Rafael Holdings, Inc.

Previous wording

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in the 2024 Form 10-K. The forward-looking statements are made as of the date of this Quarterly Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

Current wording

This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in the 2024 Form 10-K/A. The forward-looking statements are made as of the date of this Quarterly Report, and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our reports on Forms 10-Q and 8-K.

Previous wording

Rafael Holdings, Inc. (“Rafael Holdings”, “Rafael”, “we” or the “Company”) is a holding company with interests in clinical and early-stage pharmaceutical companies, including an investment in (and planned Merger with) 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 (“NPC1”), a rare, fatal and progressive genetic disorder, 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 a majority interest in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company. We also hold a majority interest in Rafael Medical Devices, LLC (“Rafael Medical Devices”), an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries, and a majority interest in Day Three Labs, Inc. (“Day Three”), a company which empowers third-party manufacturers to reimagine their existing cannabis offerings enabling them to bring to market better, cleaner, more precise and predictable versions by utilizing Day Three’s pharmaceutical-grade technology and innovation like Unlokt™. 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. Since then, the Company has sought partners for programs at Farber (as defined below) and has entered into a license agreement for one of its technologies that is in pre-clinical research stage. The Company’s primary focus, to date, has been to expand our investment portfolio through opportunistic and strategic investments including therapeutics, which address high unmet medical needs. Upon closing of the planned Merger with Cyclo, the Company intends to focus its efforts on making Trappsol® Cyclo™ its lead clinical program. In anticipation of that change in strategic focus, the Company is currently evaluating its operating entities (or portfolio of assets) to ensure the future focus of its resources on core assets and specifically the Trappsol® Cyclo™ clinical and development efforts.

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, including an investment in (and planned Merger with) 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 (“NPC1”), a rare, fatal and progressive genetic disorder, 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 a majority interest in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company. We also hold a majority interest in Rafael Medical Devices, LLC (“Rafael Medical Devices”), an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries, and a majority interest in Day Three Labs, Inc. (“Day Three”), a company which empowers third-party manufacturers to reimagine their existing cannabis offerings enabling them to bring to market better, cleaner, more precise and predictable versions by utilizing Day Three’s technology and innovation like Unlokt™. 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. Since then, the Company has sought partners for programs at Farber (as defined below) and has entered into a license agreement for one of its technologies that is in pre-clinical research stage. The Company’s primary focus, to date, has been to expand our investment portfolio through opportunistic and strategic investments including therapeutics, which address high unmet medical needs. Upon closing of the planned Merger with Cyclo, the Company intends to focus its efforts on making Trappsol® Cyclo™ its lead clinical program. In anticipation of that change in strategic focus, the Company is currently evaluating its operating entities (or portfolio of assets) to ensure the future focus of its resources on core assets and specifically the Trappsol® Cyclo™ clinical and development efforts.

Previous wording

As discussed in more detail in Note 11 to the consolidated financial statements, on August 21, 2024, the Company entered into a Merger Agreement with Cyclo. In the event the Merger is consummated, the Company intends to fund the TransportNPC phase III clinical trial, evaluating Trappsol® Cyclo™ in Niemann Pick C, to its interim analysis in the middle of 2025 and focus its efforts on Trappsol® Cyclo™ as its lead clinical program. At that point, the Company will make a determination as to whether or not to file an NDA for Trappsol® Cyclo™.

Current wording

As discussed in more detail in Note 11 to the consolidated financial statements, on August 21, 2024, the Company entered into a Merger Agreement with Cyclo. In the event the Merger is consummated, the Company intends to fund the TransportNPC phase 3 clinical trial, evaluating Trappsol® Cyclo™ in Niemann Pick C, to its interim analysis in the middle of 2025 and focus its efforts on Trappsol® Cyclo™ as its lead clinical program. At that point, the Company will make a determination as to whether or not to file an NDA for Trappsol® Cyclo™.

Previous wording

In May 2021, the Company formed Rafael Medical Devices, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries. In August 2023, the Company raised $925,000 from third parties in exchange for 31.6% ownership of Rafael Medical Devices.

