This Annual Report contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934, including statements that contain the words "believes,"
"anticipates," "expects," "plans," "intends" and similar words and phrases.
These forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from the results projected in
any forward-looking statement. In addition to the factors specifically noted in
the forward-looking statements, other important factors, risks and uncertainties
that could result in those differences include, but are not limited to, those
discussed under Item 1A to Part I "Risk Factors" in this Annual Report. The
forward-looking statements are made as of the date of this Annual Report, and we
assume no obligation to update the forward-looking statements, or to update the
reasons why actual results could differ from those projected in the
forward-looking statements. Investors should consult all of the information set
forth in this report and the other information set forth from time to time in
our reports filed with the Securities and Exchange Commission pursuant to the
Securities Act of 1933 and the Securities Exchange Act of 1934, including our
reports on Forms 10-Q and 8-K.

The following discussion should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Item 8 of this Annual Report.





                                       28

CRITICAL ACCOUNTING POLICIES


Our financial statements and accompanying notes are prepared in accordance with
accounting principles generally accepted in the United States of America, or
U.S. GAAP. The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue and expenses as well as the disclosure of contingent assets
and liabilities. Critical accounting policies are those that require application
of management's most subjective or complex judgments, often as a result of
matters that are inherently uncertain and may change in subsequent periods. Our
critical accounting policies include those related to the allowance for doubtful
accounts, goodwill, valuation of long-lived assets, income taxes, sales taxes,
and regulatory agency fees, and direct cost of revenues-disputed amounts.
Management bases its estimates and judgments on historical experience and other
factors that are believed to be reasonable under the circumstances. Actual
results may differ from these estimates under different assumptions or
conditions. See Note 1 to the Consolidated Financial Statements in this Annual
Report for a complete discussion of our significant accounting policies.

Allowance for Doubtful Accounts





Our allowance for doubtful accounts was $6.1 million at July 31, 2020 and $5.4
million at July 31, 2019. The allowance for doubtful accounts as a percentage of
gross trade accounts receivable increased to 12.1% at July 31, 2020 from 8.6% at
July 31, 2019 because the allowance for doubtful accounts increased and gross
trade accounts receivable decreased at July 31, 2020 compared to July 31, 2019.
The allowance for doubtful accounts increased at July 31, 2020 compared to July
31, 2019 primarily due to increases in the allowance for doubtful accounts of
NRS, net2phone, and IDT Payment Services, which corresponds to the increases in
their revenues in fiscal 2020 compared to fiscal 2019. Gross trade accounts
receivable decreased at July 31, 2020 compared to July 31, 2019 mostly due to
the decrease in Carrier Services' trade accounts receivable as a result of the
decrease in Carrier Services' revenues in fiscal 2020 compared to fiscal 2019.



We estimate the balance of our allowance for doubtful accounts by analyzing
accounts receivable balances by age and applying historical write-off and
collection trend rates. Our estimates include separately providing for customer
receivables based on specific circumstances and credit conditions, and when it
is deemed probable that the balance is uncollectible. Account balances are
written off against the allowance when it is determined that the receivable will
not be recovered. Our estimates of recoverability of customer accounts may
change due to new developments, changes in assumptions or changes in our
strategy, which may impact our allowance for doubtful accounts balance. We
continually assess the likelihood of potential amounts or ranges of
recoverability and adjust our allowance accordingly; however, actual collections
and write-offs of trade accounts receivables may materially differ from our

estimates.



Goodwill
Our goodwill is attributable to our Retail Communications reporting unit in our
Telecom & Payment Services segment and our net2phone-UCaaS reporting unit in our
net2phone segment. Retail Communications' goodwill was $11.3 million and $11.2
million at July 31, 2020 and 2019, respectively, and net2phone-UCaaS' goodwill
was $1.5 million and nil at July 31, 2020 and 2019, respectively.



Goodwill is not amortized. Instead, goodwill is reviewed annually (or more
frequently under various conditions) for impairment using a fair value approach.
We perform our annual, or interim, goodwill impairment test by comparing the
fair value of the reporting unit with its carrying amount. We would recognize an
impairment charge for the amount by which the carrying amount exceeds the
reporting unit's fair value; however, the loss recognized would not exceed the
total amount of goodwill allocated to the reporting unit. Additionally, we
consider income tax effects from any tax-deductible goodwill on the carrying
amount of the reporting unit when measuring the goodwill impairment loss, if
applicable. The fair value of the reporting unit is estimated using discounted
cash flow methodologies, as well as considering third party market value
indicators.



The annual impairment tests for Retail Communications in fiscal 2020 and fiscal
2019 and net2phone-UCaaS in fiscal 2020 resulted in no goodwill impairment,
since their estimated fair values substantially exceeded their carrying value at
those times. In addition, we do not believe Retail Communications or
net2phone-UCaaS are currently at risk of goodwill impairment. Calculating the
fair value of the reporting unit requires significant estimates and assumptions
by management. Should the estimates and assumptions regarding the fair value of
the reporting unit prove to be incorrect, we may be required to record
impairments to our goodwill in future periods and such impairments could be
material.



We have the option to perform a qualitative assessment to determine whether it
is necessary to perform the quantitative goodwill impairment test. However, we
may elect to perform the quantitative goodwill impairment test even if no
indications of a potential impairment exist.



                                       29

Valuation of Long-Lived Assets





We test the recoverability of our long-lived assets whenever events or changes
in circumstances indicate that the carrying value of any such asset may not be
recoverable. Such events or changes in circumstances include:

? significant actual underperformance relative to expected performance or

projected future operating results;

? significant changes in the manner or use of the asset or the strategy of our

overall business;

? significant adverse changes in the business climate in which we operate; and

? loss of a significant contract.






