SEC Info - Straight Path Communications Inc. - ‘10-12G’ on 5/6/13

Recent Issued Accounting Standards Not Yet Adopted

In December 2011, an accounting standard update was issued to enhance disclosures and provide converged disclosures in U.S. GAAP and International Financial Reporting Standards, or IFRS, about derivative instruments that are either offset on the statement of financial position or subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the statement of financial position. Entities will be required to provide both net and gross information for those assets and liabilities in order to enhance comparability between entities that prepare their financial statements on the basis of U.S. GAAP and entities that prepare their financial statements on the basis of IFRS. We are required to adopt this standard update on August 1, 2013. We are evaluating the impact that this standard update will have on our consolidated financial statements.

In July 2012, an accounting standard update was issued to reduce the complexity of performing an impairment test for indefinite-lived intangible assets by simplifying how an entity tests those assets for impairment and to improve consistency in impairment testing guidance among long-lived asset categories. The amendments in the update permit an entity to first assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test. Prior to the adoption of this update, an entity is required to test indefinite-lived intangible assets for impairment, on at least an annual basis, by comparing the fair value of the asset with its carrying amount. We are required to adopt this standard update on August 1, 2013. The adoption of this standard update will not impact our financial position, results of operations or cash flows.

Results of Operations

We were incorporated in April 2013 in the state of Delaware. Our financial statements include the assets, liabilities, results of operations and cash flows relating to the businesses to be included in the spin-off, and are reflected as if we were a separate entity and operated our business in all periods presented.

We evaluate the performance of our operating business segments based primarily on income (loss) from operations. Accordingly, the income and expense line items below income (loss) from operations are only included in our discussion of the consolidated results of operations.

Six Months Ended January 31, 2013 Compared to Six Months Ended January 31, 2012

Straight Path Spectrum Segment

	Six months ended January 31,						Change
	2013			2012			$			%
	(in millions)
Revenues	$	0.3		$	0.3		$	—			2.9	%
Direct cost of revenues charged by IDT		(0.1	)		(0.1	)		—			(35.8	)
Selling, general and administrative		(0.3	)		(0.2	)		(0.1	)		(69.7	)
Gain on assignment of wireless spectrum		0.2			—			0.2		nm
Income from operations	$	0.1		$	—		$	0.1			98.5	%

nm—not meaningful

Revenues. Revenues were mostly unchanged in the six months ended January 31, 2013 compared to the similar period in fiscal 2012, as a result of revenue from new leases with current customers, offset by the loss of revenue from leases that expired or terminated.

Direct cost of revenues. Direct cost of revenues, which are charged to us by IDT, include governmental fees and connectivity costs that were mostly unchanged in the six months ended January 31, 2013 compared to the similar period in fiscal 2012.

Selling, general and administrative expense. Selling, general and administrative expenses increased in the six months ended January 31, 2013 compared to the similar period in fiscal 2012 primarily due to a reduction in the reversal of accrued lease termination costs that were recorded in a prior period. In addition, legal and consulting fees increased in the six months ended January 31, 2013 compared to the similar period in fiscal 2012. These increases were partially offset by a decrease in commissions on spectrum leases.

Gain on assignment of wireless spectrum. In March and April 2012, we closed on the assignment of spectrum partitioned and/or disaggregated from eight of our spectrum licenses covering metropolitan areas from our nationwide portfolio. We received cash of $6.8 million in exchange for the licenses and recorded a gain of $5.3 million. In the six months ended January 31, 2013, we settled certain claims related to the assignment and recorded an additional gain of $0.2 million.

Straight Path IP Segment

	Six months ended January 31,						Change
	2013			2012			$			%
	(in millions)
Revenues	$	0.4		$	—		$	0.4		nm
General and administrative expense		(2.4	)		(0.3	)		(2.1	)		(721.9	)
Loss from operations	$	(2.0	)	$	(0.3	)	$	(1.7	)		(577.1	)%

nm—not meaningful

Revenues. In January 2012, we filed complaints in the United States District Court for the Eastern District of Virginia against Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc. claiming infringement of a number of our key patents. We sought both damages and injunctive relief from the defendants. The defendants each filed an answer to the complaint and/or a counterclaim. A Markman hearing (also known as a claim construction hearing) was held on October 10, 2012, and on October 26, 2012, the judge issued an Opinion and Order that was favorable to us. In October and November 2012, we reached confidential settlement agreements with each of the three defendants. In connection with the settlements, we recognized revenue of $0.4 million in the six months ended January 31, 2013.

General and administrative expense. The increase in general and administrative expense in the six months ended January 31, 2013 compared to the similar period in fiscal 2012 was due to increases in stock-based compensation, legal fees and other employee related expense. On September 24, 2012, IDT’s Board of Directors approved a grant of 10% of the equity of Straight Path IP to Howard Jonas, Chairman and Chief Executive Officer of IDT. These Straight Path IP shares vested immediately. We recorded stock-based compensation expense of $1.2 million in the first quarter of fiscal 2013 for the grant of these shares, based on the estimated fair value of the shares on the grant date. The estimated fair value of the Straight Path IP shares was determined using the income approach based on expected future royalties. Legal fees, which relate to defending and enforcing our rights related to our patents, increased mainly due to the complaints and settlements described above.

Consolidated

The following is a discussion of our consolidated income and expense line items below income (loss) from operations.

	Six months ended January 31,						Change
	2013			2012			$			%
	(in millions)
Loss from operations	$	(1.9	)	$	(0.3	)	$	(1.6	)		(654.8	)%
Interest income		—			—			—			29.9
Interest expense		—			—			—			(100.0	)
Provision for income taxes		—			—			—			(294.9	)
Net loss		(1.9	)		(0.3	)		(1.6	)		(638.0	)
Net loss attributable to noncontrolling interests		0.3			0.1			0.2		nm
Net loss attributable to Straight Path Communications, Inc.	$	(1.6	)	$	(0.2	)	$	(1.4	)		(567.1	)%

nm—not meaningful

Net loss attributable to noncontrolling interests. The change in net loss attributable to noncontrolling interests was primarily due to the 10% increase in the aggregate noncontrolling interests in Straight Path IP from 5.5% to 15.5%, as well as an increase in Straight Path IP’s net loss. On September 24, 2012, IDT’s Board of Directors approved a grant of 10% of the equity of Straight Path IP to Howard Jonas. In addition, the stock-based compensation expense of $1.2 million that we recorded for the grant of these shares significantly increased Straight Path IP’s net loss in the six months ended January 31, 2013 compared to the similar period in fiscal 2012.

Fiscal Year Ended July 31, 2012 Compared to Fiscal Year Ended July 31, 2011

Straight Path Spectrum Segment

	Fiscal Year ended July 31,						Change
	2012			2011			$			%
	(in millions)
Revenues	$	0.6		$	0.5		$	0.1			10.8	%
Direct cost of revenues charged by IDT		(0.1	)		—			(0.1	)		(56.8	)
Selling, general and administrative		(0.4	)		(0.3	)		(0.1	)		(49.9	)
Gain on assignment of wireless spectrum		5.3			—			5.3		nm
Income from operations	$	5.4		$	0.2		$	5.2		nm

nm—not meaningful

Revenues. Revenues increased in fiscal 2012 compared to fiscal 2011 primarily as a result of revenue from new leases, partially offset by the loss of revenue from leases that expired or terminated in fiscal 2012.

Direct cost of revenues. Direct cost of revenues, which have been charged to us by IDT, include governmental fees and connectivity costs that increased in fiscal 2012 compared to fiscal 2011 primarily due to the increase in revenues.

Selling, general and administrative expense. Selling, general and administrative expenses increased in fiscal 2012 compared to fiscal 2011 due to a reduction in the reversal of accrued lease termination costs that were recorded in a prior period and an increase in commissions on spectrum leases, partially offset by a decrease in legal fees.

Gain on assignment of wireless spectrum. In March and April 2012, we closed on the assignment of spectrum partitioned and/or disaggregated from eight of our LMDS and 39 GHz spectrum licenses covering metropolitan areas from our nationwide portfolio. We received cash of $6.8 million in exchange for the assignments and recorded a gain of $5.3 million in fiscal 2012.

Straight Path IP Segment

	Fiscal Year ended July 31,						Change
	2012			2011			$			%
	(in millions)
Revenues	$	—		$	3.5		$	(3.5	)		(100.0	)%
General and administrative expense		(0.6	)		(1.2	)		0.6			51.4
(Loss) income from operations	$	(0.6	)	$	2.3		$	(2.9	)		(125.5	)%

Revenues. In August 2010, we entered into a settlement, release and cross-license agreement in connection with a lawsuit asserting infringement of our patents. We received a payment of $3.5 million in August 2010 as a result of the agreement. We earned no revenues in fiscal 2012 and in years prior to fiscal 2010.

General and administrative expense. Legal and professional fees, which relate to defending and enforcing our rights related to our patents, decreased from $0.3 million in fiscal 2011 to nil in fiscal 2012. The decrease was mainly due to settlement of litigation in August 2010. Other general and administrative expense, which consists mainly of compensation costs and corporate expenses, decreased from $0.9 million in fiscal 2011 to $0.6 million in fiscal 2012. The decrease was mainly due to a $0.7 million stock-based compensation charge that we recorded in fiscal 2011 as a result of a 5.5% fully vested equity grant to two IDT employees. Partially offsetting the decrease was additional compensation costs for the compensation of our former CEO, who was appointed in May 2011.

Consolidated

The following is a discussion of our consolidated income and expense line items below income (loss) from operations.

	Fiscal Year ended July 31,					Change
	2012		2011			$			%
	(in millions)
Income from operations	$	4.8	$	2.5		$	2.3			95.0	%
Interest income		—		—			—			45.5
Interest expense		—		(0.1	)		0.1			84.6
Other income		—		0.1			(0.1	)		(99.1	)
Provision for income taxes		—		(0.9	)		0.9			97.2
Net income		4.8		1.6			3.2			201.1
Net loss attributable to noncontrolling interests		—		—			—			95.7
Net income attributable to Straight Path Communications, Inc.	$	4.8	$	1.6		$	3.2			200.0	%

Interest expense. Interest expense in fiscal 2011 related to a note payable that we issued in the first quarter of fiscal 2010 and fully repaid in October 2011. The note was issued in connection with our conversion of a $2.0 million liability for legal fees into an unsecured note payable with interest at an annual rate of 5.1%.

Other income. Other income in fiscal 2011 is primarily due to a state excise tax refund received in February 2011.

Income Taxes. The provision for income taxes in fiscal 2011 was primarily the result of taxable income generated by Straight Path IP. In fiscal 2012, our income before income taxes was primarily from Straight Path Spectrum’s gain on the assignment of wireless spectrum. Straight Path Spectrum used a portion of its net operating losses to offset its taxable income, therefore our consolidated provision for income taxes in fiscal 2012 was $25,000.

Net loss attributable to noncontrolling interests. Net loss attributable to noncontrolling interests was $33,000 and $17,000 in fiscal 2012 and fiscal 2011, respectively. Beginning in March 2011, Straight Path IP had aggregate noncontrolling interests of 5.5%.

Liquidity and Capital Resources

General

Historically, we have satisfied our cash requirements primarily through funding from IDT, proceeds from the assignment of spectrum licenses, and settlements or licensing fees received. In connection with the spin-off, IDT will transfer cash to us prior to the spin-off such that we will have approximately $15 million in cash at the time of the spin-off, and IDT will capitalize any amount due from us to IDT as an equity contribution. As a result, there will be no indebtedness owing from us to IDT immediately following the spin-off. We anticipate our total costs to increase by $750,000 to $1.0 million per year as a result of being a public reporting company. Several of the costs included in this estimated range are preliminary, subject to negotiation, and may vary from the estimates when finalized. We currently expect that the cash that IDT will transfer to us will be sufficient to meet our anticipated cash requirements during the next twelve months.

As of January 31, 2013, we had cash and cash equivalents of $2.2 million and working capital (current assets less current liabilities) of $1.5 million.

(in millions)	Six months ended January 31,			Year ended July 31,
	2013			2012			2011
Cash flows(used in) provided by
Operating activities	$	(1.1	)	$	(1.1	)	$	1.5
Investing activities		—			7.0			(0.2	)
Financing activities		0.7			(3.9	)		(0.9	)
(Decrease) increase in cash and cash equivalents	$	(0.4	)	$	2.0		$	0.4

Operating Activities

Our cash flow from operations varies significantly from quarter to quarter and from year to year, depending on our operating results and the timing of operating cash receipts and payments, specifically payments of trade accounts payable. The cash provided by operating activities in fiscal 2011 was primarily due to the proceeds of $3.5 million that we received in August 2010 as a result of a settlement, release and cross-license agreement in connection with a lawsuit asserting infringement of our patents.

Investing Activities

Proceeds from assignment of wireless spectrum partitioned and/or disaggregated from eight of our LMDS and 39 GHz licenses of $6.8 million in fiscal 2012 were due to the transactions consummated in March and April 2012. We recorded a gain on the assignment of $5.3 million in fiscal 2012.

We used cash of $0.2 million in fiscal 2011 to purchase a certificate of deposit. In fiscal 2012, we received cash of $0.2 million upon the maturity of the certificate of deposit.

Financing Activities

During all periods presented, IDT provided us with the cash required to fund our working capital requirements and our operations. In the six months ended January 31, 2013, expenses paid by IDT on our behalf and net cash transfers received from IDT were an aggregate of $0.7 million. In fiscal 2012 and fiscal 2011, our repayments to IDT net of expenses paid by IDT on our behalf were $3.3 million and $0.3 million, respectively. In addition, in the six months ended January 31, 2013 and fiscal 2012, $0.7 million and $233.4 million, respectively, of amounts due from us to IDT were contributed by IDT to our equity.

In the first quarter of fiscal 2010, we converted a liability of $2.0 million into an unsecured note payable. The note incurred interest at an annual rate of 5.1% and was payable in three annual payments of $0.7 million, which included principal and interest. The note was fully repaid in October 2011.

We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. Following that time, it is our intention to distribute not less than 50% of our consolidated positive net earnings available for distribution to our stockholders. Distributions will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets. The nature of our operations is that, in the short term until our licensing, leasing, assignment and enforcement programs become more firmly established, we do not anticipate generating meaningful cash flows. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

We have no future contractual obligations or other commercial commitments as of January 31, 2013. In April 2013, we entered into a lease agreement for our corporate headquarters in Richmond, Virginia for a term of twelve months beginning on May 1, 2013 and ending on April 30, 2014 at a monthly rent of $800.

OFF-BALANCE SHEET ARRANGEMENTS

As of January 31, 2013, we did not have any “off-balance sheet arrangements,” as defined in relevant SEC regulations that are reasonably likely to have a current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

In connection with the spin-off, we and IDT will enter into a tax separation agreement, which will set forth the responsibilities of IDT and us with respect to, among other things, liabilities for federal, state and local 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. IDT will be generally responsible for our federal, state and local income taxes for periods before and including the spin-off. We will be generally responsible for all other taxes relating to our business. We and IDT will each generally be responsible for managing those disputes that relate to the taxes for which each of us is responsible and, under certain circumstances, may jointly control any dispute relating to taxes for which both of us are responsible.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Smaller reporting companies are not required to provide the information required by this item.

BUSINESS

Straight Path Spectrum, Inc.

Overview

We hold a significant number of licenses for commercial fixed wireless spectrum in the United States, providing broad geographic coverage and a large amount of total bandwidth in many areas. These include licenses in what is known as the 39 GHz band and LMDS band. We have licenses covering the entire continental United States with at least 600 MHz (Megahertz) of bandwidth in each of the top 25 U.S. markets (measured by population).

Our spectrum is primarily used to provide backhaul services for existing wireless internet service providers (WISPs) and for cellular mobile backhaul. WISPs include primarily providers that serve WiFi markets in venues, businesses and outdoor public spaces. The mobile network operators have used our spectrum for macro cellular backhaul where fiber backhaul is not available or as a substitution for fiber. The cellular market is undergoing a transformational change from 3G to 4G. In this transformation, many mobile network operators intend to deploy large quantities of so called small cells. A small cell is a self-contained base station with or without integrated 3G and/or WiFi capability that is capable of being deployed at “street level” or within narrowly bound locations that cannot be served by existing macro tower locations. Small cells may be affixed to lamp posts, small buildings, sides of buildings even traffic lights. In this manner the mobile network operators are able to provide dense coverage and capacity solutions to maximize their 4G business opportunities. A particular problem for small cell deployment is the choice of backhaul. Traditional fiber backhaul is oftentimes cost prohibitive for the mobile network operators where they don’t have a large fiber penetration market. Our spectrum is regarded one of several alternatives for providing small cell backhaul amongst several wireless backhaul alternatives. The features allowing for channel concatenation, sectored antenna leases and the permitted use of extremely small antennas in our holdings make our spectrum an attractive choice for small cell backhaul.

History

In December 2001, IDT, through its subsidiary, Winstar Holdings, LLC, acquired FCC spectrum licenses and other assets from the bankruptcy estate of Winstar Communications, Inc. Certain of those spectrum licenses were transferred to Straight Path Spectrum (then known as IDT Spectrum, Inc.). Certain licenses were allowed to lapse upon expiration, and others were extended, resulting in the holdings described below.

Our Spectrum Holdings

We hold a significant number of licenses for commercial fixed wireless spectrum in the United States, providing broad geographic coverage and a large amount of total bandwidth in many areas. These include licenses in what is known as the 39 GHz band and LMDS band. We have at least 200Mhz of bandwidth in every location in the United States. In higher population areas, our licenses cover 600 MHz or more of bandwidth.

The Federal Communications Commission grants spectrum licenses of various types according to geographic areas. Our auctioned 39 GHz band spectrum is primarily licensed in Economic Areas, or EAs. EAs are delineated by the Regional Analysis Division, Bureau of Economic Analysis, U.S. Department of Commerce and are based on metropolitan or micropolitan statistical areas that serve as regional centers of economic activity, plus the surrounding counties that are economically related to these areas.

Prior to adopting service rules for the 39 GHz spectrum distributed by auction, the FCC permitted licensees to define their own service areas. Applicants for licenses provided the latitude and longitude points for the boundaries of their desired service area, thereby creating service areas generally rectangular in shape – rectangular service areas, or RSAs.

Currently, the United States is divided into 176 EAs for the auctioned 39 GHz spectrum. Our licenses cover all EAs, and, based on a comparison of the geographic areas covered by our licenses with the U.S. Census Bureau’s 2000 Census, cover most of the U.S. population. We hold multiple licenses in all U.S. markets including 629 exclusive EA licenses, 113 39 GHz RSA licenses, and 15 licenses in the LMDS band. Our 39 GHz licenses, which are our primary holdings, include at least 100 MHz of total bandwidth in every U.S. market, with up to 1,000 MHz in certain markets. We hold an average of 720 MHz of spectrum in each of the top 25 EAs. As a result, we believe that we are well positioned to provide a single source of fixed wireless spectrum solutions across a variety of geographic areas and bandwidth requirements.

