UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549FORM 10-Q

 

 

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FORM 10-Q

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JANUARYOCTOBER 31, 20182021

or

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-16371

IDT CORPORATION

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware22-3415036

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

520 Broad Street, Newark, New Jersey07102
(Address of principal executive offices)(Zip Code)

(973)438-1000

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each className of each exchange on which registered
Class B common stock, par value $.01 per shareNew York Stock Exchange

Trading symbol: IDT

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐  (Do not check if a smaller reporting company)Smaller reporting company☐
Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒

As of MarchDecember 8, 2018,2021, the registrant had the following shares outstanding:

Class A common stock, $.01 par value: 1,574,326 shares outstanding (excluding 1,698,000 treasury shares)
Class B common stock, $.01 par value: 23,279,95324,187,548 shares outstanding (excluding 2,302,0952,192,276 treasury shares)

 

 

 

 

 

IDT CORPORATION

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION1
Item 1.Financial Statements (Unaudited)1
Consolidated Balance Sheets1
Consolidated Statements of Operations2
Consolidated Statements of Comprehensive Income (Loss)3
 
 Item 1.Financial Statements (Unaudited)3
Consolidated Balance Sheets3
Consolidated Statements of Cash FlowsOperations4
 
 Notes to Consolidated Financial Statements of Comprehensive (Loss) Income5
 
Consolidated Statements of Equity6
Consolidated Statements of Cash Flows7
Notes to Consolidated Financial Statements8
Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations1922
 
Item 3.Quantitative and Qualitative Disclosures About Market Risks31
 
Item 4.Controls and Procedures31
 Item 4.
PART II.  OTHER INFORMATIONControls and Procedures32
 
Item 1.PART II. OTHER INFORMATIONLegal Proceedings3233
 
Item 1A.Risk Factors32
 Item 1.Legal Proceedings33
Item 1A.Risk Factors33
Item 2.Unregistered Sales of Equity Securities and Use of Proceeds32
Item 3.Defaults Upon Senior Securities32
Item 4.Mine Safety Disclosures32
Item 5.Other Information32
Item 6.Exhibits33
 
Item 3.Defaults Upon Senior Securities33
Item 4.Mine Safety Disclosures33
Item 5.Other Information33
Item 6.Exhibits33
SIGNATURES34

2

 

PART I. FINANCIAL INFORMATION

 

Item 1.Financial Statements (Unaudited)

IDT CORPORATION

CONSOLIDATED BALANCE SHEETS

  

October 31, 2021

  

July 31, 2021

 
  (Unaudited)  (Note 1) 
    (in thousands) 
Assets        
Current assets:        
Cash and cash equivalents $114,543  $107,147 
Restricted cash and cash equivalents  107,317   119,769 
Debt securities  13,633   14,012 
Equity investments  31,144   42,434 
Trade accounts receivable, net of allowance for doubtful accounts of $4,810 at October 31, 2021 and $4,438 at July 31, 2021  51,263   46,644 
Disbursement prefunding  23,969   27,656 
Prepaid expenses  17,130   13,694 
Other current assets  26,491   16,779 
Total current assets  385,490   388,135 
Property, plant, and equipment, net  30,870   30,829 
Goodwill  14,798   14,897 
Other intangibles, net  7,312   7,578 
Equity investments  9,487   11,654 
Operating lease right-of-use assets  7,768   7,671 
Deferred income tax assets, net  41,686   41,502 
Other assets  10,318   10,389 
Total assets $507,729  $512,655 
Liabilities and equity        
Current liabilities:        
Trade accounts payable $31,615  $24,502 
Accrued expenses  120,440   129,085 
Deferred revenue  41,299   42,293 
Customer deposits  100,342   115,524 
Other current liabilities  32,223   27,930 
Total current liabilities  325,919   339,334 
Operating lease liabilities  5,533   5,473 
Other liabilities  975   1,234 
Total liabilities  332,427   346,041 
Commitments and contingencies      - 
Redeemable noncontrolling interest  10,010   — 
Equity:        
IDT Corporation stockholders’ equity:        
Preferred stock, $.01 par value; authorized shares—10,000; 0 shares issued  —   — 
Class A common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and 1,574 shares outstanding at October 31, 2021 and July 31, 2021  33   33 
Class B common stock, $.01 par value; authorized shares—200,000; 26,380 and 26,379 shares issued and 24,188 and 24,187 shares outstanding at October 31, 2021 and July 31, 2021, respectively  264   264 
Common stock, value        
Additional paid-in capital  278,306   278,021 
Treasury stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 2,192 and 2,192 shares of Class B common stock at October 31, 2021 and July 31, 2021, respectively  (60,439)  (60,413)
Accumulated other comprehensive loss  (9,226)  (10,183)
Accumulated deficit  (45,336)  (42,858)
Total IDT Corporation stockholders’ equity  163,602   164,864 
Noncontrolling interests  1,690   1,750 
Total equity  165,292   166,614 
Total liabilities and equity $507,729  $512,655 

See accompanying notes to consolidated financial statements.

3

IDT CORPORATION

 

  January 31,
2018		  July 31,
2017		 
  (Unaudited)  (Note 1) 
  (in thousands) 
Assets      
Current assets:      
Cash and cash equivalents $54,055  $90,344 
Marketable securities  46,202   58,272 
Trade accounts receivable, net of allowance for doubtful accounts of $2,642 at January 31, 2018 and $2,657 at July 31, 2017  71,652   64,979 
Prepaid expenses  15,915   14,506 
Other current assets  30,733   18,749 
Assets held for sale  138,700   124,267 
Total current assets  357,257   371,117 
Property, plant and equipment, net  88,621   88,994 
Goodwill  11,447   11,326 
Investments  24,350   26,894 
Deferred income tax assets, net  8,653   11,841 
Other assets  8,616   3,657 
Assets held for sale  5,285   5,134 
Total assets $504,229  $518,963 
Liabilities and equity        
Current liabilities:        
Trade accounts payable $37,071  $40,989 
Accrued expenses  113,154   125,359 
Deferred revenue  71,789   76,451 
Other current liabilities  4,683   4,659 
Liabilities held for sale  129,423   115,318 
Total current liabilities  356,120   362,776 
Other liabilities  1,107   1,080 
Liabilities held for sale  642   550 
Total liabilities  357,869   364,406 
Commitments and contingencies        
Equity:        
IDT Corporation stockholders’ equity:        
Preferred stock, $.01 par value; authorized shares—10,000; no shares issued  —   — 
Class A common stock, $.01 par value; authorized shares—35,000; 3,272 shares issued and 1,574 shares outstanding at January 31, 2018 and July 31, 2017  33   33 
Class B common stock, $.01 par value; authorized shares—200,000; 25,582 and 25,561 shares issued and 23,280 and 23,264 shares outstanding at January 31, 2018 and July 31, 2017, respectively  256   256 
Additional paid-in capital  396,259   394,462 
Treasury stock, at cost, consisting of 1,698 and 1,698 shares of Class A common stock and 2,302 and 2,297 shares of Class B common stock at January 31, 2018 and July 31, 2017, respectively  (83,365)  (83,304)
Accumulated other comprehensive loss  (2,531)  (2,343)
Accumulated deficit  (173,386)  (163,370)
Total IDT Corporation stockholders’ equity  137,266   145,734 
Noncontrolling interests  9,094   8,823 
Total equity  146,360   154,557 
Total liabilities and equity $504,229  $518,963 

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

  

2021

  

2020

 
  

Three Months Ended

October 31,

 
  

2021

  

2020

 
  (in thousands, except per share data) 
Revenues $370,083  $343,425 
Costs and expenses:        
Direct cost of revenues (exclusive of depreciation and amortization)  291,625   273,174 
Selling, general and administrative (i)  60,113   52,140 
Depreciation and amortization  4,446   4,493 
Severance  38   113 
Total costs and expenses  356,222   329,920 
Other operating expense, net (see Note 11)  (88)  (252)
Income from operations  13,773   13,253 
Interest income (expense), net  13  (41)
Other expense, net  (16,216)  (1,380)
(Loss) income before income taxes  (2,430)  11,832 
Benefit from (provision for) income taxes  85  (3,417)
Net (loss) income  (2,345)  8,415 
Net income attributable to noncontrolling interests  (133)  (127)
Net (loss) income attributable to IDT Corporation $(2,478) $8,288 
(Loss) earnings per share attributable to IDT Corporation common stockholders:        
Basic $(0.10) $0.32 
Diluted $(0.10) $0.32 
         
Weighted-average number of shares used in calculation of (loss) earnings per share:        
Basic  25,566   25,534 
Diluted  25,566   25,861 

         
(i)Stock-based compensation included in selling, general and administrative expenses $285  $506 

See accompanying notes to consolidated financial statements.

1

 


IDT CORPORATION

 

CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)COMPREHENSIVE (LOSS) INCOME

  

Three Months Ended
January 31,

  

Six Months Ended
January 31,

 
   2018  2017   2018  2017 
  (in thousands, except per share data) 
    
Revenues $395,883  $367,556  $789,438  $736,707 
Costs and expenses:                
Direct cost of revenues (exclusive of depreciation and amortization)  337,229   310,913   673,738   623,941 
Selling, general and administrative (i)  52,358   47,325   102,429   92,763 
Depreciation and amortization  5,735   5,301   11,408   10,601 
Severance  195   —   635   — 
Total costs and expenses  395,517   363,539   788,210   727,305 
Other operating expense  (846)  (889)  (1,625)  (1,088)
(Loss) income from operations  (480)  3,128   (397)  8,314 
Interest income, net  286   309   648   609 
Other income (expense), net  370   (419)  (456)  1,974 
Income (loss) before income taxes  176   3,018   (205)  10,897 
Benefit from (provision for) income taxes  1,514   (1,761)  99   12,655 
Net income (loss)  1,690   1,257   (106)  23,552 
Net income attributable to noncontrolling interests  (174)  (382)  (470)  (758)
Net income (loss) attributable to IDT Corporation $1,516  $875  $(576) $22,794 
                 
Earnings (loss) per share attributable to IDT Corporation common stockholders:                
Basic $0.06  $0.04  $(0.02) $1.00 
Diluted $0.06  $0.04  $(0.02) $0.99 
Weighted-average number of shares used in calculation of earnings (loss) per share:                
Basic  24,643   22,768   24,635   22,740 
Diluted  24,724   22,963   24,635   22,931 
                 
Dividends declared per common share $0.19  $0.19  $0.38  $0.38 
                 
(i) Stock-based compensation included in selling, general and administrative expenses $987  $1,426  $1,797  $2,128 

(Unaudited)

  2021  

2020

 
  

Three Months Ended

October 31,

 
  2021  

2020

 
  (in thousands) 
Net (loss) income $(2,345) $8,415 
Other comprehensive (loss) income:        
Change in unrealized gain on available-for-sale securities  (111)  (29)
Foreign currency translation adjustments  1,068   251 
Other comprehensive income  957   222 
Comprehensive (loss) income  (1,388)  8,637 
Comprehensive income attributable to noncontrolling interests  (133)  (127)
Comprehensive (loss) income attributable to IDT Corporation $(1,521) $8,510 

See accompanying notes to consolidated financial statements.

 

2

5

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)EQUITY (Unaudited)

  Class A  Class B  Capital  Treasury  Comprehensive  Deficit  Interests  Total 
  

Three Months Ended October 31, 2021

(in thousands)

 
  IDT Corporation Stockholders       
  Class A Common Stock  Class B Common Stock  Additional Paid-In Capital  Treasury Stock  Accumulated Other Comprehensive Loss  Accumulated Deficit  Noncontrolling Interests  Total Equity 
BALANCE AT JULY 31, 2021 $33  $264  $278,021  $(60,413) $(10,183) $(42,858) $1,750  $166,614 
Restricted Class B common stock purchased from employee  —   —   —  (26)   —   —   —  (26)
Exercise of stock options                                
Repurchases of Class B common stock through repurchase program                                
Stock-based compensation  —   —   285   —   —   —   —   285 
Distributions to noncontrolling interests  —   —   —   —   —   —   (183)  (183)
Other comprehensive income  —   —   —   —   957   —   —   957 
Net loss  —   —   —   —   —   (2,478)  123   (2,355)
BALANCE AT OCTOBER 31, 2021 $33  $264  $278,306  $(60,439

) 

 $(9,226) $(45,336) $1,690  $165,292 

 

  

Three Months Ended October 31, 2020

(in thousands)

 
  IDT Corporation Stockholders       
  Class A Common Stock  Class B Common Stock  Additional Paid-In Capital  Treasury Stock  Accumulated Other Comprehensive Loss  Accumulated Deficit  Noncontrolling Interests  Total Equity 
BALANCE AT JULY 31, 2020 $33  $260  $277,443  $(56,221) $(7,410) $(139,333) $(3,633) $71,139 
BALANCE $33  $260  $277,443  $(56,221) $(7,410) $(139,333) $(3,633) $71,139 
Exercise of stock options  —   —   185   —   —   —   —   185 
Repurchases of Class B common stock through repurchase program  —   —   —   (2,849)  —   —   —   (2,849)
Restricted Class B common stock purchased from employees  —   —   —   (7)  —   —   —   (7)
Stock-based compensation  —   —   506   —   —   —   —   506 
Distributions to noncontrolling interests  —   —   —   —   —   —   (28)  (28)
Other comprehensive income  —   —   —   —   222   —   —   222 
Net income  —   —   —   —   —   8,288   127   8,415 
Net (loss) income  —   —   —   —   —   8,288   127   8,415 
BALANCE AT OCTOBER 31, 2020 $33  $260  $278,134  $(59,077) $(7,188) $(131,045) $(3,534) $77,583 
BALANCE $33  $260  $278,134  $(59,077) $(7,188) $(131,045) $(3,534) $77,583 

(Unaudited)

  

Three Months Ended
January 31,

  

Six Months Ended
January 31,

 
  

2018

  

2017

  

2018

  

2017

 
  (in thousands) 
Net income (loss) $1,690  $1,257  $(106) $23,552 
Other comprehensive income (loss):                
Change in unrealized loss on available-for-sale securities  (120)  (40)  (150)  (63)
Foreign currency translation adjustments  330   459   (38)  (2,403)
Other comprehensive income (loss)  210   419   (188)  (2,466)
Comprehensive income (loss)  1,900   1,676   (294)  21,086 
Comprehensive income attributable to noncontrolling interests  (174)  (382)  (470)  (758)
Comprehensive income (loss) attributable to IDT Corporation $1,726  $1,294  $(764) $20,328 

See accompanying notes to consolidated financial statements.


3

6

 

IDT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

  

Six Months Ended
January 31,

 
  

2018

  

2017

 
  (in thousands) 
Operating activities      
Net (loss) income $(106) $23,552 
Adjustments to reconcile net (loss) income to net cash used in operating activities:        
Depreciation and amortization  11,408   10,601 
Deferred income taxes  3,212   (12,868)
Provision for doubtful accounts receivable  696   126 
Realized loss (gain) on marketable securities  9   (305)
Interest in the equity of investments  (77)  (295)
Stock-based compensation  1,797   2,128 
Change in assets and liabilities:        
Restricted cash and cash equivalents  (3,663)  4,098 
Trade accounts receivable  (4,568)  (8,189)
Prepaid expenses, other current assets and other assets  (15,109)  (1,432)
Trade accounts payable, accrued expenses, other current liabilities and other liabilities  (20,344)  (15,010)
Customer deposits  4,481   (1,177)
Deferred revenue  (4,710)  (2,043)
Net cash used in operating activities  (26,974)  (814)
Investing activities        
Capital expenditures  (10,931)  (10,543)
Proceeds from sale of interest in Straight Path IP Group Holding, Inc.  6,000   — 
Purchase of IP Interest from Straight Path Communications Inc.  (6,000)  — 
Payment for acquisition, net of cash acquired  —   (1,827)
Cash used for investments  —   (8,304)
Purchases of marketable securities  (19,797)  (17,209)
Proceeds from maturities and sales of marketable securities  31,610   16,848 
Net cash provided by (used in) investing activities  882   (21,035)
Financing activities        
Dividends paid  (9,440)  (8,765)
Distributions to noncontrolling interests  (717)  (817)
Proceeds from borrowings under revolving credit facility  19,080   — 
Repayments of borrowings under revolving credit facility  (19,080)  — 
Proceeds from exercise of stock options  —   835 
Proceeds from sale of member interests in CS Pharma Holdings, LLC.  —   1,250 
Repurchases of Class B common stock  (61)  (1,838)
Net cash used in financing activities  (10,218)  (9,335)
Effect of exchange rate changes on cash and cash equivalents  592   (829)
Net decrease in cash and cash equivalents  (35,718)  (32,013)
Cash and cash equivalents at beginning of period, including $5,716 held for sale at July 31, 2017  96,060   109,537 
Cash and cash equivalents at end of period, including $6,287 held for sale at January 31, 2018 $60,342  $77,524 
Supplemental schedule of non-cash investing and financing activities        
Reclassification of liability for member interests in CS Pharma Holdings, LLC $—  $8,750 
  

2021

  

2020

 
  

Three Months Ended

October 31,

 
  

2021

  

2020

 
  (in thousands) 
Operating activities        
Net (loss) income $(2,345) $8,415 
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:        
Depreciation and amortization  4,446   4,493 
Deferred income taxes  (413)  3,104 
Provision for doubtful accounts receivable  716   579 
Net unrealized loss from marketable securities  

13,386

   17 
Stock-based compensation  285   506 
Other  1,718   1,077 
Changes in assets and liabilities:        
Trade accounts receivable  (5,638)  (4,020)
Disbursement prefunding, prepaid expenses, other current assets, and other assets  (7,563)  7,318 
Trade accounts payable, accrued expenses, other current liabilities, and other liabilities  3,265  (2,023)
Customer deposits at IDT Financial Services Limited (Gibraltar-based bank)  (13,069)  (549)
Deferred revenue  (641)  (150)
Net cash (used in) provided by operating activities  (5,853)  18,767 
Investing activities        
Capital expenditures  (4,353)  (4,564)
Purchase of convertible preferred stock in equity method investment  

(1,051

)  

—

 
Purchases of debt securities and equity investments  (6,260)  (29,295)
Proceeds from maturities and sales of debt securities and redemption of equity investments  3,867   6,596 
Net cash used in investing activities  (7,797)  (27,263)
Financing activities        
Distributions to noncontrolling interests  (183)  (28)
Proceeds from other liabilities  

2,302

   

—

 
Repayment of other liabilities  (1,242)  (40)
Proceeds from sale of redeemable equity in subsidiary  10,000   — 
Proceeds from exercise of stock options  —   185 
Repurchases of Class B common stock  (26)  (2,856)
Net cash provided by (used in) financing activities  10,851  (2,739)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents  (2,257)  (1,859)
Net decrease in cash, cash equivalents, and restricted cash and cash equivalents  (5,056)  (13,094)
Cash, cash equivalents, and restricted cash and cash equivalents at beginning of period  226,916   201,222 
Cash, cash equivalents, and restricted cash and cash equivalents at end of period $221,860  $188,128 

See accompanying notes to consolidated financial statements.

4

7

 

IDT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

(Unaudited)

Note 1—Basis of Presentation

The accompanying unaudited consolidated financial statements of IDT Corporation and its subsidiaries (the “Company” or “IDT”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotesnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and six months ended JanuaryOctober 31, 20182021 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2018.2022. The balance sheet at July 31, 20172021 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotesnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2017,2021, as filed with the U.S. Securities and Exchange Commission (“SEC”(the “SEC”).

The Company’s fiscal year ends on July 31 of each calendar year. Each reference below to a fiscal year refers to the fiscal year ending in the calendar year indicated (e.g., fiscal 20182022 refers to the fiscal year ending July 31, 2018)2022).

Note 2— IDT Financial Services Holding Limited AssetsBusiness Segment Information

The Company has 3 reportable business segments, Fintech, net2phone-Unified Communications as a Service (“UCaaS”), and Liabilities Held for Sale

On June 22, 2017,Traditional Communications. The Company’s reportable segments are distinguished by types of service, customers, and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s wholly-owned subsidiary IDT Telecom, Inc.chief operating decision maker. The accounting policies of the segments are the same as the accounting policies of the Company as a whole. There are no significant asymmetrical allocations to segments. The Company evaluates the performance of its business segments based primarily on income (loss) from operations.

  The Fintech segment is comprised of National Retail Solutions (“IDT Telecom”) entered into a Share Purchase Agreement with JAR Fintech Limited (“JAR Fintech”) and JAR Capital Limited to sell the capital stock of IDT Financial Services Holding Limited, a company incorporated under the laws of Gibraltar and a wholly-owned subsidiary of IDT Telecom (“IDTFS Holding”NRS”), an operator of a nationwide point of sale (“POS”) network providing payment processing, digital advertising, transaction data, and ancillary services, and BOSS Revolution Money Transfer, a provider of international money remittance and related value/payment transfer services.

  The net2phone-UCaaS segment is comprised of net2phone’s cloud communications offerings.

  The Traditional Communications segment includes Mobile Top-Up, which enables customers to JAR Fintech. IDTFS Holding istransfer airtime and bundles of airtime, messaging, and data to international and domestic mobile accounts, BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities in the sole shareholderUnited States and Canada, and Carrier Services, a wholesale provider of IDT Financial Services Limited (“IDTFS”), a Gibraltar-based bankinternational voice and e-money issuer, providing prepaid cardSMS termination and outsourced traffic management solutions across the European Economic Area. The Share Purchase Agreement provides for an aggregate purchase priceto telecoms worldwide. Traditional Communications also includes other smaller businesses, many in harvest mode.