There were no such events or changes in circumstances in fiscal 2020 or fiscal
2019. If we determine that the carrying value of certain long-lived assets may
not be recoverable, we test for impairment based on the projected undiscounted
cash flows to be derived from such asset. If the projected undiscounted future
cash flows are less than the carrying value of the asset, we will record an
impairment loss based on the difference between the estimated fair value and the
carrying value of the asset. We generally measure fair value by considering sale
prices for similar assets or by discounting estimated future cash flows from the
asset using an appropriate discount rate. Cash flow projections and fair value
estimates require significant estimates and assumptions by management. Should
our estimates and assumptions prove to be incorrect, we may be required to
record impairments in future periods and such impairments could be material.

Income Taxes, Sales Taxes, and Regulatory Agency Fees





Our current and deferred income taxes and associated valuation allowance,
accruals for sales taxes, as well as telecom regulatory agency fee accruals, are
impacted by events and transactions arising in the normal course of business as
well as in connection with special and non-routine items. Assessment of the
appropriate amount of income taxes, sales taxes, and certain regulatory agency
fees is dependent on several factors, including estimates of the timing and
realization of deferred income tax assets, the results of audits, changes in tax
laws or regulatory agency rules and regulations, as well as unanticipated future
actions impacting related accruals of regulatory agency fees.



The valuation allowance on our deferred income tax assets was $58.7 million and
$74.2 million at July 31, 2020 and 2019, respectively. In fiscal 2020, due to
taxable income in the United States, we utilized deferred tax assets and
released the corresponding valuation allowance to offset income tax expense of
$3.5 million. In addition, in fiscal 2020, we released an additional $8.4
million of the valuation allowance on the portion of the deferred tax assets
that we are more likely than not going to utilize because we are forecasting
future profitability in the United States.



On June 21, 2018, in South Dakota v Wayfair Inc., the United States Supreme
Court held that states may charge sales tax on purchases made from out-of-state
sellers, even if the seller does not have a physical presence in the taxing
state. We have evaluated our state tax filings with respect to the Wayfair
decision and are in the process of reviewing our remittance practices. It is
possible that one or more jurisdictions may assert that we have liability for
periods for which we have not collected sales, use or other similar taxes, and
if such an assertion or assertions were successful it could adversely affect our
business, financial position and operating results. One or more jurisdictions
may change their laws or policies to apply their sales, use or other similar
taxes to our operations, and if such changes were made it could materially and
adversely affect our business, financial position and operating results.



Our 2017 FCC Form 499-A, which reports our calendar year 2016 revenue, related
to payments due to the FCC, is currently under audit by the Internal Audit
Division of the Universal Service Administrative Company. At July 31, 2020 and
2019, our accrued expenses included $40.8 million and $44.7 million,
respectively, for these regulatory fees for the years covered by the audit, as
well as prior and subsequent years. If we do not properly calculate, or have not
properly calculated, the amount payable by us, we may be subject to interest and
penalties.

Direct Cost of Revenues-Disputed Amounts


Our direct cost of revenues includes estimated amounts for pending disputes with
other carriers. The billing disputes typically arise from differences in minutes
of use and/or rates charged by carriers that provide service to us. At July 31,
2020 and 2019, there was $19.9 million and $22.4 million, respectively, in
outstanding carrier payable disputes, for which we recorded direct cost of
revenues of $7.5 million and $9.4 million, respectively. We consider various
factors to determine the amount to accrue for pending disputes, including (1)
our historical experience in dispute resolution, (2) the basis of disputes, (3)
the financial status and our current relationship with vendors, and (4) our
aging of prior disputes. Subsequent adjustments to our estimates may occur when
disputes are resolved or abandoned, but these adjustments are generally not
material to our results of operations. However, there can be no assurance that
revisions to our estimates will not be material to our results of operations in
the future.



                                       30

RECENTLY ISSUED ACCOUNTING STANDARDS NOT YET ADOPTED





In June 2016, the Financial Accounting Standards Board, or FASB, issued
Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments-Credit
Losses (Topic 326), Measurement of Credit Losses on Financial Instruments, that
changes the impairment model for most financial assets and certain other
instruments. For receivables, loans and other instruments, entities will be
required to use a new forward-looking current expected credit loss model that
generally will result in the earlier recognition of allowance for losses. For
available-for-sale debt securities with unrealized losses, entities will measure
credit losses in a manner similar to current practice, except the losses will be
recognized as allowances instead of reductions in the amortized cost of the
securities. In addition, an entity will have to disclose significantly more
information about allowances, credit quality indicators and past due securities.
The new provisions will be applied as a cumulative-effect adjustment to retained
earnings. We will adopt the new standard on August 1, 2023. We are evaluating
the impact that the new standard will have on our consolidated financial
statements.



In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740),
Simplifying the Accounting for Income Taxes, that removes certain exceptions to
the general principles in Topic 740, and clarifies and amends existing guidance
in Topic 740. We will adopt the new standard on August 1, 2021. We are
evaluating the impact that the new standard will have on our consolidated
financial statements.



In January 2020, the FASB issued ASU No. 2020-01, Investments-Equity Securities
(Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and
Derivatives and Hedging (Topic 815), that clarifies the interactions between
Topic 321, Topic 323, and Topic 815. The amendments in this ASU affect the
application of the measurement alternative for certain equity securities and the
equity method of accounting, and guidance for certain forward contracts and
purchased options to purchase securities, that, upon settlement or exercise,
would be accounted for under the equity method of accounting. We will adopt the
new standard on August 1, 2021. We are evaluating the impact that the new
standard will have on our consolidated financial statements.



RESULTS OF OPERATIONS



We are a multinational company with operations primarily in the communications
and payment industries. We have two reportable business segments, Telecom &
Payment Services and net2phone. Our Telecom & Payment Services segment provides
retail telecommunications and payment offerings as well as wholesale
international long-distance traffic termination. Our net2phone segment provides
cloud communications and telephony services to business customers.

Coronavirus Disease (COVID-19)

We continue to monitor and respond to the impacts of the COVID-19 pandemic on all aspects of our business, including our customers, employees, suppliers, vendors, and business partners.





