Rafael Holdings, Inc.

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 (the “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™. Day Three and Rafael Medical Devices, together with the Pharmaceutical Companies, represent our “Portfolio 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. Since then, the Company has sought partners for programs at Farber and has entered into a license agreement for one of its technologies. The Company’s primary focus is 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.

Current wording

Rafael Holdings, Inc. (“Rafael Holdings”, “Rafael”, “we” or the “Company”) is a biotechnology company that develops pharmaceuticals and holds interests in clinical and early-stage companies that develop pharmaceuticals and medical devices. Our lead candidate is 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. We also hold: (i) a majority equity interest in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage pharmaceutical company; (ii) Barer Institute Inc. (“Barer”), a wholly-owned cancer research focused entity whose operations have been substantially curtailed; (iii) a majority interest in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company; (iv) 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 (v) a majority interest in Day Three Labs, Inc. (“Day Three”), a company which empowers third-party manufacturers to reimagine their existing product offerings by utilizing Day Three’s technology and innovation like Unlokt™. Our primary focus has been the continued development of Trappsol® Cyclo™ through the completion of its ongoing pivotal Phase 3 clinical trial, the potential filing for regulatory approval and ultimately, if approved, commercialization of the product. We also look to expand our investment portfolio through opportunistic and strategic investments including that address high unmet medical needs. We continuously evaluate our other holdings to ensure the focus of our resources are on core assets and specifically the continued development of Trappsol® Cyclo™.

Previous wording

Historically, the Company owned real estate assets. In 2020, the Company sold an office building located in Piscataway, New Jersey and, on August 22, 2022, the Company sold the building at 520 Broad Street in Newark, New Jersey that serves as headquarters for the Company and several tenants and an associated public garage (the “520 Property”). As of July 31, 2024, the Company holds a portion of a commercial building in Jerusalem, Israel as its remaining owned real estate asset.

Current wording

Historically, we owned real estate assets. As of July 31, 2025, we hold a portion of a commercial building in Jerusalem, Israel as our sole remaining real estate asset.

Previous wording

In May 2023, the Company first invested in Cyclo Therapeutics. Cyclo is a clinical-stage biotechnology company that develops cyclodextrin-based products for the potential treatment of neurodegenerative diseases. Cyclo’s lead drug candidate is Trappsol® Cyclo™ (hydroxypropyl beta cyclodextrin), a treatment for Niemann-Pick Disease, type C1 (“NPC1”). NPC1 is a rare and fatal autosomal recessive genetic disease resulting in disrupted cholesterol metabolism that impacts the brain, lungs, liver, spleen, and other organs. In January 2017 the FDA granted Fast Track designation to Trappsol® Cyclo™ for the treatment of NPC1. Initial patient enrollment in the U.S. Phase I study commenced in September 2017, and in May 2020 Cyclo announced Top Line data demonstrating Trappsol® Cyclo™ was well tolerated in this study. Cyclo is currently conducting a Phase III Clinical Trial Evaluating Trappsol®Cyclo™ in Pediatric and Adult Patients with Niemann-Pick Disease, Type C1. See Notes 11 and 12 to the Consolidated Financial Statements for more information on the Company’s investments in Cyclo.

Current wording

In May 2023, we first invested in Cyclo, a clinical-stage biotechnology company that develops cyclodextrin-based products for the potential treatment of neurodegenerative diseases. Cyclo’s lead drug candidate is Trappsol® Cyclo™ (hydroxypropyl beta cyclodextrin), a treatment for NPC1. NPC1 is a rare and fatal autosomal recessive genetic disease resulting in disrupted cholesterol metabolism that impacts the brain, lungs, liver, spleen, and other organs. In January 2017, the FDA granted Fast Track designation to Trappsol® Cyclo™ for the treatment of NPC1. Initial patient enrollment in the U.S. Phase I study commenced in September 2017 and in May 2020, Cyclo announced Top Line data indicating Trappsol® Cyclo™ was well tolerated in this study. Cyclo is currently conducting a Phase 3 Clinical Trial evaluating Trappsol® Cyclo™ in Pediatric and Adult Patients with Niemann-Pick Disease, Type C1. On March 25, 2025, we consummated the Merger with Cyclo whereby Cyclo became a wholly-owned subsidiary of the Company. See Note 3 to our Consolidated Financial Statements for more information on the Merger with Cyclo.

