Income Taxes (Tables)

12 Months Ended

Jul. 31, 2013

Dec. 31, 2013

Inventergy Inc [Member]

Jul. 31, 2013

Cortelco Systems Holding Corp [Member]

Income Tax Expenses Benefit

Income tax expense consisted of the following for the fiscal years ended July 31, 2013 and 2012 (in thousands): 

	Fiscal year ended
	July 31, 2013		July 31, 2012
Current
Federal	$	-	$	-
State		20		20
		20		20
Deferred
Federal		-		-
State		-		-
		-		-
	$	20	$	20

Income tax expense (benefit) consisted of the following for the fiscal years ended July 31, 2013 and 2012 (in thousands):

	Fiscal year ended
	July 31, 2013		July 31, 2012
Current
Federal	$	155	$	270
State		30		50
		185		320
Deferred
Federal		17		(1)
State		3		-
		20		(1)
	$	205	$	319

Reconciliation

A reconciliation between the income tax expense recognized in the Company's consolidated statements of operations and the income tax expense (benefit) computed by applying the domestic federal statutory income tax rate to income before income taxes for fiscal years 2013 and 2012 is as follows (in thousands):

	2013		2012
Income tax expense at federal statutory rate (35%)	$	85	$	186
State income taxes		13		13
Change in valuation allowance		382		(160)
Effect of tax rate differences and newly enacted tax rates in Puerto Rico		(245)		-
Imputed interest expense on notes payable - related parties		(193)		(32)
Other, net		(22)		13
Total income tax expense	$	20	$	20

A reconciliation between the income tax expense recognized in the Company's consolidated statements of operations and the income tax expense (benefit) computed by applying the domestic federal statutory income tax rate to income (loss) before income taxes for fiscal years 2013 and 2012 is as follows (in thousands):

	2013		2012
Income tax expense at federal statutory rate (35%)	$	486	$	349
State income taxes		21		33
Change in valuation allowance		64		(35)
Effect of tax rate differences and newly enacted tax rates in Puerto Rico		(176)		-
Imputed interest expense on notes payable - related parties		(193)		(32)
Other, net		3		4
Total income tax expense	$	205	$	319

Deferred Tax Effects

The deferred tax effects of the Company's principal temporary differences at July 31, 2013 and 2012 are as follows (in thousands):

	2013		2012
Allowance for doubtful receivables	$	105	$	177
Inventories		227		858
Basis difference in property and equipment		(12)		(5)
Accrued warranty costs		87		50
Accrued expenses and other		123		115
Deferred revenue		-		(42)
Net operating loss carry-forwards		10,668		9,663
Valuation allowance		(11,198)		(10,816)
Total deferred tax asset	$	-	$	-

Significant components of the Company's deferred income taxes are as follows as of December 31, 2013:

Deferred taxes
Net operating loss carryforwards	$	170,103
Intangibles – startup costs		1,171,673
Stock-based compensation		73,082
Gross deferred tax assets		1,414,858
Valuation allowance		(1,414,858)
Net deferred tax assets	$	-

The deferred tax effects of the Company's principal temporary differences at July 31, 2013 and 2012 are as follows (in thousands):

	2013		2012
Allowance for doubtful accounts	$	39	$	43
Inventories		227		233
Basis difference in property and equipment		(7)		(1)
Accrued warranty costs		46		46
Accrued expenses and other		65		107
Net operating loss carry-forwards		41		70
Valuation allowance		(103)		(170)
Net deferred income taxes	$	308	$	328