Operationally, our employees transitioned to work-from-home during the third
quarter of fiscal 2020 and, to a large degree, continued to work-from-home in
the fourth quarter. Our salespeople and delivery employees continued to serve
our independent retailers and channel partners with minimal interruption.



COVID-19 had mixed financial impacts on us during the third and fourth quarters
of fiscal 2020. It drove significant increases in demand for our consumer
offerings, principally BOSS Revolution Money Transfer, BOSS Revolution Calling
and Mobile Top-Up, through our digital channels during the latter half of March
and into April. Digital transaction levels remained relatively stable at levels
significantly above pre-COVID-19 levels in the fourth quarter of fiscal 2020.
Conversely, consumer sales originating through retailers and channel partners
slowed modestly in late March and April before stabilizing in the fourth
quarter. NRS was slightly impacted by the closure of some of its retailers in
the third quarter, but most re-opened quickly and many attracted increased foot
traffic following the onset of COVID-19 as local retailers are typically more
accessible to pedestrian traffic than big box retailers. The resilience of local
retailers enabled NRS to expand sales of terminals and payment processing and
advertising services in the fourth quarter of fiscal 2020. net2phone-UCaaS'
customer base growth slowed somewhat in the second half of our third fiscal
quarter in certain Latin American markets. However, aggregate sales rebounded in
the fourth quarter in most of our markets led by increases in the United States.
Carrier Services' revenue, which has been declining as communications globally
transition away from traditional international long-distance voice, was further
exacerbated by the impact of COVID-19 as business communications shifted from
calling to video conferencing and other collaboration platforms.



As of the date of this filing, management believes that we continue to have
sufficient liquidity and capital resources for the foreseeable future. Looking
ahead, current economic conditions, if enduring, may create additional hardship
for many of our customers. Over the longer term, sustained levels of high
unemployment along with declining economic activity and less favorable foreign
exchange market conditions could materially and adversely impact us by dampening
demand for both our retail and wholesale offerings. The situation remains fluid
and we cannot predict with certainty the potential impact of COVID-19 on our
business, results of operations, financial condition and cash flows.



                                       31






Concentration of Customers




Our most significant customers typically include telecom operators to whom we
provide wholesale services and distributors of our retail calling products.
While they may vary from quarter to quarter, our five largest customers
collectively accounted for 12.7% and 13.6% of total consolidated revenues in
fiscal 2020 and fiscal 2019, respectively. Our customers with the five largest
receivables balance collectively accounted for 13.8% and 20.6% of the
consolidated gross trade accounts receivable at July 31, 2020 and 2019,
respectively. This concentration of customers increases our risk associated with
nonpayment by those customers. In an effort to reduce our risk, we perform
ongoing credit evaluations of our significant customers, and in some cases, do
not offer credit terms to customers, choosing instead to require prepayment.
Historically, when we have issued credit, we have not required collateral to
support trade accounts receivables from our customers. However, when necessary,
we have imposed stricter credit restrictions on our customers. In some cases,
this has resulted in our sharply curtailing, or ceasing completely, sales to
certain customers. We attempt to mitigate our credit risk related to specific
Carrier Services customers by also buying services from the customer, in order
to create an opportunity to offset our payables and receivables with the
customer. In this way, we can continue to sell services to these customers while
reducing our receivable exposure risk. When it is practical to do so, we will
increase our purchases from Carrier Services customers with receivable balances
that exceed our applicable payables in order to maximize the offset and reduce
our credit risk.

Year Ended July 31, 2020 compared to Year Ended July 31, 2019

The following table sets forth certain items in our statements of income as a percentage of our total revenues:





Year ended July 31                                               2020          2019
REVENUES:
Telecom & Payment Services                                          96.2 %        96.6 %
net2phone                                                            3.8           3.4
TOTAL REVENUES                                                     100.0         100.0

COSTS AND EXPENSES: Direct cost of revenues (exclusive of depreciation and amortization)

                                                       80.5

83.3


Selling, general and administrative                                 16.0

14.5


Depreciation and amortization                                        1.5   

       1.6
Severance                                                            0.3           0.1
TOTAL COSTS AND EXPENSES                                            98.3          99.5

Other operating expense, net                                        (0.4 )        (0.6 )
INCOME (LOSS) FROM OPERATIONS                                        1.3          (0.1 )
Interest income, net                                                 0.1

0.1


Other (expense) income, net                                         (0.1 )

-


INCOME BEFORE INCOME TAXES                                           1.3 % 

         - %




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.



                                       32






Our results of operations discussion include two performance metrics: minutes of
use and direct cost of revenues as a percentage of revenues. Minutes of use is a
nonfinancial metric that measures aggregate customer usage during a reporting
period. Minutes of use is an important factor in BOSS Revolution Calling's and
Carrier Services' revenue recognition since satisfaction of our performance
obligation occurs when the customer uses our service. Minutes of use trends and
comparisons between periods are used in the analysis of revenues and direct cost
of revenues. Direct cost of revenues as a percentage of revenues is a financial
metric that measures changes in our direct cost of revenues relative to changes
in revenues during the same period. Direct cost of revenues is the numerator and
revenues are the denominator in this ratio. Direct cost of revenues as a
percentage of revenues is a useful metric for monitoring and evaluating trends
in the net contribution of our revenues.

Telecom & Payment Services Segment

Telecom & Payment Services, which represented 96.2% and 96.6% of our total revenues in fiscal 2020 and fiscal 2019, respectively, markets and distributes the following communications and payment services:

? Growth includes NRS' POS network offerings and BOSS Revolution Money Transfer,

an international money remittance service for customers in the United States.