Previous wording

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

Current wording

In 2019, we established Barer, originally as a preclinical cancer metabolism research operation, to focus on developing a pipeline of novel therapeutic compounds, including compounds designed to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer was comprised of scientists and academic advisors that are experts in cancer metabolism, chemistry, and drug development. In addition to its own internal discovery efforts, Barer pursued collaborative research agreements and in-licensing opportunities with leading scientists from top academic institutions. Barer’s majority owned subsidiary, Farber Partners, LLC (“Farber”), was formed around one such agreement with Princeton University’s Office of Technology Licensing (“Princeton”) for technology from the laboratory of Dr. Joshua Rabinowitz, in the Department of Chemistry, Princeton University, for an exclusive worldwide license to its SHMT (serine hydroxymethyltransferase) inhibitor program. In November 2022, we resolved to curtail our early-stage development efforts, including pre-clinical research at Barer. Since then, we have sought partners for Farber programs and has entered into a license agreement for one of its technologies that is in the pre-clinical research stage with the Ludwig Institute of Cancer Research and has transferred majority ownership of another one of its technologies, SHMT, to a new company, Forme Therapeutics, that is being managed by Dr. Joshua Rabinowitz with the goal of developing SHMT. Going forward, we expect that Barer will primarily operate as an entity holding interest in these two cancer-focused opportunities.

Previous wording

The Company owns a 37.5% equity interest in RP Finance LLC (“RP Finance”), which was, until March 13, 2024 (the date of the RP Finance Consolidation, as described in Note 3 to the Consolidated Financial Statements), accounted for under the equity method. RP Finance is an entity associated with members of the family of Howard Jonas (Executive Chairman, Chairman of the Board, and controlling stockholder of the Company) which holds 37.5% equity interest of RP Finance. RP Finance holds debt and equity investments in Cornerstone. In October 2021, Cornerstone received negative results of its Avenger 500 Phase 3 study for Devimistat in pancreatic cancer as well as a recommendation to stop its ARMADA 2000 Phase 3 study due to a determination that the trial would unlikely achieve its primary endpoint (the “Data Events”). Due to the Data Events, RP Finance fully impaired its then debt and equity investments in Cornerstone.

Current wording

We own a 37.5% equity interest in RP Finance LLC (“RP Finance”), which was, until March 13, 2024 (the date of the RP Finance Consolidation (as described in Note 6 to the Consolidated Financial Statements)), accounted for under the equity method. RP Finance is an entity in which vehicles associated with members of the family of Howard S. Jonas (Executive Chairman, Chief Executive Officer, President, Chairman of the Board, and controlling stockholder of the Company), hold an aggregate 37.5% equity interest. RP Finance holds debt and equity investments in Cornerstone. In October 2021, Cornerstone received negative results of its Avenger 500 Phase 3 study for Devimistat in pancreatic cancer as well as a recommendation to stop its ARMADA 2000 Phase 3 study due to a determination that the trial would be unlikely to achieve its primary endpoint (the “Data Events”). Due to the Data Events, RP Finance fully impaired its then debt and equity investments in Cornerstone.

