UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
for the quarterly period ended
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RAFAEL HOLDINGS, INC.
TABLE OF CONTENTS
i
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
RAFAEL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited, in thousands, except share and per share data)
| October
31, 2021 | July 31, 2021 | |||||||
| ASSETS | (Note 2) | |||||||
| CURRENT ASSETS | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Trade accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Due from Rafael Pharmaceuticals, net of allowance for losses on related party receivables of $ | ||||||||
| Due from Rafael Pharmaceuticals - line of credit, net of allowance for loan losses of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Equity investment – RP Finance LLC | ||||||||
| Due from RP Finance LLC, net of allowance for losses on related party receivables of $ | ||||||||
| Investments – Rafael Pharmaceuticals | ||||||||
| Investments – Other Pharmaceuticals | ||||||||
| Investments – Hedge Funds | ||||||||
| In-process research and development and patents | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND EQUITY | ||||||||
| CURRENT LIABILITIES | ||||||||
| Trade accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Other current liabilities | ||||||||
| Due to related parties | ||||||||
| Note payable, net of debt issuance costs | ||||||||
| Total current liabilities | ||||||||
| Other liabilities | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY | ||||||||
| Class A common stock, $ | ||||||||
| Class B common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income related to foreign currency translation adjustment | ||||||||
| Total equity attributable to Rafael Holdings, Inc. | ||||||||
| Noncontrolling interests | ||||||||
| TOTAL EQUITY | ||||||||
| TOTAL LIABILITIES AND EQUITY | $ | $ | ||||||
See accompanying notes to the unaudited consolidated interim financial statements.
1
RAFAEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited, in thousands, except share and per share data)
| Three Months Ended October 31, | ||||||||
| 2021 | 2020 | |||||||
| REVENUE | ||||||||
| Rental – Third Party | $ | $ | ||||||
| Rental – Related Party | ||||||||
| Parking | ||||||||
| Other – Related Party | ||||||||
| Total revenue | ||||||||
| COSTS AND EXPENSES | ||||||||
| Selling, general and administrative | ||||||||
| Research and development | ||||||||
| Depreciation and amortization | ||||||||
| Provision for loss on receivable pursuant to line of credit | ||||||||
| Provision for losses on related party receivables | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Interest expense, net | ( | ) | ||||||
| Gain on sale of building | ||||||||
| Impairment of investments - Other Pharmaceuticals | ( | ) | ||||||
| Impairment of cost method investment - Rafael Pharmaceuticals | ( | ) | ||||||
| Unrealized gain on investments - Hedge Funds | ||||||||
| Loss before income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | ( | ) | ||||||
| (Loss) earnings in equity of RP Finance | ( | ) | ||||||
| Consolidated net loss | ( | ) | ( | ) | ||||
| Net (loss) income attributable to noncontrolling interests | ( | ) | ||||||
| Net loss attributable to Rafael Holdings, Inc. | $ | ( | ) | $ | ( | ) | ||
| OTHER COMPREHENSIVE LOSS | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Foreign currency translation adjustment | ( | ) | ||||||
| Total comprehensive loss | ( | ) | ( | ) | ||||
| Comprehensive loss attributable to noncontrolling interests | ( | ) | ||||||
| Total comprehensive loss attributable to Rafael Holdings, Inc. | $ | ( | ) | $ | ( | ) | ||
| Loss per share | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of shares used in calculation of loss per share | ||||||||
| Basic and diluted | ||||||||
See accompanying notes to the unaudited consolidated interim financial statements.
2
RAFAEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands, except share and per share data)
| Three Months Ended October 31, 2021 | ||||||||||||||||||||||||||||||||||||
Common Stock, Series A | Common Stock, Series B | Additional Paid-in | Accumulated | Accumulated other comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | income | interests | Equity | ||||||||||||||||||||||||||||
| Balance at August 1, 2021 | $ | $ | $ | $ | ( | ) | $ | | $ | $ | ||||||||||||||||||||||||||
| Net loss for the three months ended October 31, 2021 | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ||||||||||||||||||||||||||||||||||
| Common stock sold to investors | ||||||||||||||||||||||||||||||||||||
| Transaction costs incurred in connection with sale of common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common stock sold to related party | ||||||||||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance at October 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Three Months Ended October 31, 2020 | ||||||||||||||||||||||||||||||||||||
Common Stock, Series A | Common Stock, Series B | Additional Paid-in | Accumulated | Accumulated other comprehensive | Noncontrolling | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | income | interests | Equity | ||||||||||||||||||||||||||||
| Balance at August 1, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net loss for the three months ended October 31, 2020 | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Balance at October 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
See accompanying notes to the unaudited consolidated interim financial statements.
3
RAFAEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Three
Months Ended October 31, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Consolidated net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile consolidated net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Deferred income taxes | ||||||||
| Net unrealized gain on investments - Hedge Funds | ( | ) | ( | ) | ||||
| Impairment of investments - Other Pharmaceuticals | ||||||||
| Impairment of cost method investment - Rafael Pharmaceuticals | ||||||||
| Provision for loss on receivable pursuant to line of credit | ||||||||
| Interest income | ( | ) | ||||||
| Provision for losses on related party receivables | ||||||||
| Loss (earnings) in equity of RP Finance | ( | ) | ||||||
| Provision for doubtful accounts | ||||||||
| Stock-based compensation | ||||||||
| Amortization of debt discount | ||||||||
| Gain on sale of building | ( | ) | ||||||
| Change in assets and liabilities: | ||||||||
| Trade accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Other assets | ||||||||
| Accounts payable and accrued expenses | ( | ) | ||||||
| Other current liabilities | ( | ) | ( | ) | ||||
| Due to related parties | ( | ) | ||||||
| Due from Rafael Pharmaceuticals | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Investing activities | ||||||||
| Purchases of property and equipment | ( | ) | ( | ) | ||||
| Payment to fund RP Finance Line of Credit | ( | ) | ( | ) | ||||
| Payment to Rafael Pharmaceuticals pursuant to Line of Credit | ( | ) | ||||||
| Proceeds from sale of building | ||||||||
| Proceeds related to distribution from Hedge Funds | ||||||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Financing activities | ||||||||
| Purchases of investments in equity securities | ||||||||
| Proceeds from exercise of options | ||||||||
| Proceeds from sale of common stock | ||||||||
| Payment of transaction costs incurred in connection with sale of common stock | ( | ) | ||||||
| Payments for taxes related to shares withheld for employee taxes | ( | ) | ||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents, and restricted cash | ( | ) | ||||||
| Net increase in cash and cash equivalents, and restricted cash | ||||||||
| Cash and cash equivalents, and restricted cash, beginning of period | ||||||||
| Cash and cash equivalents, and restricted cash, end of period | $ | $ | ||||||
| Reconciliation of cash and restricted cash | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Total cash and cash equivalents and restricted cash shown in statement of cash flows | $ | $ | ||||||
See accompanying notes to the unaudited consolidated interim financial statements.
4
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – DESCRIPTION OF BUSINESS
Rafael Holdings, Inc. (NYSE-RFL), (“Rafael Holdings” or the “Company”), a Delaware corporation, focused on discovering and developing novel cancer and immune metabolism therapies with the potential to improve and extend the lives of patients. The Company also owns commercial real estate assets, which it operates as a separate line of business.
The Company has an investment in Rafael Pharmaceuticals Inc., or Rafael Pharmaceuticals, that includes preferred and common equity interests and a warrant to purchase additional equity. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Rafael Pharmaceuticals in exchange for issuing Company Class B common stock to the other stockholders of Rafael Pharmaceuticals. On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Rafael Pharmaceuticals’ lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas, and following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat has recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In connection with the preparation of the Company’s first quarter financial statements, U.S. GAAP required that the Company assess the impact of the Data Events and determine whether the carrying values of the Company’s assets were impaired based upon the Company’s expectations to realize future value. In light of Data Events, the Company concluded that currently the likelihood of further development of and prospects for CPI-613 is uncertain and has fully impaired the value of its loans, receivables, and investment in Rafael Pharmaceuticals based upon its valuation of Rafael Pharmaceuticals.
In 2019, the Company established Barer Institute (“Barer”), as an early-stage small molecule research institute focused on developing a pipeline of novel therapeutic compounds, including compounds to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer is led by a team of scientists and academic advisors considered to be among the leading experts in cancer metabolism, chemistry, and drug development. In addition to its own internal discovery efforts, Barer is pursuing collaborative research agreements and in-licensing opportunities with leading scientists from top academic institutions. Farber Partners, LLC (“Farber”) was formed to support agreements with Princeton University’s Office of Technology Licensing for technology from the laboratory of Professor Joshua Rabinowitz, in the Department of Chemistry, Princeton University, including an exclusive worldwide license to its SHMT (serine hydroxymethyltransferase) inhibitor program. The Company also holds a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage oncological pharmaceutical company based in Israel. In addition, the Company has recently initiated efforts to develop other early stage pharmaceutical ventures including Levco Pharmaceuticals Ltd. (“Levco”), an Israeli company, established to partner with Dr. Alberto Gabizon and a leading institution in Israel on the development of novel compounds for cancer.
The Company’s commercial real estate holdings consist of a building at 520 Broad Street in Newark, New Jersey that serves as headquarters for the Company and certain other entities and hosts other tenants and an associated 800-car public garage, and a portion of a building in Israel.
The “Company” in these consolidated financial statements refers to Rafael Holdings and its subsidiaries on a consolidated basis. All significant intercompany accounts and transactions have been eliminated in consolidation.
5
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
All majority-owned subsidiaries are consolidated with all intercompany transactions and balances eliminated in consolidation or combination. The entities included in these consolidated financial statements are as follows:
| Company | Country of Incorporation | Percentage Owned | ||||
| Rafael Holdings, Inc. | % | |||||
| Broad Atlantic Associates, LLC | % | |||||
| IDT 225 Old NB Road, LLC | % | |||||
| IDT R.E. Holdings Ltd. | % | |||||
| Rafael Holdings Realty, Inc. | % | |||||
| Barer Institute, Inc. | % | |||||
| The Barer Institute, LLC | % | |||||
| Hillview Avenue Realty, JV | % | |||||
| Hillview Avenue Realty, LLC | % | |||||
| Rafael Medical Devices, LLC | % | |||||
| Levco Pharmaceuticals Ltd. | % | |||||
| Farber Partners, LLC | % | |||||
| Pharma Holdings, LLC | % | |||||
| LipoMedix Pharmaceuticals Ltd. | % | |||||
| Altira Capital & Consulting, LLC | % | |||||
| CS Pharma Holdings, LLC | %* | |||||
| * |
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company and its subsidiaries 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, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.
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 ended in the calendar year indicated (e.g., fiscal 2021 refers to the fiscal year ended July 31, 2021).
Operating results for the three months ended October 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2022. The balance sheet at July 31, 2021 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021, or the 2021 Form 10-K, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Liquidity
As of October 31, 2021, the Company had cash and
cash equivalents of $
6
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Risks and Uncertainties – COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV, which causes COVID-19, has proved to be highly contagious. It has since spread extensively throughout the world, including the United States, and was declared a global pandemic by the World Health Organization in March 2020. The Company actively monitors the outbreak, including the spread of new variants of interest, and its potential impact on the Company’s operations and those of the Company’s holdings.
The pandemic’s impacts on the Company’s and its affiliates’ operations and specifically the ongoing clinical trials of the Company’s pharmaceutical holdings have been actively managed by respective pharmaceutical management teams who have worked closely with the appropriate regulatory agencies to continue clinical trial activities with as minimal impact as possible including receiving waivers for certain clinical trial activities from the respective regulatory agencies to continue the studies.
Even with growing availability of testing and vaccines, there remains a general degree of uncertainty in the national commercial real estate market based on the COVID-19 pandemic. As a result, there remains a potential impact to the value of the Company’s real estate portfolio as well as efforts to monetize those assets.
The Company has implemented a number of measures to protect the health and safety of the Company’s workforce including a voluntary work-from-home policy for the Company’s workforce who can perform their jobs from home as well as restrictions on discretionary business travel.
Due to both known and unknown risks, including quarantines, closures and other restrictions resulting from the outbreak, operations and those of the Company’s holdings may be adversely impacted. Additionally, due to the evolving nature to the COVID-19 situation, the Company cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic may have on the Company’s business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and the severity of the spread of the COVID-19 pandemic in the U.S. and globally, the effectiveness of federal, state, local and foreign government actions on mitigation and spread of COVID-19, the pandemic’s impact on the U.S. and global economies, changes in the Company’s customers’ behavior emanating from the pandemic and how quickly the Company can resume our normal operations, among others. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares. For all these reasons, the Company may incur expenses or delays relating to such events outside of the Company’s control, which could have a material adverse impact on the Company’s business, and the Company will continue to monitor the situation closely.
Concentration of Credit Risk and Significant Customers
The Company routinely assesses the financial strength
of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited. For the three months
ended October 31, 2021, related parties represented
Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash represents escrow funds held in bank accounts owned by the Company to be used to pay the severance due to the chief executive officer for termination without cause, pursuant to his employment agreement. The Company does not have the right to use this cash balance for any other purpose.
7
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Reserve for Receivables
The Company evaluates accounts receivable, loans, interest and fees receivable for impairment under ASC 310, Receivables. The Company also evaluates the reserve for losses and estimates collectability of accounts receivable, loans, interest and fees receivable based on historical bad debt experience, management’s assessment of the financial condition of individual companies with which the Company conducts business, current market conditions, and reasonable and supportable forecasts of future economic conditions.
Investments
The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled affiliates. All significant intercompany accounts and transactions between the consolidated affiliates are eliminated.
Investments in businesses that the Company does not control, but in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters are accounted for using the cost method. The Company periodically evaluates its investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded in the accompanying consolidated statements of operations and comprehensive loss, and a new basis in the investment is established.
Variable Interest Entities
In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary.
Cost Method Investments – Rafael Pharmaceuticals (see Note 3) is a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance. Cost method investments are presented as “Investments – Rafael Pharmaceuticals.”
Equity Method Investments – RP Finance, LLC (“RP Finance”), (see Note 5), has been identified as a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of RP Finance that most significantly impact RP Finance’s economic performance and, therefore, is not required to consolidate RP Finance. The Company accounts for its investment in RP Finance using the equity method of accounting.
Revenue Recognition
The Company applies the five-step approach as described in ASC 606, Revenue from Contracts with Customers, which consists of the following: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when (or as) the entity satisfies a performance obligation.
The Company disaggregates its revenue by source within its consolidated statements of operations and comprehensive loss. As an owner and operator of real estate, the Company derives the majority of its revenue from leasing office and parking space to tenants at its properties. In addition, the Company earns revenue from recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs. Revenue from recoveries from tenants is recorded together with rental income on the consolidated statements of operations and comprehensive loss which is also consistent with the guidance under ASC 842, Leases.
8
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Contractual rental revenue is reported on a straight-line basis over the terms of the respective leases. Accrued rental income, included within other assets on the consolidated balance sheets, represents cumulative rental income earned in excess of rent payments received pursuant to the terms of the individual lease agreements.
The Company also earns revenue from parking which is derived primarily from monthly and transient daily parking. The monthly and transient daily parking revenue falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied, consistent with the Company’s previous accounting.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments or parking customers to pay amounts due.
Research and Development Costs
Research and development costs and expenses incurred by consolidated entities consist primarily of salaries and related personnel expenses, stock-based compensation, fees paid to external service providers, laboratory supplies, costs for facilities and equipment, license costs, and other costs for research and development activities. Research and development expenses are recorded in operating expenses in the period in which they are incurred. Estimates have been used in determining the liability for certain costs where services have been performed but not yet invoiced. The Company monitors levels of performance under each significant contract for external service providers, including the extent of patient enrollment and other activities through communications with the service providers to reflect the actual amount expended.
Contingent milestone payments associated with acquiring rights to intellectual property are recognized when probable and estimable. These amounts are expensed to research and development when there is no alternative future use associated with the intellectual property.
Stock-Based Compensation
The Company accounts for stock-based compensation using the provisions of ASC 718, Stock Based Compensation, which requires the recognition of the fair value of stock-based compensation. Stock-based compensation is estimated at the grant date based on the fair value of the awards. The Company accounts for forfeitures as they occur. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss.
Recently Issued Accounting Standards Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
NOTE 3 – INVESTMENT IN RAFAEL PHARMACEUTICALS
Equity Investment in Rafael Pharmaceuticals and Impairment of Cost Method Investment
Rafael Pharmaceuticals is a clinical stage, cancer metabolism-based therapeutics company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells.
The Company owns equity interests and rights in
Rafael Pharmaceuticals through a
9
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Pharma Holdings owns
A trust for the benefit of the children of Howard
Jonas (Chairman of the Board and former Chief Executive Officer of the Company and former Chairman of the Board of Rafael Pharmaceuticals)
holds a financial instrument (the “Instrument”) that owns
Pharma Holdings holds 44.0 million shares of Rafael Pharmaceuticals Series D Convertible Preferred Stock and a warrant to increase the combined ownership of Pharma Holdings and CS Pharma to up to 56% of the fully diluted equity interests in Rafael Pharmaceuticals (the “Warrant”). The Warrant is exercisable at the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments.
On March 25, 2020, the Board of Directors of Rafael
Pharmaceuticals extended the expiration date of the Warrant held by Pharma Holdings to purchase shares of the Warrant from December 31,
2020 to June 30, 2021, and on August 31, 2020 the Board of Directors of Rafael Pharmaceuticals further extended the expiration date of
the Warrant held by Pharma Holdings, LLC to purchase shares of the Warrant to August 15, 2021. In connection with the Merger Agreement,
the Warrant expiration was extended and will expire upon the earlier of (i) upon the occurrence of the effective time of the Merger (the
“Effective Time”), or (ii) if the Effective Time does not occur, the date that is calculated by adding (A) the number of calendar
days the Merger Agreement has been in effect prior to its termination in accordance with its terms, to (B) August 15, 2021. Accordingly,
the Company holds an effective
Pharma Holdings also holds certain governance rights in Rafael Pharmaceuticals including appointment of directors. Pharma Holdings is not the primary beneficiary of Rafael Pharmaceuticals as it does not control or direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance.
CS Pharma holds
The Company and its subsidiaries collectively
own securities representing
The Series D Convertible Preferred Stock has a stated value of $1.25 per share (subject to appropriate adjustment to reflect any stock split, combination, reclassification or reorganization of the Series D Preferred Stock or any dilutive issuances, as described below). Holders of Series D Stock are entitled to receive non-cumulative dividends when, as and if declared by the Board of Rafael Pharmaceuticals, prior to any dividends to any other class of capital stock of Rafael Pharmaceuticals. In the event of any liquidation, dissolution or winding up of the Company, or in the event of any deemed liquidation, proceeds from such liquidation, dissolution or winding up shall be distributed first to the holders of Series D Stock. Except with respect to certain major decisions, or as required by law, holders of Series D Stock vote together with the holders of the other preferred stock and common stock and not as a separate class.
The Company serves as the managing member of Pharma
Holdings, and Pharma 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 Pharma Holdings to
The Company evaluated its investments in Rafael Pharmaceuticals in accordance with ASC 323, Investments – Equity Method and Joint Ventures, to establish the appropriate accounting treatment for its investment and has concluded that its investment did not meet the criteria for the equity method of accounting or consolidation and is carried at cost.
Rafael Pharmaceuticals is a VIE; however, the Company has determined that it is not the primary beneficiary as it does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance. In addition, the interests held in Rafael Pharmaceuticals are Series D Convertible Preferred Stock and do not represent in-substance common stock.
10
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The Instrument holds a contractual right to receive
additional shares of Rafael Pharmaceuticals capital stock equal to
Pharma Holdings holds the Warrant to purchase
a significant stake in Rafael Pharmaceuticals, as well as other equity and governance rights in Rafael Pharmaceuticals.
On January 28, 2021, Pharma Holdings partially exercised the Warrant to maintain the 51% ownership percentage and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings.
