NOTE 1 – BASIS OF PRESENTATION

General Business Plan

As of March 1, 2014, the Company owns seven commercial real estate properties and a variety of intellectual property assets focused on the consumer sector. The Company’s business plan includes the monetization of its remaining commercial real estate properties and the sale or development of the Trinity Place Property.

Description of Former Business Operations; Disposition of the Company’s and Filene’s Businesses

Prior to November 2, 2011, all of the Company’s and Filene’s business operations consisted primarily of running retail operations. The Company’s 46 stores offered a broad range of “off-price” first quality, in-season merchandise. As the economy worsened, sales continued to erode and, as a result, cash flow suffered and significant operational losses continued to threaten the on-going businesses. Trade vendors tightened and/or ceased credit terms. As a result, the Company and Filene’s projected that, absent additional financing or measures to monetize certain assets, liquidity would cease to exist.

At a meeting held on November 1, 2011, the Company’s Board of Directors determined that it was in the best interests of the Company and its shareholders for it and its subsidiaries to file voluntary petitions for reorganization under Chapter 11 and liquidate the retail operations. On November 2, 2011, the Company and Filene’s filed voluntary petitions for reorganization under Chapter 11 in the Court. On August 30, 2012, the Court entered an order confirming the Plan by which the Company and its subsidiaries would be reorganized, and the Plan became effective on September 14, 2012.

If the Company and Filene’s are able to generate value in excess of what is needed to satisfy all of their obligations under the Plan, any excess cash proceeds will be used by the Company in the manner determined by the Board of Directors.

Liquidation Basis of Accounting

In response to the Chapter 11 filing the Company adopted the liquidation basis of accounting effective on October 30, 2011, which was the beginning of the fiscal month closest to the petition date.

Under the liquidation basis of accounting, assets are stated at their net realizable value, liabilities are stated at their net settlement amount and estimated costs over the period of liquidation are accrued to the extent reasonably determinable.

The Company does not believe it would qualify for fresh start accounting if it were to emerge from liquidation. Under fresh-start accounting, assets and liabilities are adjusted to fair value. Since fresh-start accounting would likely not apply if the company were to emerge from liquidation, the Company’s accounting basis could revert back to the going concern basis of accounting, resulting in all remaining assets and liabilities at that date being adjusted to their net book value less an adjustment for depreciation and / or amortization calculated from the date the Company entered liquidation through the date it emerged from liquidation. Accordingly, if a change in accounting basis were to occur, it would likely result in a decrease in the reporting basis of the respective assets and liabilities. The Company can provide no guarantee that it will emerge from liquidation as a going concern entity, nor can it guarantee the method of accounting that would be adopted upon emergence from liquidation.

The preparation of the accompanying consolidated financial statements in conformity with the liquidation basis of accounting requires management to make significant estimates and assumptions about future events. These estimates and the underlying assumptions affect the reported amounts of assets and liabilities. These estimates include, among others, realizable value of real estate and other assets, accrued liquidation costs, lease settlement costs, and deferred tax assets. Actual results could differ from those estimates.

Reclassifications

Certain amounts reported for prior years in the Consolidated Financial Statements and Notes to Consolidated Financial Statements have been reclassified to conform to the current year’s presentation.

Estimated Costs of Liquidation

Significant estimates and judgment are required to determine the accrued costs of liquidation, which reflects all other remaining operating expenses and contractual commitments such as payroll and related expenses, lease termination costs, professional fees and other outside services to be incurred during the liquidation period. 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						Balance
	March 1,		Adjustments				March 2,		Adjustments				February 25,
Estimated Costs of Liquidation	2014		to Reserves		Payments		2013		to Reserves		Payments		2012

Real estate related carrying costs	$	10,961	$	4,404	$	(9,096)	$	15,653	$	13,763	$	(5,760)	$	7,650
Professional fees		3,666		2,564		(3,944)		5,046		13,879		(31,753)		22,920
Payroll related costs		2,717		1,445		(2,156)		3,428		4,938		(3,087)		1,577
Other		568		459		(251)		360		1,159		(968)		169
	$	17,912	$	8,872	$	(15,447)	$	24,487	$	33,739	$	(41,568)	$	32,316

The assumptions underlying the estimated accrued costs of liquidation of $17.9 million as of March 1, 2014 contemplated all changes in estimates resulting from the Plan.

The Company reviewed all of its 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 Fiscal 2012 to conclude in July 2015 based on expectations that substantially all of its real estate properties are likely to be monetized prior to the end of 2014, with a short period thereafter to conclude the liquidation.

The following discussion explains the adjustments to the costs of liquidation reserves as recorded during the fiscal year ended March 1, 2014:

Adjustments to increase the reserve for real estate carrying costs of approximately $4.4 million were mainly the result of increasing the estimated expenses due to the higher estimated values of the properties as well as estimated timing of property sales. The estimates assume that two of the Company’s properties will be sold or monetized by May 2014 and the remaining five of its properties, including the Trinity Place Property, will be sold or monetized by the end of December 2014.

Adjustments to increase the reserve for professional fees of approximately $2.6 million reflects increased costs resulting from the complexities of litigating the estate.

Adjustments to increase the reserve for payroll and related liquidation expenses of approximately $1.5 million were primarily the result of settlement charges relating to the separation agreement with the former principle executive officer during the second quarter ended August 31, 2013.

