2.	Basis of Presentation

The accompanying financial data has been prepared by the Company, without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K as filed with the SEC for the fiscal year ended July 31, 2013.

In the opinion of management, the accompanying financial data reflect all adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of net assets. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the dates of the financial statements. Actual results could differ from these estimates.

On March 24, 2013, following the Company’s filing of the Certificate of Dissolution, the Company adopted the liquidation basis of accounting. See “Liquidation Basis of Accounting” below for further information regarding the Company’s adoption of the liquidation basis of accounting.

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 be reviewed periodically 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 any claims. 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.

For the three and six months ended January 25, 2014, the Company adjusted its estimate of the net realizable value of assets and its estimated settlement amounts of liabilities. The result of these changes was a net increase to net assets of $3.0 million.

The net realizable value of assets increased by $2.0 million as a result of the entry into the Patent Sale Agreement with respect to the IBM Patents. None of the IBM Patents are related to the IQstream Patent Portfolio, which the Company continues to own. For purposes of the Statement of Net Assets, we determined that we cannot reasonably provide an estimate of the net realizable value of the IQstream Patent Portfolio and, accordingly, have assigned no value to the IQstream Patent Portfolio. In the event the Company is successful in its efforts to sell the IQstream Patent Portfolio, the Company will record the amount of the sale at the time thereof, which may result in a net increase to net assets.

Additionally, the net realizable value of assets increased by $1.1 million as a result of the determination by a neutral accountant that certain disputed amounts were for the account of the Company under the Asset Sale Agreement. For additional information concerning this matter, see Note 5, “Commitments and Contingencies.”

The Company also increased its reserve for estimated costs during the Dissolution period by $0.2 million. The increase was primarily related to additional compensation and consulting costs expected to be incurred as a result of certain wind down activities taking longer to complete than originally anticipated. The increase to compensation costs was offset in part by a reduction in estimated professional fees and other expenses associated with wind down activities.

The Company accrued estimated costs expected to be incurred in carrying out the Plan of Dissolution. Under Delaware law, 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 January 25, 2014.

The table below summarizes the reserve for estimated costs during the Dissolution period as of January 25, 2014 (in thousands):


	Amount
Compensation	$	1,542
Professional fees		1,734
Other expenses associated with wind down activities		1,575
Insurance		165

	$	5,016

These estimated costs will continue to be reviewed periodically and adjusted as appropriate.

On January 31, 2014, all surviving representations and warranties under the Asset Sale Agreement expired without Buyer asserting any indemnification claims against the Company. Accordingly, the Company has not recorded, nor does it expect to record, any liability in connection with those obligations.