? Core includes our three largest communications and/or payments offerings by

revenue: BOSS Revolution Calling, an international long-distance calling

service marketed primarily to immigrant communities in the United States,

Mobile Top-Up, which enables customers to transfer airtime and bundles of

airtime, messaging, and data to mobile accounts internationally and

domestically, and Carrier Services, which provides international voice and text

termination as well as outsourced traffic management solutions to telecoms

globally. Core also includes smaller communications and payments offerings,


   many in harvest mode.





Telecom & Payment Services' most significant revenue streams are from BOSS
Revolution Calling, Mobile Top-Up, and Carrier Services. BOSS Revolution Calling
and Mobile Top-Up are sold direct-to-consumers and through distributors and
retailers. We receive payments for BOSS Revolution Calling, traditional calling
cards, and Mobile Top-Up prior to providing the services. We recognize the
revenue when services are provided to the customer. Our international calling
revenues tend to be somewhat seasonal, with our second fiscal quarter (which
contains Christmas and New Year's Day) and our fourth fiscal quarter (which
contains Mother's Day and Father's Day) typically showing higher minute volumes.



(in millions)                                             Change
Year ended July 31                      2020          2019           $           %
Revenues                              $ 1,294.9     $ 1,361.9     $ (67.0 )      (4.9 )%
Direct cost of revenues                 1,072.0       1,161.2       (89.2 )      (7.7 )

Selling, general and administrative       161.6         161.1         0.5  

      0.3
Depreciation and amortization              12.3          16.1        (3.8 )     (23.1 )
Severance                                   3.5           1.4         2.1       141.0
Other operating expense, net                3.2           7.8        (4.6 )     (58.6 )
Income from operations                $    42.3     $    14.3     $  28.0       195.2 %

Revenues.Telecom & Payment Services' revenues and minutes of use in fiscal 2020 and fiscal 2019 consisted of the following:





(in millions)                                         Change
Year ended July 31                 2020          2019          $/#           %
Growth:
BOSS Revolution Money Transfer   $    48.0     $    23.1     $   24.9       108.0 %
National Retail Solutions             12.0           6.2          5.8        93.3
Other                                    -           0.1         (0.1 )     (38.6 )
Core:
Mobile Top-Up                        334.3         272.0         62.3        22.9
BOSS Revolution Calling              463.9         490.7        (26.8 )      (5.4 )
Carrier Services                     393.8         514.2       (120.4 )     (23.4 )
Other                                 42.9          55.6        (12.7 )     (22.9 )
Total revenues                   $ 1,294.9     $ 1,361.9     $  (67.0 )      (4.9 )%
Minutes of use
BOSS Revolution Calling              3,902         4,317         (415 )      (9.6 )%
Carrier Services                    14,362        17,500       (3,138 )     (17.9 )




                                       33






Revenues from BOSS Revolution Money Transfer increased in fiscal 2020 compared
to fiscal 2019 driven by transient foreign exchange market conditions related to
COVID-19, and increased growth in transaction volumes on our BOSS Revolution
Money app, partially related to COVID-19. In addition, in fiscal 2020, we
stabilized our in-store transaction levels and intend to grow our retail
footprint in the future.



Revenues from NRS increased in fiscal 2020 compared to fiscal 2019 driven by
revenue growth from its merchant services, including credit card processing
services for retailers, digital advertising through its POS terminal network,
and data analytics. NRS expects its credit card processing service will have
significant customer growth in fiscal 2021 compared to prior periods. In
addition, NRS expects to sell a larger portion of its network's advertising
capacity going-forward, which would increase its in-store advertising revenue.



Revenues from Mobile Top-Up increased in fiscal 2020 compared to fiscal 2019 due
to increased demand on our digital platforms, as well as from increased demand
for broadband connectivity and other bundled offerings partially related to
COVID-19.



Revenues and minutes of use from BOSS Revolution Calling decreased in fiscal
2020 compared to fiscal 2019, although COVID-19 related demand in fiscal 2020
slowed the rate of decline in BOSS Revolution Calling revenue compared to prior
periods. In particular, BOSS Revolution Calling's revenue and minutes of use
increased in the fourth quarter of fiscal 2020 compared to the third quarter of
fiscal 2020. BOSS Revolution Calling continues to be impacted by persistent,
market-wide trends, including the proliferation of unlimited calling plans
offered by wireless carriers and mobile virtual network operators, and the
increasing penetration of free and paid over-the-top voice and messaging
services.



Revenues and minutes of use from Carrier Services decreased in fiscal 2020
compared to fiscal 2019 as communications globally transition away from
traditional international long-distance voice. This was further exacerbated by
the impact of COVID-19 as business communications shifted from calling to video
conferencing and other collaboration platforms. Although Carrier Services'
revenue stabilized in the fourth quarter of fiscal 2020 compared to the third
quarter of fiscal 2020, we expect that Carrier Services will continue to be
adversely impacted by these trends, and minutes of use and revenues will likely
continue to decline from quarter-to-quarter, as we seek to maximize economics
rather than necessarily sustain minutes of use or revenues.



Direct Cost of Revenues. Direct cost of revenues in Telecom & Payment Services
decreased in fiscal 2020 compared to fiscal 2019 primarily due to decreases in
Carrier Services' and BOSS Revolution Calling's direct cost of revenues in
fiscal 2020 compared to fiscal 2019, partially offset by an increase in Mobile
Top-Up's direct cost of revenues in fiscal 2020 compared to fiscal 2019.



Year ended July 31                                     2020       2019

Change

Direct cost of revenues as a percentage of revenues 82.8 % 85.3 % 


   (2.5 )%




Direct cost of revenues as a percentage of revenues in Telecom & Payment
Services decreased 250 basis points in fiscal 2020 compared to fiscal 2019
primarily due to decreases in direct cost of revenues as a percentage of
revenues in BOSS Revolution Money Transfer, BOSS Revolution Calling, and NRS.
BOSS Revolution Money Transfer's direct cost of revenues as a percentage of
revenues decreased largely from increased foreign exchange revenue derived, in
part, from strategies leveraging the strengthened U.S. dollar and other
transient foreign exchange market conditions. BOSS Revolution Calling's direct
cost of revenues as a percentage of revenues decreased primarily due to the
continued migration of customers to the direct-to-consumer channel. The
increased adoption of our digital, direct-to-consumer channels is expected to
endure and contribute to future reductions in direct cost of revenues as a
percentage of revenues.



