Rafael Holdings, Inc. (RFL) has announced the completed sale of the 520 Property for an aggregate gross purchase price of $49.4 million in its recent quarterly report. After paying off a $15 million mortgage note, commissions, taxes, and other related costs, the company received a net cash amount of approximately $33 million at the closing. The sale resulted in a gain on disposal of discontinued operations of roughly $6.8 million.
The 520 Property is owned by Broad Atlantic Associates, LLC, a wholly-owned subsidiary of Rafael Holdings, and was determined to meet the held-for-sale criteria as of July 1, 2022. The disposal of the property occurred during the three months ended October 31, 2022. As a result of this strategic shift that will significantly impact the company’s operations and financial results, the accompanying consolidated financial statements show the activity related to the sale of the 520 Property as discontinued operations. Depreciation on the 520 Property ceased on July 1, 2022.
Investment in Cornerstone Pharmaceuticals
The recent quarterly report also contains information concerning Rafael Holdings’ investment in Cornerstone Pharmaceuticals, a clinical-stage cancer metabolism-based therapeutics company. The company owns debt and equity interests and rights in Cornerstone Pharmaceuticals through a 90%-owned non-operating subsidiary, Pharma Holdings, LLC (Pharma Holdings). Since Pharma Holdings owns 50% of CS Pharma Holdings, LLC (CS Pharma), a non-operating entity that owns equity interests in Cornerstone Pharmaceuticals, Rafael Holdings holds an effective 45% indirect interest in the assets held by CS Pharma.
Pharma Holdings holds 44 million shares of Cornerstone Pharmaceuticals’ Series D Convertible Preferred Stock and a warrant to increase the combined ownership of Pharma Holdings and CS Pharma to up to 56% of the fully diluted equity interests in Cornerstone Pharmaceuticals. The exercise price of the warrant is the lower of 70% of the price sold in an equity financing or $1.25 per share, subject to certain adjustments. The warrant expiration was extended to April 1, 2022.
Impact of New Accounting Standards
Looking forward, Rafael Holdings is currently evaluating the impact of new accounting standards issued by the Financial Accounting Standards Board (FASB) on its financial position or results of operations upon adoption. Such new standards include ASU 2016-13, which changes the impairment model for most financial assets and certain other instruments, and ASU No. 2020-06, which simplifies accounting for convertible instruments and contracts in an entity’s own equity.
Note that we may hold securities mentioned in this article. The source of this article are the SEC filings available at https://www.sec.gov/Archives/edgar/data/1713863/000121390023048592/f10q0423_rafaelhold.htm that we extracted with the help of various software tools. Even though we have implemented various fact-checking processes, some incorrect information may have remained in the article (false positive). Let us know if you find any inconsistencies!