in lieu of a fractional share of all classes of our common stock.

Rafael owns commercial real estate assets and interests in clinical and early stage pharmaceutical companies. The assets are operated as two separate lines of business. The commercial real estate holdings consist of the building at 520 Broad Street in Newark, New Jersey that houses IDT’s headquarters and its associated public garage, an office/data center building in Piscataway, New Jersey and a portion of a building in Israel that hosts offices for IDT and certain affiliates. The pharmaceutical holdings include debt interests and warrants in Rafael Pharmaceuticals, Inc., which is a clinical stage, oncology-focused, pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells, and a majority equity interest in Lipomedix Pharmaceuticals Ltd., an early stage pharmaceutical development company based in Israel.

Critical Accounting Policies

Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. See Note 1 to the combined financial statements in our Registration Statement on Form 10-12G for the year ended July 31, 2017 for a complete discussion of our significant accounting policies.

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Recently Issued Accounting Standards Not Yet Adopted

In May 2014, the Financial Accounting Standards Board (“FASB”), and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard that will supersede most of the current revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The goals of the revenue recognition project were to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements. We will adopt this standard on August 1, 2018. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. We are evaluating the impact that the standard will have on our consolidated financial statements.

In January 2016, the FASB issued an ASU, to provide more information about recognition, measurement, presentation and disclosure of financial instruments. The amendments in the ASU include, among other changes, the following: (1) equity investments (except those accounted for under the equity method or that result in consolidation) will be measured at fair value with changes in fair value recognized in net income, (2) a qualitative assessment each reporting period to identify impairment of equity investments without readily determinable fair values, (3) financial assets and financial liabilities will be presented separately by measurement category and form of financial asset on the balance sheet or the notes to the financial statements, and (4) an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities classified as available-for-sale in other comprehensive income. In addition, a practicability exception will be available for equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient. These investments may be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Entities will have to reassess at each reporting period whether an investment qualifies for this practicability exception. We will adopt the amendments in this ASU on August 1, 2018. We are evaluating the impact that the ASU will have on our consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases. The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact of our pending adoption of the new standard on our consolidated financial statements.

In June 2016, the FASB issued an ASU that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. We will adopt the new standard on August 1, 2020. We are evaluating the impact that the new standard will have on our consolidated financial statements.

In November 2016, the FASB issued an ASU that includes specific guidance on the classification and presentation of changes in restricted cash and cash equivalents in the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash or restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the statement of cash flows. The ASU will be applied using a retrospective transition method to each period presented. We will adopt the amendments in this ASU on August 1, 2018. The adoption will impact our beginning of the period and end of the period cash and cash equivalents balance in our statement of cash flows, as well as our net cash provided by operating activities.

In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current guidance, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the ASU narrows the definition of the term output. We will adopt the amendments in this ASU on August 1, 2018. We are evaluating the impact that the new standard will have on our consolidated financial statements.

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In May 2017, the FASB issued an ASU to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Pursuant to this ASU, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified (if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification); (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. We will adopt the amendments in this ASU prospectively to an award modified on or after on August 1, 2018. We are evaluating the impact that the new standard will have on our consolidated financial statements.

In August 2017, the FASB issued an ASU intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the ASU includes certain targeted improvements to simplify the application of hedge accounting guidance in U.S. GAAP. The amendments in this ASU are effective for us on August 1, 2019. Early application is permitted. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements will be applied prospectively. We are evaluating the impact that this ASU will have on our consolidated financial statements.

Results of Operations

Three and Nine Months Ended April 30, 2018 Compared to Three and Nine Months Ended April 30, 2017

Our business consists of two reportable segments. We evaluate the performance of our Real Estate segment based primarily on income (loss) from operations and our Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials. Accordingly, the income and expense line items below income (loss) from operations are only included in the discussion of consolidated and combined results of operations.

Pharmaceuticals Segment

	Three Months Ended April 30,					Change						Nine Months Ended April 30,					Change
	2018			2017		$			%			2018			2017		$			%
	(in thousands)											(in thousands)
Selling, general and administrative	$	(258	)	$	—	$	(258	)		100.0	%	$	(631	)	$	—	$	(631	)		100.0	%
Depreciation and amortization		—			—		—			—			—			—		—			—
Loss from operations	$	(258	)	$	—	$	(258	)		100.0	%	$	(631	)	$	—	$	(631	)		100.0	%

To date, the Pharmaceuticals segment has not generated any revenues. The entirety of the expenses in the Pharmaceuticals segment relate to the research and development activities of Lipomedix, of which we are a 50.6% owner.

Real Estate Segment

	Three Months Ended April 30,						Change						Nine Months Ended April 30,						Change
	2018			2017			$			%			2018			2017			$			%
	(in thousands)												(in thousands)
Rental – Third Party Revenues	$	400		$	219		$	181			82.6	%	$	1,085		$	661		$	424			64.1	%
Rental – Related Party Revenues		447			854			(407	)		(47.7	)		1,442			2,680			(1,238	)		(46.2	)
Parking Revenues		246			209			37			17.7			630			677			(47	)		(6.9	)
Selling, general and administrative		(1,144	)		(1,035	)		109			10.5			(3,850	)		(2,667	)		(1,183	)		(44.4	)
Depreciation and amortization		(422	)		(411	)		(11	)		(2.7	)		(1,276	)		(1,233	)		(43	)		(3.5	)
(Loss) income from operations	$	(473	)	$	(164	)	$	(309	)		(188.4	)%	$	(1,969	)	$	118		$	(2,087	)		(1,768.6	)%

17

Revenues.  Rental and Parking revenues decreased by $189,000 and $861,000, respectively, for the three and nine months ended April 30, 2018 as compared to the three and nine months ended April 30, 2017. Third Party revenues increased for the nine months ended April 30, 2018 due to new tenants taking occupancy in the 520 Broad Street building. Related Party revenues decreased due to a reduction in space being leased by IDT in the Piscataway facility during three and nine months ended April 30, 2018 as compared to the three and nine months ended April 30, 2017, as well as new lease terms, effective August 1, 2017, being signed during the first quarter of fiscal 2018 for both the 520 Broad Street and Israel buildings. Parking revenues increased by $37,000 for the three months ended April 30, 2018 as compared to the prior year period due to an increase in the number of monthly customers, as well as two new and one returning corporate customer. Parking revenues decreased by $47,000 for the nine months ended April 30, 2018 as compared to the prior year period primarily due to a headcount reduction at one customer, as well as several small customers going out of business during the first quarter of fiscal 2018, partially offset by the activity during the three months ended April 30, 2018.

Selling, general and administrative expenses.  Selling, general and administrative expenses consists mainly of payroll, benefits, facilities and consulting and professional fees. The increase in selling, general and administrative expenses in the nine months ended April 30, 2018 compared to the nine months ended April 30, 2017 is primarily due to $606,000 in compensation expense related to the assignment of the contingent right to receive Bonus Shares in Rafael Pharmaceuticals to Howard Jonas, as well as increased utility cost of $175,000 due to new tenants in the 520 Broad Street building and costs associated with the Spin-Off. The increase in selling, general and administrative expenses in the three months ended April 30, 2018 compared to the three months ended April 30, 2017 is primarily due to legal and professional services fees related to the Spin-Off and public company costs.

Depreciation and amortization expenses. Depreciation and amortization expenses in the three and nine months ended April 30, 2018 as compared to the three and nine months ended April 30, 2017 remained relatively consistent between periods.

Consolidated and combined operations

Our consolidated and combined income and expense line items below income from operations were as follows:

	Three Months Ended April 30,						Change						Nine Months Ended April 30,						Change
	2018			2017			$			%			2018			2017			$			%
	(in thousands)												(in thousands)
(Loss) income from operations	$	(731	)	$	(164	)	$	(567	)		(345.7	)%	$	(2,600	)	$	118		$	(2,718	)		(2,303.4	)%
Interest (income) expense		(71	)		(1	)		(70	)		7,000.0			(75	)		(8	)		(67	)		837.5
Net gains resulting from sales of marketable securities		(24	)		—			(24	)		nm			(24	)		—			(24	)		nm
Net loss (gains) resulting from foreign exchange transactions		28			(136	)		164			(120.6	)		(90	)		(167	)		87			46.1
Net loss on equity investments		—			—			—			—			104			—			104			nm
Gain on disposal of bonus shares		—			—			—			—			(246	)		—			(246	)		nm
(Benefit) provision for income taxes		(5	)		38			(43	)		(113.2	)		8,438			68			8,370			12,308.8
Net (loss) income before noncontrolling interest		(659	)		(65	)		(594	)		(7,112.0	)		(10,707	)		225			(10,932	)		(4,858.7	)
Net loss attributable to noncontrolling interest		128			—			128			nm			304			—			304			nm
Net (loss) income.	$	(531	)	$	(65	)	$	(466	)		(716.9	)%	$	(10,403	)	$	225		$	(10,628	)		(4,723.6	)%

nm – not meaningful

Interest income, net and Net gains resulting from sales of marketable securities.  Interest income and net gains resulting from sales of marketable securities in the three and nine months ended April 30, 2018 increased due to interest earned on the $31 million of marketable securities contributed by IDT as of the Spin-off on March 26, 2018.

Net gain (loss) resulting from foreign exchange transactions.  Net losses resulting from foreign exchange transactions are comprised entirely from changes in movements in New Israeli Shekels relative to the U.S. Dollar.

