Rafael Holdings Inc
For the period ended Apr 30, 2024. Filed Jun 14, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Apr 30, 2024 · Filed Jun 14, 2024
RFL$1.04-1.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-01-31; filed 2024-03-14.
0001213900-24-022343
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-04-30; filed 2024-06-14.
0001213900-24-052918
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 68 previous paragraphs and 76 current paragraphs.
36 unchanged; 29 reworded; 11 added; 3 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 8 previous and 10 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (11)
Current report
IPR&D expense. IPR&D expenses during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 increased by $89.9 million due to the Cornerstone Acquisition. See Note 3 to our accompanying consolidated financial statements for more information on the transaction.
Current report
Infusion Technology
Current report
*Infusion Technology Revenue.*Infusion Technology Revenue increased by $262 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.
Current report
*Cost of Infusion Technology revenue.*Cost of Infusion Technology increased by$85 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024. The specific costs are related to supplies, materials, production labor, and travel costs.
Current report
*General and administrative expense.*General and administrative expenses consist mainly of payroll, insurance, software, and licenses. General and administrative expenses increased by $225 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.
Current report
Research and development expenses. Research and development expenses increased by $314 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.
Current report
*General and administrative.*General and administrative expense decreased by $25 thousand and $8 thousand during the three and nine months ended April 30, 2024, respectively compared to the three and nine months ended April 30, 2023.
Current report
Unrealized (loss) gain on investment - Hedge Funds. We recorded an unrealized loss of approximately $3 thousand and $131 thousand for the three months ended April 30, 2024 and 2023, respectively. We recorded an unrealized loss of approximately $118 thousand and an unrealized gain of approximately $120 thousand for the nine months ended April 30, 2024 and 2023, respectively.
Current report
*Recovery of receivables from Cornerstone Pharmaceuticals.*We recorded an increase in recovery of receivables from Cornerstone Pharmaceuticals of approximately $31.3 million for the three and nine months ended April 30, 2024. See Note 3 to our accompanying consolidated financial statements for more information related to this matter.
Current report
Benefit from income tax. In accordance with the State of New Jersey’s Technology Business Tax Certificate Transfer Program, which allowed certain high technology and biotechnology companies to sell unused net operating loss carryforwards (‘NOLs’) to other New Jersey-based corporate taxpayers based in New Jersey, the Company received approximately $2.6 million for the sale of the Company’s prior period NOLs totaling $31.6 million in the third quarter of fiscal 2024 which was recorded in the benefit from income taxes in the consolidated statements of operations and comprehensive loss for the three and nine months ended April 30, 2024.
Current report
Cash used in operating activities decreased by $3.8 million from cash used of $8.8 million for the nine months ended April 30, 2023 to cash used of $4.9 million for the nine months ended April 30, 2024, as the increase in the loss from continuing operations was more than offset by the impact from non-cash items, such as $89.86 million in in-process research and development expense, $31.31 million from the recovery of receivables from Cornerstone, and changes in assets and liabilities.
Removed paragraphs (3)
Previous report
*General and amortization.*General and amortization expense decreased by $15 thousand during the three and six months ended January 31, 2024 compared to the three and six months ended January 31, 2023.
Previous report
Unrealized gain (loss) on investments - Hedge Funds. We recorded unrealized gains of approximately $51 thousand and $378 thousand for the three months ended January 31, 2024 and 2023, respectively. We recorded unrealized losses of approximately $115 thousand and $251 thousand in unrealized gains for the six months ended January 31, 2024 and 2023, respectively.
Previous report
Cash used in operating activities decreased by $2.78 million from cash used of $7.44 million for the six months ended January 31, 2023 to cash used of $4.66 million for the six months ended January 31, 2024, which is primarily attributed to the decrease in net loss from continuing operations.