Current wording

In May 2021, the Company formed Rafael Medical Devices, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries. In August 2023, the Company raised $925,000 from third parties in exchange for 31.6% ownership of Rafael Medical Devices. On December 11, 2024, Rafael Medical Devices received the Food and Drug Administration’s (“FDA”) substantial equivalence determination for the VECTR System in response to Rafael Medical Devices’ 510(k) premarket notification. The FDA’s clearance of the VECTR System is for use in minimally invasive ligament or fascia release surgeries, such as carpal tunnel release in the wrist and cubital tunnel release in the elbow. The VECTR System has been classified into Class II and is subject to special controls (performance standards) in addition to the general controls provisions of the Federal Food, Drug and Cosmetic Act and the Quality System regulation codified in 21 CFR Part 820 which requires that each manufacturer establish a quality system by which the manufacturer monitors the manufacturing process and maintains records that show compliance with the FDA regulations and the manufacturer’s written specifications and procedures relating to each device, as well as other requirements and applicable laws and regulations. Our development of future products will depend upon the success of the VECTR System and the our ability to identify attractive opportunities in the marketplace.

Previous wording

In April 2023, the Company first invested in Day Three, a company which empowers third-party manufacturers to reimagine their existing cannabis offerings enabling them to bring to market better, cleaner, more precise and predictable versions by utilizing Day Three’s pharmaceutical-grade technology and innovation like Unlokt™. In January 2024, the Company entered into a series of transactions with Day Three and certain shareholders, acquiring a controlling interest of Day Three and subsequently consolidating Day Three’s results (the “Day Three Acquisition”). The Company is evaluating the prospects for Day Three’s technology and offerings.

Current wording

In April 2023, the Company first invested in Day Three, a company which empowers third-party manufacturers to reimagine their existing cannabis offerings enabling them to bring to market better, cleaner, more precise and predictable versions by utilizing Day Three’s technology and innovation like Unlokt™. In January 2024, the Company entered into a series of transactions with Day Three and certain shareholders, acquiring a controlling interest of Day Three and subsequently consolidating Day Three’s results (the “Day Three Acquisition”). The Company is evaluating the prospects for Day Three’s technology and offerings in light of current regulatory and commercial conditions. During the three months ended January 31, 2025, Day Three has reduced certain operations.

Previous wording

Our consolidated expenses for our Healthcare segment were as follows:

Current wording

Consolidated expenses for our Healthcare segment were as follows:

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 Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. As of October 31, 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.

Current wording

To date, the Healthcare segment has not generated any revenues. The expenses in the Healthcare segment relate to the activities of Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. As of January 31, 2025, 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 increase in general and administrative expenses during the three months ended October 31, 2024 compared to the three months ended October 31, 2023 is comprised of an increase in insurance expense of approximately $0.1 million, and an increase in payroll expenses of approximately $0.2 million related to the inclusion of Cornerstone, an increase in professional fees of approximately $0.3 million related to the Cyclo Merger, partially offset by a decrease in stock-based compensation expense of $0.2 million and a decrease in legal fees of $0.1 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 decrease in general and administrative expenses during the three months ended January 31, 2025 compared to the three months ended January 31, 2024 is due to a decrease in stock-based compensation, offset by an increase in legal and professional fees due to the plan of merger with Cyclo.

Previous wording

Research and development expenses. Research and development expenses increased for the three months ended October 31, 2024 as compared to the three months ended October 31, 2023. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. The increase for the three months ended October 31, 2024 stems primarily from the inclusion of expenses of Cornerstone following its acquisition in March 2024 (See Note 3) as well as ongoing clinical trials including the clinical trial being conducted by LipoMedix.

Current wording

Research and development expenses. Research and development expenses increased for the three and six months ended January 31, 2025 and 2024 compared to the corresponding periods of the prior fiscal year. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. The increases stems primarily from the inclusion of expenses of Cornerstone following its acquisition in March 2024 (See Note 3) as well as ongoing clinical trials including at Lipomedix.

Previous wording

The Infusion Technology segment is comprised of a majority equity interest in Day Three which was acquired in January 2024. Revenues associated with the Infusion Technology segment include infusion technology revenue derived from Day Three’s Unlokt technology. Cost of Infusion Technology revenue includes supplies, materials, production labor, and travel costs. General and administrative expenses for the Infusion Technology segment consist mainly of payroll, insurance, software, and licenses. Research and development expenses for the Infusion Technology segment include costs related to the development of new products and services.

Current wording

The Infusion Technology segment is comprised of our majority equity interest in Day Three, which was acquired in January 2024. The Infusion Technology segment did not have significant operating results for the three and six months ended January 31, 2024. Revenues associated with the Infusion Technology segment consist of infusion technology revenue derived from Day Three’s Unlokt technology. Cost of Infusion Technology revenue includes supplies, materials, production labor, and travel costs. General and administrative expenses for the Infusion Technology segment consist mainly of payroll, insurance, software, and licenses. Research and development expenses for the Infusion Technology segment include costs related to the development of new products and services.