Net loss on equity investment.  Net loss on equity investment relates entirely to our proportionate share of the net loss recorded by Lipomedix, in which we held a 38.9% interest before purchasing a majority stake during November 2017, prior to its being consolidated.

Gain on disposal of bonus shares.  The gain on disposal of bonus shares relates entirely to the increase in fair value of the contingent right to receive bonus shares obtained during fiscal year 2017 from the date of purchase through assigning the rights thereto over to Howard Jonas in September 2017.

18

Net Income Attributable to Noncontrolling Interests. The change in the net income attributable to noncontrolling interests in the three and nine months ended April 30, 2018 compared to the similar periods in fiscal 2017 was due to the net loss attributable to the noncontrolling interests in Lipomedix in the three and nine months ended April 30, 2018. We began consolidating Lipomedix in November 2017.

Liquidity and Capital Resources

General

Historically, we satisfied our cash requirements primarily through intercompany debt funding from IDT. In connection with the Spin-Off, IDT transferred assets to Rafael such that, at the time of the Spin-Off, we had approximately $42.7 million in cash and cash equivalents and liquid marketable securities and approximately $3.9 million in interests in hedge funds. Additionally, IDT transferred approximately $2.0 million in securities in another entity that are not liquid. The cash and cash equivalents and liquid marketable securities figure includes $10.0 million held in CS Pharma Holdings LLC (“CS Pharma”), a controlled entity of which we are an effective 45% owner. Additionally, $1.6 million in outstanding intercompany debt between IDT and Rafael Holdings as of the distribution date was converted to equity and there was no indebtedness from Rafael Holdings to IDT immediately following the Spin-Off. Prior to the Spin-Off, we maintained an intercompany balance due to IDT that related to advances for investments and purchases of property and equipment, as well as charges for services provided to us by IDT and payroll costs for our personnel that are paid by IDT, partially offset by revenues earned from leases to IDT. We anticipate our total operating costs will be between $2,000,000 and $2,300,000 per year as a result of being a public reporting company. Several of the costs included in this estimated range are preliminary, subject to negotiation, and may vary from the estimates when finalized.

As of April 30, 2018, we had cash and cash equivalents of $10.6 million and liquid marketable securities of $30.9 million. We expect our cash from operations in the next twelve months and the balance of cash and cash equivalents and liquid marketable securities that we held as of April 30, 2018 to be sufficient to meet our currently anticipated working capital, research and development, and capital expenditure requirements during the twelve-month period ending April 30, 2019.

(in thousands)	Nine Months Ended April 30,
	2018			2017
Cash flows (used in) provided by
Operating activities	$	(1,070	)	$	(478	)
Investing activities		(136	)		(9,890	)
Financing activities		—			19,767
Effect of exchange rates on cash and cash equivalents		55			(9	)
(Decrease) increase in cash and cash equivalents	$	(1,151	)	$	9,390

Operating Activities

Our cash flow from operations varies from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically payments of trade accounts payable. The increase in cash flows provided by operating activities in in the three and nine months ended April 30, 2018 as compared to the three and nine months ended April 30, 2017 related primarily to decreased charges from related parties.

19

Investing Activities

Cash used in investing activities for the three and nine months ended April 30, 2018 related entirely to fixed asset additions. Cash used in investing activities for the three and nine months ended April 30, 2017, consisted mostly of investments in Rafael Pharmaceuticals (through CS Pharma) of $8.0 million and investments in Lipomedix of $300,000.

Financing Activities

Cash provided by financing activities for the three months and nine months ended April 30, 2018 related to cash advances from IDT of $900,000. In connection with our investment in Rafael Pharmaceuticals, our subsidiary CS Pharma issued member interests to third parties in exchange for cash investment in CS Pharma of $10 million. We hold a 90% interest in IDT-Rafael Holdings, LLC, which holds a 50% interest in CS Pharma, and we are or control the managing member of both entities. During the three and nine months ended April 30, 2017, CS Pharma received $10.0 million from the sale of its member interests to third parties. It is expected that CS Pharma will use its cash to invest in Rafael Pharmaceuticals. Additionally, during the second half of fiscal 2017 we sold 10% of IDT-Rafael Holdings, LLC, in which our direct and indirect interest and rights in Rafael Pharmaceuticals were held, to Howard Jonas for $1.0 million, which represented 10% of the Company’s cost basis in IDT-Rafael Holdings. As we hold our interest in CS Pharma through our 90%-owned non-operating subsidiary, IDT-Rafael Holdings, LLC, which holds a 50% interest in CS Pharma, we hold an effective 45% indirect interest in the assets held by CS Pharma, including its cash. Cash provided by financing activities related to cash advances from IDT for the three and nine months ended April 30, 2017 was $447,000 and $9.8 million, respectively.

We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

Off-Balance Sheet Arrangements

As of April 30, 2018, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

In connection with the Spin-Off, we and IDT entered into a tax separation agreement, which sets forth the responsibilities of IDT and us with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. IDT is generally responsible for our federal, state, local and foreign income taxes for periods before and including the Spin-Off. We are generally responsible for all other taxes relating to our business. We and IDT will each generally be responsible for managing those disputes that relate to the taxes for which each of us is responsible and, under certain circumstances, may jointly control any dispute relating to taxes for which both of us are responsible.

Item 3. Quantitative and Qualitative Disclosures About Market Risks

Foreign Currency Risk

Revenues from tenants located in Israel represented 3% and 5% of our consolidated and combined revenues in the three and nine months ended April 30, 2018 and in the three and nine months ended April 30, 2017, respectively. The entirety of these revenues is in currencies other than the U.S. Dollar. Our foreign currency exchange risk is somewhat mitigated by our ability to offset a portion of these non U.S. Dollar-denominated revenues with operating expenses that are paid in the same currencies. While the impact from fluctuations in foreign exchange rates affects our revenues and expenses denominated in foreign currencies, the net amount of our exposure to foreign currency exchange rate changes at the end of each reporting period is generally not material.

Investment Risk

In addition to, but separate from our primary business, we hold a portion of our assets in marketable securities, hedge funds and a passive investment in another entity. Investments in marketable securities and hedge funds carry a degree of risk, and depend to a great extent on correct assessments of the future course of price movements of securities and other instruments. There can be no assurance that our investment managers will be able to accurately predict these price movements. The securities markets have in recent years been characterized by great volatility and unpredictability. Our passive interests in other entities are not currently liquid and we cannot assure that they we will be able to liquidate them when we desire, or ever. Accordingly, the value of our investments may go down as well as up and we may not receive the amounts originally invested upon redemption.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2018.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended April 30, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

20

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Legal proceedings in which we are involved are more fully described in Note 8 to the Consolidated and Combined Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.

Item 1A. Risk Factors

There are no material changes from the risk factors previously disclosed in Item 1A to Part I of our Registration Statement on Form 10-12G.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

Item 6. Exhibits

Exhibit Number	Description
31.1*	Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

*       Filed or furnished herewith.

21

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Rafael Holdings, Inc.
June 11, 2018	By:	/s/ Howard S. Jonas
		Howard S. Jonas Chief Executive Officer
June 11, 2018	By:	/s/ David Polinsky
		David Polinsky Chief Financial Officer

22

EX-31.1

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Howard S. Jonas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rafael Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2018

/s/ Howard S. Jonas

Howard S. Jonas

Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Polinsky, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Rafael Holdings, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 11, 2018

/s/ David Polinsky 

David Polinsky

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to
18 U.S.C. Section 1350
(as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of Rafael Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, Howard S. Jonas, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 11, 2018

/s/ Howard S. Jonas

Howard S. Jonas

Chief Executive Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Rafael Holdings, Inc. and will be retained by Rafael Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

EXHIBIT 32.2

Certification Pursuant to
18 U.S.C. Section 1350
(as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act Of 2002)

In connection with the Quarterly Report of Rafael Holdings, Inc. (the “Company”) on Form 10-Q for the quarter ended April 30, 2018 as filed with the Securities and Exchange Commission (the “Report”), I, David Polinsky, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: June 11, 2018

/s/ David Polinsky

David Polinsky

Chief Financial Officer

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Rafael Holdings, Inc. and will be retained by Rafael Holdings, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document and Entity Information - shares	9 Months Ended
	Apr. 30, 2018	Jun. 11, 2018
Entity Registrant Name	Rafael Holdings, Inc.
Entity Central Index Key	0001713863
Amendment Flag	false
Trading Symbol	RFL
Current Fiscal Year End Date	--07-31
Document Type	10-Q
Document Period End Date	Apr. 30, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q3
Entity Filer Category	Accelerated Filer
Class A common stock
Entity Common Stock, Shares Outstanding		787,163
Class B common stock
Entity Common Stock, Shares Outstanding		11,752,973