Wireless Spectrum

Fixed wireless systems offer an alternative means of providing high-speed, high-capacity voice and data transmissions using antennae placed at strategic points connected by direct line of sight. In many circumstances, fixed wireless systems eliminate the need for expensive and time-consuming trenching or physical connections to wired networks and are less expensive and quicker to deploy than wired systems. We believe that wireless systems, and systems using our proposed installations, are also more flexible than wired solutions, and that there are specific characteristics of our spectrum assets that make them more attractive than other wireless offerings for backhaul applications.

As the table below illustrates, the small cell forum predicts that by 2015 there will be 4.5 small cells deployed per macro cell. In the United States there are over 350,000 macro cellular towers deployed, with an average of 2.5 carriers deployed per tower. Conservatively, using the small cell forum statistics we can predict that there will 3.5 million small cells deployed by 2015 with a majority of these using wireless backhaul.

As the capacity necessary to support home and mobile communications needs increases, the providers of those services need solutions to carry that volume. Traffic from various customers are carried to communications points – cells or other – and the aggregated traffic needs to be carried from those points back to the central or regional hubs where they interconnect with larger communications networks. This process is known as backhaul.

Our Strategy

Our strategy is to focus on applications and geographies where our spectrum holdings are best suited to meet the needs of the market. We will seek to leverage the inherent advantages and capabilities of our assets, including the breadth and depth of the portfolio to educate various communications industry participants as to how our offerings best meet the needs of their operations for backhaul and other transmission capacity.

We will focus on urban markets, where we can best exploit the physical properties and advantages of our spectrum assets, which include high bandwidth and high circuit density. We are developing working relationships with service providers, systems integrators, equipment and technology supply partners to ensure that all the elements necessary to deploy our solutions are available to our prospective customers.

Our Services

Spectrum leasing services

We currently lease spectrum and provide related services to telecommunications providers and other companies that prefer to buy their own equipment and design their own fixed wireless networks for last mile and backhaul applications and have the staff and operational systems to support a build-out.

Developing Service Offerings

We have the ability to design and deliver “wide-channel” spectrum incorporating 150MHz bandwidth links coupled with small aperture antennae in a point-to-point network architecture configuration that can advantageously satisfy the performance and economic requirements for small cell backhaul at a high-scale volume.

We anticipate providing our services for the following applications:

●	enhancing the ability of WISPs to serve customers in an area to allow greater utilization of high bandwidth applications; and

●	providing backhaul capabilities to wireless service providers deploying a small cell network to serve high density areas.

As on-line applications such as streaming and real-time video gain in popularity and demand increasing amounts of data transmission volume, existing WISP infrastructure cannot support concentrations of users utilizing those applications in an area. Utilizing our spectrum holdings to transmit large volumes of data from a high-demand area can cost-effectively increase the WISP’s ability to serve these customers.

Wireless service providers are struggling with the ability to meet the demand from customers using wireless devices for high volume data applications in addition to voice. One strategy that is gaining traction is to deploy small cell networks in high demand areas – such as business districts and downtown areas in large metropolitan areas.

Wireless service providers have traditionally deployed networks of large “cells” that cover a significant area, and carry traffic to substantial numbers of wireless customers. The voice and data traffic from those large cells is carried back to the providers’ hubs (a process known as “backhaul”) by a variety of high volume methods, primarily fiber optic cables. This requires that the cells be sited on fiber optic cable access points.

The small cell approach is to develop a network of a large number of small cells giving more ubiquitous coverage of an area and providing more flexible coverage as traffic demands migrate between portions of the covered area. The small cells are to be sited on buildings, lampposts and other locations close to the ground and will provide service to a smaller number of users over a smaller area than large cells. The small cells retain the need for high volume backhaul to a central or regional hub that enable communications to other users, the internet and data providers. Because of their requirements to be close to the ground and the need for a large number in an area, small cells cannot be consistently sited with easy access to fiber optic access points, and must rely, to a greater extent on other solution for their backhaul needs.

We believe that our spectrum holdings provide a cost-effective and attractive solution for these needs as compared to fiber optic or other wired or wireless alternatives:

●	Our spectrum is able to carry large volumes of traffic from one point to another point (point-to-point) or from one point to a number of points (point-to-multipoint);

●	Our solutions are scalable as to volume and geographic coverage;

●	Our solutions can be deployed at lower cost than new wired connectivity;

●	Our solutions can be implemented quickly and without the need to secure additional rights;

●	We can deploy our spectrum assets flexibly and support multiple customers in a single area;

●	Because of our substantial holdings in large metropolitan areas, we can utilize our spectrum for various applications and support the needs of the largest service providers;

●	Our extensive bandwidth in high population density areas enables us to deploy multiple adjacent channels – or concatenate – to support extremely high volume applications;

●	Because we own spectrum licenses across the United States, we can provide a large scale solution for national ISPs and wireless service providers;

●	For small cell applications, we can utilize small antennae that are not available for other wireless solutions where sites cannot accommodate large equipment;

Point to Multipoint Installations

Wireless backhaul operations can be deployed using point-to-point or point-to-multipoint installations. Point-to-point is typically line-of-sight with highly directive antennas at each end of the link. This requires dedicated transceiver hardware at each end of the link. In point-to-multipoint applications a transceiver can support multiple small cells or other collection points thus reducing the expense of additional hardware and the space demands of that equipment. Our spectrum holdings are express authorized for point-to-multipoint applications by FCC rulemaking. In deployments to support small cell backhaul, the hub uses multiple sector antennas to provide connectivity to a number of terminals anywhere around the hub site. New small cell sites can be added without revisiting the hub site.

Sales and Marketing

We intend to market our services to a targeted group of internet service providers, wireless communications providers and other telecommunications carriers. We may also market to other commercial enterprises and through systems integrators. We will focus on substantial entities who do not have their own wired or fiber optic networks or portfolio of spectrum licenses to meet their backhaul and other requirements. In addition, we intend to work with large systems integrators for the cellular mobile network operators that provide backhaul equipment and services to the Service Provider community.

Major customers

In fiscal 2012 and fiscal 2011, Straight Path Spectrum’s revenues from transactions with a single customer that amounted to 10% or more of total revenues were as follows:

Year ended July 31 (in thousands)	2012		2011
Customer:
Covad Communications Group	$	161	$	154
AT&T		124		124
Verizon		90		90

Competition

We operate in the highly competitive telecommunications market. We expect to compete primarily on the basis of our fixed wireless license portfolio, experience and technical skills, competitive pricing model, service quality, reliability and deployment speed.

We face significant competition from entities that deliver voice and data transmission service and capacity through a variety of methods, including copper, fiber, coaxial cable and other wireless communications solutions.

Our principal competitors are fiber providers such as Level 3 Communications, Inc., NEON and Verizon, cable companies such as Comcast and Time Warner, other spectrum license holders such as XO Communications and Fiber Tower, long-distance interexchange carriers such as AT&T and Verizon, and the mobile cellular operators that use Common Carrier Channel licenses acquired from the FCC.

Many of our competitors have longer operating histories, long-standing relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we do and, as a result, may have substantial competitive advantages over us. Additionally, market perceptions as to reliability and security for fixed wireless solutions as compared to copper or fiber networks provide us with additional marketing challenges. We may not be able to exploit new or emerging technologies or adapt to changes in customer requirements more quickly than these competitors, or devote the necessary resources to the marketing and sale of our services.

The FCC imposes significant regulation on licensees of wireless spectrum with respect to how wireless spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, and resolution of issues of interference between spectrum bands. The adoption or modification of laws or regulations relating to our fixed wireless licenses and operations could limit or otherwise adversely affect the manner in which we currently conduct our business and compete with other fixed wireless service providers.

Regulatory Framework

Our fixed wireless operations and wireless licenses in the Local Multipoint Distribution Service (“LMDS”) and 39 GHz bands are subject to significant regulation and oversight, primarily by the FCC and, to a certain extent, by the International Telecommunications Union (“ITU”), Congress, other federal agencies, and foreign, state, and local authorities. At the federal level, the FCC has jurisdiction over the use of the electromagnetic spectrum, including exclusive jurisdiction over licensing and technical rules for operations of mobile wireless carriers, certain site acquisition matters, and all interstate telecommunications services. State regulatory commissions have jurisdiction over intrastate common carrier and certain other communications providers, unless preempted by the FCC. Municipalities may regulate limited aspects of our business by, for example, imposing zoning requirements, requiring installation permits, and controlling access to public rights-of-way. The regulations of these agencies are continually evolving through rulemakings, adjudications, and other administrative and judicial proceedings, and future regulatory changes or interpretation of existing regulations could have an adverse effect on our business.

FCC Licensing and Regulation

In general, the FCC’s regulations impose potential limits on, among other things, the amount of foreign investment that may be made in some types of FCC licenses, on the transfer or assignment of licenses, on the construction and technical aspects of the operation of wireless communication systems, and on the nature of the services that can be provided within a particular frequency band. The FCC imposes significant regulation on licensees of wireless spectrum with respect to how radio spectrum is used by licensees, the nature of the services that licensees may offer and how the services may be offered, and resolution of issues of interference between spectrum bands. In addition, we are subject to certain regulatory and other fees levied by the FCC for certain classes of licenses and services. The adoption or modification of laws or regulations relating to our fixed wireless licenses and operations could limit or otherwise adversely affect the manner in which we currently conduct our business. Under some circumstances, our licenses may be canceled or conditioned. We also may be fined for any past or future violation of the FCC’s rules, and in extreme cases, our licenses may be revoked.

The ITU internationally and the FCC in the United States allocate the radio spectrum in specific frequency bands to particular services. If the FCC decides in the future to allocate additional spectrum in the high frequency bands to fixed services, the successful auction of that spectrum could increase the number of entities that hold this spectrum, and its general availability could have a material adverse effect on the value of our spectrum. In addition, as demand for spectrum grows, the FCC may conduct rulemaking proceedings to allow other licensed or unlicensed equipment to operate in the same spectrum as our licensed bands. This may increase potential interference with our fixed wireless operations and have an adverse effect on our business. The FCC has also in recent years taken action to maximize the use of the common carrier microwave spectrum that is available to the public at low cost. If the FCC continues to take such actions or allocates additional spectrum to common carrier microwave operations, such regulatory activity could have a material adverse effect on our spectrum.

Our spectrum licenses in the LMDS and 39 GHz bands are granted for ten-year terms. The renewal date for our New York City LMDS license is in February 2016, renewal dates for our 14 other LMDS licenses are in 2018, and the renewal dates for our 39 GHz EA licenses are in 2020. A “substantial service” requirement applies to each of these LMDS and 39 GHz licenses. This requirement is intended to provide licensees with flexibility in constructing their licenses. The FCC has established “safe harbor” guidelines that provide licensees with a degree of certainty as to how to comply with the requirement, but they are not the only way to demonstrate substantial service. Generally, if a licensee can demonstrate that it has made tangible use of the licensed frequencies, it should be able to make the requisite showing, although there is evolving precedent in this area. Furthermore, the FCC has taken a flexible approach to non-broadcast license renewal, an approach that has evolved over the past several years, including, for example, the potential for substantial service to be demonstrated by niche, specialized or technologically sophisticated services. If the FCC finds that a licensee has failed to meet the substantial service requirement for any license, however, that authorization is subject to termination.

Although the FCC’s rules currently require that a wireless licensee in our spectrum bands demonstrate substantial service only during its initial license term, the FCC is considering whether to apply additional or more stringent performance requirements in conjunction with the license renewal process for subsequent license terms. If we are unable to meet any current or future requirements for renewal of any of our licenses, they may be subject to termination.

As of May 2013, Straight Path Spectrum has renewed 629 of its 39 GHz EA licenses and established a new expiration date of October 18, 2020 for these licenses. Straight Path Spectrum has filed its substantial service performance filings for its 39 GHz licenses. Many of these showings have been accepted by the FCC, but some remain pending. In a recent transaction, Straight Path Spectrum assigned spectrum that was partitioned and/or disaggregated from eight of its LMDS and 39 GHz EA licenses. Straight Path Spectrum also 113 active 39 GHz RSA common carrier licenses, the vast majority of which expire in early to mid-2017. Straight Path Spectrum has filed substantial service showings for all 113 active 39 GHz RSA licenses. Some of these showings have been accepted by the FCC, and some remain pending. In addition, Straight Path Spectrum holds 15 LMDS licenses in the 28 GHz range, which expire on August 10, 2018 (except for its New York City LMDS license, which expires on February 1, 2016). Straight Path Spectrum has met its substantial service build-out obligations for its LMDS licenses.

The FCC rules require that certain providers of telecommunications file reports with, and make contributions to, the Universal Service Fund. In general, while reports may have to be filed, contributions to the USF generally need not be made with respect to revenues received for “resale-type” services — telecommunications capacity sold or leased in bulk to a carrier who then uses that capacity to provide services to end-users. Conversely, revenues received with respect to “retail-type” services generally are subject to a USF contribution requirement. Historically, revenue from certain of our services has been subject to a USF contribution requirement, and timely reports and contributions have been made. Our future operations may require us to make USF reports and/or contributions, depending on the nature of the services we offer and the type of customers we serve. USF contributions, which are typically passed to the customer, may make our services more expensive.

Additionally, the FCC requires the payment of other fees in certain circumstances, including regulatory fees, application processing fees, and contributions to other funds, for example. If any of these requirements change, it may make our services more expensive.

State regulation

We believe that the fixed wireless communications that we expect to provide or are providing are not subject to state public utility regulation. Nonetheless, it is possible that one or more state regulators will seek to assert jurisdiction over, and therefore impose additional regulatory burdens on, us and our services. If one or more state regulatory commissions were to impose regulations on our services, our compliance could materially increase our costs of providing services and therefore have an adverse impact on our business operations and profitability.

Significant statements concerning the regulatory environment are set forth in the section entitled “Risk Factors”, and we strongly recommend reviewing that section in conjunction with this section.

Straight Path IP Group, Inc.

Straight Path IP Group, Inc., or Straight Path IP Group, a Delaware corporation and a subsidiary of SPCI, will consist of our ownership and deriving value from a portfolio of patents covering aspects of communications, primarily related to communications over the Internet.

We own 84.5% of our subsidiary Straight Path IP Group, subject to outstanding options held by an employee to purchase another 0.5% from us. In addition, the former Chief Executive Officer of Straight Path IP Group has asserted claim to the right to receive options to purchase another 5% of Straight Path IP Group’s common stock from us, which is now subject to dispute by us.

The spin-off will separate our businesses from the remainder of IDT’s operations and holdings, as well as other interests. We, along with IDT’s management, believe that the operational and growth prospects of our businesses may best be realized by a separation from those non-spun-off businesses based on several factors including synergies and growth prospects. Each of our businesses is described in more detail below.

Our principal business is the acquisition, development, licensing and protection of intellectual property. We presently own eleven patents issued by the U.S. Patent Office and their foreign counterparts that primarily relate to various communications technologies and include, among other things, patents facilitating the use of communications over the Internet, which we refer to as the NetSpeak Portfolio. We also own the Droplet Portfolio of patents as well as a non-sublicensable, non-exclusive right in source code for peer to peer calling applications.

In connection with our activities relating to the protection of our intellectual property, it may be necessary to assert patent infringement claims against third parties that we believe are infringing our patents. A subsidiary of IDT asserted six of the eleven patents in our NetSpeak portfolio in 2006 against eBay Inc., Skype Technologies SA, Skype Communications, S.A.R.L. and Skype, Inc. That litigation concluded after pending for more than four years in federal district court. A subsidiary of IDT entered into a global settlement agreement with the defendants. In January 2012, the Company filed complaints in the United States District Court for the Eastern District of Virginia against Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc. claiming infringement of a number of its key patents. The Company sought both damages and injunctive relief from the defendants. The defendants each filed an answer to the complaint and/or a counterclaim. A Markman hearing (also known as a claim construction hearing) was held on October 10, 2012, and on October 26, 2012, the judge issued an Opinion and Order that was favorable to the Company. In October and November 2012, the Company reached confidential settlement agreements with each of the three defendants, and in connection with such settlements, the Company received cash and one of the defendants transferred to the Company a number of patents and patent applications and a non-sublicensable, non-exclusive right in source code for peer to peer calling applications.

Our intellectual property currently consists of the following patents:

(1)	NetSpeak Portfolio:

●

U.S. Patent No. 6,108,704: Point-to-Point Internet Protocol and its foreign counterparts,

727702 Australia

764522 Australia

764583 Australia

764521 Australia

2231127 Canada

96197195.9 China

852868 Finland

852868 France

852868 Germany

1017192 Hong Kong

10-414512 Korea

212126 Mexico

51774 Singapore

852868 Sweden

852868 Italy

NI-096566 Taiwan

●	U.S. Patent No. 6,131,121: Point-to-point computer network communication utility utilizing dynamically assigned network protocol addresses;

●	U.S. Patent No. 6,701,365: Point-to-Point Internet Protocol;

●	U.S. Patent No. 6,513,066: Establishing a point-to-point internet communication;

●	U.S. Patent No. 6,185,184: Directory server for providing dynamically assigned network protocol addresses;

●	U.S. Patent No. 6,829,645: Method and apparatus for establishing point-to-point communications over a computer network;

●	U.S. Patent No. 6,687,738: Establishing an internet telephone call using e-mail;

●	U.S. Patent No. 6,009,469: Graphic user interface for internet telephony application;

●	U.S. Patent No. 6,226,678: Method and apparatus for dynamically defining data communication utilities.

●	U.S. Patent No. 6,178,453: Virtual circuit switching architecture.

●	U.S. Patent No. 7,149,208: Method and apparatus for providing caller identification based responses in a computer telephony environment.

Our future success is largely dependent upon our proprietary technologies, our ability to protect our intellectual property rights and consummate license agreements with respect to our intellectual property. The complexity of patent and common law, combined with our limited resources, create risk that our efforts to protect our patents may not be successful. We cannot be assured that our patents will be upheld, or that third parties will not invalidate our patents.

These patents have finite lives, and the patents start to expire on September 25, 2015, although certain rights related to the patents may be enforceable following expiration for infringement that occurred before expiration. There is no guarantee that the patents will be adequately exploited or commercialized.

Straight Path IP Group is a party to an agreement with a leading multi-national law firm pursuant to which such firm will provide legal services to us with respect to enforcement of our patents. The terms of the agreement with the firm provide for us to pay fees solely out of proceeds of recoveries (subject to certain exceptions if we terminate the relationship) up to a maximum of 40% of those proceeds, and for the firm to advance expenses of the litigation.

(2)	Droplet Portfolio:

United States Patents Nos. 6,825,780; 6,847,317; 7,844,122; 7,525,463; 8,279,098;

7,436,329; and 7,679,649 and a number of U.S. and foreign patent applications.

Straight Path IP Group currently has 3 employees and its principal offices are currently located at 5300 Hickory Park Drive, Suite 218, Glen Allen, Virginia 23059. Straight Path IP Group’s principal offices were previously located in Arlington, Virginia.