On June 17, 2021, the Company entered into a merger
agreement with Rafael Pharmaceuticals. Upon closing of the merger, each outstanding share of each class of Rafael Pharmaceuticals capital
stock will be automatically cancelled and will entitle a holder of shares of a given class of Rafael Pharmaceuticals capital stock to
receive
Due to the Data Events, during the three months
ended October 31, 2021, the Company recorded an impairment charge of approximately $
The impairment charge of $
The Company filed a preliminary proxy statement/prospectus related to the Merger and the issuance of shares to interest holders of Rafael Pharmaceuticals thereunder with the SEC on September 14, 2021.
Line of Credit to Rafael Pharmaceuticals and Impairment of Related Receivable
On September 24, 2021, the Company entered into
a Line of Credit Loan Agreement (the “Line of Credit Agreement”) with Rafael Pharmaceuticals (the “Debtor”) in
which the Debtor may borrow up to an aggregate amount of $
Due to the Data Events, as of October 31, 2021,
the Company recorded a full reserve on the amounts due to the Company from Rafael Pharmaceuticals related to the Line of Credit Agreement
for $
11
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4 – INVESTMENT IN ALTIRA
The Company entered into a Membership Interest
Purchase Agreement (the “Purchase Agreement”) on May 13, 2020 with a member (the “First Seller”) of Altira Capital
& Consulting, LLC (“Altira”). Pursuant to the Purchase Agreement, on May 13, 2020,
The Company has accounted for the purchase of
the initial
For the fiscal year ended July 31, 2020, the Company
determined that the investment in Altira was fully impaired as of the acquisition date as there were no probable cash flows, and accordingly,
the investment had no value. The Company recorded an impairment charge of $
On December 7, 2020,
Certain of the post-closing payments may be made, at the Company’s discretion, in cash or shares of the Company’s Class B common stock based on the ten-day average share price of the Company’s Class B common stock prior to the date of payment or any combination thereof.
The purchase of the additional membership interests
was accounted for as an asset acquisition, as Altira is not considered a business in accordance with the guidance in ASC 805, Business
Combinations. The membership interests acquired do not consist of inputs, processes, and are not generating outputs, as required in
ASC 805 to qualify as a business, and are therefore accounted for as an asset acquisition. Although this transaction is considered an
asset acquisition, there are no assets or liabilities to be recorded as of the acquisition date as Altira does not have any business operations.
The cost of the investment was determined to be $
12
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
For the year ended July 31, 2021, the Company
determined that the investment in Altira was fully impaired as of the acquisition date as there were no probable cash flows, and accordingly,
had no value. The Company recorded an impairment charge of $
During the year ended July 31, 2021, the Company
issued
Additionally, the Company issued
Upon the December 2020 acquisition of the additional
NOTE 5 – INVESTMENT IN RP FINANCE, LLC
On February 3, 2020, Rafael Pharmaceuticals entered
into a Line of Credit Loan Agreement (“Line of Credit Agreement”) with RP Finance which provides a revolving commitment of
up to $
The Company owns 37.5% of the equity interests in RP Finance and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. Howard Jonas owns 37.5% of the equity interests in RP Finance, and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. The remaining 25% equity interests in RP Finance are owned by other shareholders of Rafael Pharmaceuticals.
Under the Line of Credit Agreement, all funds borrowed will bear interest at the mid-term Applicable Federal Rate published by the U.S. Internal Revenue Service. The maturity date is the earlier of February 3, 2025, upon a change of control of Rafael Pharmaceuticals or a sale of Rafael Pharmaceuticals or its assets. Rafael Pharmaceuticals can draw on the facility on 60 days’ notice. The funds borrowed under the Line of Credit Agreement must be repaid out of certain proceeds from equity sales by Rafael Pharmaceuticals.
In connection with entering into the Line of Credit
Agreement, Rafael Pharmaceuticals agreed to issue to RP Finance shares of its common stock representing
RP Finance has been identified as a VIE; however,
the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of RP
Finance that most significantly impact RP Finance’s economic performance and, therefore, is not required to consolidate RP Finance.
Therefore, the Company will use the equity method of accounting to record its investment in RP Finance. The Company has recognized a loss
of approximately $
As of October 31, 2021,
13
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Impairment of Equity Method Investment
Due to the Data Events, during the three months
ended October 31, 2021, the Company recorded equity in loss of RP Finance of $
NOTE 6 – INVESTMENT IN LIPOMEDIX PHARMACEUTICALS LTD.
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 of October 31, 2021, the Company held
In November 2019, the Company provided bridge
financing in the principal amount of $
In January 2020, the Company provided bridge financing
in the principal amount of $
In March 2020, the Company provided bridge financing
in the principal amount of $
In May 2020, the Company entered into a Share
Purchase Agreement with LipoMedix to purchase
In March 2021, the Company provided bridge financing
in the principal amount of up to $
NOTE 7 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
| ● | Level 1 – quoted prices in active markets for identical assets or liabilities; |
| ● | Level 2 – quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or |
| ● | Level 3 – unobservable inputs for the asset or liability, such as discounted cash flow models or valuations. |
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
14
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The following is a listing of the Company’s assets required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of October 31, 2021 and July 31, 2021:
| October 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | (unaudited, in thousands) | |||||||||||||||
| Hedge funds | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| July 31, 2021 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | (in thousands) | |||||||||||||||
| Hedge funds | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
At October 31, 2021 and July 31, 2021, the Company did not have any liabilities measured at fair value on a recurring basis.
The following table summarizes the changes in the fair value of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
| Three Months Ended | ||||||||
| October 31, | ||||||||
| 2021 | 2020 | |||||||
| (unaudited, in thousands) | ||||||||
| Balance, beginning of period | $ | $ | ||||||
| Liquidation of Hedge Fund Investments | ( | ) | ||||||
| Total gain included in earnings | ||||||||
| Balance, end of period | $ | $ | ||||||
Hedge funds classified as Level 3 include investments
and securities which may not be based on readily observable data inputs. The availability of observable inputs can vary from security
to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and
not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. The fair value
of these assets is estimated based on information provided by the fund managers or the general partners. Therefore, these assets are classified
as Level 3. In October 2020, the Company received a $
The Company received proceeds from the sale of
a portion of the Company’s investments in Hedge Funds in October 2020 and May 2021 of approximately $
The Company holds $
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, investment in equity securities, trade accounts receivable, and accounts payable. At October 31, 2021 and July 31, 2021, 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.
15
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Other assets and other liabilities. At October 31, 2021 and July 31, 2021, 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 trade accounts receivable, trade accounts payable, and due from related parties. The recorded carrying amounts of trade accounts receivable, trade accounts payable and due from related parties approximate 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 October 31, 2021 or July 31, 2021.
NOTE 8 – TRADE ACCOUNTS RECEIVABLE
Trade Accounts Receivable consisted of the following:
| October 31, 2021 | July 31, 2021 | |||||||
| (unaudited, in thousands) | (in thousands) | |||||||
| Trade Accounts Receivable | $ | $ | ||||||
| Accounts Receivable – Related Party | ||||||||
| Less Allowance for Doubtful Accounts | ( | ) | ( | ) | ||||
| Trade Accounts Receivable, net | $ | $ | ||||||
The current portion of deferred rental income
included in Prepaid Expenses and Other Current Assets was approximately $
The noncurrent portion of deferred rental income
included in Other Assets was approximately $
NOTE 9 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
| October 31, 2021 | July 31, 2021 | |||||||
| (unaudited, in thousands) | (in thousands) | |||||||
| Building and Improvements | $ | $ | ||||||
| Land | ||||||||
| Furniture and Fixtures | ||||||||
| Other | ||||||||
| Less Accumulated Depreciation | ( | ) | ( | ) | ||||
| Total | $ | $ | ||||||
Other property and equipment consist of other equipment and miscellaneous computer hardware.
Depreciation expense pertaining to property and
equipment was approximately $
The Company’s headquarters are located at 520 Broad Street in Newark, New Jersey, where it occupies office space in the building owned by its subsidiary.
16
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 10 – LOSS PER SHARE
Basic net loss per share is computed by dividing net loss 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 per shares includes potentially dilutive securities such as stock options, warrants to purchase common stock, and other convertible instruments unless the result of inclusion would be anti-dilutive. These securities have been excluded from the calculation of diluted net loss per shares for the three months ended October 31, 2021 and October 31, 2020 because all such securities are anti-dilutive for all periods presented.
The following table summarizes the Company’s potentially dilutive securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:
| Three Months Ended October 31, | ||||||||
| 2021 | 2020 | |||||||
| Shares issuable upon exercise of stock options | ||||||||
| Shares issuable upon exercise of warrants to purchase Class B common stock | ||||||||
The diluted loss per share computation equals basic loss per share for the three months ended October 31, 2021 and 2020 because the Company had a net loss and the impact of the assumed exercise of stock options and warrants would have been anti-dilutive.
NOTE 11 – NOTE PAYABLE
On July 9, 2021, the Company, as guarantor, Rafael
Holdings Realty, Inc., a wholly-owned subsidiary of the Company (“Realty”), as pledgor, and Broad-Atlantic Associates, LLC,
a wholly-owned subsidiary of Realty (the “Borrower,” and together with the Company and Realty, the “Borrower Parties”),
as borrower, entered into a loan agreement (the “Loan Agreement”) with 520 Broad Street LLC, a third-party lender (the “Lender”).
The Loan Agreement provides for a loan in the amount of $
The Note Payable bears interest at a rate per annum equal to seven and one-quarter percent (7.25%) and thereafter at an interest rate per annum equal to the 30-day LIBOR Rate, as published in The Wall Street Journal, plus 6.90% per annum, but in no event less than seven and one-quarter percent (7.25%) per annum. The Note Payable is due on August 1, 2022, subject to the Company’s option to extend the maturity date until August 1, 2023 for a fee equal to three-quarters of one percent (0.75%) of the Note Payable.
The Loan Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Loan Agreement, including covenants and restrictions that, among other things, restrict the Borrower’s ability to incur liens, or transfer, lease or sell the collateral as defined in the Loan Agreement. A failure to comply with these covenants could permit the Lender to declare the Borrower’s obligations under the Loan Agreement, together with accrued interest and fees, to be immediately due and payable.
Interest expense under the Note Payable amounted
to $
Unamortized debt issuance costs on the Note Payable
totaled $
NOTE 12 – RELATED PARTY TRANSACTIONS
IDT Corporation
The Company has historically maintained an intercompany
balance due to/from related parties that relates to cash advances for investments, loan repayments, charges for services provided to the
Company by IDT Corporation, or IDT, and payroll costs for the Company’s personnel that were paid by IDT. The Company also receives
rental income from various companies under common control to IDT. The Company recorded expense of approximately $
17
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
IDT leases approximately
During the year ended July 31, 2021, IDT exercised
Rafael Pharmaceuticals
The Company provides Rafael Pharmaceuticals with
administrative, finance, accounting, tax and legal services. Howard S. Jonas served as the former Chairman of the Board of Rafael Pharmaceuticals
and owns an equity interest in Rafael Pharmaceuticals. Ameet Mallik currently serves as Chairman of Rafael Pharmaceuticals. The Company
billed Rafael Pharmaceuticals $
The balance owed to the Company by Rafael Pharmaceuticals
as of October 31, 2021, was written off, resulting in a loss on related party receivable of $
Levco Pharmaceuticals Ltd
On September 8, 2020, Levco entered into a research
and development consulting agreement with Dr. Alberto Gabizon for a two-year period. Under the agreement, in exchange for the services
provided, Levco will pay Dr. Gabizon $
On September 8, 2020, Levco entered into a Sponsored
Research Agreement with a company for a research program related to patent applications with payments totaling $
Farber Partners, LLC
Farber, a controlled subsidiary of the Company, reached agreements with Princeton University including to in-license certain patents and related information related to the serine hydroxymethyltransferase (SHMT) inhibitor program developed by the laboratory of Dr. Joshua D. Rabinowitz at Princeton. Farber will pay Princeton minimum annual royalty payments, in addition to percentage royalties and a percentage of any sublicense revenue. Additionally, there are development milestone payments which Farber will pay Princeton for the first three products developed by Farber, or any sublicensees or affiliates.
Pharma Holdings
On January 28, 2021, Pharma Holdings partially exercised the Warrant and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings.
Related Party Rental Income
The Company leases space to related parties which represented approximately 51% and 49% of the Company’s total revenue for the three months ended October 31, 2021 and 2020, respectively. See Note 17 for future minimum rent payments from related parties and other tenants.
Investment in Altira
In May 2020, the Company acquired its first membership
interest of
18
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
RP Finance
For the three months ended October 31, 2021, the Company recognized an approximately $575 thousand loss and for the three months ended October 31, 2020, the Company recognized approximately $96 thousand in income from its ownership interests in RP Finance. As of October 31, 2021, the equity method investment in RP Finance was reduced to $0 due to the Data Events. The Company recorded a loss on related party receivables of $9.375 million related to amounts owed by RP Finance (see Note 5).
Howard Jonas, Chairman of the Board and Former Chief Executive Officer
In December 2020, two entities, on whose Boards
of Directors Howard Jonas, the Registrant’s Chairman of the Board and former Chief Executive Officer serves, each purchased
NOTE 13 – INCOME TAXES
During the three months ended October 31, 2021
and 2020, the Company recognized an income tax provision of $
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 with 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 balances.
NOTE 14 – BUSINESS SEGMENT INFORMATION
The Company conducts business as
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 Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials and the Real Estate segment based primarily on results of operations. All investments in Rafael Pharmaceuticals and assets and expenses associated with LipoMedix, Barer, Levco, Farber, and Rafael Medical Devices are tracked separately in the Pharmaceuticals segment.
The Pharmaceuticals segment is comprised of preferred and common equity interests and the Warrant to purchase equity interests in Rafael Pharmaceuticals, a majority equity interest in LipoMedix, Barer, Levco, Farber, and Rafael Medical Devices. To date, the Pharmaceuticals segment has not generated any revenues.
The Real Estate segment consists of
19
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Operating results for the business segments of the Company are as follows:
| (unaudited, in thousands) | Pharmaceuticals | Real Estate | Total | |||||||||
| Three Months Ended October 31, 2021 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Three Months Ended October 31, 2020 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
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):
Three Months Ended October 31, (unaudited) | 2021 | 2020 | ||||||
| Revenue from tenants located in Israel | % | % | ||||||
Net long-lived assets and total assets held outside of the United States, which are located in Israel, were as follows:
| (unaudited, in thousands) | United States | Israel | Total | |||||||||
| October 31, 2021 | ||||||||||||
| Long-lived assets, net | $ | $ | $ | |||||||||
| Total assets | ||||||||||||
| July 31, 2021 | ||||||||||||
| Long-lived assets, net | $ | $ | $ | |||||||||
| Total assets | ||||||||||||
NOTE 15 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On July 12, 2019, the Company received a Citation
and Notification of Penalty from the Occupational Safety and Health Administration of the U.S. Department of Labor, or OSHA, related to
an OSHA inspection of 520 Broad Street, Newark, New Jersey. The citation seeks to impose penalties related to alleged violations of the
Occupation Safety and Health Act of 1970 at 520 Broad Street. On July 31, 2019, the Company filed a Notice of Contest with OSHA contesting
the citation in its entirety. On February 14, 2020, the Company entered into a Settlement Agreement with OSHA, as related to the citation
received on July 12, 2019.
On December 31, 2019, an employee of the Company filed a complaint in connection with the incident that led to the OSHA inspection noted above for personal injuries against the Company and other parties in the New Jersey Supreme Court for an incident that took place on January 31, 2019 at 520 Broad Street, Newark, New Jersey. The Company is vigorously defending its interests in this matter. The loss is considered remote and no accrual has been recorded.
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, other than noted above, 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.
20
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 16 – EQUITY
Class A Common Stock and Class B Common Stock
The rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. The holders of Class A common stock and Class B common stock receive identical dividends per share when and if declared by the Company’s Board of Directors. In addition, the holders of Class A common stock and Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common stock do not have any other contractual participation rights. The holders of Class A common stock are entitled to three votes per share and the holders of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option of the holder. Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock.
On May 27, 2021, the Company filed a Registration
Statement on Form S-3, whereby the Company may sell up to $
On June 1, 2021, the Company filed a Registration
Statement on Form S-3 and issued
On August 19, 2021, the Company entered into a
Securities Purchase Agreement (the “Institutional Purchase Agreement”) with institutional investors (the “Institutional
Investors”) and a Securities Purchase Agreement with I9Plus, LLC, (the “Jonas Purchase Agreement”), an entity affiliated
with Howard S. Jonas, the Chairman of the Board of Directors of the Company. On August 24, 2021,
On August 19, 2021, in connection with the Institutional Purchase Agreement, the Company entered into a Registration Rights Agreement with the Institutional Investors whereby the Company agreed to prepare and file a registration statement with the SEC within 30 days after the earlier of (i) the date of the closing of the Merger Agreement, and (ii) the date the Merger Agreement is terminated in accordance with its terms, for purposes of registering the resale of the Institutional Shares and any shares of Class B common stock issued as a dividend or other distribution with respect to the Institutional Shares.
21
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Stock Options
A summary of stock option activity for the Company is as follows:
Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value (in thousands) | |||||||||||||
| Outstanding at July 31, 2021 | $ | $ | ||||||||||||||
| Granted | ||||||||||||||||
| Exercised | ||||||||||||||||
| Cancelled / Forfeited | ( | ) | ||||||||||||||
| Outstanding at October 31, 2021 | $ | $ | ||||||||||||||
| Exercisable at October 31, 2021 | $ | $ | ||||||||||||||
At October 31, 2021, there are unrecognized
compensation costs related to non-vested stock options of $
The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the three months ended October 31, 2021:
| Risk-free interest rate | % | ||
| Expected term (in years) | |||
| Expected volatility | % | ||
| Expected dividend yield | % |
Restricted Stock
The fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.
A summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:
Number of Non-vested Shares | Weighted Average Grant Date | |||||||
| Outstanding at July 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Cancelled / Forfeited | ( | ) | ||||||
| Non-vested shares at October 31, 2021 | $ | |||||||
At October 31, 2021, there was $
Securities Purchase Agreement
On December 7, 2020, Rafael Holdings entered into
a Securities Purchase Agreement (the “SPA”) for the sale of
22
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Approximately $
Equity-classified Warrants
In connection with the Share Purchase Agreement,
each purchaser was granted warrants to purchase twenty percent (
During the year ended July 31, 2021, IDT
and Genie each exercised
There were no exercises of warrants during the
three months ended October 31, 2021. At October 31, 2021, the Company had outstanding warrants to purchase
Grant to Board of Directors
Pursuant to the Company’s 2018 Equity Incentive Plan, three of our four non-employee directors of the Company were granted 4,203 restricted shares of our Class B common stock in January 2020 and 4,203 restricted shares of our Class B common stock in January 2021 which fully vested on the date of the grants. The fair value of the awards on the date of the grants were approximately $286,000 and $208,000 in January 2021 and January 2020, respectively, which was included in selling, general and administrative expense.
NOTE 17 – LEASES
The future contractual minimum lease payments to be received (excluding operating expense reimbursements) by the Company as of October 31, 2021, under non-cancellable operating leases which expire on various dates through 2028 are as follows:
| Year ending July 31, | Related Parties | Other | Total | |||||||||
| (in thousands) | ||||||||||||
| 2022 (remaining) | $ | $ | $ | |||||||||
| 2023 | ||||||||||||
| 2024 | ||||||||||||
| 2025 | ||||||||||||
| 2026 | ||||||||||||
| Thereafter | ||||||||||||
| Total Minimum Future Rental Income | $ | $ | $ | |||||||||
23
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 18 – SUBSEQUENT EVENTS
On November 1, 2021, the Company issued
On November 11, 2021, the Company entered into
a share purchase agreement with LipoMedix to purchase up to
As of the date of the Share Purchase Agreement,
there was an outstanding loan balance including principal of $
On November 21, 2021, Ameet Mallik resigned as
Chief Executive Officer of the Company, effective January 31, 2022. Mr. Mallik will remain as a director of the Company. The Company expects
to incur approximately $
On November 21, 2021, the Board of Directors decided
that four additional members of the executive team will depart at various dates during January 2022. The Company expects to incur approximately
$
24
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
Rafael Holdings, Inc. (NYSE-RFL), (“Rafael Holdings” or the “Company”), a Delaware corporation, is focused on discovering and developing novel cancer and immune metabolism therapies with the potential to improve and extend the lives of patients. The Company also owns commercial real estate assets, which it operates as a separate line of business.