XML

Consolidated and Combined Balance Sheets - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Current assets:
Cash and cash equivalents	$ 10,605	$ 11,756
Trade accounts receivable, net of allowance for doubtful accounts of $82 at April 30, 2018 and July 31, 2017	406	264
Marketable securities	30,942
Due from Rafael Pharmaceuticals	1,600
Prepaid expenses and other current assets	645	147
Total current assets	44,198	12,167
Property and equipment, net	50,554	51,160
Investments - Rafael Pharmaceuticals	11,700	13,478
Investments - Other	5,949
Deferred income tax assets, net	8	8,859
Patents	180
In-process research and development	1,575
Other assets	920	540
Total assets	115,084	86,204
Current liabilities:
Trade accounts payable	362	115
Accrued expenses	296	213
Other current liabilities	27	35
Total current liabilities	685	363
(Due from) due to related parties	(621)	23,693
Other liabilities	70	70
Total liabilities	134	24,126
Commitments and contingencies
Rafael Holdings, Inc. stockholders’/members' equity:
Group equity		50,427
Additional paid in capital	103,509
Accumulated deficit	(192)
Accumulated other comprehensive income	1,998	2,316
Total Rafael Holdings, Inc. stockholders’/members' equity	105,441	52,743
Noncontrolling interests	9,509	9,335
Total equity	114,950	62,078
Total liabilities and equity	115,084	86,204
Class A common stock
Rafael Holdings, Inc. stockholders’/members' equity:
Common stock value	8
Class B common stock
Rafael Holdings, Inc. stockholders’/members' equity:
Common stock value	$ 118

XML

Consolidated and Combined Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Allowance for doubtful accounts	$ 82	$ 82
Class A common stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	787,163
Common stock, shares outstanding	787,163
Class B common stock
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	11,754,835
Common stock, shares outstanding	11,754,835

XML

Consolidated and Combined Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Revenues:
Rental - Third Party	$ 400	$ 219	$ 1,085	$ 661
Rental - Related Party	447	854	1,442	2,680
Parking	246	209	630	677
Total revenues	1,093	1,282	3,157	4,018
Costs and expenses:
Selling, general and administrative	1,402	1,035	4,481	2,667
Depreciation and amortization	422	411	1,276	1,233
(Loss) income from operations	(731)	(164)	(2,600)	118
Interest income	(71)	(1)	(75)	(8)
Net losses (gains) resulting from foreign exchange transactions	28	(136)	(90)	(167)
Net gains on sales of marketable securities	(24)		(24)	(167)
Net loss on equity investments			104
Gain on disposal of bonus shares			(246)
(Loss) income before income taxes	(664)	(27)	(2,269)	293
(Benefit from) provision for income taxes	(5)	38	8,438	68
Net (loss) income	(659)	(65)	(10,707)	225
Net loss attributable to noncontrolling interests	128		304
Net (loss) income attributable to Rafael Holdings, Inc.	$ (531)	$ (65)	$ (10,403)	$ 225
(Loss) earnings per share attributable to Rafael Holdings, Inc. common stockholders:
Basic	$ (0.04)	$ (0.01)	$ (0.83)	$ 0.02
Diluted	$ (0.04)	$ (0.01)	$ (0.83)	$ 0.02
Weighted average number of shares used in calculation of (loss) earnings per share:
Basic	12,542	12,542	12,542	12,542
Diluted	12,542	12,542	12,542	12,542

XML

Consolidated and Combined Statements of Comprehensive (Loss) Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Statement of Comprehensive Income [Abstract]
Net (loss) income	$ (531)	$ (65)	$ (10,403)	$ 225
Other comprehensive (loss) income:
Unrealized loss on marketable securities	(311)		(311)
Foreign currency translation adjustments	(85)	22	(10)	27
Comprehensive (loss) income	(1,055)	(43)	(11,028)	252
Comprehensive loss attributable to noncontrolling interests	29		29
Comprehensive (loss) income attributable to Rafael Holdings, Inc.	$ (1,026)	$ (43)	$ (10,999)	$ 252

XML

Consolidated and Combined Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017
Operating activities
Net (loss) income	$ (10,403)	$ 225
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	1,276	1,256
Deferred income taxes	8,851	(72)
Realized gain on disposal of bonus shares	(246)
Realized gain on marketable securities	(24)
Non-cash compensation	616
Interest in the equity of investments	(80)
Change in assets and liabilities:
Accounts and rents receivable	(142)	(40)
Other current assets and prepaid expenses	(392)	(117)
Other assets	(355)	(298)
Accounts payable and accrued expenses	223	155
Other current liabilities	(8)	(7)
Due from related parties	(386)	(1,758)
Other liabilities		178
Net cash used in operating activities	(1,070)	(478)
Investing activities
Purchases of property and equipment	(572)	(1,590)
Proceeds from sale and maturity of marketable securities	436
Purchase of investments		(8,300)
Net cash used in investing activities	(136)	(9,890)
Financing activities
Proceeds from sale of member interests in CS Pharma Holdings, LLC		10,000
Cash advances from related parties, net of repayments		9,767
Net cash used in financing activities		19,767
Effect of exchange rate changes on cash and cash equivalents	55	(9)
Net (decrease) increase in cash and cash equivalents	(1,151)	9,390
Cash and cash equivalents at beginning of period	11,756	2,339
Cash and cash equivalents at end of period	10,605	11,729
Supplemental Schedule of Non-Cash Financing and Investing Activities
Cash payments made for taxes
Cash payments made for interest

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Description of Business and Basis of Presentation

9 Months Ended

Apr. 30, 2018

Description of Business and Basis of Presentation [Abstract]

Description of Business and Basis of Presentation

Note 1 — Description of Business and Basis of Presentation

Description of Business

Rafael Holdings, Inc. (“Rafael Holdings”), a Delaware corporation, is comprised of all of the accounts of the following wholly-owned subsidiaries: IDT 225 Old NB Road, LLC, a Delaware Limited Liability Company; IDT Realty LLC, a New Jersey Limited Liability Company; I.D.T. R.E. Holdings, Ltd., an Israeli Company; Broad Atlantic Associates LLC, a Delaware Limited Liability Company; Broad Atlantic Realty LLC, a Delaware Limited Liability Company; Hillview Avenue Realty, a Delaware Limited Liability Company; Hillview Avenue Realty JV, a Delaware Limited Liability Company; IDT Capital Real Estate Holdings LLC, a Delaware Limited Liability Company; and IDT Capital, Inc., a Delaware Corporation. Additionally, it includes the accounts of the 90% owned IDT-Rafael Holdings, LLC, the 50% owned CS Pharma Holdings, LLC, and the majority-owned Lipomedix Pharmaceuticals, Ltd., an Israeli Company.

The “Company” in these financial statements refers to Rafael Holdings on this consolidated and combined basis as if Rafael Holdings existed and owned the above interests in these entities in all periods presented.

All significant intercompany accounts and transactions have been eliminated in consolidation or combination.

Basis of Presentation

The accompanying unaudited consolidated and combined financial statements the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended April 30, 2018 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2018. The balance sheet at July 31, 2017 has been derived from the Company’s audited financial statements at that date, but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the combined financial statements and footnotes thereto included elsewhere in the Registration Statement on Form 10-12G filed on February 20, 2018.

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal year 2017 refers to the fiscal year ending July 31, 2017).

The Company’s Spin-Off

The Company was formerly a subsidiary of IDT Corporation (“IDT”). On March 26, 2018, IDT spun-off the Company to IDT’s stockholders and the Company became an independent public company through a pro rata distribution of the Company’s common stock held by IDT to IDT’s stockholders (the “Spin-Off”). As a result of the Spin-Off, each of IDT’s stockholders received: (i) one share of the Company’s Class A common stock for every two shares of IDT’s Class A common stock held of record on March 13, 2018 (the “Record Date”), and (ii) one share of the Company’s Class B common stock for every two shares of IDT’s Class B common stock held of record on the Record Date. On March 26, 2018, 787,163 shares of the Company’s Class A common stock, and 11,754,835 shares of the Company’s Class B common stock were issued and outstanding, which includes 114,945 restricted stock units issued to employees and consultants in connection with the spin.

The Company entered into various agreements with IDT prior to the Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with IDT after the Spin-Off, and a Transition Services Agreement, which provides for certain services to be performed by IDT to facilitate the Company’s transition into a separate publicly-traded company. These agreements provide for, among other things, (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the Spin-Off, (2) transitional services to be provided by IDT relating to human resources and employee benefits administration, and (3) finance, accounting, tax, investor relations and legal services to be provided by IDT to the Company following the Spin-Off. In addition, the Company entered into a Tax Separation Agreement with IDT, which sets forth the responsibilities of the Company and IDT with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the Spin-Off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods.

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Acquisition of Lipomedix Pharmaceuticals Ltd. ("Lipomedix")

9 Months Ended

Apr. 30, 2018

Acquisition of Lipomedix Pharmaceuticals Ltd. ("Lipomedix") [Abstract]

Acquisition of Lipomedix Pharmaceuticals Ltd. ("Lipomedix")

Note 2 — Acquisition of Lipomedix Pharmaceuticals Ltd. (“Lipomedix”)-

Lipomedix is a development-stage, privately held Israeli company focused on the development of an innovative, safe and effective cancer therapy based on liposome delivery.

As a result of its initial $100,000 investment, the Company received approximately 3.2% of the common shares outstanding. During the second quarter of fiscal year 2017, the Company made an additional $300,000 investment in Lipomedix, increasing its ownership to 13.95% of the issued and outstanding ordinary shares, as well as providing Lipomedix with an advance of $200,000. During the fourth quarter of fiscal year 2017, the Company made an additional $1.1 million investment, inclusive of the $200,000 advance, in Lipomedix, increasing its ownership to 38.86% of the issued share capital of the issued and outstanding ordinary shares. As such, the Company began accounting for this investment under the equity method as of and for the fourth quarter of fiscal year 2017. During the fourth quarter of fiscal year 2017, the Company recognized approximately $113,000 as its proportionate share of Lipomedix's loss. As of July 31, 2017, Lipomedix had assets totaling $1.2 million and liabilities totaling $77,000.

