Rafael Holdings, Inc 10-Q for FY2022 Q2
Rafael Holdings, Inc. (RFL)
About this 10-Q
Rafael Holdings, Inc filed this 10-Q on March 17, 2022, covering the quarter ended January 31, 2022 (FY2022 Q2).
Headline figures
Quarter ended January 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Revenue
- $1.11M
- up 15.7% from $959K a year earlier
- Net loss
- $2.57M
- compared with a net loss of $8.24M a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
for
the quarterly period ended
or
Commission
File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices, zip code)
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No
The number of shares outstanding of the registrant’s common stock as of March 14, 2022 was:
| Class A common stock, par value $0.01 per share: | ||
| Class B common stock, par value $0.01 per share: |
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)
| January 31, 2022 | 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 $ | ||||||||
| 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 January 31, | Six Months Ended January 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| 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 | ||||||||||||||||
| Impairment – Altira | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Gain on sale of building | ||||||||||||||||
| Impairment of investments – Other Pharmaceuticals | ( | ) | ||||||||||||||
| Impairment of cost method investment – Rafael Pharmaceuticals | ( | ) | ||||||||||||||
| Unrealized (loss) gain on investments – Hedge Funds | ( | ) | ( | ) | ||||||||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Equity in earnings (loss) of RP Finance | ( | ) | ||||||||||||||
| Consolidated net loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to noncontrolling interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss attributable to Rafael Holdings, Inc. | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| OTHER COMPREHENSIVE LOSS | ||||||||||||||||
| Consolidated 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 data)
| Three Months Ended January 31, 2022 | ||||||||||||||||||||||||||||||||||||
| Common Stock, Series A |
Common Stock, Series B |
Additional Paid-in |
Accumulated | Accumulated other |
Noncontrolling | Total | ||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | income | interests | Equity | ||||||||||||||||||||||||||||
| Balance at October 31, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2022 | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Acquisition of additional ownership interest in LipoMedix | — | — | ( |
) | ||||||||||||||||||||||||||||||||
| Forfeiture of restricted stock | — | ( |
) | ( |
) | ( |
) | ( |
) | |||||||||||||||||||||||||||
| Shares withheld for payroll taxes | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance at January 31, 2022 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | |||||||||||||||||||||||||
| Six Months Ended January 31, 2022 | ||||||||||||||||||||||||||||||||||||
| 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 July 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net loss for the six months ended January 31, 2022 | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Forfeiture of restricted stock | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Common stock sold to investors | ||||||||||||||||||||||||||||||||||||
| Transaction costs incurred in connection with sale of common stock | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common stock sold to related party | ||||||||||||||||||||||||||||||||||||
| Acquisition of additional ownership interest in LipoMedix | — | — | ( | ) | ||||||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | — | ( | ) | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance at January 31, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||
See accompanying notes to the unaudited consolidated interim financial statements.
3
RAFAEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited, in thousands, except share data)
| Three Months Ended January 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 October 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Net loss for the three months ended January 31, 2021 | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Stock-based compensation | ||||||||||||||||||||||||||||||||||||
| Stock-based compensation to Board of Directors | — | |||||||||||||||||||||||||||||||||||
| Shares issued - Securities Purchase Agreements | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||
| Capital contribution for noncontrolling interest | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ||||||||||||||||||||||||||||||||||
| Balance at January 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||||||||||||
| Six Months Ended January 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 July 31, 2020 | $ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
| Net loss for the six months ended January 31, 2021 | — | — | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||||||||||||||
| Stock-based compensation to Board of Directors | — | — | — | — | — | — | ||||||||||||||||||||||||||||||
| Shares issued - Securities Purchase Agreements | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Shares withheld for payroll taxes | — | — | ( |
) | — | ( |
) | — | — | — | ( |
) | ||||||||||||||||||||||||
| Stock options exercised | ||||||||||||||||||||||||||||||||||||
| Capital contribution for noncontrolling interest | — | — | ||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||||||
| Balance at January 31, 2021 | $ | $ | $ | $ | ( |
) | $ | $ | $ | |||||||||||||||||||||||||||
See accompanying notes to the unaudited consolidated interim financial statements.
4
RAFAEL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Six Months Ended January 31, | ||||||||
| 2022 | 2021 | |||||||
| 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 (loss) gain on investments - Hedge Funds | ( | ) | ||||||
| Impairment of investments - Other Pharmaceuticals | ||||||||
| Impairment of cost method investment - Rafael Pharmaceuticals | ||||||||
| Impairment - Altira | ||||||||
| Provision for loss on receivable pursuant to line of credit | ||||||||
| Equity in loss (earnings) of RP Finance | ( | ) | ||||||
| Provision for losses on related party receivables | ||||||||
| 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 | ||||||||
| Purchase of Investment in Altira | ( | ) | ||||||
| Investment in Rafael Pharmaceuticals | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing activities | ||||||||
| Contribution from noncontrolling interest of consolidated entity | ||||||||
| Proceeds from exercise of options | ||||||||
| Proceeds from issuance 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 (decrease) 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 | $ | $ | ||||||
| Supplemental schedule of noncash investing and financing activities | ||||||||
| Acquisition of additional ownership interest in LipoMedix | $ | $ | ||||||
| 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.
5
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, 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 the Data Events, the Company concluded that currently the likelihood of further development of and prospects for CPI-613 is uncertain and has fully impaired in the Company’s financial statements for the six months ended January 31, 2022, the value of its loans, receivables, and investment in Rafael Pharmaceuticals based upon its valuation of Rafael Pharmaceuticals. On February 2, 2022, the Company withdrew its Registration Statement on Form S-4, which terminated the merger agreement pursuant to certain sections of the merger agreement, effective immediately.
In 2019, the Company established the Barer Institute (“Barer”), 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.
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), 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.
6
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 8 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 and six months ended January 31, 2022 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.
7
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Liquidity
As
of January 31, 2022, the Company had cash and cash equivalents of $
Risks and Uncertainties - COVID-19, War in Ukraine
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 being conducted by Rafael Pharmaceuticals are being managed by Rafael Pharmaceuticals and its agents.
Even with growing availability of testing and vaccines and the relaxation of public health measures that were implemented to limit the spread of the pandemic, there continues to be uncertainty around the COVID-19 pandemic and its impact.
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. Most of our employees have returned to working from the office on a part-time basis.
The full impact of the COVID-19 pandemic on the Company will depend on factors such as the length of time of the pandemic; the responses of federal, state and local governments, the impact of future variants that may emerge; vaccination rates among the population; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy and consumer behavior; and the effect on our employees, vendors, and other partners.
The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the companies in which we have investments, financial condition, and results of operations. Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the Russian – Ukraine war on our business and the companies in which we have investments.
Reclassification
Certain
comparative figures have been reclassified to conform to the current period presentation. The unaudited consolidated statement of operations
and comprehensive loss for the three months ended October 31, 2021 included a provision for losses on related party receivables of $
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 and six months ended January 31, 2022, related parties represented
8
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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 include 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.
9
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
10
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 and research and development 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
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 now expire on April 1, 2022, however, at this time, the Company does not intend to exercise the Warrant.
11
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 Rafael Pharmaceuticals, 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.
The
Instrument holds a contractual right to receive additional shares of Rafael Pharmaceuticals capital stock equal to
12
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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.
Due to the Data Events, during the six months
ended January 31, 2022, the Company recorded an impairment charge of approximately $
Approximately
$
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, during the six months ended January 31, 2022, the Company recorded a full reserve on the amounts due the Company
from Rafael Pharmaceuticals related to the Line of Credit Agreement for $
The
Company also recorded a loss on related party receivables of approximately $
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,
13
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 $
For
the three and six months ended January 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 $
14
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 approximately $
As of January 31, 2022, the Company has funded a cumulative total of $9.375 million in accordance with its 37.5% ownership interests in RP Finance.
15
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 the 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 January 31, 2022, 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 $
On
November 15, 2021, the Company entered into a share purchase agreement with LipoMedix to purchase up to
16
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
As
of the date of the Share Purchase Agreement, there was an outstanding loan balance including principal of $
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.
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 January 31, 2022 and July 31, 2021:
| January 31, 2022 | ||||||||||||||||
| 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 January 31, 2022 and July 31, 2021, the Company did not have any liabilities measured at fair value on a recurring basis.
17
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 January 31, | Six Months Ended January 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited, in thousands) | (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 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 January 31, 2022 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 January 31, 2022 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 January 31, 2022 or July 31, 2021.
18
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 8 – TRADE ACCOUNTS RECEIVABLE
Trade Accounts Receivable consisted of the following:
| January 31, 2022 | 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:
| January 31, 2022 | 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 a building owned by its subsidiary.
