Rafael : Quarterly Report for Quarter Ending October 31, 2025 (Form 10-Q)

About this update from Rafael Holdings, Inc.

Management's Discussion and Analysis of Financial Condition and Results of Operations 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 this Quarterly Report. 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. The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 1 of this Quarterly Report. Overview 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. The Company's 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 operation whose operations have been substantially streamlined; (iii) and 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 enabling those third-party manufacturers to bring to market better, cleaner, more precise and predictable versions of their product by utilizing Day Three's technology. Our primary focus is to finish development of Trappsol® Cyclo™ through the completion of its ongoing pivotal Phase 3 clinical trial and bring that product to regulatory approval and market, and to expand its investment portfolio through opportunistic and strategic investments, including in therapeutics, that address high unmet medical needs. We are currently evaluating our other holdings to ensure the future focus of our resources on core assets and specifically the Trappsol® Cyclo™ clinical and development efforts. Historically, we owned real estate assets. As of October 31, 2025, we hold a portion of a commercial building in Jerusalem, Israel as our sole remaining real estate asset. 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 for more information on the Merger with Cyclo. LipoMedix is a clinical stage Israeli company focused on the development of a product candidate that holds the potential to be an innovative, safe, and effective cancer therapy based on liposome delivery. As of October 31, 2025, our ownership interest in LipoMedix was approximately 95%. As needed, we provide debt or equity funding to Lipomedix to support its development and clinical efforts. LipoMedix is currently exploring strategic options for its lead candidate, including potential licensing opportunities, collaborations with industry partners, and investigator-initiated studies. 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 its early-stage development efforts, including pre-clinical research at Barer and has, since that date, ceased almost all of such activity. 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 while seeking out external investment and partnerships. Going forward, we expect that Barer will primarily operate as an entity holding interest in these two cancer-focused opportunities. 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. We are currently reviewing Cornerstone's current efforts, prospects and available resources to determine the optimal operational direction. 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 $45,000 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. 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, pursuant to which they sold assets and licensed certain applications of their Unlokt™ technology used in their cannabinoid ingredient manufacturing business. Results of Operations 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. Healthcare segment Results of operations for our Healthcare segment were as follows: Three Months Ended October 31, Change 2025 2024 $ % (in thousands) Product revenue $ 154 $ - $ 154 100 % Cost of product revenue (9 ) - (9 ) (100 )% General and administrative (2,752 ) (2,290 ) (462 ) (20 )% Research and development (7,484 ) (1,161 ) (6,323 ) (545 )% Depreciation and amortization (33 ) (71 ) 38 54 % Loss from operations $ (10,124 ) $ (3,522 ) $ (6,602 ) (187 )% The Healthcare segment is comprised of the activities of Barer, LipoMedix, Farber, Cornerstone, Cyclo, and Rafael Medical Devices. As of October 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. Product revenue. Total revenue for the Healthcare segment for the three months ended October 31, 2025, increased to approximately $0.2 million compared to $0 for the three months ended October 31, 2024. This increase is primarily due to the inclusion of product revenue generated by Cyclo following the Cyclo Merger in March 2025. 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, 2025 compared to the three months ended October 31, 2024 is primarily due to the consolidation of Cyclo's general and administrative expenses, amounting to $0.9 million, partially offset by a decrease of $0.3 million of payroll due to terminations, and a $0.1 million decrease in stock based compensation. Research and development expenses. Research and development expenses increased for the three months ended October 31, 2025 compared to the three months ended October 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 $6.3 million, an increase in stock based compensation expense of $0.4 million, offset by a $0.2 million decrease in payroll due to terminations and a $0.2 million decrease in clinical trial and other expenses, excluding Cyclo. Infusion Technology segment Results of operations for our Infusion Technology segment were as follows: Three Months Ended October 31, Change 2025 2024 $ % (in thousands) Infusion Technology revenue $ - $ 51 $ (51 ) (100 )% Cost of Infusion Technology revenue - (37 ) 37 100 % General and administrative (29 ) (112 ) 83 74 % Research and development - (165 ) 165 100 % Loss from operations $ (29 ) $ (263 ) $ 234 89 % The Infusion Technology segment is comprised of our majority equity interest in Day Three, which was acquired in January 2024. Revenues associated with the Infusion Technology segment consist of Infusion Technology revenue derived from Day Three's Unlokt TM 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. On March 14, 2025, Day Three Labs Manufacturing entered into the DTLM Sale Agreement, pursuant to which they sold assets and licensed certain applications of their Unlokt™ technology used in Infusion Technology services, causing an overall reduction in revenues and operating expenses during the three months ended October 31, 2025. Real Estate segment 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: Three Months Ended October 31, Change 2025 2024 $ % (in thousands) Rental - Third Party $ 56 $ 50 $ 6 12 % Rental - Related Party 30 27 3 11 % General and administrative (57 ) (121 ) 64 53 % Depreciation and amortization (17 ) (15 ) (2 ) (13 )% Income (loss) from operations $ 12 $ (59 ) $ 71 (120 )% General and administrative expenses. General and administrative expenses consist mainly of real estate taxes, payroll, accounting and legal fees, as well as building operating and office expenses. The decrease in general and administrative expenses during the three months ended October 31, 2025 compared to the three months ended October 31, 2024 is