On November 16, 2017, the Company exercised its option to purchase additional shares in Lipomedix for $900,000, which increased its ownership to 50.6% of the issued and outstanding ordinary shares. As such, the Company began consolidating this investment as of and for the second quarter of fiscal year 2018.

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Marketable Securities

9 Months Ended

Apr. 30, 2018

Marketable Securities [Abstract]

Marketable Securities

Note 3 — Marketable Securities

The following is a summary of marketable securities:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale securities:
April 30, 2018:
Certificates of deposit*	$	13,243	$	—	$	(33	)	$	13,210
Federal Government Sponsored Enterprise notes		3,188		—		(28	)		3,160
International agency notes		522		—		(17	)		505
Mutual funds		5,453		—		(70	)		5,383
Corporate bonds		3,068		—		(65	)		3,003
U.S. Treasury notes		5,358		—		(98	)		5,260
Municipal bonds		421		—		—			421
Total	$	31,253	$	—	$	(311	)	$	30,942

* Each of the Company’s certificates of deposit has a CUSIP, was purchased in the secondary market through a broker, and may be sold in the secondary market.

Proceeds from maturities and sales of available-for-sale securities were $436,000 and $0 in the three and nine months ended April 30, 2018 and 2017, respectively. The gross realized gains that were included in earnings as a result of sales were $24,000 in the three and nine months ended April 30, 2018, and $0 in the three and nine months ended April 30, 2017. There were no gross realized losses that were included in earnings as a result of sales in the three and nine months ended April 30, 2018 and 2017. The Company uses the specific identification method in computing the gross realized gains and gross realized losses on the sales of marketable securities.

The contractual maturities of the Company’s available-for-sale debt securities at April 30, 2018 were as follows:

	Fair Value
		(in thousands)
Within one year	$	13,465
After one year through five years		12,335
After five years through ten years		—
After ten years		—
Total	$	25,800

The following available-for-sale securities were in an unrealized loss position for which other-than-temporary impairments have not been recognized:

	Unrealized Losses			Fair Value
	(in thousands)
April 30, 2018:
Certificates of deposit	$	(33	)	$	10,403
Federal Government Sponsored Enterprise notes		(28	)		3,160
International agency notes		(17	)		505
Corporate bonds		(70	)		5,369
Equity		(65	)		3,003
U.S. Treasury notes		(98	)		5,260
Municipal bonds		—			421
Total	$	(311	)	$	28,121

The Company did not own any marketable securities as of July 31, 2017.

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Fair Value Measurements

9 Months Ended

Apr. 30, 2018

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 4 — Fair Value Measurements

The following table presents the balance of assets measured at fair value on a recurring basis:

(in thousands)	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
April 30, 2018
Available-for-sale securities:
Marketable Securities	$	10,643	$	20,299	$	—	$	30,942
Rafael Pharmaceuticals convertible promissory notes		—		—		6,300		6,300
Total	$	10,643	$	20,299	$	6,300	$	37,242
July 31, 2017
Available-for-sale securities:
Rafael Pharmaceuticals convertible promissory notes	$	—	$	—	$	6,300	$	6,300
Total	$	—	$	—	$	6,300	$	6,300

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

At April 30, 2018 and July 31, 2017, the Company did not have any liabilities measured at fair value on a recurring basis.

At April 30, 2018 and July 31, 2017, the fair value of the Rafael Pharmaceuticals convertible promissory notes, which were classified as Level 3, was estimated based on a valuation of Rafael Pharmaceuticals by reference to recent transactions in its securities, the September 2016 Series D Convertible Note investment, as well as utilizing a discounted cash flow technique under the Income Approach and other factors that could not be corroborated by the market.

The following table summarizes the change in the balance of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3). There were no liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) in the three and nine months ended April 30, 2018 or 2017.

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
	(in thousands)
Balance, beginning of period	$	6,300	$	4,200	$	6,300	$	2,000
Purchases		—		—		—		2,200
Balance, end of period	$	6,300	$	4,200	$	6,300	$	4,200
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period	$	—	$	—	$	—	$	—

At April 30, 2018 and July 31, 2017, the Company had $5.9 million and $0, respectively, in investments in hedge funds and in securities in another entity that are not liquid, which were included in “Investments - Other” in the accompanying consolidated balance sheets. The Company’s related investments are accounted for using the cost method; therefore these investments are not measured at fair value.

Fair Value of Other Financial Instruments

The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting these data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

Cash and cash equivalents, other current assets, customer deposits and other current liabilities. At April 30, 2018 and July 31, 2017, the carrying amount of these assets and liabilities approximated fair value because of the short period of time to maturity. The fair value estimates for cash and cash equivalents were classified as Level 1 and other current assets, customer deposits and other current liabilities were classified as Level 2 of the fair value hierarchy.

Other assets and other liabilities. At April 30, 2018 and July 31, 2017, the carrying amount of these assets and liabilities approximated fair value. The fair values were estimated based on the Company’s assumptions, which were classified as Level 3 of the fair value hierarchy.

The Company’s financial instruments include accounts and rents receivable, accounts payable, and due from related parties. The recorded carrying amount of accounts and rents receivable, accounts payable and due from related approximates their fair value due to their short-term nature. Other than noted above, the Company did not have any other assets or liabilities that were measured at fair value on a recurring basis as of April 30, 2018 or July 31, 2017.

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(Loss) Earnings Per Share

9 Months Ended

Apr. 30, 2018

(Loss) Earnings Per Share [Abstract]

(Loss) Earnings Per Share

Note 5 — (Loss) Earnings Per Share

Basic (loss) earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted (loss) earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and diluted earnings (loss) per share attributable to the Company’s common stockholders consists of the following:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
Basic weighted-average number of shares		12,541,998		12,541,998		12,541,998		12,541,998

In the three and nine months ended April 30, 2018 and in the three months ended April 30, 2017, the diluted loss per share computation equals basic loss per share because the Company had a net loss and the impact of the assumed exercise of stock options and the vesting of restricted stock would have been anti-dilutive. For all periods prior to the Spin-Off, the Company utilized the number of shares distributed in the Spin-Off as the denominator for historical earnings per share for each period presented.

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Establishment of Valuation Allowance for Deferred Tax Asset

9 Months Ended

Apr. 30, 2018

Establishment of Valuation Allowance for Deferred Tax Asset / Income Taxes [Abstract]

Establishment of Valuation Allowance for Deferred Tax Asset

Note 6 — Establishment of Valuation Allowance for Deferred Tax Asset

Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the amendments to related party leases effective August 1, 2017, which, in comparison to fiscal year 2017, will reduce revenues by approximately $1.7 million annually through 2025. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, a valuation allowance of $8.4 million was recorded to reserve for the entirety of the Company’s domestic deferred tax asset during the first quarter of fiscal 2018. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period are increased, or if additional weight is given to subjective evidence, such as the Company’s projections for growth.

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Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals")

9 Months Ended

Apr. 30, 2018

Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals") [Abstract]

Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals")

Note 7 — Investment in Rafael Pharmaceuticals, Inc. (“Rafael Pharmaceuticals”)

Rafael Pharmaceuticals is a clinical stage, oncology-focused pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells.

On December 7, 2015, IDT approved an investment of up to $10 million in Rafael Pharmaceuticals. $2 million of this investment was funded as of July 31, 2016, as follows: $500,000 funded upon signing the Subscription and Loan Agreement during the second quarter of fiscal year 2016; and $1.5 million funded during the third quarter of fiscal year 2016. The initial $2 million investment was in exchange for Rafael Pharmaceuticals 3.5% convertible promissory notes due in fiscal year 2018. To date, the Company has not accrued interest on this note, as collection cannot be reasonably assured; however, the Company has received an independent appraisal indicating the fair value of its investment in Rafael Pharmaceuticals exceeds the carrying value. On September 16, 2016, the Company made an additional $8 million investment in exchange for Rafael Pharmaceuticals' 3.5% convertible promissory notes due in fiscal year 2018.

The Company owns its interests/rights in Rafael Pharmaceuticals through a 90%-owned non-operating subsidiary, IDT-Rafael Holdings, LLC. (“IDT-Rafael Holdings”). IDT-Rafael Holdings holds warrants to purchase a significant stake in Rafael Pharmaceuticals, as well as other equity and governance rights in Rafael Pharmaceuticals, and owns 50% of CS Pharma Holdings, LLC (“CS Pharma”), a non-operating entity which holds the convertible debt and other rights to purchase equity interests in Rafael Pharmaceuticals.

Those interests/rights include:

1. $10,000,000 of Series D Convertible Notes of Rafael Pharmaceuticals held by CS Pharma;

2. A warrant to purchase 56% of the capital stock of Rafael Pharmaceuticals — the right to exercise the first $10,000,000 worth of the warrant is held by CS Pharma; and the remainder is held directly by IDT-Rafael Holdings; and

3. Certain governance rights, including appointment of directors.

On March 2, 2017, Howard Jonas, IDT’s Chairman of the Board, and Chairman of the Board of Rafael Pharmaceuticals, purchased 10% of IDT-Rafael Holdings for a purchase price of $1 million, which represented 10% of the Company’s cost basis in IDT-Rafael Holdings. Accordingly, we hold an effective 45% indirect interest in the assets held by CS Pharma, including its cash. Separately, Howard Jonas and Deborah Jonas jointly own $525,000 of Series C Convertible Notes of Rafael Pharmaceuticals, and The Howard S. and Deborah Jonas Foundation owns $525,000 of Series C Notes of Rafael Pharmaceuticals.

