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Fair Value Measurements | 3 Months Ended
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Oct. 31, 2023
Fair Value Measurements [Abstract] |
FAIR VALUE MEASUREMENTS | NOTE 11 – 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 following is a listing of 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 October 31, 2023 and July 31, 2023:
|  | October 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  | (in thousands) |
Available-for-sale securities - Corporate Bonds |  | $ | — |  |  | $ | 46,476 |  |  | $ | — |  |  | $ | 46,476 |
Available-for-sale securities - U.S. Treasury Bills |  |  | 12,418 |  |  |  | — |  |  |  | — |  |  |  | 12,418 |
Investment in Cyclo Therapeutics Inc. - Common Stock |  |  | 8,759 |  |  |  | — |  |  |  | — |  |  |  | 8,759 |
Investment in Cyclo Therapeutics Inc. - Warrants |  |  | — |  |  |  | — |  |  |  | 1,090 |  |  |  | 1,090 |
Hedge funds |  |  | — |  |  |  | — |  |  |  | 2,318 |  |  |  | 2,318 |
Convertible note receivable, related party |  |  | — |  |  |  | — |  |  |  | 1,858 |  |  |  | 1,858 |
Total |  | $ | 21,177 |  |  | $ | 46,476 |  |  | $ | 5,266 |  |  | $ | 72,919 |
|  | July 31, 2023 |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Total |
Assets: |  | (in thousands) |
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 October 31, 2023 and 2022, 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):
|  | Three Months Ended October 31, |
|  | 2023 |  |  | 2022 |
|  | (in thousands) |
Balance, beginning of period |  | $ | 6,905 |  |  | $ | 4,764 |
Withdrawal from Hedge Fund Investments |  |  | (2,500 | ) |  |  | — |
Unrealized loss on Hedge Fund |  |  | (166 | ) |  |  | (127 | )
Investment in Cyclo Warrants |  |  | 1,338 |  |  |  | — |
Unrealized loss on Cyclo Warrants |  |  | (248 | ) |  |  |  |
Unrealized loss on Convertible Note Receivable, Related Party |  |  | (63 | ) |  |  | — |
Balance, end of period |  | $ | 5,266 |  |  | $ | 4,637 |
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 three months ended October 31, 2023, the Company requested a withdrawal from Hedge Fund Investments of $2.5 million. The withdrawal was not yet funded at October 31, 2023 and is included in Prepaid expenses and other current assets in the accompanying consolidated balance sheets. Available-for-sale securities classified as Level 3 include a convertible note receivable, related party (see Note 5) 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 investments 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 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. 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. Both of 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 October 31, 2023:
Unobservable Input |  | Range |  | Weighted Average
Price Per Share [1] |  | $0.49 - $0.58 |  | $0.54
Exercise Price |  | $0.95 - $1.25 |  | $1.10
Expected Volatility |  | 82.2% - 85.5% |  | 84.0%
Risk - Free Rate [2] |  | 4.90% |  | 4.90%
Marketability Discount |  | 45.0% - 50.0% |  | 48.0%
Remaining Term |  | 3.97 to 6.75 years |  | 5.36 years
Fair Value per Warrant [3] |  | $0.15 - $0.18 |  | $0.17
[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 October 31, 2023
The Company holds $0.0 and $65 thousand as of October 31, 2023 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 is 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.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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