UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 1)

☒ Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended October 31, 2021.

☐ Transition report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934.

Commission File Number: 000-55863

RAFAEL HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Delaware

82-2296593

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

520 Broad Street, Newark, New Jersey 07102

(Address of principal executive offices, zip code)

(212) 658-1450

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Class B common stock, par value $0.01 per share

RFL

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s common stock as of December 10, 2021 was:

Class A common stock, par value $0.01 per share:	787,163 shares
Class B common stock, par value $0.01 per share:	19,912,790 shares

EXPLANATORY NOTE

References throughout this Amendment No. 1 to the Quarterly Report on Form 10-Q to “we,” “us,” the “Company” or “our company” are to Rafael Holdings, Inc.

This Amendment No. 1 (“Amendment No. 1”) to the Quarterly Report on Form 10-Q/A amends the Quarterly Report on Form 10-Q of Rafael Holdings, Inc. for the quarter ended October 31, 2021, as filed with the Securities and Exchange Commission (“SEC”) on December 15, 2021 (the “Original Filing”).

On February 28, 2022, the Company’s management and the audit committee of the Company’s board of directors (the “Audit Committee”) concluded that our previously issued unaudited consolidated interim financial statements included in our Quarterly Report on Form 10-Q for the three-month period ended October 31, 2021, filed with the SEC on December 15, 2021, should be restated to correct the allocation of losses attributable to the noncontrolling interests and to correct the calculation of weighted average shares outstanding to exclude nonvested restricted stock.

As such, the Company is restating in this Form 10-Q/A the unaudited consolidated interim financial statements for the three-month period ended October 31, 2021.

On February 28, 2022, the Company’s management concluded that material weaknesses in internal control over financial reporting related to the accounting for non-controlling interests and earnings per share existed and that the disclosure controls and procedures were not effective as of October 31, 2021.

We are filing this Amendment No. 1 to amend and restate the Original Filing with modification as necessary to reflect the restatement. The following items have been amended to reflect the restatement:

Part I, Item 1, Financial Information

Part I, Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part I, Item 4, Controls and Procedures

Part II, Item 1A, Risk Factors

In addition, the Company’s Chief Executive Officer and Chief Financial Officer have provided new certifications dated as of the date of this Amendment No. 1 (Exhibits 31.1, 31.2, 32.1 and 32.2).

Except as described above and set forth in this Amendment No. 1, this Amendment No. 1 does not amend or update any other information contained in the Original Filing. This Amendment No. 1 does not purport to reflect any information or events subsequent to the Original Filing, except as expressly described herein. Accordingly, this Amendment No. 1 should be read in conjunction with the Original Filing and with our filings with the SEC subsequent to the Original Filing.

RAFAEL HOLDINGS, INC.

TABLE OF CONTENTS

Part I. FINANCIAL INFORMATION

	Item 1.	Financial Statements (Unaudited)	1
		Consolidated Balance Sheets as of October 31, 2021 (as restated) and July 31, 2021	1
		Consolidated Statements of Operations and Comprehensive Loss for the Three Months Ended October 31, 2021 (as restated) and 2020	2
		Consolidated Statements of Equity for the Three Months Ended October 31, 2021 (as restated) and 2020	3
		Consolidated Statements of Cash Flows for the Three Months Ended October 31, 2021 and 2020	4
		Notes to Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations (as restated)	26
	Item 3.	Quantitative and Qualitative Disclosures about Market Risks	31
	Item 4.	Controls and Procedures	31

Part II. OTHER INFORMATION

	Item 1.	Legal Proceedings	32
	Item 1A.	Risk Factors	32
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	32
	Item 3.	Defaults Upon Senior Securities	32
	Item 4.	Mine Safety Disclosures	32
	Item 5.	Other Information	32
	Item 6.	Exhibits	33

SIGNATURES			34

PART 1. FINANCIAL INFORMATION

ITEM 1. Financial Statements

RAFAEL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited, in thousands, except share and per share data)