Additionally, the Company previously owned the contractual right to receive "Bonus Shares" for an additional 10% of the outstanding capital stock of Rafael Pharmaceuticals that are issued only upon achieving certain milestones. If the milestones are met, Bonus Shares are to be issued without any additional payment.

On September 12, 2017, IDT’s Compensation Committee, Corporate Governance Committee and Board of Directors approved a compensatory arrangement with Howard S. Jonas related to this right to receive additional Rafael Pharmaceutical shares. In connection with this arrangement, IDT-Rafael Holdings distributed this right to its members such that the Company received the right to 9% of the outstanding capital stock of Rafael Pharmaceuticals and Mr. Jonas received the right to 1% of the outstanding capital stock of Rafael Pharmaceuticals. In addition, as compensation for assuming the role of Chairman of the Board of the Company, and to create additional incentive to contribute to its success, on September 19, 2017, the Company assigned its right to receive 9% of the outstanding capital stock of Rafael Pharmaceuticals to Mr. Jonas. The right is further transferable by Mr. Jonas, in his discretion.

The Rafael Pharmaceuticals Series D Note earns interest at 3.5% per annum, with principal and accrued interest due and payable on September 16, 2018. The Series D Note is convertible at the holder’s option into shares of Rafael Pharmaceuticals’ Series D Preferred Stock. The Series D Note also includes a mandatory conversion into Rafael Pharmaceuticals common stock upon a qualified initial public offering, and conversion at the holder’s option upon an unqualified financing event. In all cases, the Series D Note conversion price is based on the applicable financing purchase price. IDT-Rafael Holdings and CS Pharma were issued warrants to purchase shares of capital stock of Rafael Pharmaceuticals representing up to 56% of the then issued and outstanding capital stock of Rafael Pharmaceuticals, on an as-converted and fully diluted basis. The right to exercise warrants as to the first $10 million thereof is held by CS Pharma and the remainder is owned by IDT-Rafael Holdings. The warrant expires on December 31, 2020. Currently, if the Company desires to raise additional financing from unaffiliated parties in connection with its exercise of its warrant or other current rights to invest in Rafael Pharmaceuticals (but not including the Rafael Pharmaceuticals rights held by CS Pharma), it first must give the other CS Pharma holders the opportunity to provide such financing on a pro rata basis. The exercise price of the warrant is the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments. The minimum initial and subsequent exercises of the warrant shall be for such number of shares that will result in at least $5 million of gross proceeds to Rafael Pharmaceuticals, or such lesser amount as represents 5% of the outstanding capital stock of Rafael Pharmaceuticals, or such lesser amount as may then remain unexercised. The warrant will expire upon the earlier of December 31, 2020 or a qualified initial public offering or liquidation event of Rafael Pharmaceuticals.

As of April 30, 2018, and based on current shares issued and outstanding of Rafael Pharmaceuticals, the Company would need to pay approximately $71 million to exercise the warrant in full and approximately $56 million to purchase a 51% controlling stake. On an as-converted and fully diluted basis (for all convertible securities of Rafael Pharmaceuticals outstanding), the Company would need approximately $122 million to exercise the warrant in full and approximately $98 million to purchase a 51% controlling stake in Rafael Pharmaceuticals. Given the Company’s anticipated available cash upon the Spin-Off, the Company would not be able to exercise the warrant in its entirety and the Company may never be able to exercise the warrant in full.

The Company serves as the managing member of IDT-Rafael Holdings and IDT-Rafael Holdings serves as the managing member of CS Pharma, with broad authority to make all key decisions regarding their respective holdings. Any distributions that are made to CS Pharma from Rafael Pharmaceuticals that are in turn distributed by CS Pharma, will need to be made pro rata to all members, which would entitle IDT-Rafael Holdings to 50% (based on current ownership) of such distributions. Similarly, if IDT-Rafael Holdings were to distribute proceeds it receives from CS Pharma, it would do so on a pro rata basis, entitled the Company to 90% (based on current ownership) of such distributions.

The Company’s investment in Rafael Pharmaceuticals, which is included in “Investments – Rafael Pharmaceuticals” in the accompanying consolidated and combined balance sheets, consists of the following:

(in thousands)	(Unaudited)  April 30,  2018		July 31,  2017
Convertible promissory note (at fair value)	$	6,300	$	6,300
Warrants (at cost)		5,400		5,400
Right to receive additional shares (at cost)		—		400
Total investment in Rafael Pharmaceuticals	$	11,700	$	12,100

As of March 26, 2017, IDT had provided Rafael Pharmaceuticals with $1.6 million in working capital financing that remained outstanding. The related receivable from Rafael Pharmaceutical was transferred by IDT to the Company as of the Spin-Off.

Rafael Pharmaceuticals is a variable interest entity; however, the Company has determined that it is not the primary beneficiary as is does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance.

On May 18, 2018, the Company entered into an arrangement with Rafael Pharmaceuticals to lend Rafael Pharmaceuticals up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals’ request, and in the Company’s discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million in the aggregate. This loan is due and payable with 30 days’ notice at the lender’s demand, not to occur before June 30, 2018. As of June 11, 2018, $800,000 had been advanced to Rafael Pharmaceuticals under this arrangement.

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Related Party Transactions

9 Months Ended

Apr. 30, 2018

Related Party Transactions [Abstract]

Related Party Transactions

Note 8 — Related Party Transactions

The Company maintains a balance due from/to related parties, which relate to rental income paid by various companies under common control to IDT to the Company, partially offset by charges for services provided to the Company by IDT and payroll costs for the Company's personnel that are paid by IDT. Historically, this also related to cash advances for investments. On March 26, 2018, IDT transferred assets to Rafael such that, at the time of the Spin-Off, we had approximately $44 million in cash and cash equivalents and liquid marketable securities and approximately $4.0 million in interests in hedge funds. Additionally, IDT transferred approximately $2.0 million in securities in another entity that are not liquid. The cash and cash equivalents and liquid marketable securities figure includes $10 million held in CS Pharma, a controlled entity of which we are an effective 45% owner. Additionally, $23.6 million in outstanding intercompany debt between IDT and Rafael Holdings as of the distribution date was converted to equity and there was no indebtedness from Rafael Holdings to IDT immediately following the Spin-Off. Prior to the Spin-Off, IDT advanced $900,000 and $9.4 million to the Company during the nine months ended April 30, 2018 and April 30, 2017, respectively to invest in Rafael Pharmaceuticals and Lipomedix. Prior to the Spin-Off and in conjunction with a Transition Services Agreement subsequent to the Spin-Off, IDT charges the Company for certain transactions and allocates routine expenses for, among other things: (1) the allocation between the Company and IDT of employee benefits, taxes and other liabilities and obligations; (2) services provided by IDT relating to human resources and employee benefits administration; (3) the allocation of responsibilities relating to employee compensation and benefit plans and programs and other related matters; and (4) finance, accounting, tax and legal services provided by IDT to the Company.

In all periods presented prior to the Spin-Off, the Company was included in IDTs consolidated federal income tax return.

The change in the Company’s liability to IDT was as follows:

	Nine Months Ended April 30,
(in thousands)	2018 (unaudited)			2017 (unaudited)
Balance at beginning of period	$	23,693		$	15,145
Payments by IDT on behalf of the Company		385			703
Rental revenues earned from IDT		(1,468	)		(2,461	)
Cash repayments, net of advances		885			19,767
Capitalized investment by IDT		(24,116	)		—
Balance at end of period	$	(621	)	$	33,154

The Company amended all of its related party leases as of August 1, 2017. The related party leases expire in April 2025 and are for 88,631 square feet and include two parking spots per thousand square feet of space leased at 520 Broad Street and for 12,400 square feet in Israel. The annual rent will be approximately $2.0 million. The related parties have the right to terminate theses leases upon four months’ notice, and upon early termination will pay a termination penalty equal to 25% of the portion of the rent due over the course of the remaining term. Related parties will have the right to lease an additional 25,000 square feet in the building located at 520 Broad Street on the same terms as the base lease, and other rights to a further 25,000 square feet should all available space be leased to other tenants. Upon expiration of the lease, these related parties have the right to renew the leases for another five years.

On April 26, 2018, the Board of Directors of Rafael Holdings, Inc. (the “Company”) and its Corporate Governance Committee approved an arrangement with Howard S. Jonas, the Chairman of the Board, Chief Executive Officer and controlling stockholder of the Company, related to the purchase of shares of Class B common stock of the Company by Mr. Jonas. Under the arrangement, subject to approval of the stockholders of the Company, Mr. Jonas has agreed to purchase 1,254,200 shares of Class B common stock (representing ten percent of the issued and outstanding equity of the Company) at a price per share of $6.89, which was the closing price for the Class B common stock on the New York Stock Exchange on April 26, 2018 (the last closing price before approval of the arrangement) for an aggregate purchase price of $8,641,438.

The investment is intended to provide the Company with working capital and to support growth initiatives, including additional investments in the real estate and pharmaceutical industries and in companies in which we own interests.

The arrangement is subject to approval of the stockholders of the Company, and no shares will be issued unless such approval is obtained. Mr. Jonas has agreed to vote in favor of the arrangement when it is submitted to the stockholders. The Company has agreed to present the matter to its stockholders at the next meeting of stockholders to be held.

Mr. Jonas paid $864,144 of the purchase price (10.0% of the total purchase price) on May 31, 2018. The remainder of the purchase price will be payable following approval of the stockholders of the Company, and the shares will be issued upon payment of in full.