MANAGEMENT

Directors and Executive Officers

We anticipate retaining additional or replacement executives prior to the spinoff. Set forth below is information concerning our executive officers and directors.

Name	Age	Position*
Ira IDavidi Jonas	26	Director and Chief Executive Officer and President
K. Chris Todd	66	Director Nominee
William F. Weld	67	Director Nominee
Fred S. Zeidman	66	Director Nominee

* Messrs. Todd, Weld and Zeidman have agreed to serve as directors effective upon the spin-off and each has consented to inclusion herein.

Set forth below is biographical information with respect to the Company’s current executive officers:

Davidi Jonas has served as Chief Executive Officer, President and Director of SPCI since April 2013 and has served as Vice President, Business Development of IDT Corporation and manager of Straight Path Spectrum since August 2012 and served as Executive Vice President and director of Straight Path IP Group from November 2012. Mr. Jonas has also served as the Rabbi of Kingsbridge Center of Israel in the Bronx, New York since 2010. Mr. Jonas taught Judaic Studies in SAR High School in Riverdale, New York from 2010 to 2012. Mr. Jonas received rabbinic ordination from Yeshivat Chovevei Torah Rabbinical School.

Key Attributes, Experience and Skills:

Mr. Jonas is very familiar with the operations included within SPCI and its subsidiaries, as well as IDT’s previous efforts to generate value from the related assets. He has exceptional inter-personal and leadership skills, and is creative in developing new applications for assets and in crafting solutions to challenges.

K. Chris Todd has been a partner at the law firm of Kellog, Huber, Hansen, Todd, Evans & Figel, P.L.L.C. since 1994. Prior to that, Mr. Todd was head of the Litigation Group at Johnson & Gibbs. Mr. Todd’s extensive career in government service includes service as a Law Clerk to a federal judge, as Associate Counsel in the Office of Independent Counsel under Lawrence Walsh during the Iran/Contra Matter, and as Assistant U.S. Attorney for the Criminal Division in the United States Attorney’s Office, Southern District of New York where Mr. Todd conducted the prosecution of numerous violations of federal law, including multi-defendant business fraud and tax evasion cases. Prior to serving in the Southern District, Mr. Todd also served as a Trial Attorney for the Department of Justice’s Tax Division, Criminal Section, where Mr. Todd conducted numerous jury trials and grand jury investigations involving tax evasion. He has a Bachelor of Arts from Texas Tech University and a J.D. from the University of Texas School of Law.

Key Attributes, Experience and Skills:

Mr. Todd’s private law practice focused on trial work, including patent infringement cases, provides invaluable expertise to the Board with respect to our Straight Path IP Group business.

William F. Weld has been a partner at the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (Mintz Levin) and a principal of ML Strategies, LLC, a consulting affiliate of Mintz Levin, since 2012. Mr. Weld has served as a director of Just Energy (TSX and NYSE: JE) since 2012. Mr. Weld was a partner at McDermott Will & Emery LLP from 2006 to 2012. In addition, Mr. Weld served two terms as Governor of Massachusetts, being elected in 1990 and re-elected in 1994 and had previously served as Assistant US Attorney General in charge of the Criminal Division of the Justice Department in Washington D.C. Mr. Weld received a Bachelor of Arts from Harvard College and a JD from Harvard Law School.

Key Attributes, Experience and Skills:

Mr. Weld’s extensive legal and other professional experience will serve as valuable asset to the Company. He has extensive contacts in commercial, legal and governmental arenas, and his managerial experience in public service and the private sector brings important skills to the functioning of the Board of Directors.

Fred S. Zeidman has served as Chairman of the Board of Petroflow Energy Corporation since September 2011 and as Chairman of the Board of Petro River Oil Corporation since 2011. Mr. Zeidman has also served as a director of Hyperdynamics Corporation since 2009 and as a director of Prosperity Bancshares, Inc. since 1986. He currently also serves as trustee for the AmeriSoft Liquidating Trust. Mr. Zeidman has served as CEO, Interim CEO and Chairman of the Board of a variety of companies, including several in the oil and gas sector. Mr. Zeidman is the Chairman Emeritus of the United States Holocaust Memorial Council. He was appointed to that position by President George W. Bush in March 2002 and served from 2002-2010. He is also Chairman Emeritus of the University of Texas Health Science System Houston and is on the Board of Trustees of the Texas Heart Institute (where he currently serves as Interim Chief Financial Officer) and the Institute for Rehabilitation and Research (TIRR). He currently serves on the Board of Directors and Executive Committee of the University of Saint Thomas and chairs its Development Committee and Houston Community College. Mr. Zeidman received his Bachelor of Science and Bachelor of Arts from Washington University and a Masters of Business Administration from New York University.

Key Attributes, Experience and Skills:

Mr. Zeidman has served in board and other leadership positions in many entities of varying size and in different industries. His experience and familiarity with the role of a director will round out the Board of Directors and provide a source of input for management to draw on.

Board of Directors

Currently, our Board of Directors is composed of Davidi Jonas. Prior to the spin-off, we intend to designate, and IDT intends, acting as majority stockholder, to elect Messrs. Todd, Weld and Zeidman such that a majority of our directors will be independent in accordance with our to-be-adopted Corporate Governance Guidelines, the rules of NYSE MKT and other applicable laws. Each director will hold office, in accordance with our Restated Certificate of Incorporation (our “Certificate of Incorporation”) and By-Laws, until the next annual meeting of stockholders and until his or her successor is duly elected and qualified. The governing instruments of Straight Path IP Group provide that all decisions regarding commencing, terminating, withdrawing or settling enforcement actions with respect to Straight Path IP Group’s intellectual property are to be made by the Straight Path IP Group board, which is to consist of the SPCI Chief Executive Officer and the independent members of the SPCI Board of Directors. All members of Straight Path IP Group’s board of directors are required to refrain from voting on matters where there is an actual conflict of interest or the appearance of a conflict of interest with respect to activities or holdings that are outside of SPCI.

CORPORATE GOVERNANCE

Director Independence

Following the spin-off, our Corporate Governance Guidelines will provide that a majority of our directors must be independent under criteria established by the NYSE MKT. Prior to the spin-off, we intend to add Messrs. Todd, Weld and Zeidman to our Board of Directors in addition to Mr. Davidi Jonas, such that a majority of our directors will be independent in accordance with our Corporate Governance Guidelines and the rules of the NYSE MKT and other applicable laws.

Following the spin-off, our Corporate Governance Guidelines will provide that a majority of our directors must be independent under criteria established by the NYSE MKT. Prior to the spin-off, we expect to designate directors in addition to Davidi Jonas, such that a majority of our directors will be independent in accordance with our Corporate Governance Guidelines and the rules of NYSE MKT and other applicable laws.

Controlled Company Exemption

Following the spin-off, we will be a “controlled company” as defined in section 801(a) of the NYSE MKT Company Guide because more than 50% of our voting power will be beneficially held by the independent trustee with voting and dispositive power over the shares in which Howard Jonas holds the economic interest. As a “controlled company,” we will be exempt from certain NYSE MKT listing standards As discussed below, we intend to apply the NYSE MKT “controlled company” exemption only for our corporate governance practices with respect to the independence requirements of our Nominating Committee.

Committees of the Board of Directors

Prior to the distribution date, our Board of Directors will establish an Audit Committee, a Nominating Committee, a Compensation Committee, and a Corporate Governance Committee. All members of the Audit, Compensation and Governance Committees will meet the criteria for independence as established by NYSE MKT and under the Sarbanes-Oxley Act of 2002. Each of the Committees is described in greater detail below. The Board will establish written charters for each of the Committees, which will be available on our website located at www.spathinc.com following the spin-off. Following the spin-off, any changes to the charters will be reflected on our website.

Audit Committee

We expect to designate members of our Audit Committee on or prior to the spin-off. The principal duties of the Audit Committee under its written charter will include: (i) responsibilities associated with our external and internal audit staffing and planning; (ii) accounting and financial reporting issues associated with our financial statements and filings with the SEC; (iii) financial and accounting organization and internal controls; (iv) auditor independence and approval of non-audit services; and (v) “whistle-blower” procedures for reporting questionable accounting and audit practices.

The Audit Committee charter will require that the Committee be comprised of at least two directors, both of whom must be independent under the NYSE MKT listing standards and the Sarbanes-Oxley Act of 2002. In addition, each member of the Audit Committee will be financially literate within the meaning of the NYSE MKT listing standards, and at least one member will have sufficient accounting or financial management expertise to qualify as an “audit committee financial expert,” as determined by the Board of Directors in accordance with SEC rules.

Nominating Committee

We expect to designate members of our Nominating Committee on or prior to the spin-off. The principal duties of the Nominating Committee under its charter will include: (i) developing the criteria and qualifications for membership on the Board of Directors; (ii) recommending candidates to fill new or vacant positions on the Board of Directors; and (iii) conducting appropriate inquiries into the backgrounds of potential candidates. We intend to apply the NYSE MKT exemption related to a controlled company which allows a “controlled company” to be exempted from complying with rules requiring that only independent directors comprise our Nominating Committee.

Compensation Committee

We expect to designate members of our Compensation Committee on or prior to the spin-off. The principal duties of the Compensation Committee under its charter will include: (i) ensuring that a succession plan for the Chief Executive Officer is in place; (ii) reviewing management’s recommendations as to compensation for executive officers and making recommendations to the Board of Directors; (iii) approving the compensation for the Chief Executive Officer and other executive officers; (iv) reviewing and approving compensation policies and practices for the Company more generally; (v) reviewing and approving major changes in employee benefit plans; (vi) reviewing short and long-term incentive plans and equity grants; (vii) recommending to the full Board of Directors changes to the compensation of the independent members of the Board of Directors; and (viii) administering our Stock Option and Incentive Plan. The Compensation Committee charter will require that the Committee be comprised of at least two directors, both of whom must be independent under our Corporate Governance Guidelines.

Corporate Governance Committee

We expect to designate members of our Corporate Governance Committee on or prior to the spin-off. The principal duties of the Corporate Governance Committee under its charter will include: (i) reviewing our Corporate Governance Guidelines and other policies and governing documents and recommending revisions as appropriate; (ii) reviewing any potential conflicts of independent directors and establishing director independence ; (iii) reviewing and monitoring related person transactions; and (iv) overseeing the self-evaluations of the Board of Directors, the Audit Committee and the Compensation Committee. The Corporate Governance Committee charter will require that the Committee be comprised of at least two directors, both of whom must be independent under the NYSE MKT listing standards.

Governance Practices

Following the spin-off, we will observe corporate governance practices and principal governance documents which are designed to ensure that we maximize stockholder value in a manner that is consistent with both the legal requirements applicable to us and a business model that requires our employees to conduct business with the highest standards of integrity. Prior to the spin-off, our Board of Directors will adopt and will adhere to corporate governance principles which the Board and senior management believe promote this purpose, are sound and represent best practices, and will review these governance practices, the corporate laws of the State of Delaware under which we were incorporated, the NYSE MKT listing standards and the regulations of the SEC, as well as best practices recognized by governance authorities to benchmark the standards under which it operates. Our principal governance documents will be as follows:

●	Corporate Governance Guidelines;
●	Board of Directors committee charters, including:

●	Audit Committee charter;
●	Nominating Committee charter;

●	Compensation Committee charter; and
●	Corporate Governance Committee charter; and

●	Code of Business Conduct and Ethics.

Our governance documents will be available following the distribution date on our web site at www.spathinc.com.

Our Board of Directors, with assistance from its Corporate Governance Committee, will regularly assess our governance practices in light of legal requirements and governance best practices.

Executive Director Sessions

Under our Corporate Governance Guidelines, the outside directors will meet in regularly scheduled executive sessions without management. We expect that a lead independent director will be selected by the Board of Directors to serve as the presiding director at these meetings.

Communications with the Board of Directors

After the spin-off, stockholders and other interested persons seeking to communicate directly with the Board of Directors, with the lead independent director or the independent directors as a group, should submit their written comments c/o Lead Independent Director at our principal executive offices set forth on page 5. The lead independent director will review any such communication at the next regularly scheduled Board meeting unless, in his or her judgment, earlier communication to the Board is warranted.

If a stockholder communication raises concerns about the ethical conduct of us or our management, it should be sent directly to our Corporate Secretary at our principal executive offices set forth on page 5. The Corporate Secretary will promptly forward a copy of any such communication to the Chairman of the Audit Committee, and take such actions as they authorize to ensure that the subject matter is addressed by the appropriate committee of the Board of Directors, by management and/or by the full Board.

The Corporate Secretary may filter out and disregard or re-direct (without providing a copy to the directors or advising them of the communication), or may otherwise handle at his or her discretion, any director communication that falls into any of the following categories:

	●	Obscene materials;
	●	Unsolicited marketing or advertising material or mass mailings;

	●	Unsolicited newsletters, newspapers, magazines, books and publications;
	●	Surveys and questionnaires;

	●	Resumes and other forms of job inquiries;
	●	Requests for business contacts or referrals;

	●	Material that is threatening or illegal; or
	●	Any communications or materials that are not in writing.

In addition, the Corporate Secretary may handle in his or her discretion any director communication that can be described as an “ordinary business matter.” Such matters include the following:

	●	Routine questions, service and product complaints and comments that can be appropriately addressed by management; and
	●	Routine invoices, bills, account statements and related communications that can be appropriately addressed by management.

Code of Business Conduct and Ethics

Prior to the distribution date, we will adopt a Code of Business Conduct and Ethics which will apply to our directors, Chief Executive Officer, Chief Financial Officer and all other SPCI employees.

DIRECTOR COMPENSATION

Each non-employee director of the Company who attends at least 75% of the regularly scheduled meetings of the Board of Directors during a calendar year will receive an annual cash retainer of $20,000. Such payment is made in January of the calendar year following attendance of at least 75% of the regularly scheduled Board meetings during the preceding year, and is pro-rated based on the quarter for non-employee directors who join the Board of Directors or depart from the Board of Directors during the prior year, if such director attended 75% of the applicable board meetings for such partial year. The Company’s Chief Executive Officer may, in his discretion, waive the requirement of 75% attendance by a director to receive the annual retainer in the case of mitigating circumstances. The Compensation Committee periodically reviews our director compensation practices. In addition, each member of our Board of Directors will receive an annual grant of restricted shares of our Class B common stock (pro rated based on the quarter in which they join the Board). The number of shares in the annual grant will be fixed following the spin-off to have a value of approximately $10,000 as of the spin-off. Shares will be vested immediately upon grant. The Compensation Committee believes that our director compensation is fair and appropriate in light of the responsibilities and obligations of our directors. Directors do not receive any annual fees for committee services, nor are there any additional fees paid to the lead independent director or audit committee financial expert.

EXECUTIVE COMPENSATION

Compensation of our Named Executive Officers

During such time as SPCI and the business that is to be transferred to SPCI was owned and conducted by IDT and its subsidiaries, no individual received any compensation in exchange for serving as an executive officer of that entity or business. We intend to enter into an employment agreement with Davidi Jonas, our Chief Executive Officer prior to the spin-off as well as enter into an employment agreement with a Chief Financial Officer.

In general, it is anticipated that each of our executive officers will receive base compensation that is commensurate with the officer’s duties, responsibilities and compensation levels for similarly situated individuals in comparable positions. In addition, executive officers may receive bonus compensation and compensatory equity-based awards.

Any bonus compensation to executive officers will be determined by our Compensation Committee based on factors it deems appropriate, including the achievement of specific performance targets and our financial and business performance. No such targets have yet been established.

Equity compensation awards will generally be granted pursuant to our 2013 Stock Option and Incentive Plan described below at levels determined by the Compensation Committee. No grants have been made nor has the Company agreed to any specific grant or level of grants.

Company Long-Term Incentive Plan

Prior to the spin-off, we intend to adopt, effective as of the distribution date, a long-term incentive plan, to be approved by IDT as our sole stockholder. The following is a general description of the plan.

Objectives. The plan is designed to attract and retain officers, employees and consultants, to encourage the sense of proprietorship of such officers, employees and consultants and to stimulate the active interest of such persons in our development and financial success. These objectives are to be accomplished by making awards under the plan and thereby providing participants with a proprietary interest in our growth and performance.

Eligibility. All of our employees, consultants and directors will be eligible for awards under the plan. Our Compensation Committee will select the participants from time to time by the grant of awards.

Shares Available for Awards. No shares of our Class A common stock and a number of shares of our Class B common stock to be equal to 3.5% of the outstanding shares of our common stock following the spin-off will be available for awards under the plan.

Administration. We intend that the plan will be administered by our Compensation Committee. The Committee will have full and exclusive power to interpret the plan and to adopt such rules, regulations and guidelines for carrying out the plan as they may deem necessary or proper, all of which powers shall be exercised in our best interests and in keeping with the objectives of the plan.

Awards. At the discretion of the Compensation Committee, awards may be in the form of (1) options, representing rights to purchase a specified number of shares Class B common stock at a specified price; (2) stock appreciation rights, representing rights to receive a payment, in cash or common stock, equal to the excess of the fair market value or other specified value of a number of shares of Class B common stock on the rights’ exercise date over a specified strike price; and (3) grants of restricted or unrestricted Class B common stock or deferred stock units denominated in Class B common stock. The Compensation Committee will determine the type or types of awards to be made to each participant under the plan and the terms, conditions and limitations applicable to each such award. Each award will be embodied in an award agreement containing such terms, conditions and limitations as determined by the Compensation Committee in its sole discretion, provided that the Compensation Committee may delegate authority to members of management to approve grants in awards to individuals who are not directors or executive officers.

Payment of Awards. Generally, payment of awards may be made in the form of cash or Class B common stock or combinations thereof and may include such restrictions as the Compensation Committee determines including, in the case of Class B common stock, as applicable, restrictions on transfer and forfeiture provisions.

The following is a brief description of these awards:

Stock Options. An award may consist of a right to purchase a specified number of shares of Class B common stock at a price specified by the Compensation Committee in the award agreement or otherwise. A stock option may be in the form of an incentive stock option to a participant who is an employee, which in addition to being subject to applicable terms, conditions and limitations established by the Committee, complies with Section 422 of the Code, or, in the case of participants who are employees or directors, in the form of a nonqualified option. The plan authorizes the Committee to specify the manner of payment of the option price.

Stock Appreciation Rights. A stock appreciation right (“SAR”), consists of a right to receive a payment, in cash or Class B common stock, as applicable, equal to the excess of the fair market value or other specified valuation of a specified number of shares of Class B common stock on the date the SAR is exercised over a specified strike price as set forth in the award agreement.

Stock Awards. A stock award may consist of Class B common stock, as applicable, or may be denominated in units of Class B common stock, as applicable. All or part of any stock award may be subject to conditions established by the Compensation Committee and set forth in the award agreement. The Committee may permit dividend equivalents with respect to restricted stock units. Such awards may be based on fair market value or other specified valuations.

The plan will have reserved for issuance pursuant to awards made under the plan shares of Class B common stock representing 3.5% of the anticipated outstanding shares of the Company’s common stock following the spin-off and that the Company expects that approximately one-half of those shares will be subject to grants of options or restricted stock on or shortly following the spin-off.

