Fair Value Measurements

12 Months Ended

Jul. 31, 2024

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 15 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:

● Level 1 - quoted prices in active markets for identical assets or liabilities;

● Level 2 - quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or

● Level 3 - unobservable inputs for the asset or liability, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s assets required to be measured at fair value on a recurring basis and where they are classified within the fair value hierarchy as of July 31, 2024 and July 31, 2023 are as follows:

	July 31, 2024
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Available-for-sale securities - Corporate and U.S. Agency Bonds	$	—	$	59,298	$	—	$	59,298
Available-for-sale securities - U.S. Treasury Bills		3,967		—		—		3,967
Investment in Cyclo - Common Stock		10,746		—		—		10,746
Convertible note receivables, due from Cyclo		—		—		5,191		5,191
Investment in Cyclo - Warrants		—		—		1,264		1,264
Hedge funds		—		—		2,547		2,547
Convertible note receivable		—		—		1,146		1,146
Total	$	14,713	$	59,298	$	10,148	$	84,159

	July 31, 2023
	Level 1		Level 2		Level 3		Total
	(in thousands)
Assets:
Available-for-sale securities - Corporate Bonds	$	—	$	46,439	$	—	$	46,439
Available-for-sale securities - U.S. Treasury Bills		11,275		—		—		11,275
Investment in equity securities		294		—		—		294
Investment in Cyclo Therapeutics Inc. - Common Stock		3,898		—		—		3,898
Investment in Cyclo Therapeutics Inc. - Warrants		865		—		—		865
Hedge funds		—		—		4,984		4,984
Convertible note receivable, related party		—		—		1,921		1,921
Total	$	16,332	$	46,439	$	6,905	$	69,676

As of July 31, 2024 and July 31, 2023, the Company did not have any liabilities measured at fair value on a recurring basis.

The following table summarizes the changes in the fair value of the assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3):

	Year Ended July 31,
	2024			2023
	(in thousands)
Balance, beginning of period	$	6,905		$	4,764
Withdrawal from Hedge Fund Investments		(2,500	)		—
Unrealized gain on Hedge Fund		63			220
Investment in Cyclo Warrants		1,338			—
Unrealized loss on Cyclo Warrants		(74	)		—
Funding of Convertible note receivable, related party		—			2,000
Unrealized gain on Convertible note receivable, related party		742			—
Realized loss on Convertible note receivable, related party released from AOCI		(663	)		—
Conversion of convertible note receivable, related party		(2,000	)		—
Funding of Convertible note receivable		1,000			—
Change in fair value of Convertible note receivable		146			—
Funding of Cyclo Convertible Note I		2,000			—
Funding of Cyclo Convertible Note II		2,000			—
Unrealized gain on issuance of Cyclo Convertible Note I		665			—
Unrealized gain on issuance of Cyclo Convertible Note II		648			—
Change in fair value of Cyclo Convertible Notes		(122	)		—
Total loss included in other comprehensive loss		—			(79	)
Balance, end of period	$	10,148		$	6,905

Hedge funds classified as Level 3 include investments and securities which may not be based on readily observable data inputs. The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. The fair value of these assets is estimated based on information provided by the fund managers or the general partners. Therefore, these assets are classified as Level 3. During the year ended July 31, 2024, the Company requested a withdrawal from Hedge Fund Investments of $2.5 million. The withdrawal was funded during the three months ended January 31, 2024.

Available-for-sale securities classified as Level 3 include a convertible note receivable, related party (see Note 8) which may not be based on readily observable data inputs. The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. The fair value of this asset is estimated using a scenario-based analysis based on the probability-weighted present value of future investment returns, considering each of the possible outcomes available to us, including cash repayment, equity conversion, and collateral transfer scenarios. Estimating the fair value of the convertible note requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. Therefore, this asset is classified as Level 3.