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 share includes potentially dilutive securities such as stock options, unvested restricted stock, 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 share for the three and six months ended January 31, 2022 and 2021 because all such securities are anti-dilutive for all periods presented.
19
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 January 31, | Six Months Ended January 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Shares issuable upon exercise of stock options | ||||||||||||||||
| Shares issuable upon vesting of restricted stock | ||||||||||||||||
| 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 and six months ended January 31, 2022 and 2021 because the Company had a net loss and the impact of the assumed exercise of non-vested restricted shares, 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 $
20
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
IDT leases approximately
During
the year ended July 31, 2021, IDT and Genie each 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. The Company billed Rafael
Pharmaceuticals $
Due
to the Data Events, the balance owed to the Company by Rafael Pharmaceuticals as of January 31, 2022, was reserved for during the six
months ended January 31, 2022, resulting in a loss on related party receivable of $
Levco Pharmaceuticals Ltd
On September 8, 2020, Levco Pharmaceuticals Ltd.
(“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.
21
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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
Investment in Altira
In May 2020, the Company acquired its first membership
interest of
RP Finance
The Company recognized approximately $0 and $96 thousand in earnings from its ownership interests of 37.5% in RP Finance for the three months ended January 31, 2022 and 2021, respectively, and a loss of $575 thousand and earnings of $192 thousand from its ownership interests of 37.5% in RP Finance for the six months ended January 31, 2022 and 2021, respectively. As of January 31, 2022, the equity method investment in RP Finance on the Company’s balance sheet was $0. 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
LipoMedix Pharmaceuticals, Ltd.
As of the date of the Share Purchase Agreement,
on November 15, 2021, there was an outstanding loan balance including principal of $
NOTE 13 – INCOME TAXES
During the six months ended January 31, 2022 and
2021, the Company recognized an income tax provision of $
22
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 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:
| (unaudited, in thousands) | Pharmaceuticals | Real Estate | Total | |||||||||
| Three Months Ended January 31, 2022 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Three Months Ended January 31, 2021 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| (unaudited, in thousands) | Pharmaceuticals | Real Estate | Total | |||||||||
| Six Months Ended January 31, 2022 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
| Six Months Ended January 31, 2021 | ||||||||||||
| Revenues | $ | $ | $ | |||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ||||||
| Loss before income taxes | ( | ) | ( | ) | ( | ) | ||||||
23
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 January 31, (unaudited) | 2022 | 2021 | ||||||
| Revenue from tenants located in Israel | % | % | ||||||
| Six Months Ended January 31, (unaudited) | 2022 | 2021 | ||||||
| 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 | |||||||||
| January 31, 2022 | ||||||||||||
| 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 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.
24
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 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.
On January 19, 2022, the Company approved the
2021 Equity Incentive Plan (“the “2021 Plan”). The 2018 Equity Incentive Plan was suspended and replaced by the 2021
Plan, and no new grants were awarded under the 2018 Equity Incentive Plan as of January 19, 2022. Existing grants under the 2018 Equity
Incentive Plan will not be impacted by the adoption of the 2021 Plan. Any of the Company’s employees, directors, consultants, and
other service providers, and those of the Company’s affiliates, are eligible to participate in the 2021 Plan. In accordance with
applicable tax rules, only employees (and the employees of parent or subsidiary corporations) are eligible to be granted incentive stock
options. The 2021 Plan authorizes stock options (both incentive stock options or non-qualified stock options), stock appreciation rights,
restricted stock, restricted stock units, and cash or other stock-based awards. The maximum number of shares of Class B common stock that
may be issued under the 2021 Plan is
25
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 | ||||||||||||||||
| Cancelled / Forfeited | ( | ) | ||||||||||||||
| Outstanding at January 31, 2022 | $ | $ | ||||||||||||||
| Exercisable at January 31, 2022 | $ | $ | ||||||||||||||
At January 31, 2022, there are unrecognized compensation costs
related to non-vested stock options of $
Vesting terms of option grants to one executive
team member during the six months ended January 31, 2022 were modified to extend the vesting period by one year. This was accounted for