SECURITY OWNERSHIP BY

CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

One hundred percent (100%) of the shares of our common stock are, and will be, prior to the distribution, held beneficially and of record by IDT. The following table sets forth information concerning shares of our Class A common stock and Class B common stock projected to be beneficially owned immediately after the distribution date by:

●	each person or entity known by us to be the beneficial owner of 5% or more of the outstanding shares each of IDT’s classes of common stock;

●	each person who we currently anticipate will be one of our directors at the time of the distribution;

●	each person who we currently anticipate will be one of our named executive officers at the time of the distribution; and

●	all persons who we currently anticipate will be our directors and executive officers at the time of the distribution as a group.

The projected share amounts in the table below are based on the number of shares of IDT’s Class A common stock and Class B common stock owned by each person or entity at April 30, 2013, adjusted for the five for one distribution ratio in the spin-off. Percentage ownership information is based on the following projected amount of SPCI outstanding shares: (i) 314,865 shares of Class A common Stock (based on 1,574,326 shares of IDT Class A common stock that were outstanding on April 30, 2013), and (ii) 4,255,261 shares of Class B common Stock (based on 21,276,304 shares of IDT Class B common stock that were outstanding on April 30, 2013. Percentage ownership information assumes the conversion of all 1,574,326 currently outstanding shares of Class A Common Stock into Class B Common Stock for the percentage ownership information of Howard Jonas and all directors and Named Executive Officers as a group). To our knowledge, except as otherwise indicated in the footnotes below, each person or entity has sole or shared voting and investment power with respect to the shares of common stock set forth opposite such persons or entity’s name. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to the securities.

Name	Number of Shares of Class B Common Stock			Percentage of Ownership of Class B Common Stock			Percentage of Aggregate Voting Powerd
Howard S. Jonas		878,167	(1)		19.2	%		73	%
520 Broad Street Newark, NJ 07102
The Vanguard Group, Inc.		271,910	(2)		6.4	%		2	%
P.O. Box 2600 Valley Forge, Pennsylvania 19482-2600
Davidi Jonas		622	(3)		*			*
K. Chris Todd		-			-			-
William F. Weld		-			-			-
Fred S. Zeidman		-			-			-
All directors, Named Executive Officers and other executive officers as a group (4 persons)		878,789			19.2	%(4)		73	%

*	Less than 1%.

d	Voting power represents combined voting power of IDT Class A Common Stock (three votes per share) and IDT Class B Common Stock (one-tenth of one vote per share). Excludes stock options.

(1)

Consists of an aggregate of (a) 1,574,326 shares of IDT Class A Common Stock held by Howard Jonas directly; and (b) 2,816,511 shares of IDT Class B Common Stock, specifically (i) 45,694 shares of IDT Class B Common Stock held by Howard Jonas directly, (ii) an aggregate of 7,780 shares of IDT Class B Common Stock beneficially owned by custodial accounts for the benefit of certain of the children of Howard Jonas (of which Howard Jonas is the custodian), (iii) 1,269,427 shares of IDT Class B Common Stock owned by the Howard S. Jonas 2009 Annuity Trust II, (iv) 1,491,579 shares of unvested restricted IDT Class B Common Stock held by Howard Jonas directly and (v) 2,031 shares of IDT Class B Common Stock held by Howard Jonas in his 401(k) plan account as of March 31, 2013. Howard Jonas, with his wife Deborah Jonas, is the co-trustee of the Howard S. Jonas 2009 Annuity Trust II. The foregoing also does not include 186,641 shares of IDT Class B Common Stock owned by the Jonas Foundation, 460,000 shares of the IDT Class B Common Stock owned by the 2012 Jonas Family, LLC (Mr. Jonas is a minority equity holder of such entity) and 468,433 shares of IDT Class B Common Stock owned by the Howard S. and Deborah Jonas Foundation, Inc., as Howard Jonas does not beneficially own these shares. The foregoing does not include an aggregate of 1,412,025 shares of IDT Class B Common Stock beneficially owned by trusts for the benefit of the children of Howard Jonas, as Howard Jonas does not exercise or share investment control of these shares. The foregoing also does not include 60 shares of the Company’s subsidiary, Straight Path IP Group, Inc. common stock owned by Mr. Jonas. In addition, Howard Jonas has undertaken that all of the SPCI Class A Common Stock and Class B Common Stock to be distributed in the spin-off that would be beneficially owned by him will be placed in trust with an independent trustee. As a result, Mr. Jonas will not retain voting or dispositive control over any shares of SPCI common stock.

(2)	According to a Schedule 13G/A filed February 11, 2013.

(3)	This includes 1,556 shares of IDT Class B Common Stock owned by Mr. Jonas’ wife. The foregoing does not include 10 shares of the Company’s subsidiary, Straight Path IP Group, Inc. common stock owned by Mr. Davidi Jonas.

(4)	Assumed conversion of all of the shares of Class A Common Stock into shares of Class B Common Stock.

OUR RELATIONSHIP WITH IDT AFTER THE SPIN-OFF

AND RELATED PERSON TRANSACTIONS

General

In connection with the spin-off, we and IDT will enter into a Separation Agreement and a Tax Separation Agreement to complete the separation of our businesses from IDT and to distribute our common stock to IDT stockholders. These agreements will govern the relationship between us and IDT after the distribution and will also provide for the allocation of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the distribution. Along with the Separation Agreement and Tax Agreement, we and IDT will enter into a short-term Transition Services Agreement. These agreements will have been prepared before the distribution, and will reflect agreement between affiliated parties established without arms-length negotiation. However, we believe that the terms of this agreement will equitably reflect the benefits and costs of our short-term relationship with IDT.

The expected terms of these agreements, which are subject to change prior to the spin-off, are summarized below. We may enter into other agreements with IDT prior to or concurrently with the separation that would relate to other aspects of our relationship with IDT following the spin-off including a short-term Transition Services Agreement with IDT, to allow us to utilize certain personnel of, and obtain administrative, financial, legal, corporate, tax and other services form IDT until we develop those capabilities internally or arrange for such services from other vendors. Unless amended, the TSA will terminate six months following the Spin-Off. Following the separation, we may enter into other commercial agreements with IDT from time to time, the terms of which will be determined at those relevant times.

Copies of these agreements described below will be filed as exhibits to our Form 10, of which this information statement is a part. The summaries of the material agreements are qualified in their entireties by reference to the full text of the agreements. We encourage you to read the full text of these material agreements.

In addition, Straight Path IP Group, IDT and certain IDT subsidiaries have entered into a license agreement whereby each of IDT, SPCI and their respective affiliates has granted and will grant a license to the other to utilize patents held by each entity.

Separation and Distribution Agreement

The Separation and Distribution Agreement will set forth the agreement between us and IDT with respect to the principal corporate transactions required to effect our separation from IDT; the distribution of our shares to IDT stockholders; and other agreements governing the relationship between IDT and us following the separation. IDT will only consummate the spin-off if specified conditions are met or approved by the IDT board. These conditions are intended to include, among others, final approval of the distribution given by the Board of Directors of IDT, and the actions and filings necessary or appropriate under Federal and state securities laws and state blue sky laws of the United States (and any comparable laws under any foreign jurisdictions) in connection with the distribution shall have been taken and, where applicable, become effective or accepted. For additional information regarding conditions to the distribution, see “The Spin-Off--Spin-Off Conditions and Termination” on page 26.

Even if these conditions are satisfied, other events or circumstances could occur that could impact the timing or terms of the spin-off or IDT’s ability or plans to consummate the spin-off. As a result of these factors, the spin-off may not occur and, if it does occur, it may not occur on the terms or in the manner described, or in the timeframe currently contemplated.

The Contribution

In connection with the distribution, IDT will contribute to us certain assets, as described in this information statement Following the spin-off, IDT will have no interest in our assets and business and will have no obligation with respect to our liabilities after the distribution other than as described below and set forth in more detail in the Separation Agreement. Similarly, we will have no interest in the assets of IDT’s other business segments and will have no obligation with respect to the liabilities of IDT’s retained businesses after the distribution other than as described below and set forth in more detail in the Separation Agreement.

The Distribution

Following the satisfaction or waiver of all conditions to the distribution as set forth in the Separation Agreement, IDT will deliver to the distribution agent certificates representing all of the outstanding shares of our common stock that IDT owns. IDT will instruct the distribution agent to distribute those shares on _________2013 or as soon thereafter as practicable, so that each IDT stockholder will receive one share of our Class A common stock for every five shares of IDT Class A common stock and one share of our Class B common stock for every five shares of IDT Class B common stock, as such stockholder owns as of the record date of the spin-off.

Termination.

The Separation Agreement will provide that it may be terminated by IDT at any time prior to the distribution date.

Liabilities and Indemnification

Generally, IDT will indemnify us, and we will indemnify IDT, for losses related to the failure of the other to pay, perform or otherwise discharge, any of the its liabilities and obligations set forth in the Separation Agreement.

Expenses

Except as expressly set forth in the Separation Agreement, whether or not the separation and distribution are completed, all third party fees, costs and expenses paid or incurred in connection with the transactions contemplated by the Separation Agreement will be paid by IDT.

Tax Separation Agreement

In connection with the spin-off, we and IDT will enter into a tax separation agreement, which sets forth the responsibilities of IDT and us 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. IDT will be generally responsible for our federal, state, local and foreign income taxes for periods before and including the spin-off. We will be generally responsible for all other taxes relating to our business. We and IDT will each generally be responsible for managing those disputes that relate to the taxes for which each of us is responsible and, under certain circumstances, may jointly control any dispute relating to taxes for which both of us are responsible.

Transition Services Agreement

In connection with the spin-off, we and IDT will enter into a Transition Services Agreement pursuant to which IDT will provide us, among other things, certain administrative and other services following the distribution date, such as services relating to human resources and employee benefits administration, finance, accounting, tax, internal audit, facilities, investor relations and legal. For each of these areas, a service schedule will summarize the services to be provided and the responsibilities of IDT and us. The services will be paid for by us as calculated in the Transition Services Agreement.

Related Person Transactions

For a complete list of IDT’s fiscal 2012 related person transactions, please see IDT’s 2012 Proxy Statement, filed with the SEC on November 7, 2012.

Further, our Chief Executive Officer, Davidi Jonas, is the son of Howard Jonas, the Chairman, Chief Executive Officer and controlling stockholder of IDT. Further, as previously disclosed in the section entitled Interest of SPCI Officers and Directors, Howard Jonas will retain the economic benefit of the SPCI shares to be placed in trust, but he will not have any voting, dispositive power or control with respect to such shares.

LEGAL PROCEEDINGS

In January 2012, the Company filed complaints in the United States District Court for the Eastern District of Virginia against Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc. claiming infringement of a number of its key patents. The Company sought both damages and injunctive relief from the defendants. The defendants each filed an answer to the complaint and/or a counterclaim. A Markman hearing (also known as a claim construction hearing) was held on October 10, 2012, and on October 26, 2012, the judge issued an Opinion and Order that was favorable to the Company. In October and November 2012, the Company reached confidential settlement agreements with each of the three defendants, and in connection with such settlements, the Company received cash and one of the defendants transferred to the Company a number of patents and patent applications and a non-sublicensable, non-exclusive right in source code for peer to peer calling applications.

A number of our patents 6,108,704; 6,131,121; 6,701,365; 6,513,066; and 6,009,469 were subject to an ex-parte reexamination at the USPTO. The USPTO has issued a Certificate of Reexamination for each of these patents.

On December 11, 2012, Straight Path IP Group filed a demand for arbitration seeking declaratory relief that the former Chief Executive Officer of Straight Path IP Group was not entitled to severance and certain equity rights under his employment agreement. On March 15, 2013, the former executive filed a response and counterclaims alleging breach of contract and seeking various forms of relief, including declarations related to the employment agreement between the parties and monetary damages. The parties agreed to a case management schedule which sets certain dates for discovery. We expect discovery to commence in the near future.

On or about December 31, 2012, the former Chief Executive Officer of Straight Path Spectrum, and a related party (the “Related Entity”) filed a complaint in New York County against IDT Corporation, IDT Spectrum, Inc., IDT Spectrum, LLC, and certain IDT executives (collectively “the Spectrum Defendants”) seeking (a) a declaration that the Related Entity was the sole owner of certain wireless spectrum licenses acquired in May 2012 in the Related Party’s name, (b) an award of money damages to compensate for alleged economic injury caused by the Spectrum Defendants’ alleged interference with plaintiffs’ existing and prospective business relationships, (c) for the court to impose a constructive trust over the proceeds of the Straight Path Spectrum portfolio in order to ensure that it is managed in a manner that maximizes its value, and (d) damages for breach of fiduciary duty. That case was removed to federal court on February 5, 2013.

On February 1, 2013, IDT Corporation, IDT Spectrum, Inc., and IDT Spectrum LLC (“IDT Plaintiffs”) filed a complaint against the former CEO of, Spectrum Holdings, and other parties in United Stated District Court for the District of New Jersey. The IDT Plaintiffs also moved for a temporary restraining order and preliminary injunction. On February 5, 2013, the court issued granted IDT’s motion for a temporary restraining order. Following an evidentiary hearing, the court reserved decision regarding issuance of a preliminary injunction. The parties are in the process of negotiating a settlement agreement.

On April 11, 2013, a Czech company, Sipnet EU S.R.O., filed an inter partes review of certain claims of one of Straight Path IP Group's patents, U.S. Patent 6,108,704 at the USPTO, citing, among other matters, prior art that they claim had not been previously considered by the USPTO. Straight Path IP Group will have an opportunity to respond within the next three months and is expected to argue that Sipnet’s request should be denied. A decision as to whether the USPTO will grant the request is not expected for approximately six months. Straight Path IP Group will defend this matter vigorously.

In addition to the foregoing, the Company may from time to time be subject to other legal proceedings that arise in the ordinary course of business.

RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM REGISTERED SECURITIES

On April 15, 2013, an employee was granted a stock option to purchase up to 0.5% of the outstanding shares of common stock of Straight Path IP Group, Inc.

On December 27, 2012, IDT granted to Howard Jonas one hundred shares of common stock of Straight Path IP Group, Inc. (representing 10% of the outstanding equity in Straight Path IP Group, Inc.). Mr. Jonas subsequently transferred 90 of such shares to family members and related entities.

DESCRIPTION OF OUR CAPITAL STOCK

As of the date of the spin-off, our authorized capital stock will consist of (i) 2 million shares of Class A common stock, (ii) 40 million shares of Class B common stock, and (iii) 3 million shares of Preferred Stock. We are registering shares of our Class A common stock and Class B common stock under the Securities Exchange Act of 1934, as amended, under our registration statement on Form 10 filed with the SEC. We do not anticipate that any shares of Preferred Stock will be outstanding as of the date of the spin-off.

The following statements set forth the material terms of our classes of authorized stock; however, reference is made to the more detailed provisions of, and such statements are qualified in their entirety by reference to, our Amended Certificate of Incorporation, a form of which has been filed as an exhibit to registration statement on Form 10 of which this Information Statement forms a part.

Class A Common Stock

Holders of shares of Class A common stock are entitled to three votes for each share on all matters to be voted on by the stockholders. Holders of Class A common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor. Each share of Class A common stock may be converted, at any time and at the option of the holder, and automatically converts upon transfers to unaffiliated parties, into one fully paid and non-assessable share of Class B common stock. In the distribution, on the distribution date, each IDT stockholder will receive one share of SPCI Class A common stock for every five shares of IDT Class A common stock held on the record date.

As of April 30, 2013, there were 1,574,326 shares of IDT Class A common stock outstanding. Based on those numbers, we anticipate that upon the distribution, there will be 314,865 shares of our Class A common stock outstanding.

Class B Common Stock

Holders of shares of Class B common stock are entitled to one tenth of one vote for each share on all matters to be voted on by the stockholders. Holders of Class B common stock are entitled to share ratably in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor. In the distribution, on the distribution date, each IDT stockholder will receive one share of SPCI Class B common stock for every five shares of IDT Class B common stock held on the record date.

As of April 30, 2013, there were 21,276,304 shares of IDT Class B common stock outstanding. Based on those numbers, we anticipate that upon the distribution, there will be 4,255,261 shares of our Class B common stock outstanding.

Preferred Stock

The Board of Directors has the authority to fix the price, rights, preferences, privileges and restrictions, including voting rights, of those shares without any further vote or action by the stockholders.

As of April 30, 2013 no shares of IDT preferred stock were outstanding. We do not anticipate that there will be any shares of our preferred stock outstanding upon the distribution.

Anti-Takeover Effects of Our Charter and By-Laws

Some provisions of Delaware law and our Certificate of Incorporation and By-Laws could make the following more difficult:

●	acquisition of us by means of a tender offer;

●	acquisition of us by means of a proxy contest or otherwise; or
●	removal of our incumbent officers and directors.

These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids. These provisions also are designed to encourage persons seeking to acquire control of us to first negotiate with our Board of Directors. We believe that the benefits of increased protection give us the potential ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us and outweigh the disadvantages of discouraging those proposals because negotiation of them could result in an improvement of their terms.

Certificate of Incorporation; By-Laws

Our Certificate of Incorporation and By-Laws contain provisions that could make more difficult the acquisition of us by means of a tender offer, a proxy contest or otherwise. These provisions are summarized below.

Undesignated Preferred Stock. The authorization of our undesignated preferred stock makes it possible for our Board of Directors to issue our preferred stock with voting or other rights or preferences that could impede the success of any attempt to change control of us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes of control of our management.

Size of Board and Vacancies. Our Certificate of Incorporation provides that the number of directors on our Board of Directors will be fixed exclusively by our Board of Directors. Newly created directorships resulting from any increase in our authorized number of directors or any vacancies in our Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause will be filled solely by the vote of our remaining directors in office.

Stockholder Meetings. Under our By-Laws, only our (i) Chief Executive Officer, (ii) President or (iii) Corporate Secretary may call special meetings of our stockholders.

Indemnification and Limitation of Liability of Directors and Officers

Our Certificate of Incorporation provides that, to the fullest extent permitted by the Delaware General Corporate Law (“DGCL”), our directors shall not be personally liable to us or our stockholders for monetary damages for breach of fiduciary duty as a director. Section 102(7) of the DGCL, however, states that such a provision may not eliminate or limit the liability of a director (i) for any breach of the director’s duty of loyalty to us or our stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to unlawful dividends, distributions or the repurchase or redemption of stock or (iv) for any transaction from which the director derives an improper personal benefit.

Our By-Laws provide that we shall indemnify and hold harmless, to the fullest extent permitted by the DGCL, any person against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement, actually and reasonably incurred in connection with any threatened, pending or completed legal proceedings in which such person is involved by reason of the fact that he is or was a director or officer of ours if he acted in good faith and in a manner that he reasonably believed to be in or not opposed to our best interests, and, with respect to any criminal action or proceeding, if he had no reasonable cause to believe that his conduct was unlawful. If the legal proceeding, however, is by or in our right, such director or officer may not be indemnified in respect of any claim, issue or matter as to which he shall have been adjudged to be liable to us unless a court determines otherwise.