The Company has an investment in Rafael Pharmaceuticals, Inc., or Rafael Pharmaceuticals, that includes preferred and common equity interests and a warrant to purchase additional equity. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Rafael Pharmaceuticals in exchange for issuing Company Class B common stock to the other stockholders of Rafael Pharmaceuticals. On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Rafael Pharmaceuticals’ lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas, and following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat has recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In connection with the preparation of the Company’s first quarter financial statements, U.S. GAAP required that the Company assess the impact of the Data Events and determine whether the carrying values of the Company’s assets were impaired based upon the Company’s expectations to realize future value. In light of Data Events, the Company concluded that currently the likelihood of further development of and prospects for CPI-613 is uncertain and has fully impaired the value of its loans, receivables, and investment in Rafael Pharmaceuticals based upon its valuation of Rafael Pharmaceuticals.
In 2019, the Company established Barer Institute (“Barer”), as an early-stage small molecule research institute focused on developing a pipeline of novel therapeutic compounds, including compounds to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer is led by a team of scientists and academic advisors considered to be among the leading experts in cancer metabolism, chemistry, and drug development. In addition to its own internal discovery efforts, Barer is pursuing collaborative research agreements and in-licensing opportunities with leading scientists from top academic institutions. Farber Partners, LLC (“Farber”) was formed to support agreements with Princeton University’s Office of Technology Licensing for technology from the laboratory of Professor Joshua Rabinowitz, in the Department of Chemistry, Princeton University, including an exclusive worldwide license to its SHMT (serine hydroxymethyltransferase) inhibitor program. The Company also holds a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage oncological pharmaceutical company based in Israel. In addition, the Company has recently initiated efforts to develop other early stage pharmaceutical ventures including Levco Pharmaceuticals Ltd. (“Levco”), an Israeli company, established to partner with Dr. Alberto Gabizon and a leading institution in Israel on the development of novel compounds for cancer.
The Company’s commercial real estate holdings consist of a building at 520 Broad Street in Newark, New Jersey that serves as headquarters for the Company and certain other entities and tenants and an associated 800-car public garage, and a portion of a building in Israel. The Company sold other real estate holdings in 2020. We continue to seek opportunities to maximize the value of our real estate holdings in multiple ways and we are also evaluating other avenues of maximizing value through redevelopment of vacant space into more marketable and thereby valuable uses.
On June 17, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with RH Merger I, Inc., a Delaware corporation and a wholly-owned subsidiary of Holdings, RH Merger II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of Holdings and Rafael Pharmaceuticals, Inc., a Delaware corporation (“Rafael Pharmaceuticals” or “Pharma”), to acquire full ownership of Rafael Pharmaceuticals in exchange for issuing Company Class B common stock to the other stockholders of Rafael Pharmaceuticals.
We filed a preliminary proxy statement/prospectus with the SEC on September 14, 2021.
We have provided debt and equity financing to Rafael Pharmaceuticals.
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Business Update - COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, has proved to be highly contagious. It has since spread extensively throughout the world, including the United States, and was declared a global pandemic by the World Health Organization in March 2020.. We actively monitor the outbreak, including the spread of new variants of interest, and its potential impact on our operations and those of our holdings.
The pandemic’s impacts on our and our affiliates’ operations and specifically the ongoing clinical trials of our pharmaceutical holdings have been actively managed by respective pharmaceutical management teams who have worked closely with the appropriate regulatory agencies to continue clinical trial activities with as minimal impact as possible including receiving waivers for certain clinical trial activities from the respective regulatory agencies to continue the studies.
Even with growing availability of testing and vaccines, there remains a general degree of uncertainty in the national commercial real estate market based on the COVID-19 pandemic. As a result there remains a potential impact to the value of our real estate portfolio as well as efforts to monetize those assets.
We have implemented a number of measures to protect the health and safety of our workforce including a voluntary work-from-home policy for our workforce who can perform their jobs from home as well as restrictions on discretionary business travel.
Due to both known and unknown risks, including quarantines, closures and other restrictions resulting from the outbreak, operations and those of our holdings may be adversely impacted. Additionally, due to the evolving nature to the COVID-19 situation, we cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic may have on our business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and the severity of the spread of the COVID-19 pandemic in the U.S. and globally, the effectiveness of federal, state, local and foreign government actions on mitigation and spread of COVID-19, the pandemic’s impact on the U.S. and global economies, changes in our customers’ behavior emanating from the pandemic and how quickly we can resume our normal operations, among others. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares. For all these reasons, we may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, and we will continue to monitor the situation closely.
Results of Operations
Our business consists of two reportable segments - Pharmaceuticals and Real Estate. We evaluate the performance of our Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials and our Real Estate segment based primarily on results of operations. Accordingly, the income and expense line items below loss from operations are only included in the discussion of consolidated results of operations.
Three Months Ended October 31, 2021 Compared to Three Months Ended October 31, 2020
Pharmaceuticals Segment
Our consolidated expenses for our Pharmaceuticals segment were as follows:
| Three Months Ended October 31, | Change | |||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| General and administrative | $ | (12,097 | ) | $ | (1,620 | ) | (10,477 | ) | (647 | )% | ||||||
| Research and development | (2,153 | ) | (515 | ) | (1,638 | ) | (318 | )% | ||||||||
| Provision for loss on receivable pursuant to line of credit | (25,000 | ) | — | (25,000 | ) | (100 | )% | |||||||||
| Provision for loss on related party receivables | (10,283 | ) | — | (10,283 | ) | (100 | )% | |||||||||
| Loss from operations | $ | (49,533 | ) | $ | (2,135 | ) | (47,398 | ) | (2220 | )% | ||||||
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To date, the Pharmaceuticals segment has not generated any revenues. The entirety of the expenses in the Pharmaceuticals segment relate to the activities of LipoMedix, Barer, Levco, Farber, and Rafael Medical Devices. For the three months ended October 31, 2021 and 2020, we held a 100% interest in Barer, a 68% interest in LipoMedix, a 95% and 0% interest in Levco, respectively, and a 93% and 0% interest in Farber, respectively. Rafael Medical Devices in which we have a 100% interest, was created in fiscal year 2021.
General and administrative expenses. General and administrative expenses consist mainly of payroll, benefits, facilities, consulting and professional fees. The increase in general and administrative expenses during the three months ended October 31, 2021 compared to the three months ended October 31, 2020 is primarily due to an increase non-cash share-based compensation expense of approximately $7.3 million, an increase in professional fees of approximately $1.6 million and payroll of approximately $1.3 million.
Research and development expenses. Research and development increased for the three months ended October 31, 2021 compared to the three months ended October 31, 2020 due to increased activity at Barer, Levco, Farber, and Rafael Medical Devices.
Loss on line of credit. Due to the Data Events, as of October 31, 2021, the Company recorded a full reserve on the $25 million due to the Company from Rafael Pharmaceuticals related to the Line of Credit Agreement.
Loss on related party receivables. Due to the Data Events, for the three months ended October 31, 2021, the Company recorded a loss of $10.1 million related to the full reserve recorded on the RP Finance receivable of $9.375 million and the Rafael Pharmaceuticals receivable of $0.7 million.
Real Estate Segment
Our consolidated income and expenses for our Real Estate segment were as follows:
| Three Months Ended October 31, | Change | |||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Rental – Third Party | $ | 196 | $ | 236 | (40 | ) | (17 | )% | ||||||||
| Rental – Related Party | 520 | 520 | — | — | % | |||||||||||
| Parking | 190 | 177 | 13 | 7 | % | |||||||||||
| Other | 120 | 120 | — | — | % | |||||||||||
| Selling, general and administrative | (795 | ) | (972 | ) | 177 | 18 | % | |||||||||
| Depreciation | (382 | ) | (437 | ) | 55 | 13 | % | |||||||||
| Loss from operations | $ | (151 | ) | $ | (356 | ) | 205 | 58 | % | |||||||
Revenues. Rental revenues decreased by approximately $40 thousand, and parking revenue increased by approximately $13 thousand for the three months ended October 31, 2021 compared to the three months ended October 31, 2020 primarily due to the sale of the building in Piscataway in August 2020 and the related reduction in rental income. The increase in parking revenue is related to increased activity at the Company’s garage at 520 Broad Street in Newark.
Selling, general and administrative expenses. Selling, general and administrative expenses consist mainly of payroll, benefits, facilities, consulting and professional fees. The decrease in selling, general and administrative expenses for the three months ended October 31, 2021 compared to the three months ended October 31, 2020 is primarily due to a decrease in real estate tax costs, partially offset by other increases in administrative expenses.
Depreciation expenses. Depreciation expenses decreased for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 due to the sale of the building in Piscataway, New Jersey.
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Consolidated Operations
Our consolidated income and expense line items below income from operations were as follows:
| Three Months Ended October 31, | Change | |||||||||||||||
| 2021 | 2020 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Loss from operations | $ | (49,684 | ) | $ | (2,491 | ) | (47,193 | ) | (1895 | )% | ||||||
| Interest expense, net | (222 | ) | — | (222 | ) | (100 | )% | |||||||||
| Gain on sale of building | — | 749 | (749 | ) | (100 | )% | ||||||||||
| Impairment of investments - Other Pharmaceuticals | — | (724 | ) | 724 | 100 | % | ||||||||||
| Impairment of cost method investment - Rafael Pharmaceuticals | (79,141 | ) | — | (79,141 | ) | (100 | )% | |||||||||
| Unrealized gain on investments - Hedge Funds | 211 | 944 | (733 | ) | (78 | )% | ||||||||||
| Loss before income taxes | (128,836 | ) | (1,522 | ) | (127,314 | ) | (8365 | )% | ||||||||
| Provision for income taxes | — | (5 | ) | 5 | 100 | % | ||||||||||
| Equity in (loss) earnings of RP Finance | (575 | ) | 96 | (671 | ) | (699 | )% | |||||||||
| Consolidated net loss | (129,411 | ) | (1,431 | ) | (127,980 | ) | (8943 | )% | ||||||||
| Net loss attributable to noncontrolling interests | (92 | ) | 15 | (107 | ) | (713 | )% | |||||||||
| Net loss attributable to Rafael Holdings, Inc. | $ | (129,319 | ) | $ | (1,446 | ) | (127,873 | ) | (8843 | )% | ||||||
Interest expense, net. Interest expense, net was $222 thousand for the three months ended October 31, 2021 and $0 for the three months ended October 31, 2020. The increase in interest expense is due to the amortization of the debt discount and the interest related to the note payable.
Gain on sale of building. In August 2020, we sold a building located in Piscataway, New Jersey, and recognized a gain on the sale of approximately $749 thousand.
Impairment of investments - Other Pharmaceuticals. We recorded an impairment loss of $724 thousand related to our investment in Nanovibronix using the measurement alternative for the three months ended October 31, 2020.
Impairment of cost method investment - Rafael Pharmaceuticals. In connection with the Data Events, we recorded a full impairment charge during the three months ended October 31, 2021 related to our cost method investment in Rafael Pharmaceuticals in the amount of $79 million.
Unrealized gain on investments - Hedge Funds. We recorded unrealized gains of approximately $211 thousand and $944 thousand for the three months ended October 31, 2021 and 2020, respectively.
Equity in (loss) earnings of RP Finance. We recognized an approximately $575 thousand loss and an approximately $96 thousand in income from our ownership interest in RP Finance for the three months ended October 31, 2021 and 2020, respectively.
Net loss (income) attributable to noncontrolling interests. The change in the net loss (income) attributable to noncontrolling interests was due to LipoMedix, and the new entities Farber and Levco for the three months ended October 31, 2021.
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Liquidity and Capital Resources
General
As of October 31, 2021, we had cash and cash equivalents of $72.4 million in addition to our investment in hedge funds valued at $5.5 million. We expect the balance of cash and cash equivalents and investment in hedge funds to be sufficient to meet our obligations for the next 12 months from the issuance of these consolidated financial statements.
| October 31, | ||||||||
| 2021 | 2020 | |||||||
| Cash flows (used in) provided by | (unaudited, in thousands) | |||||||
| Operating activities | $ | (6,474 | ) | $ | (2,653 | ) | ||
| Investing activities | (26,904 | ) | 3,638 | |||||
| Financing activities | 97,909 | 43 | ||||||
| Effect of exchange rates on cash and cash equivalents | 2 | (3 | ) | |||||
| Increase in cash and cash equivalents | $ | 64,533 | $ | 1,025 | ||||
Operating Activities
The increase in cash used in operating activities for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020 was primarily related to the net loss offset by the impact from noncash items, primarily the impairment of cost method investment in Rafael Pharmaceuticals of $79 million, the reserve on the amounts due to the Company from Rafael Pharmaceuticals related to the Line of Credit Agreement for $25 million, the reserve on receivables due from Rafael Pharmaceuticals totaling $10.3 million, and stock based compensation of $7.6 million as well as other changes in assets and liabilities.
Investing Activities
Cash used in investing activities for the three months ended October 31, 2021 was primarily related to amounts loaned to Rafael Pharmaceuticals of approximately $25 million pursuant to the Line of Credit Agreement and the payments to fund our portion of advances under the line of credit between RP Finance and Rafael Pharmaceuticals in the amount of approximately $1.9 million.
Cash provided by investing activities for the three months ended October 31, 2020 was primarily related to the proceeds from the sale of the building in Piscataway, New Jersey of approximately $3.7 million, and the proceeds related to the Hedge Funds liquidation of $2 million, offset by payments to fund our portion of advances under the line of credit between RP Finance and Rafael Pharmaceuticals in the amount of approximately $1.9 million.
Financing Activities
Cash provided by financing activities for the three months ended October 31, 2021 was primarily related to proceeds of approximately $104 million related to the sale of our common stock to investors and a related party.
Cash provided by financing activities for the three months ended October 31, 2020 was due to the receipt of proceeds from the exercise of employee stock options.
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.
Trends and Uncertainties – COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV-2, which causes COVID-19, has proved to be highly contagious. It has since spread extensively throughout the world, including the United States, and was declared a global pandemic by the World Health Organization in March 2020. We actively monitor the outbreak, including the spread of new variants of interest, and its potential impact on our operations and those of our holdings.
The pandemic’s impacts on our and our affiliates’ operations and specifically the ongoing clinical trials of our pharmaceutical holdings have been actively managed by respective pharmaceutical management teams who have worked closely with the appropriate regulatory agencies to continue clinical trial activities with as minimal impact as possible including receiving waivers for certain clinical trial activities from the respective regulatory agencies to continue the studies.
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Even with growing availability of testing and vaccines, there remains a general degree of uncertainty in the national commercial real estate market based on the COVID-19 pandemic. As a result there remains a potential impact to the value of our real estate portfolio as well as efforts to monetize those assets.
We have implemented a number of measures to protect the health and safety of our workforce including a voluntary work-from-home policy for our workforce who can perform their jobs from home as well as restrictions on discretionary business travel.
Due to both known and unknown risks, including quarantines, closures and other restrictions resulting from the outbreak, operations and those of our holdings may be adversely impacted. Additionally, due to the evolving nature to the COVID-19 situation, we cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic may have on our business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and the severity of the spread of the COVID-19 pandemic in the U.S. and globally, the effectiveness of federal, state, local and foreign government actions on mitigation and spread of COVID-19, the pandemic’s impact on the U.S. and global economies, changes in our customers’ behavior emanating from the pandemic and how quickly we can resume our normal operations, among others. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares. For all these reasons, we may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, and we will continue to monitor the situation closely.
Critical Accounting Policies and Estimates
We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note 1, “Description of Business and Summary of Significant Accounting Policies,” to our consolidated financial statements included in our 2021 Form 10-K.
The application of critical accounting policies requires that we make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. These estimates and assumptions are based on historical and other factors believed to be reasonable under the circumstances. We evaluate these estimates and assumptions on an ongoing basis and may retain outside consultants to assist in our evaluation. If actual results ultimately differ from previous estimates, the revisions are included in results of operations in the period in which the actual amounts become known. The critical accounting policies that involve the most significant management judgments and estimates used in preparation of our consolidated financial statements, or are the most sensitive to change from outside factors, are discussed in “Part II, Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of the Company’s Annual Report on Form 10-K for fiscal 2021 (“2021 Form 10-K”). There have been no material changes in our critical accounting policies and procedures during the three months ended October 31, 2021.
Off-Balance Sheet Arrangements
We do 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.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
There have been no significant changes in our market risk exposures from those described in Item 7A of our 2021 Form 10-K.
We are monitoring the potential impacts of the COVID-19 pandemic on our business. While the potential economic impact brought by, and the duration of, the COVID-19 pandemic is difficult to assess or predict, the impact on the global financial markets may reduce our ability to access capital, which could negatively impact our long-term liquidity.
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 October 31, 2021.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended October 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
Legal proceedings in which we are involved are more fully described in Note 15 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.
Item 1A. Risk Factors
There were no material changes from the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the year ended July 31, 2021, except for the following:
We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cyber security incidents, could harm our ability to operate our and the Pharmaceutical Companies’ businesses effectively.
Despite the implementation of security measures, our and the Pharmaceutical Companies’ internal computer systems and those of third parties with which we and the Pharmaceutical Companies contract are vulnerable to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. System failures, accidents or security breaches could cause interruptions in our and the Pharmaceutical Companies’ operations, and could result in a material disruption of their clinical and commercialization activities and business operations, in addition to possibly requiring substantial expenditures of resources to remedy. The loss of clinical trial data could result in delays in our and the Pharmaceutical Companies’ regulatory approval efforts and significantly increase their costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our or the Pharmaceutical Companies’ data or applications, or inappropriate disclosure of confidential or proprietary information, we and the Pharmaceutical Companies could incur liability and their product research, development and commercialization efforts could be delayed.
Furthermore, we and our third-party providers rely on electronic communications and information systems to conduct our operations. We and our third-party providers have been, and may continue to be, targeted by parties using fraudulent e-mails and other communications in attempts to misappropriate bank accounting information, passwords, or other personal information or to introduce viruses or other malware to our information systems. In October 2021, we experienced a cybersecurity incident where a related party’s email was hacked which led to payment of two invoices. As of the date of this filing, one of the invoices had been recovered by the Company. We continue to explore a range of steps to enhance our security protections and prevent future unauthorized activity.
Although we endeavor to mitigate these threats, such cyber-attacks against us or our third-party providers and business partners remain a serious issue. The pervasiveness of cybersecurity incidents in general and the risks of cyber-crime are complex and continue to evolve. Although we are making significant efforts to maintain the security and integrity of our information systems and are exploring various measures to manage the risk of a security breach or disruption, there can be no assurance that our security efforts and measures will be effective or that attempted security breaches or disruptions would not be successful or damaging.
Our insurance policies may not be adequate to compensate us for the potential losses arising from any such disruption, failure or security breach. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, our insurance may not cover all claims made against us and could have high deductibles in any event, and defending a suit, regardless of its merit, could be costly and divert management attention.
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.
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Item 6. Exhibits
|
Exhibit Number |
Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2* | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104* | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed or furnished herewith. |
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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.
| Date: December 15, 2021 | Rafael Holdings, Inc. | |
| By: | /s/ Ameet Mallik | |
| Ameet Mallik | ||
| Chief Executive Officer | ||
| By: | /s/ Patrick Fabbio | |
| Patrick Fabbio | ||
| Chief Financial Officer | ||
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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, Ameet Mallik, 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: December 15, 2021
/s/ Ameet Mallik
|
Ameet Mallik Chief Executive Officer |
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, Patrick Fabbio, 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: December 15, 2021
/s/ Patrick Fabbio
|
Patrick Fabbio Chief Financial Officer |
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 October 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Ameet Mallik, 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: December 15, 2021 | |
| /s/ Ameet Mallik | |
| Ameet Mallik | |
| 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.