Corporate costs include compensation, consulting fees, treasury, tax and accounting services, human resources, corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, business development, charitable contributions, travel, and other corporate-related general and administrative expenses. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

Operating results for the outstanding equity interestsbusiness segments of IDTFS Holdingthe Company were as follows:

Schedule of approximately $4.1 million plus an amount equalOperating Results of Business Segments

(in thousands) Fintech  net2phone-
UCaaS		  Traditional Communications  Corporate  Total 
Three Months Ended October 31, 2021               
Revenues $22,568  $12,913  $334,602  $—  $370,083 
(Loss) income from operations  (45)  (4,198)  20,125   (2,109)  13,773 
                               
Three Months Ended October 31, 2020                    
Revenues $20,087  $9,702  $313,636  $—  $343,425 
Income (loss) from operations  3,136   (3,880)  15,861   (1,864)  13,253 

8

Note 3—Revenue Recognition

The Company earns revenue from contracts with customers, primarily through the provision of retail telecommunications and payment offerings as well as wholesale international voice and SMS termination. BOSS Revolution Money Transfer, NRS, and net2phone-UCaaS are technology-driven, synergistic businesses that leverage the Company’s core assets, and revenue is primarily recognized at a point in time, and in some cases (mainly net2phone-UCaaS) is recognized over time. Traditional Communications are mostly minute-based, paid-voice communications services, and revenue is primarily recognized at a point in time. The Company’s most significant revenue streams are from Mobile Top-Up, BOSS Revolution Calling, and Carrier Services. Mobile Top-Up and BOSS Revolution Calling are sold direct-to-consumers and through distributors and retailers.

Disaggregated Revenues

The following table shows the Company’s revenues disaggregated by business segment and service offered to customers:

Schedule of Revenues Disaggregated by Business Segment and Service Offered to Customers

  

Three Months Ended

October 31,

 
  

2021

  

2020

 
  (in thousands) 
BOSS Revolution Money Transfer $12,496  $15,157 
National Retail Solutions  10,072   4,930 
Total Fintech  22,568   20,087 
net2phone-UCaaS  12,913   9,702 
Mobile Top-Up  128,485   95,835 
BOSS Revolution Calling  105,969   117,350 
Carrier Services  89,195   87,773 
Other  10,953   12,678 
Total Traditional Communications  334,602   313,636 
Total $370,083  $343,425 

The following table shows the Company’s revenues disaggregated by geographic region, which is determined based on selling location. On February 1, 2021, the Company changed the geographic sourcing of certain revenues from the United States to the valueUnited Kingdom.

Schedule of IDTFS’ net assets,Revenues Disaggregated by Geographic Region

(in thousands) Fintech  net2phone-UCaaS  Traditional Communications  Total 
Three Months Ended October 31, 2021            
United States $22,568  $6,824  $238,692  $268,084 
Outside the United States:                
United Kingdom  —   —   81,769   81,769 
Other  —   6,089   14,141   20,230 
Total outside the United States  —   6,089   95,910   101,999 
Total $22,568  $12,913  $334,602  $370,083 

(in thousands) Fintech  net2phone-UCaaS  Traditional Communications  Total 
Three Months Ended October 31, 2020            
United States $20,087  $5,090  $270,623  $295,800 
Outside the United States:                
United Kingdom  —   —   29,421   29,421 
Other  —   4,612   13,592   18,204 
Total outside the United States  —   4,612   43,013   47,625 
Total $20,087  $9,702  $313,636  $343,425 

Remaining Performance Obligations

The Company does not have any significant revenue from performance obligations satisfied or partially satisfied in previous reporting periods. The Company’s remaining performance obligations at October 31, 2021 and July 31, 2021 had an original expected duration of one year or less.

9

Accounts Receivable and Contract Balances

The timing of revenue recognition may differ from the time of billing to be paid at closing, subjectthe Company’s customers. Trade accounts receivable in the Company’s consolidated balance sheets represent unconditional rights to adjustments relating to customer assets of IDTFS. The netconsideration. An entity records a contract asset value of IDTFS was $14.5 million at January 31, 2018. A portionwhen revenue is recognized in advance of the purchase price willentity’s right to bill and receive consideration. The Company has not identified any contract assets.

Contract liabilities arise when the Company receives consideration or bills its customers prior to providing the goods or services promised in the contract. The Company’s contract liability balance is primarily payments received for prepaid BOSS Revolution Calling. Contract liabilities are recognized as revenue when services are provided to the customer. The contract liability balances are presented in the Company’s consolidated balance sheets as “Deferred revenue”.

The following table presents information about the Company’s contract liability balance:

Schedule of Information About Contract Liability Balance

  2021  

2020

 
  

Three Months Ended

October 31,

 
  2021  

2020

 
  (in thousands) 
Revenue recognized in the period from amounts included in the contract liability balance at the beginning of the period $22,456  $23,460 

Deferred Customer Contract Acquisition and Fulfillment Costs

The Company recognizes as an asset its incremental costs of obtaining a contract with a customer that it expects to recover. The Company charges its direct costs to fulfill contracts to expense as incurred. The Company’s incremental costs of obtaining a contract with a customer are sales commissions paid to acquire customers. The Company applies the practical expedient whereby the Company primarily charges these costs to expense when incurred because the amortization period would be placed in escrow at closing and released to IDT Telecom once all ofone year or less for the conditionsasset that would have been met underrecognized from deferring these costs. For net2phone-UCaaS sales, employees and third parties receive commissions on sales to end users. The Company amortizes the Share Purchase Agreement. The saledeferred costs over the expected customer relationship period when it is expected to closeexceed one year.

The Company’s deferred customer contract acquisition costs were as follows:

Schedule of Deferred Customer Contract Acquisition Costs

  

October 31,2021

  

July 31, 2021

 
  (in thousands) 
Deferred customer contract acquisition costs included in “Other current assets” $3,787  $3,460 
Deferred customer contract acquisition costs included in “Other assets”  3,241   3,151 
Total $7,028  $6,611 

  The Company’s amortization of deferred customer contract acquisition costs during the periods were as follows:

Schedule of Amortization of Deferred Customer Contract Acquisition Costs

  

2021

  

2020

 
  

Three Months Ended

October 31,

 
  

2021

  

2020

 
  (in thousands) 
Amortization of deferred customer contract acquisition costs $1,012  $767 

Note 4—Leases

The Company’s leases primarily consist of operating leases for office space. These leases have remaining terms from one to six years. net2phone-UCaaS also has operating leases for office equipment. Certain of these leases contain renewal options that may be exercised and/or options to terminate the lease. The Company has concluded that it is not reasonably certain that it would exercise the options to extend or terminate the leases.

net2phone-UCaaS is the lessee in the second quarter of calendar 2018, subject to regulatory approval and other customary conditions set forth in the Share Purchase Agreement.equipment leases that are classified as finance leases. The remaining closing conditions are outside of the Company’s control and there can be no assurance that the sale will be completed.

The pending disposition of IDTFS Holding did not meet the criteria to be reported as a discontinued operation and accordingly, its results of operations and cash flows have not been reclassified. The IDTFS Holding assets and liabilities held for sale includedrelated to these finance leases are not material to the following:Company’s consolidated balance sheets.

  

January 31,
2018

  

July 31,
2017

 
  (in thousands) 
Current assets held for sale:      
Cash and cash equivalents $6,287  $5,716 
Restricted cash and cash equivalents  128,153   115,609 
Trade accounts receivable, net of allowance for doubtful accounts of $3,239 and $2,550 at January 31, 2018 and July 31, 2017, respectively  2,919   1,844 
Prepaid expenses  854   758 
Other current assets  487   340 
Total current assets held for sale $138,700  $124,267 
         
Noncurrent assets held for sale:        
Property, plant and equipment, net $19  $24 
Other intangibles, net  164   165 
Other assets  5,102   4,945 
Total noncurrent assets held for sale $5,285  $5,134 
         
Current liabilities held for sale:        
Trade accounts payable $2,007  $372 
Accrued expenses  252   226 
Customer deposits  127,107   114,689 
Other current liabilities  57   31 
Total current liabilities held for sale $129,423  $115,318 
         
Noncurrent liabilities held for sale:        
Other liabilities $642  $550 
Total noncurrent liabilities held for sale $642  $550 

5

10

 

IDTFS Holding is included in the Telecom Platform Services segment. IDTFS Holding’s (loss) income before income taxesThe Company leases office and (loss) income before income taxes attributable to the Company, which is included in the accompanying consolidated statements of operations, were as follows:

  

Three Months Ended
January 31,

  

Six Months Ended
January 31,

 
  

2018

  

2017

  

2018

  

2017

 
  (in thousands) 
(Loss) income before income taxes $(559) $(421) $(1,009) $174 
                 
(Loss) income before income taxes attributable to IDT Corporation $(559) $(421) $(1,009) $174 

Note 3—Spin-Off ofparking space from Rafael Holdings, Inc. (“Rafael”) in a building and Investmentparking garage located at 520 Broad Street, Newark, New Jersey. The Company also leases office space in Rafael Pharmaceuticals, Inc.

On or about March 26, 2018,Israel from Rafael. Howard S. Jonas, the Company expects to spin-off its subsidiary, Rafael Holdings, Inc. (“RHI”), to the Company’s stockholders, so that RHI will be a separate publicly traded company. ApprovalChairman of the spin-off by the Company’s stockholders is not required. The Company’s Board of Directors, believes thatis also the spin-off will allow RHI to better focus on its strategic mission and that its potential can be better realized as an independent entity. The spin-off of RHI will occur by way of a pro rata distribution of RHI’s capital stock to the Company’s stockholders. On the distribution date, each of the Company’s stockholders as of the record date for the distribution of March 13, 2018 will receive one share of RHI Class A common stock for every two shares of the Company’s Class A common stock and one share of RHI Class B common stock for every two shares of the Company’s Class B common stock. Completion of the RHI spin-off is subject to receipt of a favorable opinion as to the spin-off’s tax-free status.

RHI owns the commercial real estate assets held by the Company and interests in two clinical stage pharmaceutical companies. 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., a pharmaceutical development company based in Israel. In addition, prior to the spin-off, the Company intends to transfer assets to RHI such that, at the time of the spin-off, RHI will have approximately $44 million in cash, cash equivalents, and marketable securities, plus $6 million in hedge fund and other investments.

RHI’s interests in Rafael Pharma, which are held through a 90%-owned non-operating subsidiary, IDT-Rafael Holdings, LLC (“IDT-Rafael Holdings”), include convertible notes issued by Rafael Pharma, and a warrant held by the Company and certain minority holders to purchase up to a majority equity stake in Rafael Pharma at the Company’s discretion in accordance with the terms of the convertible note and the warrant. The remaining 10% of IDT-Rafael Holdings is held by Howard S. Jonas, the Company’s Chairman of the Board, and Chairman of the Board of Rafael Pharma.

IDT-Rafael Holdings hadDirectors of Rafael. The Newark lease expires in April 2025 and the contractual right to receive additional shares of Rafael Pharma representing 10%Israel lease expires in July 2025. In each of the outstanding capital stockthree months ended October 31, 2021 and 2020, the Company incurred lease costs of $0.5 million in connection with the Rafael Pharma that will be issued uponleases, which is included in operating lease cost in the occurrencetable below.

Supplemental disclosures related to the Company’s operating leases were as follows:

Schedule of anySupplemental Disclosures Related to the Company's Operating Leases

  2021  2020 
  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Operating lease cost $700  $729 
Short-term lease cost  347   65 
Total lease cost $1,047  $794 

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

 $695  $710 

Schedule of the following: (i) Food and Drug Administration approval of a Rafael Pharma drug application, (ii) an initial public offering of Rafael Pharma at a valuation of over $500 million, or (iii) a sale of Rafael Pharma above certain valuations. Currently, none of the conditions have been satisfied and the right remains contingent. Supplemental Disclosures Related Weighted Average Operating Leases

  

October 31, 2021

  

July 31, 2021

 
Weighted-average remaining lease term-operating leases  3.4 years   3.4 years 
Weighted-average discount rate-operating leases  2.9%  2.9%

On September 14, 2017, IDT-Rafael Holdings distributed this right to its members on a pro rata basis such that13, 2021, the Company received the right to 9%entered into a new lease with an aggregate operating lease liability of the outstanding capital stock$0.7 million. The Company’s aggregate operating lease liability was as follows:

Schedule of Rafael Pharma and Howard Jonas received the right to 1%Aggregate Operating Lease Liability

  

October 31, 2021

  

July 31, 2021

 
   (in thousands) 
Operating lease liabilities included in “Other current liabilities” $2,500  $2,456 
Operating lease liabilities included in noncurrent liabilities  5,533   5,473 
Total $8,033  $7,929 

Future minimum maturities of the outstanding capital stockoperating lease liabilities were as follows (in thousands):

Schedule of Rafael Pharma. In addition, as compensation for assuming the roleFuture Minimum Maturities of Chairman of the Board of Rafael Pharma, and to create additional incentive to contribute to the success of Rafael Pharma, on September 19, 2017, the Company transferred its right to receive 9% of the outstanding capital stock of Rafael Pharma to Mr. Jonas. The right is further transferable at the discretion of Mr. Jonas.Operating Lease Liabilities

Twelve-month period ending October 31:  
2022 $2,698 
2023  2,406 
2024  1,967 
2025  1,095 
2026  139 
Thereafter  

154

 
Total lease payments  8,459 
Less imputed interest  (426)
Total operating lease liabilities $8,033 

Howard Jonas and his wife Deborah Jonas jointly own $525,000 of Series C Convertible Notes of Rafael Pharma, and The Howard S. and Deborah Jonas Foundation own an additional $525,000 of Series C Convertible Notes of Rafael Pharma. 

IDT-Rafael Holdings’ controlled 50%-owned subsidiary, CS Pharma Holdings, LLC (“CS Pharma”), holds Rafael Pharma’s Series D convertible promissory note with a principal amount of $10 million (the “Series D Note”). The Series D Note earns interest at 3.5% per annum, with principal and accrued interest due and payable on September 16, 2018. The Series D Note is convertible at the holder’s option into shares of Rafael Pharma’s Series D Preferred Stock. The Series D Note also includes a mandatory conversion into Rafael Pharma common stock upon a qualified initial public offering, and conversion at the holder’s option upon an unqualified financing event. In all cases, the Series D Note conversion price is based on the applicable financing purchase price.

IDT-Rafael Holdings and CS Pharma hold warrants to purchase shares of capital stock of Rafael Pharma representing in the aggregate up to 56% of the then issued and outstanding capital stock of Rafael Pharma, on an as-converted and fully diluted basis. The right to exercise warrants as to the first $10 million thereof is held by CS Pharma. The exercise price of the warrant is the lower of 70% of the price sold in an equity financing, or $1.25 per share, subject to certain adjustments. The minimum initial and subsequent exercises of the warrant shall be for such number of shares that will result in at least $5 million of gross proceeds to Rafael Pharma, or such lesser amount as represents 5% of the outstanding capital stock of Rafael Pharma, or such lesser amount as may then remain unexercised. The warrant will expire upon the earlier of December 31, 2020 or a qualified initial public offering or liquidation event. 

6

11

 

Note 5—Cash, Cash Equivalents, and Restricted Cash and Cash Equivalents

The Company’s investment in Rafael Pharma, which was included in “Investments”following table provides a reconciliation of cash, cash equivalents, and restricted cash and cash equivalents reported in the accompanying consolidated balance sheets consiststhat equals the total of the following:

  

January 31,
2018

  

July 31,
2017

 
  (in thousands) 
Series D Note (at fair value) $6,300  $6,300 
Warrants (at cost)  5,400   5,400 
Right to receive additional shares (at cost)  —   400 
Total investment in Rafael Pharma $11,700  $12,100 

same amounts reported in the consolidated statements of cash flows:

Rafael Pharma is a variable interest entity, however, the Company has determined that it is not the primary beneficiary as the Company does not have the power to direct the activitiesSchedule of Rafael Pharma that most significantly impact Rafael Pharma’s economic performance. Cash, Cash Equivalents, and Restricted Cash and Cash Equivalents

  

October 31, 2021

  

July 31, 2021

 
  (in thousands) 
Cash and cash equivalents $114,543  $107,147 
Restricted cash and cash equivalents  107,317   119,769 
Total cash, cash equivalents, and restricted cash and cash equivalents $221,860  $226,916 

At JanuaryOctober 31, 2018,2021 and July 31, 2021, restricted cash and cash equivalents included $101.8 million and $115.8 million, respectively, in restricted cash and cash equivalents for customer deposits held by IDT Financial Services Limited, the Company’s maximum exposure to lossGibraltar-based bank.

Company Restricted Cash and Cash Equivalents

The Company treats unrestricted cash and cash equivalents held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC, which provide the Company’s international money transfer services in the United States, as a resultsubstantially restricted and unavailable for other purposes. At October 31, 2021 and July 31, 2021, “Cash and cash equivalents” in the Company’s consolidated balance sheets included an aggregate of its involvement with Rafael Pharma$16.7 million and $15.3 million, respectively, held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC, that was its $11.7 million investment, since there were nounavailable for other arrangements, events or circumstances that could expose the Company to additional loss.purposes.

Note 4—Marketable6—Debt Securities

The following is a summary of marketableavailable-for-sale debt securities:

Schedule of Available-for-sale Securities

  

Amortized Cost

  

Gross Unrealized Gains

  

Gross Unrealized Losses

  

Fair Value

 
  (in thousands) 
Available-for-sale securities:                
January 31, 2018:                
Certificates of deposit* $24,441  $2  $(1) $24,442 
Federal Government Sponsored Enterprise notes  3,216   —   (26)  3,190 
International agency notes  399   —   (9)  390 
Mutual funds  5,425   40   —   5,465 
Corporate bonds  3,332   —   (39)  3,293 
Equity  79   —   (3)  76 
U.S. Treasury notes  5,397   —   (76)  5,321 
Municipal bonds  4,029   —   (4)  4,025 
Total $46,318  $42  $(158) $46,202 
July 31, 2017:                
Certificates of deposit* $29,011  $1  $(7) $29,005 
Federal Government Sponsored Enterprise notes  3,992   —   (14)  3,978 
International agency notes  291   —   —   291 
Mutual funds  5,353   77   —   5,430 
Corporate bonds  4,643   —   —   4,643 
Equity  74   —   (26)  48 
U.S. Treasury notes  6,673   —   —   6,673 
Municipal bonds  8,201   4   (1)  8,204 
Total $58,238  $82  $(48) $58,272 
  Amortized Cost  Gross Unrealized Gains  Gross Unrealized Losses  Fair Value 
  (in thousands) 
October 31, 2021:            
Certificates of deposit* $-  $-  $—  $- 
U.S. Treasury bills and notes $1,663  $—  $(36) $1,627 
Corporate bonds  6,276   33   (116)  6,193 
Municipal bonds  5,814   —   (1)  5,813 
Total $13,753  $33  $(153) $13,633 
                 
July 31, 2021:                
Certificates of deposit* $1,200  $3  $—  $1,203 
U.S. Treasury bills and notes  1,669   —   (17)  1,652 
Corporate bonds  6,327   38   (33)  6,332 
Municipal bonds  4,825   —   —   4,825 
Total $14,021  $41  $(50) $14,012 

*Each of the Company’s certificates of deposit has a CUSIP, was purchased in the secondary market through a broker and may be sold in the secondary market.

7

At January 31, 2018 and July 31, 2017, the Company owned 24,923 and 23,227 shares, respectively, of Zedge, Inc. Class B common stock that had a fair value of $76,000 and $48,000, respectively.

Proceeds from maturities and sales of available-for-saledebt securities and redemptions of equity investments were $12.1 $3.9 million and $10.8 $6.6 million in the three months ended JanuaryOctober 31, 20182021 and 2017, respectively, and $31.6 million and $16.8 million in the six months ended January 31, 2018 and 2017,2020, respectively. The grossThere were no realized gains or realized losses that were included in earnings as a resultfrom sales of sales were $16,000 and $9,000debt securities in the three and six months ended JanuaryOctober 31, 2018, respectively. The gross realized gains that were included in earnings as a result of sales were $0.3 million in the three2021 and six months ended January 31, 2017.2020. The Company uses the specific identification method in computing the gross realized gains and gross realized losses on the sales of marketabledebt securities.