We may enter into agreements to indemnify our directors and officers in addition to the indemnification provided for in our Certificate of Incorporation. Such agreements, among other things, would indemnify our directors and officers for certain expenses (including attorneys’ fees), judgments, fines and settlement amounts incurred by such person in any action or proceeding, including any action by or in our rights, on account of services as our director or officer or as a director or officer of any subsidiary of ours, or as a director or officer of any other company or enterprise to which the person provides services at our request.

We intend to obtain directors’ and officers’ liability insurance providing coverage to our directors and officers.

Annual Meeting of Stockholders

Our By-Laws provide that an annual meeting of stockholders will be held each year on a date fixed by resolution of our Board of Directors. The first annual meeting of our stockholders after the spin-off is expected to be held on [____].

In order for a stockholder to bring, pursuant to our By-Laws, nominations or other proposals before the [_____] annual stockholders meeting, the stockholder must comply with the requirements for stockholder proposals set forth in the Proxy Statement relating to such meeting and submit such proposals by [_____].

Submission of Proposals for the 2014Annual Meeting of Stockholders

Stockholders who wish to present proposals for inclusion in our proxy materials in connection with the 2014 annual meeting of stockholders must submit such proposals in writing to our Corporate Secretary at 5300 Hickory Park Drive, Suite 218, Glen Allen, VA 23059, which proposals must be received at such address no later than [_____ __, ____].

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form 10 with respect to the shares of our common stock to be received by the stockholders of IDT in the spin-off. This information statement does not contain all of the information set forth in the Form 10 registration statement and the exhibits to the Form 10 registration statement. For further information with respect to SPCI and the shares of our common stock, reference is hereby made to the Form 10 registration statement, including its exhibits. Statements made in this information statement relating to the contents of any contract, agreement or other documents are not necessarily complete and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document, with each such statement being qualified in all respects by reference to the document to which it refers. You may review a copy of the Form 10 registration statement, including its exhibits, at the SEC’s public reference room, located at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of these materials from the SEC upon the payment of certain fees prescribed by the SEC. You may obtain further information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, copies of the Form 10 registration statement and related documents may be obtained through the SEC Internet address at http://www.sec.gov.

As a result of the spin-off, we will become subject to the information and reporting requirements of the Securities Exchange Act of 1934 and, in accordance with the Exchange Act, will file reports, proxy statements and other information with the SEC. After the spin-off, these reports, proxy statements and other information may be inspected and copied at the public reference facilities of the SEC listed above. You also will be able to obtain copies of this material from the public reference facilities of the SEC as described above, or inspect them without charge at the SEC’s website.

In addition, we intend to furnish holders of our common stock with annual reports containing consolidated financial statements audited by an independent accounting firm.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

STRAIGHT PATH COMMUNICATIONS, INC.

Report of Independent Registered Public Accounting Firm	F-2

Consolidated Balance Sheets as of July 31, 2012 and 2011	F-3

Consolidated Statements of Operations for the Years Ended July 31, 2012 and 2011	F-4

Consolidated Statements of Equity (Deficit) for the Years Ended July 31, 2012 and 2011	F-5

Consolidated Statements of Cash Flows for the Years Ended July 31, 2012 and 2011	F-6

Notes to Consolidated Financial Statements	F-7

Condensed Consolidated Balance Sheets as of January 31, 2013 (Unaudited) and July 31, 2012	F-19

Condensed Consolidated Unaudited Statements of Operations for the Six Months Ended January 31, 2013 and 2012	F-20

Condensed Consolidated Unaudited Statements of Cash Flows for the Six Months Ended January 31, 2013 and 2012	F-21

Notes to the Condensed Consolidated Unaudited Financial Statements	F-22

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholder of Straight Path Communications, Inc.,

We have audited the accompanying consolidated balance sheets of Straight Path Communications, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of July 31, 2012 and 2011, and the related consolidated statements of operations, equity (deficit), and cash flows for each of the years in the two-year period ended July 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Straight Path Communications, Inc. and subsidiaries at July 31, 2012 and 2011, and the results of their operations and their cash flows for each year in the two-year period ended July 31, 2012, in conformity with generally accepted accounting principles in the United States of America.

/s/ Zwick and Banyai, PLLC

Zwick and Banyai, PLLC

Southfield, Michigan

May 3, 2013

F-2

STRAIGHT PATH COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

July 31 (in thousands, except share data)	2012			2011
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,598		$	600
Certificate of deposit		—			240
Trade accounts receivable, net of allowance for doubtful accounts of $11 as of July 31, 2012 and 2011, respectively		37			63
Other current assets		30			23
TOTAL CURRENT ASSETS		2,665			926
Prepaid expenses—long-term portion		150			171
TOTAL ASSETS	$	2,815		$	1,097
LIABILITIES AND EQUITY (DEFICIT)
CURRENT LIABILITIES:
Trade accounts payable	$	1		$	3
Accrued expenses		1,169			476
Deferred revenue		75			72
Income taxes payable		20			—
Due to IDT Corporation		—			236,655
Note payable		—			666
TOTAL CURRENT LIABILITIES		1,265			237,872
Deferred revenue—long-term portion		150			38
TOTAL LIABILITIES		1,415			237,910
Commitments and contingencies
EQUITY (DEFICIT):
Straight Path Communications, Inc. stockholder’s equity (deficit):
Common stock, $.01 par value; authorized shares—1,500; 100 shares issued		—			—
Additional paid-in capital		366,172			132,715
Accumulated deficit		(364,694	)		(369,483	)
Total Straight Path Communications, Inc. stockholder’s equity (deficit)		1,478			(236,768	)
Noncontrolling interests		(78	)		(45	)
TOTAL EQUITY (DEFICIT)		1,400			(236,813	)
TOTAL LIABILITIES AND EQUITY (DEFICIT)	$	2,815		$	1,097

See accompanying notes to consolidated financial statements.

F-3

STRAIGHT PATH COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Year ended July 31 (in thousands, except pro forma per-share data)	2012			2011
REVENUES	$	553		$	4,000
COSTS AND EXPENSES:
Direct cost of revenues charged by IDT Corporation		92			59
Selling, general and administrative		1,010			1,489
TOTAL COSTS AND EXPENSES		1,102			1,548
Gain on assignment of wireless spectrum		5,330			—
INCOME FROM OPERATIONS		4,781			2,452
Interest income		8			5
Interest expense		(9	)		(55	)
Other income		1			79
INCOME BEFORE INCOME TAXES		4,781			2,481
Provision for income taxes		(25	)		(902	)
NET INCOME		4,756			1,579
Net loss attributable to noncontrolling interests		33			17
NET INCOME ATTRIBUTABLE TO STRAIGHT PATH COMMUNICATIONS, INC.	$	4,789		$	1,596

Pro forma earnings per share attributable to Straight Path Communications, Inc. stockholders:
Basic	$	1.05		$	0.35
Diluted	$	0.96		$	0.32
Weighted-average number of shares used in calculation of pro forma earnings per share:
Basic		4,580			4,580
Diluted		4,971			4,971

See accompanying notes to consolidated financial statements.

F-4

STRAIGHT PATH COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF EQUITY (DEFICIT)

(in thousands)

	Straight Path Communications, Inc. Stockholder
	Common Stock - Shares		Common Stock – Amount		Additional Paid-in Capital		Accumulated Deficit			Noncontrolling Interests			Total Equity (Deficit)
BALANCE AT JULY 31, 2010		—	$	—	$	132,007	$	(371,079	)	$	—		$	(239,072	)
Stock-based compensation						680								680
Grants of equity of subsidiary						28					(28	)		—
Net income for the year ended July 31, 2011								1,596			(17	)		1,579
BALANCE AT JULY 31, 2011		—		—		132,715		(369,483	)		(45	)		(236,813	)
Stock-based compensation						52								52
Amount due to IDT Corporation contributed to equity						233,405								233,405
Net income for the year ended July 31, 2012								4,789			(33	)		4,756
BALANCE AT JULY 31, 2012		—	$	—	$	366,172	$	(364,694	)	$	(78	)	$	1,400

See accompanying notes to consolidated financial statements.

F-5

STRAIGHT PATH COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Year ended July 31 (in thousands)	2012			2011
OPERATING ACTIVITIES
Net income	$	4,756		$	1,579
Stock-based compensation		52			680
Gain on assignment of wireless spectrum		(5,330	)		—
Change in assets and liabilities:
Trade accounts receivable		26			(53	)
Other current assets and prepaid expenses—long-term portion		15			(195	)
Trade accounts payable and accrued expenses		(779	)		(568	)
Income taxes payable		20			—
Deferred revenue		114			73
Net cash (used in) provided by operating activities		(1,126	)		1,516
INVESTING ACTIVITIES
Proceeds from assignment of wireless spectrum		6,800			—
Purchase of certificate of deposit		—			(240	)
Proceeds from maturity of certificate of deposit		240			—
Net cash provided by (used in) investing activities		7,040			(240	)
FINANCING ACTIVITIES
Repayment of funding provided by IDT Corporation, net		(3,250	)		(265	)
Repayment of note payable		(666	)		(634	)
Net cash used in financing activities		(3,916	)		(899	)
Net increase in cash and cash equivalents		1,998			377
Cash and cash equivalents at beginning of year		600			223
Cash and cash equivalents at end of year	$	2,598		$	600

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash payments made for interest	$	34		$	66
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amount due to IDT Corporation contributed to equity	$	233,405		$	—

See accompanying notes to consolidated financial statements.

F-6

STRAIGHT PATH COMMUNICATIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1—Description of Business and Summary of Significant Accounting Policies

Description of Business

Straight Path Communications, Inc. (“Straight Path”), a Delaware corporation, is currently a subsidiary of IDT Corporation (“IDT”). Straight Path was incorporated in April 2013. Straight Path’s businesses will consist of 100% ownership of Straight Path Spectrum, Inc. (“Straight Path Spectrum”), which holds, leases and markets fixed wireless spectrum licenses, and 84.5% ownership of Straight Path IP Group, Inc. (“Straight Path IP”), which holds intellectual property primarily related to communications over the Internet and the licensing and other businesses related to this intellectual property.

The “Company” in these financial statements refers to Straight Path, Straight Path Spectrum, and Straight Path IP on a consolidated basis as if Straight Path existed and owned the above interests in these entities in all periods presented.

IDT has approved the spin-off of the Company through a distribution to the holders of IDT Corporation’s Class A common stock and Class B common stock of all of the shares of the Company held by IDT Corporation. The spin-off will separate the Company’s businesses from the remainder of IDT’s operations and holdings. The Company, along with IDT’s management, believes that the operational and growth prospects of the Company’s businesses may best be realized by a separation from those that will remain with IDT based on several factors including synergies and growth prospects. As a separate company, investors will have the ability to independently value the Company, in contrast to IDT’s more mature business.

Straight Path Spectrum, Inc.

Straight Path Spectrum holds a broad collection of exclusively licensed commercial fixed wireless spectrum licenses. These licenses, granted by the Federal Communications Commission (the “FCC”) include over six hundred 39 GHz licenses and fifteen licenses in the local multipoint distribution service (“LMDS”) band. Straight Path Spectrum offers its customers point-to-point and point-to-multipoint wireless broadband digital telecommunications services. The broad geographical reach of the licenses enables Straight Path Spectrum to provide its services throughout the United States.

In October 2010, Straight Path Spectrum paid an aggregate of $0.2 million to renew certain of its 39 GHz FCC licenses and established a new expiration date of October 18, 2020 for these licenses. The Company included the license renewal costs in prepaid expenses, which will be charged to expense on a straight-line basis over the ten year term of the licenses.

Straight Path IP Group, Inc.

The Company believes that many parties are operating by infringing on Straight Path IP’s intellectual property, specifically one or more of Straight Path IP’s patents related to communications over the Internet. The Company intends to seek to license its patents and enforce its rights in order to generate revenue.

Straight Path IP’s patent portfolio consists of two patent portfolios.

(1)	NetSpeak Portfolio:

United States Patents Nos. 6,108,704; 6,131,121; 6,701,365; 6,513,066; 6,185,184; 6,829,645; 6,687,738; 6,009,469; 6,226,678; 7,149,208 and 6,178,453, and the foreign counterparts to U.S. Patent No. 6,108,704, listed below:

727702	Australia
764522	Australia
764583	Australia
764521	Australia

F-7

2231127	Canada
96197195.9	China
852868	Finland
852868	France
852868	Germany
1017192	Hong Kong
10-414512	Korea
212126	Mexico
51774	Singapore
852868	Sweden
852868	Italy
NI-096566	Taiwan

(collectively, the “NetSpeak patents.”) These patents are Straight Path IP’s core assets. The patents have finite lives, and the patents start to expire on September 25, 2015, although Straight Path IP Group may continue to enforce the patents for patent infringement that occurred before expiration. There is no guarantee that the patents will be adequately exploited or commercialized.

IDT is a party to an agreement with a leading multi-national law firm which will be assigned to the Company in connection with the consummation of the spin-off. Pursuant to this agreement, the law firm will provide legal services to Straight Path IP with respect to enforcement of its NetSpeak patents. The terms of the agreement provide for Straight Path IP to pay fees solely out of proceeds of recoveries (subject to certain exceptions if Straight Path IP terminates the relationship) up to a maximum of 40% of those proceeds, and for the firm to advance expenses of the litigation.

(2)	Droplet Portfolio:

United States Patents Nos. 6,825,780; 6,847,317; 7,844,122; 7,525,463; 8,279,098;

7,436,329; and 7,679,649 and a number of U.S. and foreign patent applications.

Basis of Accounting and Consolidation

The consolidated financial statements include the assets, liabilities, results of operations and cash flows of the entities to be included in the spin-off. The assets and liabilities in these financial statements are recorded at historical cost. Direct expenses historically incurred by IDT on behalf of the entities are reflected in these financial statements. The most significant expenses are as follows. Straight Path IP’s legal and professional fees, salaries and employee benefits have been allocated based on specific identification. Facility costs as well as certain salaries consisting of payroll, human resources, purchasing, accounts payable, treasury, network and telephone services, legal, travel, and consulting fees were allocated to these entities based on estimates of the incremental cost incurred by IDT. Medical and dental benefits were allocated to these entities based on rates similar to COBRA health benefit provision rates charged to former IDT employees. Stock-based compensation and retirement benefits under IDT’s defined contribution plan were allocated to these entities based on specific identification. Insurance was allocated to these entities based on a combination of headcount and specific policy identification. Management believes that the assumptions and methods of allocation used were reasonable. However, the costs as allocated are not necessarily indicative of the costs that would have been incurred if these entities operated on a stand-alone basis. Therefore, the consolidated financial statements included herein may not necessarily be indicative of the financial position, results of operations, changes in equity and cash flows of the Company to be expected in the future or what they would have been had the Company been a separate stand-alone entity during the periods presented.

All material intercompany balances and transactions have been eliminated in consolidation.

These financial statements have been prepared on the basis that the Company will continue as a going concern. The Company had an accumulated deficit at July 31, 2012 of $364.7 million, although it had net income attributable to its controlling interests of $4.8 million and $1.6 million in fiscal 2012 and fiscal 2011, respectively. In order for the Company to meet its obligations and other cash flow needs, IDT will transfer cash to the Company prior to the spin-off such that the Company will have approximately $15 million in cash at the time of the spin-off, which management believes will be sufficient to meet the Company’s cash requirements during the next twelve months.

F-8

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results may differ from those estimates.

Revenue Recognition

Straight Path Spectrum lease revenues are recognized on a straight line basis over the contractual lease period, which generally range from one to three years. Revenues from assignments of FCC licenses are recognized upon execution of the agreement by both parties, provided that the amounts are fixed or determinable, there are no significant undelivered obligations and collectability is reasonably assured. Revenues from assignments of FCC licenses less applicable costs of the sale are classified as “Gain on assignment of wireless spectrum” in the accompanying Consolidated Statements of Operations.

Straight Path IP licenses its portfolio of patents to companies who use these patents in the provision of their service. The contractual terms of the license agreements generally provide for payments over an extended period of time. For the licensing agreements with fixed royalty payments, Straight Path IP generally recognizes revenue from these arrangements as amounts become due and collectability is reasonable assured. For the licensing agreements with variable royalty payments which are based on a percentage of sales, Straight Path IP earns royalties at the time that the customers’ sales occur. Straight Path IP’s customers, however, do not report and pay royalties owed for sales in any given period until after the conclusion of that period. As Straight Path IP is unable to estimate the customers’ sales in any given period to determine the royalties due to Straight Path IP, it recognizes royalty revenues when sales and royalties are reported by customers and when other revenue recognition criteria are met.

In addition, Straight Path IP may enter into certain settlements of patent infringement disputes. The amount of consideration received upon any settlement (including but not limited to past royalty payments, future royalty payments and punitive damages) is allocated to each element of the settlement based on the fair value of each element. In addition, revenues related to past royalties are recognized upon execution of the agreement by both parties, provided that the amounts are fixed or determinable, there are no significant undelivered obligations and collectability is reasonably assured. Straight Path IP does not recognize any revenues prior to execution of the agreement since there is no reliable basis on which it can estimate the amounts for royalties related to previous periods or assess collectability.

Direct Cost of Revenues

Direct cost of revenues for Straight Path Spectrum consists primarily of network and connectivity costs and associated regulatory taxes and fees. Such costs are charged to expense as incurred. Straight Path IP does not incur direct cost of revenues.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Income Taxes

The accompanying financial statements include provisions for federal, state and foreign income taxes on a separate tax return basis.

The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the period in which related temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in its assessment of a valuation allowance. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date of such change.

F-9

The Company uses a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return. The Company determines whether it is more-likely-than-not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. In evaluating whether a tax position has met the more-likely-than-not recognition threshold, the Company presumes that the position will be examined by the appropriate taxing authority that has full knowledge of all relevant information. Tax positions that meet the more-likely-than-not recognition threshold are measured to determine the amount of tax benefit to recognize in the financial statements. The tax position is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Differences between tax positions taken in a tax return and amounts recognized in the financial statements will generally result in one or more of the following: an increase in a liability for income taxes payable, a reduction of an income tax refund receivable, a reduction in a deferred tax asset, or an increase in a deferred tax liability.

The Company classifies interest and penalties on income taxes as a component of income tax expense.

Contingencies

The Company accrues for loss contingencies when both (a) information available prior to issuance of the financial statements indicates that it is probable that a liability had been incurred at the date of the financial statements and (b) the amount of loss can reasonably be estimated. When the Company accrues for loss contingencies and the reasonable estimate of the loss is within a range, the Company records its best estimate within the range. When no amount within the range is a better estimate than any other amount, the Company accrues the minimum amount in the range. The Company discloses an estimated possible loss or a range of loss when it is at least reasonably possible that a loss may have been incurred.