Reworded paragraphs (29)
Previous wording
Rafael Holdings, Inc. (NYSE:RFL), (“Rafael Holdings”, “we” or the “Company”), a Delaware corporation, is a holding company with interests in clinical and early-stage pharmaceutical companies (the “Pharmaceutical Companies”), including an investment in Cornerstone Pharmaceuticals, Inc., formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company, a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage pharmaceutical company, Barer Institute Inc. (“Barer”), a wholly-owned preclinical cancer metabolism research operation, and an investment in Cyclo Therapeutics, Inc. (Nasdaq: CYTH) (“Cyclo Therapeutics” or “Cyclo), a clinical-stage biotechnology company dedicated to developing life-changing medicines for patients and families living with challenging diseases through its lead therapeutic asset, Trappsol®Cyclo™. We also hold an majority interest in Day Three Labs, Inc. (“Day Three”), a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products, and a majority interest in Rafael Medical Devices, LLC, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries (“Rafael Medical Devices” and Day Three together with the Pharmaceutical Companies, represent our “Investment Companies”). In November 2022, the Company resolved to curtail its early-stage development efforts, including pre-clinical research at Barer. The decision was taken to reduce spending as the Company focuses on exploring strategic opportunities. The Company’s primary focus is to expand our investment portfolio through opportunistic and strategic investments including therapeutics which address high unmet medical needs.
Current wording
Rafael Holdings, Inc. (“Rafael Holdings”, “Rafael”, “we” or the “Company”) is a holding company with interests in clinical and early-stage pharmaceutical companies (the “Pharmaceutical Companies”), including a majority interest in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company, a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage pharmaceutical company, Barer Institute Inc. (“Barer”), a wholly-owned preclinical cancer metabolism research operation, and an investment in Cyclo Therapeutics Inc. (Nasdaq: CYTH), (“Cyclo Therapeutics” or “Cyclo”), a clinical-stage biotechnology company dedicated to developing Trappsol®Cyclo™, which is being evaluated in clinical trials for the potential treatment of Niemann-Pick Disease Type C1 (NPC), a rare, fatal and progressive genetic disorder. We also hold a majority interest in Day Three Labs, Inc. (“Day Three”), a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products, and a majority interest in Rafael Medical Devices, LLC, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries (“Rafael Medical Devices” and Day Three together with the Pharmaceutical Companies, represent our “Investment Companies”). In November 2022, the Company resolved to curtail its early-stage development efforts, including pre-clinical research at Barer. The decision was taken to reduce spending as the Company focuses on exploring strategic opportunities. The Company’s primary focus is to expand our investment portfolio through opportunistic and strategic investments including therapeutics, which address high unmet medical needs.
Previous wording
The Company holds debt and equity investments in Cornerstone, that include preferred and common equity interests. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Cornerstone in exchange for issuing Company Class B common stock to the other stockholders of Cornerstone (“Merger Agreement” or “Merger”). On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Cornerstone’s lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas. In addition, following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In light of the Data Events, the Company concluded that the prospects for CPI-613 were uncertain and fully impaired in its financial statements for the fiscal year ended July 31, 2022, the value of its loans, receivables, and investment in Cornerstone based upon its valuation of Cornerstone.
Current wording
The Company previously held debt and equity investments in Cornerstone that included preferred and common equity interests. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Cornerstone in exchange for issuing Company Class B common stock to the other stockholders of Cornerstone (“Merger Agreement” or “Merger”). On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Cornerstone’s lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas. In addition, following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In light of the Data Events, the Company concluded that the prospects for CPI-613 were uncertain and fully impaired in its financial statements for the fiscal year ended July 31, 2022, the value of its loans, receivables, and investment in Cornerstone based upon its valuation of Cornerstone.
Previous wording
On February 2, 2022, the Company terminated the Merger Agreement with Cornerstone Pharmaceuticals, effective immediately, in accordance with its terms.
Current wording
On February 2, 2022, the Company terminated the Merger Agreement with Cornerstone, effective immediately, in accordance with its terms.
Previous wording
On March 21, 2023, the Company loaned $2.0 million to Cornerstone which debt is represented by a Promissory Note made by Cornerstone (the “Promissory Note”). The Promissory Note, which bears interest at a rate of seven and one-half percent (7.5%) per annum, was originally due and payable on May 22, 2023. The Promissory Note was amended to extend the maturity date to March 13, 2024 and to waive any increase in the interest rate provided for in the Promissory Note, provided that the entire principal amount and all accrued interest thereon is repaid in cash or converted into equity securities of Cornerstone no later than March 13, 2024.
Current wording
On March 21, 2023, the Company loaned $2.0 million to Cornerstone which debt is represented by a promissory note made by Cornerstone (the “2023 Promissory Note”). The 2023 Promissory Note, which bears interest at a rate of seven and one-half percent (7.5%) per annum, was originally due and payable on May 22, 2023. The 2023 Promissory Note was amended to extend the maturity date to March 13, 2024 and to waive any increase in the interest rate provided for in the 2023 Promissory Note, provided that the entire principal amount and all accrued interest thereon is repaid in cash or converted into equity securities of Cornerstone no later than March 13, 2024.