Selling, General and Administrative. Selling, general and administrative expense
in Telecom & Payment Services increased in fiscal 2020 compared to fiscal 2019
primarily due to increases in debit and credit card processing charges,
stock-based compensation, and sales commissions, partially offset by decreases
in employee compensation, marketing expense, and legal fees. The increase in
card processing charges was the result of the shift in the sales of our consumer
offerings from cash transactions at retailers to credit and debit card
transactions through our BOSS Revolution apps and other digital channels. As a
percentage of Telecom & Payment Services' revenue, Telecom & Payment Services'
selling, general and administrative expense increased to 12.5% from 11.8% in
fiscal 2020 and fiscal 2019, respectively.



Depreciation and Amortization. Depreciation and amortization expense in Telecom
& Payment Services decreased in fiscal 2020 compared to fiscal 2019 as more of
our property, plant and equipment became fully depreciated, partially offset by
depreciation of equipment added to our telecommunications network and
capitalized costs of consultants and employees developing internal use software.



                                       34






Severance Expense. Severance expense in Telecom & Payment Services in fiscal
2020 was incurred mostly for technology and software development employees in
the United States, Carrier Services employees in Europe, and retail-related
employees in Asia.



Other Operating Expense, net. Telecom & Payment Services recorded accruals for
non-income related taxes related to one of its foreign subsidiaries of $2.2
million and $8.0 million in fiscal 2020 and 2019, respectively. Also, in fiscal
2020, Telecom & Payment Services recorded a write-off of $0.6 million for
certain assets primarily in South America and accrued $0.5 million expense for a
legal matter. In addition, in fiscal 2019, other operating expense, net was
partially offset by a gain of $0.2 million from the sale of a calling card

business in Asia.



net2phone Segment

net2phone, which represented 3.8% and 3.4% of our total revenues in fiscal 2020 and fiscal 2019, respectively, is comprised of two verticals:

? net2phone-UCaaS, a cloud communications service for businesses in North and

South America and certain other international markets.

? net2phone-Platform Services, which provides telephony services to cable


   operators and other offerings that leverage a common technology platform.




(in millions)                                           Change
Year ended July 31                     2020        2019        $           %
Revenues                              $  50.8     $ 47.3     $  3.5          7.5 %
Direct cost of revenues                  12.0       12.9       (0.9 )       (6.7 )

Selling, general and administrative      44.2       34.1       10.1         29.8
Depreciation and amortization             8.0        6.5        1.5

22.1


Other operating expense, net              1.3        0.3        1.0       

388.7
Loss from operations                  $ (14.7 )   $ (6.5 )   $ (8.2 )     (126.7 )%




Revenues.net2phone's revenues in fiscal 2020 and fiscal 2019 consisted of the
following:



(in millions)                                  Change
Year ended July 31             2020       2019        $           %
net2phone-UCaaS               $ 31.9     $ 24.5     $  7.4        30.2 %
net2phone-Platform Services     18.9       22.8       (3.9 )     (16.8 )
Total revenues                $ 50.8     $ 47.3     $  3.5         7.5 %





net2phone-UCaaS' revenues increased in fiscal 2020 compared to fiscal 2019
driven by growth in its international and U.S. markets, partially offset by
strengthening of the U.S. dollar compared to local currencies in key Latin
American markets. On September 14, 2018, net2phone-UCaaS entered the Canadian
market through the acquisition of Versature Corp. Versature's revenues increased
$1.6 million in fiscal 2020 compared to fiscal 2019. On December 11, 2019, we
acquired Ringsouth Europa, S.L., which expanded net2phone-UCaaS' business into
Spain. Ringsouth's revenues were $0.6 million in fiscal 2020. net2phone-UCaaS'
customer base growth slowed modestly in the second half of our third fiscal
quarter with the onset of COVID-19 before rebounding in the fourth quarter led
by growth in the United States. During the third quarter of fiscal 2020,
net2phone-UCaaS introduced Huddle, its secure video conferencing solution, as
well as an integration of its cloud communications offering with Microsoft
Teams.

net2phone-Platform Services' revenues decreased in fiscal 2020 compared to fiscal 2019 due to changes in contractual terms for telephony services that were effective beginning in January 2020.

Direct Cost of Revenues. Direct cost of revenues decreased in fiscal 2020 compared to fiscal 2019 because of decreases in the direct cost of revenues in both net2phone-UCaaS and net2phone-Platform Services.


Year ended July 31                                     2020       2019

Change

Direct cost of revenues as a percentage of revenues 23.6 % 27.2 % 


   (3.6 )%




                                       35






Direct cost of revenues as a percentage of revenues decreased 360 basis points
in fiscal 2020 compared to fiscal 2019 because of a decrease in direct cost of
revenues as a percentage of revenues in net2phone-UCaaS, partially offset by an
increase in direct cost of revenues as a percentage of revenues in
net2phone-Platform Services.



Selling, General and Administrative. Selling, general and administrative expense
increased in fiscal 2020 compared to fiscal 2019 due to increases in employee
compensation, stock-based compensation, and sales commissions. As a percentage
of net2phone's revenues, net2phone's selling, general and administrative
expenses were 87.0% and 72.1% in fiscal 2020 and fiscal 2019, respectively.



Depreciation and Amortization. The increase in depreciation and amortization
expense in fiscal 2020 compared to fiscal 2019 was due to increases in
depreciation of net2phone-UCaaS' customer premises equipment, additional
depreciation and amortization in Versature, and increases in depreciation of
capitalized costs of consultants and employees developing internal use software.



