2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation - The consolidated financial statements, except for the December 31, 2012 consolidated balance sheet, are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2012 presented in our Annual Report on Form 10-K. The consolidated balance sheet as of December 31, 2012 was derived from the audited consolidated balance sheet contained in our Annual Report on Form 10-K. All significant intercompany accounts and transactions have been eliminated. In the opinion of management, the accompanying consolidated financial statements contain all adjustments, which are of a normal and recurring nature, necessary to present fairly the financial position of the Company as of September 30, 2013 and December 31, 2012, and the results of operations and comprehensive income (loss) for the three and nine months ended September 30, 2013 and 2012, and changes in equity for the nine months ended September 30, 2013 and cash flows for the nine months ended September 30, 2013 and 2012. Because of the inherent seasonality and changing trends of the youth oriented markets, sports and specialty brands, operating results for the Company on a quarterly basis may not be indicative of operating results for the full year.

Revenue Recognition – Service revenues, which consists of licensing revenues: Licensing revenues, net of licensor participations, are recognized when the underlying royalties from the sales of the related products are earned. If the Company has no significant direct continuing involvement with the underlying Property or obligation to the licensee, the Company recognizes guaranteed royalties, net of licensor participations, at the time the arrangement becomes effective as long as the license period has commenced. Where the Company has significant continuing direct involvement with the underlying Property or obligation to the licensee, guaranteed minimum royalties, net of licensor participations, are recognized ratably over the term of the license or based on sales of the related products, if greater. Licensing advances and guaranteed payments collected but not yet earned by the Company are classified as deferred revenue in the accompanying consolidated balance sheets.

Product revenues: Product revenues are recognized when delivery has occurred and the risk of loss has passed to the customer. This is generally upon shipment of goods to customers, except when shipping terms dictate otherwise. The Company records shipping and handling billed to a customer in a sales transaction as revenue, while the costs incurred for shipping and handling are recorded in cost of sales in the accompanying consolidated statement of operations.

Fair Value Measurements - The fair values of the Company’s financial instruments reflect the estimates of amounts that would be received from selling an asset in an orderly transaction between market participants at the measurement date. The fair value estimates presented in this report are based on information available to the Company as of September 30, 2013 and December 31, 2012.

The carrying values of cash and cash equivalents, accounts receivable, due to licensors, accounts payable, accrued expenses and deferred revenue approximate fair value. The authoritative guidance issued by the Financial Accounting Standards Board (“FASB”) includes a fair value hierarchy based on three levels of inputs, the first two of which are considered observable and the last of which is considered unobservable, that may be used to measure fair value. The three levels are the following:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Inventories - Inventories are stated at the lower of cost or market. The $132 inventory balance at September 30, 2013 consists of finished goods related to the IsoBLOX™ and Sports Licensing/Distribution segment.

Stock-based compensation - The Company accounts for all share-based payments to employees and directors based on their grant date fair values. Compensation for share-based payments to non-employees is based on the fair value at the measurement date, which is generally the performance completion date. The fair value is initially measured at the grant date and subsequently measured at each reporting period until the final measurement date. The fair value of the Company’s stock option awards is expensed over the vesting life of the underlying stock options using the straight-line method.

Reorganization Items - The Company’s costs related to professional, consulting and trustee fees, as the case may be, in conjunction with the Bankruptcy Cases were expensed as incurred and reported as reorganization items in the accompanying consolidated statements of operations.

Reclassifications - Certain reclassifications have been made to prior period amounts to conform to the current period presentation.

Other Comprehensive Income (Loss) - The Company classifies items as other comprehensive income (loss) by their nature in the financial statements and displays the accumulated balance of other comprehensive income (loss) separately from retained earnings and additional paid-in capital in the equity section of the consolidated balance sheet. The changes in cumulative translation adjustment during the first nine months of 2013 included a reclassification of $344 in cumulative translation adjustment income as a result of the liquidation of the Company’s UK subsidiary. This change has been reported as income from discontinued operations in the accompanying statements of operations.

Recently Adopted Accounting Standards - In February 2013, the FASB issued an accounting standards update that requires companies to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amounts are required to be reclassified in their entirety to net income. For other amounts that are not required to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference to other required disclosures that provide additional detail about those amounts. This guidance was effective January 1, 2013.

Recently Issued Accounting Standards - There have been no recent accounting pronouncements expected to have a material impact on the Company’s financial condition or results of operations and cash flows.