Pro Forma Earnings Per Share

IDT currently expects the spin-off of the Company to occur by way of a pro rata distribution of the Company’s Class A common stock and Class B common stock held by IDT to IDT’s stockholders. Prior to the distribution, the Company will be authorized to issue two classes of its common stock, Class A and Class B, that will be exchanged for all of the outstanding shares of the Company’s common stock held by IDT. In the distribution, on the distribution date, it is expected that each IDT stockholder will receive one share of the Company’s Class A common stock for every five shares of IDT Class A common stock and one share of the Company’s Class B common stock for every five shares of IDT Class B common stock held on the record date for the spin-off. As of January 31, 2013, the Company would have distributed 0.3 million shares of its Class A common stock (based on 1.6 million shares of IDT Class A common stock that were expected to be outstanding on the record date) and 4.6 million shares of its Class B common stock (based on 21.3 million shares of IDT Class B common stock that were expected to be outstanding on the record date). Pro forma basic earnings per share is computed by dividing net income by the pro forma number of shares of all classes of common stock assumed to have been outstanding during the applicable period. Pro forma diluted earnings per share is determined in the same manner as pro forma basic earnings per share, except that the number of shares assumed to have been outstanding is increased to include pro forma restricted stock subject to risk of forfeiture, unless the effect of such increase in anti-dilutive.

Stock-Based Compensation

The Company recognizes compensation expense for all of its grants of stock-based awards based on the estimated fair value on the grant date. Compensation cost for awards is recognized using the straight-line method over the vesting period. Stock-based compensation is included in selling, general and administrative expense.

F-10

Fair Value Measurements

Fair value of financial and non-financial assets and liabilities is defined as an exit price, which is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The three-tier hierarchy for inputs used to measure fair value, which prioritizes the inputs to valuation techniques used to measure fair value, is as follows:

Level 1 –	quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 –	quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 –	unobservable inputs based on the Company’s assumptions used to measure assets and liabilities at fair value.

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the assets and liabilities being measured and their placement within the fair value hierarchy.

Allowance for Doubtful Accounts

The allowance for doubtful accounts reflects the Company’s best estimate of probable losses inherent in the accounts receivable balance. The allowance is determined based on known troubled accounts, historical experience and other currently available evidence. Doubtful accounts are written-off upon final determination that the trade accounts will not be collected. The change in the allowance for doubtful accounts is as follows:

Fiscal Year ended July 31 (in thousands)	Balance at beginning of year		Additions charged to costs and expenses		Deductions			Balance at end of year
2012
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	11	$	—	$	—		$	11
2011
Reserves deducted from accounts receivable:
Allowance for doubtful accounts	$	20	$	—	$	(9	)	$	11

Note 2—Fair Value Measurements

At July 31, 2012, the Company did not have any assets or liabilities measured at fair value on a recurring basis.

At July 31, 2012 and 2011, the carrying amounts of the financial instruments included in cash and cash equivalents, certificate of deposit, other current assets, accrued expenses, due to IDT Corporation, and note payable-current portion approximate fair value because of the short period of time to maturity. The fair value estimates for cash and cash equivalents were classified as Level 1 and certificate of deposit, other current assets, accrued expenses, due to IDT Corporation, and note payable-current portion were classified as Level 2 of the fair value hierarchy. The estimated fair value of the Company’s financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

F-11

Note 3—Income Taxes

Significant components of the Company’s deferred income tax assets consist of the following:

July 31 (in thousands)	2012			2011
Deferred income tax assets:
Accrued expenses	$	118		$	126
Net operating loss		49,864			49,807
Other		—			2,174
Total deferred income tax assets		49,982			52,107
Valuation allowance		(49,982	)		(52,107	)
DEFERRED INCOME TAX ASSETS, NET	$	—		$	—

Because of the way it is structured, the Company will file separate returns for its separate businesses. Because of its losses in previous years, the Company concluded that it does not meet the criteria of more likely than not in order to utilize its deferred federal income tax assets in the foreseeable future. Accordingly, the Company recorded a valuation allowance against its deferred federal income tax assets.

Winstar Holdings, LLC (“Winstar”) is a wholly-owned affiliate treated as a partnership for Federal income tax purposes. Winstar has material net operating losses that are “suspended” in accordance with section 704(d) of the Internal Revenue Code, and accordingly, are not available to the Company. As a consequence of the “suspension”, no deferred tax asset is reflected herein with respect of such net operating losses. If, however, any part of such net operating losses does become available, it will be reported and appropriate disclosures made.

The provision for income taxes consists of the following:

Fiscal Year ended July 31 (in thousands)	2012			2011
Current:
Federal	$	(172	)	$	730
State and local		(42	)		172
		(214	)		902
Deferred:
Federal		192			—
State and local		47			—
		239			—
PROVISION FOR INCOME TAXES	$	25		$	902

The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes provided are as follows:

Fiscal Year ended July 31 (in thousands)	2012			2011
U.S. federal income tax at statutory rate	$	1,912		$	801
Valuation allowance		(1,889	)		41
State and local income tax, net of federal benefit		2			60
PROVISION FOR INCOME TAXES	$	25		$	902

At July 31, 2012, the Company had U.S. federal and state net operating loss carryforwards of approximately $124 million and $125 million, respectively. These carry-forward losses are available to offset future U.S. federal and state taxable income. The U.S. federal net operating loss carryforwards will start to expire in fiscal 2022, with fiscal 2012’s loss expiring in fiscal 2033. The state net operating loss carryforwards will start to expire in fiscal 2022, with fiscal 2012’s loss expiring in fiscal 2033. Straight Path IP has state net operating loss carryforwards of approximately $0.6 million, all other net operating loss carryforwards relate to Straight Path Spectrum.

F-12

The change in the valuation allowance for deferred income taxes was as follows:

Fiscal Year ended July 31 (in thousands)	Balance at beginning of year		Additions charged to costs and expenses		Deductions			Balance at end of year
2012
Reserves deducted from deferred income taxes, net:
Valuation allowance	$	52,107	$	—	$	(2,125	)	$	49,982
2011
Reserves deducted from deferred income taxes, net:
Valuation allowance	$	52,143	$	—	$	(36	)	$	52,107

The Company had no unrecognized income tax benefits at July 31, 2012 or 2011.

The Company is a member of IDT’s consolidated group, therefore its income or loss were included in IDT’s tax return and will not remain with the Company following the spin-off. IDT currently remains subject to examinations of its consolidated U.S. federal tax returns for fiscal years 2009 through fiscal 2012, and state and local tax returns generally for fiscal 2008 through fiscal 2012.

Note 4— Accrued Expenses

Accrued expenses consist of the following:

July 31 (in thousands)	2012		2011
Accrued sales commissions	$	898	$	—
Accrued taxes		124		124
Accrued professional fees		116		67
Accrued lease termination costs		—		206
Accrued interest		—		25
Other		31		54
TOTAL	$	1,169	$	476

Note 5— Note Payable

In the first quarter of fiscal 2010, the Company converted a liability of $2.0 million into an unsecured note payable. The note incurred interest at an annual rate of 5.1% and was payable in three annual payments of $0.7 million, which included principal and interest. The note was fully repaid in October 2011.

Note 6—Equity

As of the date of the spin-off, the Company’s authorized capital stock is expected to consist of (i) 2 million shares of Class A common stock, (ii) 40 million shares of Class B common stock, and (iii) 3 million shares of Preferred Stock.

Class A Common Stock and Class B Common Stock

The rights of holders of shares of Class A common stock and Class B common stock are identical except for certain voting and conversion rights and restrictions on transferability. Shares of Class A common stock and Class B common stock receive identical dividends per share when and if declared by the Company’s Board of Directors. In addition, shares of Class A common stock and Class B common stock have identical and equal priority rights per share in liquidation. The Class A common stock and Class B common stock do not have any other contractual participation rights. Shares of Class A common stock are entitled to three votes per share and shares of Class B common stock are entitled to one-tenth of a vote per share. Each share of Class A common stock may be converted into one share of Class B common stock, at any time, at the option of the holder. Shares of Class A common stock are subject to certain limitations on transferability that do not apply to shares of Class B common stock.

F-13

Preferred Stock

The Company’s Board of Directors has the authority to fix the price, rights, preferences, privileges and restrictions, including voting rights, of shares of the Company’s Preferred Stock without any further vote or action by the stockholders.

Dividend

The Company does not anticipate paying dividends on its common stock until it achieves sustainable profitability and retains certain minimum cash reserves. Following that time, it is the Company’s intention to distribute not less than 50% of its consolidated positive net earnings available for distribution to its stockholders. Distributions will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets. The nature of the Company’s operations is that, in the short term until our enforcement and licensing, leasing and sales programs become more firmly established, the Company does not anticipate generating meaningful cash flows. The payment of dividends in any specific period will be at the sole discretion of the Company’s Board of Directors.

Note 7— Stock-Based Compensation

Prior to the spin-off, the Company intends to adopt, effective as of the distribution date, a stock option and incentive plan, to be approved by IDT as the Company’s sole stockholder. The plan will have reserved for issuance pursuant to awards made under the plan shares of Class B common stock representing 3.5% of the anticipated outstanding shares of the Company’s common stock following the spin-off and that the Company expects that approximately one-half of those shares will be subject to grants of options or restricted stock on or shortly following the spin-off.

In the spin-off, the exercise price of each outstanding option to purchase IDT Class B common stock will be proportionately reduced based on the relative trading prices of IDT and SPCI following the spin-off. Further, each option holder will receive his or her ratable share in a pool of options to purchase 14,069 shares of SPCI Class B common stock with an exercise price equal to the closing price of SPCI on the first trading day following the consummation of the spin-off and an expiration date equal to the later of (i) the expiration of the IDT option held by such option holder and (ii) a date on or about the first anniversary of the spin-off when SPCI insiders will be free to trade in shares of SPCI under SPCI’s to be adopted insider trading policy.

On September 24, 2012, IDT’s Board of Directors approved a grant of 10% of the equity of Straight Path IP to Howard Jonas, Chairman and Chief Executive Officer of IDT. These Straight Path IP shares vested immediately. The Company recorded stock-based compensation expense of $1.2 million in the first quarter of fiscal 2013 for the grant of these shares, based on the estimated fair value of the shares on the grant date. The estimated fair value of the Straight Path IP shares was determined using the income approach based on expected future royalties.

In May 2011, Straight Path IP entered into an employment agreement with its then Chief Executive Officer (“CEO”), pursuant to which Straight Path IP committed to grant options to its CEO to purchase shares of Straight Path IP’s common stock representing 5.0% of Straight Path IP’s outstanding equity. The options vested monthly from May 2011 through April 2015. The estimated value of this grant was $0.2 million which Straight Path IP was recognizing using the straight-line method over the vesting period. The fair value of the options was estimated using a Black-Scholes valuation model and the following assumptions: (1) expected volatility of 49% based on the historical volatility of a comparable company and other factors, (2) a discount rate of 2.2% and (3) an expected term of six years. The fair value of the underlying Straight Path IP shares was determined using the income approach. The Company recorded stock-based compensation expense related to this grant of $52,000 and $13,000 in fiscal 2012 and fiscal 2011, respectively. The Company ceased recording stock-based compensation upon the termination of the CEO, and such options are now subject to dispute by us, as discussed in Note 8.

F-14

On March 15, 2011, Straight Path IP granted shares of its common stock to two employees of IDT representing 5.5% of the outstanding equity of Straight Path IP. These Straight Path IP shares vested immediately. The Company recorded stock-based compensation expense of $0.7 million in fiscal 2011 for the grant of these Straight Path IP shares, based on the estimated fair value of the shares on the grant date. The estimated fair value of the Straight Path IP shares was determined using the income approach based on expected future royalties.

On April 15, 2013, an employee was granted a stock option to purchase up to 0.5% of the outstanding shares of common stock of Straight Path IP. The option vests 33.2% immediately, 33.4% on May 31, 2013 and 33.4% on May 31, 2014. The estimated value of this grant was nil which Straight Path IP will recognize using the straight-line method over the vesting period. The fair value of the options was estimated using a Black-Scholes valuation model.

Note 8—Commitments and Contingencies

Legal Proceedings

On December 11, 2012, Straight Path IP Group filed a demand for arbitration seeking declaratory relief that the former Chief Executive Officer of Straight Path IP Group was not entitled to severance and certain equity rights under his employment agreement. On March 15, 2013, the former executive filed a response and counterclaims alleging breach of contract and seeking various forms of relief, including declarations related to the employment agreement between the parties and monetary damages. The parties agreed to a case management schedule which sets certain dates for discovery. The Company expects discovery to commence in the near future.

In addition to the foregoing, the Company may from time to time be subject to other legal proceedings that arise in the ordinary course of business. Although there can be no assurance in this regard, the Company does not expect any of those legal proceedings to have a material adverse effect on the Company’s results of operations, cash flows or financial condition.

Lease Commitments

At July 31, 2012, the Company had an operating lease for office space with a six month term from August 1, 2012 to January 31, 2013. The aggregate future minimum payments for this lease were $6,000.

Rental expense under operating leases was $15,000 and $6,000 in fiscal 2012 and fiscal 2011, respectively.

F-15

FCC License Renewal

As of October 18, 2010, Straight Path Spectrum renewed its 39 GHz EA licenses and established a new expiration date of October 18, 2020 for these licenses. Straight Path Spectrum has filed its substantial service performance filings for its 39 GHz EA licenses, and most have been accepted by the FCC, although some remain pending.

Straight Path Spectrum also holds 113 active 39 GHz Rectangular Service Area (RSA) common carrier licenses, the vast majority of which expire in early to mid-2017. Straight Path Spectrum has renewed all 113 active 39 GHz RSA licenses. Straight Path Spectrum also filed the required substantial service showings before the final construction deadline. Some of these showings have been accepted by the FCC, and some remain pending.

In addition, Straight Path Spectrum holds 15 LMDS licenses in the 28 GHz range, which expire on August 10, 2018 (except for its New York City LMDS license which expires on February 1, 2016). Straight Path Spectrum has met its substantial service build-out obligations for these LMDS licenses.

Note 9—Related Party Transactions

IDT charges the Company for certain transactions and allocates routine expenses based on company specific items. In addition, IDT controls the flow of the Company’s treasury transactions. In fiscal 2012 and fiscal 2011, IDT allocated to the Company an aggregate of $1.1 million and $0.5 million, respectively, for payroll, benefits, insurance, facilities and other expenses, which were included in “Selling, general and administrative expense” in the consolidated statements of operations. In all periods presented, the Company was included in IDT’s consolidated federal income tax return.

The change in the Company’s liability to IDT was as follows:

Fiscal Year ended July 31 (in thousands)	2012			2011
Balance at beginning of year	$	236,655		$	236,868
Payments by IDT on behalf of the Company		1,767			1,865
Deferred taxes offset against IDT net operating losses		3			852
Cash repayments, net of advances		(5,020	)		(2,930	)
Amount due to IDT contributed to equity		(233,405	)		—
Balance at end of year	$	—		$	236,655
Average balance during the year	$	118,328		$	236,762

Note 10—Revenues and Gain on Assignment of Wireless Spectrum

Revenues

In fiscal 2012 and fiscal 2011, Straight Path Spectrum’s revenues from transactions with a single customer that amounted to 10% or more of total revenues (excluding Straight Path IP’s revenues of $3.5 million in fiscal 2011 described above) were as follows:

Fiscal Year ended July 31 (in thousands)	2012		2011
Customer:
Covad Communications Group	$	161	$	154
AT&T		124		124
Verizon		90		90

F-16

The loss of any of these major customers would have a material adverse effect on the Company’s results of operations and cash flows.

In August 2010, Straight Path IP entered into a settlement, release and cross-license agreement in connection with its lawsuits asserting infringement of its patents. Straight Path IP received a payment of $3.5 million in August 2010 as a result of the agreement, which was recorded as revenue during fiscal 2011.

Gain on Assignment of Wireless Spectrum

Note 11—Business Segment Information

The Company has two reportable business segments, Straight Path Spectrum, which holds leases and sells fixed wireless spectrum, and Straight Path IP, which holds intellectual property primarily related to communications over the Internet and the licensing and other businesses related to this intellectual property.

The Company’s reportable segments are distinguished by types of service, customers and methods used to provide their services. The operating results of these business segments are regularly reviewed by the Company’s chief operating decision maker.

The accounting policies of the segments are the same as the accounting policies of the Company as a whole. The Company evaluates the performance of its business segments based primarily on income (loss) from operations. There are no significant asymmetrical allocations to segments.

Operating results for the business segments of the Company were as follows:

(in thousands)	Straight Path Spectrum		Straight Path IP			Total
Fiscal Year ended July 31, 2012
Revenues	$	553	$	—		$	553
(Loss) income from operations		5,366		(585	)		4,781
Gain on assignment of wireless spectrum included in income from operations		5,330		—			5,330
Fiscal Year ended July 31, 2011
Revenues	$	500	$	3,500		$	4,000
Income from operations		157		2,295			2,452

Total assets for the business segments of the Company were as follows:

(in thousands)	Straight Path Spectrum		Straight Path IP		Reclassification			Total
Total assets:
July 31, 2012	$	2,574	$	241	$	—		$	2,815
July 31, 2011		1,097		564		(564	)		1,097

None of the company’s revenues were generated outside of the United States in fiscal 2012 or fiscal 2011. The Company did not have any assets outside the United States at July 31, 2012 or 2011.

F-17

Note 12—Subsequent Events

In January 2012, Straight Path IP filed complaints in the United States District Court for the Eastern District of Virginia against Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc. claiming infringement of a number of its key patents. Straight Path IP sought both damages and injunctive relief from the defendants. The defendants each filed an answer to the complaint and/or a counterclaim. A Markman hearing (also known as a claim construction hearing) was held on October 10, 2012, and on October 26, 2012, the judge issued an Opinion and Order that was favorable to Straight Path IP. In October and November 2012, Straight Path IP reached confidential settlement agreements with each of the three defendants. In connection with the settlements, Straight Path IP recognized revenue of $0.4 million in the six months ended January 31, 2013, which included cash plus a number of patents and patent applications and a non-sublicensable, non-exclusive right in source code for peer to peer calling applications.

In connection with the planned spin-off, the Company and IDT will enter into a Separation and Distribution Agreement and a Tax Separation Agreement to complete the separation of the Company’s businesses from IDT and to distribute the Company’s common stock to IDT’s stockholders. These agreements will govern the relationship between the Company and IDT after the distribution and will also provide for the allocation of employee benefits, taxes and other liabilities and obligations attributable to periods prior to the distribution. These agreements will be prepared before the distribution, and will reflect agreements between affiliated parties established without arms-length negotiation. However, the Company expects that the terms of these agreements will equitably reflect the benefits and costs of the Company’s ongoing relationships with IDT.

The Company also intends to enter into agreements with IDT that will ease our transition from a consolidated subsidiary to an independent company following the spin-off. It is intended that IDT, pursuant to a short term Transition Services Agreement, will continue to provide certain services, including, but not limited to services relating to human resources, employee benefits administration, finance, accounting, tax, internal audit, facilities, investor relations and legal services for an agreed period following the spin-off.