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 October 31, 2021 as filed with the Securities and Exchange Commission (the “Report”), I, Patrick Fabbio, 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: December 15, 2021
| /s/ Patrick Fabbio | |
| Patrick Fabbio | |
| 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.
Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2021 |
|---|---|---|
| Allowance for doubtful accounts (in Dollars) | $ 212 | $ 193 |
| Allowance for losses on related party receivables (in Dollars) | 720 | 0 |
| Allowance for loan losses (in Dollars) | 25,000 | |
| Allowance for losses on related party receivables (in Dollars) | $ 9,375 | $ 0 |
| Class A Common Stock | ||
| Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 35,000,000 | 35,000,000 |
| Common stock, shares issued | 787,163 | 787,163 |
| Common stock, shares outstanding | 787,163 | 787,163 |
| Class B Common Stock | ||
| Common stock, par value (in Dollars per share) | $ 0.01 | $ 0.01 |
| Common stock, shares authorized | 200,000,000 | 200,000,000 |
| Common stock, shares issued | 19,896,066 | 16,947,066 |
| Common stock, shares outstanding | 19,882,219 | 16,936,864 |
Description of Business |
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| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DESCRIPTION OF BUSINESS | NOTE 1 – DESCRIPTION OF BUSINESS
Rafael Holdings, Inc. (NYSE-RFL), (“Rafael Holdings” or the “Company”), a Delaware corporation, focused on discovering and developing novel cancer and immune metabolism therapies with the potential to improve and extend the lives of patients. The Company also owns commercial real estate assets, which it operates as a separate line of business.
The Company has an investment in Rafael Pharmaceuticals Inc., or Rafael Pharmaceuticals, that includes preferred and common equity interests and a warrant to purchase additional equity. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Rafael Pharmaceuticals in exchange for issuing Company Class B common stock to the other stockholders of Rafael Pharmaceuticals. On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Rafael Pharmaceuticals’ lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas, and following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat has recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In connection with the preparation of the Company’s first quarter financial statements, U.S. GAAP required that the Company assess the impact of the Data Events and determine whether the carrying values of the Company’s assets were impaired based upon the Company’s expectations to realize future value. In light of Data Events, the Company concluded that currently the likelihood of further development of and prospects for CPI-613 is uncertain and has fully impaired the value of its loans, receivables, and investment in Rafael Pharmaceuticals based upon its valuation of Rafael Pharmaceuticals.
In 2019, the Company established Barer Institute (“Barer”), as an early-stage small molecule research institute focused on developing a pipeline of novel therapeutic compounds, including compounds to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer is led by a team of scientists and academic advisors considered to be among the leading experts in cancer metabolism, chemistry, and drug development. In addition to its own internal discovery efforts, Barer is pursuing collaborative research agreements and in-licensing opportunities with leading scientists from top academic institutions. Farber Partners, LLC (“Farber”) was formed to support agreements with Princeton University’s Office of Technology Licensing for technology from the laboratory of Professor Joshua Rabinowitz, in the Department of Chemistry, Princeton University, including an exclusive worldwide license to its SHMT (serine hydroxymethyltransferase) inhibitor program. The Company also holds a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage oncological pharmaceutical company based in Israel. In addition, the Company has recently initiated efforts to develop other early stage pharmaceutical ventures including Levco Pharmaceuticals Ltd. (“Levco”), an Israeli company, established to partner with Dr. Alberto Gabizon and a leading institution in Israel on the development of novel compounds for cancer.
The Company’s commercial real estate holdings consist of a building at 520 Broad Street in Newark, New Jersey that serves as headquarters for the Company and certain other entities and hosts other tenants and an associated 800-car public garage, and a portion of a building in Israel.
The “Company” in these consolidated financial statements refers to Rafael Holdings and its subsidiaries on a consolidated basis. All significant intercompany accounts and transactions have been eliminated in consolidation.
All majority-owned subsidiaries are consolidated with all intercompany transactions and balances eliminated in consolidation or combination. The entities included in these consolidated financial statements are as follows:
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Summary of Significant Accounting Policies |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Accounting Policies [Abstract] | |
| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company and its subsidiaries 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, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.
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 ended in the calendar year indicated (e.g., fiscal 2021 refers to the fiscal year ended July 31, 2021).
Operating results for the three months ended October 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2022. The balance sheet at July 31, 2021 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021, or the 2021 Form 10-K, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates.
Liquidity
As of October 31, 2021, the Company had cash and cash equivalents of $72.4 million in addition to our investment in hedge funds valued at $5.5 million. The Company expects the balance of cash and cash equivalents and investment in hedge funds to be sufficient to meet our obligations for the next 12 months from the issuance of these consolidated financial statements.
Risks and Uncertainties – COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV, which causes COVID-19, has proved to be highly contagious. It has since spread extensively throughout the world, including the United States, and was declared a global pandemic by the World Health Organization in March 2020. The Company actively monitors the outbreak, including the spread of new variants of interest, and its potential impact on the Company’s operations and those of the Company’s holdings.
The pandemic’s impacts on the Company’s and its affiliates’ operations and specifically the ongoing clinical trials of the Company’s pharmaceutical holdings have been actively managed by respective pharmaceutical management teams who have worked closely with the appropriate regulatory agencies to continue clinical trial activities with as minimal impact as possible including receiving waivers for certain clinical trial activities from the respective regulatory agencies to continue the studies.
Even with growing availability of testing and vaccines, there remains a general degree of uncertainty in the national commercial real estate market based on the COVID-19 pandemic. As a result, there remains a potential impact to the value of the Company’s real estate portfolio as well as efforts to monetize those assets.
The Company has implemented a number of measures to protect the health and safety of the Company’s workforce including a voluntary work-from-home policy for the Company’s workforce who can perform their jobs from home as well as restrictions on discretionary business travel.
Due to both known and unknown risks, including quarantines, closures and other restrictions resulting from the outbreak, operations and those of the Company’s holdings may be adversely impacted. Additionally, due to the evolving nature to the COVID-19 situation, the Company cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic may have on the Company’s business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and the severity of the spread of the COVID-19 pandemic in the U.S. and globally, the effectiveness of federal, state, local and foreign government actions on mitigation and spread of COVID-19, the pandemic’s impact on the U.S. and global economies, changes in the Company’s customers’ behavior emanating from the pandemic and how quickly the Company can resume our normal operations, among others. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares. For all these reasons, the Company may incur expenses or delays relating to such events outside of the Company’s control, which could have a material adverse impact on the Company’s business, and the Company will continue to monitor the situation closely.
Concentration of Credit Risk and Significant Customers
The Company routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited. For the three months ended October 31, 2021, related parties represented 51% of the Company’s revenue, and as of October 31, 2021, two customers represented 71% and 14% of the Company’s accounts receivable balance, respectively. For the three months ended October 31, 2020, related parties represented 49% of the Company’s revenue, and as of October 31, 2020, two customers represented 25% and 14% of the Company’s accounts receivable balance, respectively.
Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
Restricted Cash
Restricted cash represents escrow funds held in bank accounts owned by the Company to be used to pay the severance due to the chief executive officer for termination without cause, pursuant to his employment agreement. The Company does not have the right to use this cash balance for any other purpose.
Reserve for Receivables
The Company evaluates accounts receivable, loans, interest and fees receivable for impairment under ASC 310, Receivables. The Company also evaluates the reserve for losses and estimates collectability of accounts receivable, loans, interest and fees receivable based on historical bad debt experience, management’s assessment of the financial condition of individual companies with which the Company conducts business, current market conditions, and reasonable and supportable forecasts of future economic conditions.
Investments
The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled affiliates. All significant intercompany accounts and transactions between the consolidated affiliates are eliminated.
Investments in businesses that the Company does not control, but in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters are accounted for using the cost method. The Company periodically evaluates its investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded in the accompanying consolidated statements of operations and comprehensive loss, and a new basis in the investment is established.
Variable Interest Entities
In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary.
Cost Method Investments – Rafael Pharmaceuticals (see Note 3) is a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance. Cost method investments are presented as “Investments – Rafael Pharmaceuticals.”
Equity Method Investments – RP Finance, LLC (“RP Finance”), (see Note 5), has been identified as a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of RP Finance that most significantly impact RP Finance’s economic performance and, therefore, is not required to consolidate RP Finance. The Company accounts for its investment in RP Finance using the equity method of accounting.
Revenue Recognition
The Company applies the five-step approach as described in ASC 606, Revenue from Contracts with Customers, which consists of the following: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when (or as) the entity satisfies a performance obligation.
The Company disaggregates its revenue by source within its consolidated statements of operations and comprehensive loss. As an owner and operator of real estate, the Company derives the majority of its revenue from leasing office and parking space to tenants at its properties. In addition, the Company earns revenue from recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs. Revenue from recoveries from tenants is recorded together with rental income on the consolidated statements of operations and comprehensive loss which is also consistent with the guidance under ASC 842, Leases.
Contractual rental revenue is reported on a straight-line basis over the terms of the respective leases. Accrued rental income, included within other assets on the consolidated balance sheets, represents cumulative rental income earned in excess of rent payments received pursuant to the terms of the individual lease agreements.
The Company also earns revenue from parking which is derived primarily from monthly and transient daily parking. The monthly and transient daily parking revenue falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied, consistent with the Company’s previous accounting.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments or parking customers to pay amounts due.
Research and Development Costs
Research and development costs and expenses incurred by consolidated entities consist primarily of salaries and related personnel expenses, stock-based compensation, fees paid to external service providers, laboratory supplies, costs for facilities and equipment, license costs, and other costs for research and development activities. Research and development expenses are recorded in operating expenses in the period in which they are incurred. Estimates have been used in determining the liability for certain costs where services have been performed but not yet invoiced. The Company monitors levels of performance under each significant contract for external service providers, including the extent of patient enrollment and other activities through communications with the service providers to reflect the actual amount expended.
Contingent milestone payments associated with acquiring rights to intellectual property are recognized when probable and estimable. These amounts are expensed to research and development when there is no alternative future use associated with the intellectual property.
Stock-Based Compensation
The Company accounts for stock-based compensation using the provisions of ASC 718, Stock Based Compensation, which requires the recognition of the fair value of stock-based compensation. Stock-based compensation is estimated at the grant date based on the fair value of the awards. The Company accounts for forfeitures as they occur. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss.
Recently Issued Accounting Standards Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. |
Investment in Rafael Pharmaceuticals |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Schedule of Investments [Abstract] | |
| INVESTMENT IN RAFAEL PHARMACEUTICALS | NOTE 3 – INVESTMENT IN RAFAEL PHARMACEUTICALS
Equity Investment in Rafael Pharmaceuticals and Impairment of Cost Method Investment
Rafael Pharmaceuticals is a clinical stage, cancer metabolism-based therapeutics company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells.
The Company owns equity interests and rights in Rafael Pharmaceuticals through a 90%-owned non-operating subsidiary, Pharma Holdings, LLC, or Pharma Holdings.
Pharma Holdings owns 50% of CS Pharma Holdings, LLC, or CS Pharma, a non-operating entity that owns equity interests in Rafael Pharmaceuticals. Accordingly, the Company holds an effective 45% indirect interest in the assets held by CS Pharma.
A trust for the benefit of the children of Howard Jonas (Chairman of the Board and former Chief Executive Officer of the Company and former Chairman of the Board of Rafael Pharmaceuticals) holds a financial instrument (the “Instrument”) that owns 10% of Pharma Holdings.
Pharma Holdings holds 44.0 million shares of Rafael Pharmaceuticals Series D Convertible Preferred Stock and a warrant to increase the combined ownership of Pharma Holdings and CS Pharma to up to 56% of the fully diluted equity interests in Rafael Pharmaceuticals (the “Warrant”). The Warrant is exercisable at the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments.
On March 25, 2020, the Board of Directors of Rafael Pharmaceuticals extended the expiration date of the Warrant held by Pharma Holdings to purchase shares of the Warrant from December 31, 2020 to June 30, 2021, and on August 31, 2020 the Board of Directors of Rafael Pharmaceuticals further extended the expiration date of the Warrant held by Pharma Holdings, LLC to purchase shares of the Warrant to August 15, 2021. In connection with the Merger Agreement, the Warrant expiration was extended and will expire upon the earlier of (i) upon the occurrence of the effective time of the Merger (the “Effective Time”), or (ii) if the Effective Time does not occur, the date that is calculated by adding (A) the number of calendar days the Merger Agreement has been in effect prior to its termination in accordance with its terms, to (B) August 15, 2021. Accordingly, the Company holds an effective 90% interest in the Rafael Pharmaceuticals interests held by Pharma Holdings directly, and an effective 45% indirect interest in the assets held by CS Pharma.
Pharma Holdings also holds certain governance rights in Rafael Pharmaceuticals including appointment of directors. Pharma Holdings is not the primary beneficiary of Rafael Pharmaceuticals as it does not control or direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance.
CS Pharma holds 16.7 million shares of Rafael Pharmaceuticals Series D Convertible Preferred Stock. CS Pharma owned a $10 million Series D Convertible Note, with 3.5% interest, in Rafael Pharmaceuticals which was converted to shares of Series D Preferred Stock in January 2019.
The Company and its subsidiaries collectively own securities representing 51% of the outstanding capital stock of Rafael Pharmaceuticals and 41% of the capital stock on a fully diluted basis (excluding the remainder of the Warrant).
The Series D Convertible Preferred Stock has a stated value of $1.25 per share (subject to appropriate adjustment to reflect any stock split, combination, reclassification or reorganization of the Series D Preferred Stock or any dilutive issuances, as described below). Holders of Series D Stock are entitled to receive non-cumulative dividends when, as and if declared by the Board of Rafael Pharmaceuticals, prior to any dividends to any other class of capital stock of Rafael Pharmaceuticals. In the event of any liquidation, dissolution or winding up of the Company, or in the event of any deemed liquidation, proceeds from such liquidation, dissolution or winding up shall be distributed first to the holders of Series D Stock. Except with respect to certain major decisions, or as required by law, holders of Series D Stock vote together with the holders of the other preferred stock and common stock and not as a separate class.
The Company serves as the managing member of Pharma Holdings, and Pharma 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 Pharma Holdings to 50% (based on current ownership) of such distributions. Similarly, if Pharma Holdings were to distribute proceeds it receives from CS Pharma, it would do so on a pro rata basis, entitling the Company to 90% (based on current ownership) of such distributions.
The Company evaluated its investments in Rafael Pharmaceuticals in accordance with ASC 323, Investments – Equity Method and Joint Ventures, to establish the appropriate accounting treatment for its investment and has concluded that its investment did not meet the criteria for the equity method of accounting or consolidation and is carried at cost.
Rafael Pharmaceuticals is a VIE; however, the Company has determined that it is not the primary beneficiary as it does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance. In addition, the interests held in Rafael Pharmaceuticals are Series D Convertible Preferred Stock and do not represent in-substance common stock.
The Instrument holds a contractual right to receive additional shares of Rafael Pharmaceuticals capital stock equal to 10% of the fully diluted capital stock of Rafael Pharmaceuticals (the “Bonus Shares”) upon the achievement of certain milestones. The Merger Agreement provides that such events will be deemed satisfied in connection with the Mergers. The Instrument will receive 2,021,802 shares of the Company’s Class B Common Stock in respect of the Bonus Shares. The additional 10% is based on the fully diluted capital stock of Rafael Pharmaceuticals, excluding the remainder for the Warrant, at the time of issuance. If any of the milestones are met, the Bonus Shares are to be issued without any additional payment.
Pharma Holdings holds the Warrant to purchase a significant stake in Rafael Pharmaceuticals, as well as other equity and governance rights in Rafael Pharmaceuticals. The Company currently owns 51% of the issued and outstanding equity in Rafael Pharmaceuticals. Approximately 8% of the issued and outstanding equity is owned by the Company’s subsidiary CS Pharma and 43% is held by the Company’s subsidiary Pharma Holdings. The Company’s subsidiary Pharma Holdings holds the Warrant, which is non-dilutable and provides for the Company to increase its (via Pharma Holdings and CS Pharma and inclusive of the interests held by the other owners of those entities) total ownership to 56%. Based on the current shares issued and outstanding of Rafael Pharmaceuticals as of July 31, 2021, the Company, and the Company’s affiliates, would need to pay approximately $17 million to exercise the Warrant in full to 56%. On an as-converted fully diluted basis (for all convertible securities of Rafael Pharmaceuticals outstanding), the Company and the Company’s affiliates would need to pay approximately $126 million to exercise the Warrant in full (including to offset the impact of additional issuances of Rafael Pharmaceuticals equity under the Line of Credit, as defined below). The Instrument holds 10% of the interest in Pharma Holdings and would need to contribute 10% of any cash necessary to exercise any portion of the Warrant. Following any exercise, a portion of the Company’s interest in Rafael Pharmaceuticals would continue to be held for the benefit of the other equity holders in Pharma Holdings and CS Pharma. Given the Company’s anticipated available cash, 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. Rafael Pharmaceuticals may also issue additional equity interests, such as employee stock options, which will require the Company to pay additional cash to maintain the Company’s ownership percentage or exercise the Warrant in full.
On January 28, 2021, Pharma Holdings partially exercised the Warrant to maintain the 51% ownership percentage and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings.
On June 17, 2021, the Company entered into a merger agreement with Rafael Pharmaceuticals. Upon closing of the merger, each outstanding share of each class of Rafael Pharmaceuticals capital stock will be automatically cancelled and will entitle a holder of shares of a given class of Rafael Pharmaceuticals capital stock to receive 0.12045 shares of Holdings’ Class B Common Stock. Pursuant to the Transactions, an aggregate of 17,145,038 shares of the Company’s Class B Common Stock are expected to be issued to holders of outstanding shares of Rafael Pharmaceuticals capital stock.
Due to the Data Events, during the three months ended October 31, 2021, the Company recorded an impairment charge of approximately $79 million related to the cost method investment in Rafael Pharmaceuticals.
The impairment charge of $79 million was the total amount of the Company’s cost method investment. The impairment loss was included in “Impairment of cost method investment – Rafael Pharmaceuticals” in the accompanying consolidated statements of operations and comprehensive loss for the three months ended October 31, 2021.
The Company filed a preliminary proxy statement/prospectus related to the Merger and the issuance of shares to interest holders of Rafael Pharmaceuticals thereunder with the SEC on September 14, 2021.
Line of Credit to Rafael Pharmaceuticals and Impairment of Related Receivable
On September 24, 2021, the Company entered into a Line of Credit Loan Agreement (the “Line of Credit Agreement”) with Rafael Pharmaceuticals (the “Debtor”) in which the Debtor may borrow up to an aggregate amount of $25 million. The first advance made to the Debtor was in the amount of $1.9 million on September 24, 2021. On October 1, 2021, a second advance was made to the Debtor in the amount of $23.1 million. The line of credit agreement accrues interest at 9% per annum. The maturity date of the Line of Credit Agreement is the later of (x) the End Date under the Merger Agreement and (y) 135 calendar days following termination of the Merger Agreement for any reason and, if such 135th day is not a business day, then the first business day thereafter. All outstanding principal and unpaid accrued interest shall be paid on the maturity date unless earlier prepaid in accordance with the Line of Credit Agreement.
