Note 15—Related Party
Transactions
See Note 6 for a
description of the IDT Global Israel transaction under “All
Other” and Note 10 for a description of the Zedge
transactions under “Sales of Stock of
Subsidiaries.”
The Company entered into
various agreements with Genie prior to the Genie Spin-Off including
a Separation and Distribution Agreement to effect the separation
and provide a framework for the Company’s relationship with
Genie after the spin-off, and a Transition Services Agreement,
which provides for certain services to be performed by the Company
and Genie to facilitate Genie’s transition into a separate
publicly-traded company. These agreements provide for, among other
things, (1) the allocation between the Company and Genie of
employee benefits, taxes and other liabilities and obligations
attributable to periods prior to the spin-off,
(2) transitional services to be provided by the Company
relating to human resources and employee benefits administration,
(3) the allocation of responsibilities relating to employee
compensation and benefit plans and programs and other related
matters, (4) finance, accounting, tax, internal audit,
facilities, investor relations and legal services to be provided by
the Company to Genie following the spin-off and (5) specified
administrative services to be provided by Genie to certain of the
Company’s foreign subsidiaries. In addition, the Company
entered into a Tax Separation Agreement with Genie, which sets
forth the responsibilities of the Company and Genie with respect
to, among other things, liabilities for federal, state, local and
foreign taxes for periods before and including the spin-off, the
preparation and filing of tax returns for such periods and disputes
with taxing authorities regarding taxes for such
periods.
Pursuant to the Separation
and Distribution Agreement, the Company indemnifies Genie and Genie
indemnifies 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. Pursuant to
the Tax Separation Agreement, the Company indemnifies Genie from
all liability for the Company’s taxes with respect to any
taxable period, and Genie indemnifies the Company from all
liability for taxes of Genie and its subsidiaries with respect to
any taxable period, including, without limitation, the ongoing tax
audits related to Genie’s business. The Company’s
Chairman of the Board and Chief Executive Officer, Howard S. Jonas,
is the controlling stockholder and Chairman of the Board of Genie.
The Company’s selling, general and administrative expenses
were reduced by $2.7 million in fiscal 2012 as a result of the fees
the Company charged to Genie for services provided pursuant to the
Transition Services Agreement, net of the amounts charged by Genie
to certain of the Company’s foreign subsidiaries. At
July 31, 2012, other current assets reported in the
Company’s consolidated balance sheet included $0.7 million
receivable from Genie.
IDT Energy, Inc., a
subsidiary of Genie, supplies electricity to the Company’s
facilities in New Jersey. In fiscal 2012, the average amount billed
by IDT Energy, Inc. to the Company was approximately $48,000 a
month.
The Company provides office
space, certain connectivity and other services to Jonas Media
Group, a publishing firm owned by Howard Jonas. Billings for
such services were $29,000, $17,000 and $24,000 in fiscal 2012,
fiscal 2011 and fiscal 2010, respectively. The balance owed to the
Company by Jonas Media Group was $29,000 and $0.3 million as of
July 31, 2012 and 2011, respectively.
The Company, through its
former subsidiary CTM Media Group (see Note 2), distributed
brochures for a distribution firm controlled by Howard Jonas.
Billings by CTM Media Group for such distribution services were
$5,000 in fiscal 2010. The distribution firm also distributes
brochures for CTM Media Group. Billings to CTM Media Group for such
services were $15,000 in fiscal 2010. The fiscal 2010 amounts are
for the period from August 1, 2009 through September 14,
2009 (the date of the CTM Spin-Off).
The Company obtains
insurance policies from several insurance brokers, one of which is
IGM Brokerage Corp. (“IGM”). IGM was, until his death
in October 2009, owned by Irwin Jonas, father of Howard Jonas, and
the Company’s General Counsel, Joyce J. Mason. IGM is
currently owned by Irwin Jonas’ widow—the mother of
Howard Jonas and Joyce Mason. Jonathan Mason, husband of Joyce
Mason and brother-in-law of Howard Jonas, provides insurance
brokerage services via IGM. Based on information the Company
received from IGM, the Company believes that (1) IGM received
commissions and fees from payments made by the Company (including
payments from third party brokers) in the aggregate amounts of
$19,000 in fiscal 2012 and $15,000 in each of fiscal 2011 and
fiscal 2010, which fees and commissions inured to the benefit of
Mr. Mason, and (2) the amounts IGM received in fiscal
2012, fiscal 2011 and fiscal 2010 represented IGM’s
commission on various insurance policies held by the Company, for
which the total payments by the Company to IGM were $0.2 million in
each of fiscal 2012, fiscal 2011 and fiscal 2010. Neither Howard
Jonas nor Joyce Mason has any ownership or other interest in IGM or
the commissions paid to IGM other than via the familial
relationships with Irwin Jonas and Jonathan Mason (and currently,
Irwin Jonas’ widow).