Previous wording

On March 13, 2024, Cornerstone consummated a restructuring of its outstanding debt and equity interests (the “Cornerstone Restructuring”). As a result of the Cornerstone Restructuring, Rafael became a 67% owner of the issued and outstanding common stock of Cornerstone (the “Cornerstone Acquisition”), and Cornerstone became a consolidated subsidiary of Rafael. The Cornerstone Acquisition is accounted for as an acquisition of a variable interest entity that is not a business in accordance with U.S. GAAP. The Company was determined to be the accounting acquirer for financial reporting purposes. See Note 3 to the Consolidated Financial Statements for additional information regarding the transaction. In conjunction with the Cornerstone Restructuring and Cornerstone Acquisition, the Company reassessed its relationship with RP Finance, and as a result determined that RP Finance is still a variable interest entity and that the Company became the primary beneficiary of RP Finance as the Company now holds the ability to control repayment of the RP Finance Line of Credit which directly impacts RP Finance’s economic performance. Therefore, following the Cornerstone Restructuring and Cornerstone Acquisition, the Company consolidated RP Finance (the “RP Finance Consolidation”). See Note 3 to the Consolidated Financial Statements for additional information on the Consolidation.

Current wording

On March 13, 2024, Cornerstone consummated a restructuring of its outstanding debt and equity interests (the “Cornerstone Restructuring”). As a result of the Cornerstone Restructuring, Rafael became a 67% owner of the issued and outstanding common stock of Cornerstone (the “Cornerstone Acquisition”), and Cornerstone became a consolidated subsidiary of Rafael. See Note 6 to the Consolidated Financial Statements for additional information on the Cornerstone Restructuring, Cornerstone Acquisition, and RP Finance Consolidation. The Company is currently reviewing Cornerstone’s current efforts, prospects and available resources to determine its optimal operational direction.

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, we formed Rafael Medical Devices, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries. In August 2023, Rafael Medical Devices sold an aggregate 31.6% equity interest to third parties for $925,000. In February 2025, we invested approximately $582,000 in cash, and Rafael Medical Devices raised approximately $44,000 from third parties in exchange for Rafael Medical Devices' Class A Units. We currently hold a 73% equity interest in Rafael Medical Devices. On December 11, 2024, Rafael Medical Devices received a substantial equivalence determination for the VECTR System from the Food and Drug Administration (“FDA”) 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). Rafael Medical Devices' development of future products will depend upon the success of the VECTR System and our Company's 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”).

Current wording

In April 2023, we first invested in Day Three, a company which empowers third-party manufacturers to reimagine their existing product offerings enabling those third-party manufacturers to bring to market better, cleaner, more precise and predictable versions of their products by utilizing Day Three’s technology and innovation like Unlokt™. In January 2024, we entered into a series of transactions with Day Three and certain of its shareholders, acquiring a controlling interest in Day Three and subsequently consolidating Day Three's results (the “Day Three Acquisition”). On March 14, 2025, Day Three Labs Manufacturing, a majority owned subsidiary of Day Three, entered into an Asset Purchase Agreement and Licensing Agreement (the “DTLM Sale Agreement”), pursuant to which they sold assets and licensed certain applications of their Unlokt™ technology used in their cannabinoid ingredient manufacturing business. See Note 13 in the Notes to our Consolidated Financial Statements for additional information.

Previous 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.

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 results of clinical trials and loss from operations, and the Infusion Technology and Real Estate segments based primarily on revenues and income (loss) from 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

Our consolidated expenses for our Healthcare segment were as follows:

Current wording

Results of operations 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 July 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

The Healthcare segment is comprised of the activities of Barer, LipoMedix, Farber, Cornerstone, Cyclo, and Rafael Medical Devices. As of July 31, 2025, we held a 100% interest in Barer and Cyclo, a 95% interest in LipoMedix, a 93% interest in Farber, a 67% interest in Cornerstone, and a 73% interest in Rafael Medical Devices.

Previous wording

Research and development expenses. Research and development expenses decreased for the year ended July 31, 2024 as compared to the year ended July 31, 2023. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Cornerstone, Day Three, and Rafael Medical Devices. The decrease for the year ended July 31, 2024 stems from the November 2022 decision to curtail the Company’s early-stage development efforts, including pre-clinical research at Barer, net of increases attributable to the acquisitions of Cornerstone and Day Three.

