IDT

IDT Corporation Form 8-K Summary

Business Context and Reporting Period

This Current Report (Form 8-K) covers the period ending March 26, 2018. IDT Corporation (IDT) completed the spin-off of certain commercial real estate assets and interests in clinical and early-stage pharmaceutical companies into a new entity, Rafael Holdings, Inc. (Rafael). Following this transaction, IDT's business will consist principally of IDT Telecom's core communications and payment services. The spin-off was executed by distributing one share of Rafael Class A common stock for every two shares of IDT Class A common stock held as of the March 13, 2018 record date.

Key Financial Metrics (Pro Forma)

The filing includes unaudited pro forma financial information reflecting the spin-off as if it occurred on January 31, 2018 (Balance Sheet) and August 1, 2016 (Statements of Operations). All figures are in thousands unless otherwise noted.

Assets Transferred to Rafael: Approximately $43.8 million in cash, cash equivalents, and marketable securities; $1.2 million in current notes receivable; $4.0 million in hedge fund interests; and $2.0 million in non-liquid securities. Total funds contributed to Rafael aggregated $50.8 million.

Material Changes Versus Prior Period

• Spin-off Impact: The pro forma adjustments remove the historical results of Rafael Holdings, Inc. from IDT's financials. This includes the removal of approximately $2.1 million in revenues and $3.9 million in expenses for the six months ended January 31, 2018.
• Profitability Shift: Historically, IDT reported a net loss of $576,000 for the six months ended January 31, 2018. On a pro forma basis, excluding Rafael's operations and adjusting for related party transactions, IDT reports a net income of $1,214,000.
• Balance Sheet Reduction: Total assets decreased from a historical $504.2 million to a pro forma $387.8 million due to the transfer of real estate and pharmaceutical assets to Rafael.
• Related Party Adjustments: Pro forma statements adjust for the elimination of related party revenue and the recognition of new rental expenses IDT will pay to Rafael for real estate holdings.

Guidance, Outlook, and Risks

Management Commentary: Management states that the real estate and pharmaceutical holdings were not germane to IDT's core communications and payment services businesses. The spin-off allows IDT to focus on its core operations.

Unusual Items and Contingencies:

• Deferred Tax Adjustment: A significant pro forma adjustment involves a deferred tax asset. Historically, IDT had reserved against Rafael's $8.4 million domestic deferred tax asset due to consolidated losses. On a standalone basis, Rafael recorded a valuation allowance of $8.4 million in the six months ended January 31, 2018, as future profitability projections changed. This adjustment is reflected in the pro forma tax benefit.
• Debt Forgiveness: The pro forma balance sheet reflects the forgiveness of a $24.4 million balance "Due to IDT Corporation" held by Rafael.

Risks: The pro forma financial information is unaudited and is not necessarily indicative of results that would have occurred if the disposition had been consummated on the assumed dates, nor does it represent future financial positions.

Investor Verification Checklist

• Verify the final share count and trading status of Rafael Holdings, Inc. (Symbol: RFL) on the NYSE American.
• Review the Information Statement mailed to stockholders for detailed terms of the spin-off.
• Confirm the specific valuation and liquidity status of the $2.0 million in non-liquid securities transferred to Rafael.
• Monitor future rental expense obligations IDT will incur to Rafael for the Newark and Piscataway facilities.
• Assess the impact of the $8.4 million deferred tax valuation allowance on future tax liabilities for both entities.