Basis of Presentation (Policies)

9 Months Ended

Apr. 27, 2013

Liquidation Basis of Accounting

On March 24, 2013, the beginning of the fiscal month following the filing of the Certificate of Dissolution, the Company began reporting on a liquidation basis of accounting. Under the liquidation basis of accounting, assets are stated at their estimated net realizable values and liabilities are stated at their estimated settlement amounts. Recorded liabilities include estimates of expected costs associated with carrying out the Plan of Dissolution. These estimates will periodically be reviewed and adjusted as appropriate.

The valuation of assets at their net realizable value and liabilities at their anticipated settlement amounts represent estimates, based on present facts and circumstances, of the net realizable value of the assets and the costs associated with carrying out the Plan of Dissolution. The actual values and costs associated with carrying out the Plan of Dissolution may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. In particular, the estimates of costs will vary with the length of time necessary to complete the Dissolution process and to resolve potential claims which have not yet been submitted to the Company. Accordingly, it is not possible to predict the timing or aggregate amount which will ultimately be distributed to stockholders, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the accompanying Statement of Net Assets.

Upon transition to the liquidation basis of accounting, the Company recorded the following adjustments to record assets at their estimated net realizable values:


Initial adjustment of assets to estimated net realizable value	Amount
Write up of assets	$	3,393
Write down of assets		(510	)

	$	2,883

The Company’s write up of assets relates to certain non-cash assets of Sycamore, including intellectual property and other assets relating to the IQstream Business, patents and patent applications related to or used in the Intelligent Bandwidth Management Business, our real estate holdings in Tyngsborough, MA, our investments in private companies and certain other fixed assets. The write up of these assets is based on our current best estimate of the net realizable value of these assets and is subject to substantial risk and uncertainties. At this time, the Company does not expect to receive any additional material consideration for these assets beyond the amounts reflected in the accompanying Statement of Net Assets. Accordingly, we believe the amount currently reflected in the Statement of Net Assets represents the maximum value of these assets.

The write down of assets relates to certain prepaid expenses and other assets that have no future net realizable value.

On April 22, 2013, the Company commenced litigation against Buyer and certain of its affiliates with respect to certain amounts due under the Asset Sale Agreement. In connection with such litigation, on May 28, 2013, the Company and such parties reached an agreement pursuant to which (1) the Company agreed to dismiss the pending litigation without prejudice, (2) Buyer paid certain undisputed amounts owed to the Company and (3) the parties agreed to submit the remaining issues relating to amounts in dispute of approximately $1.4 million to arbitration for resolution by a neutral accountant. Following receipt of the aforementioned undisputed amounts, the Company dismissed the pending lawsuit without prejudice. Because of the unpredictability of any settlement amount or ruling in favor of the Company by a neutral accountant, the Company is currently unable to estimate the net realizable value of any proceeds in connection with this matter. Accordingly, the Company has not recorded any receivables for the amount at issue. If the Company is successful in its efforts to recover all or any portion of the $1.4 million from Buyer, the Company will record the amount of any settlement, decision or order by the arbitrator at the time thereof, which may result in an aggregate increase to net assets. For additional information concerning this litigation, see Note 10: “Commitments and Contingencies.”

The Company accrued estimated costs expected to be incurred in carrying out the Plan of Dissolution. Under the General Corporation Law of the State of Delaware (the “DGCL”), the dissolution period will last for a minimum of three years. The Company was required to make certain estimates and exercise judgment in determining the accrued costs of liquidation as of March 24, 2013. Upon transition to the liquidation basis of accounting, the Company accrued the following costs expected to be incurred in the Dissolution:


Accrued costs of liquidation	Amount
Restructuring	$	3,309
Compensation		3,539
Professional fees		3,672
Other expenses associated with wind down activities		2,725
Insurance		1,500

	$	14,745

The accrued costs of liquidation do not include an estimate of the amount that the Company may be required to pay under the Asset Sale Agreement to satisfy our indemnification obligations, if any, to Buyer and its related parties, or any other amount we may be required to pay to Buyer under the Asset Sale Agreement. The Company’s aggregate indemnification liability for breaches of representations and warranties is limited to approximately $2.8 million. The Company’s indemnification obligations for breaches of representations and warranties expire no later than twelve months following the closing date of the Asset Sale, which was January 31, 2013. In the event Buyer is able to successfully assert indemnification claims against the Company, the Company will record the amount of any such liability at the time thereof, resulting in a decrease to net assets.

The table below summarizes the accrued costs of liquidation as of April 27, 2013:


Accrued costs of liquidation	Amount
Compensation	$	3,111
Professional fees		3,400
Other expenses associated with wind down activities		2,620
Insurance		1,500

	$	10,631

See Note 12: “Subsequent Events” for additional information.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

On June 16, 2011, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income (“ASU 2011-05”), which revises the manner in which entities present comprehensive income in their financial statements. The new guidance requires companies to report components of comprehensive income in either: (1) a continuous statement of comprehensive income; or (2) two separate consecutive statements. ASU 2011-05 does not change the items that must be reported in other comprehensive income. The Company adopted ASU 2011-05 in the first quarter of fiscal 2013 by reporting a separate statement of comprehensive income (loss).

In April 2013, the FASB issued ASU No. 2013-07, Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting. The new standard addresses when and how an entity should apply the liquidation basis of accounting. The new guidance is effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013 and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted. The Company adopted ASU No. 2013-07 in the third quarter of fiscal 2013. The adoption did not have a material impact on the Company’s application of the liquidation basis of accounting.

In March 2013, the FASB issued ASU No. 2013-05, Foreign Currency Matters. The new standard addresses a parent’s accounting for the cumulative translation adjustment upon derecognition of certain subsidiaries or group of assets within a foreign entity or of an investment in a foreign entity. The objective of the update is to resolve the diversity in practice about the appropriate guidance to apply to the release of the cumulative translation adjustment into net income when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or a business within a foreign entity. The update provides that the entire amount of the cumulative translation adjustment associated with the foreign entity would be released when there has been a sale of a subsidiary or group of net assets within a foreign entity and the sale represents the substantially complete liquidation of the investment in the foreign entity. This update is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2013. Early adoption is permitted. The Company adopted ASU No. 2013-05 in the third quarter of fiscal 2013. The adoption did not have a material impact on the Company.