Note 3—Settlement of Claims with IDT and Sale of Straight Path IP Group

On April 9, 2017, the Company and IDT entered into the IDT Term Sheet, providing for the settlement and mutual release of potential indemnification claims asserted by each of the Company and IDT in connection with liabilities that may exist or arise relating to the subject matter of the investigation by (including but not limited to fines, fees or penalties imposed by) the FCC (the “Mutual Release”). On October 24, 2017, the Company, IDT and other parties entered into a Settlement Agreement and Release (the “IDT Settlement Agreement”) and related agreements, and consummated the settlement.

Pursuant to the IDT Settlement Agreement, in exchange for the Mutual Release, the parties effected the following actions:

	1.	IDT paid the Company $10 million and the right to receive 22% of the net proceeds of the Straight Path IP Group patent portfolio (as described in more detail below) in settlement of various claims. Such payment was deemed to be a tax-free contribution to capital by IDT effective prior to the Spinoff;

	2.	IDT paid the Company $6 million for the Company’s ownership interest in Straight Path IP Group; and

	3.	The Company created a trust (the beneficial interests in which will be owned by Class B common stockholders of the Company) that will be entitled to receive 22 percent of the net proceeds, if any, received by Straight Path IP Group from any license, and certain transfers or assignments of any of the patent rights held, or any settlement, award or judgment involving any of the patent rights (including any net proceeds received after the closing of the Merger). The Company agreed to contribute $4,500,000 to the trust. Such contribution has been classified as a dividend. As of October 31, 2017 and to the date of the filing of this report, the Company contributed $750,000. The trust agreement provides that the Company will pay the remaining $3.75 million at the earlier of (i) the closing date under the Verizon Merger Agreement or (ii) August 11, 2018.

As discussed above, we sold our interest in Straight Path IP Group and the Company recognized a gain of $2,276,000 net of noncontrolling interests. Such gain was classified as an increase to additional paid-in capital due to the voting interests Howard Jonas has in each entity.

The Company incurred costs totaling approximately $1,029,000 related to the negotiation and execution of the IDT Settlement Agreement. These costs were included in calculating the gain recognized by the Company.

As a result of the sale, the operations of Straight Path IP Group are classified as discontinued operations in the consolidated statements of operations. The statement of operations for Fiscal 2017 have been restated to conform to the current presentation. The discontinued operations of Straight Path IP Group for Fiscal 2018 and Fiscal 2017 are summarized below:

	Three Months Ended
	October 31,
	2017			2016
	(in thousands)

Revenues	$	-		$	-

Costs and expenses:
Selling, general and administrative		1,294			875

Total costs and expenses		1,294			875

Loss from operations		(1,294	)		(875	)

Other income (expense):
Interest expense including amortization of debt discounts		(195	)		-
Interest income		-			2

Total other income (expense)		(195	)		2

Loss provision for income taxes		(1,489	)		(873	)
Provision for income taxes		-			(1	)

Net loss		(1,489	)		(874	)

Loss attributable to noncontrolling interests		229			124

Net loss from discontinued operations attributable to Straight Path Communications Inc.	$	(1,260	)	$	(750	)