top of page

Rafael Holdings and Qualtrics International

Hudson Labs Red Flags - Dirty Laundry

Welcome to our weekly reports featuring impactful and unusual disclosures as extracted by Hudson Labs' algorithms.

Filings from the week of October 18-22, 2021


Top Red Flags from last week:

VINCO VENTURES INC (BBIG) On October 19, Vinco announced a slew of resignations, including the resignation of their CEO, Christopher Ferguson, their CFO and Treasurer, Brett Vroman, as well as four directors, Louis Foreman, Frank Jennings, Mary Ann Halford and Kevin J. O’Donnell. This follows the resignation of their Chief Strategy Officer, Brain McFadden, on October 6. The CFO and CSO are joining a subsidiary, Cryptyde.

EQUITABLE HOLDINGS INC (EQH) and ALLIANCEBERNSTEIN HOLDING LP ($AB) Mr. Ramon de Oliveira resigned from the board of both companies, with each filing 8-Ks citing “communications that were inconsistent with the Company’s standards”.

ENJOY TECHNOLOGY INCDE (ENJY) dismissed their auditors WithumSmith+Brown, who for fiscal 2020 identified a material misstatement, resulting in the restatement of accounting for warrants. Enjoy has appointed PWC as their new auditors.

AMERICAN EXPRESS CO (AXP) American Express included a $37M partial recovery of a prior period $53M customer write-off due to client bankruptcy in their current quarter results.



10-K | Market cap: $600M

Days after this report went to our institutional investors, Rafael’s stock price dropped from $30 to $8 overnight. Check out our newsletter for more on what happened after the report.

In their summary of key risks, Rafeal notes that they are heavily dependent on the success of Rafeal Parmaceutical’s CPI-613 product [1]. Later in their filing, they indicate that significant milestones (including completing an initial trial of, and filing an application with the FDA for, CPI-613) are not yet considered probable [2].

In fiscal 2020, the company made a $4M equity investment acquiring a 33.3% interest in Altira that was deemed to be fully impaired at year-end (July 31, 2020) [3]. The company made an additional $7M asset investment for another 33.3% of Altira in fiscal 2021 (December 2020), which was deemed to be fully impaired as at July 31, 2021 [4].

The initial investment has $6M in contingent consideration provisions not yet recognized as milestones (for CPI-613) are not considered probable [2].

65% of revenues ($2.10M out of $3.91M total revenues) are from related party rent, an increase from 52% in the prior year [5].

78% of the company’s accounts receivable balance is due to two customers [5].

  1. “We depend heavily on the future success of Rafael Pharmaceuticals’ lead product candidate (CPI-613® (devimistat)). Clinical trials of the product candidate may not be successful. If Rafael Pharmaceuticals is unable to gain regulatory approval or commercialize its product candidates or experience significant delays in doing so, our business will be materially harmed.”

  2. “...3) $3,000,000 due within fifteen (15) days of interim data analysis in Rafael Pharmaceutical’s Phase 3 pivotal trial (AVENGER 500®) of CPI-613® (devimistat); and 4) $3,000,000 which is due within one-hundred and twenty (120) days from the date that Rafael Pharmaceuticals files a new drug application with the U.S. Food and Drug Administration for approval of devimistat (CPI-613) as a first in-line therapy for pancreatic cancer, as defined in the Purchase Agreement.”... “The contingent consideration, as described within the Purchase Agreement, in the amount of $6,000,000, will be recognized when the payments are considered probable.”

  3. The Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) on May 13, 2020 with a member (the “First Seller”) of Altira Capital & Consulting, LLC (“Altira”). Pursuant to the Purchase Agreement, on May 13, 2020…”... “The Company recorded an impairment charge of $4,000,000, which was the total amount of the Company’s investment recognized for the Purchase Agreement as of July 31, 2020.”

  4. “The Company recorded an impairment charge of $7,000,000, which was the total amount of the Company’s investment recognized for the Second Altira Agreement as of July 31, 2021.”

  5. “For the year ended July 31, 2021, related parties represented 65% of the Company’s revenue, and as of July 31, 2021, two customers represented 45% and 33% of the Company’s accounts receivable balance, respectively. For the year ended July 31, 2020, related parties represented 52% of the Company’s revenue, and as of July 31, 2020, three customers represented 11%, 10%, and 10% of the Company’s accounts receivable balance, respectively.”



10-Q | Market cap: $23B

The company highlights a 47% revenue growth in the earning release. Not highlighted are increases of 290% and 57% in General and Administrative and Sales and Marketing expenses, respectively.

Qualtrics went public via IPO in January 2021, however SAP continues to own over 50% of total voting power. The company has perpetual, unfavorable contracts with SAP, including providing a irrevocable, royalty-free license to all of the company’s patents and certain other IP, and requiring the company to cover costs of certain government investigations [1].

In October 2021, the company completed its acquisition of Clarabridge for aggregate consideration of $1.125B [2]. This acquisition changes the company’s US tax status: deferred tax assets and valuation allowances are expected to decrease starting in Q4 [3].

  1. “SAP owns more than 50% of the total voting power of our common shares and we are a “controlled company” within the meaning of the corporate governance rules of Nasdaq.”... “The agreements were not negotiated at arm’s length and contain terms that we would not have agreed to with an independent third party. For example, we are providing SAP an irrevocable, royalty-free license to all of our patents and certain other intellectual property that will remain in place perpetually, even after SAP is no longer a majority shareholder. As another example, SAP does not give us the ability to control the investigation, negotiation, and settlement of certain government investigations but requires us to pay for all expenses associated therewith.“

  2. “Pursuant to the terms of the Merger Agreement, all outstanding shares of Clarabridge capital stock were cancelled in exchange for aggregate consideration of $1.125 billion, subject to certain adjustments, in the form of shares of Class A common stock of the Company and cash, as provided by the Merger Agreement. “

  3. “As a result of the acquisition of Clarabridge, Inc. (“Clarabridge”) on October 1, 2021, ..., SAP America, Inc. (“SAP America”) no longer holds 80% of the value of our outstanding stock, and as such, the Company will no longer be a member of SAP America’s consolidated group for U.S. federal income tax purposes (the “U.S. Consolidated Group”), as of October 1, 2021.”


Hudson Labs is software that extracts red flags for all SEC filers and predicts crisis in real-time. Protect your portfolio.


bottom of page