Previous wording

*Unrealized loss on convertible notes receivable, due from Cyclo.*We recorded an unrealized loss of $1.6 million for thethree months ended October 31, 2024 related to the change in fair value of our convertible notes receivable due from Cyclo which were not held during the three months ended October 31, 2023.

Current wording

*Unrealized gain (loss) on convertible notes receivable, due from Cyclo.*We recorded an unrealized gain of $0.5 million and an unrealized loss of $1.1 million for the three and six months ended January 31, 2025, respectively, on our convertible notes receivable, due from Cyclo.

Previous wording

Unrealized loss on investment - Hedge Funds. We recorded an unrealized loss of $0 and $166 thousand for the three months ended October 31, 2024 and 2023, respectively.

Current wording

Unrealized gain (loss) on investment - Hedge Funds. We recorded an unrealized gain of $51 thousand and an unrealized loss of $115 thousand for the three and six months ended January 31, 2024, respectively. During thesix months ended January 31, 2025, the Company requested a withdrawal of its remaining balance in Hedge Fund Investments. The Company recognized a realized loss of $2 thousand upon the approval of the withdrawal, which is included in interest income.

Previous wording

*Interest expense.*Interest expense was $0.2 million for the three months ended October 31, 2024 which is attributable to liabilities assumed in the Cornerstone Acquisition in March 2024.

Current wording

*Interest expense.*Interest expense was $0.2 and $0.3 million for thethree and six months ended January 31, 2025, respectively, which is attributable to liabilities assumed in the Cornerstone Acquisition in March 2024. We did not have interest expense in the three and six months ended January 31, 2024.

Previous wording

Equity in loss of Day Three. We recognized a loss of $216 thousand from our ownership interest in Day Three due to operating results for the three months ended October 31, 2023. 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.

Current wording

Equity in loss of Day Three. We recognized a loss of $0.2 million and $0.4 million 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 10 to our accompanying consolidated financial statements for further information regarding the acquisition.

Previous wording

As of October 31, 2024, we held cash and cash equivalents of approximately $8.2 million and available-for-sale securities valued at approximately $46.1 million. 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.

Current wording

As of January 31, 2025, we held cash and cash equivalents of approximately $48.3 million. The Company expects its balance of cash and cash equivalents 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 operating activities increased by $0.9 million from cash used of $2.1 million for the three months ended October 31, 2023 to cash used of $3.0 million for the three months ended October 31, 2024, due to the increase in the net loss partially offset by the impact from non-cash items and changes in assets and liabilities.

Current wording

Cash used in operating activities increased by $0.7 million from cash used of $4.7 million for the six months ended January 31, 2024 to cash used of $5.4 million for the six months ended January 31, 2025, due to the change from a net income to net loss position, partially offset by the impact from non-cash items and changes in assets and liabilities.

Previous wording

Cash provided by investing activities for the three months ended October 31, 2024 was primarily due to proceeds of $33.3 million from sales and maturities of available-for-sale securities, partially offset by purchases of available-for-sale securities of approximately $15.7 million and the issuance of $9.0 million in convertible notes due from Cyclo.

Current wording

Cash provided by investing activities for the six months ended January 31, 2025 was primarily due to proceeds of $80.7 million from sales and maturities of available-for-sale securities and $2.3 million in proceeds from hedge funds, partially offset by purchases of available-for-sale securities of approximately $16.9 million and payments of $15.0 million for convertible notes due from Cyclo.

Previous wording

Cash used in investing activities for the three months ended October 31, 2023 was primarily due to purchases of available-for-sale securities of approximately $47.5 million, the purchase of investment in Cyclo of $6.8 million, and the loan of $0.3 million to Day Three. This is partially offset by proceeds of $47.5 million from the sale and maturities of available-for-sale securities and proceeds of $0.3 million from the sale of equity securities.

Current 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.

Previous wording

Cash used in financing activities for the three months ended October 31, 2024 was related to a payment for taxes related to shares withheld for employee taxes of $50 thousand.

Current wording

Cash used in financing activities for the six months ended January 31, 2025 was related to a payment for taxes related to shares withheld for employee taxes of $75 thousand.

Previous wording

Cash provided by financing activities for the three months ended October 31, 2023 was primarily related to the proceeds from sale of RMD membership units of $0.9 million.

Current wording

Cash provided by financing activities for the six months ended January 31, 2024 was primarily related to proceeds from sale of RMD membership units of $0.9 million, partially offset by principal payments on our installment note payable of $0.8 million.

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 2024. There were no material changes during the three months ended October 31, 2024 to the Critical Accounting Estimates previously disclosed.

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/A for fiscal 2024. There were no material changes during the six months ended January 31, 2025 to the Critical Accounting Estimates previously disclosed except as follows: