Description of Business

12 Months Ended

Jul. 31, 2023

Description of Business [Abstract]

DESCRIPTION OF BUSINESS

NOTE 1 – DESCRIPTION OF BUSINESS

Description of Business

Rafael Holdings, Inc. (NYSE:RFL), (“Rafael Holdings”, “we” or the “Company”), a Delaware corporation, is a holding company with interests in clinical and early-stage pharmaceutical companies (the “Pharmaceutical Companies”), including an investment in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company, a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage pharmaceutical company, the Barer Institute Inc. (“Barer”), a wholly-owned preclinical cancer metabolism research operation, an investment in Cyclo Therapeutics Inc. (Nasdaq: CYTH), (“Cyclo Therapeutics” or “Cyclo”), a clinical-stage biotechnology company dedicated to developing life-changing medicines for patients and families living with challenging diseases through its lead therapeutic asset, Trappsol^® Cyclo™., an investment in Day Three Labs, Inc. (“Day Three”), a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products in the cannabis industry, and a majority interest in Rafael Medical Devices, LLC, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries (“Rafael Medical Devices” and Day Three Labs together with the Pharmaceutical Companies, represent our “Investment Companies”). In November 2022, the Company resolved to curtail its early-stage development efforts, including pre-clinical research at Barer. The decision was taken to reduce spending as the Company focuses on exploring strategic opportunities. The Company’s primary focus is to expand our investment portfolio through opportunistic and strategic investments including therapeutics which address high unmet medical needs.

Historically, the Company owned multiple real estate assets. In 2020, the Company sold an office building located in Piscataway, New Jersey and, on August 22, 2022, the Company sold the building at 520 Broad Street in Newark, New Jersey that serves as headquarters for the Company and several tenants and an associated public garage (the “520 Property”). See Note 3 for further details on the sale transaction. Currently, the Company holds a portion of a commercial building in Jerusalem, Israel as its remaining real estate asset.

The Company holds debt and equity investments in Cornerstone 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 Cornerstone Pharmaceuticals in exchange for issuing Company Class B common stock to the other stockholders of Cornerstone Pharmaceuticals (“Merger Agreement” or “Merger”). On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613^® (devimistat), Cornerstone Pharmaceuticals’ lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas. In addition, following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat 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 financial statements for the first quarter ended October 31, 2021, accounting principles generally accepted in the United States of America (“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 the Data Events, the Company concluded that the likelihood of further development of and prospects for CPI-613 is uncertain and fully impaired in the first quarter ended October 31, 2021 the value of its loans, receivables, and investment in Cornerstone Pharmaceuticals based upon its valuation of Cornerstone Pharmaceuticals. On February 2, 2022, the Company terminated the Merger Agreement with Cornerstone Pharmaceuticals, effective immediately, in accordance with its terms. Subsequently, on February 2, 2022, the Company withdrew its Registration Statement on Form S-4 related to the proposed Merger. On March 21, 2023, the Company loaned $2.0 million to Cornerstone which debt is represented by a Promissory Note made by Cornerstone (the “Promissory Note” or “Note”).

Cornerstone is in the process of a comprehensive restructuring transaction including, the conversion of the debt under the Line of Credit Agreement and the Promissory Note held by the Company, the conversion and modification of other Cornerstone debt obligations, the extension of the Cornerstone debt held by RP Finance, a reverse stock split, the conversion of all outstanding preferred stock of Cornerstone into common stock and the adoption of certain governance measures. This transaction is subject to a number of conditions which are beyond the Company’s control.

In May 2023, the Company invested in Cyclo Therapeutics. Cyclo is a clinical stage biotechnology company that develops cyclodextrin-based products for the treatment of neurodegenerative diseases. Cyclo’s lead drug candidate is Trappsol^® Cyclo™ (hydroxypropyl beta cyclodextrin), a treatment for Niemann-Pick Type C disease (“NPC”). NPC is a rare and fatal autosomal recessive genetic disease resulting in disrupted cholesterol metabolism that impacts the brain, lungs, liver, spleen, and other organs. In January 2017, the FDA granted Fast Track designation to Trappsol^® Cyclo™ for the treatment of NPC. Initial patient enrollment in the U.S. Phase I study commenced in September 2017, and in May 2020 Cyclo announced Top Line data showing a favorable safety and tolerability profile for Trappsol^® Cyclo™ in this study. Cyclo is currently conducting a Phase 3 Clinical Trial Evaluating Trappsol^® Cyclo™ in Pediatric and Adult Patients with Niemann-Pick Disease Type C1.

In 2019, the Company established Barer, a preclinical cancer metabolism research operation, to focus on developing a pipeline of novel therapeutic compounds, including compounds to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer has been comprised of scientists and academic advisors that are experts in cancer metabolism, chemistry, and drug development. In addition to its own internal discovery efforts, Barer pursued collaborative research agreements and in-licensing opportunities with leading scientists from top academic institutions. Barer’s subsidiary, Farber Partners, LLC (“Farber”), was formed around one such agreement with Princeton University’s Office of Technology Licensing for technology from the laboratory of Professor Joshua Rabinowitz, in the Department of Chemistry, Princeton University, for an exclusive worldwide license to its SHMT (serine hydroxymethyltransferase) inhibitor program. In November 2022, the Company resolved to curtail its early-stage development efforts, including pre-clinical research at the Barer Institute.

In 2016, the Company first invested in LipoMedix, a clinical stage pharmaceutical company and holds a majority of the common stock.

In April 2023, the Company invested in Day Three Labs, the majority-owner of Day three Labs Manufacturing, a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products in the cannabis industry.

In May 2021, the Company formed Rafael Medical Devices, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries. In August 2023, the Company raised $925,000 from third parties in exchange for 31.62% ownership of Rafael Medical Devices.

The Company also holds a 95% investment in LipoMedix, a development-stage, privately held Israeli company focused on the development of an innovative, safe and effective cancer therapy based on liposome delivery.

The “Company” in these consolidated financial statements refers to Rafael Holdings and its subsidiaries on a consolidated basis.

All majority-owned subsidiaries are consolidated with all intercompany transactions and balances eliminated in consolidation. In addition to Rafael Holdings, Inc., the subsidiaries included in these consolidated financial statements are as follows:

Company	Country of Incorporation	Percentage Owned
Broad Atlantic Associates, LLC	United States – Delaware		100	%
IDT R.E. Holdings Ltd.	Israel		100	%
Rafael Holdings Realty, Inc.	United States – Delaware		100	%
Barer Institute, Inc.	United States – Delaware		100	%*
The Barer Institute, LLC	United States – Delaware		100	%*
Hillview Avenue Realty, JV	United States – Delaware		100	%
Hillview Avenue Realty, LLC	United States – Delaware		100	%
Rafael Medical Devices, Inc.	United States – Delaware		100	%
Levco Pharmaceuticals Ltd.	Israel		95	%***
Farber Partners, LLC	United States – Delaware		93	%
Pharma Holdings, LLC	United States – Delaware		90	%
LipoMedix Pharmaceuticals Ltd.	Israel		95	%****
Altira Capital & Consulting, LLC	United States – Delaware		67	%
CS Pharma Holdings, LLC	United States – Delaware		45	%**

* In November 2022, the Company resolved to curtail its early-stage development efforts, including pre-clinical research at Barer. The decision was taken to reduce spending as the Company focuses on exploring strategic opportunities.

** 50% of CS Pharma Holdings, LLC is owned by Pharma Holdings, LLC. We have a 90% ownership in Pharma Holdings, LLC and, therefore, an effective 45% interest in CS Pharma Holdings, LLC. The Company, along with CS Pharma and Pharma Holdings, collectively own securities representing 51% of the outstanding capital stock of Cornerstone Pharmaceuticals and 42% of the capital stock on a fully diluted basis (excluding the remainder of the Warrant). Refer to Note 4 for further details.

*** During Fiscal 2022, the Company discontinued further material investment in Levco.

**** On February 9, 2023, the Company increased its ownership interest in LipoMedix Pharmaceuticals Ltd. an additional 11% from 84% to 95%.

On March 15, 2022, the Company dissolved IDT 225 Old NB Road, LLC.