The contractual maturities of the Company’s available-for-sale debt securities at JanuaryOctober 31, 20182021 were as follows:

Schedule of Contractual Maturities of Available-for-sale Debt Securities

  Fair Value 
  (in thousands) 
Within one year $1,258 
After one year through five years  6,326 
After five years through ten years  5,249 
After ten years  800 
Total $13,633 

12

 

  

Fair Value

 
  (in thousands) 
Within one year $25,771 
After one year through five years  14,890 
After five years through ten years  — 
After ten years  — 
Total $40,661 

The following available-for-sale debt securities were in an unrealized loss position for which other-than-temporary impairments havewere not been recognized:

Schedule of Available-for-sale Securities, Unrealized Loss Position

  Unrealized Losses  Fair Value 
  (in thousands) 
January 31, 2018:      
Certificates of deposit $1  $5,340 
Federal Government Sponsored Enterprise notes  26   3,190 
International agency notes  9   390 
Corporate bonds  39   3,293 
Equity  3   76 
U.S. Treasury notes  76   5,321 
Municipal bonds  4   3,067 
Total $158  $20,677 
July 31, 2017:        
Certificates of deposit $7  $12,155 
Federal Government Sponsored Enterprise notes  14   3,529 
Equity  26   48 
Municipal bonds  1   3,349 
Total $48  $19,081 
  Unrealized Losses  Fair Value 
  (in thousands)    
October 31, 2021:        
U.S. Treasury bills and notes $36  $1,627 
Corporate bonds  116   5,572 
Municipal bonds  1   4,569 
Total $153  $11,768 
         
July 31, 2021:        
U.S. Treasury bills and notes $17  $1,652 
Corporate bonds  33   3,293 
Total $50  $4,945 

8

At July 31, 2017,2021, there were no securities in a continuous unrealized loss position for 12 months or longer. At JanuaryOctober 31, 2018,2021, the following available-for-sale debt securities included in the table above were in a continuous unrealized loss position for 12 months or longer:

  Unrealized Losses  Fair Value 
  (in thousands) 
Federal Government Sponsored Enterprise notes $13  $1,810 
Municipal bonds  1   348 
Total $14  $2,158 

Schedule of Continuous Unrealized Loss Position for 12 Months or Longer

  Unrealized LossesFair Value 
  (in thousands) 
U.S. Treasury bills and notes $36  $1,627 
Corporate bonds  44   1,219 
Total $80  $2,846 

At JanuaryOctober 31, 2018,2021, the Company did not intend to sell any of the debt securities that wereincluded in a continuous unrealized loss position for 12 months or longer,the table above, and it is not more likely than not that the Company will be required to sell theany of these securities before recovery of their amortized cost bases,the unrealized losses, which may be at maturity.

Note 7—Equity Investments

Equity investments consist of the following:

Schedule of Equity Investments

  

October 31, 2021

  

July 31, 2021

 
  (in thousands)    
Zedge, Inc. Class B common stock, 42,282 shares at October 31, 2021 and July 31, 2021 $488  $649 
Rafael Holdings, Inc. Class B common stock, 290,214 and 246,565 shares at October 31, 2021 and July 31, 2021, respectively  2,194   12,479 
Rafael Holdings, Inc. restricted Class B common stock, nil and 43,649 shares at October 31, 2021 and July 31, 2021, respectively  —   2,209 
Other marketable equity securities  5,186   3,630 
Fixed income mutual funds  23,276   23,467 
Current equity investments $31,144  $42,434 
         
Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”) $2,119  $2,465 
Series B and Series C convertible preferred stock—equity method investment  3,329   2,901 
Hedge funds  2,814   3,563 
Other  1,225   2,725 
Noncurrent equity investments $9,487  $11,654 

The Company received the shares of Zedge, Inc. (“Zedge”) Class B common stock and 28,320 of the shares of Rafael Class B common stock set forth in the table above in connection with the lapsing of restrictions on Zedge and Rafael restricted stock held by certain of the Company’s employees and the Company’s payment of taxes related thereto. The Company purchased 261,894 shares of Rafael Class B common stock in fiscal 2021. Howard S. Jonas is the Vice-Chairman of the Board of Directors of Zedge.

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

Schedule of Carrying Value of Equity Investments

  2021  2020 
  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Balance, beginning of period $2,743  $4,109 
Redemption for Visa mandatory release assessment  —   (1,870)
Adjustment for observable transactions involving a similar investment from the same issuer  (346)  (130)
Impairments  —   — 
Balance, end of the period $2,397  $2,109 

13

 

Note 5—Fair Value Measurements

The Company decreased the carrying value of the shares of Visa Series C Preferred it held by $0.3 million and $0.1 million in the three months ended October 31, 2021 and 2020, respectively, based on the fair value of Visa Class A common stock and a discount for lack of current marketability.

Unrealized gains and losses for all equity investments included the following:

Schedule of Unrealized (losses) Gains for All Equity Investments

  2021  2020 
  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Net losses recognized during the period on equity investments $(14,494) $(920)
Less: net gains and losses recognized during the period on equity investments sold during the period  —   — 
Unrealized losses recognized during the period on equity investments still held at the reporting date $(14,494) $(920)

The net losses on investments in the three months ended October 31, 2021 was primarily from unrealized losses of $12.5 million on shares of Rafael Class B common stock.

Equity Method Investment

On February 2, 2021, the Company paid $4.0 million to purchase shares of series B convertible preferred stock of a communications company (the equity method investee, or “EMI”), and on August 10, 2021, the Company paid $1.1 million to purchase shares of the EMI’s series C convertible preferred stock and additional shares of the EMI’s series B convertible preferred stock. The initial shares purchased represented 23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased the Company’s ownership to 26.57% on an as converted basis.

The Company accounts for this investment using the equity method since the series B and series C convertible preferred stock are in-substance common stock, and the Company can exercise significant influence over the operating and financial policies of the EMI.

The Company determined that on the dates of the acquisitions, there were differences of $3.4 million and $1.0 million between its investment in the EMI and its proportional interest in the equity of the EMI, which represented the Company’s share of the EMI’s customer list on the dates of the acquisitions. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of operations, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 18).

The following tables presenttable summarizes the change in the balance of the Company’s equity method investment:

Summary of Changes in Equity Method Investments

  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Balance, beginning of period $2,901  $— 
Purchase of convertible preferred stock  1,051   — 
Equity in the net loss of investee  (441)  — 
Amortization of equity method basis difference  (182)  — 
Balance, end of period $3,329  $— 

Summarized financial information of the EMI was as follows:

Summary of Statements of Operations

  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Revenues $1,691  $— 
Costs and expenses:        
Direct cost of revenues  1,462   — 
Selling, general and administrative  1,889   — 
Depreciation and amortization  -   - 
Severance  -   - 
Total costs and expenses  3,351   — 
Loss from operations  (1,660)  — 
Other expense  (1)  — 
Net loss $(1,661) $— 

14

Note 8—Fair Value Measurements

The following table presents the balance of assets and liabilities measured at fair value on a recurring basis:

Schedule of Balance of Assets Measured at Fair Value On a Recurring Basis

  

Level 1 (1)

  

Level 2 (2)

  

Level 3 (3)

  

Total

 
  (in thousands) 
January 31, 2018            
Available-for-sale securities:            
Marketable securities $10,862  $35,340  $—  $46,202 
Rafael Pharma Series D Note  —   —   6,300   6,300 
Total $10,862  $35,340  $6,300  $52,502 
July 31, 2017                
Available-for-sale securities:                
Marketable securities $12,151  $46,121  $—  $58,272 
Rafael Pharma Series D Note  —   —   6,300   6,300 
Total $12,151  $46,121  $6,300  $64,572 
  Level 1 (1)  Level 2 (2)  Level 3 (3)  Total 
  (in thousands) 
October 31, 2021                
Debt securities $1,627  $12,006  $—  $13,633 
Equity investments included in current assets  31,144   —   —   31,144 
Equity investments included in noncurrent assets  —   —   2,119   2,119 
Total $32,771  $12,006  $2,119  $46,896 
                 
Contingent consideration included in:                
Other current liabilities $—  $—  $(628) $(628)
Other noncurrent liabilities  —   —   (387)  (387)
                 
Total $—  $—  $(1,015) $(1,015)
                 
July 31, 2021                
Debt securities $1,652  $12,360  $—  $14,012 
Equity investments included in current assets  40,225   2,209   —   42,434 
Equity investments included in noncurrent assets  —   —   2,465   2,465 
                 
Total $41,877  $14,569  $2,465  $58,911 
                 
Contingent consideration included in:                
Other current liabilities $—  $—  $(628) $(628)
Other noncurrent liabilities  —   —   (397)  (397)
                 
Total $—  $—  $(1,025) $(1,025)

(1)quoted prices in active markets for identical assets or liabilities
(2)observable inputs other than quoted prices in active markets for identical assets and liabilities
(3)no observable pricing inputs in the market

(1) – quoted prices in active markets for identical assets or liabilities

(2) – observable inputs other than quoted prices in active markets for identical assets and liabilities

(3) – no observable pricing inputs in the market

At JanuaryOctober 31, 20182021 and July 31, 2017,2021, the Company didhad $2.8 million and $3.6 million, respectively, in investments in hedge funds, which were included in noncurrent “Equity investments” in the accompanying consolidated balance sheets. The Company’s investments in hedge funds were accounted for using the equity method, therefore they were not have any liabilities measured at fair value on a recurring basis.value.

15

 

At January 31, 2018 and July 31, 2017, the fair value of the Rafael Pharma Series D Note, which was classified as Level 3, was estimated based on a valuation of Rafael Pharma and other factors that could not be corroborated by the market.

The following table summarizes the change in the balance of the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3). There were no:

Schedule of Assets Measured at Fair Value On a Recurring Basis Using Significant Unobservable Inputs (Level 3)

  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Balance, beginning of period $2,465  $3,825 
Redemption for Visa mandatory release assessment  —   (1,870)
Total losses included in “Other expense, net”  (346)  (130)
Balance, end of period $2,119  $1,825 
         
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period $—  $— 

The following table summarizes the change in the balance of the Company’s liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) in the three and six months ended January 31, 2018 and 2017.:

Schedule of Liabilities Measured at Fair Value On a Recurring Basis Using Significant Unobservable Inputs (Level 3)

 

Three Months Ended
January 31,

 

Six Months Ended
January 31,

  

Three Months Ended

October 31,

 
 

2018

 

2017

 

2018

 

2017

  2021 2020 
 (in thousands)  (in thousands) 
Balance, beginning of period $6,300  $4,200  $6,300  $2,000  $1,025  $396 
Purchases  —   —   —   2,200 
Total gains included in “Foreign currency translation adjustment”  (10)  (5)
Balance, end of period $6,300  $4,200  $6,300  $4,200  $1,015  $391 
                        
Change in unrealized gains or losses for the period included in earnings for assets held at the end of the period $—  $—  $—  $— 
Change in unrealized gains or losses for the period included in earnings for liabilities held at the end of the period $—  $— 

9

At January 31, 2018 and July 31, 2017, the Company had $8.8 million and $8.6 million, respectively, in investments in hedge funds, which were included in “Investments” in the accompanying consolidated balance sheets. The Company’s investments in hedge funds are accounted for using the equity method or the cost method, therefore investments in hedge funds are not measured at fair value.

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.

Cash and cash equivalents, restricted cash and cash equivalents, other current assets, customer deposits, and other current liabilities.At JanuaryOctober 31, 20182021 and July 31, 2017,2021, the carrying amount of these assets and liabilities approximated fair value because of the short period of time to maturity. The fair value estimates for cash, cash equivalents, and restricted cash and cash equivalents were classified as Level 1 and other current assets, customer deposits, and other current liabilities were classified as Level 2 of the fair value hierarchy.

Other assets and other liabilities.At JanuaryOctober 31, 20182021 and July 31, 2017,2021, the carrying amount of these assets and liabilities approximated fair value. The fair values were estimated based on the Company’s assumptions, which were classified as Level 3 of the fair value hierarchy.

TheNote 9—Acquisition

On December 3, 2020, the Company’s investments at January 31, 2018subsidiary IDT International Telecom, Inc. (“IDTIT”) acquired 51% of the issued shares of a company that provides a digital platform facilitating supply and July 31, 2017 included investments in the equitydistribution of certain privately held entitiesmobile airtime and data top-ups and other investments that are accountedservices across borders. The purchase price was $2.4 million, net of cash acquired. The Company also recorded $0.4 million for at cost. It is not practicable to estimate the estimated fair value of these investments becausecontingent consideration of $0.5 million. Pursuant to a Put/Call Option Agreement related to the 5% of the lackissued shares of a quoted market pricethe acquired company that the seller did not initially sell to IDTIT (“Option Shares”), the seller exercised its option and on March 22, 2021, IDTIT purchased the Option Shares for $0.3 million. On June 15, 2021, IDTIT purchased 19% of the issued shares of the acquired company from the remaining noncontrolling interest holder for $1.0 million. The Company also recorded $0.2 million for the shares of these entities, and the inability to estimate theirestimated fair value without incurring excessive cost. The carryingof contingent consideration of up to $0.3 million. There was no change in the estimated fair value of these investments was $10.4 million and $10.8 million at January 31, 2018 and July 31, 2017, respectively, which the Company believes was not impaired.

Note 6— Equity

Changescontingent consideration in the components of equity were as follows:

  Six Months Ended
January 31, 2018		 
  Attributable to IDT Corporation  Noncontrolling Interests  Total 
  (in thousands) 
Balance, July 31, 2017 $145,734  $8,823  $154,557 
Dividends declared ($0.38 per share)  (9,440)  —   (9,440)
Restricted Class B common stock purchased from employees  (61)  —   (61)
Transfer of right to receive equity to Howard S. Jonas  —   (40)  (40)
Consolidation of Lipomedix Pharmaceuticals Ltd.  —   558   558 
Distributions to noncontrolling interests  —   (717)  (717)
Stock-based compensation  1,797   —   1,797 
Comprehensive income:            
Net loss  (576)  470   (106)
Other comprehensive loss  (188)  —   (188)
Comprehensive income  (764)  470   (294)
Balance, January 31, 2018 $137,266  $9,094  $146,360 

Dividend Payments

In the six months ended January 31, 2018, the Company paid cash dividends of $0.38 per share on its Class A common stock and Class B common stock, or $9.4 million in total. In the sixthree months ended October 31, 2016,2021.

The Company’s pro forma results of operations as if the acquisitions occurred on August 1, 2020 were not materially different from the actual results of operations.

16

Note 10—Variable Interest Entity

As of May 31, 2021, the Company paid cash dividendsentered into a Warrant Purchase Agreement with the shareholders of $0.38 per share onan entity (the variable interest entity, or “VIE”) that operates money transfer businesses. The Company determined that, effective May 31, 2021, it had the power to direct the activities of the VIE that most significantly impact its Class A common stockeconomic performance, and Class B common stock, or $8.8 millionthe Company has the obligation to absorb losses of and the right to receive benefits from the VIE that could potentially be significant to it. The Company therefore determined that it is the primary beneficiary of the VIE, and as a result, the Company consolidates the VIE. The Company does not currently own any interest in total.the VIE and thus the net income incurred by the VIE was attributed to noncontrolling interests in the accompanying consolidated statements of operations.

On March 5, 2018,The VIE’s net income and aggregate funding repaid to the Company’s BoardCompany by the VIE were as follows:

Schedule of Directors declared a dividend of $0.09 per shareNet Income (loss) and Aggregate Funding Repaid to the Company By VIE

  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Net income of the VIE $144  $— 
Aggregate funding repaid to the Company by the VIE, net $(3) $— 

The VIE’s summarized consolidated balance sheet amounts are as follows:

VIE’s Summarized Consolidated Balance Sheet

  

October 31, 2021

  

July 31, 2021

 
  (in thousands) 
Assets:        
Cash and equivalents $1,419  $1,364 
Restricted cash  5,384   3,848 
Trade accounts receivable, net  31   91 
Prepaid expenses  210   344 
Other current assets  863   858 
Total current assets  -   - 
Goodwill  -   - 
Property, plant, and equipment, net  652   637 
Equity investments  -   - 
Operating lease right-of-use assets  -   - 
Deferred income tax assets, net  -   - 
Other assets  -   - 
Other intangibles, net  1,042   1,042 
         
Total assets $9,601  $8,184 
         
Liabilities and noncontrolling interests:        
Trade accounts payable $5  $312 
Accrued expenses  41   26 
Other current liabilities  6,058   4,491 
Due to the Company  5   8 
Accumulated other comprehensive loss  (6)  (7)
Noncontrolling interests  3,498   3,354 
         
Total liabilities and noncontrolling interests $9,601  $8,184 

The VIE’s assets may only be used to settle the VIE’s obligations and may not be used for other consolidated entities. The VIE’s liabilities are non-recourse to the second quarter of fiscal 2018 to holdersgeneral credit of the Company’s other consolidated entities.

Note 11—Other Operating Expense, Net

The following table summarizes the other operating expense, net by business segment:

Schedule of Other Operating Expense, Net

         
  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Corporate—Straight Path Communications Inc. class action legal fees $(978) $(321)
Corporate—Straight Path Communications Inc. class action insurance claims  915  623
Traditional Communications—net2phone indemnification claim  (25)  — 
Traditional Communications—Carrier Services settlement  —   (554)
         
Total other operating expense, net $(88) $(252)

Straight Path Communications Inc. Class A common stock and Class B common stock. The dividend will be paidAction

As discussed in Note 17, the Company (as well as other defendants) has been named in a pending putative class action on or about March 23, 2018 tobehalf of the stockholders of record as of the close of business on March 19, 2018.Company’s former subsidiary, Straight Path Communications Inc. (“Straight Path”), and a derivative complaint. The Company incurred legal fees and recorded offsetting gains from insurance claims related to this action in the three months ended October 31, 2021 and 2020.

10

17

 

 

Indemnification Claim

Beginning in June 2019, as part of a commercial resolution, the Company indemnified a net2phone cable telephony customer related to patent infringement claims brought against the customer.

Note 12—Revolving Credit Facility

The Company’s subsidiary, IDT Telecom, Inc. (“IDT Telecom”), entered into a credit agreement, dated as of May 17, 2021, with TD Bank, N.A. for a revolving credit facility for up to a maximum principal amount of $25.0 million. IDT Telecom may use the proceeds to finance working capital requirements and for certain closing costs of the facility. At October 31, 2021 and July 31, 2021, IDT Telecom had not borrowed any amounts under this facility. The revolving credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum at the Intercontinental Exchange Benchmark Administration Ltd. LIBOR multiplied by the Regulation D maximum reserve requirement plus 125 to 175 basis points, depending upon IDT Telecom’s leverage ratio as computed for the most recent fiscal quarter. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest is due in May 2024. IDT Telecom pays a quarterly unused commitment fee on the average daily balance of the unused portion of the $25.0 million commitment of 30 to 85 basis points, depending upon IDT Telecom’s leverage ratio as computed for the most recent fiscal quarter. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain targets based on financial ratios during the term of the revolving credit facility. As of October 31, 2021, IDT Telecom was in compliance with all of the covenants.

Note 13—Equity

Stock Repurchases

The Company has aan existing stock repurchase program authorized by its Board of Directors for the repurchase of up to an aggregate of 8.0 million shares of the Company’s Class B common stock. The Board of Directors authorized the repurchase of up to 8.0 million shares in the aggregate. There were no0 repurchases under the program in the sixthree months ended JanuaryOctober 31, 2018 or 2017.2021. In the three months ended October 31, 2020, the Company repurchased 463,792 shares of Class B common stock for an aggregate purchase price of $2.8 million. At JanuaryOctober 31, 2018, 8.02021, 5.8 million shares remained available for repurchase under the stock repurchase program.

In the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, the Company paid $0.1 million $26,000 and $1.8 million,$7,000, respectively, to repurchase 5,170 shares 627 and 94,338 1,053 shares, respectively, of the Company’s Class B common stock that were tendered by employees of the Company to satisfy the employees’ tax withholding obligations in connection with the vesting of deferred stock units (“DSUs”) and lapsing of restrictions on awards of restricted stock. Such shares were repurchased by the Company based on their fair market value on the trading day immediately prior to the vesting date.

Deferred Stock Units Equity Incentive Program

The Company has an existing equity incentive program in the form of DSUs that, upon vesting, will entitle the grantees to receive shares of the Company’s Class B common stock. The number of shares issuable on the vesting date varies between 50% to 200% of the number of DSUs that vest on that vesting date, depending on the market price for the underlying Class B common stock on the vesting date relative to the market price at the time of the grant. At October 31, 2021, there were 154,169 unvested DSUs outstanding that are eligible to vest (if the conditions therefor are satisfied) on January 5, 2022.

2015 Stock Option and Incentive Plan

In the three months ended October 31, 2020, the Company received proceeds from the exercise of stock options of $0.2 million for which the Company issued 21,894 shares of its Class B common stock. There were 0 stock option exercises in the three months ended October 31, 2021.

 

On DecemberSeptember 14, 2017,2021, the Company’s stockholders approved an amendment toBoard of Directors amended the Company’s 2015 Stock Option and Incentive Plan to increase the number of shares of the Company’s Class B common stock available for the grant of awards thereunder by an additional 0.3 million175,000 shares. The amendment is subject to approval by the Company’s stockholders at its annual meeting of stockholders on December 15, 2021.

In the six months ended January 31, 2017, the Company received proceeds from the exercise of its stock options of $0.8 million. There were no stock option exercises in the six months ended January 31, 2018. In the six months ended January 31, 2017, the Company issued 73,471 Note 14—Redeemable Noncontrolling Interest

On September 29, 2021, NRS sold 862,442 shares of its Class B common stock, which represents 2.5% of its outstanding capital stock on a fully diluted basis, to Alta Fox Opportunities Fund LP (“Alta Fox”) for cash of $10 million. Alta Fox has the right to request that NRS redeem all or any portion of the NRS common shares that it purchased at the per share purchase price during a period of 182 days following the fifth anniversary of this transaction. The redemption right shall terminate upon the consummation of (i) a sale of NRS or its assets for cash or securities that are listed on a national securities exchange, (ii) a public offering of NRS’ securities, or (iii) a distribution of NRS’ capital stock following which NRS’ common shares are listed on a national securities exchange.

The shares of NRS’ Class B common stock sold to Alta Fox have been classified as mezzanine equity in the accompanying consolidated balance sheet because they may be redeemed at the option exercises.of Alta Fox, although the shares are not mandatorily redeemable. The carrying amount of the shares includes the noncontrolling interest in the net income of NRS.