In April 2013, the Company entered into a lease agreement for its corporate headquarters in Richmond, Virginia for a term of twelve months beginning on May 1, 2013 and ending on April 30, 2014 at a monthly rent of $800.

F-18

STRAIGHT PATH COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)	January 31, 2013 (Unaudited)			July 31, 2012 (See Note)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,204		$	2,598
Trade accounts receivable, net of allowance for doubtful accounts of $11 as of January 31, 2013 and July 31, 2012, respectively		55			37
Other current assets		84			30
TOTAL CURRENT ASSETS		2,343			2,665
Prepaid expenses—long-term portion		230			150
TOTAL ASSETS	$	2,573		$	2,815
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Trade accounts payable	$	1		$	1
Accrued expenses		735			1,169
Deferred revenue		120			75
Income taxes payable		20			20
TOTAL CURRENT LIABILITIES		876			1,265
Deferred revenue—long-term portion		239			150
TOTAL LIABILITIES		1,115			1,415
Commitments and contingencies
EQUITY:
Straight Path Communications, Inc. stockholder’s equity:
Common stock, $.01 par value; authorized shares—1,500; 100 shares issued		—			—
Additional paid-in capital		367,930			366,172
Accumulated deficit		(366,291	)		(364,694	)
Total Straight Path Communications, Inc. stockholder’s equity		1,639			1,478
Noncontrolling interests		(181	)		(78	)
TOTAL EQUITY		1,458			1,400
TOTAL LIABILITIES AND EQUITY	$	2,573		$	2,815

See accompanying notes to condensed consolidated financial statements.

F-19

STRAIGHT PATH COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

Six months ended January 31 (in thousands, except pro forma per-share data)	2013			2012
REVENUES	$	697		$	269
COSTS AND EXPENSES:
Direct cost of revenues charged by IDT Corporation		26			39
Selling, general and administrative		2,703			479
TOTAL COSTS AND EXPENSES		2,729			518
Gain on assignment of wireless spectrum		150			—
LOSS FROM OPERATIONS		(1,882	)		(249	)
Interest income		6			4
Interest expense		—			(8	)
LOSS BEFORE INCOME TAXES		(1,876	)		(253	)
Provision for income taxes		(12	)		(3	)
NET LOSS		(1,888	)		(256	)
Net loss attributable to noncontrolling interests		291			17
NET LOSS ATTRIBUTABLE TO STRAIGHT PATH COMMUNICATIONS, INC.	$	(1,597	)	$	(239	)

Pro forma earnings per share attributable to Straight Path Communications, Inc. stockholders:
Basic	$	(0.35	)	$	(0.05	)
Diluted	$	(0.35	)	$	(0.05	)
Weighted-average number of shares used in calculation of pro forma earnings per share:
Basic		4,570			4,570
Diluted		4,570			4,570

See accompanying notes to condensed consolidated financial statements.

F-20

STRAIGHT PATH COMMUNICATIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six months ended January 31 (in thousands)	2013			2012
OPERATING ACTIVITIES
Net loss	$	(1,888	)	$	(256	)
Stock-based compensation		1,226			26
Change in assets and liabilities:
Trade accounts receivable		(18	)		17
Other current assets and prepaid expenses—long-term portion		(134	)		12
Trade accounts payable and accrued expenses		(434	)		(247	)
Deferred revenue		134			69
Net cash used in operating activities		(1,114	)		(379	)
INVESTING ACTIVITIES
Proceeds from maturity of certificate of deposit		—			240
Net cash provided by investing activities		—			240
FINANCING ACTIVITIES
Funding provided by IDT Corporation, net		720			1,567
Repayment of note payable		—			(666	)
Net cash provided by financing activities		720			901
Net (decrease) increase in cash and cash equivalents		(394	)		762
Cash and cash equivalents at beginning of period		2,598			600
Cash and cash equivalents at end of period	$	2,204		$	1,362

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Amount due to IDT Corporation contributed to equity	$	720		$	—

See accompanying notes to condensed consolidated financial statements.

F-21

STRAIGHT PATH COMMUNICATIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Note 1—Description of Business and Basis of Presentation

Description of Business

Straight Path Spectrum, Inc.

Straight Path Spectrum holds a broad collection of exclusively licensed commercial fixed wireless spectrum licenses. These licenses, granted by the Federal Communications Commission (the “FCC”) include 629 39 GHz EA licenses and 15 licenses in the local multipoint distribution service (“LMDS”) band. Straight Path Spectrum offers its customers point-to-point and point-to-multipoint wireless broadband digital telecommunications services. The broad geographical reach of the licenses enables Straight Path Spectrum to provide its services throughout the United States.

In October 2010, Straight Path Spectrum paid an aggregate of $0.2 million to renew certain of its FCC licenses and established a new expiration date of October 18, 2020 for these licenses. The Company included the license renewal costs in prepaid expenses, which will be charged to expense on a straight-line basis over the ten year term of the licenses.

Straight Path IP Group, Inc.

Straight Path IP’s patent portfolio consists of two patent portfolios.

(1)	NetSpeak Portfolio:

727702	Australia
764522	Australia
764583	Australia
764521	Australia
2231127	Canada
96197195.9	China
852868	Finland
852868	France
852868	Germany
1017192	Hong Kong
10-414512	Korea
212126	Mexico
51774	Singapore
852868	Sweden
852868	Italy
NI-096566	Taiwan

F-22

(2)	Droplet Portfolio:

United States Patents Nos. 6,825,780; 6,847,317; 7,844,122; 7,525,463; 8,279,098;

7,436,329; and 7,679,649 and a number of U.S. and foreign patent applications.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six months ended January 31, 2013 are not necessarily indicative of the results that may be expected for the fiscal year ending July 31, 2013. The balance sheet at July 31, 2012 has been derived from the Company’s audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, please refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2012, as filed with the U.S. Securities and Exchange Commission (“SEC”).

These financial statements have been prepared on the basis that the Company will continue as a going concern. The Company had a net loss in the six months ended January 31, 2013 of $1.9 million and an accumulated deficit at January 31, 2013 of $366.3 million. In order for the Company to meet its obligations and other cash flow needs, IDT will transfer cash to the Company prior to the spin-off such that the Company will have approximately $15 million in cash at the time of the spin-off, which management believes will be sufficient to meet the Company’s anticipated cash requirements during the next twelve months.

Pro Forma Earnings Per Share

IDT currently expects the spin-off of the Company to occur by way of a pro rata distribution of the Company’s Class A common stock and Class B common stock held by IDT to IDT’s stockholders. Prior to the distribution, the Company will be authorized to issue two new classes of its common stock, Class A and Class B, that will be exchanged for all of the outstanding shares of the Company’s common stock held by IDT. In the distribution, on the distribution date, it is expected that each IDT stockholder will receive one share of the Company’s Class A common stock for every five shares of IDT Class A common stock and one share of the Company’s Class B common stock for every five shares of IDT Class B common stock held on the record date for the spin-off. As of January 31, 2013, the Company would have distributed 0.3 million shares of its Class A common stock (based on 1.6 million shares of IDT Class A common stock that were expected to be outstanding on the record date) and 4.6 million shares of its Class B common stock (based on 21.3 million shares of IDT Class B common stock that were expected to be outstanding on the record date). Pro forma basic earnings per share is computed by dividing net income by the pro forma number of shares of all classes of common stock assumed to have been outstanding during the applicable period. Pro forma diluted earnings per share is determined in the same manner as pro forma basic earnings per share, except that the number of shares assumed to have been outstanding is increased to include pro forma restricted stock subject to risk of forfeiture, unless the effect of such increase in anti-dilutive.

F-23

Note 2—Fair Value Measurements

At January 31, 2013, the Company did not have any assets or liabilities measured at fair value on a recurring basis.

At January 31, 2013 and July 31, 2012, the carrying amounts of the financial instruments included in cash and cash equivalents, other current assets and accrued expenses approximate fair value because of the short period of time to maturity. The fair value estimates for cash and cash equivalents were classified as Level 1 and other current assets and accrued expenses were classified as Level 2 of the fair value hierarchy. The estimated fair value of the Company’s financial instruments was determined using available market information or other appropriate valuation methodologies. However, considerable judgment is required in interpreting this data to develop estimates of fair value. Consequently, the estimates are not necessarily indicative of the amounts that could be realized or would be paid in a current market exchange.

Note 3—Accrued Expenses

Accrued expenses consist of the following:

(Unaudited) (in thousands)	January 31, 2013 (Unaudited)		July 31, 2012
Accrued sales commissions	$	2	$	898
Accrued taxes		124		124
Accrued professional fees		169		116
Accrued employee related expenses and other		440		31
TOTAL	$	735	$	1,169

Note 4—Equity

Changes in the components of equity in the six months ended January 31, 2013 were as follows:

(Unaudited) (in thousands)	Attributable to Straight Path Communications, Inc.			Noncontrolling Interests			Total
Balance, July 31, 2012	$	1,478		$	(78	)	$	1,400
Grant of equity in Straight Path IP		1,025			188			1,213
Stock-based compensation		13			—			13
Amount due to IDT Corporation contributed to equity		720			—			720
Net loss		(1,597	)		(291	)		(1,888	)
Balance, January 31, 2013	$	1,639		$	(181	)	$	1,458

F-24

Grant of Equity in Straight Path IP

Stock-Based Compensation

In May 2011, Straight Path IP entered into an employment agreement with its then Chief Executive Officer (“CEO”), pursuant to which Straight Path IP committed to grant options to its CEO to purchase shares of Straight Path IP’s common stock representing 5.0% of Straight Path IP’s outstanding equity. The options vested monthly from May 2011 through April 2015. The estimated value of this grant was $0.2 million which Straight Path IP was recognizing using the straight-line method over the vesting period. The fair value of the options was estimated using a Black-Scholes valuation model and the following assumptions: (1) expected volatility of 49% based on the historical volatility of a comparable company and other factors, (2) a discount rate of 2.2% and (3) an expected term of six years. The fair value of the underlying Straight Path IP shares was determined using the income approach. The Company recorded stock-based compensation expense related to this grant of $13,000 in the six months ended January 31, 2013. The Company ceased recording stock-based compensation upon the termination of the CEO, and such options are now subject to dispute by us, as discussed in Note 5.

On April 9, 2013, an employee was granted a stock option to purchase up to 0.5% of the outstanding shares of common stock of Straight Path IP. The option vests 33.2% immediately, 33.4% on May 31, 2013 and 33.4% on May 31, 2014. The estimated value of this grant was nil which Straight Path IP will recognize using the straight-line method over the vesting period. The fair value of the options was estimated using a Black-Scholes valuation model.

Class A Common Stock and Class B Common Stock

F-25

Preferred Stock

Dividend

The Company does not anticipate paying dividends on its common stock until it achieves sustainable profitability and retains certain minimum cash reserves. Following that time, it is the Company’s intention to distribute not less than 50% of its consolidated positive net earnings available for distribution to its stockholders. Distributions will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets. The nature of the Company’s operations is that, in the short term until its enforcement and licensing, leasing and sales programs become more firmly established, the Company does not anticipate generating meaningful cash flows. The payment of dividends in any specific period will be at the sole discretion of the Company’s Board of Directors.

Note 5—Commitments and Contingencies

Legal Proceedings

On December 11, 2012, Straight Path IP Group filed a demand for arbitration seeking declaratory relief that the former Chief Executive Officer of Straight Path IP Group was not entitled to severance and certain equity rights under his employment agreement. On March 15, 2013, the former executive filed a response and counterclaims alleging breach of contract and seeking various forms of relief, including declarations related to the employment agreement between the parties and monetary damages. The parties agreed to a case management schedule which sets certain dates for discovery. The Company expects discovery to commence in the near future.

F-26

FCC License Renewal

As of April 2013, Straight Path Spectrum renewed 629 of its 39 GHz EA licenses and established a new expiration date of October 18, 2020 for these licenses. Straight Path Spectrum has filed its substantial service performance filings for its 39 GHz licenses. Many of these showings have been accepted by the FCC, but some remain pending. In a recent transaction, Straight Path Spectrum assigned spectrum that was partitioned and/or disaggregated from eight of its LMDS and 39 GHz EA licenses.

Straight Path Spectrum also holds 113 active 39 GHz RSA common carrier licenses, the vast majority of which expire in early to mid-2017. Straight Path Spectrum has filed substantial service showings for all 113 active 39 GHz RSA licenses. Some of these showings have been accepted by the FCC, and some remain pending.

In addition, Straight Path Spectrum holds 15 LMDS licenses in the 28 GHz range, which expire on August 10, 2018 (except for its New York City LMDS license, which expires on February 1, 2016). Straight Path Spectrum has met its substantial service build-out obligations for its LMDS licenses.

Note 6—Related Party Transactions

IDT charges the Company for certain transactions and allocates routine expenses based on company specific items. In addition, IDT controls the flow of the Company’s treasury transactions. In the six months ended January 31, 2013 and 2012, IDT allocated to the Company an aggregate of $0.3 million and $0.5 million, respectively, for payroll, benefits, insurance, facilities and other expenses, which were included in “Selling, general and administrative expense” in the consolidated statements of operations. In all periods presented, the Company was included in IDT’s consolidated federal income tax return.

The change in the Company’s liability to IDT in the six months ended January 31, 2013 was as follows:

(Unaudited) (in thousands)
Balance at beginning of period	$	—
Payments by IDT on behalf of the Company		471
Deferred taxes offset against IDT net operating losses		12
Cash advances, net of repayments		237
Amount due to IDT contributed to equity		(720	)
Balance at end of period	$	—
Average balance during the period	$	360

Note 7—Revenues and Gain on Assignment of Wireless Spectrum

Revenues

In January 2012, Straight Path IP filed complaints in the United States District Court for the Eastern District of Virginia against Stalker Software, Inc. (d/b/a CommuniGate Systems, Inc.), ooVoo, LLC, and Vivox, Inc. claiming infringement of a number of its key patents. Straight Path IP sought both damages and injunctive relief from the defendants. The defendants each filed an answer to the complaint and/or a counterclaim. A Markman hearing (also known as a claim construction hearing) was held on October 10, 2012, and on October 26, 2012, the judge issued an Opinion and Order that was favorable to Straight Path IP. In October and November 2012, Straight Path IP reached confidential settlement agreements with each of the three defendants. In connection with the settlements, Straight Path IP recognized revenue of $0.4 million in the six months ended January 31, 2013, which included cash plus a number of patents and patent applications, a non-sublicensable, non-exclusive right in source code for peer to peer calling applications and $200,000.

Gain on Assignment of Wireless Spectrum

In March and April 2012, Straight Path Spectrum closed on the assignment of spectrum partitioned and/or disaggregated from eight of its LMDS and 39 GHz EA spectrum licenses covering metropolitan areas from its nationwide portfolio. In fiscal 2012, Straight Path Spectrum received cash of $6.8 million in exchange for the licenses and recorded a gain of $5.3 million. In the six months ended January 31, 2013, Straight Path Spectrum settled certain claims related to the assignment and recorded an additional gain of $0.2 million.

F-27

Note 8—Business Segment Information

Operating results for the business segments of the Company were as follows:

(Unaudited) (in thousands)	Straight Path Spectrum		Straight Path IP			Total
Six months ended January 31, 2013
Revenues	$	277	$	420		$	697
Income (loss) from operations		80		(1,962	)		(1,882	)
Gain on assignment of wireless spectrum included in income from operations		150		—			150
Six months ended January 31, 2012
Revenues	$	269	$	—		$	269
Income (loss) from operations		41		(290	)		(249	)

Total assets for the business segments of the Company were as follows:

(Unaudited) (in thousands)	Straight Path Spectrum		Straight Path IP		Total
Total assets:
January 31, 2013	$	2,138	$	435	$	2,573
July 31, 2012		2,574		241		2,815

Note 9—Subsequent Events

F-28

Q:	Why am I receiving this document?

A:	IDT is delivering this document to you because you were a holder of IDT’s Class A common stock or Class B common stock on the record date for the distribution of our shares of our Class A common stock and Class B common stock. Accordingly, you are entitled to receive one share of our Class A common stock for every five shares of IDT Class A common stock that you held on the record date and one share of our Class B common stock for every five shares of IDT Class B common stock that you held on the record date. No action is required for you to participate in the distribution.

Q:	What is the spin-off?

A:	The spin-off is the overall transaction of separating our company from IDT resulting in SPCI being owned by the public and continuing to own and operate the assets of Straight Path Spectrum and Straight Path IP Group. This will consist of internal movement of the assets and entities so that they will be owned by SPCI. The final step of the spin-off will be the pro rata distribution by IDT of our Class A common stock and Class B common stock held by IDT to holders of IDT’s Class A common stock and Class B common stock, as set forth in the answer above. We refer to this last step as the “distribution.” For additional information regarding these transactions, see “The Spin-Off--Manner of Effecting the Spin-Off” beginning on page 22.

Q:	What is SPCI?

A:	Up to the time of the spin-off, we will be a wholly-owned subsidiary of IDT. Following the spin-off, we will be a separate publicly-traded company. We will own 100% of the equity interests in Straight Path Spectrum and have a majority holding of Straight Path IP Group.

Q:	Why is IDT separating our businesses and distributing our stock?

A:	IDT’s Board of Directors and management believe the separation will provide the benefits set forth below under the caption “The Spin-Off – Reasons for the Spin-Off” beginning on page 19, including more effective deployment of the intellectual property and intangible assets of Straight Path. Management also considered the other factors set forth below under the caption “The Spin-Off – Other Benefits of the Spin-Off” on page 21.

Q:	Why is the separation of the two companies structured as a spin-off?

A:	IDT’s Board of Directors believes that a spin-off of our shares is a cost-effective and tax efficient way to separate the companies.

Q:	What is the record date for the distribution?

A:	The record date is ________, 2013 and ownership will be determined as of 5:00 p.m., New York City time, on that date. When we refer to the “record date,” we are referring to that time and date.

Q:	When will the spin-off be completed?

A:	Shares of our common stock will be distributed on or about ____________________, 2013. We refer to this date as the “distribution date.”

Q:	What will be our relationship with IDT after the spin-off?

A:	IDT and SPCI each will be independent publicly-traded companies with no common management and no ongoing relationship other than provision of certain services during a transition period, licenses of patents from each entity and its affiliates to the other, and as necessary to cooperate with respect to certain matters related to periods prior to the spin-off. Any relationships among management of us and IDT are described below under the caption “Our Relationship with IDT After the Spin-Off and Related Person Transactions.”

Q:	Can IDT decide to cancel the distribution of our common stock even if all the conditions have been met?

A:	Yes. The distribution is conditioned upon satisfaction or waiver of certain conditions. See “The Spin-Off--Spin-Off Conditions and Termination” beginning on page 26. IDT has the right to terminate the stock distribution, even if all of these conditions are met, if at any time IDT’s Board of Directors determines, in its sole discretion that IDT and SPCI are better served by remaining a combined company or that business conditions are such that it is not advisable to complete the spin-off.

Q:	What will happen to the listing of IDT’s Class B common stock?

