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Investment in Day Three Labs Inc. | 3 Months Ended
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Oct. 31, 2023
Investment in Day Three Labs Inc. [Abstract] |
INVESTMENT IN DAY THREE LABS INC. | NOTE 8 – INVESTMENT IN DAY THREE LABS INC. 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 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 in the cannabis industry. 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 (33.333% 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 the filing date of this report, the Company had not exercised the warrant. The Company has accounted for this investment as an equity method investment in accordance with the guidance in ASC 323, Investments – Equity Method and Joint Ventures. The Company determined that a 38% ownership interest in Day Three and its right to designate two members of the Board of Directors of Day Three (out of a current total of seven members) indicates that the Company is able to exercise significant influence. Upon exercise of the warrant, the Company will have the right to appoint a third member of the Day Three Board of Directors. The Company has determined that Day Three is a VIE; however, the Company is not the primary beneficiary as it does not have the power to direct the activities that most significantly impact Day Three’s economic performance. The Company has therefore concluded it is not required to consolidate Day Three. The Company uses the equity method of accounting to record its investment in Day Three. Day Three’s fiscal year ends on December 31, and as a result, the Company will recognize its share of Day Three’s earnings/loss on a one-month lag. For the three months ended October 31, 2023, the Company recognized approximately $216 thousand of equity in loss of Day Three, based on its proportionate share of Day Three’s results through September 30, 2023. The assets and operations of Day Three are not significant to the Company's assets or operations. On October 10, 2023, the Company entered into a Promissory Note (the "Day Three Note") with Day Three for $250,000. The Day Three Note accrues interest at 5.01% per annum and matures on January 8, 2024. The principal balance of $250,000 is included in Prepaid expenses and other current assets at October 31, 2023. Subsequent to quarter end, on November 30, 2023, the Company advanced another $150,000 to Day Three pursuant to a second Promissory Note (the "Day Three Note II") made by Day Three. The Day Three Note II accrues interest at 5.17% per annum and matures on January 8, 2024.

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