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Leases

12 Months Ended

Jul. 31, 2020

Note 3—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 include 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 the lease or terminate the lease.

The adoption of ASC 842 resulted in the recognition of operating lease liabilities of $12.4 million and operating ROU assets of the same amount as of August 1, 2019 based on the present value of the remaining minimum rental payments associated with the Company’s leases.

net2phone has equipment leases that were classified as capital leases under Topic 840 and are finance leases under ASC 842. net2phone is also the lessor in various equipment leases that were classified as sales-type capital leases under Topic 840, that are classified as sales-type finance leases under ASC 842. The assets and liabilities related to these finance leases are not material to the Company’s consolidated balance sheets.

On March 26, 2018, the Company completed a pro rata distribution of the common stock that the Company held in the Company’s former subsidiary, Rafael Holdings, Inc. (“Rafael”) to the Company’s stockholders of record as of the close of business on March 13, 2018 (the “Rafael Spin-Off”). The Company leases office space and parking in Rafael’s building and parking garage located at 520 Broad St, Newark, New Jersey. The Company also leases office space in Israel from Rafael. The Newark lease expires in April 2025 and the Israel lease expires in July 2025. In fiscal 2020 and fiscal 2019, the Company incurred lease costs of $1.9 million and $1.8 million, respectively, in connection with the Rafael leases, which is included in operating lease cost in the table below.

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

Year ended July 31 (in thousands)	2020
Operating lease cost	$	2,832
Short-term lease cost		246
TOTAL LEASE COST	$	3,078

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	2,745

July 31	2020
Weighted-average remaining lease term-operating leases		4.2 years
Weighted-average discount rate-operating leases		3.12	%

The Company’s aggregate operating lease liability was as follows:

July 31 (in thousands)	2020
Operating lease liabilities included in “Other current liabilities”	$	2,350
Operating lease liabilities included in noncurrent liabilities		7,353
TOTAL	$	9,703

Future minimum maturities of operating lease liabilities were as follows:

(in thousands)
Year ending July 31:
2021	$	2,621
2022		2,453
2023		2,072
2024		1,827
2025		1,418
Thereafter		—
Total lease payments		10,391
Less imputed interest		(688	)
Total operating lease liabilities	$	9,703

The Company adopted ASC 842 on August 1, 2019 using the modified retrospective transition approach, which requires the following disclosures for periods presented prior to adoption. In fiscal 2019, rental expense under operating leases in accordance with Topic 840 was $4.8 million. The future minimum payments for operating leases as of July 31, 2019 were as follows:

(in thousands)
Year ending July 31:
2020	$	6,876
2021		3,558
2022		2,585
2023		2,108
2024		1,869
Thereafter		1,459
Total payments	$	18,455