18

 

Note 7—15—(Loss) Earnings (Loss) Per Share

Basic earnings per share is computed by dividing net income attributable to all classes of common stockholders of the Company by the weighted average number of shares of all classes of common stock outstanding during the applicable period. Diluted earnings per share is computed in the same manner as basic earnings per share, except that the number of shares is increased to include restricted stock still subject to risk of forfeiture and to assume exercise of potentially dilutive stock options using the treasury stock method, unless the effect of such increase is anti-dilutive.

The weighted-average number of shares used in the calculation of basic and diluted (loss) earnings (loss) per share attributable to the Company’s common stockholders consists of the following:

Schedule of Weighted-average Number of Shares Used in the Calculation of Basic and Diluted (Loss) Earnings Per Share

 

Three Months Ended
January 31,

 

Six Months Ended
January 31,

  

Three Months Ended

October 31,

 
 

2018

 

2017

 

2018

 

2017

  2021 2020 
 (in thousands)  (in thousands) 
Basic weighted-average number of shares  24,643   22,768   24,635   22,740   25,566   25,534 
Effect of dilutive securities:                        
Stock options  10   77   —   58   —   — 
Non-vested restricted Class B common stock  71   118   —   133   —   327 
Diluted weighted-average number of shares  24,724   22,963   24,635   22,931   25,566   25,861 

The following shares were excluded from the calculation of diluted (loss) earnings per share:

Schedule of Outstanding Stock Options Excluded from the Calculation of Diluted (Loss) Earnings Per Share

  

Three Months Ended

October 31,

 
  2021  2020 
  (in thousands) 
Stock options  1,035   1,104 
Non-vested restricted Class B common stock  352   — 
Shares excluded from the calculation of diluted earnings per share  1,387   1,104 

The diluted loss per share computation:

  

Three Months Ended
January 31,

  

Six Months Ended
January 31,

 
  

2018

  

2017

  

2018

  

2017

 
  (in thousands) 
Stock options  1,160   3   1,273   18 
Non-vested restricted Class B common stock  —   —   191   — 
Shares excluded from the calculation of diluted earnings per share  1,160   3   1,464   18 

Inequals basic loss per share in the three months ended JanuaryOctober 31, 2018, and in the three and six months ended January 31, 2017, stock options with an exercise price that was greater than the average market price of the Company’s stock during the period were excluded from the diluted earnings per share computation.

In the six months ended January 31, 2018, the diluted loss per share computation equals basic loss per share2021 because the Company had a net loss and the impact of the assumed exercise of stock options and the vesting of restricted stock would have been anti-dilutive.

11

Note 8—Revolving Credit Facility Stock options with an exercise price that was greater than the average market price of the Company’s common stock in the three months ended October 31, 2020 were excluded from the calculation of diluted earnings per share.

 

The Company’s subsidiary, IDT Telecom, entered into a credit agreement, dated July 12, 2012, with TD Bank, N.A. for a line of credit facility for up to a maximum principal amount of $25.0 million. The credit agreement was amended as of January 31, 2018. IDT Telecom may use the proceeds to finance working capital requirements, acquisitions and for other general corporate purposes. The line of credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum, at the option of IDT Telecom, at either (a) the U.S. Prime Rate less 125 basis points, or (b) the LIBOR rate adjusted by the Regulation D maximum reserve requirement plus 125 basis points. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date of January 31, 2020. At January 31, 2018 and July 31, 2017, there were no amounts outstanding under the facility. The Company intends to borrow under the facility from time to time. IDT Telecom pays a quarterly unused commitment fee of 0.325% per annum on the average daily balance of the unused portion of the $25.0 million commitment. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain financial targets and ratios during the term of the line of credit, including restrictions on dividend payments on IDT Telecom capital stock and restrictions on IDT Telecom’s aggregate loans and advances to affiliates or subsidiaries.

Note 9—16—Accumulated Other Comprehensive Loss

The accumulated balances for each classification of other comprehensive loss(loss) income were as follows:

Schedule of Accumulated Balances for Each Classification of Other Comprehensive (Loss) Income

  Unrealized
Loss on Available-for-Sale Securities		  Foreign Currency Translation  Accumulated Other Comprehensive Loss 
    (in thousands)    
Balance, July 31, 2021 $(9) $(10,174) $(10,183)
Other comprehensive (loss) income attributable to IDT Corporation  (111)  1,068  957
Balance, October 31, 2021 $(120) $(9,106) $(9,226)

Note 17—Commitments and Contingencies

Coronavirus Disease (COVID-19)

The Company continues to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of its business, including its customers, employees, suppliers, vendors, and business partners.

Operationally, the Company’s employees transitioned to work-from-home during the third quarter of fiscal 2020 and, to a large degree, continue to work-from-home. Beginning in the fourth quarter of fiscal 2021, certain of the Company’s employees returned to work in the Company’s offices on a part-time basis. The Company’s salespeople, customer service employees, technicians, and delivery employees continue to serve its independent retailers, channel partners, and customers with minimal interruption.

19

 

  

Unrealized Gain (Loss) on Available-for-Sale Securities

  

Foreign Currency Translation

  

Accumulated Other Comprehensive Loss

  

Location of (Gain) Loss Recognized

  (in thousands)
Balance, July 31, 2017 $2,134  $(4,477) $(2,343)  
Other comprehensive loss attributable to IDT Corporation before reclassifications  (159)  (38)  (197)  
Less: reclassification for loss included in net loss  9   —   9  Other income (expense), net
Net other comprehensive loss attributable to IDT Corporation  (150)  (38)  (188)  
Balance, January 31, 2018 $1,984  $(4,515) $(2,531)  

At both January 31, 2018 and July 31, 2017, unrealized gain on available-for-sale securities included unrealized gain of $2.1 millionCOVID-19 had mixed financial impacts on the Rafael Pharma Series D Note.

Note 10—Business Segment Information

The Company has two reportable business segments, Telecom Platform Servicesbeginning in the third quarter of fiscal 2020 and net2phone-Unified Communications as a Service (“net2phone-UCaaS”) (formerly known as UCaaS). The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker.

Telecom Platform Services and net2phone-UCaaS comprise the IDT Telecom division. The Telecom Platform Services segment provides retail telecommunications and payment offerings as well as wholesale international long distance traffic termination. The net2phone-UCaaS segment is comprised of (1) cable telephony, (2) cloud-based private branch exchange, or PBX, services offered to enterprise customers exclusivelycontinuing through value-added resellers, service providers, telecom agents and managed service providers, (3) Session Initiation Protocol, or SIP, trunking, which supports inbound and outbound domestic and international calling from an IP PBX, and (4) PicuP, a highly-automated business phone service that answers, routes and manages voice calls.

Beginning in the first quarter of fiscal 2018,2022.

Legal Proceedings

On January 22, 2019, Jose Rosales filed a putative class action against IDT America, IDT Domestic Telecom and IDT International in California state court alleging certain violations of employment law. Plaintiff alleges that these companies failed to compensate members of the Telecom Platform Services segment includes Consumer Phone Services, which was previously reported asputative class in accordance with California law. In August 2019, the Company filed a separate segment. Consumer Phone Services provides consumer local and long distance services in certain U.S. states. Comparative results have been reclassified and restated as if Consumer Phone Services was included in Telecom Platform Services in all periods presented.

Operating segments not reportable individually are included in All Other. All Other includes the Company’s real estate holdingscross complaint against Rosales alleging trade secret and other smaller businesses. Corporate costs includeviolations. The parties are now seeking court approval of a settlement agreement.

On April 24, 2018, Sprint Communications Company L.P. filed a patent infringement claim against the Company and certain services, such as compensation, consulting fees, treasuryof its affiliates in the U.S. District Court for the District of Delaware alleging infringement of U.S. Patent Nos. 6,298,064; 6,330,224; 6,343,084; 6,452,932; 6,463,052; 6,473,429; 6,563,918; 6,633,561; 6,697,340; 6,999,463; 7,286,561; 7,324,534; 7,327,728; 7,505,454; and accounts payable, tax7,693,131. Plaintiff was seeking damages and accounting services, human resourcesinjunctive relief. On June 28, 2018, Sprint dismissed the complaint without prejudice. The Company is evaluating the underlying claim, and payroll, corporate purchasing, corporate governance including Boardat this stage, is unable to estimate its potential liability, if any. The Company intends to vigorously defend any claim of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, business development, and other corporate-related general and administrative expenses including, among others, facilities costs, charitable contributions and travel, as well as depreciation expense on corporate assets. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

12

The accounting policiesinfringement of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. IDT Telecom depreciation and amortization are allocated to Telecom Platform Services and net2phone-UCaaS because the related assets are not tracked separately by segment. There are no other significant asymmetrical allocations to segments.listed patents.

Operating results for the business segments of the Company are as follows:

(in thousands) Telecom
Platform
Services		  net2phone-UCaaS  All Other  Corporate  Total 
Three Months Ended January 31, 2018               
Revenues $387,065  $8,299  $519  $—  $395,883 
Income (loss) from operations  4,589   (790)  (1,019)  (3,260)  (480)
Severance  195   —   —   —   195 
Other operating expense  —   —   —   (846)  (846)
                     
Three Months Ended January 31, 2017                    
Revenues $359,924  $7,142  $490  $—  $367,556 
Income (loss) from operations  7,187   (464)  82   (3,677)  3,128 
Other operating expense  —   —   —   (889)  (889)
                     
Six Months Ended January 31, 2018                    
Revenues $772,129  $16,087  $1,222  $—  $789,438 
Income (loss) from operations  9,150   (1,464)  (1,650)  (6,433)  (397)
Severance  605   —   —   30   635 
Other operating expense  —   —   —   (1,625)  (1,625)
                     
Six Months Ended January 31, 2017                    
Revenues $721,435  $14,278  $994  $—  $736,707 
Income (loss) from operations  13,732   (639)  172   (4,951)  8,314 
Other operating expense  —   —   —   (1,088)  (1,088)

Note 11—Commitments and Contingencies

Legal Proceedings

On July 31, 2013, the Company completed a pro rata distribution of the common stock of the Company’s subsidiary Straight Path Communications Inc. (“Straight Path”) to the Company’s stockholders of record as of the close of business on July 25, 2013 (the “Straight Path Spin-Off”). On July 5, 2017, plaintiff JDS1, LLC, on behalf of itself and all other similarly situated stockholders of Straight Path, and derivatively on behalf of Straight Path as nominal defendant, filed a putative class action and derivative complaint in the Court of Chancery of the State of Delaware against the Company, The Patrick Henry Trust (a trust formed by Howard S. Jonas that held record and beneficial ownership of certain shares of Straight Path he formerly held), Howard S. Jonas, and each of Straight Path’s directors. The complaint alleges that the Company aided and abetted Straight Path Chairman of the Board and Chief Executive Officer Davidi Jonas, and Howard S. Jonas in his capacity as controlling stockholder of Straight Path, in breaching their fiduciary duties to Straight Path in connection with the settlement of claims between Straight Path and the Company related to potential indemnification claims concerning Straight Path’s obligations under the Consent Decree it entered into with the Federal Communications Commission (“FCC”), as well as the proposed sale of Straight Path’s subsidiary Straight Path IP Group, Inc. (“SPIP”) to the Company in connection with that settlement. That action was consolidated with a similar action that was initiated by The Arbitrage Fund. The Plaintiffs are seeking, among other things, (i) a declaration that the action may be maintained as a class action or in the alternative, that demand on the Straight Path Board is excused; (ii) that the term sheet is invalid; (iii) awarding damages for the unfair price stockholders are receivingreceived in the merger between Straight Path and Verizon Communications Inc. for their shares of Straight Path’s Class B common stock; and (iv) ordering Howard S. Jonas, Davidi Jonas, and the Company to disgorge any profits for the benefit of the class Plaintiffs. On August 28, 2017, the Plaintiffs filed an amended complaint. On September 24, 2017, the Company filed a motion to dismiss the amended complaint.complaint, which was ultimately denied, and which denial was affirmed by the Delaware Supreme Court. The parties are engaged in discovery and motion practice. The trial is currently scheduled for May 2022. The Company intends to vigorously defend the action. On November 20, 2017, the Delaware Chancery Court issued an order staying the case pending the closing of the transaction between Verizon and Straight Path on the grounds that the claims are not ripe. That transaction closed on February 28, 2018 and the Court was so notified. In the three and six months ended January 31, 2018,this matter (see Note 11). At this stage, the Company incurred legal fees of $0.2 million and $1.0 million, respectively, relatedis unable to this putative class action, which is included in “Other operating expense” in the accompanying consolidated statement of operations.estimate its potential liability, if any.

13

On May 5, 2004, the Company filed a complaint in the Supreme Court of the State of New York, County of New York, seeking injunctive relief and damages against Tyco Group, S.A.R.L., Tyco Telecommunications (US) Inc. (f/k/a TyCom (US) Inc.), Tyco International, Ltd., Tyco International (US) Inc., and TyCom Ltd. (collectively “Tyco”). The Company alleged that Tyco breached a settlement agreement that it had entered into with the Company to resolve certain disputes and civil actions among the parties. The Company alleged that Tyco did not provide the Company, as required under the settlement agreement, free of charge and for the Company’s exclusive use, a 15-year indefeasible right to use four Wavelengths in Ring Configuration (as defined in the settlement agreement) on a global undersea fiber optic network that Tyco was deploying at that time. After extensive proceedings, including several decisions and appeals, the New York Court of Appeals affirmed a lower court decision to dismiss the Company’s claim and denied the Company’s motion for re-argument of that decision. On June 23, 2015, the Company filed a new summons and complaint against Tyco in the Supreme Court of the State of New York, County of New York alleging that Tyco breached the settlement agreement. In September 2015, Tyco filed a motion to dismiss the complaint, which the Company opposed. Oral argument was held on March 9, 2016. On October 17, 2016, the judge granted Tyco’s motion and dismissed the complaint. In August 2017, the Company filed an appeal, which Tyco opposed. On November 22, 2017, oral argument was held on the appeal. On December 21, 2017, the Company’s appeal was denied. On January 22, 2018, the Company filed a motion for leave to appeal to the New York Court of Appeals. On February 6, 2018, Tyco opposed the Company’s motion. The Company awaits the court’s decision.

In addition to the foregoing, the Company is subject to other legal proceedings that have arisen in the ordinary course of business and have not been finally adjudicated. Although there can be no assurance in this regard, the Company believes that none of the other legal proceedings to which the Company is a party will have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

 

Sales Tax Contingency

On June 21, 2018, the United States Supreme Court rendered a decision in South Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the state to collect and remit sales tax on goods and services provided to purchasers in the state, overturning certain existing court precedent. The Company has evaluated its state tax filings with respect to the Wayfair decision and is in the process of reviewing its remittance practices. It is possible that one or more jurisdictions may assert that the Company has liability for periods for which it has not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could materially and adversely affect the Company’s business, financial position, and operating results. One or more jurisdictions may change their laws or policies to apply their sales, use or other similar taxes to the Company’s operations, and if such changes were made it could materially and adversely affect the Company’s business, financial position, and operating results.

Regulatory Fees Audit

The Company’s 2017 FCC Form 499-A, which reports its calendar year 2016 revenue, related to payments due to the FCC, is currently under audit by the Universal Service Administrative Company (“USAC”). The Internal Audit Division of USAC issued preliminary audit findings and the Company has, in accordance with audit procedures, appealed certain of the findings. The Company awaits a final decision by USAC on the preliminary audit findings. Depending on the findings contained in the final decision, the Company may further appeal to the FCC. Although a final decision remains pending, the Company has been invoiced $2.9 million and $1.8 million on behalf of the Federal Telecommunications Relay Services Fund and on behalf of the Universal Service Administrative Company.Fund, respectively. The Company does not intend to remit payment for these fees unless and until a negative decision on its appeal has been issued. In response to the aforementioned preliminary audit findings, the Company made certain changes to its filing policies and procedures for years that remain potentially under audit. At JanuaryOctober 31, 20182021 and July 31, 2017,2021, the Company’s accrued expenses included $39.7 $38.2 million and $43.5 $38.3 million, respectively, for theseFCC-related regulatory fees for the yearsyear covered by the audit, as well as prior and subsequent years.

 

20

Purchase Commitments

TheAt October 31, 2021, the Company had purchase commitments of $18.7 $4.0 million at January 31, 2018, including the aggregate commitment under the Reciprocal Services Agreement described below.primarily for equipment and services.

Reciprocal Services Agreement

 

In August 2017, the Company entered into a Reciprocal Services Agreement with a telecom operator in Central America for a full range of services, including, but not limited to, termination of inbound and outbound international long-distance voice calls. Performance Bonds

The Company has committed to pay such telecom operator monthly committed amounts during the term of the agreement. In addition, under certain limited circumstances, the parties may renegotiate the amount of the monthly payments. In the event the parties do not agree on re-pricing terms after good faith negotiations, then either party has the right to terminate the agreement. Pursuant to the agreement, in September 2017, the Company deposited $11.75 million into an escrow account as security for the benefit of the telecom operator, which is included in “Other current assets” in the accompanying consolidated balance sheet.

Performance Bonds

IDT Payment Services and IDT Telecom have performance bonds issued through third parties for the benefit of various states in order to comply with the states’ financial requirements for money remittance licenses and telecommunications resellers, respectively.resellers. At JanuaryOctober 31, 2018,2021, the Company had aggregate performance bonds of $15.1 $19.6million outstanding.

Substantially Restricted Cash and Cash Equivalents

The Company treats unrestricted cash and cash equivalents held by IDT Payment Services, which provides the Company’s international money transfer services in the United States, as substantially restricted and unavailable for other purposes. At January 31, 2018 and July 31, 2017, “Cash and cash equivalents” in the Company’s consolidated balance sheets included an aggregate of $10.0 million and $10.8 million, respectively, held by IDT Payment Services that was unavailable for other purposes.

14

 

FCC Investigation of Straight Path Communications Inc. Settlement Agreement and Mutual ReleaseSpectrum LLC

The Company entered into various agreements with Straight Path prior to the Straight Path Spin-Off including a Separation and Distribution Agreement to effect the separation and provide a framework for the Company’s relationship with Straight Path after the spin-off. On September 20, 2016, the Company received a letter of inquiry from the Enforcement Bureau of the FCC requesting certain information and materials related to an investigation of potential violations by Straight Path Spectrum LLC (formerly a subsidiary of the Company and currently a subsidiary of Straight Path) in connection with licenses to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services. The Company has cooperated with the FCC in this matter and has responded to the letter of inquiry. If the FCC were to pursue separate action against the Company, the FCC could seek to fine or impose regulatory penalties or civil liability on the Company related to activities during the period of ownership by the Company.

The Separation and Distribution Agreement provides for the Company and Straight Path to indemnify each other for certain liabilities. The Company and Straight Path each communicated that it was entitled to indemnification from the other in connection with the inquiry described above and related matters. On October 24, 2017, the Company, Straight Path, SPIP and PR-SP IP Holdings LLC (“PR-SP”), an entity owned by Howard Jonas, entered into a Settlement Agreement and Release that provides for, among other things, the settlement and mutual release of potential liabilities and claims that may exist or arise under the Separation and Distribution Agreement between the Company and Straight Path. In exchange for the mutual release, the Company paid Straight Path an aggregate of $16 million in cash, Straight Path transferred to the Company its majority ownership interest in Straight Path IP Group Holding, Inc. (“New SPIP”), which holds the equity of SPIP, the entity that holds intellectual property primarily related to communications over computer networks, subject to the right to receive 22% of the net proceeds, if any, received by SPIP from licenses, settlements, awards or judgments involving any of the patent rights and certain transfers of the patents or related rights, that will be retained by Straight Path’s stockholders (such equity interest, subject to the retained interest right, the “IP Interest”), and the Company undertook certain funding and other obligations related to SPIP. The Settlement Agreement and Release allocates (i) $10 million of the payment and the retained interest right to the settlement of claims and the mutual release and (ii) $6 million to the transfer of the IP Interest. Note 18—Other Expense, Net

Consistent with the contemplated arrangement that was previously disclosed, on October 24, 2017, the Company sold its entire majority interests in New SPIP to PR-SP in exchange for $6 million and the assumption by PR-SP of the funding and other obligations undertaken by the Company.

Note 12—Other Income (Expense), Net

Other income (expense),expense, net consists of the following:

Schedule of Other Expense Net

  

Three Months Ended
January 31,

  

Six Months Ended
January 31,

 
  

2018

  

2017

  

2018

  

2017

 
  (in thousands) 
Foreign currency transaction gains (losses) $169  $(729) $(559) $1,330 
(Loss) gain on sale of marketable securities  (16)  305   (9)  305 
Gain on investments  179   32   59   295 
Other  38   (27)  53   44 
Total other income (expense), net $370  $(419) $(456) $1,974 
         
  Three Months Ended
October 31,		 
  2021  2020 
  (in thousands) 
Foreign currency transaction losses $(250) $(428)
Equity in net loss of investee  (623)  — 
Losses on investments (see Note 7)  (14,494)  (920)
Other  (849)  (32)
Total other expense, net $(16,216) $(1,380)

Note 13—Income Tax and New Jersey Corporation Business Tax

Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted “An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018”, which is commonly referred to as “The Tax Cuts and Jobs Act” (the “Tax Act”). The Tax Act reduces the U.S. federal statutory corporate tax rate from 35.0% to 21.0% effective January 1, 2018, requires companies to pay a one-time repatriation tax on earnings of certain foreign subsidiaries that were previously tax deferred (“transition tax”), and makes other changes to the U.S. income tax code. Due to the Company’s July 31 fiscal year-end, the lower corporate income tax rate is phased in, resulting in a blended U.S. federal statutory tax rate of approximately 26.9% for the Company’s fiscal year ending July 31, 2018, and 21.0% for the Company’s fiscal years thereafter.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”), expressing its views regarding the Financial Accounting Standards Board (“FASB”)’s Accounting Standards Codification 740,Income Taxes, in the reporting period that includes the enactment date of the Tax Act. SAB 118 recognizes that a registrant’s review of certain income tax effects of the Tax Act may be incomplete at the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. Specifically, SAB 118 allows a company to report provisional estimates in the reporting period that includes the enactment date if the company does not have the necessary information available, prepared, or fully analyzed for certain income tax effects of the Tax Act. The provisional estimates would be adjusted during a measurement period not to exceed 12 months from the enactment date of the Tax Act, at which time the accounting for the income tax effects of the Tax Act is required to be completed.

15

As of January 31, 2018, the Company had not completed its accounting for the income tax effects of the Tax Act; however, the Company had made a reasonable estimate of the effect on its existing AMT credit carryover. Because the AMT credit will be refundable if not utilized in the next four years, the Company reversed the valuation allowance that offset the AMT credit. As a result, in the three months ended January 31, 2018, the Company recorded a noncurrent receivable and an income tax benefit of $3.3 million for the anticipated refund. The reduction in the corporate tax rate is not expected to impact the Company’s results of operations or financial position in the foreseeable future because the income tax benefit from the reduced tax rate will be offset by the valuation allowance.

The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S. income taxes. The Company expects to utilize net operating loss carryforwards to offset any transition tax that it may incur. Therefore the Company did not record any provisional income tax expense for the transition tax for its foreign subsidiaries. At January 31, 2018, the undistributed earnings of the Company’s foreign subsidiaries continued to be permanently reinvested and the Company does not intend to repatriate any of the amounts. As a result, the Company has not provided for additional income or withholding taxes for the undistributed earnings or for any additional outside basis differences with respect to the foreign entities. The Company continues to review the anticipated impacts of the global intangible low taxed income (“GILTI”) and base erosion anti-abuse tax (“BEAT”), which are not effective until August 1, 2018. The Company has not recorded any impact associated with either GILTI or BEAT in the three months ended January 31, 2018.

The Company anticipates that its assumptions and estimates may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, the FASB, and various other taxing jurisdictions. In particular, the Company anticipates that the U.S. state jurisdictions will continue to determine and announce their conformity or decoupling from the Tax Act, either in its entirety or with respect to specific provisions. Legislative and interpretive actions could result in adjustments to the Company’s provisional estimates when the accounting for the income tax effects of the Tax Act is completed. The Company will continue to evaluate the impact of the Tax Act on its financial statements, and will record the effect of any reasonable changes in its estimates and adjustments.

Elmion Netherlands B.V. Deferred Tax Assets

In the six months ended January 31, 2017, the Company determined that its valuation allowance on the losses of Elmion Netherlands B.V., a Netherlands subsidiary, was no longer required due to an internal reorganization that generated income and a projection of income in future periods. The Company recorded a benefit from income taxes of $16.6 million in the six months ended January 31, 2017 from the full recognition of the Elmion Netherlands B.V. deferred tax assets.

New Jersey Corporation Business Tax

In September 2017, the Company, IDT Domestic Telecom, Inc. (a subsidiary of the Company) and certain other affiliates, were certified by the New Jersey Economic Development Authority as having met all of the requirements of the Grow New Jersey Assistance Act Tax Credit Program. The corporation business tax credits to be received are a maximum of $21.1 million. The Company may claim a tax credit each tax year for ten years beginning in 2017. The tax credit can be applied to 100% of the Company’s New Jersey tax liability each year, and the unused amount of the annual credit can be carried forward. In addition, the Company may apply for a tax credit transfer certificate to sell unused tax credits to another business. The tax credits must be sold for no less than 75% of the value of the tax credits. The tax credits are subject to reduction, forfeiture and recapture if, among other things, the number of full-time employees declines below the program or statewide minimum.

Note 14—19—Recently Issued Accounting Standard Not Yet Adopted

In May 2014, the FASB and the International Accounting Standards Board jointly issued a comprehensive new revenue recognition standard that will supersede most of the current revenue recognition guidance under U.S. GAAP and International Financial Reporting Standards (“IFRS”). The goals of the revenue recognition project were to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. The Company expects to adopt this standard on August 1, 2018 using the modified retrospective approach. The Company has identified its main revenue streams, which include Boss Revolution PIN-less international calling revenue, wholesale carrier services revenue, and domestic and international airtime top-up revenue. The Company is currently reviewing contracts and other relevant documents related to its wholesale carrier services revenue to determine how to apply the new standard to this revenue stream. The Company expects to continue its review and evaluation for its other revenue streams in fiscal 2018. Currently, the Company cannot reasonably estimate the impact that the adoption of the standard will have on its consolidated financial statements.

16

In January 2016, the FASB issued an ASU to provide more information about recognition, measurement, presentation and disclosure of financial instruments. The amendments in the ASU include, among other changes, the following: (1) equity investments (except those accounted for under the equity method or that result in consolidation) will be measured at fair value with changes in fair value recognized in net income, (2) a qualitative assessment each reporting period to identify impairment of equity investments without readily determinable fair values, (3) financial assets and financial liabilities will be presented separately by measurement category and form of financial asset on the balance sheet or the notes to the financial statements, and (4) an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities classified as available-for-sale in other comprehensive income. In addition, a practicability exception will be available for equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient. These investments may be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Entities will have to reassess at each reporting period whether an investment qualifies for this practicability exception. The Company will adopt the amendments in this ASU on August 1, 2018. The Company is evaluating the impact that the ASU will have on its consolidated financial statements. 

In February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. The Company will adopt the new standard on August 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is evaluating the impact that the new standard will have on its consolidated financial statements. 

In June 2016, the FASBFinancial Accounting Standards Board issued an ASUAccounting Standards Update No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss”current expected credit loss model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators, and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. The Company will adopt the new standard on August 1, 2020.2023. The Company is evaluating the impact that the new standard will have on its consolidated financial statements.

In November 2016, the FASB issued an ASU that includes specific guidance on the classification and presentation of changes in restricted cash and cash equivalents in the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash or restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the statement of cash flows. The ASU will be applied using a retrospective transition method to each period presented. The Company will adopt the amendments in this ASU on August 1, 2018. The adoption will impact the Company’s beginning of the period and end of the period cash and cash equivalents balance in its statement of cash flows, as well as its net cash provided by operating activities.

In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current guidance, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the ASU narrows the definition of the term output. The Company will adopt the amendments in this ASU on August 1, 2018. The Company is evaluating the impact that the new standard will have on its consolidated financial statements.

17

21

 

In May 2017, the FASB issued an ASU to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Pursuant to this ASU, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified (if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification); (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. The Company will adopt the amendments in this ASU prospectively to an award modified on or after on August 1, 2018. The Company is evaluating the impact that the new standard will have on its consolidated financial statements.

In August 2017, the FASB issued an ASU intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the ASU includes certain targeted improvements to simplify the application of hedge accounting guidance in U.S. GAAP. The amendments in this ASU are effective for the Company on August 1, 2019. Early application is permitted. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements will be applied prospectively. The Company is evaluating the impact that this ASU will have on its consolidated financial statements.

18

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with the accompanying consolidated financial statements and the associated notes thereto of this Quarterly Report, and the audited consolidated financial statements and the notes thereto and our Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the fiscal year ended July 31, 2017,2021, as filed with the U.S. Securities and Exchange Commission (or SEC).

As used below, unless the context otherwise requires, the terms “the Company,” “IDT,” “we,” “us,” and “our” refer to IDT Corporation, a Delaware corporation, its predecessor, International Discount Telecommunications, Corp., a New York corporation, and their subsidiaries, collectively.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including statements that contain the words “believes,” “anticipates,” “expects,” “plans,” “intends,” and similar words and phrases. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the results projected in any forward-looking statement. In addition to the factors specifically noted in the forward-looking statements, other important factors, risks, and uncertainties that could result in those differences include, but are not limited to, those discussed under Item 1A to Part I “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended July 31, 2017.2021. The forward-looking statements are made as of the date of this report and we assume no obligation to update the forward-looking statements, or to update the reasons why actual results could differ from those projected in the forward-looking statements. Investors should consult all of the information set forth in this report and the other information set forth from time to time in our reports filed with the SEC pursuant to the Securities Act of 1933 and the Securities Exchange Act of 1934, including our Annual Report on Form 10-K for the fiscal year ended July 31, 2017.2021.

Overview

We are a multinational holding company with operations primarily in the telecommunications and payment industries. We have two reportable business segments, Telecom Platform Services and net2phone-Unified Communications as a Service, or net2phone-UCaaS (formerly known as UCaaS). The Telecom Platform Services segment provides retail telecommunications and payment offerings as well as wholesale international long distance traffic termination. The net2phone-UCaaS segment is comprised of (1) cable telephony, (2) cloud-based private branch exchange, or PBX, services offered to enterprise customers exclusively through value-added resellers, service providers, telecom agents and managed service providers, (3) Session Initiation Protocol, or SIP, trunking, which supports inbound and outbound domestic and international calling from an IP PBX, and (4) PicuP, a highly-automated business phone service that answers, routes and manages voice calls. Telecom Platform Services and net2phone-UCaaS comprise our IDT Telecom division. Operating segments not reportable individually are included in All Other. All Other includes our real estate holdings and other smaller businesses.

Since our inception, we have derived the majority of our revenues and operating expenses from IDT Telecom’s businesses. IDT Telecom’s revenues represented 99.8% and 99.9% of our total revenues in the six months ended January 31, 2018 and 2017, respectively.

On or about March 26, 2018, we expect to spin-off our subsidiary Rafael Holdings, Inc., or RHI, to our stockholders, so that RHI will be a separate publicly traded company. Approval of the spin-off by our stockholders is not required. Our Board of Directors believes that the spin-off will allow RHI to better focus on its strategic mission and that its potential can be better realized as an independent entity. The spin-off of RHI will occur by way of a pro rata distribution of RHI’s capital stock to our stockholders. On the distribution date, each of our stockholders as of the record date for the distribution of March 13, 2018 will receive one share of RHI Class A common stock for every two shares of our Class A common stock and one share of RHI Class B common stock for every two shares of our Class B common stock. Completion of the RHI spin-off is subject to receipt of a favorable opinion as to the spin-off’s tax-free status.

RHI owns the commercial real estate assets held by us and interests in two clinical stage pharmaceutical companies. The commercial real estate holdings consist of our 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 us and certain affiliates. The pharmaceutical holdings include debt interests and warrants in Rafael Pharmaceuticals, Inc., or 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., or Lipomedix, a pharmaceutical development company based in Israel. In addition, prior to the spin-off, we intend to transfer assets to RHI such that, at the time of the spin-off, RHI will have approximately $44 million in cash, cash equivalents, and marketable securities, plus $6 million in hedge fund and other investments.

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Critical Accounting Policies

Our consolidated financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our significant accounting policies are described in Note 1 to the consolidated financial statements included in our Annual Report on Form 10-K for fiscal 2017. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses as well as the disclosure of contingent assets and liabilities. Critical accounting policies are those that require application of management’s most subjective or complex judgments, often as a result of matters that are inherently uncertain and may change in subsequent periods. Our critical accounting policies include those related to the allowance for doubtful accounts, goodwill, valuation of long-lived and intangible assets, income taxes and regulatory agency fees, and IDT Telecom direct cost of revenues—disputed amounts. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. For additional discussion of our critical accounting policies, see our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for fiscal 2017.

Recently Issued Accounting Standard Not Yet Adopted

In May 2014,June 2016, the Financial Accounting Standards Board or FASB, and the Internationalissued Accounting Standards Board jointly issued a comprehensive new revenue recognition standard that will supersede mostUpdate No. 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of the current revenue recognition guidance under U.S. GAAP and InternationalCredit Losses on Financial Reporting Standards, or IFRS. The goals of the revenue recognition project were to clarify and converge the revenue recognition principles under U.S. GAAP and IFRS and to develop guidance that would streamline and enhance revenue recognition requirements. Entities have the option of using either a full retrospective or modified retrospective approach for the adoption of the standard. We expect to adopt this standard on August 1, 2018 using the modified retrospective approach. We have identified our main revenue streams, which include Boss Revolution PIN-less international calling revenue, wholesale carrier services revenue, and domestic and international airtime top-up revenue. We are currently reviewing contracts and other relevant documents related to our wholesale carrier services revenue to determine how to apply the new standard to this revenue stream. We expect to continue our review and evaluation for our other revenue streams in fiscal 2018. Currently, we cannot reasonably estimate the impact that the adoption of the standard will have on our consolidated financial statements.

In January 2016, the FASB issued an ASU to provide more information about recognition, measurement, presentation and disclosure of financial instruments. The amendments in the ASU include, among other changes, the following: (1) equity investments (except those accounted for under the equity method or that result in consolidation) will be measured at fair value with changes in fair value recognized in net income, (2) a qualitative assessment each reporting period to identify impairment of equity investments without readily determinable fair values, (3) financial assets and financial liabilities will be presented separately by measurement category and form of financial asset on the balance sheet or the notes to the financial statements, and (4) an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities classified as available-for-sale in other comprehensive income. In addition, a practicability exception will be available for equity investments that do not have readily determinable fair values and do not qualify for the net asset value practical expedient. These investments may be measured at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer. Entities will have to reassess at each reporting period whether an investment qualifies for this practicability exception. We will adopt the amendments in this ASU on August 1, 2018. We are evaluating the impact that the ASU will have on our consolidated financial statements.

In February 2016, the FASB issued an ASU related to the accounting for leases. The new standard establishes a right-of-use, or ROU, model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. We will adopt the new standard on August 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are evaluating the impact that the new standard will have on our consolidated financial statements.

In June 2016, the FASB issued an ASUInstruments, that changes the impairment model for most financial assets and certain other instruments. For receivables, loans and other instruments, entities will be required to use a new forward-looking “expected loss”current expected credit loss model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses in a manner similar to current practice, except the losses will be recognized as allowances instead of reductions in the amortized cost of the securities. In addition, an entity will have to disclose significantly more information about allowances, credit quality indicators, and past due securities. The new provisions will be applied as a cumulative-effect adjustment to retained earnings. We will adopt the new standard on August 1, 2020.2023. We are evaluating the impact that the new standard will have on our consolidated financial statements.

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In November 2016, the FASB issued an ASU that includes specific guidance on the classification and presentation of changes in restricted cash and cash equivalents in the statement of cash flows. The amendments in this ASU require that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Amounts generally described as restricted cash or restricted cash equivalents will be included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the statement of cash flows. The ASU will be applied using a retrospective transition method to each period presented. We will adopt the amendments in this ASU on August 1, 2018. The adoption will impact our beginning of the period and end of the period cash and cash equivalents balance in our statement of cash flows, as well as our net cash provided by operating activities.

In January 2017, the FASB issued an ASU to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Under the current guidance, there are three elements of a business—inputs, processes, and outputs. While an integrated set of assets and activities (collectively referred to as a “set”) that is a business usually has outputs, outputs are not required to be present. In addition, all the inputs and processes that a seller uses in operating a set are not required if market participants can acquire the set and continue to produce outputs, for example, by integrating the acquired set with their own inputs and processes. The amendments in this ASU provide a screen to determine when a set is not a business. The screen requires that when substantially all of the fair value of the gross assets acquired (or disposed of) is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business. This screen reduces the number of transactions that need to be further evaluated. If the screen is not met, the amendments in this ASU (1) require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and (2) remove the evaluation of whether a market participant could replace missing elements. The amendments provide a framework to assist entities in evaluating whether both an input and a substantive process are present. The framework includes two sets of criteria to consider that depend on whether a set has outputs. Although outputs are not required for a set to be a business, outputs generally are a key element of a business; therefore, the FASB has developed more stringent criteria for sets without outputs. Lastly, the ASU narrows the definition of the term output. We will adopt the amendments in this ASU on August 1, 2018. We are evaluating the impact that the new standard will have on our consolidated financial statements.

In May 2017, the FASB issued an ASU to provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. Pursuant to this ASU, an entity should account for the effects of a modification unless all the following are met: (1) the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the original award immediately before the original award is modified (if the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification); (2) the vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and (3) the classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified. We will adopt the amendments in this ASU prospectively to an award modified on or after on August 1, 2018. We are evaluating the impact that the new standard will have on our consolidated financial statements.

In August 2017, the FASB issued an ASU intended to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. In addition, the ASU includes certain targeted improvements to simplify the application of hedge accounting guidance in U.S. GAAP. The amendments in this ASU are effective for us on August 1, 2019. Early application is permitted. Entities will apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements will be applied prospectively. We are evaluating the impact that this ASU will have on our consolidated financial statements.

Results of Operations

Three and Six Months Ended January 31, 2018 Compared to Three and Six Months Ended January 31, 2017

We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.

Coronavirus Disease (COVID-19)

We continue to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of our business, including our customers, employees, suppliers, vendors, and business partners.

Operationally, our employees transitioned to work-from-home during the third quarter of fiscal 2020 and, to a large degree, continue to work-from-home. Beginning in the fourth quarter of fiscal 2021, certain of our employees returned to work in our offices on a part-time basis. Our salespeople, customer service employees, technicians, and delivery employees continue to serve our independent retailers, channel partners, and customers with minimal interruption.

COVID-19 has had mixed financial impacts on our businesses beginning in the third quarter of fiscal 2020 and continuing through the first quarter of fiscal 2022. It drove increases in demand for our consumer offerings, principally BOSS Revolution Money Transfer, BOSS Revolution Calling and Mobile Top-Up, through our digital channels beginning in the latter half of March 2020. Subsequently, digital transaction levels have continued to increase relative to retailer originated transactions. Correspondingly, sales of consumer offerings originating through retailers and channel partners slowed modestly in late March and April 2020 before stabilizing in the fourth quarter of fiscal 2020. National Retail Solutions, or NRS, was immaterially impacted by the closure of some of its retailers in the third quarter of fiscal 2020, but most re-opened quickly and many attracted increased foot traffic following the onset of COVID-19 as local retailers are typically more accessible to pedestrian traffic than big box retailers. The resilience of local retailers has enabled NRS to continue to expand sales of terminals, payment processing, and advertising services. Carrier Services’ revenue, which had been declining as communications globally transition away from traditional international long-distance voice, declined more rapidly following the onset of COVID-19 as business communications shifted from calling to video conferencing and other collaboration platforms.

21

22

 

Telecom Platform Services Segment

BeginningAt the onset of the COVID-19 pandemic, the transition from offices to a more flexible workforce increased the demand for net2phone-UCaaS’ offerings. Customers transitioned from their on-premises phone system to net2phone-UCaaS’ cloud solution, ported their phone numbers, and quickly set-up their employees to work remotely. In April 2020, the release of Huddle, net2phone-UCaaS’ integrated video conferencing solution, significantly improved net2phone-UCaaS’ functionality for remote work, which also increased the demand for its services. COVID-19 had mixed financial impacts on net2phone-UCaaS’ business beginning in the third quarter of fiscal 2020. Its customer base growth slowed somewhat in the second half of fiscal 2020 in certain Latin American markets. However, Latin American sales rebounded in the first quarter of fiscal 2018,2021 and sales have remained strong in its United States and Canadian markets. In the Telecom Platform Services segment includes Consumer Phone Services,second half of fiscal 2021, COVID-19 cases increased in Latin America, in particular Brazil, and in Spain. This caused businesses to downsize or shutdown, which was previously reportedreduced its customer base and revenues. In the fourth quarter of fiscal 2021, the demand for flexible communications solutions for a hybrid workforce has resulted in an increase in new net2phone-UCaaS customers.

As of the date of this Quarterly Report, including the impact of COVID-19, we expect that our cash from operations and the balance of cash, cash equivalents, debt securities, and current equity investments that we held on October 31, 2021 will be sufficient to meet our anticipated working capital and capital expenditure requirements during the twelve month period ending October 31, 2022. However, the situation remains fluid and we cannot predict with certainty the potential impact of COVID-19 on our business, results of operations, financial condition, and cash flows.

Explanation of Performance Metrics

Our results of operations discussion include the following performance metrics: active point of sale, or POS, terminals, payment processing accounts, direct cost of revenues as a separate segment. Consumer Phone Services provides consumer local and long distance services in certain U.S. states. Comparative results have been reclassified and restated as if Consumer Phone Services was included in Telecom Platform Services in all periods presented.

Telecom Platform Services, which represented 97.8% and 97.9%percentage of our total revenues, in the six months ended January 31, 2018 and 2017, respectively, markets and distributes multiple communications and payment services across three broad business verticals:

●Retail Communications provides international long-distance calling products primarily to foreign-born communities worldwide, with its core markets in the United States;
●Wholesale Carrier Services is a global telecom carrier, terminating international long distance calls around the world for Tier 1 fixed line and mobile network operators, as well as other service providers; and
●Payment Services provides payment offerings, including international and domestic airtime top-up and international money transfer.

  Three months ended
January 31,		  Change  Six months ended
January 31,		  Change 
  2018  2017  $  %  2018  2017  $  % 
  (in millions) 
Revenues $387.1  $359.9  $27.2   7.5% $772.1  $721.4  $50.7   7.0%
Direct cost of revenues  334.6   308.0   26.6   8.6   668.6   617.7   50.9   8.2 
Selling, general and administrative  43.6   40.7   2.9   6.8   85.7   81.8   3.9   4.7 
Depreciation  4.1   4.0   0.1   3.5   8.1   8.2   (0.1)  (0.7)
Severance  0.2   —   0.2   nm   0.6   —   0.6   nm 
Income from operations $4.6  $7.2  $(2.6)  (36.2)% $9.1  $13.7  $(4.6)  (33.4)%

nm—not meaningful

Revenues. Telecom Platform Services’ revenues, minutes of use and average revenue per minute for the three months ended January 31, 2018 and 2016 consisted of the following:

  

Three months ended
January 31,

  

Change

  

Six months ended
January 31,

  

Change

 
  

2018

  

2017

  

$/#

  

%

  

2018

  

2017

  

$/#

  

%

 
  (in millions, except revenue per minute) 
Telecom Platform Services Revenues                                
Retail Communications $145.2  $154.6  $(9.4)  (6.1)% $291.4  $313.1  $(21.7)  (6.9)%
Wholesale Carrier Services  172.5   145.8   26.7   18.3   343.0   289.1   53.9   18.6 
Payment Services  69.4   59.5   9.9   16.5   137.7   119.2   18.5   15.5 
Total Telecom Platform Services revenues $387.1  $359.9  $27.2   7.5% $772.1  $721.4  $50.7   7.0%
Minutes of use                                
Retail Communications  1,416   1,708   (292)  (17.1)%  2,889   3,537   (648)  (18.3)%
Wholesale Carrier Services  5,385   5,057   328   6.5   10,601   9,405   1,196   12.7 
Total minutes of use  6,801   6,765   36   0.5%  13,490   12,942   548   4.2%
Average revenue per minute                                
Retail Communications $0.1026  $0.0905  $0.0121   13.3% $0.1009  $0.0885  $0.0124   14.0%
Wholesale Carrier Services  0.0320   0.0288   0.0032   11.1   0.0324   0.0307   0.0017   5.2 

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Retail Communications’ revenue decreased 6.1% and 6.9% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017, and Retail Communications’ minutes of use decreased 17.1% and 18.3% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017. The decrease in Retail Communications’ revenues and minutes of use was primarily due to increased competition from wireless network operators, mobile virtual network operators and alternative communications solutions such as over-the-top voice and messaging services. Revenue from our Boss Revolution international calling service, which is Retail Communications’ most significant offering, declined 4.2% and 4.8% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017, and Boss Revolution’s minutes of use declined 14.1% and 15.3% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017. In addition, the decrease in Retail Communications’seats, subscription revenue, and minutes of useuse.

NRS uses two metrics, among others, to measure the size of its customer base: active POS terminals and payment processing accounts. Active POS terminals are the number of POS terminals that have completed at least one transaction in the threecalendar month. It excludes POS terminals that are being installed. Payment processing accounts are NRS PAY accounts that can generate revenue. It excludes accounts that have been approved but not activated. NRS uses these two metrics in its analysis of revenue trends and six months ended January 31, 2018 compared to the similar periods in fiscal 2017 was due to continuing declines in Europe, South America and Asia, and continuing declines from traditional disposable calling cards in the U.S. Retail Communications’ revenue comprised 37.8% and 43.4% of Telecom Platform Services’ revenue in the six months ended January 31, 2018 and 2017, respectively.comparisons between periods.

Wholesale Carrier Services’ revenue increased 18.3% and 18.6% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017, and Wholesale Carrier Services’ minutes of use increased 6.5% and 12.7% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017, due to an increase in traditional carrier minutes of use and revenues. Wholesale Carrier Services’ revenue comprised 44.4% and 40.1% of Telecom Platform Services’ revenue in the six months ended January 31, 2018 and 2017, respectively.

Payment Services’ revenue increased 16.5% and 15.5% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017 due to increases in revenue from our international and domestic airtime top-up service, our international money transfer service (specifically transactions originating from our direct to consumer channels), and our National Retail Solutions point-of-sale terminal business. The increase in revenues from airtime top-up in the three and six months ended January 31, 2018 compared to the similar periods in fiscal 2017 reflected growth from new mobile partners and diversification of airtime top-up offerings. We have money transmitter licenses in 47 of the 49 states that require such a license, as well as in Puerto Rico and Washington, D.C. Future growth in Payment Services is expected from the Boss Revolution Money app that features international money transfers, airtime top-up and electronic gift cards. National Retail Solutions is also expected to continue expanding. Payment Services’ revenue comprised 17.8% and 16.5% of Telecom Platform Services’ revenue in the six months ended January 31, 2018 and 2017, respectively.

  Three months ended
January 31,		     Six months ended
January 31,		 
  2018  2017  Change  2018  2017  Change 
Telecom Platform Services                        
Direct cost of revenues as a percentage of revenues  86.5%  85.6%  0.9%  86.6%  85.6%  1.0%

Direct Cost of Revenues. Direct cost of revenues in Telecom Platform Services increased in the three and six months ended January 31, 2018 compared to the similar periods in fiscal 2017 mainly due to the 6.5% and 12.7% increase in Wholesale Carrier Services’ minutes of use in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017. Direct cost of revenues as a percentage of revenues is a financial metric that measures changes in Telecom Platform Servicesour direct cost of revenues relative to changes in revenues during the same period. Direct cost of revenues is the numerator and revenues are the denominator in this ratio. Direct cost of revenues as a percentage of revenues is a useful metric for monitoring and evaluating trends in the net contribution of our revenues.

net2phone-UCaaS’ cloud communications offering is priced on a per-seat basis, with each customer employee identity constituting a seat, and its subscription revenue is a monthly base fee per seat. The number of seats served and subscription revenue trends and comparisons between periods are used in the analysis of net2phone-UCaaS’ revenues and direct cost of revenues.

Minutes of use is a nonfinancial metric that measures aggregate customer usage during a reporting period. Minutes of use is an important factor in BOSS Revolution Calling’s and Carrier Services’ revenue recognition since satisfaction of our performance obligation occurs when the customer uses our service. Minutes of use trends and comparisons between periods are used in the analysis of revenues and direct cost of revenues.

Three Months Ended October 31, 2021 Compared to Three Months Ended October 31, 2020

Fintech Segment

Fintech, which represented 6.1% and 5.9% of our total revenues in the three months ended October 31, 2021 and 2020, respectively, is comprised of BOSS Revolution Money Transfer, a provider of international money remittance and related value/payment transfer services, and NRS, an operator of a nationwide POS network providing payment processing, digital advertising, transaction data, and ancillary services.

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Three months ended
October 31,

  

Change

 
  

2021

  

2020

  

$

  

%

 
             
Revenues:                
BOSS Revolution Money Transfer $12.5  $15.2  $(2.7)  (17.6)%
National Retail Solutions  10.1   4.9   5.2   104.3 
                 
Total revenues  22.6   20.1   2.5   12.4 
Direct cost of revenues  7.2   6.2   1.0   16.9 
Selling, general and administrative  14.8   10.4   4.4   42.9 
Depreciation and amortization  0.6   0.4   0.2   43.9 
                 
(Loss) income from operations $—  $3.1  $(3.1)  (101.4)%

Revenues. Revenues from BOSS Revolution Money Transfer decreased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily because the significant benefit from transient foreign exchange market conditions that materially improved BOSS Revolution Money Transfer’s revenues in the three months ended October 31, 2020 ceased by January 31, 2021. The revenue decline was partially offset by revenue from increased 90transaction volume in BOSS Revolution Money Transfer’s digital channel in the three months ended October 31, 2021 compared to the similar period in fiscal 2021.

Revenues from NRS increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 driven primarily by the expansion of its POS network, and 100revenue growth from its digital out-of-home advertising and payment processing services. Advertising and data revenue increased 130% to $4.3 million in the three months ended October 31, 2021 from $1.9 million in the three months ended October 31, 2020. Merchant services and other revenue, which includes payment processing services, increased 146% to $3.1 million in the three months ended October 31, 2021 from $1.3 million in the three months ended October 31, 2020. Active POS terminals increased 37% to 15,100 at October 31, 2021 from 11,100 at October 31, 2020. Payment processing accounts increased 118% to 6,800 at October 31, 2021 from 3,100 at October 31, 2020.

Direct Cost of Revenues. BOSS Revolution Money Transfer’s direct cost of revenues increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 due to increased direct cost of revenues in both its retailer and digital channels. NRS’ direct cost of revenues increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily due to the increase in its revenues.

  

Three months ended

October 31,

  
  2021  2020  Change 
         
Direct cost of revenues as a percentage of revenues  32.1%  30.9%  1.2%

Direct cost of revenues as a percentage of revenues increased 120 basis points in the three and six months ended JanuaryOctober 31, 2018, respectively,2021 compared to the similar periodsperiod in fiscal 2017 primarily2021 due to a shiftthe increase in the revenue mix within our Telecom Platform Services segment towards Wholesale Carrier Services, which typically exhibits higherBOSS Revolution Money Transfer’s direct cost of revenues as a percentage of revenues, than our Retail Communications’ offerings.

Selling, General and Administrative. Selling, general and administrative expense in our Telecom Platform Services segment increased in the three months ended January 31, 2018 compared to the similar period in fiscal 2017 primarily due to increases in employee compensation and credit card charges. Selling, general and administrative expense in our Telecom Platform Services segment increased in the six months ended January 31, 2018 compared to the similar period in fiscal 2017 primarily due to increases in employee compensation and credit card charges, partially offset by a decrease in marketing expense. The increase in credit card charges relates to increases in Boss Revolution and international money transfer direct to consumer transactions. As a percentage of Telecom Platform Services’ revenue, Telecom Platform Services’ selling, general and administrative expense decreased to 11.2% from 11.3% in the three months ended January 31, 2018 and 2017, respectively, and decreased to 11.1% from 11.3% in the six months ended January 31, 2018 and 2017, respectively.

Depreciation and Amortization. Depreciation and amortization expense increased 3.5% in the three months ended January 31, 2018 compared to the similar period in fiscal 2017, and was substantially unchanged in the six months ended January 31, 2018 compared to the similar period in fiscal 2017. Depreciation and amortization expense increased due to increases in depreciation of capitalized costs of consultants and employees developing internal use software.

Severance. In the three and six months ended January 31, 2018, Telecom Platform Services completed an adjustment to its workforce and incurred severance expense of $0.2 million and $0.6 million, respectively.

23

net2phone-UCaaS Segment

  Three months ended
January 31,		  Change  Six months ended
January 31,		  Change 
  2018  2017  $  %  2018  2017  $  % 
  (in millions) 
Revenues $8.3  $7.1  $1.2   16.2% $16.1  $14.3  $1.8   12.7%
Direct cost of revenues  2.6   2.9   (0.3)  (10.7)  5.1   6.2   (1.1)  (17.7)
Selling, general and administrative  5.3   3.8   1.5   40.0   10.0   7.1   2.9   41.0 
Depreciation  1.2   0.9   0.3   31.4   2.5   1.6   0.9   51.5 
Loss from operations $(0.8) $(0.5) $(0.3)  (70.3)% $(1.5) $(0.6) $(0.9)  (129.3)%

Revenues. net2phone-UCaaS’ revenue increased 16.2% and 12.7% in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017 primarily due to continued growth from its cloud-based communications offering – both in the U.S. and in South America. In light of the strong growth in the cloud-based communications offering in Argentina and Brazil, net2phone-UCaaS anticipates additional international expansion in South America and Asia in fiscal 2018.

  Three months ended
January 31,		     Six months ended
January 31,		    
  2018  2017  Change  2018  2017  Change 
net2phone-UCaaS                        
Direct cost of revenues as a percentage of revenues  31.5%  41.0%  (9.5)%  31.8%  43.5%  (11.7)%

Direct Cost of Revenues. Direct cost of revenues in net2phone-UCaaS decreased in the three and six months ended January 31, 2018 compared to the similar periods in fiscal 2017 primarily because of a decrease in the direct cost of revenues in cable telephony service, partially offset by an increase in the direct cost of revenues of cloud-based communications. Direct cost of revenues as a percentage of revenues in net2phone-UCaaS decreased 950 and 1,170 basis points in the three and six months ended January 31, 2018, respectively, compared to the similar periods in fiscal 2017 primarily because of the decrease in the direct cost of revenues in cable telephony service, as well as decreases inalthough NRS’ direct cost of revenues as a percentage of revenues in cloud-based communications and SIP trunking.

Selling, General and Administrative. Selling, general and administrative expense in our net2phone-UCaaS segment increaseddecreased in the three and six months ended JanuaryOctober 31, 20182021 compared to the similar periodsperiod in fiscal 2017 due to an increase in employee compensation resulting from an increase in the number of sales and information technology employees. We increased employees and compensation in our net2phone-UCaaS segment as we invested in the growth of net2phone-UCaaS’ lines of business.2021.

Depreciation. The increase in depreciation expense in the net2phone-UCaaS segment in the three and six months ended January 31, 2018 compared to the similar periods in fiscal 2017 was due to increases in depreciation of capitalized costs of consultants and employees developing internal use software to support our new products.

All Other

Currently, operating segments not reportable individually are included in All Other.

  Three months ended
January 31,		  Change  Six months ended
January 31,		  Change 
  2018  2017  $  %  2018  2017  $  % 
  (in millions) 
Revenues $0.5  $0.5  $—   5.8% $1.2  $1.0  $0.2   23.0%
Direct cost of revenues  —   —   —   —   —   —   —   — 
Selling, general and administrative  1.1   —   1.1   nm   2.0   —   2.0   nm 
Depreciation  0.4   0.4   —   3.4   0.8   0.8   —   3.2 
(Loss) income from operations $(1.0) $0.1  $(1.1)  nm  $(1.6) $0.2  $(1.8)  nm 

nm—not meaningful

Revenues.In April 2016, we entered into two leases with tenants for space in our headquarters building at 520 Broad Street, Newark, New Jersey. One lease is for a portion of the sixth floor for an eleven-year term, of which the first six years are non-cancellable. The other lease is for a portion of the ground floor and basement for a term of ten years and seven months. The tenant under this lease has the right to extend the term for three consecutive periods of five years each. Rental income from the first lease commenced in December 2016, and rental income from the second lease commenced in March 2017. In addition, in April 2017, we entered into a third lease for another portion of the ground floor for a term of ten years, four months. Rental income from the third lease commenced in March 2018.

24

Selling, General and Administrative. Selling, general and administrative expense increased in the three and six months ended JanuaryOctober 31, 20182021 compared to the similar periodsperiod in fiscal 20172021 primarily due to increases in expenses relatedsales commissions, employee compensation, and debit and credit card processing charges. The increase in card processing charges was the result of increased credit and debit card transactions through our BOSS Revolution Money app and other digital channels. As a percentage of Fintech’s revenue, Fintech’s selling, general and administrative expense increased to RHI, including Lipomedix,65.6% from 51.6% in the three months ended October 31, 2021 and our commercial real estate. We began consolidating Lipomedix2020, respectively.

Depreciation and Amortization. Depreciation and amortization expense increased in November 2017 after we purchased additional sharesthe three months ended October 31, 2021 compared to the similar period in fiscal 2020 primarily due to increased depreciation of capitalized costs of consultants and employees developing internal use software and increased depreciation of NRS’ POS equipment.

net2phone-UCaaS Segment

The net2phone-UCaaS segment, which represented 3.5% and 2.8% of our ownershiptotal revenues in the three months ended October 31, 2021 and 2020, respectively, is comprised of net2phone’s cloud communications offerings.

24

  

Three months ended
October 31,

  

Change

 
  

2021

  

2020

  

$

  

%

 
             
Revenues $12.9  $9.7  $3.2   33.1%
Direct cost of revenues  2.5   2.1   0.4   18.9 
Selling, general and administrative  13.3   10.4   2.9   27.8 
Depreciation and amortization  1.3   1.1   0.2   22.2 
                 
Loss from operations $(4.2) $(3.9) $(0.3)  (8.2)%

Revenues.  net2phone-UCaaS’s revenues increased in the three months ended October 31, 2021 compared to 50.6%the similar period in fiscal 2021 driven primarily by growth in the United States, although revenue increased in all net2phone-UCaaS regions. Seats served increased 38% to 244,000 at October 31, 2021 from 176,000 at October 31, 2020. Subscription revenue increased 38% to $12.5 million in the three months ended October 31, 2021 from $9.1 million in the three months ended October 31, 2020 led by growth in both the South American and North American regions. In the three months ended October 31, 2021, net2phone-UCaaS launched a HIPAA compliant program for certain of its communications and collaboration solutions and introduced net2phone Phone App for Teams. The app enables Microsoft Teams users to add voice capabilities into Teams environments without additional licenses.

Direct Cost of Revenues. Direct cost of revenues increased in the issuedthree months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily due to the increase in revenues, with the largest increase in Latin America.

  

Three months ended

October 31,

   
  2021  2020  Change 
         
Direct cost of revenues as a percentage of revenues  19.1%  21.4%  (2.3)%

Direct cost of revenues as a percentage of revenues decreased 230 basis points in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily because of a decrease in direct cost of revenues as a percentage of revenues in the United States. net2phone-UCaaS’ focus on mid-sized businesses, multi-channel strategies, and outstanding ordinary shareslocalized offerings generated revenue growth that exceeded the increase in direct cost of Lipomedix.revenues.

Selling, General and Administrative. Selling, general and administrative expense of Lipomedixincreased in the three and six months ended JanuaryOctober 31, 20182021 compared to the similar period in fiscal 2021 primarily due to increases in employee compensation and sales commissions. As a percentage of net2phone-UCaaS’ revenues, net2phone-UCaaS’ selling, general and administrative expenses decreased to 103.1% from 107.4% in the three months ended October 31, 2021 and 2020, respectively.

Depreciation and Amortization. The increase in depreciation and amortization expense in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 was $0.4 million.due to increased depreciation of net2phone-UCaaS’ telephone equipment leased to customers and increased depreciation of capitalized costs of consultants and employees developing internal use software.

 

Traditional Communications Segment

The Traditional Communications segment, which represented 90.4% and 91.3% of our total revenues in the three months ended October 31, 2021 and 2020, respectively, includes Mobile Top-Up, which enables customers to transfer airtime and bundles of airtime, messaging, and data to international and domestic mobile accounts, BOSS Revolution Calling, an international long-distance calling service marketed primarily to immigrant communities in the United States and Canada, and Carrier Services, a wholesale provider of international voice and SMS termination and outsourced traffic management solutions to telecoms worldwide. Traditional Communications also includes other smaller businesses, many in harvest mode.

Traditional Communications’ most significant revenue streams are from Mobile Top-Up, BOSS Revolution Calling, and Carrier Services. Mobile Top-Up and BOSS Revolution Calling are sold direct-to-consumers and through distributors and retailers. We receive payments for BOSS Revolution Calling, traditional calling cards, and Mobile Top-Up prior to providing the services. We recognize the revenue when services are provided to the customer. Traditional Communications’ revenues tend to be somewhat seasonal, with the second fiscal quarter (which contains Christmas and New Year’s Day) and the fourth fiscal quarter (which contains Mother’s Day and Father’s Day) typically showing higher minute volumes.

25

  Three months ended
October 31,		  Change 
  2021  2020  $/#  % 
             
Revenues:                
Mobile Top-Up $128.5  $95.8  $32.7   34.1%
BOSS Revolution Calling  106.0   117.3   (11.3)  (9.7)
Carrier Services  89.2   87.8   1.4   1.6 
Other  10.9   12.7   (1.8)  (13.3)
                 
Total revenues  334.6   313.6   21.0   6.7 
Direct cost of revenues  281.9   264.9   17.0   6.4 
Selling, general and administrative  30.0   29.2   0.8   2.6 
Depreciation and amortization  2.6   3.0   (0.4)  (15.3)
Severance  —   0.1   (0.1)  (66.4)
Other operating expense  —   0.5   (0.5)  (95.3)
                 
Income from operations $20.1  $15.9  $4.2   26.9%
                 
Minutes of use:                
BOSS Revolution Calling  804   927   (123)  (13.3)%
Carrier Services  2,060   2,917   (857)  (29.4)

Revenues. Revenues from Mobile Top-Up increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily from continued product expansion and growth in the business-to-business wholesale channel. In addition, our acquisition of a mobile top-up company in December 2020 contributed to our increased penetration into the market in Africa.

Revenues and minutes of use from BOSS Revolution Calling decreased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021. In fiscal 2021, COVID-19-related demand slowed the rate of decline in BOSS Revolution Calling revenue that we experienced but it was less significant in the three months ended October 31, 2021. BOSS Revolution Calling continues to be impacted by persistent, market-wide trends, including the proliferation of unlimited calling plans offered by wireless carriers and mobile virtual network operators, and the increasing penetration of free and paid over-the-top voice, video conferencing, and messaging services.

Revenues from Carrier Services increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 due to an increase in the average rate per minute. Minutes of use from Carrier Services decreased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 as communications globally continued to transition away from international voice calling. This trend was accelerated by the impact of COVID-19 as business communications shifted from calling to video conferencing and other collaboration platforms. We expect that Carrier Services will continue to be adversely impacted by these trends, and minutes of use and revenues will likely continue to decline from quarter-to-quarter, as we seek to maximize economics rather than necessarily sustain minutes of use or revenues.

Direct Cost of Revenues. Direct cost of revenues increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily due to increases in Mobile Top-Up’s and Carrier Services’ direct cost of revenues in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 as a result of the increases in revenues from those lines of business, partially offset by a decrease in and BOSS Revolution Calling’s direct cost of revenues in the three months ended October 31, 2021 compared to the similar period in fiscal 2021.