The Company recognizes the fair value of the Cyclo Warrants utilizing a Black-Scholes option pricing valuation model (“Black-Scholes model”) at acquisition and each reporting date. The application of the Black-Scholes model utilizes significant assumptions, including expected volatility, expected life, marketability discount 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 Cyclo’s publicly-traded warrants. As a result of the unobservable inputs that were used to determine the expected volatility of the Cyclo Warrants, the fair value measurement of these warrants reflected a Level 3 measurement within the fair value measurement hierarchy. 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.‌ The expected volatility is a key assumption or input to the valuation of the Cyclo Warrants; however, changes in the expected volatility assumption will have less of an effect on the Black-Scholes model valuation as the Cyclo Warrants approach their expiration. The Cyclo Warrants are subject to limits on exercise and any sales of the underlying shares of common stock would be subject to volume restrictions 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.

Below are the unobservable inputs to the Cyclo Warrants which reflect a Level 3 measurement within the fair value measurement hierarchy as of July 31, 2024:

Unobservable Input	Range		Weighted Average
Price Per Share [1]	$	0.7-$0.74	$	0.72
Exercise Price	$	0.95 - $1.25	$	1.13
Expected Volatility		85% - 104%		96.2	%
Risk - Free Rate [2]		4.0%-4.1%		4.04	%
Marketability Discount		38%-41%		55.0	%
Remaining Term (Years)		3.2 - 6.0		4.9
Fair Value per Warrant [3]	$	0.19	$	0.19

^[1] Closing price of Cyclo’s common shares adjusted to reflect regulatory resale restrictions which ranged from 40.0% to 50.0%.

^[2] US Treasury rate for a period commensurate with the Remaining Term.

^[3] Concluded fair value per warrant as of July 31, 2024.

The Company used a scenario-based analysis to estimate the fair value of the Cyclo Convertible Notes based on the probability-weighted present value of future investment returns, considering each of the possible outcomes available to the Company, including cash repayment and equity conversion. Estimating the fair values of the Cyclo Convertible Notes requires the development of significant and subjective estimates that may, and are likely to, change over the duration of the instrument with related changes in internal and external market factors. The four scenarios included maturity, a subsequent financing, a change in control, and an event of default, whereby total probability of one-hundred percent (100%) is allocated across the four scenarios, at issuance and each subsequent reporting period. With respect to the scenario reflecting maturity of the Cyclo Convertible Notes, the associated volatility assumption reflects voluntary conversion of the Cyclo Convertible Notes prior to their respective maturities. The Company used scenario-based analyses at June 11, 2024, July 16, 2024, and July 31, 2024 to determine the issuance date and period-end fair values of the Cyclo Convertible Note I and Cyclo Convertible Note II, respectively, with the following inputs:

	Convertible Note I						Convertible Note II
Input	Issuance at June 11, 2024			Remeasured at July 31, 2024			Issuance at July 16, 2024			Remeasured at July 31, 2024
Discount factor		0.927 - 0.932			0.95 - 0.955			0.942			0.955
Conversion price	$	0.95		$	0.95		$	0.95		$	0.95
Dividend		0	%		0	%		0	%		0	%
Risk free rate		5.29% - 5.30	%		5.24% - 5.26	%		5.25	%		5.26	%
Stock price	$	1.24		$	1.19		$	1.22		$	1.19
Term		0.39 - 0.42 years			0.28 - 0.25 years			0.30 years			0.25 years
Equity volatility		61.0% - 73.0	%		59.0% - 67.0	%		65.0	%		59.0	%
Black-Scholes Merton Call Value	$	0.22 - $0.39		$	0.15 - $0.31		$	0.19- $0.33		$	0.15 - $0.29

The Company holds $0 and $65 thousand as of July 31, 2024 and July 31, 2023, respectively, in investments in securities in another entity that are not liquid, which were included in Investments - Other Pharmaceuticals in the accompanying consolidated balance sheets. The investment was liquidated during the year ended July 31, 2024. The investment was accounted for under ASC 321, Investments - Equity Securities, using the measurement alternative as defined within the guidance.

Fair Value of Other Financial Instruments

The estimated fair value of the Company’s other financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting these data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

The Company’s financial instruments include trade accounts receivable, trade accounts payable, and due from related parties. The recorded carrying amounts of accounts receivable, accounts payable and due to related parties approximate their fair value due to their short-term nature.