Note 7—Equity Investments

Equity investments consist of the following:

 Schedule of Equity Investments

Howard Jonas, the Chairman of the Company and the Chairman of the Company’s Board of Directors is also the Vice-Chairman of the Board of Directors of Zedge, Inc. and the Chairman of the Board of Directors, Executive Chairman, Chief Executive Officer, and President of Rafael.

In June 2025, pursuant to Rafael’s rights offering that was announced on April 29, 2025, the Company purchased 168,122 shares of Rafael Class B common stock for an aggregate of $0.2 million.

In June 2016, upon the acquisition of Visa Europe Limited by Visa, Inc. (“Visa”), IDT Financial Services received 1,830 shares of Visa Series C Preferred among other consideration. In July 2024, in connection with Visa’s mandatory release assessments, the Company received 33 shares of Visa’s Series A Preferred. In August 2024, the 33 shares of Visa Series A Preferred were converted into 3,300 shares of Visa Class A common stock, which the Company sold for $0.9 million.

The changes in the carrying value of the Company’s equity investments without readily determinable fair values for which the Company elected the measurement alternative was as follows:

 Schedule of Carrying Value of Equity Investments

The Company adjusted the carrying value of the shares of Visa Series C Preferred it held based on the fair value of Visa Class A common stock, including a discount for lack of current marketability, which is classified as “Adjustment for observable transactions involving a similar investment from the same issuer” in the table above. The Certificate of Designation with respect to the shares of Visa Series C Preferred restricts the transferability of the shares, there is no public market for the shares, and none is expected to develop. The shares become fully convertible into shares of Visa Class A common stock in June 2028.

In connection with the acquisition of Regal Bancorp by SR Bancorp, the Company received cash of $0.2 million in fiscal 2024 in exchange for shares of Regal Bancorp common stock it held.

Unrealized gains and losses for all equity investments measured at fair value included the following:

 Schedule of Unrealized Gains (losses) Gains for All Equity Investments

The unrealized gains and losses for all equity investments measured at fair value in the table above included the following:

Equity Method Investment

The Company has an investment in shares of convertible preferred stock of a communications company (the equity method investee, or “EMI”). As of July 31, 2025 and 2024, the Company’s ownership was 33.4% of the EMI’s outstanding shares on an as converted basis. The Company accounts for this investment using the equity method since the Company can exercise significant influence over the operating and financial policies of the EMI but does not have a controlling interest.

The Company determined that on the dates of the acquisitions of the EMI’s shares, there were differences between its investment in the EMI and its proportional interest in the equity of the EMI of an aggregate of $8.2 million, which represented the share of the EMI’s customer list on the dates of the acquisitions attributed to the Company’s interest in the EMI. These basis differences are being amortized over the 6-year estimated life of the customer list. In the accompanying consolidated statements of income, amortization of equity method basis difference is included in the equity in the net loss of investee, which is recorded in “Other expense, net” (see Note 17).

As of April 6, 2023, the Company was the holder of secured promissory notes made by the EMI in exchange for loans of an aggregate of $4.0 million including accrued interest. The notes provided for interest on the principal amount at 15% per annum payable monthly. The notes were due and payable in February 2023 and April 2023. On April 6, 2023, in accordance with an Agreement and Plan of Merger dated as of April 5, 2023, the EMI merged with and into its subsidiary, with the subsidiary being the surviving corporation. Effective with the merger, the principal and accrued interest of the EMI’s secured promissory notes was converted into shares of the EMI’s convertible preferred stock.

The following table summarizes the change in the balance of the Company’s equity method investment. The balance as of July 31, 2025 is classified as other current liabilities in the consolidated balance sheets.

Summary of Changes in Equity Method Investments

In February 2025, the Company entered into a loan agreement with the EMI for providing the EMI with a revolving credit facility. The aggregate principal amount available under the facility is $2.0 million. The loans will incur interest at 12% per annum payable semiannually and are due and payable in February 2027. In fiscal 2025, the Company loaned the EMI an aggregate of $1.9 million under the revolving credit facility.