as a modification, and no incremental compensation cost was recorded as the amount is nominal. In addition, the Company recorded a reversal
of approximately $
The value of option grants is calculated using the Black-Scholes option pricing model with the following assumptions for options granted during the six months ended January 31, 2022:
| 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 Fair Value | |||||||
| Outstanding at July 31, 2021 | $ | |||||||
| Granted | ||||||||
| Vested | ( | ) | ||||||
| Cancelled / Forfeited | ( | ) | ( | ) | ||||
| Non-vested shares at January 31, 2022 | $ | |||||||
26
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
At January 31, 2022, there was $
On November 21, 2021, Ameet Mallik resigned as Chief Executive Officer
of the Company, effective January 31, 2022. In connection with his resignation, there was a material forfeiture of the former CEO’s
Class B restricted shares, resulting in a reversal of approximately $
| Three months ended January 31, | Six months ended January 31, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| (unaudited, in thousands) | (unaudited, in thousands) | |||||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Forfeiture of RSUs within general and administrative | ( | ) | ( | ) | ||||||||||||
| Net stock-based compensation expense | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
Securities Purchase Agreement
On December 7, 2020, Rafael Holdings entered into
a Securities Purchase Agreement (the “SPA”) for the sale of
Approximately $
Equity-classified Warrants
In connection with the Share Purchase Agreement,
each purchaser was granted warrants to purchase twenty percent (
27
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
During the year ended July 31, 2021, IDT
and Genie each exercised
There were no exercises of warrants during the
six months ended January 31, 2022. At January 31, 2022, the Company had outstanding warrants to purchase
Grant to Board of Directors
In January 2022, the Company granted
In January 2021, the Company granted a total of
NOTE 17 – LEASES
The future contractual minimum lease payments to be received (excluding operating expense reimbursements) by the Company as of January 31, 2022, 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 | $ | $ | $ | ||||||||||
28
RAFAEL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 18 – SUBSEQUENT EVENTS
Issuance of Restricted Stock to Executives
On February 1, 2022, the Company issued
Withdrawal of Registration Statement
On February 2, 2022, the Company withdrew its Registration Statement on Form S-4, which terminated the Merger Agreement with Rafael Pharmaceuticals pursuant to certain sections of the Merger Agreement, effective immediately.
On February 15, 2022, the Company filed a Registration Statement on Form S-3 (as amended on March 2, 2022) registering the resale by the Institutional Investors of the shares purchased by them. The Registration Statement was declared effective on March 7, 2022.
Severance Payment
During February 2022, the Company paid approximately
$
29
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. We have provided debt and equity financing to 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 light of the Data Events, the Company concluded that currently the likelihood of further development of and prospects for CPI-613 is uncertain and has fully impaired in its financial statements for the six months ended January 31, 2022, the value of its loans, receivables, and investment in Rafael Pharmaceuticals based upon its valuation of Rafael Pharmaceuticals.
On February 2, 2022, the Company withdrew its Registration Statement on Form S-4, which terminated the merger agreement pursuant to certain sections of the merger agreement, effective immediately.
In 2019, the Company established the Barer Institute (“Barer”), 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 invested in other early stage pharmaceutical ventures.
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.
Business Update - COVID-19, War in Ukraine
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 being conducted by Rafael Pharmaceuticals are being managed by Rafael Pharmaceuticals and its agents.
30
Even with growing availability of testing and vaccines and the relaxation of public health measures that were implemented to limit the spread of the pandemic, there continues to be uncertainty around the COVID-19 pandemic and its impact.
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. Most of our employees have returned to working from the office on a part-time basis.
The full impact of the COVID-19 pandemic on the Company will depend on factors such as the length of time of the pandemic; the responses of federal, state and local governments, the impact of future variants that may emerge; vaccination rates among the population; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy and consumer behavior; and the effect on our employees, vendors, and other partners.
The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the companies in which we have investments, financial condition, and results of operations. Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the Russian – Ukraine war on our business and the companies in which we have investments.
