Related Party Transactions

9 Months Ended

Apr. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Note 5—Related Party Transactions

In connection with the Spin-Off, the Company and IDT entered into a Separation and Distribution Agreement and a Tax Separation Agreement to complete the separation of the Company’s businesses from IDT and to distribute the Company’s common stock to IDT’s stockholders. These agreements govern the relationship between the Company and IDT after the distribution and provide for the allocation of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the distribution. These agreements reflect terms between affiliated parties established without arms-length negotiation. The Company believes that the terms of these agreements equitably reflect the benefits and costs of the Company’s ongoing relationships with IDT.

Pursuant to the Separation and Distribution Agreement, the Company has indemnified IDT and IDT has indemnified the Company 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. The Separation and Distribution Agreement includes, among other things, that IDT is obligated to reimburse the Company for the payment of any liabilities of the Company arising or related to the period prior to the Spin-Off. In the three and nine months ended April 30, 2014, IDT paid $0.3 million and $0.4 million, respectively, pursuant to this obligation, which was recorded as “Income from IDT Corporation payments of liabilities” in the combined and consolidated statement of operations.

The Company also entered into a Transition Services Agreement, pursuant to which IDT is continuing to provide certain services through July 31, 2014, including, but not limited to information and technology, human resources, payroll, tax, accounts payable, purchasing, treasury, financial systems, investor relations, legal, corporate accounting, internal audit, and facilities for an agreed period following the Spin-Off.

Prior to the Spin-Off, IDT charged the Company for certain transactions and allocated routine expenses based on company specific items. Specifically, IDT allocated payroll, benefits, insurance, facilities and other expenses to the Company, which were included in “Selling, general and administrative” expense in the combined and consolidated statements of operations. In addition, both prior to and subsequent to the Spin-Off, IDT charged the Company for regulatory fees, connectivity charges and legal expenses, which was included in “Direct cost of revenues” in the combined and consolidated statements of operations.

Following are the amounts that IDT charged the Company pursuant to the Transition Services Agreement or through intercompany charges for periods prior to the Spin-Off:

	Three Months Ended April 30,				Nine Months Ended April 30,
	2014		2013		2014		2013
	(in thousands)
Included in direct cost of revenues	$	12	$	15	$	39	$	40
Included in selling, general and administrative		105		162		698		478