On May 18, 2018, the Company entered into an arrangement with Rafael Pharmaceuticals to lend Rafael Pharmaceuticals up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals’ request, and in the Company’s discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million in the aggregate. This loan is due and payable with 30 days’ notice at the lender’s demand, not to occur before June 30, 2018. As of June 11, 2018, $800,000 had been advanced to Rafael Pharmaceuticals under this arrangement.

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Income Taxes

9 Months Ended

Apr. 30, 2018

Establishment of Valuation Allowance for Deferred Tax Asset / Income Taxes [Abstract]

Income Taxes

Note 9 — Income Taxes

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, which is commonly referred to as “The Tax Cuts and Jobs Act” (the “Tax Act”). The Tax Act reduces the U.S. federal statutory corporate tax rate from 35.0% to 21.0% effective January 1, 2018, requires companies to pay a one-time repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred (“transition tax”), and makes other changes to the U.S. income tax code. Due to the Company’s July 31 fiscal year-end, the lower corporate income tax rate is phased in, resulting in a blended U.S. federal statutory tax rate of approximately 26.9% for the Company’s fiscal year ending July 31, 2018, and 21.0% for the Company’s fiscal years thereafter.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), expressing its views regarding the Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification 740, Income Taxes, in the reporting period that includes the enactment date of the Tax Act. SAB 118 recognizes that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. Specifically, SAB 118 allows a company to report provisional estimates in the reporting period that includes the enactment date if the company does not have the necessary information available, prepared, or fully analyzed for certain income tax effects of the Tax Act. The provisional estimates would be adjusted during a measurement period not to exceed 12 months from the enactment date of the Tax Act, at which time the accounting for the income tax effects of the Tax Act is required to be completed.

As of April 30, 2018, the Company had not completed its accounting for the income tax effects of the Tax Act. The reduction in the corporate tax rate is not expected to impact the Company’s results of operations or financial position in the foreseeable future because the income tax benefit from the reduced tax rate will be offset by the valuation allowance.

The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S. income taxes. The Company expects to utilize net operating loss carryforwards to offset any transition tax that it may incur. Therefore, the Company did not record any provisional income tax expense for the transition tax for its foreign subsidiaries. At April 30, 2018, the undistributed earnings of the Company’s foreign subsidiaries continued to be permanently reinvested. The Company is currently reevaluating the need to repatriate future earnings of its foreign subsidiaries due to the reduction in cash, cash equivalents, and marketable securities because of the Rafael Spin-Off. The Company has not provided for additional income or withholding taxes for the undistributed earnings or for any additional outside basis differences with respect to the foreign entities. The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until August 1, 2018. The Company has not recorded any impact associated with either GILTI or BEAT in the nine months ended April 30, 2018.

The Company anticipates that its assumptions and estimates may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, the FASB, and various other taxing jurisdictions. In particular, the Company anticipates that the U.S. state jurisdictions will continue to determine and announce their conformity or decoupling from the Tax Act, either in its entirety or with respect to specific provisions. Legislative and interpretive actions could result in adjustments to the Company’s provisional estimates when the accounting for the income tax effects of the Tax Act is completed. The Company will continue to evaluate the impact of the Tax Act on its financial statements, and will record the effect of any reasonable changes in its estimates and adjustments.

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Business Segment Information

9 Months Ended

Apr. 30, 2018

Business Segment Information [Abstract]

Business Segment Information

Note 10 — Business Segment Information

The Company conducts business as two operating segments, Pharmaceuticals and Real Estate. The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker. Beginning in the second quarter of fiscal 2018, the Pharmaceuticals segment is comprised of debt interests and warrants in Rafael Pharmaceuticals and a majority equity interest in Lipomedix Pharmaceuticals. Comparative results have been reclassified and restated as if the Pharmaceuticals segment existed for all periods presented. To date, the Pharmaceuticals segment has not generated any revenues.

The Real Estate segment includes the Company’s real estate holdings, including the building at 520 Broad Street in Newark, New Jersey that houses IDT’s headquarters and its associated public garage, an office/data center building in Piscataway, New Jersey and a portion of a building in Israel that hosts offices for IDT and certain affiliates.

The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its Real Estate segment based primarily on income (loss) from operations and its Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials. All investments in Rafael Pharmaceuticals and assets, expenses and expenses associated with Lipomedix are tracked separately in the Pharmaceuticals segment. All corporate costs are allocated to the Real Estate segment.

Operating results for the business segments of the Company are as follows:

(in thousands)	Pharmaceuticals			Real Estate			Total
Three Months Ended April 30, 2018
Revenues	$	—		$	1,093		$	1,093
(Loss) income from operations		(258	)		(473	)		(731	)
Three Months Ended April 30, 2017
Revenues	$	—		$	1,282		$	1,282
Loss from operations		—			(164	)		(164	)
Nine Months Ended April 30, 2018
Revenues	$	—		$	3,157		$	3,157
(Loss) income from operations		(631	)		(1,969	)		(2,600	)
Nine Months Ended April 30, 2017
Revenues	$	—		$	4,018		$	4,018
Income from operations		—			118			118

Geographic Information

Revenues from tenants located outside of the United States were generated entirely from related parties located in Israel. Revenues from these non-United States customers as a percentage of total revenues were as follows (revenues by country are determined based on the location of the related facility):

Nine months ended	April 30, 2018 (unaudited)			April 30, 2017 (unaudited)
Revenue from tenants located in Israel		3	%		5	%

Net long-lived assets and total assets held by the Company were located as follows:

(in thousands)	United States		Foreign		Total
April 30, 2018 (unaudited)
Long-lived assets, net	$	67,270	$	3,616	$	70,886
Total assets		110,699		4,385		115,084
July 31, 2017
Long-lived assets, net	$	71,674	$	2,363	$	74,037
Total assets		83,675		2,529		86,204

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Commitments and Contingencies

9 Months Ended

Apr. 30, 2018

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 11 — Commitments and Contingencies

Legal Proceedings

The Company may from time to time be subject to legal proceedings that may arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

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Marketable Securities (Tables)

9 Months Ended

Apr. 30, 2018

Marketable Securities [Abstract]

Schedule of marketable securities

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Available-for-sale securities:
April 30, 2018:
Certificates of deposit*	$	13,243	$	—	$	(33	)	$	13,210
Federal Government Sponsored Enterprise notes		3,188		—		(28	)		3,160
International agency notes		522		—		(17	)		505
Mutual funds		5,453		—		(70	)		5,383
Corporate bonds		3,068		—		(65	)		3,003
U.S. Treasury notes		5,358		—		(98	)		5,260
Municipal bonds		421		—		—			421
Total	$	31,253	$	—	$	(311	)	$	30,942

* Each of the Company’s certificates of deposit has a CUSIP, was purchased in the secondary market through a broker, and may be sold in the secondary market.

Schedule of contractual maturities of the Company's available-for-sale debt securities

	Fair Value
		(in thousands)
Within one year	$	13,465
After one year through five years		12,335
After five years through ten years		—
After ten years		—
Total	$	25,800

Schedule of available-for-sale securities were in an unrealized loss position

	Unrealized Losses			Fair Value
	(in thousands)
April 30, 2018:
Certificates of deposit	$	(33	)	$	10,403
Federal Government Sponsored Enterprise notes		(28	)		3,160
International agency notes		(17	)		505
Corporate bonds		(70	)		5,369
Equity		(65	)		3,003
U.S. Treasury notes		(98	)		5,260
Municipal bonds		—			421
Total	$	(311	)	$	28,121

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Fair Value Measurements (Tables)

9 Months Ended

Apr. 30, 2018

Fair Value Measurements [Abstract]

Summary of balance of assets measured at fair value on a recurring basis

(in thousands)	Level 1 (1)		Level 2 (2)		Level 3 (3)		Total
April 30, 2018
Available-for-sale securities:
Marketable Securities	$	10,643	$	20,299	$	—	$	30,942
Rafael Pharmaceuticals convertible promissory notes		—		—		6,300		6,300
Total	$	10,643	$	20,299	$	6,300	$	37,242
July 31, 2017
Available-for-sale securities:
Rafael Pharmaceuticals convertible promissory notes	$	—	$	—	$	6,300	$	6,300
Total	$	—	$	—	$	6,300	$	6,300

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

Summary of assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3)

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
	(in thousands)
Balance, beginning of period	$	6,300	$	4,200	$	6,300	$	2,000
Purchases		—		—		—		2,200
Balance, end of period	$	6,300	$	4,200	$	6,300	$	4,200
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period	$	—	$	—	$	—	$	—

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(Loss) Earnings Per Share (Tables)

9 Months Ended

Apr. 30, 2018

(Loss) Earnings Per Share [Abstract]

Summary of weighted-average number of shares used in the calculation of basic and diluted (loss) earnings per share

	Three Months Ended April 30,				Nine Months Ended April 30,
	2018		2017		2018		2017
Basic weighted-average number of shares		12,541,998		12,541,998		12,541,998		12,541,998

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Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals") (Tables)

9 Months Ended

Apr. 30, 2018

Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals") [Abstract]

Schedule of consolidated and combined balance sheets

(in thousands)	(Unaudited)  April 30,  2018		July 31,  2017
Convertible promissory note (at fair value)	$	6,300	$	6,300
Warrants (at cost)		5,400		5,400
Right to receive additional shares (at cost)		—		400
Total investment in Rafael Pharmaceuticals	$	11,700	$	12,100

