Rafael Holdings, Inc.: Form 10-Q for the period ended Apr 30, 2024

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 a majority interest in Cornerstone Pharmaceuticals, Inc. (“Cornerstone”), formerly known as Rafael Pharmaceuticals Inc., a cancer metabolism-based therapeutics company, 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 an investment in 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 (NPC), a rare, fatal and progressive genetic disorder. We also hold a majority interest in Day Three Labs, Inc. (“Day Three”), a company which reimagines existing cannabis offerings with pharmaceutical-grade technology and innovation like Unlokt™ to bring to market better, cleaner, more precise and predictable products, and a majority interest in Rafael Medical Devices, LLC, an orthopedic-focused medical device company developing instruments to advance minimally invasive surgeries (“Rafael Medical Devices” and Day Three together with the Pharmaceutical Companies, represent our “Investment 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. The Company’s primary focus is to expand our investment portfolio through opportunistic and strategic investments including therapeutics, which address high unmet medical needs.

The Company previously held debt and equity investments in Cornerstone that included preferred and common equity interests. On June 17, 2021, the Company entered into a merger agreement to acquire full ownership of Cornerstone in exchange for issuing Company Class B common stock to the other stockholders of Cornerstone (“Merger Agreement” or “Merger”). On October 28, 2021, the Company announced that the AVENGER 500 Phase 3 clinical trial for CPI-613® (devimistat), Cornerstone’s lead product candidate, did not meet its primary endpoint of significant improvement in overall survival in patients with metastatic adenocarcinoma of the pancreas. In addition, following a pre-specified interim analysis, the independent data monitoring committee for the ARMADA 2000 Phase 3 study for devimistat recommended the trial to be stopped due to a determination that it was unlikely to achieve the primary endpoint (the “Data Events”). In light of the Data Events, the Company concluded that the prospects for CPI-613 were uncertain and fully impaired in its financial statements for the fiscal year ended July 31, 2022, the value of its loans, receivables, and investment in Cornerstone based upon its valuation of Cornerstone.

On September 24, 2021, the Company entered into a Line of Credit Loan Agreement (the “Line of Credit Agreement”) with Cornerstone under which Cornerstone borrowed $25 million from the Company. Due to the Data Events, the Company recorded a full reserve on the $25 million due the Company from Cornerstone.

On February 2, 2022, the Company terminated the Merger Agreement with Cornerstone, effective immediately, in accordance with its terms.

On March 21, 2023, the Company loaned $2.0 million to Cornerstone which debt is represented by a promissory note made by Cornerstone (the “2023 Promissory Note”). The 2023 Promissory Note, which bears interest at a rate of seven and one-half percent (7.5%) per annum, was originally due and payable on May 22, 2023. The 2023 Promissory Note was amended to extend the maturity date to March 13, 2024 and to waive any increase in the interest rate provided for in the 2023 Promissory Note, provided that the entire principal amount and all accrued interest thereon is repaid in cash or converted into equity securities of Cornerstone no later than March 13, 2024.

On March 13, 2024, Cornerstone consummated a restructuring of its outstanding debt and equity interests. See Note 3 to our accompanying consolidated financial statements for additional information regarding the restructuring transaction.

In 2019, the Company established Barer Institute Inc., an early-stage small molecule research operation focused on developing a pipeline of novel therapeutic compounds, including compounds to regulate cancer metabolism with potentially broader application in other indications beyond cancer. Barer was led by a team of scientists and academic advisors considered to be among the leading 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 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. The Company also holds a majority equity interest in LipoMedix, a clinical stage oncological pharmaceutical company based in Israel. In addition, the Company has invested in other early-stage pharmaceutical ventures.

In 2016, the Company first invested in LipoMedix Pharmaceuticals Ltd. (“LipoMedix”), a clinical stage pharmaceutical company. On February 9, 2023, the Company entered into a Share Purchase Agreement with LipoMedix in which LipoMedix sold 70,000,000 ordinary shares to the Company at a price per share of $0.03 and an aggregate sale price of approximately $2.1 million. Subsequent to this transaction, the Company owns 95% of LipoMedix.

On April 7, 2023, the Company entered into a Common Stock Purchase Agreement (the “Day Three Purchase Agreement”) with Day Three. Day Three is a cannabinoid ingredient manufacturer specializing in the development and commercialization of novel cannabis product solutions. Pursuant to the Day Three Purchase Agreement, the Company purchased 4,302,224 shares of common stock representing 38% of the outstanding shares of common stock of Day Three (33.33% on a fully diluted basis), for a purchase price of $3.0 million. The Company also received a warrant exercisable for 7,528,893 shares of common stock at an aggregate purchase price of $3.0 million, which expires five years from the date of issuance or earlier based on the occurrence of certain events as defined in the Day Three Purchase Agreement. As of April 30, 2024, the Company had not exercised the warrant. See Note 10 to our accompanying consolidated financial statements for further detail.