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 and Six Months Ended January 31, 2022 Compared to Three and Six Months Ended January 31, 2021
Pharmaceuticals Segment
Our consolidated expenses for our Pharmaceuticals segment were as follows:
| Three Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| General and administrative | $ | 1,714 | $ | (1,733 | ) | 3,447 | 199 | % | ||||||||
| Research and development | (3,335 | ) | (1,568 | ) | (1,767 | ) | (113 | )% | ||||||||
| Impairment - Altira | — | (7,000 | ) | 7,000 | 100 | % | ||||||||||
| Loss from operations | $ | (1,621 | ) | $ | (10,301 | ) | 8,680 | 84 | % | |||||||
31
| Six Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| General and administrative | $ | (10,383 | ) | $ | (3,352 | ) | (7,031 | ) | (210 | )% | ||||||
| Research and development | (5,488 | ) | (2,083 | ) | (3,405 | ) | (163 | )% | ||||||||
| Provision for loss on receivable pursuant to line of credit | (25,000 | ) | — | (25,000 | ) | (100 | )% | |||||||||
| Provision for losses on related party receivables | (10,095 | ) | — | (10,095 | ) | (100 | )% | |||||||||
| Impairment – Altira | — | (7,000 | ) | 7,000 | 100 | % | ||||||||||
| Loss from operations | $ | (50,966 | ) | $ | (12,435 | ) | (38,531 | ) | (310 | )% | ||||||
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. As of January 31, 2022 we held a 100% interest in Barer, a 84% interest in LipoMedix, a 95% interest in Levco, and a 93% interest in Farber. 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, severance, stock compensation expense, benefits, facilities, consulting and professional fees. The decrease in general and administrative expenses during the three months ended January 31, 2022 compared to the three months ended January 31, 2021 is primarily due to a net decrease in stock-based compensation of approximately $11.5 million (inclusive of a forfeiture of restricted stock units of approximately $19.0 million), an increase in severance expense of approximately $5.9 million, an increase in payroll expenses of approximately $1.4 million, an increase in professional fees of approximately $0.6 million, and increases in other administrative expenses. The majority of these increases were related to pre-launch activities for CPI-613 ® which are not expected to be recurring in light of the Data Events.
The increase in general and administrative expenses during six months ended January 31, 2022 compared to the six months ended January 31, 2021 is primarily due to severance expense of approximately $5.9 million, an increase in payroll expenses of approximately $2.7 million, an increase in professional fees of approximately $2.2 million, partially offset by a net decrease in stock based compensation expense of approximately $3.8 million (inclusive of a forfeiture of restricted stock units of approximately $19.0 million). The majority of these increases were related to pre-launch activities for CPI-613 ® which are not expected to be recurring in light of the Data Events.
Research and development expenses. Research and development expenses increased for the three and six months ended January 31, 2022 and 2021 due to increased activity at Barer, LipoMedix, Farber, and Rafael Medical Devices.
Loss on line of credit. Due to the Data Events, for the six months ended January 31, 2022, 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 six months ended January 31, 2022, the Company recorded a loss of approximately $10.1 million related to the full reserve recorded on the RP Finance receivable of $9.375 million, and the full reserve recorded on the Rafael Pharmaceuticals receivable of $0.720 million.
Impairment expense - Altira. The Company recorded an impairment loss of $7 million related to the Company’s additional investment in 33.333% of Altira during the three and six months ended January 31, 2021.
32
Real Estate Segment
Our consolidated income and expenses for our Real Estate segment were as follows:
| Three Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Rental – Third Party | $ | 232 | $ | 190 | 42 | 22 | % | |||||||||
| Rental – Related Party | 705 | 527 | 178 | 34 | % | |||||||||||
| Parking | 173 | 122 | 51 | 42 | % | |||||||||||
| Other - Related Party | — | 120 | (120 | ) | (100 | )% | ||||||||||
| Selling, general and administrative | (818 | ) | (1,034 | ) | 216 | 21 | % | |||||||||
| Depreciation | (381 | ) | (441 | ) | 60 | 14 | % | |||||||||
| Loss from operations | $ | (89 | ) | $ | (516 | ) | 427 | 83 | % | |||||||
| Six Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Rental – Third Party | $ | 428 | $ | 426 | 2 | — | % | |||||||||
| Rental – Related Party | 1,225 | 1,047 | 178 | (17 | )% | |||||||||||
| Parking | 363 | 299 | 64 | (21 | )% | |||||||||||
| Other | 120 | 240 | (120 | ) | 50 | % | ||||||||||
| Selling, general and administrative | (1,613 | ) | (2,007 | ) | 394 | 20 | % | |||||||||
| Depreciation | (763 | ) | (878 | ) | 115 | 13 | % | |||||||||
| Loss from operations | $ | (240 | ) | $ | (873 | ) | 633 | 73 | % | |||||||
Revenues. Total rental revenues increased by approximately $220 thousand and $180 thousand, and parking revenue increased by approximately $51 thousand and $64 thousand for the three and six months ended January 31, 2022, respectively. The increase in rental revenues is attributable to an increase in real estate tax escalations of approximately $178 thousand from a related party. 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 of approximately $216 thousand and $394 thousand for the three and six months ended January 31, 2022, respectively, is primarily due to a decrease in real estate tax costs due to the sale of the building in Piscataway, New Jersey, partially offset by other increases in administrative expenses.
