3.	Liquidation Basis of Accounting

Fiscal year 2014

Net assets in liquidation were $9.5 million and $13.64 million as of July 31, 2014 and July 31, 2013, respectively.

As of July 31, 2014, assets consisted of cash and cash equivalents of $12.24 million, the Tyngsborough Land valued at $2.5 million and other assets of $0.05 million. Based on our current best estimate of the realizable value of the Company’s remaining assets relating to the IQstream Business and the Company’s investment in Tejas, we have assigned values of $0.01 million and $0, respectively, to these assets for purposes of the Statement of Net Assets.

As of July 31, 2014, liabilities consisted of accrued expenses of $0.04 million, our reserve for estimated costs during the Dissolution period of $3.46 million and other liabilities of $1.79 million. For additional information concerning other liabilities, see Note 7. “Income Taxes.”

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 from the filing of the Certificate of Dissolution. The Company was required to make certain estimates and exercise judgment in determining the accrued costs of liquidation as of July 31, 2014 and July 31, 2013.

The table below summarizes the reserve for estimated costs during the Dissolution period as of July 31, 2014 and July 31, 2013 (in thousands):


	July 31, 2014		July 31, 2013
Compensation	$	1,004	$	2,396
Professional fees		1,154		2,637
Other expenses associated with wind down activities		1,010		1,970
Insurance		294		1,333

	$	3,462	$	8,336

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.

Net assets in liquidation decreased $4.14 million during fiscal year 2014. On July 29, 2014, the Company paid a liquidating distribution to stockholders, resulting in a decrease to net assets of $6.93 million.

In addition to the impact of the liquidating distribution, during the twelve months ended July 31, 2014, the Company also adjusted its estimate of the realizable value of assets and its estimated settlement amounts of liabilities, resulting in a net increase to net assets of $2.79 million. The realizable value of assets increased by $2.99 million as a result of the sale of the IBM Patents for $2.0 million, the sale of the IQstream Patents for $0.3 million, the determination by a neutral accountant that certain disputed amounts were for the account of the Company under the Asset Sale Agreement for $1.11 million, and an increase in other assets of $0.03 million, partially offset by a decrease in the realizable value for the Tyngsborough Land of $0.45 million. The Company increased its reserve for estimated costs during the Dissolution period by $0.46 million. The increase was primarily related to additional professional fees of $0.35 million, compensation costs of $0.28 million and insurance costs of $0.13 million expected to be incurred as a result of certain wind down activities taking longer to complete than originally anticipated, including continued compliance with our public company reporting obligations. The increase was offset in part by a reduction in estimated other expenses of $0.3 million associated with wind down activities. The Company also decreased accrued expenses and other liabilities by $0.26 million primarily related to taxes in certain state and foreign jurisdictions.

Fiscal year 2013

Upon transition to the liquidation basis of accounting on March 24, 2013, the Company recorded the following adjustments to record assets at their estimated realizable values:


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

	$	2,883

The Company’s initial write up of assets related to certain of the Company’s non-cash assets, 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, the Tyngsborough Land, our investment in Tejas and certain other fixed assets.

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

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

Net assets in liquidation as of March 24, 2013 were $15.14 million.

During the period from March 24, 2013 through July 31, 2013, the Company recorded adjustments to reduce our estimate of the realizable value for the Tyngsborough Land and for our other assets. The reduction in our estimate of realizable value for the Tyngsborough land was the result of the termination of a Restated Purchase and Sale Agreement pursuant to which we had agreed to sell the Tyngsborough Land to a third party. The reduction in our estimate of realizable value for our other assets primarily related to a reduction in the realizable value of our patent portfolio. During fiscal year 2014, the Company sold the IBM and IQstream patent portfolios.

During the period from March 24, 2013 through July 31, 2013, the Company reduced its accrual for estimated costs of liquidation by $1.62 million. The reduction reflected our updated estimate of costs related to compensation, professional fees, other expenses and insurance.