Mason and Company
Consulting, LLC (“Mason and Co.”), a company owned
solely by Jonathan Mason, receives an annual fee for the insurance
brokerage referral and placement of the Company’s health
benefit plan with Brown & Brown Metro, Inc. Based on
information the Company received from Jonathan Mason, the Company
believes that Mason and Co. received from Brown & Brown
Metro, Inc. commissions and fees from payments made by the Company
in the amount of $20,000 in fiscal 2012 and $24,000 in each of
fiscal 2011 and fiscal 2010. Neither Howard Jonas nor Joyce Mason
has any ownership or other interest in Mason and Co. or the
commissions paid to Mason and Co., other than via the familial
relationships with Jonathan Mason.
Beginning in August 2009,
IDT Domestic Telecom, Inc., a subsidiary of the Company, leased
space in a building in the Bronx, New York. Howard Jonas
and Samuel (Shmuel) Jonas, the Company’s Chief Operating
Officer effective June 24, 2010 and previously the
Company’s Vice President of Operations, and the son of
Howard Jonas, are members of the limited liability company
that owns the building. IDT Domestic Telecom rented 3,304 square
feet for two years for $0.1 million per year and incurred costs of
less than $0.1 million to build-out the space. In August 2009, the
limited liability company was paid an aggregate of $0.3 million for
the lease and the build-out costs.
The Company had loans
receivable outstanding from employees aggregating $0.3 million and
$0.2 million as of July 31, 2012 and 2011, respectively, which
are included in “Other current assets” in the
accompanying consolidated balance sheets.
Prior to the CTM Spin-Off,
the Company provided certain services to CTM Holdings’
subsidiaries. The Company and CTM Holdings entered into a Master
Services Agreement, dated September 14, 2009, pursuant to
which, among other things, the Company provided certain
administrative and other services to CTM Holdings on an interim
basis. Such services included assistance with periodic reports
required to be filed with the SEC as well as maintaining minutes,
books and records of meetings of the Board of Directors and its
committees, and assistance with corporate governance. Howard Jonas
is the controlling stockholder and Chairman of the Board of CTM
Holdings. In fiscal 2011 and fiscal 2010, the Company’s
selling, general and administrative expenses were reduced by $0.1
million and $0.8 million, respectively, for the amounts charged to
CTM Holdings. At July 31, 2011, other current assets included
less than $0.1 million receivable from CTM Holdings.
The Company and CTM
Holdings entered into a Tax Separation Agreement, dated as of
September 14, 2009, to provide for certain tax matters
including the assignment of responsibility for the preparation and
filing of tax returns, the payment of and indemnification for
taxes, entitlement to tax refunds and the prosecution and defense
of any tax controversies. Pursuant to this agreement, the Company
indemnifies CTM Holdings from all liability for taxes of CTM
Holdings and its subsidiaries for periods ending on or before
September 14, 2009, and CTM Holdings indemnifies the Company
from all liability for taxes of CTM Holdings and its subsidiaries
accruing after September 14, 2009. Also, for periods ending on
or before September 14, 2009, the Company shall have the right
to control the conduct of any audit, examination or other
proceeding brought by a taxing authority. CTM Holdings shall have
the right to participate jointly in any proceeding that may affect
its tax liability unless the Company has indemnified CTM Holdings.
Finally, CTM Holdings and its subsidiaries agreed not to carry back
any net operating losses, capital losses or credits for any taxable
period ending after September 14, 2009 to a taxable period
ending on or before September 14, 2009 unless required by
applicable law, in which case any refund of taxes attributable to
such carry back shall be for the account of the Company.