On May 2, 2023, the Company entered into a Securities Purchase Agreement (the “Cyclo SPA”) with Cyclo. Cyclo is a clinical stage biotechnology company dedicated to developing life-changing medicines for patients and families living with challenging diseases through its lead therapeutic asset, Trappsol®. The Company purchased from Cyclo (i) 2,514,970 common shares (the “Purchased Shares”) and (ii) a warrant to purchase 2,514,970 common shares with an exercise price of $0.71 per share (the “May Warrant”), at a combined purchase price equal to $0.835 per Purchased Share and May Warrant to purchase one share, for an aggregate purchase price of $2.1 million. The May Warrant is exercisable until August 1, 2030.

On August 1, 2023, pursuant to a Securities Purchase Agreement (the “Cyclo II SPA”) dated June 1, 2023, the Company purchased an additional 4,000,000 shares of common stock (the “Cyclo II Shares”), and received a warrant to purchase an additional 4,000,000 Shares (the “Cyclo II Warrant”), for an aggregate purchase price of $5,000,000. The Cyclo II Warrant has an exercise price of $1.25 per share and is exercisable until August 1, 2030. The August 1, 2023 investment increased the Company’s percentage ownership of Cyclo common stock to approximately 34%. As of the date of this filing, the Company has not exercised the Cyclo II Warrant.

On October 20, 2023, the Company exercised the May Warrant to purchase 2,514,970 common shares at an exercise price of $0.71 per share, pursuant to a Securities Purchase Agreement dated October 20, 2023, and received a new warrant (the “Replacement Warrant”) to purchase 2,766,467 common shares at an exercise price of $0.95 per share. The Replacement Warrant is exercisable until October 20, 2027. As of the date of this report, the Company had not exercised the Replacement Warrant. Both the Cyclo II Warrant and Replacement Warrant (collectively, the “Cyclo Warrants”) are subject to the restriction that exercise(s) do not convey more than 49% ownership to the Company. Upon exercise of the May Warrant, the Company recognized a realized gain of $424 thousand. The October 20, 2023 investment increased the Company’s percentage ownership of Cyclo common stock to approximately 40%.

In August 2023, the Company raised $925,000 from third parties in exchange for a 31.62% ownership of Rafael Medical Devices. As of July 31, 2023, the Company recorded $825,000 of the funds received related to the sale within prepaid expenses and other current assets and other current liabilities within the consolidated balance sheets.

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 520 Property. As of July 31, 2023, the Company holds a portion of a commercial building in Jerusalem, Israel as its remaining real estate asset.

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 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.

Healthcare Segment

Our consolidated expenses for our Healthcare segment were as follows:

(in thousands)

51

(in thousands)

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 April 30, 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.

On August 1, 2023, Rafael Medical Devices closed on the sale of membership units in exchange for $925,000, and following that sale, the Company holds a 68% voting interest based on the outstanding equity interests in Rafael Medical Devices. As of July 31, 2023, the Company recorded $825,000 of the funds received related to the sale within prepaid expenses and other current assets and other liabilities within the consolidated balance sheets.

General and administrative expenses. General and administrative expenses consist mainly of payroll, stock-based compensation expense, benefits, facilities, consulting and professional fees. The Company operations have been scaled to meet the current needs which has led to reduced overall general and administrative expenses. The decrease during the three months ended April 30, 2024 compared to the three months ended April 30, 2023 is comprised of a decrease in licenses and fees of approximately $0.3, a decrease in insurance expense of approximately $0.3 million, and a decrease in stock-based compensation of approximately $0.1 million.

The decrease in general and administrative expenses during the nine months ended April 30, 2024 compared to the nine months ended April 30, 2023 is comprised of a decrease in insurance expense of approximately $1.0 million, a decrease in payroll expenses of approximately $0.7 million, a decrease in severance pay expense of approximately $0.3 million, partially offset by a net increase in professional fees of approximately $0.9 million.

Research and development expenses. Research and development expenses increased for the three months and decreased for the nine months ended April 30, 2024 as compared to the corresponding periods in fiscal 2023. Research and development expenses are derived from activity at Barer, LipoMedix, Farber, Cornerstone, and Rafael Medical Devices. The increase in the current quarter relates to new activity for Cornerstone. The decrease for the nine month period stems from the November 2022 decision to curtail the Company’s early-stage development efforts, including pre-clinical research at Barer Institute.