Depreciation expenses. Depreciation expenses decreased by approximately $60 thousand and decreased by approximately $115 thousand for the three and six months ended January 31, 2022, respectively, compared to the three and six months ended January 31, 2021, due to the sale of the building in Piscataway, New Jersey.
33
Consolidated Operations
Our consolidated income and expense line items below income from operations were as follows:
| Three Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Loss from operations | $ | (1,710 | ) | $ | (10,817 | ) | 9,107 | 84 | % | |||||||
| Interest expense, net | (397 | ) | (1 | ) | (396 | ) | (39600 | )% | ||||||||
| Unrealized (loss) gain on investments - Hedge Funds | (454 | ) | 2,489 | (2,943 | ) | (118 | )% | |||||||||
| Loss before income taxes | (2,561 | ) | (8,329 | ) | 5,768 | 69 | % | |||||||||
| Provision for income taxes | (4 | ) | (4 | ) | — | — | % | |||||||||
| Equity in earnings of RP Finance | — | 96 | (96 | ) | (100 | )% | ||||||||||
| Consolidated net loss | (2,565 | ) | (8,237 | ) | 5,672 | 69 | % | |||||||||
| Net loss attributable to noncontrolling interests | (244 | ) | (72 | ) | (172 | ) | (239 | )% | ||||||||
| Net loss attributable to Rafael Holdings, Inc. | $ | (2,321 | ) | $ | (8,165 | ) | 5,844 | 72 | % | |||||||
| Six Months Ended January 31, | Change | |||||||||||||||
| 2022 | 2021 | $ | % | |||||||||||||
| (unaudited, in thousands) | ||||||||||||||||
| Loss from operations | $ | (51,206 | ) | $ | (13,308 | ) | (37,898 | ) | (285 | )% | ||||||
| Interest expense, net | (807 | ) | (1 | ) | (806 | ) | (80600 | )% | ||||||||
| 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 (loss) gain on investments - Hedge Funds | (243 | ) | 3,433 | (3,676 | ) | (107 | )% | |||||||||
| Loss before income taxes | (131,397 | ) | (9,851 | ) | (121,546 | ) | (1234 | )% | ||||||||
| Provision for income taxes | (4 | ) | (9 | ) | 5 | 56 | % | |||||||||
| Equity in (loss) earnings of RP Finance | (575 | ) | 192 | (767 | ) | (399 | )% | |||||||||
| Consolidated net loss | (131,976 | ) | (9,668 | ) | (122,308 | ) | (1265 | )% | ||||||||
| Net loss attributable to noncontrolling interests | (17,631 | ) | (57 | ) | (17,574 | ) | (30832 | )% | ||||||||
| Net loss attributable to Rafael Holdings, Inc. | $ | (114,345 | ) | $ | (9,611 | ) | (104,734 | ) | (1090 | )% | ||||||
Interest expense, net. Interest expense, net was $397 thousand and $807 thousand the three and six months ended January 31, 2022, respectively, and $1 thousand for the three and six months ended January 31, 2021. The interest expense for the three months ended January 31, 2022 is due to the amortization of the debt discount and the interest related to the note payable. The increase in interest expense for the six months ended January 31, 2022 is primarily related to the full six months of amortization of the debt discount and the interest related to the note payable. We recorded a reserve on related party interest receivable on the line of credit of $0.6 million and $0.8 million for the three and six months ended January 31, 2022, respectively.
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 for the six months ended January 31, 2021.
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 six months ended January 31, 2021.
34
Impairment of cost method investment - Rafael Pharmaceuticals. In connection with the Data Events, we recorded a full impairment charge during the six months ended January 31, 2022 related to our cost method investment in Rafael Pharmaceuticals in the amount of $79 million.
Unrealized (loss) gain on investments - Hedge Funds. We recorded unrealized (losses) gains of approximately $(454) thousand and $2.5 million for the three months ended January 31, 2022 and 2021, respectively, and approximately $(243) thousand and $3.4 million for the six months ended January 31, 2022 and 2021, respectively.
