Note 3—Derivative Instruments

The primary risk managed by the Company using derivative instruments is foreign exchange risk. Foreign exchange forward contracts are entered into as hedges against unfavorable fluctuations in the U.S. Dollar - NOK exchange rate. Subsequent to the Spin-Off and until November 2016, IDT provided hedging services to the Company pursuant to the Transition Services Agreement (see Note 7). As of November 16, 2016, the Company entered into a Foreign Exchange Agreement with Western Alliance Bank allowing the Company to enter into foreign exchange contracts under its revolving credit facility with the bank (see Note 8). The Company does not apply hedge accounting to these contracts; therefore the changes in fair value are recorded in earnings. By using derivative instruments to mitigate exposures to changes in foreign exchange rates, the Company is exposed to credit risk from the failure of the counterparty to perform under the terms of the contract. The credit or repayment risk is minimized by entering into transactions with high-quality counterparties.

There were no outstanding derivative instruments on April 30, 2018. On May 2, 2018, the Company entered into a series of forward contracts pursuant to the Foreign Exchange Agreement with Western Alliance Bank as follows:

Settlement Date	U.S. Dollar Amount		NOK Amount
Jun-18		500,000		4,004,545
Jul-18		500,000		3,999,545
Aug-18		500,000		3,994,495
Sep-18		500,000		3,989,945
Oct-18		500,000		3,986,095
Nov-18		500,000		3,983,595

Total		3,000,000		23,958,220

The fair value of outstanding derivative instruments recorded as assets in the accompanying consolidated balance sheets were as follows:

Asset Derivatives	Balance Sheet Location	April 30, 2018		July 31, 2017
		(in thousands)
Derivatives not designated or not qualifying as hedging instruments:
Foreign exchange forward contracts	Other current assets	$	-	$	137

The effects of derivative instruments on the consolidated statements of comprehensive loss were as follows:

		Amount of Loss Recognized on Derivatives
		Three Months Ended					Nine Months Ended
		April 30,					April 30,
Derivatives not designated or not qualifying as hedging instruments	Location of Loss Recognized on Derivatives	2018		2017			2018			2017
			(in thousands)
Foreign exchange forward contracts	Net loss resulting from foreign exchange transactions	$	-	$	(92	)	$	(1	)	$	(68	)