Previous wording
On August 1, 2023, pursuant to a Securities Purchase Agreement (the “Cyclo II SPA”) dated June 1, 2023, the Company purchased an additional 4,000,000 shares of common stock (the “Cyclo II Shares”), and received a warrant to purchase an additional 4,000,000 Shares (the “Cyclo II Warrant”), for an aggregate purchase price of $5,000,000. The Cyclo II Warrant has an exercise price of $1.25 per share and is exercisable until August 1, 2030. The August 1, 2023 investment increased the Company’s percentage ownership of Cyclo common stock to approximately 34%. As of the date of this report, the Company has not exercised the Cyclo II Warrant.
Current wording
On August 1, 2023, pursuant to a Securities Purchase Agreement (the “Cyclo II SPA”) dated June 1, 2023, the Company purchased an additional 4,000,000 shares of common stock (the “Cyclo II Shares”), and received a warrant to purchase an additional 4,000,000 Shares (the “Cyclo II Warrant”), for an aggregate purchase price of $5,000,000. The Cyclo II Warrant has an exercise price of $1.25 per share and is exercisable until August 1, 2030. The August 1, 2023 investment increased the Company’s percentage ownership of Cyclo common stock to approximately 34%. As of the date of this filing, the Company has not exercised the Cyclo II Warrant.
Previous wording
Our business consists of two reportable segments - Healthcare and Real Estate. We evaluate the performance of our Healthcare 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.
Current wording
Our business consists of three reportable segments - Healthcare, Infusion Technology, and Real Estate. We evaluate the performance of our Healthcare segment based primarily on research and development efforts and results of clinical trials, and our Infusion Technology and Real Estate segments 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.
Previous wording
To date, the Healthcare segment has not generated any revenues. The entirety of the expenses in the Healthcare segment relate to the activities of LipoMedix, Farber, Day Three, and Rafael Medical Devices. As of January 31, 2024, we held a 100% interest in Barer, a 95% interest in LipoMedix, a 93% interest in Farber, 73% interest in Day Three and a 68% interest in Rafael Medical Devices.
Current wording
To date, the Healthcare segment has not generated any revenues. The entirety of the expenses in the Healthcare segment relate to the activities of Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. As of April 30, 2024, we held a 100% interest in Barer, a 95% interest in LipoMedix, a 93% interest in Farber, a 67% interest in Cornerstone, and a 68% interest in Rafael Medical Devices.
Previous wording
General and administrative expenses. General and administrative expenses consist mainly of payroll, stock-based compensation expense, benefits, facilities, consulting and professional fees. The Company operations have been scaled to meet the current needs which has led to reduced overall general and administrative expenses. The increase during the three months ended January 31, 2024 compared to the three months ended January 31, 2023 is comprised of an increase in stock-based compensation expense of approximately $0.7 million due to a forfeiture of an award with a value of approximately $0.9 million in the three months ended January 31, 2023, an increase in professional fees of approximately $0.3 million, an increase in legal fees of approximately $0.1, partially offset by a net decrease in insurance expense of approximately $0.4 million, a net decrease of severance pay expense of approximately $0.3 million, and a net decrease of payroll expenses of approximately $0.2 million.
Current wording
General and administrative expenses. General and administrative expenses consist mainly of payroll, stock-based compensation expense, benefits, facilities, consulting and professional fees. The Company operations have been scaled to meet the current needs which has led to reduced overall general and administrative expenses. The decrease during the three months ended April 30, 2024 compared to the three months ended April 30, 2023 is comprised of a decrease in licenses and fees of approximately $0.3, a decrease in insurance expense of approximately $0.3 million, and a decrease in stock-based compensation of approximately $0.1 million.
Previous wording
The decrease in general and administrative expenses during the six months ended January 31, 2024 compared to the six months ended January 31, 2023 is comprised of a decrease in insurance expense of approximately $0.7 million, a decrease in payroll expenses of approximately $0.6 million, a decrease in severance pay expense of approximately $0.3, partially offset by a net increase in professional fees of approximately $0.6 million, an increase in stock based compensation of approximately $0.1 million (which included the impact of a forfeiture of approximately $0.9 million in the six months ended January 31, 2023), and an increase in other general and administrative expenses of approximately $0.1 million.
