Related Party Transactions

12 Months Ended

Jul. 31, 2016

Related Party Transactions [Abstract]

Related Party Transactions

Note 9—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, to distribute the Company’s common stock to IDT’s stockholders, and set forth certain understandings related to the Spin-Off. 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 agreed to indemnify IDT and IDT has agreed to indemnify 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 Fiscal 2014, IDT paid approximately $386,000 pursuant to this obligation, which was recorded as “Income from IDT Corporation payments of liabilities” in the consolidated statement of operations. No payments were received in Fiscal 2015 or Fiscal 2016.

At the Spin-Off, the Company entered into a Transition Services Agreement (“TSA”) with IDT, pursuant to which IDT has 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. As of January 1, 2015, all of these services are provided by other vendors. The Company and IDT extended the TSA enabling the Company to seek input from IDT on an ad hoc basis if the Company deemed it necessary. No services were provided under the TSA since January 1, 2015.

IDT charged the Company for certain transactions and allocates routine expenses based on specific items prior to January 1, 2015. Specifically, IDT allocated payroll, benefits, insurance, facilities, and other expenses to the Company, which were included in “Selling, general and administrative expense” in the consolidated statements of operations. In addition, IDT charged the Company for regulatory fees, connectivity charges, and legal expenses, which were included in “Direct cost of revenues” in the consolidated statements of operations.

In July 2015, legal expenses totaling $513,481 that were paid by IDT on behalf of the Company were forgiven. The Company recognized the transaction as an increase of additional paid-in capital.

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

Year ended July 31, (in thousands)	2016		2015
Balance at beginning of year	$	—	$	6
Payments by IDT on behalf of the Company		—		464
Deferred taxes offset against IDT net operating losses		—		—
Cash repayments, net of advances		—		(470	)
Amount due to IDT contributed to equity		—		—
Balance at end of year	$	—	$	—
Average balance during the year	$	—	$	56