  

Three months ended

October 31,

   
  2021  2020  Change 
         
Direct cost of revenues as a percentage of revenues 84.3%  84.5%  (0.2)%

Direct cost of revenues as a percentage of revenues decreased 20 basis points in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 because of decreases in direct cost of revenues as a percentage of revenues in Mobile Top-Up, BOSS Revolution Calling, and Carrier Services in the three months ended October 31, 2021 compared to the similar period in fiscal 2021. The decreases in direct cost of revenues as a percentage of revenues at Mobile Top-Up and BOSS Revolution Calling were primarily due to the continued migration of customers to our digital platforms. The increased adoption of our digital, direct-to-consumer channels is expected to continue, which is expected to contribute to future reductions in direct cost of revenues as a percentage of revenues.

26

Selling, General and Administrative. Selling, general and administrative expense increased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 primarily due to increases in consulting expense and marketing expense, partially offset by decreases in employee compensation and stock-based compensation. As a percentage of Traditional Communications’ revenue, Traditional Communications’ selling, general and administrative expense decreased to 9.0% from 9.3% in the three months ended October 31, 2021 and 2020, respectively.

Depreciation and Amortization. Depreciation and amortization expense decreased in the three months ended October 31, 2021 compared to the similar period in fiscal 2021 as more of our property, plant, and equipment became fully depreciated, partially offset by depreciation of equipment added to our telecommunications network and capitalized costs of consultants and employees developing internal use software.

Severance Expense. In the three months ended October 31, 2021 and 2020, we incurred severance expense of $38,000 and $0.1 million, respectively.

Other Operating Expense. Other operating expense of $25,000 in the three months ended October 31, 2021 was for the indemnification of a net2phone cable telephony customer related to patent infringement claims brought against the customer. Other operating expense in the three months ended October 31, 2020 was for a settlement of a Carrier Services’ claim.

Corporate

  Three months ended October 31,  Change 
   2021   2020   $   % 
      (in millions)     
General and administrative $(2.0) $(2.2) $0.2   5.6%
Other operating (expense) gain, net  (0.1)  0.3   (0.4)  (120.7)
Loss from operations $(2.1) $(1.9) $(0.2)  (13.2)%

  

Three months ended
January 31,

  

Change

  

Six months ended
January 31,

  

Change

 
  

2018

  

2017

  

$

  

%

  

2018

  

2017

  

$

  

%

 
  (in millions) 
General and administrative $2.4  $2.8  $(0.4)  (13.4)% $4.8  $3.9  $0.9   23.7%
Other operating expense  0.9   0.9   —   4.8   1.6   1.1   0.5   49.3 
                                 
Loss from operations $3.3  $3.7  $(0.4)  (11.4)% $6.4  $5.0  $1.4   29.9%

Corporate costs include compensation, consulting fees, treasury, and accounts payable, tax and accounting services, human resources, and payroll, corporate purchasing, corporate governance including Board of Directors’ fees, internal and external audit, investor relations, corporate insurance, corporate legal, business development,charitable contributions, travel, and other corporate-related general and administrative expenses, including, among others, facilities costs, charitable contributions and travel.expenses. Corporate does not generate any revenues, nor does it incur any direct cost of revenues.

General and Administrative. The decrease in Corporate general and administrative expense decreased in the three months ended JanuaryOctober 31, 20182021 compared to the similar period in fiscal 2017 was2021 primarily due to decreases in employee compensation and stock-based compensation expense, partially offset by an increase in legal fees. The increase in Corporate general and administrative expense in the six months ended January 31, 2018 compared to the similar period in fiscal 2017 was primarily due to increases in legal fees and employee compensation, partially offset bybecause of a decrease in stock-based compensation expense.due to reductions in expense of deferred stock units granted in June 2019, as well as a decrease in employee compensation. As a percentage of our total consolidated revenues, Corporate general and administrative expense werewas 0.5% and 0.6% and 0.8% in the three months ended JanuaryOctober 31, 20182021 and 2017, respectively, and 0.6% and 0.5% in the six months ended January 31, 2018 and 2017,2020, respectively.

Other Operating Expense(Expense) Gain, net. On July 31, 2013, we completed a pro rata distribution of the common stock of our former subsidiary Straight Path Communications Inc., or Straight Path, to our stockholders. In the three and six months ended January 31, 2018, we incurred legal fees of $0.2 million and $1.0 million, respectively, related to the Straight Path stockholders’ putative class action and derivative complaint. In addition, As discussed in the three and six months ended January 31, 2018, we incurred fees of $0.6 million related to other legal matters. In the three and six months ended January 31, 2017, we incurred legal fees of $0.9 million and $1.1 million, respectively, related to a letter of inquiry from the Federal Communications Commission, or FCC, in connection with its investigation of potential license violations by Straight Path Spectrum LLC (a subsidiary of Straight Path and formerly a subsidiary of ours). (See Note 1117 to the Consolidated Financial Statements included in Item 1 to Part I of thethis Quarterly Report, we (as well as other defendants) have been named in a pending putative class action on Form 10-Q).behalf of the stockholders of our former subsidiary, Straight Path Communications Inc., or Straight Path, and a derivative complaint. We incurred legal fees of $1.0 million and $0.3 million in the three months ended October 31, 2021 and 2020, respectively, related to this action. Also, we recorded offsetting gains from insurance claims for this matter of $0.9 million and $0.6 million in the three months ended October 31, 2021 and 2020, respectively.

Consolidated

The following is a discussion of certain of our consolidated stock-based compensation expense,expenses, and our consolidated income and expense line items below income from operations.

Related Party Lease Costs. We lease office and parking space in a building and parking garage located at 520 Broad Street, Newark, New Jersey that is owned by our former subsidiary, Rafael Holdings, Inc., or Rafael. We also lease office space in Israel from Rafael. The Newark lease expires in April 2025 and the Israel lease expires in July 2025. We incurred lease costs of $0.5 million in each of the three months ended October 31, 2021 and 2020 in connection with the Rafael leases, which is included in consolidated selling, general and administrative expenses.

Stock-Based Compensation Expense. Stock-based compensation expense included in consolidated selling, general and administrative expenses was $1.0$0.3 million and $1.4$0.5 million in the three months ended JanuaryOctober 31, 20182021 and 2017, respectively, and $1.8 million and $2.1 million2020, respectively. The decrease in stock-based compensation expense in the sixthree months ended JanuaryOctober 31, 2018 and 2017, respectively.2021 compared to the similar period in fiscal 2021 was primarily due to reductions in expense of deferred stock units granted in June 2019. At JanuaryOctober 31, 2018,2021, unrecognized compensation cost related to non-vested stock-based compensation including stock options and restricted stock, was an aggregate of $4.1$0.4 million. The unrecognized compensation cost is expected to be recognized over the remaining vesting period that ends in 2020.fiscal 2024.

25

27

 

  

Three months ended
January 31,

  

Change

  

Six months ended
January 31,

  

Change

 
  2018  

2017

  

$

  

%

  

2018

  

2017

  

$

  

%

 
  (in millions) 
(Loss) income from operations $(0.5) $3.1  $(3.6)  (115.3)% $(0.4) $8.3  $(8.7)  (104.8)%
Interest income, net  0.3   0.3   —   (7.4)  0.6   0.6   —   6.4 
Other income (expense), net  0.4   (0.4)  0.8   188.3   (0.4)  2.0   (2.4)  (123.1)
Benefit from (provision for) income taxes  1.5   (1.7)  3.2   186.0   0.1   12.7   (12.6)  (99.2)
Net income (loss)  1.7   1.3   0.4   34.4   (0.1)  23.6   (23.7)  (100.5)
Net income attributable to noncontrolling interests  (0.2)  (0.4)  0.2   54.5   (0.5)  (0.8)  0.3   38.0 
Net income (loss) attributable to IDT Corporation $1.5  $0.9  $0.6   73.3% $(0.6) $22.8  $(23.4)  (102.5)%
  Three months ended
October 31,		  Change 
  2021  2020  $  % 
             
Income from operations $13.8  $13.3  $0.5   3.9%
Interest income (expense), net  —   (0.1)  0.1   131.7 
Other expense, net  (16.2)  (1.4)  (14.8)  nm 
Benefit from (provision for) income taxes  0.1   (3.4)  3.5   102.5 
Net (loss) income  (2.3)  8.4   (10.7)  (127.9)
Net income attributable to noncontrolling interests  (0.2)  (0.1)  (0.1)  (4.7)
                 
Net (loss) income attributable to IDT Corporation $(2.5) $8.3  $(10.8)  (129.9)%

nm—not meaningful

Other Income (Expense),Expense, net. Other income (expense),expense, net consists of the following:

  

Three months ended

October 31,

 
  

2021

  

2020

 
  (in millions) 
Foreign currency transaction losses $(0.3) $(0.4)
Equity in the net loss of investee  (0.6)  — 
Losses on investments  (14.5)  (0.9)
Other  (0.8)  (0.1)
Total other expense, net $(16.2) $(1.4)

  

Three months ended
January 31,

  

Six months ended
January 31,

 
  

2018

  

2017

  

2018

  

2017

 
  (in millions) 
Foreign currency transaction gains (losses) $0.2  $(0.7) $(0.6) $1.3 
Gain on sale of marketable securities  —   0.3   —   0.3 
Gain on investments  0.2   —   0.1   0.3 
Other  —   —   0.1   0.1 
Total other income (expense), net $0.4  $(0.4) $(0.4) $2.0 

Benefit from (Provision for) Income Taxes.On December 22, 2017, the U.S. government enacted “An ActFebruary 2, 2021, we paid $4.0 million to Provide for Reconciliation Pursuantpurchase shares of series B convertible preferred stock of a communications company (the equity method investee, or EMI), and on August 10, 2021, we paid $1.1 million to Titles II and Vpurchase shares of the Concurrent ResolutionEMI’s series C convertible preferred stock and additional shares of the EMI’s series B convertible preferred stock. The initial shares purchased represented 23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased our ownership to 26.57% on an as converted basis. We account for this investment using the equity method since the series B and series C convertible preferred stock are in-substance common stock, and we can exercise significant influence over the operating and financial policies of the EMI. We determined that on the Budget for Fiscal Year 2018”, which is commonly referred to as “The Tax Cutsdates of the acquisitions, there were differences of $3.4 million and Jobs Act”, or the Tax Act. The Tax Act provides for comprehensive tax legislation that reduces the U.S. federal statutory corporate tax rate from 35.0% to 21.0% effective January 1, 2018, requires companies to pay a one-time repatriation tax, or transition tax, on earnings of certain foreign subsidiaries that were previously tax deferred, and makes other changes to the U.S. income tax code. Due to$1.0 million between our July 31 fiscal year-end, the lower corporate income tax rate is phased in, resulting in a blended U.S. federal statutory tax rate of approximately 26.9% for our fiscal year ending July 31, 2018, and 21.0% for our fiscal years thereafter.

On December 22, 2017, the SEC issued Staff Accounting Bulletin No. 118, or SAB 118, expressing its views regarding the FASB’s Accounting Standards Codification 740,Income Taxes,investment in the reporting period that includesEMI and our proportional interest in the enactment dateequity of the Tax Act. SAB 118 recognizes that a registrant’s review of certain income tax effectsEMI, which represented our share of the Tax Act may be incomplete atEMI’s customer list on the time financial statements are issued for the reporting period that includes the enactment date, including interim periods therein. Specifically, SAB 118 allows a company to report provisional estimates in the reporting period that includes the enactment date if the company does not have the necessary information available, prepared, or fully analyzed for certain income tax effectsdates of the Tax Act. The provisional estimates would be adjusted during a measurement period not to exceed 12 months fromacquisitions. These basis differences are being amortized over the enactment date6-year estimated life of the Tax Act, at which time the accounting for the income tax effects of the Tax Act is required to be completed.customer list.

As of January 31, 2018, we had not completed our accounting for the income tax effects of the Tax Act; however, we had made a reasonable estimate of the effectThe losses on our existing AMT credit carryover. Because the AMT credit will be refundable if not utilized in the next four years, we reversed the valuation allowance that offset the AMT credit. As a result,investments in the three months ended JanuaryOctober 31, 2018, we recorded a noncurrent receivable and an income tax benefit of $3.3 million for the anticipated refund. The reduction in the corporate tax rate is not expected to impact our results of operations or financial position in the foreseeable future because the income tax benefit2021 was primarily from the reduced tax rate will be offset by the valuation allowance.

The transition tax is based on total post-1986 earnings and profits which were previously deferred from U.S. income taxes. We expect to utilize net operating loss carryforwards to offset any transition tax that we may incur. Therefore we did not record any provisional income tax expense for the transition tax for our foreign subsidiaries. At January 31, 2018, the undistributed earnings of our foreign subsidiaries continued to be permanently reinvested and we do not intend to repatriate any of the amounts. As a result, we have not provided for additional income or withholding taxes for the undistributed earnings or for any additional outside basis differences with respect to the foreign entities. We continue to review the anticipated impacts of the global intangible low taxed income, or GILTI, and base erosion anti-abuse tax, or BEAT, which are not effective until August 1, 2018. We have not recorded any impact associated with either GILTI or BEAT in the three months ended January 31, 2018.

26

We anticipate that our assumptions and estimates may change as a result of future guidance and interpretation from the Internal Revenue Service, the SEC, the FASB, and various other taxing jurisdictions. In particular, we anticipate that the U.S. state jurisdictions will continue to determine and announce their conformity or decoupling from the Tax Act, either in its entirety or with respect to specific provisions. Legislative and interpretive actions could result in adjustments to our provisional estimates when the accounting for the income tax effects of the Tax Act is completed. We will continue to evaluate the impact of the Tax Act on our financial statements, and will record the effect of any reasonable changes in our estimates or adjustments.

In the six months ended January 31, 2017, we determined that our valuation allowance on theunrealized losses of Elmion Netherlands B.V., or Elmion, a Netherlands subsidiary, was no longer required due to an internal reorganization that generated income and a projection that the income would continue. We recorded a benefit$12.5 million on shares of Rafael Class B common stock.

Benefit from income taxes of $16.6 million in the six months ended January 31, 2017 from the full recognition of the Elmion deferred tax assets.

(Provision for) Income Taxes.The change in income tax expense in the three and six months ended JanuaryOctober 31, 20182021 compared to the similar periodsperiod in fiscal 2017, excluding the benefits from income taxes in the three and six months ended January 31, 2018 and in the six months ended January 31, 2017,2021 was generallyprimarily due to the differences in the tax ratesamount of taxable (loss) income in the jurisdictions where the results were recorded.various taxing jurisdictions.

Net Income Attributable to Noncontrolling Interests. The change in the net income attributable to noncontrolling interests in the three and six months ended JanuaryOctober 31, 20182021 compared to the similar periodsperiod in fiscal 20172021 was primarilymostly due to new noncontrolling interests subsequent to October 31, 2020. On September 29, 2021, NRS sold shares of its Class B common stock to a decreasethird party that represents 2.5% of its outstanding capital stock on a fully diluted basis. As of May 31, 2021, we began consolidating a variable interest entity, or VIE, because we determined that we are the primary beneficiary of the VIE since we have the power to direct the activities of the VIE that most significantly impact its economic performance, and we have the obligation to absorb losses of and the right to receive benefits from the VIE that could potentially be significant to it. We do not currently own any interest in the VIE and thus the net income attributableincurred by the VIE was attributed to noncontrolling interests. On December 31, 2020, Howard S. Jonas, the noncontrolling interests in certain IDT Telecom subsidiaries, as well as net loss attributable toChairman of our Board of Directors, and Shmuel Jonas, our Chief Executive Officer, each received fifty restricted shares of net2phone 2.0, Inc., or net2phone 2.0, Class B common stock, which represents 5% of the noncontrolling interests in Lipomedix inoutstanding common stock of net2phone 2.0. net2phone 2.0 owns and operates our net2phone-UCaaS segment. Finally, beginning on December 3, 2020, we acquired an aggregate of 75% of the threeissued shares of a company that provides a digital platform facilitating supply and six months ended January 31, 2018. We began consolidating Lipomedix in November 2017.distribution of mobile airtime and data top-ups and other services across borders.

28

 

Liquidity and Capital Resources

General

We currentlyAs of the date of this Quarterly Report, including the impact of COVID-19, we expect our cash from operations in the next twelve months and the balance of cash, cash equivalents, debt securities, and marketable securitiescurrent equity investments that we held at Januaryon October 31, 2018 to2021 will be sufficient to meet our currently anticipated working capital and capital expenditure requirements during the twelve-month period ending JanuaryOctober 31, 2019.2022.

 

At JanuaryOctober 31, 2018,2021, we had cash, cash equivalents, debt securities, and marketable securitiescurrent equity investments of $100.3$159.3 million and working capital (current assets in excess of current liabilities) of $1.1$59.6 million. At January 31, 2018, we also had $8.8 million in investments in hedge funds, which were included in “Investments” in our consolidated balance sheet.

On or about March 26, 2018, we expect to spin-off our wholly-owned subsidiary, RHI, to our stockholders. RHI owns certain commercial real estate assets and interests in Rafael Pharma and Lipomedix. Prior to the spin-off, we intend to transfer assets to RHI such that, at the time of the spin-off, RHI will have approximately $44 million in cash, cash equivalents, and marketable securities, plus $6 million in hedge fund and other investments.

We treat unrestricted cash and cash equivalents held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC as substantially restricted and unavailable for other purposes. At JanuaryOctober 31, 2018,2021, “Cash and cash equivalents” in our consolidated balance sheet included an aggregate of $10.0$16.7 million held by IDT Payment Services, Inc. and IDT Payment Services of New York, LLC that was unavailable for other purposes.

  

Three months ended

October 31,

 
  

2021

  

2020

 
  (in millions) 
Cash flows (used in) provided by:        
Operating activities $(5.9) $18.8 
Investing activities  (7.8)  (27.3)
Financing activities  10.9  (2.7)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents  (2.3)  (1.9)
Decrease in cash, cash equivalents, and restricted cash and cash equivalents $(5.1) $(13.1)

We have not recorded U.S. income tax expense for foreign earnings, since such earnings are permanently reinvested outside the United States. Upon distribution of these foreign earnings to our domestic entities, we may be subject to U.S. income taxes and withholding of foreign taxes, however, it is not practicable to determine the amount, if any, which would be paid.

  

Six months ended
January 31,

 
  

2018

  

2017

 
  (in millions) 
Cash flows (used in) provided by:        
Operating activities $(27.0) $(0.8)
Investing activities  0.9   (21.0)
Financing activities  (10.2)  (9.3)
Effect of exchange rate changes on cash and cash equivalents  0.6   (0.9)
Decrease in cash and cash equivalents $(35.7) $(32.0)

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically trade accounts receivable and trade accounts payable.

27

Gross trade accounts receivable increased to $74.3$56.1 million at JanuaryOctober 31, 20182021 from $67.6$51.1 million at July 31, 2017 primarily due to a $6.8 million increase in IDT Telecom’s gross trade accounts receivable balance. The increase in IDT Telecom’s gross trade accounts receivable balance was2021 primarily due to amounts billed in in the sixthree months ended JanuaryOctober 31, 2018 in excess of2021 that were greater than collections during the period, and the effect of changes in foreign currency exchange rates.period.

Deferred revenue as a percentagearises from sales of total revenuesprepaid products and varies from period to period depending on the mix and the timing of revenues. Deferred revenue arises from IDT Telecom’s sales of prepaid products. Deferred revenue decreased to $71.8$41.3 million at JanuaryOctober 31, 20182021 from $76.5$42.3 million at July 31, 20172021 primarily due to a decreasedecreases in the BOSS Revolution Calling and Mobile Top-Up deferred revenue balances.

Customer deposit liabilities at IDT Telecom U.S. Boss Revolution balance.Financial Services Limited, our Gibraltar-based bank, decreased to $100.3 million at October 31, 2021 from $115.5 million at July 31, 2021. Our restricted cash and cash equivalents included $101.8 million and $115.8 million at October 31, 2021 and July 31, 2021, respectively, held by the bank.

On September 20, 2016, we receivedJune 21, 2018, the United States Supreme Court rendered a letter of inquiry fromdecision in South Dakota v. Wayfair, Inc., holding that a state may require a remote seller with no physical presence in the Enforcement Bureau ofstate to collect and remit sales tax on goods and services provided to purchasers in the FCC requestingstate, overturning certain information and materials related to an investigation of potential violations by Straight Path Spectrum LLC in connection with licenses to operate on the 28 GHz and 39 GHz bands of the Fixed Microwave Services.existing court precedent. We have cooperatedevaluated our state tax filings with the FCC in this matter and have respondedrespect to the letter of inquiry. The FCC could seek to fine or impose regulatory penalties or civil liability on us related to activities during the period of ownership by us.