primarily the result of a decrease in real estate taxes. Consolidated Operations Our consolidated income and expense line items below loss from operations were as follows: Three Months Ended October 31, Change 2025 2024 $ % (in thousands) Loss from operations $ (10,141 ) $ (3,844 ) $ (6,297 ) (164 )% Interest income 399 568 (169 ) (30 )% Realized gain on available-for-sale securities - 194 (194 ) (100 )% Unrealized loss on investment - Cyclo - (4,365 ) 4,365 100 % Unrealized loss on convertible notes receivable, due from Cyclo - (1,588 ) 1,588 (100 )% Interest expense (160 ) (162 ) 2 1 % Other income (loss), net 115 (2 ) 117 (5850 )% Loss before income taxes (9,787 ) (9,199 ) (588 ) (6 )% Provision for income taxes (10 ) (12 ) 2 (17 )% Consolidated net loss (9,797 ) (9,211 ) (586 ) (6 )% Net income (loss) attributable to noncontrolling interests 19 (205 ) 224 109 % Net loss attributable to Rafael Holdings, Inc. $ (9,816 ) $ (9,006 ) $ (810 ) (9 )% Interest income. We recorded interest income of $0.4 million and $0.6 million for the three months ended October 31, 2025 and 2024, respectively. In November 2024, we sold our investments in available-for-sale securities and cash equivalents to reallocate assets to better align with our strategic goals. Accordingly, interest income has decreased due to a lower interest rate and decreased interest income earning balances. Realized gain on available-for-sale securities. We recognized a realized gain on available-for-sale securities of $0.2 million for the three months ended October 31, 2024, related to sale and maturity activity. Unrealized loss on investment - Cyclo. Unrealized gains and losses on investment - Cyclo are recognized as a result of changes in the fair value of our investments in Cyclo common stock and warrants which fluctuated due to the volatility of the market price of Cyclo common stock leading up to the Cyclo Merger. We recorded an unrealized loss of $4.4 million for the three months ended October 31, 2024. Unrealized loss on convertible notes receivable, due from Cyclo. We recorded an unrealized loss of $1.6 million for the three months ended October 31, 2024 related to the change in fair value of our convertible notes receivable due from Cyclo, which were forgiven as part of the Cyclo merger and therefore not held during the three months ended October 31, 2025. Interest expense. We recorded interest expense of $0.2 million and $0.2 million for the three months ended October 31, 2025 and 2024, respectively, related to Cornerstone's convertible notes and creditor payable. Other income, net. Other income, net was $0.1 million for the three months ended October 31, 2025 primarily due to the gain on sale of Cornerstone's fixed assets of $0.1 million. Other income, net was $2 thousand for the three months ended October 31, 2024, related primarily to the dissolution of a majority owned subsidiary. Net income (loss) attributable to noncontrolling interests. The change in the net income (loss) attributable to noncontrolling interests is primarily attributed to higher net losses at certain majority-owned subsidiaries during the three months ended October 31, 2024. Liquidity and Capital Resources October 31, July 31, Change 2025 2025 $ % Balance Sheet Data: (in thousands) Cash and cash equivalents $ 45,539 $ 52,769 $ (7,230 ) (14 )% Convertible notes receivable classified as available-for-sale 1,858 1,858 - - % Working capital 36,245 45,114 (8,869 ) (20 )% Total assets 105,375 114,109 (8,734 ) (8 )% Total equity attributable to Rafael Holdings, Inc. 85,181 94,391 (9,210 ) (10 )% Noncontrolling interests 3,999 3,980 19 - % Total equity $ 89,180 $ 98,371 $ (9,191 ) (9 )% Three Months Ended October 31, Change 2025 2024 $ % Cash flows (used in) provided by: (in thousands) Operating activities $ (6,806 ) $ (3,042 ) $ (3,764 ) (124 )% Investing activities (430 ) 8,575 (9,005 ) 105 % Financing activities (30 ) (48 ) 18 38 % Effect of exchange rates on cash and cash equivalents 36 (1 ) 37 3700 % Increase (decrease) in cash and cash equivalents $ (7,230 ) $ 5,484 $ (12,714 ) (232 )% Capital Resources As of October 31, 2025, we held cash and cash equivalents of approximately $45.5 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 Quarterly Report on Form 10-Q. Operating Activities For the three months ended October 31, 2025, cash used in operating activities was $6.8 million, impacted by a net loss of $9.8 million adjusted for non-cash items totaling $0.6 million. Cash generated from operating assets and liabilities primarily included the collection of other receivables of $1.2 million and accounts receivable of $0.2 million, as well as an increase in accounts payable and accrued expenses of $0.5 and a decrease in prepaid clinical trial costs of $0.2 million. For the three months ended October 31, 2024, cash used in operating activities was $3.0 million, impacted by a net loss of $9.2 million adjusted for non-cash items totaling $5.9 million. Cash used from operating assets and liabilities primarily included the collection of $0.2 million of accounts receivable and $0.1 million of interest receivables, offset by a decrease in accounts payable and accrued expenses of $0.1 million. Investing Activities Cash used in investing activities for the three months ended October 31, 2025 was primarily due to the purchase of preferred shares from Nina Medical for $0.5 million, offset by proceeds of $0.1 million from the sale of property and equipment. 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., offset by purchases of available-for-sale securities of approximately $15.7 million, and purchases of $9.0 million in convertible notes receivable, due from Cyclo. Financing Activities Cash used in financing activities for the three months ended October 31, 2025 was primarily related to $28 thousand of payments for taxes on shares withheld for employee taxes. Cash used in financing activities for the three months ended October 31, 2024 was primarily related to the $48 thousand of payments for taxes on shares withheld for employee taxes. We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors. Critical Accounting Estimates We have chosen accounting policies that we believe are appropriate to accurately and fairly report our operating results and financial condition in conformity with U.S. GAAP. We apply these accounting policies in a consistent manner. Our significant accounting policies are discussed in Note 2, "Summary of Significant Accounting Policies", in our accompanying consolidated financial statements. 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 year 2025. Off-Balance Sheet Arrangements We do not have any "off-balance sheet arrangements", as defined in relevant SEC regulations, that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

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