Current wording

Research and development expenses. Research and development expenses increased for the year ended July 31, 2025 compared to the year ended July 31, 2024. Research and development expenses are derived from activity at Cyclo, Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. The increase is primarily due to the consolidation of Cyclo's research and development expenses, amounting to $8.4 million, following the Cyclo Merger in March 2025.

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 (loss) and expenses for our Real Estate segment were as follows:

Current wording

The Real Estate segment consists of a portion of a commercial building in Israel. Consolidated revenue, expenses and loss for our Real Estate segment were as follows:

Previous wording

*Unrealized gain on convertible notes receivable, due from Cyclo.*We recorded an unrealized gain of $1.2 million related to the convertible note receivable due from Cyclo for the year ended July 31, 2024.

Current wording

*Unrealized (loss) gain on convertible notes receivable, due from Cyclo.*We recorded an unrealized loss of $0.7 million for the year ended July 31, 2025, on our convertible notes receivable, due from Cyclo. The outstanding principal and accrued interest on the Cyclo Convertible Notes were forgiven in the Cyclo Merger.

Previous wording

Unrealized gain on investment - Hedge Funds. We recorded an unrealized gain of approximately $63 thousand and an unrealized gain of approximately $220 thousand for the years ended July 31, 2024 and 2023, respectively.

Current wording

Unrealized gain on investment - Hedge Funds. We recorded an unrealized gain of approximately $63 thousand for the year ended July 31, 2024. During the year ended July 31, 2025, we requested a withdrawal of its remaining balance in Hedge Fund Investments, and no longer hold any hedge fund investments.

Previous wording

*Recovery of receivables from Cornerstone.*We recorded an increase in recovery of receivables from Cornerstone of approximately $31.3 million for the year ended July 31, 2024. See Note 3 to our accompanying consolidated financial statements for more information related to this matter.

Current wording

Recovery of receivables from Cornerstone Pharmaceuticals. We recorded an increase in recovery of receivables from Cornerstone Pharmaceuticals of approximately $31.3 million for the year ended July 31, 2024. See Note 6 to our accompanying consolidated financial statements for more information related to this matter.

Previous wording

Equity in loss of Day Three. We recognized a loss of approximately $422 and $203 thousand from our ownership interest in Day Three due to operating results for the years ended July 31, 2024 and 2023, 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.

Current wording

Equity in loss of Day Three. We recognized a loss of $0.4 million from our ownership interest in Day Three due to operating results for the year ended July 31, 2024. As of January 2, 2024, Day Three is a majority-owned subsidiary which is consolidated.

Previous wording

*Net loss attributable to noncontrolling interests.*The change in the net loss attributable to noncontrolling interests is primarily attributed to the net loss of Cornerstone which includes $89.9 million in IPR&D expenses.

Current wording

*Net loss attributable to noncontrolling interests.*The change in the net loss attributable to noncontrolling interests is primarily attributed to acquisition of Cornerstone and Day Three and the consolidation of their activity.

Previous wording

As of July 31, 2024, we held cash and cash equivalents of approximately $2.7 million and available-for-sale securities valued at approximately $63.3 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 14 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 Annual Report on Form 10-K.

Current wording

As of July 31, 2025, we held cash and cash equivalents of approximately $52.8 million. We expect the 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 Annual Report on Form 10-K.

Previous wording

Cash used in investing activities for the year ended July 31, 2024 was primarily due to purchases of available-for-sale securities of approximately $155.7 million, purchase of $4.0 million in convertible notes receivable from Cyclo, and the investment in Cyclo common stock and warrants of $6.8 million, partially offset by proceeds of $153.4 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 year ended July 31, 2024 was primarily due to purchases of available-for-sale securities of approximately $155.7 million, purchases of $4.0 million in convertible notes receivable, due from Cyclo, and the investment in Cyclo common stock and warrants of $6.8 million, partially offset by proceeds of $153.4 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 year ended July 31, 2023 was primarily related to repayment of the $15.0 million note payable in connection with the sale of 520 Property and for payment of taxes related to shares withheld for employee taxes on vesting of shares granted to employees.