Equity in (loss) earnings of RP Finance. We recognized approximately $0 and $96 thousand in earnings from our ownership interest in RP Finance for the three months ended January 31, 2022, and 2021, respectively. We recognized a loss of $575 thousand and earnings of $192 thousand from our ownership interest in RP Finance for the six months ended January 31, 2022 and 2021, respectively.
Net loss attributable to noncontrolling interests. The change in the net loss attributable to noncontrolling interests was due to an approximate $17.3 million loss related to the Rafael Pharmaceuticals impairment loss (the total impairment loss was approximately $79 million) which was applicable to noncontrolling interests in certain of the Company’s subsidiaries and was allocated to the holders of interests in CS Pharma and Pharma Holdings in the approximate amounts of $10.4 million and $6.9 million, respectively, for the six months ended January 31, 2022. The additional change is related to the loss from LipoMedix, Farber, and Levco for the three months ended January 31, 2022.
Liquidity and Capital Resources
General
As of January 31, 2022, we had cash and cash equivalents of $65.0 million (excluding restricted cash) in addition to our investment in hedge funds valued at $5.0 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.
| January 31, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows (used in) provided by | (unaudited, in thousands) | |||||||
| Operating activities | $ | (13,811 | ) | $ | (5,527 | ) | ||
| Investing activities | (26,937 | ) | (8,420 | ) | ||||
| Financing activities | 97,868 | 13,809 | ||||||
| Effect of exchange rates on cash and cash equivalents | 51 | 18 | ||||||
| Increase (decrease) in cash and cash equivalents | $ | 57,171 | $ | (120 | ) | |||
Operating Activities
The increase in cash used in operating activities for the six months ended January 31, 2022 as compared to the six months ended January 31, 2021 was primarily related to the net loss of $132.0 million, partially 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 the Company from Rafael Pharmaceuticals related to the Line of Credit Agreement for $25 million, the reserve on receivables due from Rafael Pharmaceuticals totaling $10.1 million, and an increase in accounts payable and accrued expenses of $5.4 million, as well as other changes in assets and liabilities.
35
Investing Activities
Cash used in investing activities for the six months ended January 31, 2022 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 used in investing activities for the six months ended January 31, 2021 was primarily related to the Company partially exercising the Warrant and purchasing 7.3 million shares of Rafael Pharmaceuticals’ Series D Preferred Stock for $9.1 million, the payments to fund the Company’s portion of advances under the line of credit between RP Finance and Rafael Pharmaceuticals, the initial payments of $1.0 million towards the acquisition of a second 33.333% membership interest in Altira for a product-in-development, offset by the proceeds of $3.7 million from the sale of the building in Piscataway, New Jersey in August 2020 and proceeds of $2.0 million from hedge funds.
Financing Activities
Cash provided by financing activities for the six months ended January 31, 2022 was primarily related to proceeds of approximately $104 million related to the sale of our common stock to investors and a related party, partially offset by payment of transactions costs of $6.2 million.
Cash provided by financing activities for the six months ended January 31, 2021 was primarily related to proceeds of $13.0 million for the sale of 567,437 shares of the Company’s Class B common stock and warrants to purchase an additional 113,487 shares of Class B common stock.
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, War in Ukraine
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 being conducted by Rafael Pharmaceuticals are being managed by Rafael Pharmaceuticals and its agents.
Even with growing availability of testing and vaccines and the relaxation of public health measures that were implemented to limit the spread of the pandemic, there continues to be uncertainty around the COVID-19 pandemic and its impact.
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. Most of our employees have returned to working from the office on a part-time basis.
The full impact of the COVID-19 pandemic on the Company will depend on factors such as the length of time of the pandemic; the responses of federal, state and local governments, the impact of future variants that may emerge; vaccination rates among the population; the efficacy of the COVID-19 vaccines; the longer-term impact of the pandemic on the economy and consumer behavior; and the effect on our employees, vendors, and other partners.
The short and long-term implications of Russia’s invasion of Ukraine are difficult to predict at this time. The imposition of sanctions and counter sanctions may have an adverse effect on the economic markets generally and could impact our business and the companies in which we have investments, financial condition, and results of operations. Because of the highly uncertain and dynamic nature of these events, it is not currently possible to estimate the impact of the Russian – Ukraine war on our business and the companies in which we have investments.