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Related Party Transactions (Tables)

9 Months Ended

Apr. 30, 2018

Related Party Transactions [Abstract]

Schedule of change in Company's liability to IDT

	Nine Months Ended April 30,
(in thousands)	2018 (unaudited)			2017 (unaudited)
Balance at beginning of period	$	23,693		$	15,145
Payments by IDT on behalf of the Company		385			703
Rental revenues earned from IDT		(1,468	)		(2,461	)
Cash repayments, net of advances		885			19,767
Capitalized investment by IDT		(24,116	)		—
Balance at end of period	$	(621	)	$	33,154

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Business Segment Information (Tables)

9 Months Ended

Apr. 30, 2018

Business Segment Information [Abstract]

Schedule of operating results for the business segments

(in thousands)	Pharmaceuticals			Real Estate			Total
Three Months Ended April 30, 2018
Revenues	$	—		$	1,093		$	1,093
(Loss) income from operations		(258	)		(473	)		(731	)
Three Months Ended April 30, 2017
Revenues	$	—		$	1,282		$	1,282
Loss from operations		—			(164	)		(164	)
Nine Months Ended April 30, 2018
Revenues	$	—		$	3,157		$	3,157
(Loss) income from operations		(631	)		(1,969	)		(2,600	)
Nine Months Ended April 30, 2017
Revenues	$	—		$	4,018		$	4,018
Income from operations		—			118			118

Schedule of revenue from tenants by geographic areas

Nine months ended	April 30, 2018 (unaudited)			April 30, 2017 (unaudited)
Revenue from tenants located in Israel		3	%		5	%

Schedule of net long-lived assets and total assets by geographic areas

(in thousands)	United States		Foreign		Total
April 30, 2018 (unaudited)
Long-lived assets, net	$	67,270	$	3,616	$	70,886
Total assets		110,699		4,385		115,084
July 31, 2017
Long-lived assets, net	$	71,674	$	2,363	$	74,037
Total assets		83,675		2,529		86,204

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Description of Business and Basis of Presentation (Details) - shares

1 Months Ended

9 Months Ended

Mar. 26, 2018

Apr. 30, 2018

Jul. 31, 2017

Employees [Member]

Description of Business and Basis of Presentation (Textual)

Restricted stock units issued

114,945

Consultants [Member]

Description of Business and Basis of Presentation (Textual)

Restricted stock units issued

114,945

IDT-Rafael Holdings, LLC [Member]

Description of Business and Basis of Presentation (Textual)

Effective ownership percentage

90.00%

Spin-off common stock, description

(i) one share of the Company’s Class A common stock for every two shares of IDT’s Class A common stock held of record on March 13, 2018 (the “Record Date”), and (ii) one share of the Company’s Class B common stock for every two shares of IDT’s Class B common stock held of record on the Record Date.

CS Pharma Holdings, LLC [Member]

Description of Business and Basis of Presentation (Textual)

Effective ownership percentage

50.00%

Class A common stock [Member]

Description of Business and Basis of Presentation (Textual)

Common stock, shares issued

787,163

Common stock, shares outstanding

787,163

Class A common stock [Member] | IDT Corporation [Member]

Description of Business and Basis of Presentation (Textual)

Common stock, shares issued

787,163

Common stock, shares outstanding

787,163

Class B common stock [Member]

Description of Business and Basis of Presentation (Textual)

Common stock, shares issued

11,754,835

Common stock, shares outstanding

11,754,835

Class B common stock [Member] | IDT Corporation [Member]

Description of Business and Basis of Presentation (Textual)

Common stock, shares issued

11,754,835

Common stock, shares outstanding

11,754,835

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Marketable Securities (Details) $ in Thousands	9 Months Ended
	Apr. 30, 2018 USD ($)
Available-for-sale securities:
Amortized Cost	$ 31,253
Gross Unrealized Gains
Gross Unrealized Losses	(311)
Fair Value	30,942
Municipal bonds [Member]
Available-for-sale securities:
Amortized Cost	421
Gross Unrealized Gains
Gross Unrealized Losses
Fair Value	421
Mutual funds [Member]
Available-for-sale securities:
Amortized Cost	5,453
Gross Unrealized Gains
Gross Unrealized Losses	(70)
Fair Value	5,383
Certificates of deposit [Member]
Available-for-sale securities:
Amortized Cost	13,243	[1]
Gross Unrealized Gains		[1]
Gross Unrealized Losses	(33)	[1]
Fair Value	13,210	[1]
Federal Government Sponsored Enterprise notes [Member]
Available-for-sale securities:
Amortized Cost	3,188
Gross Unrealized Gains
Gross Unrealized Losses	(28)
Fair Value	3,160
International agency notes [Member]
Available-for-sale securities:
Amortized Cost	522
Gross Unrealized Gains
Gross Unrealized Losses	(17)
Fair Value	505
Corporate bonds [Member]
Available-for-sale securities:
Amortized Cost	3,068
Gross Unrealized Gains
Gross Unrealized Losses	(65)
Fair Value	3,003
U.S. Treasury notes [Member]
Available-for-sale securities:
Amortized Cost	5,358
Gross Unrealized Gains
Gross Unrealized Losses	(98)
Fair Value	$ 5,260

[1] Each of the Company's certificates of deposit has a CUSIP, was purchased in the secondary market through a broker, and may be sold in the secondary market.

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Marketable Securities (Details 1) $ in Thousands	Apr. 30, 2018 USD ($)
Marketable Securities [Abstract]
Within one year	$ 13,465
After one year through five years	12,335
After five years through ten years
After ten years
Total	$ 25,800

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Marketable Securities (Details 2) $ in Thousands	Apr. 30, 2018 USD ($)
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	$ (311)
Fair Value	28,121
Certificates of deposit [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	33
Fair Value	10,403
Federal Government Sponsored Enterprise notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	28
Fair Value	3,160
International agency notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	17
Fair Value	505
Corporate bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	70
Fair Value	5,369
Equity [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	65
Fair Value	3,003
U.S. Treasury notes [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	98
Fair Value	5,260
Municipal bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Unrealized Losses	0
Fair Value	$ 421

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Marketable Securities (Details Textual) - USD ($)	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Marketable Securities (Textual)
Proceeds from maturities and sales of available-for-sale securities	$ 436,000		$ 0
Realized gains from sales of available-for-sale securities	24,000	$ 0	24,000	$ 0
Realized losses from sales of available-for-sale securities

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Fair Value Measurements (Details) - USD ($) $ in Thousands		Apr. 30, 2018	Jul. 31, 2017
Available-for-sale securities:
Marketable Securities		$ 30,942
Fair Value Measurements, Recurring basis [Member]
Available-for-sale securities:
Marketable Securities		30,942
Rafael Pharmaceuticals convertible promissory notes		6,300	6,300
Total		37,242	6,300
Fair Value Measurements, Recurring basis [Member] | Level 1 [Member]
Available-for-sale securities:
Marketable Securities	[1]	10,643
Rafael Pharmaceuticals convertible promissory notes	[1]
Total	[1]	10,643
Fair Value Measurements, Recurring basis [Member] | Level 2 [Member]
Available-for-sale securities:
Marketable Securities	[2]	20,299
Rafael Pharmaceuticals convertible promissory notes	[2]
Total	[2]	20,299
Fair Value Measurements, Recurring basis [Member] | Level 3 [Member]
Available-for-sale securities:
Marketable Securities	[3]
Rafael Pharmaceuticals convertible promissory notes	[3]	6,300	6,300
Total	[3]	$ 6,300	$ 6,300

[1] quoted prices in active markets for identical assets or liabilities

[2] observable inputs other than quoted prices in active markets for identical assets and liabilities

[3] no observable pricing inputs in the market

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Fair Value Measurements (Details 1) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Defined Benefit Plan Disclosure [Line Items]
Balance, beginning of period			$ 6,300	$ 2,000
Balance, end of period	$ 6,300	$ 4,200	6,300	4,200
Level 3 [Member]
Defined Benefit Plan Disclosure [Line Items]
Balance, beginning of period	6,300	4,200	6,300	2,000
Purchases				2,000
Balance, end of period	6,300	4,200	6,300	4,200
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period

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Fair Value Measurements (Details Textual) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Fair Value Measurements (Textual)
Fair value of investments in hedge funds	$ 5,900	$ 0

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(Loss) Earnings Per Share (Details) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Weighted-average number of shares used in the calculation of basic and diluted earnings per share
Basic weighted-average number of shares	12,542	12,542	12,542	12,542

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Establishment of Valuation Allowance for Deferred Tax Asset (Details) - USD ($) $ in Millions	3 Months Ended	9 Months Ended
	Apr. 30, 2018	Apr. 30, 2018
Establishment of Valuation Allowance for Deferred Tax Asset (Textual)
Deferred revenue, description		A significant piece of objective negative evidence evaluated was the amendments to related party leases effective August 1, 2017, which, in comparison to fiscal year 2017, will reduce revenues by approximately $1.7 million annually through 2025.
Valuation allowance	$ 8.4

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Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals") (Details) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Schedule of consolidated balance sheets
Convertible promissory note (at fair value)	$ 6,300	$ 6,300
Warrants (at cost)	5,400	5,400
Right to receive additional shares (at cost)		400
Total investment in Rafael Pharmaceuticals	$ 11,700	$ 12,100