A:	Nothing. We expect that IDT Class B common stock will continue to be traded on the New York Stock Exchange under the symbol “IDT.”

Q:	Will the spin-off affect the market price of my IDT shares?

A:	Possibly. As a result of the spin-off, the trading price of IDT shares immediately following the distribution may be lower than immediately prior to the distribution because the trading price will no longer reflect the value of our assets. In addition, until the market has fully analyzed the operations of IDT without these assets, the price of IDT shares may fluctuate more than it has historically. Furthermore, the combined trading prices of IDT’s Class B common stock and, if and when outstanding, our Class B common stock, after the distribution may be higher or lower than the trading price of IDT Class B common stock prior to the distribution. See the Risk Factor entitled “There may not be an active trading market for shares of our common stock and stockholders may find it difficult to transfer our securities.” on page 17.

Q:	What will IDT stockholders receive in the spin-off?

A:	In the spin-off, IDT stockholders will receive one share of our Class A common stock for every five shares of IDT Class A common stock and one share of our Class B common stock for every five shares of IDT Class B common stock that they own as of the record date, and compensation in lieu of fractional shares as set forth below. Immediately after the spin-off, IDT stockholders will still own all of IDT’s current business segments, but they will own them as two separate investments rather than as a single investment. Holders of our Class A common stock will be entitled to three votes per share and holders of our Class B common stock will be entitled to one tenth of one vote per share. After the spin-off, the certificates and book-entry interests representing the “old” IDT Class A common stock and Class B common stock will represent such stockholders’ interests in the IDT businesses (other than our businesses) following the spin-off, and the certificates and book-entry interests representing our Class A common stock and Class B common stock that stockholders receive in the spin-off will represent their interest in SPCI businesses only.

Q:	If a stockholder owns unvested restricted stock or deferred stock units of IDT, what will that stockholder receive in the spin-off?

A:	Holders of unvested restricted stock of IDT will receive, in respect of those unvested restricted shares, one share of our Class B common stock for every five unvested restricted shares of IDT Class B common stock that they own as of the record date for the spin-off. Those particular unvested restricted shares of our stock that you will receive will be restricted under the same terms as the IDT unvested restricted shares in respect of which they were issued. This means that unvested restricted shares of our stock received in the spin-off are subject to forfeiture on the same terms, and their restrictions lapse at the same time, as the corresponding IDT shares. Holders of deferred stock units, or DSUs with respect to Class B common stock of IDT will receive, upon vesting, in addition to the shares of IDT Class B common stock, one share of our Class B common stock for every five shares of IDT Class B common stock subject to the DSU. Vesting of the DSUs will not be impacted by the spin-off.

Q:	If a stockholder owns options to purchase shares of IDT stock, what will that option holder receive in the spin-off?

A:	In the spin-off, the exercise price of each outstanding option to purchase IDT Class B common stock will be proportionately reduced based on the relative trading prices of IDT and SPCI following the spin-off. Further, each option holder will receive his or her ratable share in a pool of options to purchase 14,069 shares of SPCI Class B common stock with an exercise price equal to the closing price of SPCI on the first trading day following the consummation of the spin-off and an expiration date equal to the later of (i) the expiration of the IDT option held by such option holder and (ii) a date on or about the first anniversary of the spin-off when SPCI insiders will be free to trade in shares of SPCI under SPCI’s to be adopted insider trading policy.

Q:	What does an IDT stockholder need to do now?

A:	IDT stockholders do not need to take any action, although we urge you to read this entire document carefully. The approval of the IDT stockholders is not required or sought to effect the spin-off, and IDT stockholders have no appraisal rights in connection with the spin-off. IDT is not seeking a proxy from any stockholders, and you are requested not to send us a proxy. IDT stockholders will not be required to pay anything for our shares distributed in the spin-off or to surrender any shares of IDT Class A common stock or Class B common stock. IDT stockholders should not send in their IDT share certificates. IDT stockholders will automatically receive their shares of our Class A common stock and Class B common stock when the spin-off is effected.

Q:	Are there risks associated with owning SPCI common stock?

A:	Yes. Our business is subject to both general and specific risks relating to our operations. In addition, our spin-off from IDT presents risks relating to our becoming a separately-traded public company as well as risks relating to the nature of the spin-off transaction itself. See “Risk Factors” beginning on page 7.

Q:	What are the U.S. federal income tax consequences of the spin-off to IDT stockholders?

A:	IDT stockholders should not recognize a gain or loss on the receipt of shares of our common stock in the spin-off other than with respect to fractional shares of our common stock for which cash is received. IDT stockholders should apportion their tax basis in IDT common stock between such IDT common stock and our common stock received in the spin-off in proportion to the relative fair market values of such stock at the time of the spin-off. An IDT stockholder’s holding period for our common stock received in the spin-off should include the period for which that stockholder’s IDT common stock was held. See “The Spin-Off--Material U.S. Federal Income Tax Consequences of the Spin-Off” beginning on page 23. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF THE SPIN-OFF TO YOU.

Q:	What if I want to sell my IDT common stock or my SPCI common stock?

A:	You should consult with your own financial advisors, such as your stockbroker, bank or tax advisor. We do not make any recommendations on the purchase, retention or sale of shares of IDT common stock or our common stock. If you decide to sell any shares after the record date, but before the spin-off, you should make sure your stockbroker, bank or other nominee understands whether you want to sell your IDT common stock, or your SPCI common stock after it is distributed, or both.

Straight Path Communications Inc. – ‘10-12G’ on 5/6/13 – EX-99.1

On: Monday, 5/6/13, at 7:13am ET · Accession #: 1213900-13-2212 · File #: 0-54951

Previous ‘10-12G’: None · Next: ‘10-12G/A’ on 6/13/13 · Latest: ‘10-12G/A’ on 7/31/13 · 4 References:

Registration of Securities (General Form) — Form 10
Filing Table of Contents

EX-99.1 — Preliminary Information Statement of Straight Path Communications Inc., Subject to Completion, Dated May 3, 2013

This exhibit is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

4 Subsequent Filings that Reference this Filing

	Sincerely,


	Howard S. Jonas Chairman of the Board of Directors and Chief Executive Officer

	Page
Questions and Answers About the Spin-Off	1
Executive Summary	5
Risk Factors	7
Special Note About Forward-Looking Statements	18
The Spin-Off	19
Dividend Policy	27
Unaudited Pro Forma Consolidated Financial Data	27
Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Business	40
Management	48
Corporate Governance	49
Director Compensation	52
Executive Compensation	53
Security Ownership by Certain Beneficial Owners and Management	54
Our Relationship with IDT After the Spin-Off and Related Person Transactions	56
Legal Proceedings	58
Description of Our Capital Stock	59
Where You Can Find More Information	61
Index to Consolidated Financial Statements	F-1

●	to “SPCI,” “us,” “we,” or “our” are to Straight Path Communications Inc. and its subsidiaries; and
●	to “IDT” are to IDT Corporation and its subsidiaries, and, with respect to periods following the spin-off, IDT Corporation and its subsidiaries other than SPCI.

Q:	Where will I be able to trade shares of SPCI common stock?

A:	There is no current public market for our common stock. Upon satisfaction of all necessary initial listing requirements, we intend to have our Class B common stock traded on NYSE MKT under the symbol “STRP”. We anticipate that trading in shares of our Class B common stock will begin on a “when-issued” basis on or shortly before the record date and before the distribution date, and “regular way” trading will begin on the first trading day following the distribution date. If trading does begin on a “when-issued” basis, you may purchase or sell our Class B common stock after that time, but your transaction will not settle until after the distribution date. On the first trading day following the distribution date, when-issued trading with respect to our Class B common stock will end and regular way trading will begin. We cannot predict the trading prices for our Class B common stock before or after the distribution date. However, neither method of trading will occur on the NYSE MKT unless our Class B common stock has received prior approval for listing.
Q:	Do you intend to pay dividends on your common stock?

A:	We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. Following that time, it is our intention to distribute not less than 50% of our consolidated positive net earnings available for distribution to our stockholders. Distributions will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets. The nature of our operations is that, in the short term until our licensing, leasing, assignment and enforcement programs become more firmly established, we do not anticipate generating meaningful cash flows. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors. We and IDT will be separate entities after the spin-off. As such, our decision to pay (or not pay) dividends in the future will not impact IDT’s decision of whether to pay (or not pay) dividends in the future. See “Dividend Policy” on page 27 for additional information on our dividend policy following the spin-off.

Q:	Where can IDT stockholders get more information?

A:	If you have any questions relating to the distribution, you should contact: IDT Corporation 520 Broad Street Newark, New Jersey 07102 Attention: Bill Ulrey, Vice President–Investor Relations and External Affairs (973) 438-3838

Q:	Who will be the distribution agent for the spin-off?

A:	American Stock Transfer & Trust Company will be the distribution agent for the spin-off. The distribution agent can be contacted at: 59 Maiden Lane Plaza Level New York, New York 10038 Telephone (800) 937-5449

Distributing company	IDT Corporation, a Delaware corporation.

Distributed company	Straight Path Communications Inc., a Delaware corporation, which following the spin-off will be comprised of Straight Path Spectrum which holds a significant number of FCC licenses for commercial fixed wireless spectrum and Straight Path IP Group which holds certain communications over the Internet related patent assets. SPCI’s principal executive offices are currently located at 5300 Hickory Park Drive, Suite 218, Glen Allen, VA 23059.

Distribution ratio	Each holder of IDT Class A will receive a distribution of one share of SPCI Class A common stock for every five shares of IDT Class A common stock held on the record date and each holder of IDT Class B common stock will receive a distribution of one share of SPCI Class B common stock for every five shares of IDT Class B common stock held on the record date. For additional information regarding how holders of IDT common stock will receive cash in lieu of fractional shares of our common stock, see “The Spin-Off Manner of Effecting the Spin-Off on page 22.

Securities to be distributed	Approximately 0.3 million shares of SPCI Class A common stock, which will constitute all of the outstanding shares of SPCI Class A common stock immediately after the spin-off (based on approximately 1.6 million shares of IDT Class A common stock that were expected to be outstanding on the record date). Approximately 4.3 million shares of SPCI Class B common stock, which will constitute all of the outstanding shares of SPCI Class B common stock immediately after the spin-off (based on approximately 21.3 million shares of IDT Class B common stock that were expected to be outstanding on the record date).

Record date	The record date will be 5:00 p.m., New York City time, on ________, 2013. In order to be entitled to receive shares of SPCI Class A common stock and/or Class B common stock in the spin-off, holders of shares of IDT Class A common stock and Class B common stock must be stockholders as of 5:00 p.m., New York City time, on the record date.

Distribution date	The distribution date will be on or about ____, 2013.

Relationship between SPCI and IDT after the spin-off	Following the spin-off, IDT and SPCI each will be independent, publicly-traded companies. . We expect to enter into a short-term Transition Services Agreement with IDT, to allow us to utilize certain personnel of, and obtain administrative, legal, financial, corporate, tax and other services form IDT until we develop those capabilities internally or arrange for such services from other vendors. Unless amended, the TSA will terminate six months following the spin-off. In addition, Straight Path IP Group, IDT and certain IDT subsidiaries have entered into a license agreement whereby each of IDT, SPCI and their respective affiliates has granted and will grant a license to the other to utilize patents held by each entity. Howard Jonas will distribute all of his SPCI Class A Common Stock and Class B Common Stock to a trust with an independent trustee. Howard Jonas will retain only the economic benefit of the shares to be placed in trust, but will have no voting or dispositive power or control with respect to such shares.

Dividend policy	We do not anticipate paying dividends on our common stock until we achieve sustainable profitability and retain certain minimum cash reserves. Following that time, it is our intention to distribute not less than 50% of our consolidated positive net earnings available for distribution to our stockholders. Distributions will be subject to the need to retain earnings for investment in growth opportunities or the acquisition of complementary assets. The nature of our operations is that, in the short term until our licensing, leasing, assignment and enforcement programs become more firmly established, we do not anticipate generating meaningful cash flows. The payment of dividends in any specific period will be at the sole discretion of our Board of Directors.

Payment of intercompany indebtedness	All existing intercompany debt between IDT and the businesses included in SPCI will be capitalized prior to the completion of the spin-off and there will be no indebtedness owing from SPCI to IDT immediately following the spin-off. The only contemplated obligations to IDT arising after the spin-off would be obligations that arise under the Separation and Distribution Agreement between SPCI and IDT (the “Separation Agreement”), the Transition Services Agreement between SPCI and IDT (the “Transition Services Agreement”) or the Tax Separation Agreement between SPCI and IDT (the “Tax Separation Agreement”).

●	Following the separation, we will operate as a separate publicly-traded company, and we expect to apply to have our Class B common stock listed for trading on the NYSE MKT under the symbol “STRP” on a regular way basis on the first trading day following the distribution date. However, trading will not occur on the NYSE MKT unless our Class B common stock has received prior approval for listing.

●	IDT will transfer cash to us prior to the spin-off such that we will have approximately $15 million in cash at the time of the spin-off for our working capital and growth initiatives.

●	Fluctuations in our financial results;
●	Changes in demand for our licenses or the prevalence of communications over the Internet use;

●	Acts of terrorism or war;
●	The availability of competing intellectual property at lower prices;

●	Difficulty in developing, preserving and protecting our intellectual property;
●	Adequacy of our internal controls;

●	Loss of key management and other personnel;
●	Our ability to comply with laws governing our operations and industries;

●	Increases in tax liabilities;
●	Difficulty in implementing our business strategies;

●	Availability and access to financial and other resources;
●	Failure to qualify as a tax-free reorganization; and

	Historical			Pro Forma Adjustments				Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	2,204		$	12,796		(A)	$	15,000
Trade accounts receivable, net		55							55
Other current assets		84							84
Total current assets		2,343							15,139
Prepaid expenses—long-term portion		230							230
Total assets	$	2,573						$	15,369

Liabilities and Equity
Current liabilities:
Trade accounts payable	$	1						$	1
Accrued expenses		735							735
Deferred revenue		120							120
Income taxes payable		20							20
Total current liabilities		876							876
Deferred revenue —long-term portion		239							239
Total liabilities		1,115							1,115
Equity :
Straight Path Communications, Inc. stockholder’s equity:
Preferred stock, $.01 par value; authorized shares— historical nil, pro forma 3,000,000; no shares issued		—							—
Common stock, $.01 par value; authorized shares—historical 1,500, pro forma nil; historical 100 shares issued; pro forma no shares issued		—					(B)		—
Class A common stock, $.01 par value; authorized shares—historical nil, pro forma 2,000,000; historical no shares issued; pro forma 315,000 shares issued and outstanding		—			3		(B)		3
Class B common stock, $.01 par value; authorized shares— historical nil, pro forma 40,000,000; historical no shares issued; pro forma 4,255,000 shares issued and outstanding		—			43		(B)		43
Additional paid-in capital		367,930			12,796	(46)	(A) (B)		380,680
Accumulated deficit		(366,291	)						(366,291	)
Total Straight Path Communications, Inc. stockholder’s equity		1,639							14,435
Noncontrolling interests		(181	)						(181	)
Total equity		1,458							14,254
Total liabilities and equity	$	2,573						$	15,369

	Historical			Pro Forma Adjustments		Pro Forma

Revenues	$	697				$	697
Costs and expenses:
Direct cost of revenues		26					26
Selling, general and administrative		2,703					2,703
Total costs and expenses		2,729					2,729
Gain on assignment of wireless spectrum		150					150
Loss from operations		(1,882	)				(1,882	)
Interest income		6					6
Loss before income taxes		(1,876	)				(1,876	)
Provision for income taxes		(12	)		(C)		(12	)
Net loss		(1,888	)				(1,888	)
Net loss attributable to noncontrolling interests		291					291
Net loss attributable to Straight Path Communications, Inc.	$	(1,597	)			$	(1,597	)

Loss per share attributable to Straight Path Communications, Inc.:
Basic					(D)	$	(0.35	)
Diluted					(D)	$	(0.35	)

Weighted average number of shares used in calculation of loss per share
Basic							4,570
Diluted							4,570

	Historical			Pro Forma Adjustments		Pro Forma

Revenues	$	553				$	553
Costs and expenses:
Direct cost of revenues		92					92
Selling, general and administrative		1,010					1,010
Total costs and expenses		1,102					1,102
Gain on assignment of wireless spectrum		5,330					5,330
Income from operations		4,781					4,781
Interest income		8					8
Interest expense		(9	)				(9	)
Other income		1					1
Income before income taxes		4,781					4,781
Provision for income taxes		(25	)		(C)		(25	)
Net income		4,756					4,756
Net loss attributable to noncontrolling interests		33					33
Net income attributable to Straight Path Communications, Inc.	$	4,789				$	4,789

Earnings per share attributable to Straight Path Communications, Inc.:
Basic					(D)	$	1.05
Diluted					(D)	$	0.96

Weighted average number of shares used in calculation of earnings per share
Basic							4,570
Diluted							4,971

This ‘10-12G’ Filing	Date	Other Filings

	10/18/20
	8/10/18
	2/1/16
	9/25/15
	5/31/14
	4/30/14	10-Q
	8/1/13
	7/31/13	10-12G/A, 10-K, 10-K/A, 3, 4, 8-A12B/A
	5/31/13
Filed on:	5/6/13
	5/3/13
	5/2/13
	5/1/13
	4/30/13
	4/15/13
	4/11/13
	4/9/13
	3/31/13
	3/16/13
	3/15/13
	2/11/13
	2/5/13
	2/1/13
	1/31/13
	12/31/12
	12/27/12
	12/11/12
	11/7/12
	10/26/12
	10/10/12
	9/24/12
	8/1/12
	7/31/12
	7/19/12
	1/31/12
	8/1/11
	7/31/11
	3/15/11
	10/18/10
	7/31/10
		List all Filings

Straight Path Communications Inc. – ‘10-12G’ on 5/6/13 – EX-99.1

On: Monday, 5/6/13, at 7:13am ET · Accession #: 1213900-13-2212 · File #: 0-54951

Previous ‘10-12G’: None · Next: ‘10-12G/A’ on 6/13/13 · Latest: ‘10-12G/A’ on 7/31/13 · 4 References: By: SEC – ‘UPLOAD’ on 7/11/13 By: SEC – ‘UPLOAD’ on 7/2/13 By: SEC – ‘UPLOAD’ on 6/21/13 By: SEC – ‘UPLOAD’ on 5/31/13

Registration of Securities (General Form) — Form 10Filing Table of Contents

EX-99.1 — Preliminary Information Statement of Straight Path Communications Inc., Subject to Completion, Dated May 3, 2013

This exhibit is an HTML Document rendered as filed. [ Alternative Formats ]

Dates Referenced Herein and Documents Incorporated by Reference

4 Subsequent Filings that Reference this Filing

Previous ‘10-12G’: None · Next: ‘10-12G/A’ on 6/13/13 · Latest: ‘10-12G/A’ on 7/31/13 · 4 References:

Registration of Securities (General Form) — Form 10
Filing Table of Contents