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Critical Accounting 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 Annual Report on Form 10-K, for fiscal 2021 (“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 2021 Form 10-K. There have been no material changes in our critical accounting policies and procedures during the six months ended January 31, 2022.
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 and the war in Ukraine on our business and the companies in which we have investments. 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 management evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer (our “Certifying Officers”), the effectiveness of our disclosure controls and procedures as of January 31, 2022, pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Certifying Officers concluded that our disclosure controls and procedures were not effective as of January 31, 2022, because of a material weakness in our internal control over financial reporting identified during the six months ended January 31, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.
We determined that there was an error in our accounting for items of income (loss) attributable to the non-controlling interests in two of our legal entities. Specifically, we did not correctly allocate losses to our noncontrolling interests, as the Company processed journal entries related to an impairment loss and other items of income (loss) outside of the normal consolidation process, and effective reviews of the consolidation did not occur. We determined that a material weakness in our internal control over financial reporting exists as we did not maintain effective internal controls over the Company’s consolidation process and accounting for items of income (loss) attributable to the non-controlling interests.
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The Company assessed whether there was a reasonable possibility that a material misstatement would not have been prevented or detected on a timely basis as a result of the above control deficiencies.
The control deficiencies resulted in material errors in items of income (loss) attributed to noncontrolling interests previously disclosed in the Company’s interim consolidated financial statements and other items of income (loss) for the three-month and six-month periods ended January 31, 2022. Based on these factors, the Company concluded that the deficiencies noted above rise to the level of a material weakness as of January 31, 2022.
Status of Remediation of Material Weaknesses in Internal Control over Financial Reporting
As previously disclosed, the Company’s management, including its Certifying Officers, identified a material weakness in the Company’s internal control over financial reporting during the three months ended October 31, 2021 related to the Company’s design of the control around the application of authoritative guidance related to earnings per share in accordance with generally accepted accounting principles in the United States. As a result of the material weaknesses identified as related to earnings per share and the accounting for items of income (loss) attributable to the noncontrolling interests, the Company filed a restatement of its quarterly report on Form 10-Q for the quarter ended October 31, 2021.
To address the material weakness described above, the Company has expanded its controls related to the calculation of earnings per share
to include enhanced reconciliation procedures between common shares issued during the period and unvested restricted shares. The enhanced
controls were implemented immediately upon identification of the material weakness and the Company’s management, including its Certifying
Officers, determined that we fully remediated the material weakness as of January 31, 2022. We will continue to monitor the effectiveness
of these controls and will make any further changes management determines necessary.
We are in the process of enhancing our internal controls for the aforementioned material weakness related to the accounting for noncontrolling interests.
In addition, management is continuing to develop the design and implementation of internal controls to require appropriate reviews as well as retain documentation of those reviews. We continuously evaluate the effectiveness of our internal control over financial reporting and may implement additional changes or remediation efforts as we implement the above actions. The deficiency will be determined to be remediated when revised controls have been operating for a reasonable period of time and have been tested to determine they are operating effectively. The remediation actions are being monitored by the Audit Committee of our Board of Directors.
Changes in Internal Control over Financial Reporting. There have been no significant changes in our internal control over financial reporting during the quarter ended January 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting other than the changes to address the remediation of the material weakness as discussed above.
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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 have identified material weaknesses in our internal control over financial reporting.
Maintaining effective internal control over financial reporting is necessary for us to produce reliable financial statements.
We have identified two material weaknesses in our internal control over financial reporting related to the accounting for the allocation of losses to our noncontrolling interests and the calculation of weighted average shares outstanding used in earnings per share as of October 31, 2021, one of which has been determined to have been remediated by January 31, 2022. As a result, our management has concluded that our disclosure controls and procedures were not effective as of January 31, 2022. See Part I. Item 4. Controls and Procedures included in this Quarterly Report on Form 10-Q.
As we work towards remediating the remaining material weakness, we are designing and implementing controls related to our financial close and consolidation process in accordance with generally accepted accounting principles in the United States.
If additional material weaknesses in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results.
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.
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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.
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: March 17, 2022 | Rafael Holdings, Inc. | |
| By: | /s/ William Conkling | |
| William Conkling | ||
| Chief Executive Officer | ||
| By: | /s/ Patrick Fabbio | |
| Patrick Fabbio | ||
| Chief Financial Officer | ||
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