Current wording
The decrease in general and administrative expenses during the nine months ended April 30, 2024 compared to the nine months ended April 30, 2023 is comprised of a decrease in insurance expense of approximately $1.0 million, a decrease in payroll expenses of approximately $0.7 million, a decrease in severance pay expense of approximately $0.3 million, partially offset by a net increase in professional fees of approximately $0.9 million.
Previous wording
Research and development expenses. Research and development expenses decreased for the three and six months ended January 31, 2024 as compared to the corresponding periods in fiscal 2023. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Day Three, and Rafael Medical Devices. The decrease stems from the November 2022 decision to curtail the Company’s early-stage development efforts, including pre-clinical research at Barer Institute.
Current wording
Research and development expenses. Research and development expenses increased for the three months and decreased for the nine months ended April 30, 2024 as compared to the corresponding periods in fiscal 2023. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. The increase in the current quarter relates to new activity for Cornerstone. The decrease for the nine month period stems from the November 2022 decision to curtail the Company’s early-stage development efforts, including pre-clinical research at Barer Institute.
Previous wording
The revenue and expenses of the 520 Property have been excluded from the real estate segment in the figures below due to its classification of held-for-sale and discontinued operations, and the sale of the 520 Property on August 22, 2022. The Real Estate segment consists of a portion of a commercial building in Israel. Consolidated income and expenses for our Real Estate segment were as follows:
Current wording
The revenue and expenses of the 520 Property have been excluded from the real estate segment in the figures below due to its classification of held-for-sale and discontinued operations, and the sale of the 520 Property on August 22, 2022. The Real Estate segment consists of a portion of a commercial building in Israel. Consolidated income (loss) and expenses for our Real Estate segment were as follows:
Previous wording
*Rental - Third Party.*Rental revenue decreased by $2 thousand and $4 thousand during the three and six months ended January 31, 2024 compared to the three and six months ended January 31, 2023.
Current wording
*Rental - Third Party.*Rental revenue decreased by $3 thousand and $1 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023.
Previous wording
*Interest income.*Interest income was $693 thousand and $562 thousand for the three months ended January 31, 2024 and 2023, respectively. Interest income was $1,275 thousand and $770 thousand for the six months ended January 31, 2024 and 2023, respectively. The increase is primarily due to an increase in interest rates.
Current wording
*Interest income.*Interest income was $0.5 million and $1.5 million for the three months ended April 30, 2024 and 2023, respectively. Interest income was $1.8 million and $2.3 million for the nine months ended April 30, 2024 and 2023, respectively. The decrease is primarily due to changes in market rates and changes in the portfolio.
Previous wording
Impairment of investments - Other Pharmaceuticals. We recorded an impairment loss of $67 thousand and $223 thousand related to our investment in Nanovibronix using the measurement alternative for the three and six months ended January 31, 2023.
Current wording
Impairment of investments - Other Pharmaceuticals. We recorded impairment losses of $128 thousand and $351 thousand related to our investment in Nanovibronix using the measurement alternative for the three and nine months ended April 30, 2023, respectively.
Previous wording
*Realized gain on available-for-sale securities.*We recorded realized gains of approximately $399 thousand and $139 thousand for the three months ended January 31, 2024 and 2023, respectively, related to available-for-sale securities sold during the period. We recorded realized gains of approximately $576 thousand and $154 thousand for the six months ended January 31, 2024 and 2023, respectively, related to available-for-sale securities sold during the period.
Current wording
*Realized gain on available-for-sale securities.*We recorded realized gain of approximately $0.9 million and $0 for the three months ended April 30, 2024 and 2023, respectively, related to available-for-sale securities sold during the period. We recorded realized gains of approximately $1.5 million and $0.2 million for the nine months ended April 30, 2024 and 2023, respectively, related to available-for-sale securities sold during the period.
Previous wording
*Realized gain on investments - Cyclo.*We recorded a realized gain of approximately $424 thousand related to the exercise of the May Warrants in connection with our October 2023 investment in Cyclo for the six months ended January 31, 2024.
Current wording
*Realized gain on investment - Cyclo.*We recorded a realized gain of approximately $424 thousand related to the exercise of the May Warrants in connection with our October 2023 investment in Cyclo for the nine months ended April 30, 2024.