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Investment in Rafael Pharmaceuticals, Inc. ("Rafael Pharmaceuticals") (Details Textual) - USD ($)		1 Months Ended			9 Months Ended		12 Months Ended
	Dec. 07, 2015	May 18, 2018	Mar. 02, 2017	Sep. 16, 2016	Apr. 30, 2018	Apr. 30, 2017	Jul. 31, 2016	Sep. 19, 2017	Sep. 12, 2017	Jul. 31, 2017	Mar. 26, 2017	Jan. 31, 2017	Apr. 30, 2016	Jan. 31, 2016
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Warrants expiry date					Dec. 31, 2020
Principal amount
Additional amount of investment funded					$ 11,700,000					$ 12,100,000
Exercise price of warrants or rights, description					The exercise price of the warrant is the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments. The minimum initial and subsequent exercises of the warrant shall be for such number of shares that will result in at least $5 million of gross proceeds to Rafael Pharmaceuticals, or such lesser amount as represents 5% of the outstanding capital stock of Rafael Pharmaceuticals, or such lesser amount as may then remain unexercised.
CS Pharma Holdings, LLC [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage in non-operating subsidiary			45.00%		50.00%
Ownership percentage in subsidiary and holds percentage of interest					90.00%
Exercise warrants value					$ 10,000,000
IDT-Rafael Holdings [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage in non-operating subsidiary					50.00%
Percentage of capital stock			10.00%
Working capital financing remained outstanding											$ 1,600,000
Outstanding debt											$ 23,600,000
Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Ownership percentage in non-operating subsidiary					90.00%
Ownership percentage in subsidiary and holds percentage of interest					51.00%
Exercise of warrants purchases, description					The Company would need to pay approximately $71 million to exercise the warrant in full and approximately $56 million to purchase a 51% controlling stake. On an as-converted and fully diluted basis (for all convertible securities of Rafael Pharmaceuticals outstanding), the Company would need approximately $122 million to exercise the warrant in full and approximately $98 million to purchase a 51% controlling stake in Rafael Pharmaceuticals. Given the Company's anticipated available cash upon the Spin-Off, the Company would not be able to exercise the warrant in its entirety and the Company may never be able to exercise the warrant in full.
Warrants expiry date					Dec. 31, 2020
Amount of investment	$ 10,000,000
Additional amount of investment funded					$ 56,000,000		$ 2,000,000						$ 1,500,000	$ 500,000
Exercise warrants value	$ 10,000,000
Percentage of exercise warrants value					56.00%
Percentage of bonus shares received					10.00%				9.00%
Exercise price of warrants or rights, description					IDT-Rafael Holdings and CS Pharma were issued warrants to purchase shares of capital stock of Rafael Pharmaceuticals representing up to 56% of the then issued and outstanding capital stock of Rafael Pharmaceuticals, on an as-converted and fully diluted basis.
Payments for exercise of warrants					$ 71,000,000
Lipomedix Pharmaceuticals Ltd. [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Additional amount of investment funded					100,000							$ 300,000
Convertible Debt Securities [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Exercise warrants value					$ 122,000,000
Convertible promissory note (Series D Note) [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Convertible promissory note, rate of interest					3.50%
Convertible promissory note, maturity date					Sep. 16, 2018
Exercise warrants value					$ 10,000,000
Purchase of exercise the warrant					$ 98,000,000
Subsequent Event [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Description of arrangement		The Company entered into an arrangement with Rafael Pharmaceuticals to lend up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals' request, and in the Company's discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million. This loan is due and payable with 30 days' notice at the lender's demand, not to occur before June 30, 2018.
Convertible Notes Payable [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Convertible promissory note, rate of interest				3.50%			3.50%
Convertible promissory note, maturity date				Jul. 31, 2018			Jul. 31, 2018
Amount of investment				$ 8,000,000			$ 2,000,000
Howard Jonas [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Percentage of bonus shares issued								9.00%
Howard Jonas [Member] | IDT-Rafael Holdings [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Purchase price			$ 1,000,000
Howard Jonas [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Percentage of bonus shares received									1.00%
The Howard S. and Deborah Jonas Foundation [Member] | Series C Convertible Notes [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Principal amount			525,000
Howard Jonas and Deborah Jonas [Member] | Series C Convertible Notes [Member] | Rafael Pharmaceuticals [Member]
Consolidation, Less than Wholly Owned Subsidiary, Parent Ownership Interest, Effects of Changes, Net [Line Items]
Principal amount			$ 525,000

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Related Party Transactions (Details) - USD ($) $ in Thousands	9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017
Related Party Transactions [Abstract]
Balance at beginning of period	$ 23,693	$ 15,145
Payments by IDT on behalf of the Company	385	703
Rental revenues earned from IDT	(1,468)	(2,461)
Cash repayments, net of advances	885	19,767
Capitalized investment by IDT	(24,116)
Balance at end of period	$ (621)	$ 33,154

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Related Party Transactions (Details Textual) - USD ($)		1 Months Ended			9 Months Ended
	Jun. 11, 2018	May 31, 2018	May 18, 2018	Apr. 26, 2018	Apr. 30, 2018	Apr. 30, 2017	Mar. 26, 2018	Jul. 31, 2017	Jul. 31, 2016
Related Party Transactions (Textual)
Advances to invest in Rafael Pharmaceuticals and Lipomedix					$ 900,000	$ 9,400,000
Cash and cash equivalents					$ 10,605,000	$ 11,729,000		$ 11,756,000	$ 2,339,000
Class B common stock [Member]
Related Party Transactions (Textual)
Agreed to purchase, shares				1,254,200
Agreed to purchase issued and outstanding, percentage				10.00%
Agreed to purchase price				$ 6.89
Purchase price				$ 8,641,438
Rafael Pharmaceuticals [Member]
Related Party Transactions (Textual)
Cash and cash equivalents							$ 44,000,000
Marketable securities							4,000,000
Additional securities							2,000,000
Rafael Pharmaceuticals [Member] | Subsequent Event [Member]
Related Party Transactions (Textual)
Description of leasing arrangements			The Company entered into an arrangement with Rafael Pharmaceuticals to lend up to $1.7 million at an interest rate of 3.5%, compounded quarterly. At Rafael Pharmaceuticals' request, and in the Company's discretion, the Company will advance amounts to the borrower, not to exceed $1.7 million. This loan is due and payable with 30 days' notice at the lender's demand, not to occur before June 30, 2018.
Advances to invest in Rafael Pharmaceuticals and Lipomedix	$ 800,000
Cs Pharma Holdings [Member]
Related Party Transactions (Textual)
Cash and cash equivalents							$ 10,000,000
Effective ownership percentage							45.00%
August 1, 2017 [Member]
Related Party Transactions (Textual)
Lease expiration date					Apr. 30, 2025
Description of leasing arrangements					The related party leases expire in April 2025 and are for 88,631 square feet and include two parking spots per thousand square feet of space leased at 520 Broad Street and for 12,400 square feet in Israel. The annual rent will be approximately $2.0 million. The related parties have the right to terminate theses leases upon four months' notice, and upon early termination will pay a termination penalty equal to 25% of the portion of the rent due over the course of the remaining term. Related parties will have the right to lease an additional 25,000 square feet in the building located at 520 Broad Street on the same terms as the base lease, and other rights to a further 25,000 square feet should all available space be leased to other tenants.
Renewal term of lease					5 years
Description of annual rent					The annual rent will be approximately $2.0 million.
Mr. Jonas [Member] | Subsequent Event [Member]
Related Party Transactions (Textual)
Purchase price		$ 864,144
Total purchase price percentage		10.00%

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Income Taxes (Details)	9 Months Ended
	Apr. 30, 2018
U.S. federal statutory tax rate for fiscal year ending July 31, 2018	26.90%
U.S. federal statutory tax rate for fiscal years thereafter	21.00%
Maximum [Member]
U.S. federal statutory corporate tax rate	35.00%
Minimum [Member]
U.S. federal statutory corporate tax rate	21.00%

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Business Segment Information (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017	Apr. 30, 2018	Apr. 30, 2017
Segment Reporting Information [Line Items]
Revenues	$ 1,093	$ 1,282	$ 3,157	$ 4,018
(Loss) income from operations	(731)	(164)	(2,600)	118
Pharmaceuticals [Member]
Segment Reporting Information [Line Items]
Revenues
(Loss) income from operations	(258)		(631)
Real Estate [Member]
Segment Reporting Information [Line Items]
Revenues	1,093	1,282	3,157	4,018
(Loss) income from operations	$ (473)	$ (164)	$ (1,969)	$ 118

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Business Segment Information (Details1)	9 Months Ended
	Apr. 30, 2018	Apr. 30, 2017
Geographic Concentration Risk [Member]
Segment Reporting Information [Line Items]
Revenue from tenants located in Israel	3.00%	5.00%

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Business Segment Information (Details 2) - USD ($) $ in Thousands	Apr. 30, 2018	Jul. 31, 2017
Segment Reporting Information [Line Items]
Long-lived assets, net	$ 70,886	$ 74,037
Total Assets	115,084	86,204
United States [Member]
Segment Reporting Information [Line Items]
Long-lived assets, net	67,270	71,674
Total Assets	110,699	83,675
Foreign [Member]
Segment Reporting Information [Line Items]
Long-lived assets, net	3,616	2,363
Total Assets	$ 4,385	$ 2,529

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Business Segment Information (Details Textual)	9 Months Ended
	Apr. 30, 2018 Segments
Business Segment Information (Textual)
Number of operating segments	2