	October 31, 2021 (As restated)			July 31, 2021
ASSETS				(Note 3)
CURRENT ASSETS
Cash and cash equivalents	$	72,387		$	7,854
Restricted cash		5,000			5,000
Trade accounts receivable, net of allowance for doubtful accounts of $212 and $193 at October 31, 2021 and July 31, 2021, respectively		712			235
Due from Rafael Pharmaceuticals, net of allowance for losses on related party receivables of $720 and $0 at October 31, 2021 and July 31, 2021, respectively		—			600
Due from Rafael Pharmaceuticals – line of credit, net of allowance for loan losses of $25,000 at October 31, 2021		—			—
Prepaid expenses and other current assets		428			1,075
Total current assets		78,527			14,764

Property and equipment, net		42,885			43,238
Equity investment – RP Finance LLC		—			575
Due from RP Finance LLC, net of allowance for losses on related party receivables of $9,375 and $0 at October 31, 2021 and July 31, 2021, respectively		—			7,500
Investments – Rafael Pharmaceuticals		—			79,141
Investments – Other Pharmaceuticals		477			477
Investments – Hedge Funds		5,479			5,268
In-process research and development and patents		1,575			1,575
Other assets		1,463			1,517
TOTAL ASSETS	$	130,406		$	154,055
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade accounts payable	$	1,145		$	1,160
Accrued expenses		1,292			1,227
Other current liabilities		121			252
Due to related parties		52			136
Note payable, net of debt issuance costs		14,653			14,528
Total current liabilities		17,263			17,303

Other liabilities		81			48
TOTAL LIABILITIES		17,344			17,351

COMMITMENTS AND CONTINGENCIES

EQUITY
Class A common stock, $0.01 par value; 35,000,000 shares authorized, 787,163 shares issued and outstanding as of October 31, 2021 and July 31, 2021, respectively		8			8
Class B common stock, $0.01 par value; 200,000,000 shares authorized, 19,896,066 issued and 19,882,219 outstanding as of October 31, 2021, and 16,947,066 issued and 16,936,864 outstanding as of July 31, 2021		198			169
Additional paid-in capital		264,867			159,136
Accumulated deficit		(152,823	)		(40,799	)
Accumulated other comprehensive income related to foreign currency translation adjustment		3,781			3,772
Total equity attributable to Rafael Holdings, Inc.		116,031			122,286
Noncontrolling interests		(2,969	)		14,418
TOTAL EQUITY		113,062			136,704
TOTAL LIABILITIES AND EQUITY	$	130,406		$	154,055

See accompanying notes to the unaudited consolidated interim financial statements.

RAFAEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited, in thousands, except share and per share data)

	Three Months Ended October 31,
	2021 (As restated)			2020

REVENUE
Rental – Third Party	$	196		$	236
Rental – Related Party		520			520
Parking		190			177
Other – Related Party		120			120
Total revenue		1,026			1,053

COSTS AND EXPENSES
Selling, general and administrative		12,892			2,592
Research and development		2,153			515
Depreciation and amortization		382			437
Provision for loss on receivable pursuant to line of credit		25,000			—
Provision for losses on related party receivables		10,283			—
Loss from operations		(49,684	)		(2,491	)

Interest expense, net		(222	)		—
Gain on sale of building		—			749
Impairment of investments – Other Pharmaceuticals		—			(724	)
Impairment of cost method investment – Rafael Pharmaceuticals		(79,141	)		—
Unrealized gain on investments – Hedge Funds		211			944
Loss before income taxes		(128,836	)		(1,522	)
Provision for income taxes		—			(5	)
(Loss) earnings in equity of RP Finance		(575	)		96
Consolidated net loss		(129,411	)		(1,431	)
Net (loss) income attributable to noncontrolling interests		(17,387	)		15
Net loss attributable to Rafael Holdings, Inc.	$	(112,024	)	$	(1,446	)

OTHER COMPREHENSIVE LOSS
Net loss	$	(129,411	)	$	(1,431	)
Foreign currency translation adjustment		9			(38	)
Total comprehensive loss		(129,402	)		(1,469	)
Comprehensive loss attributable to noncontrolling interests		36			(21	)
Total comprehensive loss attributable to Rafael Holdings, Inc.	$	(129,438	)	$	(1,490	)

Loss per share
Basic and diluted	$	(5.91	)	$	(0.09	)

Weighted average number of shares used in calculation of loss per share
Basic and diluted		18,948,084			15,822,722

See accompanying notes to the unaudited consolidated interim financial statements.

RAFAEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in thousands, except share and per share data)

	Three Months Ended October 31, 2021
	Common Stock, Series A				Common Stock, Series B					Additional Paid-in			Accumulated			Accumulated other comprehensive		Noncontrolling			Total
	Shares		Amount		Shares			Amount		Capital			Deficit			income		interests			Equity
Balance at August 1, 2021		787,163	$	8		16,936,864		$	169	$	159,136		$	(40,799	)	$	3,772	$	14,418		$	136,704
Net loss for the three months ended October 31, 2021		—		—		—			—		—			(112,024	)		—		(17,387	)		(129,411	)
Stock-based compensation		—		—		—			—		7,851			—			—		—			7,851
Common stock sold to investors		—		—		2,833,425			28		99,142			—			—		—			99,170
Transaction costs incurred in connection with sale of common stock		—		—		—			—		(6,228	)		—			—		—			(6,228	)
Common stock sold to related party		—		—		112,501			1		4,996			—			—		—			4,997
Shares withheld for payroll taxes		—		—		(571	)		—		(30	)		—			—		—			(30	)
Foreign currency translation adjustment		—		—		—			—		—			—			9		—			9
Balance at October 31, 2021 (as restated)		787,163	$	8		19,882,219		$	198	$	264,867		$	(152,823	)	$	3,781	$	(2,969	)	$	113,062

	Three Months Ended October 31, 2020
	Common Stock, Series A				Common Stock, Series B				Additional Paid-in		Accumulated			Accumulated other comprehensive			Noncontrolling		Total
	Shares		Amount		Shares		Amount		Capital		Deficit			income			interests		Equity
Balance at August 1, 2020		787,163	$	8		15,028,536	$	149	$	129,136	$	(16,255	)	$	3,762		$	13,728	$	130,528
Net loss for the three months ended October 31, 2020		—		—		—		—		—		(1,446	)		—			15		(1,431	)
Stock-based compensation		—		—		7,261		—		214		—			—			—		214
Stock options exercised		—		—		8,750		—		43		—			—			—		43
Foreign currency translation adjustment		—		—		—		—		—		—			(38	)		—		(38	)
Balance at October 31, 2020		787,163	$	8		15,044,547	$	149	$	129,393	$	(17,701	)	$	3,724		$	13,743	$	129,316

See accompanying notes to the unaudited consolidated interim financial statements.

RAFAEL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)

	Three Months Ended October 31,
	2021			2020
Operating activities
Consolidated net loss	$	(129,411	)	$	(1,431	)
Adjustments to reconcile consolidated net loss to net cash used in operating activities
Depreciation and amortization		382			437
Deferred income taxes		—			6
Net unrealized gain on investments – Hedge Funds		(211	)		(944	)
Impairment of investments – Other Pharmaceuticals		—			724
Impairment of cost method investment – Rafael Pharmaceuticals		79,141			—
Provision for loss on receivable pursuant to line of credit		25,000			—
Interest income		(188	)		—
Provision for losses on related party receivables		10,283			—
Loss (earnings) in equity of RP Finance		575			(96	)
Provision for doubtful accounts		19			38
Stock-based compensation		7,851			214
Amortization of debt discount		125			—
Gain on sale of building		—			(749	)

Change in assets and liabilities:
Trade accounts receivable		(496	)		(80	)
Prepaid expenses and other current assets		649			(187	)
Other assets		54			30
Accounts payable and accrued expenses		48			(490	)
Other current liabilities		(124	)		(122	)
Due to related parties		(84	)		26
Due from Rafael Pharmaceuticals		(120	)		30
Other liabilities		33			(59	)
Net cash used in operating activities		(6,474	)		(2,653	)

Investing activities
Purchases of property and equipment		(29	)		(145	)
Payment to fund RP Finance Line of Credit		(1,875	)		(1,875	)
Payment to Rafael Pharmaceuticals pursuant to Line of Credit

SEC Form 10-Q/A filed by Rafael Holdings Inc. (Amendment)