Previous wording
*Unrealized gain on investments - Cyclo.*We recorded an unrealized gain of approximately $9.7 million and $7.6 million related to the change in fair value in our investment in Cyclo for the three and six months ended January 31, 2024, respectively.
Current wording
*Unrealized (loss) gain on investment - Cyclo.*We recorded an unrealized loss of approximately $4.4 million and an unrealized gain of $3.2 million related to the change in fair value in our investment in Cyclo for the three and nine months ended April 30, 2024, respectively.
Previous wording
Equity in loss of Day Three. We recognized a loss of approximately $206 thousand and $422 thousand from our ownership interest in Day Three due to operating results for the three and six months ended January 31, 2024, respectively. As of January 2, 2024, Day Three is a majority-owned subsidiary which is consolidated. See Note 8 to our accompanying consolidated financial statements for further information regarding the acquisition.
Current wording
Equity in loss of Day Three. We recognized a loss of approximately $0 and $422 thousand from our ownership interest in Day Three due to operating results for the three and nine months ended April 30, 2024, respectively. As of January 2, 2024, Day Three is a majority-owned subsidiary which is consolidated. See Note 10 to our accompanying consolidated financial statements for further information regarding the acquisition.
Previous wording
Income (loss) from discontinued operations related to 520 Property. Discontinued operations include: (i) rental and parking revenues, (ii) payroll, benefits, facilities, consulting and professional fees dedicated to 520 Property, (iii) depreciation and amortization expenses, (iv) interest (including amortization of debt issuance costs) on the note payable that was secured by a mortgage on the 520 Property, and (v) gain on the disposal of the 520 Property. The operating results of these items are presented in our consolidated statements of operations and comprehensive loss as discontinued operations for all periods presented. The decrease in the net income attributable to discontinued operations for the six months ended January 31, 2024 as compared to the six months ended January 31, 2023 was due to a gain on the sale of the 520 Property of $6.8 million.
Current wording
Income from discontinued operations related to 520 Property. Discontinued operations include: (i) rental and parking revenues, (ii) payroll, benefits, facilities, consulting and professional fees dedicated to 520 Property, (iii) depreciation and amortization expenses, (iv) interest (including amortization of debt issuance costs) on the note payable that was secured by a mortgage on the 520 Property, and (v) gain on the disposal of the 520 Property. The operating results of these items are presented in our consolidated statements of operations and comprehensive loss as discontinued operations for all periods presented. The decrease in the net income attributable to discontinued operations for the nine months ended April 30, 2024 as compared to the nine months ended April 30, 2023 was due to a gain on the sale of the 520 Property of $6.8 million.
Previous wording
As of January 31, 2024, we held cash and cash equivalents of approximately $7.1 million, and available-for-sale securities valued at approximately $64.6 million. On August 22, 2022, the Company received net proceeds of approximately $33 million in connection with the sale of the 520 Property (see Note 3 to our accompanying consolidated financial statements for further details). The Company expects its balance of cash and cash equivalents, and available-for-sale-securities, to be sufficient to meet our obligations for at least the 12 months from the filing of this Quarterly Report on Form 10-Q.
Current wording
As of April 30, 2024, we held cash and cash equivalents of approximately $7.4 million and available-for-sale securities valued at approximately $64.9 million. On August 22, 2022, the Company received net proceeds of approximately $33 million in connection with the sale of the 520 Property (see Note 13 to our accompanying consolidated financial statements for further details). The Company expects its balance of cash and cash equivalents, and available-for-sale securities, to be sufficient to meet our obligations for at least the next 12 months from the filing of this Quarterly Report on Form 10-Q.
Previous wording
Cash used in investing activities for the six months ended January 31, 2024 was primarily due to purchases of available-for-sale securities of approximately $105.1 million and the investment in Cyclo of $6.8 million, partially offset by proceeds of $100.1 million from sales and maturities of available-for-sale securities and $2.5 million in proceeds from hedge funds.
Current wording
Cash used in investing activities for the nine months ended April 30, 2024 was primarily due to purchases of available-for-sale securities of approximately $133.7 million and the investment in Cyclo of $6.8 million, partially offset by proceeds of $129.0 million from sales and maturities of available-for-sale securities and $2.5 million in proceeds from hedge funds.
