Discontinued Operations

9 Months Ended

Apr. 30, 2014

Discontinued Operations [Abstract]

Discontinued Operations

10. Discontinued Operations

On July 31, 2013, the Company sold the rights for the purchase, sale and licensing of its Millennium, eQueue and eConn product lines and related inventories to PiOn, Incorporated (“PiOn”) located in Manchester, New Hampshire. The divestiture is consistent with the Company’s plan to discontinue marketing efforts in the PBX and call center telecommunications systems segment and focus on IP voice and security endpoints within its Cortelco business segment. Under terms of the sale, the Company received cash proceeds of approximately $48,000, assigned approximately $52,000 in deferred revenue liabilities to the buyer and will receive up to three years of royalty payments based on future sales of products included in the Millennium, eQueue, and eConn product lines. Royalty payments over the contractual period are to be received 30 days after each calendar quarter with royalty revenue recognized when earned.

The Company will continue to fulfill product orders and provide repair and refurbishment services for PiOn as part of an orderly transition from the Company’s Corinth, Mississippi warehouse to PiOn’s warehouse in Manchester, New Hampshire. The transition period will be no less than six months and can be extended indefinitely. The net cash flows expected to be received and paid by the Company related to the fulfillment, repair and refurbishment services during the transition period are not expected to be significant.

In accordance with the Company’s decision to exit the communications systems and services business segment, the results of operations from these businesses have been classified as discontinued operations for all periods presented. Further, assets and liabilities related to the discontinued operations in the accompanying consolidated balance sheets are as follows (in thousands):

	April 30,		July 31,
	2014		2013
Assets of Discontinued Operations
Trade and other accounts receivable	$	-	$	106
Prepaid and other current assets		14		26
Property and equipment, net		17		20
	$	31	$	152
Liabilities of Discontinued Operations
Accounts payable		0		4
Accrued expenses and other		35		62
	$	35	$	66

Condensed results of operations for the discontinued operations for the nine months ended April 30, 2014 and 2013 are as follows (in thousands):

	Nine Months Ended
	April 30,
	2014		2013
Revenues	$	32	$	983
Royalties earned from sale of business		161		-
Income from discontinued operations	$	140	$	240

Upon the consummation of the merger transaction described under footnote 1 above certain assets, liabilities and operations will be divested in accordance with a transition agreement. Assets and liabilities related to the divestiture in the accompanying consolidated balance sheets are as follows (in thousands):

	April 30,		July 31,
	2014		2013
Assets of Divested Operations
Cash	$	1,611	$	1,649
Trade and other accounts receivable		3,513		4,261
Prepaid and other current assets		265		231
Property and equipment, net		441		483
Investments		596		990
	$	6,426	$	7,614
Liabilities of Divested Operations
Accounts payable		2,053		2,145
Accrued expenses and other		757		967
Notes payable - related parties		3,140		3,189
	$	5,950	$	6,301

Condensed results of operations related to the divestiture for the nine months ended April 30, 2014 and 2013 are as follows (in thousands):

	Nine Months Ended
	April 30,
	2014		2013
Revenues	$	13,674	$	15,019
Operating expenses		2,934		2,875
Interest income (expense)		(454)		168
Income (loss) from divested operations	$	(617)	$	721