Other Operating Expense, net. Other operating expense, net in fiscal 2020 and
fiscal 2019 was primarily due to the indemnification of a net2phone cable
telephony customer related to patent infringement claims brought against the
customer.



Corporate

(in millions)                                          Change
Year ended July 31                     2020       2019        $           %

General and administrative expenses $ (9.1 ) $ (9.2 ) $ 0.1 1.4 % Depreciation and amortization

           (0.1 )        -       (0.1 )

nm


Other operating (expense) gain, net     (0.5 )      0.3       (0.8 )     (262.7 )
Loss from operations                  $ (9.7 )   $ (8.9 )   $ (0.8 )       (9.1 )%




nm-not meaningful



Corporate costs include compensation, consulting fees, treasury and accounts
payable, tax and accounting services, human resources and payroll, corporate
purchasing, corporate governance including Board of Directors' fees, internal
and external audit, investor relations, corporate insurance, corporate legal,
charitable contributions, travel, and other corporate-related general and
administrative expenses. Corporate does not generate any revenues, nor does it
incur any direct cost of revenues.



General and Administrative. Corporate general and administrative expense
decreased in fiscal 2020 compared to fiscal 2019 primarily because of decreases
in employee compensation, legal fees, and consulting expense, partially offset
by an increase in stock-based compensation. As a percentage of our total
consolidated revenues, Corporate general and administrative expense was 0.7% in
both fiscal 2020 and fiscal 2019.



Other Operating (Expense) Gain, net. We incurred legal fees of $3.6 million and
$2.0 million in fiscal 2020 and fiscal 2019, respectively, related to the
putative class action related to Straight Path (see Item 3 to Part I "Legal
Proceedings" included elsewhere in this Annual Report). Also, in fiscal 2020 and
fiscal 2019, we recorded offsetting gains from insurance claims for this matter
of $3.1 million and $2.3 million, respectively.



Consolidated

The following is a discussion of certain of our consolidated expenses, and our consolidated income and expense line items below income from operations.





Related Party Lease Costs. We lease office space and parking in Rafael Holdings'
building and parking garage located at 520 Broad St, Newark, New Jersey. We also
lease office space in Israel from Rafael Holdings. The Newark lease expires in
April 2025 and the Israel lease expires in July 2025. In fiscal 2020 and fiscal
2019, we incurred lease costs of $1.9 million and $1.8 million, respectively, in
connection with the Rafael Holdings' leases, which is included in consolidated
selling, general and administrative expenses.



Stock-Based Compensation Expense. Stock-based compensation expense included in
consolidated selling, general and administrative expenses was $3.9 million and
$2.2 million in fiscal 2020 and fiscal 2019, respectively. The increase in
stock-based compensation expense in fiscal 2020 compared to fiscal 2019 was
primarily due to expense of deferred stock units granted in June 2019. At July
31, 2020, unrecognized compensation cost related to non-vested stock-based
compensation was an aggregate of $1.7 million. The unrecognized compensation
cost is expected to be recognized over the remaining vesting period that ends in
fiscal 2022.



                                       36






(in millions)                                                    Change
Year ended July 31                           2020          2019            $             %
Income (loss) from operations              $    17.9     $    (1.0 )   $    18.9            nm
Interest income, net                             1.1           0.8           0.3          34.4 %
Other (expense) income, net                     (1.3 )         0.7          (2.0 )      (285.8 )
Benefit from (provision for) income
taxes                                            3.7          (0.2 )         3.9            nm
Net income                                      21.4           0.3          21.1            nm
Net loss (income) attributable to
noncontrolling interests                           -          (0.2 )         0.2         106.1
Net income attributable to IDT
Corporation                                $    21.4     $     0.1     $    21.3            nm




nm-not meaningful



Other (Expense) Income, net. Other (expense) income, net consists of the
following:



(in millions)
Year ended July 31                                  2020       2019
Foreign currency transaction gains (losses)        $  0.4     $ (0.7 )
Write-off of tax assets related to prior periods     (1.3 )        -
(Loss) gain on investments                           (0.3 )      1.8
Other                                                (0.1 )     (0.4 )
TOTAL                                              $ (1.3 )   $  0.7




Income Taxes. In fiscal 2020, due to taxable income in the United States, we
utilized deferred tax assets and released the corresponding valuation allowance
to offset income tax expense of $3.5 million. In addition, in fiscal 2020, we
released an additional $8.4 million of the valuation allowance on the portion of
the deferred tax assets that we are more likely than not going to utilize
because we are forecasting future profitability in the United States. The
increase in income tax expense in fiscal 2020 compared to fiscal 2019, excluding
the benefit from the valuation allowance released in fiscal 2020, was primarily
due to differences in the amount of taxable income earned in the various taxing
jurisdictions.



On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security
Act ("CARES Act") was signed into U.S. federal law, which is aimed at providing
emergency assistance and health care for individuals, families, and businesses
affected by the COVID-19 pandemic and generally supporting the U.S. economy. The
CARES Act, among other things, includes provisions related to refundable payroll
tax credits, deferment of the employer portion of social security payments, net
operating loss carryback periods, modifications to the net interest deduction
limitations, and technical corrections to tax depreciation methods for qualified
improvement property. The CARES Act did not have a significant impact on our
consolidated financial statements in fiscal 2020. We will continue to assess the
impact of the CARES Act on our consolidated financial statements.



Net Loss (Income) Attributable to Noncontrolling Interests. The change in the
net loss (income) attributable to noncontrolling interests in fiscal 2020
compared to fiscal 2019 was primarily due to a decrease in the net income of
certain subsidiaries.

LIQUIDITY AND CAPITAL RESOURCES





General




We currently expect our cash from operations in fiscal 2021 and the balance of
cash, cash equivalents, debt securities, and current equity investments that we
held on July 31, 2020 to be sufficient to meet our currently anticipated working
capital and capital expenditure requirements during fiscal 2021. As of the date
of this filing, including the impact of COVID-19 on us, management believes that
we continue to have sufficient liquidity and capital resources for the
foreseeable future.