Previous wording
Cash used in investing activities for the six months ended January 31, 2023 was primarily due to purchases of available-for-sale securities of approximately $113.1 million, partially offset by proceeds of $71.4 million from the sale of available-for-sale securities.
Current wording
Cash used in investing activities for the nine months ended April 30, 2023 was primarily due to purchases of available-for-sale securities of approximately $166.3 million, the investment in Day Three of $3.0 million, and the issuance of a convertible promissory note receivable of $2.0 million. This is partially offset by proceeds of $137.0 million from the sale of available-for-sale securities.
Previous wording
Cash provided by financing activities for six months ended January 31, 2024 was primarily related to the principal payments on installment of the note payable of $0.8 million partially offset by the proceeds from sale of RMD membership units of $0.9 million.
Current wording
Cash used in financing activities for the nine months ended April 30, 2024 was primarily related to the principal payments on installment of the note payable of $0.8 million partially offset by the proceeds from sale of RMD membership units of $0.9 million.
Previous wording
Cash used in financing activities for six months ended January 31, 2023 was primarily related to payments for taxes related to shares withheld for employee taxes.
Current wording
Cash used in financing activities for the nine months ended April 30, 2023 was primarily related to payments for taxes related to shares withheld for employee taxes.
Previous wording
The cash flows from discontinued operations - 520 Property for the six months ended January 31, 2023 represent the net income excluding non-cash depreciation and amortization, as well as the proceeds from the sale of the 520 Property.
Current wording
The cash flows from discontinued operations - 520 Property for the nine months ended April 30, 2023 represent the net income excluding non-cash depreciation and amortization, as well as the net proceeds from the sale of the 520 Property.
Previous wording
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 the Critical Accounting Estimates section in Item 7 of the Annual Report on Form 10-K for fiscal 2023. There were no material changes during the six months ended January 31, 2024 to the Critical Accounting Estimates previously disclosed in the Annual Report on Form 10-K for fiscal 2023 except as follows:
Current wording
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 the Critical Accounting Estimates section in Item 7 of the Annual Report on Form 10-K for fiscal 2023. There were no material changes during the nine months ended April 30, 2024 to the Critical Accounting Estimates previously disclosed in the Annual Report on Form 10-K for fiscal 2023 except as follows:
Previous wording
The total aggregate fair value of the Cyclo investment of $19,567,187 as of January 31, 2024 is comprised of common shares with an aggregate fair value of $17,066,587 (measured based on the closing stock price of Cyclo Therapeutics, Inc., a Level I fair value) and warrants with an aggregate fair value of $2,500,600 (measured using a Level III fair value estimate).
Current wording
The total aggregate fair value of the Cyclo investment of $15,171,714 as of April 30, 2024 is comprised of common shares with an aggregate fair value of $13,183,712 (measured based on the closing stock price of Cyclo Therapeutics, Inc., a Level 1 fair value) and warrants with an aggregate fair value of $1,988,002 (measured using a Level 3 fair value estimate).
Previous wording
The Company recognizes the fair value of the Cyclo Warrants utilizing a Black-Scholes option-pricing valuation model (“Black-Scholes model”) at acquisition and each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including expected volatility, expected life and risk-free interest rate. In order to determine the volatility, we measured expected volatility based on several inputs, including considering a peer group of publicly traded companies and the implied volatility of the Company’s publicly-traded warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. Both of the Cyclo Warrants and the underlying shares of common stock are subject to volume restrictions in accordance with SEC Rule 144 for which a discount to the stock price of Cyclo was applied. The Black-Scholes model further incorporated a discount for the overall lack of marketability for the Cyclo Warrants.
Current wording
The Company recognizes the fair value of the Cyclo Warrants utilizing a Black-Scholes model at acquisition and each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including expected volatility, expected life and risk-free interest rate. In order to determine the volatility, we measured expected volatility based on several inputs, including considering a peer group of publicly traded companies and the implied volatility of the Company’s publicly-traded warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term. Both of the Cyclo Warrants and the underlying shares of common stock are subject to volume restrictions in accordance with SEC Rule 144 for which a discount to the stock price of Cyclo was applied. The Black-Scholes model further incorporated a discount for the overall lack of marketability for the Cyclo Warrants.
Previous wording
Certain inputs utilized in our Black-Scholes model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statement of operations.
Current wording
Certain inputs utilized in our Black-Scholes model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statements of operations and comprehensive loss.