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Equity Investments | 12 Months Ended
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Jul. 31, 2023
Cash and Cash Equivalents [Abstract] |
Equity Investments | Note 8—Equity Investments Equity investments consist of the following: Schedule of Equity Investments
July 31 (in thousands) |  | 2023 |  |  | 2022 |
Zedge, Inc. Class B common stock, 42,282 shares at July 31, 2023 and 2022 |  | $ | 89 |  |  | $ | 117 |
Rafael Holdings, Inc. Class B common stock, 278,810 and 290,214 shares at July 31, 2023 and 2022, respectively |  |  | 558 |  |  |  | 586 |
Other marketable equity securities |  |  | 1,497 |  |  |  | 4,089 |
Fixed income mutual funds |  |  | 4,054 |  |  |  | 12,299 |
Current equity investments |  | $ | 6,198 |  |  | $ | 17,091 |
Visa Inc. Series C Convertible Participating Preferred Stock (“Visa Series C Preferred”) |  | $ | 1,263 |  |  | $ | 1,132 |
Visa Inc. Series A Convertible Participating Preferred Stock (“Visa Series A Preferred”) |  |  | — |  |  |  | 1,230 |
Convertible preferred stock—equity method investment |  |  | 2,784 |  |  |  | 1,001 |
Hedge funds |  |  | 3,002 |  |  |  | 3,238 |
Other |  |  | 2,825 |  |  |  | 825 |
Noncurrent equity investments |  | $ | 9,874 |  |  | $ | 7,426 |
The Company received the shares of Zedge Inc. (“Zedge”) Class B common stock and 28,320 of the shares of Rafael Class B common stock set forth in the table above in connection with the lapsing of restrictions on Zedge and Rafael restricted stock held by certain of the Company’s employees and the Company’s payment of taxes on behalf of its employees related thereto. The Company purchased 261,894 shares of Rafael Class B common stock in fiscal 2021 (see below). The Company sold 11,404 shares of Rafael Class B common stock in November 2022. Howard S. Jonas is the Vice-Chairman of the Board of Directors of Zedge. On December 7, 2020, the Company purchased from Rafael 218,245 newly issued shares of Rafael’s Class B common stock and a warrant to purchase up to 43,649 shares of Rafael’s Class B common stock at an exercise price of $22.91 at any time on or after December 7, 2020 and on or prior to June 6, 2022. The aggregate purchase price of $5.0 million was allocated $4.6 million to the shares and $0.4 million to the warrant based on their relative purchase date fair values. The fair value of the warrant on the acquisition date was estimated using a Black-Scholes valuation model that represented a Level 3 measurement. The purchase price was based on a per share price of $22.91, which was the closing price of Rafael’s Class B common stock on the New York Stock Exchange on the trading day immediately preceding the purchase date. On March 15, 2021, the Company exercised the warrant in full and purchased 43,649 shares of Rafael’s Class B common stock for cash of $1.0 million. In June 2016, upon the acquisition of Visa Europe Limited by Visa, Inc. (“Visa”), IDT Financial Services received 1,830 shares of Visa Series C Preferred among other consideration. At July 31, 2020, each share of Visa Series C Preferred was convertible into 13.722 shares of Visa Class A common stock (the “Conversion Adjustment), subject to certain conditions, and will be convertible at the holder’s option beginning in June 2028. On September 24, 2020, in connection with Visa’s first mandatory release assessment, the Company received 125 shares of Visa Series A Preferred and the Conversion Adjustment for Visa Series C Preferred was reduced to 6.861. In June 2021, the 125 shares of Visa Series A Preferred were converted into 12,500 shares of Visa Class A common stock, which the Company sold for $2.9 million. On July 28, 2022, in connection with Visa’s second mandatory release assessment, the Company received 58 shares of Visa Series A Preferred and the Conversion Adjustment for Visa Series C Preferred was reduced to 3.645. In August 2022, the 58 shares of Visa Series A Preferred were converted into 5,800 shares of Visa Class A common stock, which the Company sold for $1.3 million. The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows: Schedule of Carrying Value of Equity Investments
Year ended July 31 (in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance, beginning of period |  | $ | 1,501 |  |  | $ | 2,743 |  |  | $ | 4,109 |
Redemption for Visa mandatory release assessment |  |  | — |  |  |  | (1,230 | ) |  |  | (1,870 | )
Purchase |  |  | — |  |  |  | 100 |  |  |  | — |
Adjustment for observable transactions involving a similar investment from the same issuer |  |  | 131 |  |  |  | (103 | ) |  |  | 510 |
Redemptions |  |  | — |  |  |  | (9 | ) |  |  | (6 | )
Impairments |  |  | — |  |  |  | — |  |  |  | — |
BALANCE, END OF PERIOD |  | $ | 1,632 |  |  | $ | 1,501 |  |  | $ | 2,743 |
IDT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company increased or decreased the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. Unrealized losses and gains for all equity investments measured at fair value included the following: Schedule of Unrealized (losses) Gains for All Equity Investments
Year ended July 31 (in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Net (losses) gains recognized during the period on equity investments |  | $ | (2,613 | ) |  | $ | (19,248 | ) |  | $ | 8,830 |
Less: net gains recognized during the period on equity investments sold during the period |  |  | 18 |  |  |  | 10 |  |  |  | 1,090 |
Unrealized (losses) gains recognized during the period on equity investments still held at the reporting date |  | $ | (2,631 | ) |  | $ | (19,258 | ) |  | $ | 7,740 |
The unrealized losses and gains for all equity investments measured at fair value in the table above included the following:
Year ended July 31 (in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Unrealized (losses) gains recognized during the period on equity investments: |  |  |  |  |  |  |  |  |  |  |  |
Rafael Class B common stock |  | $ | (7 | ) |  | $ | (14,101 | ) |  | $ | 8,291 |
Zedge Class B common stock |  | $ | (28 | ) |  | $ | (533 | ) |  | $ | 591 |
Unrealized (losses) gains recognized during the period on equity investments still held at the reporting date |  | $ | (2,631 | ) |  | $ | (19,258 | ) |  | $ | 7,740 |
Equity Method Investment On February 2, 2021, the Company paid $4.0 million to purchase shares of Series B convertible preferred stock of a communications company (the equity method investee, or “EMI”), and on August 10, 2021, the Company paid $1.1 million to purchase shares of the EMI’s Series C convertible preferred stock and additional shares of the EMI’s Series B convertible preferred stock. The initial shares purchased represented 23.95% of the outstanding shares of the EMI on an as converted basis. The subsequent purchases increased the Company’s ownership to 26.57% on an as converted basis. The Company accounted for this investment using the equity method since the Series B and Series C convertible preferred stock were in-substance common stock, and the Company could exercise significant influence over the operating and financial policies of the EMI. As of July 31, 2022, the Company was the holder of secured promissory notes made by the EMI in exchange for loans of an aggregate of $2.5 million, which increased to an aggregate of $4.0 million including accrued interest as of April 6, 2023. At July 31, 2022, the notes were included in “Other current assets” in the accompanying consolidated balance sheets. The notes provided for interest on the principal amount at 15% per annum payable monthly. The notes were due and payable in February 2023 and April 2023. On April 6, 2023, in accordance with an Agreement and Plan of Merger dated as of April 5, 2023, the EMI merged with and into its subsidiary, with the subsidiary being the surviving corporation. Effective with the merger, the EMI has no common stock outstanding, each share of the EMI’s convertible preferred stock was converted into shares of the subsidiary’s Series A Convertible Preferred Stock (“EMI Preferred Stock”), and the principal and accrued interest of the EMI’s secured promissory notes was converted into shares of EMI Preferred Stock (the “Conversions”). In addition, each of the EMI’s shareholders agreed to purchase additional shares of EMI Preferred Stock, for which the Company paid $0.8 million in fiscal 2023 to purchase the additional shares. Following the merger, the Conversions, and the purchases of additional shares of EMI Preferred Stock, the Company’s ownership increased to 33.3% of the EMI’s outstanding shares. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but it does not have a controlling interest. IDT CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued) The Company determined that on the dates of the acquisitions, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other (expense) income, net” (see Note 18). The following table summarizes the change in the balance of the Company’s equity method investment: Summary of Changes in Equity Method Investments
Year ended July 31 (in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |
Balance, beginning of period |  | $ | 1,001 |  |  | $ | 2,901 |  |  | $ | — |
Purchase of convertible preferred stock |  |  | 840 |  |  |  | 1,051 |  |  |  | 4,000 |
Conversion of secured promissory notes into convertible preferred stock |  |  | 4,038 |  |  |  | — |  |  |  | — |
Equity in the net loss of investee |  |  | (2,153 | ) |  |  | (2,224 | ) |  |  | (816 | )
Amortization of equity method basis difference |  |  | (942 | ) |  |  | (727 | ) |  |  | (283 | )
BALANCE, END OF PERIOD |  | $ | 2,784 |  |  | $ | 1,001 |  |  | $ | 2,901 |
Summarized financial information of the EMI was as follows: Summary of Statements of Operations
July 31 (in thousands) |  | 2023 |  |  | 2022 |
Current assets |  | $ | 3,661 |  |  | $ | 3,911 |
Noncurrent assets |  | $ | 2,245 |  |  | $ | 2,462 |
Current liabilities |  | $ | (2,771 | ) |  | $ | (11,480 | )
Noncurrent liabilities |  | $ | — |  |  | $ | — |
(in thousands) |  | Year ended July 31, 2023 |  |  | Year ended July 31, 2022 |  |  | From the date of acquisition to July 31, 2021 |
REVENUES |  | $ | 7,998 |  |  | $ | 7,889 |  |  | $ | 1,898 |
COSTS AND EXPENSES: |  |  |  |  |  |  |  |  |  |  |  |
Direct cost of revenues |  |  | 6,680 |  |  |  | 9,451 |  |  |  | 1,937 |
Selling, general and administrative |  |  | 7,871 |  |  |  | 5,834 |  |  |  | 3,388 |
TOTAL COSTS AND EXPENSES |  |  | 14,551 |  |  |  | 15,285 |  |  |  | 5,325 |
LOSS FROM OPERATIONS |  |  | (6,553 | ) |  |  | (7,396 | ) |  |  | (3,427 | )
Other (expense) income, net |  |  | (1,305 | ) |  |  | (342 | ) |  |  | 101 |
NET LOSS |  | $ | (7,858 | ) |  | $ | (7,738 | ) |  | $ | (3,326 | )
As of July 27, 2023, the EMI’s shareholders including the Company agreed to purchase additional shares of EMI Preferred Stock. The Company subscribed to purchase additional shares for an aggregate of $1.0 million. In the first quarter of fiscal 2024 through October 11, 2023, the Company paid $0.7 million to purchase the shares.

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- Definition The entire disclosure for cash, cash equivalents, investments in debt and equity instruments (including cost and equity investees and related income statement amounts), equity and cost method investments, investments in joint ventures and any other investment. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 65 -Paragraph 13 -Subparagraph (d)(3) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482477/820-10-65-13 + Details
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