Note 2 – Basis of Presentation

Liquidation Basis of Accounting

The liquidation basis of accounting is appropriate when the liquidation of a company appears imminent and the net realizable value of its assets is reasonably determinable. Under this basis of accounting, assets and liabilities are stated at their net realizable value and estimated costs over the anticipated period of liquidation are accrued to the extent reasonably determinable.

Significant estimates and judgment are required to determine the accrued costs of liquidation. The company’s accrued costs expected to be incurred in liquidation and recorded payments made related to the accrued liquidation costs are as follows (in thousands):

	Balance						Balance
	March 2,		Adjustments				November 30,
Estimated Costs of Liquidation	2013		to Reserves		Payments		2013

Real estate related carrying costs	$	15,653	$	61	$	(7,213)	$	8,501
Professional fees		5,046		1,283		(2,930)		3,399
Payroll related costs		3,428		847		(1,432)		2,843
Other		360		62		(251)		171
	$	24,487	$	2,253	$	(11,826)	$	14,914

The Company reviewed all operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, property carrying costs and professional fees to determine the estimated costs to be incurred during the liquidation period. The liquidation period, which was initially anticipated to conclude in August 2012, was amended in the fourth quarter of 2012 to conclude in July 2015 based on the then-current belief of the Company that substantially all of its real estate properties were likely to be monetized prior to the end of 2014, with a short period thereafter to conclude the liquidation. The Company expects to continue evaluating the best way to monetize its remaining assets.

Adjustments to increase the reserve for real estate carrying costs of approximately $ 0.1 million were recorded during the thirty-nine weeks ended November 30, 2013. The adjustments were mainly the result of a slight increase in selling expenses through the liquidation period.

Adjustments to increase the reserve for professional fees of approximately $1.3 million were recorded during the thirty-nine weeks ended November 30, 2013. The majority of the increase reflects the evaluation of professional fees through the liquidation period contemplated under the Plan, mainly bankruptcy and corporate related legal fees.

Adjustments to increase the reserve for payroll related costs are due to increased payroll related to hiring the Company’s new CEO in October 2013 as well as increased length of time for certain employees and retention compensation; the adjustments do not reflect the elimination of cash incentives that were potentially payable to the Company’s prior principal executive officer which were not included in the accrual for payroll-related costs because they were instead treated as transaction costs.

Adjustments to Fair Value of Assets and Liabilities

The following table summarizes adjustments to the fair value of assets and liabilities under the liquidation basis of accounting during the thirty-nine week period ended November 30, 2013 (in thousands):

	March 3, 2013
	through
Adjustments of Assets and Liabilities to Net Realizable Value	November 30, 2013
Adjust real estate to estimated net realizable value	$	(725)
Adjust estimated lease settlement costs to net realizable value		3,635
Adjust other claims to net realizable value		1,949
	$	4,859

During the thirty-nine weeks ended November 30, 2013, the Company reduced the value of two properties by $0.7 million to the final selling price, primarily attributable to the sale of the Elmsford property in August 2013.

During the thirty-nine weeks ended November 30, 2013, there were approximately $3.6 million of reductions to estimated lease settlement claims payout and $1.9 million of reductions of other claims payouts as the Company continues its reconciliation of claims.