IPR&D expense. IPR&D expenses during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 increased by $89.9 million due to the Cornerstone Acquisition. See Note 3 to our accompanying consolidated financial statements for more information on the transaction.

Infusion Technology

(in thousands)

52

(in thousands)

Infusion Technology Revenue. Infusion Technology Revenue increased by $262 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.

Cost of Infusion Technology revenue. Cost of Infusion Technology increased by $85 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024. The specific costs are related to supplies, materials, production labor, and travel costs.

General and administrative expense. General and administrative expenses consist mainly of payroll, insurance, software, and licenses. General and administrative expenses increased by $225 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.

Research and development expenses. Research and development expenses increased by $314 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023 due to the acquisition of Day Three in January 2024.

Real Estate Segment

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:

(in thousands)

(in thousands)

Rental - Third Party. Rental revenue decreased by $3 thousand and $1 thousand during the three and nine months ended April 30, 2024 compared to the three and nine months ended April 30, 2023.

General and administrative. General and administrative expense decreased by $25 thousand and $8 thousand during the three and nine months ended April 30, 2024, respectively compared to the three and nine months ended April 30, 2023.

Consolidated Operations

Our consolidated income and expense line items below loss from operations were as follows:

(in thousands)

(in thousands)

Interest income. Interest income was $0.5 million and $1.5 million for the three months ended April 30, 2024 and 2023, respectively. Interest income was $1.8 million and $2.3 million for the nine months ended April 30, 2024 and 2023, respectively. The decrease is primarily due to changes in market rates and changes in the portfolio.

Impairment of investments - Other Pharmaceuticals. We recorded impairment losses of $128 thousand and $351 thousand related to our investment in Nanovibronix using the measurement alternative for the three and nine months ended April 30, 2023, respectively.

Realized gain on available-for-sale securities. We recorded realized gain of approximately $0.9 million and $0 for the three months ended April 30, 2024 and 2023, respectively, related to available-for-sale securities sold during the period. We recorded realized gains of approximately $1.5 million and $0.2 million for the nine months ended April 30, 2024 and 2023, respectively, related to available-for-sale securities sold during the period.

Realized gain on investment - Cyclo. We recorded a realized gain of approximately $424 thousand related to the exercise of the May Warrants in connection with our October 2023 investment in Cyclo for the nine months ended April 30, 2024.

Unrealized (loss) gain on investment - Cyclo. We recorded an unrealized loss of approximately $4.4 million and an unrealized gain of $3.2 million related to the change in fair value in our investment in Cyclo for the three and nine months ended April 30, 2024, respectively.

Unrealized (loss) gain on investment - Hedge Funds. We recorded an unrealized loss of approximately $3 thousand and $131 thousand for the three months ended April 30, 2024 and 2023, respectively. We recorded an unrealized loss of approximately $118 thousand and an unrealized gain of approximately $120 thousand for the nine months ended April 30, 2024 and 2023, respectively.

Recovery of receivables from Cornerstone Pharmaceuticals. We recorded an increase in recovery of receivables from Cornerstone Pharmaceuticals of approximately $31.3 million for the three and nine months ended April 30, 2024. See Note 3 to our accompanying consolidated financial statements for more information related to this matter.

Benefit from income tax. In accordance with the State of New Jersey’s Technology Business Tax Certificate Transfer Program, which allowed certain high technology and biotechnology companies to sell unused net operating loss carryforwards (‘NOLs’) to other New Jersey-based corporate taxpayers based in New Jersey, the Company received approximately $2.6 million for the sale of the Company’s prior period NOLs totaling $31.6 million in the third quarter of fiscal 2024 which was recorded in the benefit from income taxes in the consolidated statements of operations and comprehensive loss for the three and nine months ended April 30, 2024.

Equity in loss of Day Three. We recognized a loss of approximately $0 and $422 thousand from our ownership interest in Day Three due to operating results for the three and nine months ended April 30, 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.

Income from discontinued operations related to 520 Property. Discontinued operations include: (i) rental and parking revenues, (ii) payroll, benefits, facilities, consulting and professional fees dedicated to 520 Property, (iii) depreciation and amortization expenses, (iv) interest (including amortization of debt issuance costs) on the note payable that was secured by a mortgage on the 520 Property, and (v) gain on the disposal of the 520 Property. The operating results of these items are presented in our consolidated statements of operations and comprehensive loss as discontinued operations for all periods presented. The decrease in the net income attributable to discontinued operations for the nine months ended April 30, 2024 as compared to the nine months ended April 30, 2023 was due to a gain on the sale of the 520 Property of $6.8 million.