The SeparationWayfair decision and Distribution Agreement related to the spin-off of Straight Path provides for us and Straight Path to indemnify each other for certain liabilities. We and Straight Path each communicated that it was entitled to indemnification from the other in connection with the inquiry described above and related matters. On October 24, 2017, we, Straight Path, Straight Path IP Group, Inc., or SPIP, and PR-SP IP Holdings LLC, or PR-SP, an entity owned by Howard Jonas, entered into a Settlement Agreement and Release that provides for, among other things, the settlement and mutual release of potential liabilities and claims that may exist or arise under the Separation and Distribution Agreement between us and Straight Path. In exchange for the mutual release, we paid Straight Path an aggregate of $16 million in cash, Straight Path transferred to us its majority ownership interest in Straight Path IP Group Holding, Inc., or New SPIP, which holds the equity of SPIP, the entity that holds intellectual property primarily related to communications over computer networks, subject to the right to receive 22% of the net proceeds, if any, received by SPIP from licenses, settlements, awards or judgments involving any of the patent rights and certain transfers of the patents or related rights, that will be retained by Straight Path’s stockholders (such equity interest, subject to the retained interest right, the “IP Interest”), and we undertook certain funding and other obligations related to SPIP. The Settlement Agreement and Release allocates (i) $10 million of the payment and the retained interest right to the settlement of claims and the mutual release and (ii) $6 million to the transfer of the IP Interest. In the accompanying consolidated statement of cash flowsare in the six months ended January 31, 2018, $10 millionprocess of the aggregate paymentreviewing our remittance practices. It is possible that one or more jurisdictions may assert that we have liability for periods for which we have not collected sales, use or other similar taxes, and if such an assertion or assertions were successful it could materially and adversely affect our business, financial position, and operating results. One or more jurisdictions may change their laws or policies to Straight Path was included inapply their sales, use or other similar taxes to our operations, and if such changes were made it could materially and adversely affect our business, financial position, and operating activities and $6 million of the aggregate payment was included in investing activities.results.

29

 

In August 2017, we entered into a Reciprocal Services Agreement with a telecom operator in Central America for a full range of services, including, but not limited to, termination of inbound and outbound international long-distance voice calls. We have committed to pay such telecom operator monthly committed amounts during the term of the agreement. In addition, under certain limited circumstances, the parties may renegotiate the amount of the monthly payments. In the event the parties do not agree on re-pricing terms after good faith negotiations, then either party has the right to terminate the agreement. Pursuant to the agreement, in September 2017, we deposited $11.75 million into an escrow account as security for the benefit of the telecom operator, which was included in operating activities in the accompanying consolidated statement of cash flows.

Investing Activities

Our capital expenditures were $10.9$4.4 million and $10.5$4.6 million in the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, respectively. We currently anticipate that total capital expenditures forin the twelve-month period ending JanuaryOctober 31, 20192022 will be between $21$18 million to $23$20 million. We expect to fund our capital expenditures with our net cash provided by operating activities and cash, cash equivalents, debt securities, and marketable securitiescurrent equity investments on hand.

On October 24, 2017,August 10, 2021, we soldpaid $1.1 million to purchase shares of the EMI’s series C convertible preferred stock and additional shares of the EMI’s series B convertible preferred stock. The purchases increased our entire majority interests in New SPIPownership of the EMI’s outstanding shares to PR-SP in exchange for $626.57% from 23.95% on an as converted basis.

Purchases of debt securities and equity investments were $6.3 million and the assumption by PR-SP of our funding and other obligations. As described above, $6 million of the aggregate payment to Straight Path that was allocated to the transfer of the IP Interest was included in investing activities in the six months ended January 31, 2018.

On December 23, 2016, we acquired all of the outstanding shares of Live Ninja, a business communications company that provides chat and messaging capabilities for small and medium-sized businesses with the ability to transfer a conversation from one channel of communications (for example, the web) to another (such as a mobile phone). We paid $2.0 million at closing, and expect to pay an additional $2.5 million through December 2018 for fixed and contingent payment obligations. The cash paid for the acquisition, net of cash acquired was $1.8 million.

28

In the six months ended January 31, 2017, we used cash of $8.3 million for additional investments. In September 2016, Rafael Pharma issued to our 50%-owned subsidiary, CS Pharma Holdings, LLC, or CS Pharma, its convertible Series D Note with a principal amount of $10 million, representing the $8 million investment funded on such date plus the conversion of $2 million principal amount convertible promissory notes issued in connection with a prior funding.

Purchases of marketable securities were $19.8 million and $17.2$29.3 million in the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, respectively. Proceeds from maturities and sales of marketabledebt securities and redemptions of equity investments were $31.6$3.9 million and $16.8$6.6 million in the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, respectively.

Financing Activities

In the six months ended January 31, 2018, we paid cash dividends of $0.38 per share on our Class A common stock and Class B common stock, or $9.4 million in total. In the six months ended January 31, 2017, we paid cash dividends of $0.38 per share on our Class A common stock and Class B common stock, or $8.8 million in total. On March 5, 2018, our Board of Directors declared a dividend of $0.09 per share for the second quarter of fiscal 2018 to holders of our Class A common stock and Class B common stock. The dividend will be paid on or about March 23, 2018 to stockholders of record as of the close of business on March 19, 2018. In light of our intention to continue to invest in our growth initiatives and the impact of the RHI spin-off on our balance sheet, our Board of Directors reduced the dividend for the second quarter of fiscal 2018 from the quarterly dividend of $0.19 per share that was paid in the first two quarters of fiscal 2018.

We distributed cash of $0.7$0.2 million and $0.8 million$28,000 in the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, respectively, to the holders of noncontrolling interests in certain of our subsidiaries.

Our subsidiary, IDT Telecom, Inc., entered into a credit agreement, dated July 12, 2012, with TD Bank, N.A. for a line of credit facility for up to a maximum principal amount of $25.0 million. The credit agreement was amended as of January 31, 2018. IDT Telecom may use the proceeds to finance working capital requirements, acquisitions and for other general corporate purposes. The line of credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum, at the option of IDT Telecom, at either (a) the U.S. Prime Rate less 125 basis points, or (b) the LIBOR rate adjusted by the Regulation D maximum reserve requirement plus 125 basis points. Interest is payable monthly and all outstanding principal and any accrued and unpaid interest is due on the maturity date of January 31, 2020. At January 31, 2018 and July 31, 2017, there were no amounts outstanding under the facility. We intend to borrow under the facility from time to time. In the sixthree months ended JanuaryOctober 31, 2018,2021 and 2020, we borrowedreceived proceeds from financing-related other liabilities of $2.3 million and nil, respectively.

In the three months ended October 31, 2021 and 2020, we repaid an aggregatefinancing-related other liabilities of $19.1$1.2 million underand $40,000, respectively.

On September 29, 2021, NRS sold 862,442 shares of its Class B common stock, which represents 2.5% of its outstanding capital stock on a fully diluted basis, to Alta Fox Opportunities Fund LP, or Alta Fox, for cash of $10 million. Alta Fox has the facility. IDT Telecom pays a quarterly unused commitment fee of 0.325% per annum on the average daily balance of the unusedright to request that NRS redeem all or any portion of the $25.0 million commitment. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain financial targets and ratiosNRS common shares that it purchased at the per share purchase price during a period of 182 days following the termfifth anniversary of this transaction. The redemption right shall terminate upon the lineconsummation of credit, including restrictions(i) a sale of NRS or its assets for cash or securities that are listed on dividend payments on IDT Telecoma national securities exchange, (ii) a public offering of NRS’ securities, or (iii) a distribution of NRS’ capital stock and restrictionsfollowing which NRS’ common shares are listed on IDT Telecom’s aggregate loans and advances to affiliates or subsidiaries.a national securities exchange.

WeIn the three months ended October 31, 2020, we received proceeds from the exercise of our stock options of $0.8$0.2 million in the six months ended January 31, 2017, for which we issued 73,47121,894 shares of our Class B common stock. There were no stock option exercises in the three months ended October 31, 2021.

In connection withWe have an existing stock repurchase program authorized by our investmentBoard of Directors for the repurchase of shares of our Class B common stock. The Board of Directors authorized the repurchase of up to 8.0 million shares in Rafael Pharma, our subsidiary CS Pharma issued member interests to third partiesthe aggregate. There were no repurchases under the program in exchange for cash investment in CS Pharma of $10 million. We hold a 50% interest in CS Pharma and we are the managing member. At Julythree months ended October 31, 2016, CS Pharma had received $8.8 million, which was included in “Other current liabilities” pending the issuance of the member interests.2021. In the sixthree months ended JanuaryOctober 31, 2017, CS Pharma received2020, we repurchased 463,792 shares of Class B common stock for an additional $1.2aggregate purchase price of $2.8 million. At October 31, 2021, 5.8 million fromshares remained available for repurchase under the sale of its member interests.stock repurchase program.

In the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, we paid $0.1 million$26,000 and $1.8 million,$7,000, respectively, to repurchase 5,170627 and 94,3381,053 shares, respectively, of our Class B common stock that were tendered by employees of ours to satisfy the employees’ tax withholding obligations in connection with the vesting of deferred stock units and lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date.

We haveOur subsidiary, IDT Telecom, Inc., or IDT Telecom, entered into a stock repurchase programcredit agreement, dated as of May 17, 2021, with TD Bank, N.A. for a revolving credit facility for up to a maximum principal amount of $25.0 million. IDT Telecom may use the proceeds to finance working capital requirements and for certain closing costs of the facility. At October 31, 2021 and July 31, 2021, IDT Telecom had not borrowed any amounts under this facility. The revolving credit facility is secured by primarily all of IDT Telecom’s assets. The principal outstanding bears interest per annum at the Intercontinental Exchange Benchmark Administration Ltd. LIBOR multiplied by the Regulation D maximum reserve requirement plus 125 to 175 basis points, depending upon IDT Telecom’s leverage ratio as computed for the repurchasemost recent fiscal quarter. Interest is payable monthly, and all outstanding principal and any accrued and unpaid interest is due in May 2024. IDT Telecom pays a quarterly unused commitment fee on the average daily balance of upthe unused portion of the $25.0 million commitment of 30 to an aggregate85 basis points, depending upon IDT Telecom’s leverage ratio as computed for the most recent fiscal quarter. IDT Telecom is required to comply with various affirmative and negative covenants as well as maintain certain targets based on financial ratios during the term of 8.0 million sharesthe revolving credit facility. As of our Class B common stock. There were no repurchases underOctober 31, 2021, IDT Telecom was in compliance with all of the program in the six months ended January 31, 2018 or 2017. At January 31, 2018, 8.0 million shares remained available for repurchase under the stock repurchase program.covenants.

Other Sources and Uses of Resources

On June 22, 2017, IDT Telecom, Inc. entered intoWe are considering spin-offs, sales of equity, and other potential dispositions of certain of our subsidiaries. Some of the transactions under consideration are in early stages and others are more advanced. A spin-off may include the contribution of a Share Purchase Agreement with JAR Fintech Limited and JAR Capital Limitedsignificant amount of cash, cash equivalents, debt securities, and/or equity securities to sell the subsidiary prior to the spin-off, which would reduce our capital stockresources. The sale of IDT Financial Services Holding Limited, a company incorporated under the lawssubsidiary’s equity in a private or public offering or other transaction would instead be a source of Gibraltar and a wholly-owned subsidiarycash to us or that subsidiary. In fiscal 2021, we announced that our Board of IDT Telecom,Directors had directed us to JAR Fintech Limited. IDT Financial Services Holding Limited is the sole shareholder of IDT Financial Services Limited, our Gibraltar-based bank. The Share Purchase Agreement provides for an aggregate purchase priceprepare for the outstanding equity interestspotential spin-off of IDT Financial Services Holding Limitedour net2phone cloud communications business. Management subsequently has stated that the preparations for the potential spin-off are progressing, with timing dependent on market conditions and other factors should our Board of £2.9 million ($4.1 millionDirectors authorize it. There is no assurance at January 31, 2018) plus an amount equal to the valuethis time that any of IDT Financial Services Holding Limited’s net assets, to be paid at closing, subject to adjustments relating to customer assets of IDT Financial Services Holding Limited. The net asset value of IDT Financial Services Holding Limited was $14.5 million at January 31, 2018. A portion of the purchase pricethese transactions will be placed in escrow and released to IDT Telecom once all of the conditions have been met under the Share Purchase Agreement. The sale is expected to close in the second quarter of calendar 2018, subject to regulatory approval and other customary conditions set forth in the Share Purchase Agreement. The remaining closing conditions are outside of our control and there can be no assurance that the sale will be completed.

29

30

 

We intend to, where appropriate, make strategic investments and acquisitions to complement, expand, and/or enter into new businesses. In considering acquisitions and investments, we search for opportunities to profitably grow our existing businesses and/or to add qualitatively to the range and diversification of businesses in our portfolio. At this time, we cannot guarantee that we will be presented with acquisition opportunities that meet our return on investmentreturn-on-investment criteria, or that our efforts to make acquisitions that meet our criteria will be successful.

Contractual Obligations and Other Commercial Commitments

The following table quantifies our future contractual obligations and other commercial commitments at JanuaryOctober 31, 2018:2021:

Payments Due by Period

(in millions)

 Total  Less than
1 year		  1–3 years  4–5 years  After 5 years 
Operating leases $6.4  $2.9  $2.1  $0.7  $0.7 
Revolving credit facility (1)  0.2   0.1   0.1   —   — 
Purchase commitments (2)  18.7   18.7   —   —   — 
                     
Total contractual obligations (3) $25.3  $21.7  $2.2  $0.7  $0.7 

Payments Due by Period

(in millions)

 

Total

  

Less than
1 year

  

1–3 years

  

4–5 years

  

After 5 years

 
Purchase commitments $4.0  $4.0  $—  $—  $— 
Connectivity obligations under service agreements  0.6   0.6   —   —   — 
Operating leases including short-term leases  8.9   3.1   4.4   1.2   0.2 
                     
Total contractual obligations (1) $13.5  $7.7  $4.4  $1.2  $0.2 

(1)Revolving credit facility includes estimated fees on the unused commitment at January 31, 2018.

 (2)(1)Purchase commitments include the aggregate commitment under the Reciprocal Services Agreement with a telecom operator in Central America for a full range of services, including, but not limited to, termination of inbound and outbound international long-distance voice calls.

(3)The above table does not include up to $10 million for the potential redemption of shares of NRS’ Class B common stock, an aggregate of $15.1$19.6 million in performance bonds, and $1.7 million in potential contingent consideration related to business acquisitions, due to the uncertainty of the amount and/or timing of any such payments.

Off-Balance Sheet Arrangements

We do not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources, other than the following.

In connection with our spin-off of Straight Path in July 2013, we and Straight Path entered into various agreements prior to the spin-off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with Straight Path after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Straight Path with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the spin-off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. Pursuant to the Separation and Distribution Agreement, we indemnify Straight Path and Straight Path indemnifies us for losses related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement. Pursuant to the Tax Separation Agreement, we indemnify Straight Path from all liability for taxes of Straight Path or any of its subsidiaries or relating to the Straight Path business with respect to taxable periods ending on or before the spin-off, from all liability for taxes of ours, other than Straight Path and its subsidiaries, for any taxable period, and from all liability for taxes due to the spin-off. (See Note 1117 to the Consolidated Financial Statements included in Item 1 to Part I of thethis Quarterly Report on Form 10-Q)Report).

In connection with our spin-off of Zedge, Inc., or Zedge, in June 2016, we and Zedge entered into various agreements prior to the spin-off including a Separation and Distribution Agreement to effect the separation and provide a framework for our relationship with Zedge after the spin-off, and a Tax Separation Agreement, which sets forth the responsibilities of us and Zedge with respect to, among other things, liabilities for federal, state, local and foreign taxes for periods before and including the spin-off, the preparation and filing of tax returns for such periods and disputes with taxing authorities regarding taxes for such periods. Pursuant to Separation and Distribution Agreement, among other things, we indemnify Zedge and Zedge indemnifies us for losses related to the failure of the other to pay, perform or otherwise discharge, any of the liabilities and obligations set forth in the agreement. Pursuant to the Tax Separation Agreement, among other things, Zedge indemnifies us from all liability for taxes of Zedge and any of Zedge’s subsidiaries or relating to Zedge’s business accruing after the spin-off, and we indemnify Zedge from all liability for taxes of Zedge and any of Zedge’s subsidiaries or relating to Zedge’s business with respect to taxable periods ending on or before the spin-off.

IDT Payment Services and IDT TelecomWe have performance bonds issued through third parties for the benefit of various states in order to comply with the states’ financial requirements for money remittance licenses and telecommunications resellers, respectively.resellers. At JanuaryOctober 31, 2018,2021, we had aggregate performance bonds of $15.1$19.6 million outstanding.

30

Item 3.Item 3.Quantitative and Qualitative Disclosures About Market Risks

Foreign Currency Risk

Revenues from our international operations were 32%28% and 31%14% of our consolidated revenues forin the sixthree months ended JanuaryOctober 31, 20182021 and 2017,2020, respectively. On February 1, 2021, we changed the geographic sourcing of certain revenues from the United States to the United Kingdom. A significant portion of these revenues is in currencies other than the U.S. Dollar. Our foreign currency exchange risk is somewhat mitigated by our ability to offset a portion of these non-U.S. Dollar-denominated revenues with operating expenses that are paid in the same currencies. While the impact from fluctuations in foreign exchange rates affects our revenuerevenues and expenses denominated in foreign currencies, the net amount of our exposure to foreign currency exchange rate changes at the end of each reporting period is generally not material.

31

 

Investment Risk

In addition to, but separate from our primary business, weWe hold a portion of our assets in marketabledebt and equity securities, andincluding hedge funds, for strategic and speculative purposes. At JanuaryOctober 31, 2018,2021, the carrying value of our marketabledebt and equity securities and investments in hedge funds was $46.2an aggregate of $54.3 million, and $8.8 million, respectively.which represented 10.7% of our total assets. Investments in marketabledebt and equity securities and hedge funds carry a degree of risk and depend to a great extent on correct assessments of the future course of price movements of securities and other instruments. There can be no assurance that our investment managers will be able to accurately predict these price movements. The securities markets have in recent years been characterized by great volatility and unpredictability. Accordingly, the value of our investments may go down as well as up and we may not receive the amounts originally invested upon redemption.

Item 4.Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and PrincipalChief Financial Officer have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on this evaluation, our Chief Executive Officer and PrincipalChief Financial Officer have concluded that our disclosure controls and procedures were effective as of JanuaryOctober 31, 2018.2021.

Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting during the quarter ended JanuaryOctober 31, 20182021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

31

32

 

PART II. OTHER INFORMATION

Item 1.Item 1.Legal Proceedings

Legal proceedings in which we are involved are more fully described in Note 1117 to the Consolidated Financial Statements included in Item 1 to Part I of this Quarterly Report on Form 10-Q.Report.

Item 1A.Item 1A.Risk Factors

There are no material changes from the risk factors previously disclosed in Item 1A to Part I of our Annual Report on Form 10-K for the fiscal year ended July 31, 2017.2021.

Item 2.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides information with respect to purchases by us of our shares during the secondfirst quarter of fiscal 2018:2022:

  

Total
Number of
Shares
Purchased

  

Average
Price
per Share

  

Total Number
of Shares
Purchased as
part of
Publicly
Announced
Plans or
Programs

  

Maximum
Number of
Shares that
May Yet Be
Purchased
Under the
Plans or
Programs (1)

 
November 1-30, 2017  —  $—   —   8,000,000 
December 1-31, 2017  —  $—   —   8,000,000 
January 1–31, 2018 (2)  3,502  $10.77   —   8,000,000 
                 
Total  3,502  $10.77   —     
   

Total

Number of
Shares

Purchased

  

Average

Price

per Share

  

Total Number
of Shares

Purchased as
part of

Publicly

Announced

Plans or

Programs

  

Maximum

Number of

Shares that

May Yet Be

Purchased

Under the

Plans or

Programs (1)

 
August 1-31, 2021  —  $—   —   5,768,497 
September 1–30, 2021  627  $40.68   —   5,768,497 
October 1–31, 2021  —  $—   —   5,768,497 
                 
Total  627  $40.68   —     

(1)On January 22, 2016, our Board of Directors approved a stock repurchase program to purchase up to 8.0 million shares of our Class B common stock and cancelled the previous stock repurchase program originally approved by the Board of Directors on June 13, 2006, which had 4,636,741 shares remaining available for repurchase.
(2)Consists of shares of Class B common stock that were tendered by employees of ours to satisfy the employees’ tax withholding obligations in connection with the lapsing of restrictions on awards of restricted stock. Such shares were repurchased by us based on their fair market value on the trading day immediately prior to the vesting date and the proceeds utilized to pay the taxes due upon such vesting event.

Item 3.Item 3.Defaults Upon Senior Securities

None

Item 4.Item 4.Mine Safety Disclosures

Not applicable

Item 5.Item 5.Other Information

None

None

32

Item6.Item 6Exhibits.Exhibits

Exhibit

Number

 

Description

 
31.1* Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
 
31.2* Certification of PrincipalChief Financial Officer pursuant to 17 CFR 240.13a-14(a), as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.
 
32.1* Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
32.2* Certification of PrincipalChief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.
 
101.INS*101.SCH* XBRL Instance Document
101.SCH*XBRL Taxonomy Extension Schema Document
 
101.CAL* XBRL Taxonomy Extension Calculation Linkbase Document
 
101.DEF* XBRL Taxonomy Extension Definition Linkbase Document
 
101.LAB* XBRL Taxonomy Extension Label Linkbase Document
 
101.PRE* XBRL Taxonomy Extension Presentation Linkbase Document
104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

 

*Filed or furnished herewith.

* Filed or furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

IDT CORPORATION
March 12, 2018December 10, 2021By:

/s/  Shmuel Jonas

SHMUEL JONAS

Shmuel Jonas

Chief Executive Officer

March 12, 2018December 10, 2021By:

/s/ Marcelo Fischer

MARCELO FISCHER

Marcelo Fischer

Senior Vice President of Finance

(PrincipalChief Financial Officer)Officer

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