Due to the Data Events, as of October 31, 2021, the Company recorded a full reserve on the amounts due to the Company from Rafael Pharmaceuticals related to the Line of Credit Agreement for $25 million, and also recorded a loss on related party receivables of $908,000 related to other amounts owed by Rafael Pharmaceuticals, including interest on the line of credit. |
Investment in Altira |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Investment In Altira [Abstract] | |
| INVESTMENT IN ALTIRA | NOTE 4 – INVESTMENT IN ALTIRA
The Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) on May 13, 2020 with a member (the “First Seller”) of Altira Capital & Consulting, LLC (“Altira”). Pursuant to the Purchase Agreement, on May 13, 2020, the First Seller sold the economic rights related to a 33.333% membership interest in Altira to the Company and in effect the Company purchased the potential right to receive a 1% royalty on Net Sales (as defined in the Royalty Agreement between Altira and Rafael Pharmaceuticals) on sales of certain Rafael Pharmaceuticals’ products. The purchase consideration for the purchase of the membership interest consisted of 1) $1,000,000 that was payable monthly in four equal monthly installments of $250,000 each; 2) $3,000,000 payable on January 3, 2021; 3) $3,000,000 due within fifteen (15) days of interim data analysis in Rafael Pharmaceutical’s Phase 3 pivotal trial (AVENGER 500®) of CPI-613® (devimistat); and 4) $3,000,000 which is due within one-hundred and twenty (120) days from the date that Rafael Pharmaceuticals files a new drug application with the U.S. Food and Drug Administration for approval of devimistat (CPI-613) as a first in-line therapy for pancreatic cancer, as defined in the Purchase Agreement. The post-closing payments are to be made to the First Seller, at the Company’s discretion, in cash or shares of the Company’s Class B common stock based on the ten-day average share price of the Company’s Class B common stock prior to the date of payment or any combination thereof.
The Company has accounted for the purchase of the initial 33.333% membership interest in Altira as an equity method investment in accordance with the guidance in ASC 323, Investments – Equity Method and Joint Ventures. The Company determined that a 33.333% membership interest in Altira indicates that the Company is able to exercise significant influence over Altira, and the Company’s membership interest is considered to be “more than minor” in accordance with the guidance. The cost of the investment was determined to be $4,000,000 pursuant to the terms of the Purchase Agreement. The contingent consideration, as described within the Purchase Agreement, in the amount of $6,000,000, will be recognized when the payments are considered probable.
For the fiscal year ended July 31, 2020, the Company determined that the investment in Altira was fully impaired as of the acquisition date as there were no probable cash flows, and accordingly, the investment had no value. The Company recorded an impairment charge of $4,000,000, which was the total amount of the Company’s investment recognized for the Purchase Agreement as of July 31, 2020.
On December 7, 2020, the Company purchased an additional 33.333% of membership interests in Altira, pursuant to a Membership Interest Purchase Agreement (the “Second Altira Agreement”) between the Company and another Altira member, (the “Second Seller”). With this transaction, the Company now owns a right to an aggregate 66.666% of the membership interests in Altira. Pursuant to the Second Altira Agreement, on December 7, 2020, the Second Seller sold his economic rights related to a 33.333% membership interest in Altira to the Company and in effect the Company purchased the potential right to receive an additional 1% royalty on Net Sales (as defined in the Royalty Agreement between Altira and Rafael Pharmaceuticals) on sales of certain Rafael Pharmaceuticals’ products. The purchase consideration for the purchase of the Membership Interest consists of 1) $1,000,000 that was payable monthly in four equal monthly installments of $250,000 each, commencing on January 4, 2021; 2) $3,000,000 payable on January 4, 2021; 3) $3,000,000 due within fifteen (15) days of the earlier to occur of either the completion of Rafael Pharmaceuticals’ Phase III pivotal trial (AVENGER 500®) of CPI-613® (devimistat) or May 31, 2021 and not before January 4, 2021; and 4) $3,000,000 which is due within one-hundred and twenty (120) days from the date that Rafael Pharmaceuticals files a new drug application with the U.S. Food and Drug Administration for approval of devimistat (CPI-613) as a first in-line therapy for pancreatic cancer, as defined in the Purchase Agreement.
Certain of the post-closing payments may be made, at the Company’s discretion, in cash or shares of the Company’s Class B common stock based on the ten-day average share price of the Company’s Class B common stock prior to the date of payment or any combination thereof.
The purchase of the additional membership interests was accounted for as an asset acquisition, as Altira is not considered a business in accordance with the guidance in ASC 805, Business Combinations. The membership interests acquired do not consist of inputs, processes, and are not generating outputs, as required in ASC 805 to qualify as a business, and are therefore accounted for as an asset acquisition. Although this transaction is considered an asset acquisition, there are no assets or liabilities to be recorded as of the acquisition date as Altira does not have any business operations. The cost of the investment was determined to be $7,000,000 pursuant to the terms of the Second Altira Agreement.
For the year ended July 31, 2021, the Company determined that the investment in Altira was fully impaired as of the acquisition date as there were no probable cash flows, and accordingly, had no value. The Company recorded an impairment charge of $7,000,000, which was the total amount of the Company’s investment recognized for the Second Altira Agreement as of July 31, 2021.
During the year ended July 31, 2021, the Company issued 129,620 shares of Class B Common Stock with a value of $3.5 million to the First Seller under the Purchase Agreement.
Additionally, the Company issued 150,703 shares of Class B Common Stock with a value of $5 million to the Altira Second Seller, and cash payments totaling $2 million to satisfy the remaining non-contingent obligation due to the Altira Second Seller during the year ended July 31, 2021.
Upon the December 2020 acquisition of the additional 33% membership interest, the Company had a majority interest in Altira, which would require consolidation. However, the assets and operations of Altira are not significant to the Company as a whole. The Company has identified the investment in Altira as a related party transaction (see Note 12). |
Investment in RP Finance, LLC |
3 Months Ended |
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Oct. 31, 2021 | |
| Investment In RP Finance LLC [Abstract] | |
| INVESTMENT IN RP FINANCE, LLC | NOTE 5 – INVESTMENT IN RP FINANCE, LLC
On February 3, 2020, Rafael Pharmaceuticals entered into a Line of Credit Loan Agreement (“Line of Credit Agreement”) with RP Finance which provides a revolving commitment of up to $50,000,000 to fund clinical trials and other capital needs.
The Company owns 37.5% of the equity interests in RP Finance and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. Howard Jonas owns 37.5% of the equity interests in RP Finance, and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. The remaining 25% equity interests in RP Finance are owned by other shareholders of Rafael Pharmaceuticals.
Under the Line of Credit Agreement, all funds borrowed will bear interest at the mid-term Applicable Federal Rate published by the U.S. Internal Revenue Service. The maturity date is the earlier of February 3, 2025, upon a change of control of Rafael Pharmaceuticals or a sale of Rafael Pharmaceuticals or its assets. Rafael Pharmaceuticals can draw on the facility on 60 days’ notice. The funds borrowed under the Line of Credit Agreement must be repaid out of certain proceeds from equity sales by Rafael Pharmaceuticals.
In connection with entering into the Line of Credit Agreement, Rafael Pharmaceuticals agreed to issue to RP Finance shares of its common stock representing 12% of the issued and outstanding shares of Rafael Pharmaceuticals common stock, with such interest subject to anti-dilution protection as set forth in the Line of Credit Agreement.
RP Finance has been identified as a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of RP Finance that most significantly impact RP Finance’s economic performance and, therefore, is not required to consolidate RP Finance. Therefore, the Company will use the equity method of accounting to record its investment in RP Finance. The Company has recognized a loss of approximately $575 thousand and earnings of $96 thousand from its ownership interests of 37.5% in RP Finance for the three months ended October 31, 2021 and 2020, respectively. The assets and operations of RP Finance are not significant and the Company has identified the equity investment in RP Finance as a related party transaction (see Note 12).
In August 2020, Rafael Pharmaceuticals called for a $5 million draw on the line of credit facility and the facility was funded by RP Finance LLC in the amount of $5 million, paid in parts in August and September 2020. In November 2020, Rafael Pharmaceuticals called for a second $5 million draw on the line of credit facility and the facility was funded by RP Finance in the amount of $5 million. In June 2021 and July 2021, Rafael Pharmaceuticals called for a total aggregate $10 million draw on the line of credit facility and the facility was funded by RP Finance in the amount of $10 million. In September 2021, Rafael Pharmaceuticals called for a $5 million draw on the line of credit facility and the facility was funded by RP Finance LLC in the amount of $5 million, paid in September 2021. For the three months ended October 31, 2021, the Company has funded a total of $1.875 million in accordance with its 37.5% ownership interest in RP Finance.
As of October 31, 2021, the Company has funded a cumulative total of $9.375 million in accordance with its 37.5% ownership interests in RP Finance.
Impairment of Equity Method Investment
Due to the Data Events, during the three months ended October 31, 2021, the Company recorded equity in loss of RP Finance of $575 thousand. As of October 31, 2021, the equity method investment on the Company’s balance sheet was reduced to $0. The Company was not obligated to guarantee obligations of RP Finance and is not committed to provided further financial support for RP Finance. Additionally, during the three months ended October 31, 2021, the Company recorded a loss on related party receivables of $9.375 million related to amounts owed by RP Finance. |
Investment in LipoMedix Pharmaceuticals Ltd. |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Business Combinations [Abstract] | |
| INVESTMENT IN LIPOMEDIX PHARMACEUTICALS LTD. | NOTE 6 – INVESTMENT IN LIPOMEDIX PHARMACEUTICALS LTD.
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 of October 31, 2021, the Company held 68% of the issued and outstanding ordinary shares of LipoMedix and has consolidated this investment from the second quarter of fiscal 2018.
In November 2019, the Company provided bridge financing in the principal amount of $100,000 to LipoMedix with a maturity date of May 3, 2020. Under the terms of the note, as long as it remains outstanding, LipoMedix may not incur any additional debt, make any shareholder distributions, or assume any liens on property or assets.
In January 2020, the Company provided bridge financing in the principal amount of $125,000 to LipoMedix with a maturity date of May 3, 2020. Under the terms of the note, as long as it remains outstanding, LipoMedix may not incur any additional debt, make any shareholder distributions, or assume any liens on property or assets.
In March 2020, the Company provided bridge financing in the principal amount of $75,000 to LipoMedix with a maturity date of April 20, 2020. Under the terms of the note, as long as it remains outstanding, LipoMedix may not incur any additional debt, make any shareholder distributions, or assume any liens on property or assets.
In May 2020, the Company entered into a Share Purchase Agreement with LipoMedix to purchase 4,000,000 ordinary shares of LipoMedix for an aggregate purchase price of $1,000,000. The purchase consideration consisted of the outstanding Promissory Notes between the Company and LipoMedix dated November 13, 2019, January 21, 2020 and March 27, 2020 in the total principal amount of $300,000 plus accrued interest, for an aggregate amount of $306,737, and $693,263 of cash, thereby increasing the Company’s ownership in LipoMedix from 58% to 68%.
In March 2021, the Company provided bridge financing in the principal amount of up to $400,000 to LipoMedix with a maturity date of September 1, 2021, and an interest rate of 8% per annum. As of October 31, 2021, the Company has provided $400,000 of funding to LipoMedix. As of October 31, 2021, accrued and unpaid interest on the bridge financing amounted to $20,094. If the note is not repaid or extended by the maturity, the interest rate will increase to 15% per annum. Under the terms of the note, as long as it remains outstanding, LipoMedix may not incur any additional debt, make any shareholder distributions, or assume any liens on property or assets. As of September 1, 2021, LipoMedix was in default on the terms of the loan and as such, the interest rate has increased to 15% per annum. |
Fair Value Measurements |
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| Fair Value Disclosures [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FAIR VALUE MEASUREMENTS | NOTE 7 – FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
The following is a listing of the Company’s assets required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of October 31, 2021 and July 31, 2021:
At October 31, 2021 and July 31, 2021, the Company did not have any liabilities measured at fair value on a recurring basis.
The following table summarizes the changes in the fair value of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Hedge funds classified as Level 3 include investments and securities which may not be based on readily observable data inputs. The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. The fair value of these assets is estimated based on information provided by the fund managers or the general partners. Therefore, these assets are classified as Level 3. In October 2020, the Company received a $2 million distribution of the Company’s investments in Hedge Funds.
The Company received proceeds from the sale of a portion of the Company’s investments in Hedge Funds in October 2020 and May 2021 of approximately $2 million and $5 million, respectively.
The Company holds $0.5 million in investments in securities in another entity that are not liquid, which were included in Investments – Other Pharmaceuticals in the accompanying consolidated balance sheets. The investment is accounted for under ASC 321, Investments – Equity Securities, using the measurement alternative as defined within the guidance, and the Company recorded an impairment loss of $0 and $0.7 million for the three months ended October 31, 2021 and 2020, respectively.
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, investment in equity securities, trade accounts receivable, and accounts payable. At October 31, 2021 and July 31, 2021, 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.
Other assets and other liabilities. At October 31, 2021 and July 31, 2021, 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 trade accounts receivable, trade accounts payable, and due from related parties. The recorded carrying amounts of trade accounts receivable, trade accounts payable and due from related parties approximate 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 October 31, 2021 or July 31, 2021. |
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Trade Accounts Receivable |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| TRADE ACCOUNTS RECEIVABLE | NOTE 8 – TRADE ACCOUNTS RECEIVABLE
Trade Accounts Receivable consisted of the following:
The current portion of deferred rental income included in Prepaid Expenses and Other Current Assets was approximately $0 and $111 thousand as of October 31, 2021 and July 31, 2021, respectively.
The noncurrent portion of deferred rental income included in Other Assets was approximately $1.4 million and $1.5 million as of October 31, 2021 and July 31, 2021, respectively. |
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Property and Equipment |
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| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| PROPERTY AND EQUIPMENT | NOTE 9 – PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
Other property and equipment consist of other equipment and miscellaneous computer hardware.
Depreciation expense pertaining to property and equipment was approximately $0.4 million and $0.4 million for the three months ended October 31, 2021 and 2020.
The Company’s headquarters are located at 520 Broad Street in Newark, New Jersey, where it occupies office space in the building owned by its subsidiary. |
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Loss Per Share |
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| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||
| LOSS PER SHARE | NOTE 10 – LOSS PER SHARE
Basic net loss per share is computed by dividing net loss 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 per shares includes potentially dilutive securities such as stock options, warrants to purchase common stock, and other convertible instruments unless the result of inclusion would be anti-dilutive. These securities have been excluded from the calculation of diluted net loss per shares for the three months ended October 31, 2021 and October 31, 2020 because all such securities are anti-dilutive for all periods presented.
The following table summarizes the Company’s potentially dilutive securities, in common share equivalents, which have been excluded from the calculation of dilutive loss per share as their effect would be anti-dilutive:
The diluted loss per share computation equals basic loss per share for the three months ended October 31, 2021 and 2020 because the Company had a net loss and the impact of the assumed exercise of stock options and warrants would have been anti-dilutive. |
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Note Payable |
3 Months Ended |
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Oct. 31, 2021 | |
| Debt Disclosure [Abstract] | |
| NOTE PAYABLE | NOTE 11 – NOTE PAYABLE
On July 9, 2021, the Company, as guarantor, Rafael Holdings Realty, Inc., a wholly-owned subsidiary of the Company (“Realty”), as pledgor, and Broad-Atlantic Associates, LLC, a wholly-owned subsidiary of Realty (the “Borrower,” and together with the Company and Realty, the “Borrower Parties”), as borrower, entered into a loan agreement (the “Loan Agreement”) with 520 Broad Street LLC, a third-party lender (the “Lender”). The Loan Agreement provides for a loan in the amount of $15 million (the “Note Payable”) from Lender to Borrower secured by (i) a first mortgage on 520 Broad Street, Newark, New Jersey 07102; and (ii) a first priority security interest in the equity of the Borrower as set forth in the Pledge and Security Agreement between Realty and Lender.
The Note Payable bears interest at a rate per annum equal to seven and one-quarter percent (7.25%) and thereafter at an interest rate per annum equal to the 30-day LIBOR Rate, as published in The Wall Street Journal, plus 6.90% per annum, but in no event less than seven and one-quarter percent (7.25%) per annum. The Note Payable is due on August 1, 2022, subject to the Company’s option to extend the maturity date until August 1, 2023 for a fee equal to three-quarters of one percent (0.75%) of the Note Payable.
The Loan Agreement contains customary affirmative covenants, negative covenants and events of default, as defined in the Loan Agreement, including covenants and restrictions that, among other things, restrict the Borrower’s ability to incur liens, or transfer, lease or sell the collateral as defined in the Loan Agreement. A failure to comply with these covenants could permit the Lender to declare the Borrower’s obligations under the Loan Agreement, together with accrued interest and fees, to be immediately due and payable.
Interest expense under the Note Payable amounted to $271,874 and $0 for the three months ended October 31, 2021 and 2020, respectively.
Unamortized debt issuance costs on the Note Payable totaled $347,193 and $0 as of October 31, 2021 and 2020, respectively. Amortization of the debt discount on the Note Payable totaled approximately $124,991 and $0 for the three months ended October 31, 2021 and 2020, respectively. |
Related Party Transactions |
3 Months Ended |
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Oct. 31, 2021 | |
| Related Party Transactions [Abstract] | |
| RELATED PARTY TRANSACTIONS | NOTE 12 – RELATED PARTY TRANSACTIONS
IDT Corporation
The Company has historically maintained an intercompany balance due to/from related parties that relates to cash advances for investments, loan repayments, charges for services provided to the Company by IDT Corporation, or IDT, and payroll costs for the Company’s personnel that were paid by IDT. The Company also receives rental income from various companies under common control to IDT. The Company recorded expense of approximately $75 thousand and $66 thousand in related party services to IDT for the three months ended October 31, 2021 and 2020, respectively, of which approximately $75 thousand and $30 thousand is included in Due to Related Parties at October 31, 2021 and 2020, respectively.
IDT leases approximately 80,000 square feet of office space plus parking at 520 Broad Street, Newark, New Jersey and approximately 3,600 square feet of office space in Jerusalem, Israel. IDT paid the Company approximately $0 and $459 thousand for office rent and parking during each of the three months ended October 31, 2021 and 2020, respectively. As of October 31, 2021 and 2020, IDT owed the Company approximately $675 thousand and $8 thousand, respectively, for office rent and parking. IDT paid the Company in full for its outstanding balance during November 2021.
During the year ended July 31, 2021, IDT exercised 43,649 warrants to purchase shares of Class B Common Stock.
Rafael Pharmaceuticals
The Company provides Rafael Pharmaceuticals with administrative, finance, accounting, tax and legal services. Howard S. Jonas served as the former Chairman of the Board of Rafael Pharmaceuticals and owns an equity interest in Rafael Pharmaceuticals. Ameet Mallik currently serves as Chairman of Rafael Pharmaceuticals. The Company billed Rafael Pharmaceuticals $120 thousand for the three months ended October 31, 2021 and 2020, respectively. As of October 31, 2021 and July 31, 2021, Rafael Pharmaceuticals owed the Company $720 thousand and $600 thousand, respectively, included in Due from Rafael Pharmaceuticals.
The balance owed to the Company by Rafael Pharmaceuticals as of October 31, 2021, was written off, resulting in a loss on related party receivable of $720 thousand (See Note 5).
Levco Pharmaceuticals Ltd
On September 8, 2020, Levco entered into a research and development consulting agreement with Dr. Alberto Gabizon for a two-year period. Under the agreement, in exchange for the services provided, Levco will pay Dr. Gabizon $3,000 per month and issue to him common shares representing up to 5% of common stock outstanding. Additionally, Levco will provide a lab grant in the amount of $120,000 to support the project.
On September 8, 2020, Levco entered into a Sponsored Research Agreement with a company for a research program related to patent applications with payments totaling $120,000 plus value-added tax. The research period is over 13 months, with two additional 12-month options to extend.
Farber Partners, LLC
Farber, a controlled subsidiary of the Company, reached agreements with Princeton University including to in-license certain patents and related information related to the serine hydroxymethyltransferase (SHMT) inhibitor program developed by the laboratory of Dr. Joshua D. Rabinowitz at Princeton. Farber will pay Princeton minimum annual royalty payments, in addition to percentage royalties and a percentage of any sublicense revenue. Additionally, there are development milestone payments which Farber will pay Princeton for the first three products developed by Farber, or any sublicensees or affiliates.
