Related Party Transactions

12 Months Ended

Jul. 31, 2014

Related Party Transactions [Abstract]

Related Party Transactions

Note 8—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 also 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.

The Company also entered into a Transition Services Agreement, pursuant to which IDT will provided certain services, 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. The majority of these services have been moved to third party vendors, and the remaining services we are receiving from IDT are expected to conclude by January 1, 2015.

IDT charged the Company for certain transactions and allocates routine expenses based on company specific items. In addition, IDT controlled the flow of the Company’s treasury transactions. In fiscal 2014 and fiscal 2013, IDT allocated to the Company an aggregate of $911,000 and $955,000, respectively, for payroll, benefits, insurance, facilities and other expenses, which were included in “Selling, general and administrative expense” in the combined and consolidated statements of operations. In addition, in fiscal 2014 and fiscal 2013, IDT charged the Company an aggregate of $29,000 and $53,000, respectively, for regulatory fees, connectivity charges and legal expenses, which were included in “Direct cost of revenues” in the combined and consolidated statements of operations. In fiscal 2013, the Company was included in IDT’s consolidated federal income tax return.

The change in the Company’s liability to IDT was as follows:

Year ended July 31  (in thousands)	2014			2013
Balance at beginning of year	$	—		$	—
Payments by IDT on behalf of the Company		940			1,008
Deferred taxes offset against IDT net operating losses		—			12
Cash repayments, net of advances		(934	)		1,737
Amount due to IDT contributed to equity		—			(2,757	)
Balance at end of year	$	6		$	—
Average balance during the year	$	111		$	1,099