See Note 13 to our accompanying consolidated financial statements for further information regarding discontinued operations.

Liquidity and Capital Resources

(in thousands)

(in thousands)

Capital Resources

As of April 30, 2024, we held cash and cash equivalents of approximately $7.4 million and available-for-sale securities valued at approximately $64.9 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 13 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 Quarterly Report on Form 10-Q.

Operating Activities

Cash used in operating activities decreased by $3.8 million from cash used of $8.8 million for the nine months ended April 30, 2023 to cash used of $4.9 million for the nine months ended April 30, 2024, as the increase in the loss from continuing operations was more than offset by the impact from non-cash items, such as $89.86 million in in-process research and development expense, $31.31 million from the recovery of receivables from Cornerstone, and changes in assets and liabilities.

Investing Activities

Cash used in investing activities for the nine months ended April 30, 2024 was primarily due to purchases of available-for-sale securities of approximately $133.7 million and the investment in Cyclo of $6.8 million, partially offset by proceeds of $129.0 million from sales and maturities of available-for-sale securities and $2.5 million in proceeds from hedge funds.

Cash used in investing activities for the nine months ended April 30, 2023 was primarily due to purchases of available-for-sale securities of approximately $166.3 million, the investment in Day Three of $3.0 million, and the issuance of a convertible promissory note receivable of $2.0 million. This is partially offset by proceeds of $137.0 million from the sale of available-for-sale securities.

Financing Activities

Cash used in financing activities for the nine months ended April 30, 2024 was primarily related to the principal payments on installment of the note payable of $0.8 million partially offset by the proceeds from sale of RMD membership units of $0.9 million.

Cash used in financing activities for the nine months ended April 30, 2023 was primarily related to payments for taxes related to 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.

Operating, Financing, and Investing Activities of Discontinued Operations

The cash flows from discontinued operations - 520 Property for the nine months ended April 30, 2023 represent the net income excluding non-cash depreciation and amortization, as well as the net proceeds from the sale of the 520 Property.

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 2023. There were no material changes during the nine months ended April 30, 2024 to the Critical Accounting Estimates previously disclosed in the Annual Report on Form 10-K for fiscal 2023 except as follows:

Investments - Fair Value Method

The Company has elected the fair value option to account for its investment in Cyclo Therapeutics Inc. over which the Company has significant influence. The fair value option is irrevocable once elected. The Company measures its investment in Cyclo at fair value and records all subsequent changes in fair value in earnings in the consolidated statement of operations. The Company believes the fair value option best reflects the underlying economics of the investment. See Note 12, “Investments,” in our accompanying consolidated financial statements for further details.

The total aggregate fair value of the Cyclo investment of $15,171,714 as of April 30, 2024 is comprised of common shares with an aggregate fair value of $13,183,712 (measured based on the closing stock price of Cyclo Therapeutics, Inc., a Level 1 fair value) and warrants with an aggregate fair value of $1,988,002 (measured using a Level 3 fair value estimate).

The Company recognizes the fair value of the Cyclo Warrants utilizing a Black-Scholes model at acquisition and each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including expected volatility, expected life and risk-free interest rate. In order to determine the volatility, we measured expected volatility based on several inputs, including considering a peer group of publicly traded companies and the implied volatility of the Company’s publicly-traded warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants. The expected life of the warrants is assumed to be equivalent to their remaining contractual term.‌ Both of the Cyclo Warrants and the underlying shares of common stock are subject to volume restrictions in accordance with SEC Rule 144 for which a discount to the stock price of Cyclo was applied. The Black-Scholes model further incorporated a discount for the overall lack of marketability for the Cyclo Warrants.

Certain inputs utilized in our Black-Scholes model may fluctuate in future periods based upon factors which are outside of the Company’s control. A significant change in one or more of these inputs used in the calculation of the fair value may cause a significant change to the fair value of our warrant liability which could also result in material non-cash gain or loss being reported in our consolidated statements of operations and comprehensive loss.

Business Combinations

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.

Goodwill

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.

The Company assesses goodwill for impairment on an annual basis as of May 31 or more frequently when events and circumstances occur indicating that recorded goodwill may be impaired.

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.

There have been no significant changes in our market risk exposures from those described in Item 7A of our 2023 Form 10-K.

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of April 30, 2024.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended April 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no material changes from the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for fiscal 2023.