Current wording

Cash used in financing activities for the year ended July 31, 2025 was primarily related to net proceeds from the issuance of common stock in the Rights Offering of $25 million offset by a payment related to shares withheld for employee taxes of $0.2 million.

Previous wording

Cash used in financing activities for the year ended July 31, 2024 was primarily related to a principal payment of $0.8 million on the installment note acquired during the Day Three Acquisition, partially offset by the proceeds from sale of RMD membership units of $0.9 million.

Current wording

Cash provided by financing activities for the year ended July 31, 2024 was primarily related to the proceeds from sale of Rafael Medical Devices membership units of $0.9 million, and partially offset by a principal payment of $0.8 million on the installment note acquired during the Day Three Acquisition.

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 below.

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:

Previous wording

Amounts paid for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair value at the date of acquisition. The fair value of identifiable intangible assets is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the identifiable net assets and liabilities acquired to goodwill. Identifiable intangible assets with finite lives are amortized over their useful lives. Acquisition-related costs, including advisory, legal, accounting, valuation, and other costs, are expensed in the periods in which the costs are incurred. The results of operations of acquired businesses are included in the consolidated financial statements from the acquisition date.

Current wording

The purchase price for acquisitions are allocated to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The fair value of identifiable intangible assets, in-process research and development ("IPR&D") and customer relationships, is based on detailed valuations that use information and assumptions provided by management, including expected future cash flows. We allocate any excess purchase price over the fair value of the identifiable net assets and liabilities acquired to goodwill. Acquired IPR&D pursuant to an asset acquisition that has no alternative future use is expensed immediately as a component of in-process research and development expense in the consolidated statements of operations and comprehensive loss.

Previous wording

The Company assesses goodwill for impairment on an annual basis or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. The Company regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results. The process of evaluating the potential impairment of goodwill requires significant judgement. In performing the Company’s annual goodwill impairment test, the Company is permitted to first assess qualitative factors to determine whether it is more likely than not the fair value of the Company’s reporting unit is less than its carrying amount, including goodwill. In performing the qualitative assessment, the Company considers certain events and circumstances specific to the reporting unit and the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount. The Company is also permitted to bypass the qualitative assessment and proceed directly to the quantitative test. If the Company chooses to undertake the qualitative assessment and concludes that it is more likely than not that the fair value of the reporting unit is less than its carrying amount, the Company would then proceed to the quantitative impairment test. In the quantitative assessment, the Company compares the fair value of the reporting unit to its carrying amount, which includes goodwill. If the fair value exceeds the carrying value, no impairment loss exists. If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.

Current wording

We assess goodwill for impairment on an annual basis as of May 31, or more frequently when events and circumstances occur indicating that the recorded goodwill may be impaired. Management regularly monitors current business conditions and other factors including, but not limited to, adverse industry or economic trends and lower projections of profitability that may impact future operating results. The process of evaluating the potential impairment of goodwill requires significant judgment. In performing our annual goodwill impairment test, we are permitted to first assess qualitative factors to determine whether it is more likely than not that the fair value of any of our reporting units is less than its carrying amount, including goodwill. In performing the qualitative assessment, management considers certain events and circumstances specific to the reporting unit and the entity as a whole, such as macroeconomic conditions, industry and market considerations, overall financial performance and cost factors when evaluating whether it is more likely than not that the fair value of any of the reporting units is less than its carrying amount. We are also permitted to bypass the qualitative assessment and proceed directly to the quantitative test. If we choose to undertake the qualitative assessment and conclude that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, we would then proceed to the quantitative impairment test. In the quantitative assessment, we compare the fair value of the reporting unit to its carrying amount, which includes goodwill. If the fair value exceeds the carrying value, no impairment loss exists. If the fair value is less than the carrying amount, a goodwill impairment loss is measured and recorded.