Pharma Holdings
On January 28, 2021, Pharma Holdings partially exercised the Warrant and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings.
Related Party Rental Income
The Company leases space to related parties which represented approximately 51% and 49% of the Company’s total revenue for the three months ended October 31, 2021 and 2020, respectively. See Note 17 for future minimum rent payments from related parties and other tenants.
Investment in Altira
In May 2020, the Company acquired its first membership interest of 33.333% in Altira, a related party. In December 2020, the Company acquired an additional 33.333% membership interest in Altira, for an aggregate of a 66.666% membership interest (see Note 4).
RP Finance
For the three months ended October 31, 2021, the Company recognized an approximately $575 thousand loss and for the three months ended October 31, 2020, the Company recognized approximately $96 thousand in income from its ownership interests in RP Finance. As of October 31, 2021, the equity method investment in RP Finance was reduced to $0 due to the Data Events. The Company recorded a loss on related party receivables of $9.375 million related to amounts owed by RP Finance (see Note 5).
Howard Jonas, Chairman of the Board and Former Chief Executive Officer
In December 2020, two entities, on whose Boards of Directors Howard Jonas, the Registrant’s Chairman of the Board and former Chief Executive Officer serves, each purchased 218,245 shares of Class B common stock for consideration of $5 million each. In connection with the purchases, each purchaser was granted warrants (the “Issued Warrants”) to purchase twenty percent (20%) of the shares of Class B common stock purchased by such purchaser. The Issued Warrants have an exercise price of $22.91 per share and expire on June 6, 2022. The shares and Issued Warrants were issued in reliance on the exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended. |
Income Taxes |
3 Months Ended |
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Oct. 31, 2021 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | NOTE 13 – INCOME TAXES
During the three months ended October 31, 2021 and 2020, the Company recognized an income tax provision of $0 on loss before income tax of $128,378 and $0 on a loss before income tax of $1,522, respectively. The change in income tax expense in relation to the loss before income tax during the three months ended October 31, 2021 compared to the three months ended October 31, 2021 was primarily due to differences in the amount of taxable (loss) income in the various taxing jurisdictions and the associated valuation allowances. As of October 31, 2021 and 2020, the Company recorded valuation allowances for the total deferred tax asset balances.
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 with 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 balances. |
Business Segment Information |
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| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BUSINESS SEGMENT INFORMATION | NOTE 14 – 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 CEO and chief operating decision-maker.
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 Pharmaceuticals segment based primarily on research and development efforts and results of clinical trials and the Real Estate segment based primarily on results of operations. All investments in Rafael Pharmaceuticals and assets and expenses associated with LipoMedix, Barer, Levco, Farber, and Rafael Medical Devices are tracked separately in the Pharmaceuticals segment.
The Pharmaceuticals segment is comprised of preferred and common equity interests and the Warrant to purchase equity interests in Rafael Pharmaceuticals, a majority equity interest in LipoMedix, Barer, Levco, Farber, and Rafael Medical Devices. To date, the Pharmaceuticals segment has not generated any revenues.
The Real Estate segment consists of the Company’s real estate holdings, including a building at 520 Broad Street in Newark, New Jersey that houses headquarters for the Company and certain affiliates and its associated public garage and a portion of an office building in Israel.
Operating results for the business segments of the Company are as follows:
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):
Net long-lived assets and total assets held outside of the United States, which are located in Israel, were as follows:
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Commitments and Contingencies |
3 Months Ended |
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Oct. 31, 2021 | |
| Commitments and Contingencies Disclosure [Abstract] | |
| COMMITMENTS AND CONTINGENCIES | NOTE 15 – COMMITMENTS AND CONTINGENCIES
Legal Proceedings
On July 12, 2019, the Company received a Citation and Notification of Penalty from the Occupational Safety and Health Administration of the U.S. Department of Labor, or OSHA, related to an OSHA inspection of 520 Broad Street, Newark, New Jersey. The citation seeks to impose penalties related to alleged violations of the Occupation Safety and Health Act of 1970 at 520 Broad Street. On July 31, 2019, the Company filed a Notice of Contest with OSHA contesting the citation in its entirety. On February 14, 2020, the Company entered into a Settlement Agreement with OSHA, as related to the citation received on July 12, 2019. As part of the Settlement Agreement, the Company agreed to pay a penalty of $127,294 in eight quarterly installment payments through November 2021, which the Company accrued for and has an outstanding balance of approximately $16,000 as of October 31, 2021. The penalty was recorded to accrued expenses within the Consolidated Balance Sheets. As the Company accounts for contingencies when a loss is considered probable and can be reasonably estimated, the accrued balance is for legal fees and losses believed to be both probable and reasonably estimable, but an exposure to additional loss may exist in excess of the amount accrued.
On December 31, 2019, an employee of the Company filed a complaint in connection with the incident that led to the OSHA inspection noted above for personal injuries against the Company and other parties in the New Jersey Supreme Court for an incident that took place on January 31, 2019 at 520 Broad Street, Newark, New Jersey. The Company is vigorously defending its interests in this matter. The loss is considered remote and no accrual has been recorded.
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, other than noted above, 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. |
Equity |
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| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| EQUITY | NOTE 16 – EQUITY
Class A Common Stock and Class B Common Stock
The rights of holders of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. The holders of Class A common stock and Class B common stock receive identical dividends per share when and if declared by the Company’s Board of Directors. In addition, the holders of Class A common stock and Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common stock do not have any other contractual participation rights. The holders of Class A common stock are entitled to three votes per share and the holders of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option of the holder. Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock.
On May 27, 2021, the Company filed a Registration Statement on Form S-3, whereby the Company may sell up to $250 million of Class B common stock. This Registration Statement was declared effective on June 7, 2021.
On June 1, 2021, the Company filed a Registration Statement on Form S-3 and issued 48,859 shares of Class B common stock to the Altira Second Seller totaling $2.25 million to satisfy a portion of the remaining non-contingent obligation due to the Altira Second Seller.
On August 19, 2021, the Company entered into a Securities Purchase Agreement (the “Institutional Purchase Agreement”) with institutional investors (the “Institutional Investors”) and a Securities Purchase Agreement with I9Plus, LLC, (the “Jonas Purchase Agreement”), an entity affiliated with Howard S. Jonas, the Chairman of the Board of Directors of the Company. On August 24, 2021, the Company issued 2,833,425 shares of Class B common stock (the “Institutional Shares”), par value $0.01 per share, to the Institutional Investors, at a purchase price equal to $35.00 per share, for aggregate gross proceeds of approximately $99.2 million, before deducting placement agent fees and other offering expenses. Additionally, pursuant to the Jonas Purchase Agreement, the Company issued 112,501 of Class B common stock to I9Plus, LLC, at a purchase price equal to $44.42 per share, which was equal to the closing price of a share of the Class B common stock on the New York Stock Exchange on August 19, 2021 (the “Jonas Offering”). The Jonas Offering resulted in additional aggregate gross proceeds of approximately $5.0 million. The total net proceeds from the issuance of shares was $98.0 million after deducting transaction costs of $6.2 million.
On August 19, 2021, in connection with the Institutional Purchase Agreement, the Company entered into a Registration Rights Agreement with the Institutional Investors whereby the Company agreed to prepare and file a registration statement with the SEC within 30 days after the earlier of (i) the date of the closing of the Merger Agreement, and (ii) the date the Merger Agreement is terminated in accordance with its terms, for purposes of registering the resale of the Institutional Shares and any shares of Class B common stock issued as a dividend or other distribution with respect to the Institutional Shares.
Stock Options
A summary of stock option activity for the Company is as follows:
At October 31, 2021, there are unrecognized compensation costs related to non-vested stock options of $8.2 million, which are expected to be recognized over the next 4.0 years.
The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the three months ended October 31, 2021:
Restricted Stock
The fair value of restricted shares of the Company’s Class B common stock is determined based on the closing price of the Company’s Class B common stock on the grant date. Share awards generally vest on a graded basis over three years of service.
A summary of the status of the Company’s grants of restricted shares of Class B common stock is presented below:
At October 31, 2021, there was $35.6 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements, which is expected to be recognized over the next 3.75 years.
Securities Purchase Agreement
On December 7, 2020, Rafael Holdings entered into a Securities Purchase Agreement (the “SPA”) for the sale of 567,437 shares of the Company’s Class B common stock at a price per share of $22.91 (which was the closing price for the Class B common stock on the New York Stock Exchange on December 4, 2020, the trading day immediately preceding the date of the SPA) for an aggregate purchase price of $13 million.
Approximately $8.2 million of the proceeds received pursuant to the SPA were used by the Company to exercise an additional portion of the Warrant in order to maintain the Company’s relative position in Rafael Pharmaceuticals in light of issuances of Rafael Pharmaceuticals equity securities to third-party shareholders of Rafael Pharmaceuticals, due to warrant exercises by these shareholders. The Company is using the remaining proceeds to fund the operations of its drug development programs including its Barer Institute subsidiary, and for general corporate purposes. Under the SPA, two entities, on whose Boards of Directors Howard Jonas, the Registrant’s Chairman of the Board and former Chief Executive Officer serves, each purchased 218,245 shares of Class B common stock for consideration of $5 million each. The shares and warrants were issued in reliance on the exemption from registration provided for under Section 4(a)(2) of the Securities Act of 1933, as amended.
Equity-classified Warrants
In connection with the Share Purchase Agreement, each purchaser was granted warrants to purchase twenty percent (20%) of the shares of Class B common stock purchased by such purchaser. The Company issued warrants to purchase 113,487 shares of Class B common stock to the purchasers. The warrants are exercisable at a per share exercise price of $22.91, and are exercisable at any time on or after December 7, 2020 through June 6, 2022. The Company determined that these warrants are equity-classified.
During the year ended July 31, 2021, IDT and Genie each exercised 43,649 warrants, resulting in a total of 87,298 shares of Class B common stock issued for proceeds of approximately $2 million.
There were no exercises of warrants during the three months ended October 31, 2021. At October 31, 2021, the Company had outstanding warrants to purchase 26,189 shares of common stock at an exercise price of $22.91 per share, all of which expire June 6, 2022.
Grant to Board of Directors
Pursuant to the Company’s 2018 Equity Incentive Plan, three of our four non-employee directors of the Company were granted 4,203 restricted shares of our Class B common stock in January 2020 and 4,203 restricted shares of our Class B common stock in January 2021 which fully vested on the date of the grants. The fair value of the awards on the date of the grants were approximately $286,000 and $208,000 in January 2021 and January 2020, respectively, which was included in selling, general and administrative expense. |
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Leases |
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| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| LEASES | NOTE 17 – LEASES
The Company is the lessor of certain properties which are leased to tenants under net operating leases with initial term expiration dates ranging from 2021 to 2029. Lease income included on the consolidated statements of operations and comprehensive loss was $0.7 million and $0.8 million for the three months ended October 31, 2021 and 2020, respectively.
The future contractual minimum lease payments to be received (excluding operating expense reimbursements) by the Company as of October 31, 2021, under non-cancellable operating leases which expire on various dates through 2028 are as follows:
The Company has related party leases that expire in April 2025 for (i) an aggregate of 88,631 square feet, which includes two parking spots per thousand square feet of space leased at 520 Broad Street, Newark, New Jersey, and (ii) 3,595 square feet in Israel. The annual rent is approximately $2.0 million in the aggregate. The related parties have the right to terminate the domestic 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. A related party has the right to terminate the Israeli lease upon four months’ notice. IDT has the right to lease an additional 50,000 square feet, in 25,000-foot increments, in the building located at 520 Broad Street, Newark, New Jersey on the same terms as their base lease, and other rights should 25,000 square feet or less remain available to lessees in the building. Upon expiration of the lease, related parties have the right to renew the leases for another five years. |
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Subsequent Events |
3 Months Ended |
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Oct. 31, 2021 | |
| Subsequent Events [Abstract] | |
| SUBSEQUENT EVENTS | NOTE 18 – SUBSEQUENT EVENTS
On November 1, 2021, the Company issued 15,000 restricted shares of the Company’s Class B common stock to certain executive officers, vesting one quarter each year commencing on September 23, 2022.
On November 11, 2021, the Company entered into a share purchase agreement with LipoMedix to purchase up to 15,975,000 ordinary shares at $0.1878 for an aggregate purchase price of $3.0 million (the “Share Purchase Agreement”). Additionally, LipoMedix issued the Company a warrant to purchase up to 15,975,000 ordinary shares at an exercise price of $0.1878 per share.
As of the date of the Share Purchase Agreement, there was an outstanding loan balance including principal of $400 thousand and accrued interest of $21.8 thousand owed by LipoMedix to the Company. This amount was netted against the $3.0 million aggregate purchase price due to LipoMedix, resulting in a cash payment by the Company of $2.6 million in exchange for the purchased shares.
On November 21, 2021, Ameet Mallik resigned as Chief Executive Officer of the Company, effective January 31, 2022. Mr. Mallik will remain as a director of the Company. The Company expects to incur approximately $5.2 million in severance costs during the year ending July 31, 2022 in relation to Mr. Mallik’s departure, of which $5 million is included in restricted cash as of October 31, 2021.
On November 21, 2021, the Board of Directors decided that four additional members of the executive team will depart at various dates during January 2022. The Company expects to incur approximately $1.0 million in severance costs during the year ending July 31, 2022 in relation to these employees’ departures. |
Accounting Policies, by Policy (Policies) |
3 Months Ended |
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Oct. 31, 2021 | |
| Accounting Policies [Abstract] | |
| Basis of Presentation | Basis of Presentation
The accompanying consolidated financial statements of the Company and its subsidiaries 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, which include only normal recurring adjustments, considered necessary for a fair presentation have been included.
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 ended in the calendar year indicated (e.g., fiscal 2021 refers to the fiscal year ended July 31, 2021).
Operating results for the three months ended October 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2022. The balance sheet at July 31, 2021 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. Therefore, these financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended July 31, 2021, or the 2021 Form 10-K, as filed with the U.S. Securities and Exchange Commission (the “SEC”).
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| Use of Estimates | Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the balance sheet and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ significantly from those estimates.
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| Liquidity | Liquidity
As of October 31, 2021, the Company had cash and cash equivalents of $72.4 million in addition to our investment in hedge funds valued at $5.5 million. The Company expects the balance of cash and cash equivalents and investment in hedge funds to be sufficient to meet our obligations for the next 12 months from the issuance of these consolidated financial statements.
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| Risks and Uncertainties - COVID-19 | Risks and Uncertainties – COVID-19
In December 2019, a novel strain of coronavirus, SARS-CoV, which causes COVID-19, has proved to be highly contagious. It has since spread extensively throughout the world, including the United States, and was declared a global pandemic by the World Health Organization in March 2020. The Company actively monitors the outbreak, including the spread of new variants of interest, and its potential impact on the Company’s operations and those of the Company’s holdings.
The pandemic’s impacts on the Company’s and its affiliates’ operations and specifically the ongoing clinical trials of the Company’s pharmaceutical holdings have been actively managed by respective pharmaceutical management teams who have worked closely with the appropriate regulatory agencies to continue clinical trial activities with as minimal impact as possible including receiving waivers for certain clinical trial activities from the respective regulatory agencies to continue the studies.
Even with growing availability of testing and vaccines, there remains a general degree of uncertainty in the national commercial real estate market based on the COVID-19 pandemic. As a result, there remains a potential impact to the value of the Company’s real estate portfolio as well as efforts to monetize those assets.
The Company has implemented a number of measures to protect the health and safety of the Company’s workforce including a voluntary work-from-home policy for the Company’s workforce who can perform their jobs from home as well as restrictions on discretionary business travel.
Due to both known and unknown risks, including quarantines, closures and other restrictions resulting from the outbreak, operations and those of the Company’s holdings may be adversely impacted. Additionally, due to the evolving nature to the COVID-19 situation, the Company cannot reasonably assess or predict at this time the full extent of the negative impact that the COVID-19 pandemic may have on the Company’s business, financial condition, results of operations and cash flows. The impact will depend on future developments such as the ultimate duration and the severity of the spread of the COVID-19 pandemic in the U.S. and globally, the effectiveness of federal, state, local and foreign government actions on mitigation and spread of COVID-19, the pandemic’s impact on the U.S. and global economies, changes in the Company’s customers’ behavior emanating from the pandemic and how quickly the Company can resume our normal operations, among others. In addition, a recession, depression, or other sustained adverse market event resulting from the spread of the coronavirus could materially and adversely affect our business and the value of our common shares. For all these reasons, the Company may incur expenses or delays relating to such events outside of the Company’s control, which could have a material adverse impact on the Company’s business, and the Company will continue to monitor the situation closely.
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| Concentration of Credit Risk and Significant Customers | Concentration of Credit Risk and Significant Customers
The Company routinely assesses the financial strength of its customers. As a result, the Company believes that its accounts receivable credit risk exposure is limited. For the three months ended October 31, 2021, related parties represented 51% of the Company’s revenue, and as of October 31, 2021, two customers represented 71% and 14% of the Company’s accounts receivable balance, respectively. For the three months ended October 31, 2020, related parties represented 49% of the Company’s revenue, and as of October 31, 2020, two customers represented 25% and 14% of the Company’s accounts receivable balance, respectively.
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| Cash and Cash Equivalents | Cash and Cash Equivalents
The Company considers all liquid investments with an original maturity of three months or less when purchased to be cash equivalents.
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| Restricted Cash | Restricted Cash
Restricted cash represents escrow funds held in bank accounts owned by the Company to be used to pay the severance due to the chief executive officer for termination without cause, pursuant to his employment agreement. The Company does not have the right to use this cash balance for any other purpose.
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| Reserve for Receivables | Reserve for Receivables
The Company evaluates accounts receivable, loans, interest and fees receivable for impairment under ASC 310, Receivables. The Company also evaluates the reserve for losses and estimates collectability of accounts receivable, loans, interest and fees receivable based on historical bad debt experience, management’s assessment of the financial condition of individual companies with which the Company conducts business, current market conditions, and reasonable and supportable forecasts of future economic conditions.
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| Investments | Investments
The method of accounting applied to long-term investments, whether consolidated, equity or cost, involves an evaluation of the significant terms of each investment that explicitly grant or suggest evidence of control or influence over the operations of the investee and also includes the identification of any variable interests in which the Company is the primary beneficiary. The consolidated financial statements include the Company’s controlled affiliates. All significant intercompany accounts and transactions between the consolidated affiliates are eliminated.
Investments in businesses that the Company does not control, but in which the Company has the ability to exercise significant influence over operating and financial matters, are accounted for using the equity method. Investments in which the Company does not have the ability to exercise significant influence over operating and financial matters are accounted for using the cost method. The Company periodically evaluates its investments for impairment due to declines considered to be other than temporary. If the Company determines that a decline in fair value is other than temporary, then a charge to earnings is recorded in the accompanying consolidated statements of operations and comprehensive loss, and a new basis in the investment is established.
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| Variable Interest Entities | Variable Interest Entities
In accordance with Accounting Standards Codification (“ASC”) 810, Consolidation, the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether or not those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.
If an entity is determined to be a VIE, the Company evaluates whether the Company is the primary beneficiary. The primary beneficiary analysis is a qualitative analysis based on power and economics. The Company consolidates a VIE if both power and benefits belong to the Company – that is, the Company (i) has the power to direct the activities of a VIE that most significantly influence the VIE’s economic performance (power), and (ii) has the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE (benefits). The Company consolidates VIEs whenever it is determined that the Company is the primary beneficiary.
Cost Method Investments – Rafael Pharmaceuticals (see Note 3) is a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of Rafael Pharmaceuticals that most significantly impact Rafael Pharmaceuticals’ economic performance. Cost method investments are presented as “Investments – Rafael Pharmaceuticals.”
Equity Method Investments – RP Finance, LLC (“RP Finance”), (see Note 5), has been identified as a VIE; however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activities of RP Finance that most significantly impact RP Finance’s economic performance and, therefore, is not required to consolidate RP Finance. The Company accounts for its investment in RP Finance using the equity method of accounting.
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| Revenue Recognition | Revenue Recognition
The Company applies the five-step approach as described in ASC 606, Revenue from Contracts with Customers, which consists of the following: (i) identifying the contract with a customer, (ii) identifying the performance obligations in the contract, (iii) determining the transaction price, (iv) allocating the transaction price to the performance obligations in the contract and (v) recognizing revenue when (or as) the entity satisfies a performance obligation.
The Company disaggregates its revenue by source within its consolidated statements of operations and comprehensive loss. As an owner and operator of real estate, the Company derives the majority of its revenue from leasing office and parking space to tenants at its properties. In addition, the Company earns revenue from recoveries from tenants, consisting of amounts due from tenants for common area maintenance, real estate taxes and other recoverable costs. Revenue from recoveries from tenants is recorded together with rental income on the consolidated statements of operations and comprehensive loss which is also consistent with the guidance under ASC 842, Leases.
Contractual rental revenue is reported on a straight-line basis over the terms of the respective leases. Accrued rental income, included within other assets on the consolidated balance sheets, represents cumulative rental income earned in excess of rent payments received pursuant to the terms of the individual lease agreements.
The Company also earns revenue from parking which is derived primarily from monthly and transient daily parking. The monthly and transient daily parking revenue falls within the scope of ASC 606 and is accounted for at the point in time when control of the goods or services transfers to the customer and the Company’s performance obligation is satisfied, consistent with the Company’s previous accounting.
The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required rent payments or parking customers to pay amounts due.
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| Research and Development Costs | Research and Development Costs
Research and development costs and expenses incurred by consolidated entities consist primarily of salaries and related personnel expenses, stock-based compensation, fees paid to external service providers, laboratory supplies, costs for facilities and equipment, license costs, and other costs for research and development activities. Research and development expenses are recorded in operating expenses in the period in which they are incurred. Estimates have been used in determining the liability for certain costs where services have been performed but not yet invoiced. The Company monitors levels of performance under each significant contract for external service providers, including the extent of patient enrollment and other activities through communications with the service providers to reflect the actual amount expended.
Contingent milestone payments associated with acquiring rights to intellectual property are recognized when probable and estimable. These amounts are expensed to research and development when there is no alternative future use associated with the intellectual property.
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| Stock-Based Compensation | Stock-Based Compensation
The Company accounts for stock-based compensation using the provisions of ASC 718, Stock Based Compensation, which requires the recognition of the fair value of stock-based compensation. Stock-based compensation is estimated at the grant date based on the fair value of the awards. The Company accounts for forfeitures as they occur. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense in the consolidated statements of operations and comprehensive loss.
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| Recently Issued Accounting Standards Not Yet Adopted | Recently Issued Accounting Standards Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and are adopted by the Company as of the specified effective date. The Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption. |
Description of Business (Tables) |
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| Schedule of entities majority-owned subsidiaries |
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Fair Value Measurements (Tables) |
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Oct. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy |
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| Schedule of changes in fair value of the assets measured at fair value on a recurring basis using significant unobservable inputs |
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Trade Accounts Receivable (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of trade accounts receivable |
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Property and Equipment (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property, Plant and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of property and equipment |
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Loss Per Share (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | |||||||||||||||||||||||||||||||||||||
| Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||
| Schedule of dilutive loss per share |
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Business Segment Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of operating results for the business segments |
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| Schedule of revenues from these non-United States customers as a percentage of total revenues |
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| Schedule of net long-lived assets and total assets by geographic areas |
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Equity (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Stockholders' Equity Note [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of stock option activity |
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| Schedule of Black-Scholes option pricing model |
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| Schedule of grants of restricted shares of Class B common stock |
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Leases (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Oct. 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Leases [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of future contractual minimum lease payments |
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Description of Business (Details) |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Description of Business (Details) [Line Items] | |
| Percentage owned | 50.00% |
| Interest percentage | 45.00% |
| Pharma Holdings, LLC [Member] | |
| Description of Business (Details) [Line Items] | |
| Percentage owned | 90.00% |
Summary of Significant Accounting Policies (Details) - USD ($) $ in Millions |
Oct. 31, 2021 |
Oct. 31, 2020 |
|---|---|---|
| Summary of Significant Accounting Policies (Details) [Line Items] | ||
| Cash and cash equivalents (in Dollars) | $ 72.4 | |
| Hedge fund investment (in Dollars) | $ 5.5 | |
| Debt due | 12 years | |
| Revenue percentage | 51.00% | 49.00% |
| Customer One [Member] | ||
| Summary of Significant Accounting Policies (Details) [Line Items] | ||
| Accounts receivable | 71.00% | 25.00% |
| Customer Two [Member] | ||
| Summary of Significant Accounting Policies (Details) [Line Items] | ||
| Accounts receivable | 14.00% | 14.00% |
Investment in Rafael Pharmaceuticals (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |||||
|---|---|---|---|---|---|---|---|
Oct. 01, 2021 |
Aug. 15, 2021 |
Sep. 24, 2021 |
Jan. 28, 2021 |
Jan. 31, 2019 |
Oct. 31, 2021 |
Jun. 17, 2021 |
|
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Ownership percentage in non-operating subsidiary | 50.00% | ||||||
| Principal amount (in Dollars) | $ 10,000,000 | ||||||
| Rafael Pharmaceuticals [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Ownership percentage in non-operating subsidiary | 90.00% | ||||||
| Ownership percentage in subsidiary and holds percentage of interest | 50.00% | ||||||
| Indirect interest in assets held, percentage | 45.00% | ||||||
| Holding effective interest, percentage | 90.00% | ||||||
| Percentage of outstanding capital stock | 51.00% | ||||||
| Percentage of outstanding capital stock on fully diluted basis | 41.00% | ||||||
| CS Pharma Holdings, LLC [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Indirect interest in assets held, percentage | 45.00% | ||||||
| Fully diluted | 10.00% | ||||||
| Convertible promissory note, rate of interest | 3.50% | ||||||
| Pharma Holdings [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Ownership percentage in non-operating subsidiary | 90.00% | ||||||
| Exercise price of warrants or rights, description | The Company currently owns 51% of the issued and outstanding equity in Rafael Pharmaceuticals. Approximately 8% of the issued and outstanding equity is owned by the Company’s subsidiary CS Pharma and 43% is held by the Company’s subsidiary Pharma Holdings. The Company’s subsidiary Pharma Holdings holds the Warrant, which is non-dilutable and provides for the Company to increase its (via Pharma Holdings and CS Pharma and inclusive of the interests held by the other owners of those entities) total ownership to 56%. Based on the current shares issued and outstanding of Rafael Pharmaceuticals as of July 31, 2021, the Company, and the Company’s affiliates, would need to pay approximately $17 million to exercise the Warrant in full to 56%. On an as-converted fully diluted basis (for all convertible securities of Rafael Pharmaceuticals outstanding), the Company and the Company’s affiliates would need to pay approximately $126 million to exercise the Warrant in full (including to offset the impact of additional issuances of Rafael Pharmaceuticals equity under the Line of Credit, as defined below). The Instrument holds 10% of the interest in Pharma Holdings and would need to contribute 10% of any cash necessary to exercise any portion of the Warrant. | ||||||
| Exercise of warrants purchases, description | On January 28, 2021, Pharma Holdings partially exercised the Warrant to maintain the 51% ownership percentage and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings. | ||||||
| Impairment charge of approximately (in Dollars) | $ 79,000,000 | ||||||
| Total amount of impairment charges (in Dollars) | 79,000,000 | ||||||
| Income Tax Holiday, Aggregate Dollar Amount (in Dollars) | $ 25,000,000 | ||||||
| Agreement accrues interest per annum | 9.00% | ||||||
| Credit agreement amount (in Dollars) | 25,000,000 | ||||||
| Other amounts (in Dollars) | $ 908,000 | ||||||
| First Advance [Member] | Pharma Holdings [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Advance amount of debtor (in Dollars) | $ 1,900,000 | ||||||
| Second Advance [Member] | Pharma Holdings [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Advance amount of debtor (in Dollars) | $ 23,100,000 | ||||||
| Howard Jonas [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Fully diluted | 10.00% | ||||||
| Howard Jonas [Member] | Rafael Pharmaceuticals [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Fully diluted | 10.00% | ||||||
| Series D Convertible Preferred Stock [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Exercise of warrants purchases, description | The Series D Convertible Preferred Stock has a stated value of $1.25 per share (subject to appropriate adjustment to reflect any stock split, combination, reclassification or reorganization of the Series D Preferred Stock or any dilutive issuances, as described below). Holders of Series D Stock are entitled to receive non-cumulative dividends when, as and if declared by the Board of Rafael Pharmaceuticals, prior to any dividends to any other class of capital stock of Rafael Pharmaceuticals. In the event of any liquidation, dissolution or winding up of the Company, or in the event of any deemed liquidation, proceeds from such liquidation, dissolution or winding up shall be distributed first to the holders of Series D Stock. Except with respect to certain major decisions, or as required by law, holders of Series D Stock vote together with the holders of the other preferred stock and common stock and not as a separate class. | ||||||
| Series D Convertible Preferred Stock [Member] | CS Pharma Holdings, LLC [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Exercise price of warrants or rights, description | Pharma Holdings holds 44.0 million shares of Rafael Pharmaceuticals Series D Convertible Preferred Stock and a warrant to increase the combined ownership of Pharma Holdings and CS Pharma to up to 56% of the fully diluted equity interests in Rafael Pharmaceuticals (the “Warrant”). The Warrant is exercisable at the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments. | ||||||
| Purchase of exercise the warrant, shares (in Shares) | 16,700,000 | ||||||
| Class B Common Stock [Member] | Rafael Pharmaceuticals [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Holding per share (in Dollars per share) | $ 0.12045 | ||||||
| Aggregate shares of common stock (in Shares) | 17,145,038 | ||||||
| Class B Common Stock [Member] | Howard Jonas [Member] | |||||||
| Investment in Rafael Pharmaceuticals (Details) [Line Items] | |||||||
| Received shares (in Shares) | 2,021,802 | ||||||
Investment in Altira (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
Jun. 01, 2021 |
Dec. 07, 2020 |
May 13, 2020 |
Dec. 31, 2020 |
May 31, 2020 |
Oct. 31, 2021 |
Jul. 31, 2021 |
Jul. 31, 2020 |
|
| Investment in Altira (Details) [Line Items] | ||||||||
| Percentage of membership interest | 33.333% | |||||||
| Cost of investments | $ 7,000,000 | |||||||
| Impairment charge | $ 7,000,000 | |||||||
| Issuance of shares (in Shares) | 4,000,000 | |||||||
| Membership interest | 33.00% | |||||||
| Business Combination [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Investment in acquired description | the Company purchased an additional 33.333% of membership interests in Altira, pursuant to a Membership Interest Purchase Agreement (the “Second Altira Agreement”) between the Company and another Altira member, (the “Second Seller”). With this transaction, the Company now owns a right to an aggregate 66.666% of the membership interests in Altira. Pursuant to the Second Altira Agreement, on December 7, 2020, the Second Seller sold his economic rights related to a 33.333% membership interest in Altira to the Company and in effect the Company purchased the potential right to receive an additional 1% royalty on Net Sales (as defined in the Royalty Agreement between Altira and Rafael Pharmaceuticals) on sales of certain Rafael Pharmaceuticals’ products. The purchase consideration for the purchase of the Membership Interest consists of 1) $1,000,000 that was payable monthly in four equal monthly installments of $250,000 each, commencing on January 4, 2021; 2) $3,000,000 payable on January 4, 2021; 3) $3,000,000 due within fifteen (15) days of the earlier to occur of either the completion of Rafael Pharmaceuticals’ Phase III pivotal trial (AVENGER 500®) of CPI-613® (devimistat) or May 31, 2021 and not before January 4, 2021; and 4) $3,000,000 which is due within one-hundred and twenty (120) days from the date that Rafael Pharmaceuticals files a new drug application with the U.S. Food and Drug Administration for approval of devimistat (CPI-613) as a first in-line therapy for pancreatic cancer, as defined in the Purchase Agreement. | |||||||
| Altira [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Percentage of membership interest | 33.333% | |||||||
| Cost of investments | $ 4,000,000 | |||||||
| Contingent consideration | $ 6,000,000 | |||||||
| Impairment charge | $ 4,000,000 | |||||||
| Purchase Agreement [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Purchase agreement, description | the First Seller sold the economic rights related to a 33.333% membership interest in Altira to the Company and in effect the Company purchased the potential right to receive a 1% royalty on Net Sales (as defined in the Royalty Agreement between Altira and Rafael Pharmaceuticals) on sales of certain Rafael Pharmaceuticals’ products. The purchase consideration for the purchase of the membership interest consisted of 1) $1,000,000 that was payable monthly in four equal monthly installments of $250,000 each; 2) $3,000,000 payable on January 3, 2021; 3) $3,000,000 due within fifteen (15) days of interim data analysis in Rafael Pharmaceutical’s Phase 3 pivotal trial (AVENGER 500®) of CPI-613® (devimistat); and 4) $3,000,000 which is due within one-hundred and twenty (120) days from the date that Rafael Pharmaceuticals files a new drug application with the U.S. Food and Drug Administration for approval of devimistat (CPI-613) as a first in-line therapy for pancreatic cancer, as defined in the Purchase Agreement. The post-closing payments are to be made to the First Seller, at the Company’s discretion, in cash or shares of the Company’s Class B common stock based on the ten-day average share price of the Company’s Class B common stock prior to the date of payment or any combination thereof. | |||||||
| Class B Common Stock [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Issuance of shares (in Shares) | 48,859 | |||||||
| Class B Common Stock [Member] | Purchase Agreement [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Issuance of shares (in Shares) | 129,620 | |||||||
| Class B Common Stock [Member] | Purchase Agreement [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Issuance of value | $ 3,500,000 | |||||||
| Class B Common Stock [Member] | Altira Second Seller [Member] | ||||||||
| Investment in Altira (Details) [Line Items] | ||||||||
| Issuance of shares (in Shares) | 150,703 | |||||||
| Issuance of value | $ 5,000,000 | |||||||
| Cash payments | $ 2,000,000 | |||||||
Investment in RP Finance, LLC (Details) - USD ($) |
1 Months Ended | 3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Aug. 31, 2020 |
Oct. 31, 2021 |
Oct. 31, 2020 |
Sep. 30, 2021 |
Jul. 31, 2021 |
Jun. 30, 2021 |
Nov. 30, 2020 |
Feb. 03, 2020 |
|
| Investment in RP Finance, LLC (Details) [Line Items] | ||||||||
| Amount of revolving commitment to funds | $ 5,000,000 | $ 10,000,000 | $ 10,000,000 | $ 5,000,000 | ||||
| Income from interest | $ 575,000 | $ 96,000 | ||||||
| Percentage of ownership interest | 37.50% | |||||||
| Line of credit facility, description | In August 2020, Rafael Pharmaceuticals called for a $5 million draw on the line of credit facility and the facility was funded by RP Finance LLC in the amount of $5 million, paid in parts in August and September 2020. | |||||||
| Ownership amount | $ 1,875,000 | |||||||
| Cumulative funds description | the Company has funded a cumulative total of $9.375 million in accordance with its 37.5% ownership interests in RP Finance. | |||||||
| Equity method investment | $ 0 | |||||||
| Rafael Pharmaceuticals [Member] | ||||||||
| Investment in RP Finance, LLC (Details) [Line Items] | ||||||||
| Amount of revolving commitment to funds | $ 5,000,000 | $ 5,000,000 | ||||||
| Percentage of issued and outstanding shares | 12.00% | |||||||
| Percentage of ownership interest | 37.50% | |||||||
| Equity loss | $ 575,000 | |||||||
| Related party receivable | $ 9,375,000 | |||||||
| Line of Credit Agreement [Member] | ||||||||
| Investment in RP Finance, LLC (Details) [Line Items] | ||||||||
| Amount of revolving commitment to funds | $ 50,000,000 | |||||||
| Description line of credit facility | The Company owns 37.5% of the equity interests in RP Finance and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. Howard Jonas owns 37.5% of the equity interests in RP Finance, and is required to fund 37.5% of funding requests from Rafael Pharmaceuticals under the Line of Credit Agreement. The remaining 25% equity interests in RP Finance are owned by other shareholders of Rafael Pharmaceuticals. | |||||||
Investment in LipoMedix Pharmaceuticals Ltd. (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 07, 2020 |
Mar. 27, 2020 |
Jan. 21, 2020 |
Sep. 01, 2021 |
Mar. 31, 2021 |
May 31, 2020 |
Mar. 31, 2020 |
Jan. 31, 2020 |
Nov. 30, 2019 |
Oct. 31, 2021 |
Nov. 13, 2019 |
|
| Investment in LipoMedix Pharmaceuticals Ltd. (Details) [Line Items] | |||||||||||
| Issued and outstanding ordinary shares, percentage | 68.00% | ||||||||||
| Bridge finance | $ 75,000 | $ 125,000 | $ 100,000 | ||||||||
| Maturity date | Apr. 20, 2020 | May 03, 2020 | May 03, 2020 | ||||||||
| Ordinary shares (in Shares) | 4,000,000 | ||||||||||
| Purchase price | $ 13,000,000 | $ 1,000,000 | |||||||||
| Total principal amount | $ 300,000 | ||||||||||
| Interest, for an aggregate amount | $ 693,263 | $ 306,737 | |||||||||
| Bridge financing amounted | $ 20,094 | ||||||||||
| Interest rate increase | 15.00% | 15.00% | |||||||||
| LipoMedix [Member] | |||||||||||
| Investment in LipoMedix Pharmaceuticals Ltd. (Details) [Line Items] | |||||||||||
| Maturity date | Sep. 01, 2021 | ||||||||||
| Principal amount | $ 400,000 | ||||||||||
| Interest rate | 8.00% | ||||||||||
| Fund amount | $ 400,000 | ||||||||||
| Minimum [Member] | LipoMedix [Member] | |||||||||||
| Investment in LipoMedix Pharmaceuticals Ltd. (Details) [Line Items] | |||||||||||
| Ownership percentage | 58.00% | ||||||||||
| Maximum [Member] | LipoMedix [Member] | |||||||||||
| Investment in LipoMedix Pharmaceuticals Ltd. (Details) [Line Items] | |||||||||||
| Ownership percentage | 68.00% | ||||||||||
Fair Value Measurements (Details) - USD ($) $ in Millions |
3 Months Ended | ||
|---|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
May 31, 2021 |
|
| Fair Value Measurements (Details) [Line Items] | |||
| Investment hedge funds | $ 2.0 | ||
| Investments in securities | $ 0.5 | ||
| Impairment loss | $ 0.0 | 0.7 | |
| Minimum [Member] | |||
| Fair Value Measurements (Details) [Line Items] | |||
| Investment hedge funds | $ 2.0 | ||
| Maximum [Member] | |||
| Fair Value Measurements (Details) [Line Items] | |||
| Investment hedge funds | $ 5.0 | ||
Fair Value Measurements (Details) - Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2021 |
|---|---|---|
| Fair Value Measurements (Details) - Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy [Line Items] | ||
| Hedge Funds | $ 5,479 | $ 5,268 |
| Total | 5,479 | 5,268 |
| Level 1 [Member] | ||
| Fair Value Measurements (Details) - Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy [Line Items] | ||
| Hedge Funds | ||
| Total | ||
| Level 2 [Member] | ||
| Fair Value Measurements (Details) - Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy [Line Items] | ||
| Hedge Funds | ||
| Total | ||
| Level 3 [Member] | ||
| Fair Value Measurements (Details) - Schedule of fair value on a recurring basis and where they are classified within the fair value hierarchy [Line Items] | ||
| Hedge Funds | 5,479 | 5,268 |
| Total | $ 5,479 | $ 5,268 |
Fair Value Measurements (Details) - Schedule of changes in fair value of the assets measured at fair value on a recurring basis using significant unobservable inputs - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Defined Benefit Plan Disclosure [Line Items] | ||
| Balance, beginning of period | $ 5,268 | $ 7,510 |
| Liquidation of Hedge Fund Investments | (2,000) | |
| Total gain included in earnings | 211 | 944 |
| Balance, end of period | $ 5,479 | $ 6,454 |
Trade Accounts Receivable (Details) - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2021 |
|---|---|---|
| Trade Accounts Receivable (Details) [Line Items] | ||
| Prepaid expenses and other current assets | $ 428 | $ 1,075 |
| Other assets | 1,400 | 1,500 |
| Current Portion of Deferred Rental Income [Member] | ||
| Trade Accounts Receivable (Details) [Line Items] | ||
| Prepaid expenses and other current assets | $ 0 | $ 111 |
Trade Accounts Receivable (Details) - Schedule of trade accounts receivable - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2020 |
|---|---|---|
| Schedule of trade accounts receivable [Abstract] | ||
| Trade Accounts Receivable | $ 234 | $ 315 |
| Accounts Receivable - Related Party | 690 | 113 |
| Less Allowance for Doubtful Accounts | (212) | (193) |
| Trade Accounts Receivable, net | $ 712 | $ 235 |
Property and Equipment (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Property and Equipment [Member] | ||
| Property and Equipment (Details) [Line Items] | ||
| Depreciation expense | $ 0.4 | $ 0.4 |
Property and Equipment (Details) - Schedule of property and equipment - Property and Equipment [Member] - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2021 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Building and Improvements | $ 47,871 | $ 47,841 |
| Land | 10,412 | 10,412 |
| Furniture and Fixtures | 1,145 | 1,145 |
| Other | 270 | 271 |
| Property and equipment, gross | 59,698 | 59,669 |
| Less Accumulated Depreciation | (16,813) | (16,431) |
| Total | $ 42,885 | $ 43,238 |
Loss Per Share (Details) - Schedule of dilutive loss per share - shares |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Schedule of dilutive loss per share [Abstract] | ||
| Shares issuable upon exercise of stock options | 565,005 | 571,800 |
| Shares issuable upon exercise of warrants to purchase Class B common stock | 26,189 | |
Note Payable (Details) - USD ($) |
3 Months Ended | ||
|---|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
Jul. 09, 2021 |
|
| Debt Disclosure [Abstract] | |||
| Note payable | $ 15,000,000 | ||
| Note payable bears interest rate, description | The Note Payable bears interest at a rate per annum equal to seven and one-quarter percent (7.25%) and thereafter at an interest rate per annum equal to the 30-day LIBOR Rate, as published in The Wall Street Journal, plus 6.90% per annum, but in no event less than seven and one-quarter percent (7.25%) per annum. The Note Payable is due on August 1, 2022, subject to the Company’s option to extend the maturity date until August 1, 2023 for a fee equal to three-quarters of one percent (0.75%) of the Note Payable. | ||
| Interest expense | $ 271,874 | $ 0 | |
| Unamortized debt issuance costs | 347,193 | 0 | |
| Amortization of the debt discount | $ 124,991 | $ 0 | |
Related Party Transactions (Details) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |||||
|---|---|---|---|---|---|---|---|---|
|
Jun. 01, 2021
shares
|
Sep. 08, 2020
USD ($)
|
Jan. 28, 2021 |
Dec. 31, 2020
USD ($)
$ / shares
shares
|
May 31, 2020
shares
|
Oct. 31, 2021
USD ($)
m²
|
Oct. 31, 2020
USD ($)
|
Jul. 31, 2021
shares
|
|
| Related Party Transactions (Details) [Line Items] | ||||||||
| Related party expenses | $ 75,000 | $ 66,000 | ||||||
| Due to related parties | $ 75,000 | 30,000 | ||||||
| Area of land (in Square Meters) | m² | 3,600 | |||||||
| Rent and parking expenses | $ 0 | 459,000 | ||||||
| Owed amount | 675,000 | 8,000 | ||||||
| Purchased shares (in Shares) | shares | 4,000,000 | |||||||
| Due from owed amount | 720,000 | 600,000 | ||||||
| Related party receivables | $ 720,000 | |||||||
| Services charges | $ 3,000 | |||||||
| Percentage of shares outstanding | 5.00% | |||||||
| Payments to grant amount | $ 120,000 | |||||||
| Related party transaction, description | The research period is over 13 months, with two additional 12-month options to extend. | The Company leases space to related parties which represented approximately 51% and 49% of the Company’s total revenue for the three months ended October 31, 2021 and 2020, respectively. See Note 17 for future minimum rent payments from related parties and other tenants. | ||||||
| Description of pharma holdings | On January 28, 2021, Pharma Holdings partially exercised the Warrant and purchased 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, of which $0.9 million was contributed by the holder of a minority interest in Pharma Holdings. | |||||||
| First membership interest | 33.333% | |||||||
| Acquired an additional membership interest | 33.333% | |||||||
| Aggregate of a membership interest | 66.666% | |||||||
| RP finance LLC, description | For the three months ended October 31, 2021, the Company recognized an approximately $575 thousand loss and for the three months ended October 31, 2020, the Company recognized approximately $96 thousand in income from its ownership interests in RP Finance. As of October 31, 2021, the equity method investment in RP Finance was reduced to $0 due to the Data Events. The Company recorded a loss on related party receivables of $9.375 million related to amounts owed by RP Finance (see Note 5). | |||||||
| Common stock for consideration | $ (6,228,000) | |||||||
| Warrants percentage | 20.00% | |||||||
| Warrants exercise price per share (in Dollars per share) | $ / shares | $ 22.91 | |||||||
| Warrants an exercise date | Jun. 06, 2022 | |||||||
| Securities Purchase Agreement [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Shares purchased (in Shares) | shares | 218,245 | |||||||
| Common stock for consideration | $ 5,000,000 | |||||||
| Levco Pharmaceuticals Ltd [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Payments to grant amount | $ 120,000 | |||||||
| IDT Rafael Holdings, LLC [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Billed amount | $ 120,000 | $ 3,000 | ||||||
| IDT Rafael Holdings, LLC [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Area of land (in Square Meters) | m² | 80,000 | |||||||
| Class B Common Stock [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Purchased shares (in Shares) | shares | 48,859 | |||||||
| Class B Common Stock [Member] | IDT Rafael Holdings, LLC [Member] | ||||||||
| Related Party Transactions (Details) [Line Items] | ||||||||
| Purchased shares (in Shares) | shares | 43,649 | |||||||
Income Taxes (Details) - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Income Tax Disclosure [Abstract] | ||
| Recognized income tax provision | $ 0 | $ 0 |
| Loss before income tax | $ 128,378 | $ 1,522 |
Business Segment Information (Details) |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Segment Reporting [Abstract] | |
| Number of operating segments | 2 |
| Sale of building, description | the Company’s real estate holdings, including a building at 520 Broad Street in Newark, New Jersey that houses headquarters for the Company and certain affiliates and its associated public garage and a portion of an office building in Israel. |
Business Segment Information (Details) - Schedule of operating results for the business segments - USD ($) $ in Thousands |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Segment Reporting Information [Line Items] | ||
| Revenues | $ 1,026 | $ 1,053 |
| Loss from operations | (49,684) | (2,491) |
| Pharmaceuticals [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Revenues | ||
| Loss from operations | (49,533) | (2,135) |
| Real Estate [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Revenues | 1,026 | 1,053 |
| Loss from operations | $ (151) | $ (356) |
Business Segment Information (Details) - Schedule of revenues from these non-United States customers as a percentage of total revenues |
Oct. 31, 2021 |
Oct. 31, 2020 |
|---|---|---|
| Segment Reporting Information [Line Items] | ||
| Revenue from tenants located in Israel | 7.00% | 6.00% |
Business Segment Information (Details) - Schedule of net long-lived assets and total assets by geographic areas - USD ($) $ in Thousands |
Oct. 31, 2021 |
Jul. 31, 2021 |
|---|---|---|
| Segment Reporting Information [Line Items] | ||
| Long-lived assets, net | $ 42,885 | $ 43,238 |
| Total assets | 130,406 | 154,055 |
| United States [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Long-lived assets, net | 41,370 | 41,704 |
| Total assets | 127,588 | 150,847 |
| Israel [Member] | ||
| Segment Reporting Information [Line Items] | ||
| Long-lived assets, net | 1,515 | 1,534 |
| Total assets | $ 2,818 | $ 3,208 |
Commitments and Contingencies (Details) |
3 Months Ended |
|---|---|
|
Oct. 31, 2021
USD ($)
| |
| Commitments and Contingencies Disclosure [Abstract] | |
| Settlement agreement, description | As part of the Settlement Agreement, the Company agreed to pay a penalty of $127,294 in eight quarterly installment payments through November 2021, which the Company accrued for and has an outstanding balance of approximately $16,000 as of October 31, 2021. |
| Legal fees | $ 16,000 |
Equity (Details) - USD ($) |
1 Months Ended | 3 Months Ended | ||||||
|---|---|---|---|---|---|---|---|---|
Jun. 01, 2021 |
Dec. 07, 2020 |
Jul. 31, 2021 |
May 31, 2020 |
Oct. 31, 2021 |
Aug. 19, 2021 |
May 27, 2021 |
Dec. 31, 2020 |
|
| Equity (Details) [Line Items] | ||||||||
| Sale of stock issued | 4,000,000 | |||||||
| Restricted stock units, description | the Company issued 2,833,425 shares of Class B common stock (the “Institutional Shares”), par value $0.01 per share, to the Institutional Investors, at a purchase price equal to $35.00 per share, for aggregate gross proceeds of approximately $99.2 million, before deducting placement agent fees and other offering expenses. | |||||||
| Options were granted | 98,000,000 | |||||||
| Deducting transaction costs (in Dollars) | $ 6,200,000 | |||||||
| Amount of aggregate purchase price (in Dollars) | $ 13,000,000 | $ 1,000,000 | ||||||
| Exercise price (in Dollars per share) | $ 22.91 | |||||||
| Stock Options [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Total unrecognized compensation cost (in Dollars) | $ 8,200,000 | |||||||
| Unrecognized compensation cost over next period | 4 years | |||||||
| Restricted Stock [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Total unrecognized compensation cost (in Dollars) | $ 35,600,000 | |||||||
| Unrecognized compensation cost over next period | 3 years 9 months | |||||||
| Class B common stock [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Sale of common stock (in Dollars) | $ 2,250,000 | $ 250,000,000 | ||||||
| Sale of stock issued | 48,859 | |||||||
| Share issued | 112,501 | |||||||
| Share per price (in Dollars per share) | $ 44.42 | |||||||
| Cash consideration (in Dollars) | $ 5,000,000 | |||||||
| Proceeds from issuance of common stock (in Dollars) | $ 2,000,000 | |||||||
| Securities Purchase Agreement [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Proceeds from issuance of warrants (in Dollars) | $ 8,200,000 | |||||||
| Securities Purchase Agreement [Member] | Class B common stock [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Sale of stock issued | 567,437 | |||||||
| Sale of stock price per share (in Dollars per share) | $ 22.91 | |||||||
| Aggregate shares of common stock | 218,245 | |||||||
| Warrant [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Purchase of warrants granted, percentage | (20.00%) | |||||||
| Warrants exercisable, description | The warrants are exercisable at a per share exercise price of $22.91, and are exercisable at any time on or after December 7, 2020 through June 6, 2022. | |||||||
| Warrants outstanding | 26,189 | |||||||
| Exercise price (in Dollars per share) | $ 22.91 | |||||||
| Warrant [Member] | IDT [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Warrants exercised | 43,649 | |||||||
| Warrant [Member] | Class B common stock [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Warrants to purchase | 113,487 | |||||||
| Warrants exercised | 87,298 | |||||||
| 2018 Equity Incentive Plan [Member] | ||||||||
| Equity (Details) [Line Items] | ||||||||
| Issuance of restricted shares | 5,000,000 | |||||||
| Option granted, description | Pursuant to the Company’s 2018 Equity Incentive Plan, three of our four non-employee directors of the Company were granted 4,203 restricted shares of our Class B common stock in January 2020 and 4,203 restricted shares of our Class B common stock in January 2021 which fully vested on the date of the grants. The fair value of the awards on the date of the grants were approximately $286,000 and $208,000 in January 2021 and January 2020, respectively, which was included in selling, general and administrative expense. | |||||||
Equity (Details) - Schedule of stock option activity $ / shares in Units, $ in Thousands |
3 Months Ended |
|---|---|
|
Oct. 31, 2021
USD ($)
$ / shares
shares
| |
| Schedule of stock option activity [Abstract] | |
| Number of Options, Outstanding, Beginning balance | shares | 683,414 |
| Weighted-Average Exercise Price, Outstanding, Beginning balance | $ / shares | $ 11.13 |
| Weighted-Average Remaining Contractual Term, Outstanding, Beginning | 3 years 18 days |
| Aggregate Intrinsic Value, Outstanding, Beginning balance | $ | $ 26,982 |
| Number of Options, Granted | shares | 280,543 |
| Weighted-Average Exercise Price, Granted | $ / shares | $ 34.25 |
| Number of Options, Exercised | shares | |
| Weighted-Average Exercise Price, Exercised | $ / shares | |
| Number of Options, Cancelled / Forfeited | shares | (3,403) |
| Weighted-Average Exercise Price, Cancelled / Forfeited | $ / shares | |
| Number of Options, Outstanding, Ending balance | shares | 960,554 |
| Weighted-Average Exercise Price, Outstanding, Ending balance | $ / shares | $ 17.8 |
| Weighted-Average Remaining Contractual Term, Outstanding, Ending balance | 4 years 10 months 6 days |
| Aggregate Intrinsic Value, Outstanding, Ending balance | $ | |
| Number of Options, Exercisable | shares | 565,005 |
| Weighted-Average Exercise Price, Exercisable | $ / shares | $ 4.9 |
| Weighted-Average Remaining Contractual Term, Outstanding, Exercisable | 1 year 4 months 24 days |
| Aggregate Intrinsic Value, Outstanding, Exercisable | $ | $ 1,503 |
Equity (Details) - Schedule of Black-Scholes option pricing model |
3 Months Ended |
|---|---|
Oct. 31, 2021 | |
| Equity (Details) - Schedule of Black-Scholes option pricing model [Line Items] | |
| Expected term (in years) | 6 years 14 days |
| Expected volatility | 75.00% |
| Expected dividend yield | |
| Minimum [Member] | |
| Equity (Details) - Schedule of Black-Scholes option pricing model [Line Items] | |
| Risk-free interest rate | 0.67% |
| Maximum [Member] | |
| Equity (Details) - Schedule of Black-Scholes option pricing model [Line Items] | |
| Risk-free interest rate | 1.16% |
Equity (Details) - Schedule of grants of restricted shares of Class B common stock |
3 Months Ended |
|---|---|
|
Oct. 31, 2021
$ / shares
shares
| |
| Schedule of grants of restricted shares of Class B common stock [Abstract] | |
| Number of Non-vested Shares, Beginning Balance | shares | 1,007,975 |
| Weighted Average Grant Date Fair Value, Beginning balance | $ / shares | $ 46.77 |
| Number of Non-vested Shares, Granted | shares | 27,908 |
| Weighted Average Grant Date Fair Value, Granted | $ / shares | $ 41.73 |
| Number of Non-vested Shares, Vested | shares | (3,332) |
| Weighted Average Grant Date Fair Value, Vested | $ / shares | $ 16.03 |
| Number of Non-vested Shares, Cancelled / Forfeited | shares | (28,286) |
| Weighted Average Grant Date Fair Value, Cancelled / Forfeited | $ / shares | $ 17.25 |
| Number of Non-vested Shares, Ending Balance | shares | 1,004,265 |
| Weighted Average Grant Date Fair Value, Ending Balance | $ / shares | $ 47.39 |
Leases (Details) - USD ($) $ in Millions |
3 Months Ended | |
|---|---|---|
Oct. 31, 2021 |
Oct. 31, 2020 |
|
| Disclosure Text Block [Abstract] | ||
| Net operating leases with initial term expiration dates ,description | The Company is the lessor of certain properties which are leased to tenants under net operating leases with initial term expiration dates ranging from 2021 to 2029. | |
| Comprehensive loss | $ 0.7 | $ 0.8 |
| Related party leases expire, description | The Company has related party leases that expire in April 2025 for (i) an aggregate of 88,631 square feet, which includes two parking spots per thousand square feet of space leased at 520 Broad Street, Newark, New Jersey, and (ii) 3,595 square feet in Israel. | |
| Annual rent | $ 2.0 | |
| Related parties terminate leases, description | The related parties have the right to terminate the domestic 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. A related party has the right to terminate the Israeli lease upon four months’ notice. IDT has the right to lease an additional 50,000 square feet, in 25,000-foot increments, in the building located at 520 Broad Street, Newark, New Jersey on the same terms as their base lease, and other rights should 25,000 square feet or less remain available to lessees in the building. Upon expiration of the lease, related parties have the right to renew the leases for another five years. | |
Leases (Details) - Schedule of future contractual minimum lease payments $ in Thousands |
Oct. 31, 2021
USD ($)
|
|---|---|
| Leases (Details) - Schedule of future contractual minimum lease payments [Line Items] | |
| 2022 | $ 2,186 |
| 2023 | 2,709 |
| 2024 | 2,693 |
| 2025 | 2,209 |
| 2026 | 562 |
| Thereafter | 1,386 |
| Total Minimum Future Rental Income | 11,745 |
| Related Parties [Member] | |
| Leases (Details) - Schedule of future contractual minimum lease payments [Line Items] | |
| 2022 | 1,579 |
| 2023 | 2,117 |
| 2024 | 2,155 |
| 2025 | 1,659 |
| 2026 | |
| Thereafter | |
| Total Minimum Future Rental Income | 7,510 |
| Other [Member] | |
| Leases (Details) - Schedule of future contractual minimum lease payments [Line Items] | |
| 2022 | 607 |
| 2023 | 592 |
| 2024 | 538 |
| 2025 | 550 |
| 2026 | 562 |
| Thereafter | 1,386 |
| Total Minimum Future Rental Income | $ 4,235 |
Subsequent Events (Details) - USD ($) |
1 Months Ended | 3 Months Ended | ||||
|---|---|---|---|---|---|---|
Nov. 11, 2021 |
Nov. 21, 2021 |
Oct. 31, 2021 |
Jul. 31, 2022 |
Nov. 01, 2021 |
Jul. 31, 2021 |
|
| Subsequent Events (Details) [Line Items] | ||||||
| Exercise price (in Dollars per share) | $ 17.8 | $ 11.13 | ||||
| Aggregate purchase price | $ 3,000,000 | |||||
| Principal amount | $ 400,000 | |||||
| Restricted cash | 5,000,000 | |||||
| Subsequent Event [Member] | ||||||
| Subsequent Events (Details) [Line Items] | ||||||
| Exercise price (in Dollars per share) | $ 0.1878 | |||||
| Purchase of ordinary shares (in Shares) | 15,975,000 | |||||
| Severance costs | $ 5,200,000 | |||||
| Severance cost | $ 1,000,000 | |||||
| LipoMedix [Member] | ||||||
| Subsequent Events (Details) [Line Items] | ||||||
| Aggregate purchase price | 3,000,000 | |||||
| Accrued interest | 21,800 | |||||
| Cash payment | $ 2,600,000 | |||||
| Class B common stock [Member] | Subsequent Event [Member] | ||||||
| Subsequent Events (Details) [Line Items] | ||||||
| Issuance of shares (in Shares) | 15,000 | |||||
| Class B common stock [Member] | Jonas Offering [Member] | Subsequent Event [Member] | ||||||
| Subsequent Events (Details) [Line Items] | ||||||
| Shares issued (in Shares) | 15,975,000 | |||||
| Exercise price (in Dollars per share) | $ 0.1878 |
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