                                       37

At July 31, 2020, we had cash, cash equivalents, debt securities, and current equity investments of $109.2 million and a working capital deficit (current liabilities in excess of current assets) of $2.7 million.





We treat unrestricted cash and cash equivalents held by IDT Payment Services as
substantially restricted and unavailable for other purposes. At July 31, 2020,
"Cash and cash equivalents" in our consolidated balance sheet included an
aggregate of $11.0 million held by IDT Payment Services that was unavailable for
other purposes.



(in millions)
Year ended July 31                                               2020          2019
Cash flows (used in) provided by:
Operating activities                                           $   (29.6 )   $    85.1
Investing activities                                               (32.5 )       (26.2 )
Financing activities                                                (5.6 )         7.2

Effect of exchange rate changes on cash, cash equivalents, and restricted cash and cash equivalents

                            11.7

(12.1 ) (Decrease) increase in cash, cash equivalents, and restricted cash and cash equivalents

$   (56.0 )   $    54.0




Operating Activities



Our cash flows from operations vary 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 trade accounts receivable and
trade accounts payable.




Gross trade accounts receivable decreased to $50.3 million at July 31, 2020 from
$63.5 million at July 31, 2019 mostly due to the decrease in Carrier Services'
trade accounts receivable as a result of the decrease in Carrier Services'
revenues in fiscal 2020 compared to fiscal 2019.



Deferred revenue arises primarily from sales of prepaid products and varies from
period to period depending on the mix and the timing of revenues. Deferred
revenue decreased to $40.1 million at July 31, 2020 from $42.5 million at July
31, 2019 primarily due to decreases in the net2phone-Platform Services and
traditional calling cards deferred revenue balances.



Customer deposit liabilities at IDT Financial Services Limited, our
Gibraltar-based bank, decreased to $116.0 million at July 31, 2020 from $175.0
million at July 31, 2019 mainly because of the decline of the bank's travel
related programs due to the effect of COVID-19. Our restricted cash and cash
equivalents included $116.3 million and $176.8 million at July 31, 2020 and
2019, respectively, held by the bank.



In August 2017, we entered into a Reciprocal Services Agreement, as amended,
with a telecom operator in Central America for a full range of services,
including, but not limited to, termination of inbound and outbound international
long-distance voice calls. This agreement was terminated on April 30, 2020.
Pursuant to the agreement, we deposited $9.2 million into an escrow account as
security for the benefit of the telecom operator. In May 2020, an aggregate of
$9.7 million for the security deposit plus interest was released from escrow and
returned to us.




On June 21, 2018, in South Dakota v Wayfair Inc., the United States Supreme
Court held that states may charge sales tax on purchases made from out-of-state
sellers, even if the seller does not have a physical presence in the taxing
state. We have evaluated our state tax filings with respect to the Wayfair
decision and are in the process of reviewing our remittance practices. It is
possible that one or more jurisdictions may assert that we have liability for
periods for which we have not collected sales, use or other similar taxes, and
if such an assertion or assertions were successful it could adversely affect our
business, financial position and operating results. One or more jurisdictions
may change their laws or policies to apply their sales, use or other similar
taxes to our operations, and if such changes were made it could materially and
adversely affect our business, financial position, and operating results.



Investing Activities



Our capital expenditures were $16.0 million in fiscal 2020 compared to $18.7
million in fiscal 2019. We currently anticipate that total capital expenditures
in fiscal 2021 will be $18 million to $20 million. We expect to fund our capital
expenditures with our net cash provided by operating activities and cash, cash
equivalents, debt securities, and current equity investments on hand.



On December 11, 2019, our subsidiary, net2phone, Inc. acquired 100% of the
outstanding shares of Ringsouth Europa, S.L., a regional provider of cloud
communications services to businesses in Spain. The acquisition expands
net2phone's business into Spain. The cash paid for the acquisition was $0.5
million. We also recorded $0.4 million for the estimated fair value of
contingent consideration. The contingent consideration includes two potential
payments to the seller of $0.4 million each, based on monthly recurring revenue
targets to be achieved over a 36-month period and 48-month period. The second
potential payment is not contingent upon meeting the target for the first
payment.



                                       38






On September 14, 2018, we acquired 100% of the outstanding shares of Versature,
a UCaaS provider serving the Canadian market. The cash paid for the acquisition
net of cash acquired was $5.5 million.



Purchases of debt securities and equity investments were $22.4 million and $8.3
million in fiscal 2020 and fiscal 2019, respectively. Proceeds from maturities
and sales of debt securities and redemptions of equity investments were $6.5
million and $6.3 million in fiscal 2020 and fiscal 2019, respectively.



Financing Activities

We distributed cash of $0.9 million and $1.5 million in fiscal 2020 and fiscal 2019, respectively, to the noncontrolling interests in certain of our subsidiaries.

In fiscal 2020 and fiscal 2019, we repaid financing-related other liabilities of $0.5 million and $0.7 million, respectively.


On December 21, 2018, we sold 2,546,689 shares of our Class B common stock that
were held in treasury to Howard S. Jonas for aggregate consideration of $14.8
million. The price per share of $5.89 was equal to the closing price of our
Class B common stock on April 16, 2018, the last closing price before approval
of the sale by our Board of Directors and its Corporate Governance Committee. On
May 31, 2018, Mr. Jonas paid $1.5 million of the purchase price, and he paid the
balance of the purchase price on December 21, 2018 after approval of the sale by
our stockholders at the 2018 annual meeting of stockholders. The purchase price
was reduced by approximately $0.2 million, which was the amount of dividends
paid on 2,546,689 shares of our Class B common stock whose record date was
between April 16, 2018 and the issuance of the shares.



