Note 3—Rafael Holdings, Inc. Spin-Off

On March 26, 2018, the Company completed a pro rata distribution of the common stock that the Company held in the Company’s subsidiary, Rafael Holdings, Inc. (“Rafael”), to the Company’s stockholders of record as of the close of business on March 13, 2018 (the “Rafael Spin-Off”). The disposition of Rafael did not meet the criteria to be reported as a discontinued operation and accordingly, Rafael’s assets, liabilities, results of operations and cash flows have not been reclassified. In connection with the Rafael Spin-Off, each of the Company’s stockholders received one share of Rafael Class A common stock for every two shares of the Company’s Class A common stock and one share of Rafael Class B common stock for every two shares of the Company’s Class B common stock, held of record as of the close of business on March 13, 2018. The Company received a legal opinion that the Rafael Spin-Off should qualify as a tax-free transaction for U.S. federal income tax purposes.

Rafael owns the commercial real estate assets and interests in two clinical stage pharmaceutical companies that were previously held by the Company. The commercial real estate holdings consist of the Company’s headquarters building and its associated public garage in Newark, New Jersey, an office/data center building in Piscataway, New Jersey and a portion of a building in Israel that hosts offices for the Company and certain affiliates. The pharmaceutical holdings include debt interests and warrants in Rafael Pharmaceuticals, Inc. (“Rafael Pharma”), which is a clinical stage, oncology-focused pharmaceutical company committed to the development and commercialization of therapies that exploit the metabolic differences between normal cells and cancer cells, and a majority equity interest in Lipomedix Pharmaceuticals Ltd. (“Lipomedix”), a pharmaceutical development company based in Israel.

In March 2018, in connection with the Rafael Spin-Off, each holder of options to purchase an aggregate of 1.3 million shares of the Company’s Class B common stock shared ratably in a pool of options to purchase 0.6 million shares of Rafael Class B common stock. The Company accounted for the grant of the new options in Rafael as a modification. In the three months ended April 30, 2018, the Company recorded stock-based compensation expense for the aggregate incremental value from the modification of $0.2 million.

The carrying amounts of Rafael’s assets and liabilities included as part of the disposal group in the Rafael Spin-Off were as follows (in thousands):

Cash and cash equivalents	$	9,287
Marketable securities		32,989
Trade accounts receivable		53
Other current assets		2,329
Property, plant and equipment, net		50,624
Investments		17,650
Other assets		2,240
Current liabilities		(159	)
Other liabilities		(94	)
Noncontrolling interests		(8,653	)
Rafael equity	$	106,266

Rafael’s (loss) income before income taxes and (loss) income before income taxes attributable to the Company, which was included in the accompanying consolidated statements of operations, were as follows:

	Three Months Ended April 30,					Nine Months Ended April 30,
	2018			2017		2018			2017
	(in thousands)
(Loss) income before income taxes	$	(1,190	)	$	52	$	(2,410	)	$	375

(Loss) income before income taxes attributable to IDT Corporation	$	(1,062	)	$	52	$	(2,107	)	$	375