On April 20, 2020, our subsidiary, IDT Domestic Telecom, Inc., or IDT DT,
received loan proceeds of $10.0 million from TD Bank, N.A, pursuant to the
Paycheck Protection Program, or the PPP Loan, under the CARES Act, administered
by the U.S. Small Business Administration. On April 29, 2020, IDT DT returned
all $10.0 million in proceeds from the PPP Loan. In light of the
oversubscription of applications for loans under the PPP, and despite IDT DT's
need for the funds to support its operations, IDT DT returned the loan proceeds
in order to make those funds available to other borrowers that may be in greater
need than IDT DT.

We received proceeds from the exercise of our stock options of $0.3 million in fiscal 2020, for which we issued 32,551 shares of our Class B common stock. There were no stock option exercises in fiscal 2019.

IDT Telecom had a credit agreement, dated as of October 31, 2019, with TD Bank,
N.A. for a line of credit facility for up to a maximum principal amount of $25.0
million until its maturity on July 15, 2020. The principal outstanding incurred
interest per annum at the LIBOR rate adjusted by the Regulation D maximum
reserve requirement plus 125 basis points. In fiscal 2020, we borrowed and
repaid an aggregate of $1.4 million under the facility. IDT Telecom paid a
quarterly unused commitment fee of 0.3% per annum on the average daily balance
of the unused portion of the $25.0 million commitment.



IDT Telecom had a credit agreement, dated as of October 31, 2018, with TD Bank,
N.A. for a line of credit facility for up to a maximum principal amount of $25.0
million until its maturity on July 15, 2019. The principal outstanding incurred
interest per annum at the LIBOR rate adjusted by the Regulation D maximum
reserve requirement plus 125 basis points. In fiscal 2019, we borrowed and
repaid an aggregate of $3.0 million under the facility. IDT Telecom paid a
quarterly unused commitment fee of 0.3% per annum on the average daily balance
of the unused portion of the $25.0 million commitment.



We have an existing stock repurchase program authorized by our Board of
Directors for the repurchase of shares of our Class B common stock. The Board of
Directors authorized the repurchase of up to 8.0 million shares in the
aggregate. In fiscal 2020, we repurchased 671,117 shares of our Class B common
stock for an aggregate purchase price of $4.2 million. In fiscal 2019, we
repurchased 729,110 shares of our Class B common stock for an aggregate purchase
price of $3.9 million. At July 31, 2020, 6.2 million shares remained available
for repurchase under the stock repurchase program.



Between August 1, 2020 and October 12, 2020, we repurchased 463,792 shares of
our Class B common stock for an aggregate purchase price of $2.8 million under
our existing stock repurchase program. At October 12, 2020, 5.8 million shares
remained available for repurchase under the stock repurchase program.



                                       39






In fiscal 2020 and fiscal 2019, we paid $0.3 million, and $28,000, respectively,
to repurchase 37,348 and 3,748 shares, respectively, of our Class B common stock
that were tendered by employees of ours to satisfy the employees' tax
withholding obligations in connection with the lapsing of restrictions on awards
of deferred stock units and restricted stock. Such shares are repurchased by us
based on their fair market value on the trading day immediately prior to the
vesting date.

Other Sources and Uses of Resources





We intend to, where appropriate, make other strategic investments and
acquisitions to complement, expand, and/or enter into new businesses. In
considering acquisitions and investments, we search for opportunities to
profitably grow our existing businesses and/or to add qualitatively to the range
and diversification of businesses in our portfolio. At this time, we cannot
guarantee that we will be presented with other acquisition opportunities that
meet our return on investment criteria, or that our efforts to make acquisitions
that meet our criteria will be successful.

CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS

The following table quantifies our future contractual obligations and other commercial commitments at July 31, 2020:





Payments Due by Period

                                                 Less than         1-3            4-5            After
(in millions)                       Total         1 year          years          years          5 years
Purchase commitments              $     2.3     $       2.3     $        -     $        -     $          -
Connectivity obligations under
service agreements                      1.6             0.9            0.7              -                -
Operating leases including
short-term leases                      11.0             3.3            4.5            3.2                -
TOTAL CONTRACTUAL OBLIGATIONS
(1)                               $    14.9     $       6.5     $      5.2     $      3.2     $          -

(1) The above table does not include an aggregate of $18.0 million in performance

bonds or $0.8 million in potential contingent consideration related to the

Ringsouth acquisition due to the uncertainty of the amount and/or timing of


     any such payments.

OFF-BALANCE SHEET ARRANGEMENTS


We do 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, other than the following.



In connection with our spin-off of Straight Path in July 2013, we and Straight
Path entered into various agreements prior to the spin-off including a
Separation and Distribution Agreement to effect the separation and provide a
framework for our relationship with Straight Path after the spin-off, and a Tax
Separation Agreement, which sets forth the responsibilities of us and Straight
Path with respect to, among other things, liabilities for federal, state, local
and foreign taxes for periods before and including the spin-off, the preparation
and filing of tax returns for such periods and disputes with taxing authorities
regarding taxes for such periods. Pursuant to the Separation and Distribution
Agreement, we indemnify Straight Path and Straight Path indemnifies us for
losses related to the failure of the other to pay, perform or otherwise
discharge, any of the liabilities and obligations set forth in the agreement.
Pursuant to the Tax Separation Agreement, we indemnify Straight Path from all
liability for taxes of Straight Path or any of its subsidiaries or relating to
the Straight Path business with respect to taxable periods ending on or before
the spin-off, from all liability for taxes of ours, other than Straight Path and
its subsidiaries, for any taxable period, and from all liability for taxes due
to the spin-off. (see Item 3 to Part I "Legal Proceedings" and Note 20 to the
Consolidated Financial Statements included in Item 8 to Part II of this Annual
Report).



We have performance bonds issued through third parties for the benefit of
various states in order to comply with the states' financial requirements for
money remittance licenses and telecommunications resellers. At July 31, 2020, we
had aggregate performance bonds of $18.0 million outstanding.

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