The following discussion explains the adjustments to the costs of liquidation reserves as recorded during the fiscal year ended March 2, 2013:

Adjustments to increase the reserve for real estate carrying costs of approximately $13.8 million were mainly the result of increasing the estimated expenses to reflect a liquidation period concluding in July 2015. The estimates assumed that eight of the Company’s properties would be sold or monetized by October 2013, another four of its properties would be sold or monetized by October 2014, and the Trinity Place Property would be sold by the end of 2014.

Adjustments to increase the reserve for professional fees of approximately $13.9 million reflects the costs of professionals as a result of extending the expected liquidation period to conclude in July 2015. This also reflects increased costs due to the complexities of litigating the estate as well as the unplanned hiring of a fee examiner during the pre-emergence time period.

Adjustments to increase the reserve for payroll and related liquidation expenses of approximately $4.9 million were primarily the result of extending the expected liquidation period to conclude in July 2015.

Adjustments to the 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 fiscal years ended March 1, 2014 and March 2, 2013 (in thousands):

Adjustments of Assets and Liabilities to Net Realizable Value	March 3, 2013 through March 1, 2014		February 26, 2012 through March 2, 2013

Adjust real estate to estimated net realizable value	$	53,685	$	16,688
Adjust other assets to estimated net realizable value		-		(2,891)
Adjust estimated lease settlement costs to net realizable value		4,574		11,922
Adjust liability to restore properties		-		311
Adjust obligation to former majority shareholder		-		(19,566)
Adjust obligation to customers		-		4,601
Adjust pension liability		1,024		1,860
Adjust other claims to net realizable value		228		(572)
	$	59,511	$	12,353

The following discussion explains the adjustments to the fair value of assets and liabilities under the liquidation basis of accounting as recorded during the fiscal year ended March 1, 2014:

Real Estate - The net realizable value of real estate assets was adjusted upward in the aggregate by approximately $53.7 million primarily from an increase in value of the Trinity Place Property, the Secaucus Lease and the property located in West Palm Beach, Florida. The revised estimates were supported by valuations from third party real estate experts. Based on management’s assessment, an estimated net realizable value of real estate of $157.7 million has been recorded at March 1, 2014. See Note 3 - Real Estate for a discussion on valuation methodology.

Lease Settlement Costs – Lease settlement costs have decreased by $4.6 million due to adjustments from 18 locations and cash settlements with three others. These reductions were mainly the result of the Company’s continued efforts to reconcile and settle its remaining lease claims.

Pension Liability – This amount mainly represents a decrease in the unfunded pension liability of the Syms sponsored defined benefit plan primarily as a result of improved performance of the plan’s assets.

Other Claims – This amount mainly represents a decrease in various claims pursuant to the final Plan document and further review by the Company of the validity of the claims made against the Company.

The following discussion explains the adjustments to the fair value of assets and liabilities under the liquidation basis of accounting as recorded during the fiscal year ended March 2, 2013:

Real Estate - The net realizable value of real estate assets was adjusted upward in the aggregate by approximately $16.7 million to reflect $15.1 million of revised estimates of management utilizing information obtained from third party real estate experts as of March 2, 2013 as well as $1.6 million in the net incremental sales price of three properties that were sold during fiscal 2012. Based on management’s assessment of available information, an estimated net realizable value of $142.6 million was recorded as of March 2, 2013. See Note 3 - Real Estate for a discussion on valuation methodology.

Other Assets – Other assets have decreased by approximately $2.9 million due mainly to the netting out of assets with corresponding claim liabilities.

Lease Settlement Costs – Lease settlement costs have decreased by $11.9 million due to adjustments from 22 locations. These reductions were mainly the result of the Plan which stipulated that the long-term Filene’s, LLC general unsecured creditors with allowed claims are entitled to a recovery of only 75% on their allowed claims.

Liability to Restore Properties – The Houston, Texas property was sold in November 2012 and the previously recorded liability to repair the roof was assumed by the acquirer of the property, thus the Company reversed the liability upon the consummation of the sale.

Obligation to Former Majority Shareholder – This represents the recognition of amounts due to the former Majority Shareholder during fiscal 2012 in accordance with the terms of the Plan. On September 14, 2012, immediately following the effectiveness of the Plan, the former Majority Shareholder sold all of its 7,857,794 shares of common stock to Syms at $2.49 per share. Payment for the shares will be made to the former Majority Shareholder in accordance with the Plan as Trinity’s real estate assets are monetized. As further discussed in Note 9, $1.8 million due from the Majority Shareholder was reclassified from other assets resulting in a net obligation to the former Majority Shareholder of approximately $17.8 million as of March 2, 2013.

Obligation to Customers – Obligations to customers represented credits issued for returned merchandise as well as gift certificates. The Company has determined that it no longer has a legal liability to the customers and accordingly the amount of $4.6 million has been derecognized.

Financial Position

As of March 1, 2014 and March 2, 2013, the Company had cash and cash equivalents of $9.7 million and $8.4 million, respectively. At March 1, 2014 and March 2, 2013, the Company’s restricted cash of $5.6 million and $5.1 million, respectively. Prior to September 14, 2012, the Company used its cash and cash equivalents primarily for the payment of professional fees related to the Chapter 11 cases, as well as its daily operations. After September 14, 2012, the Company has used its cash and equivalents primarily for the payment of professional fees and claims related to the Chapter 11 cases, as well as its daily operations and to fund reserves under the Plan.

The Company has estimated claims liabilities recorded in its consolidated financial statements of approximately $62.1 million and $102 million at March 1, 2014 and March 2, 2013, respectively. The claims liability includes the Majority Shareholder liability of approximately $7.1 million and $17.8 million at March 1, 2014 and March 2, 2013, respectively. During the fiscal year ended March 1, 2014, the Company made cash payments to holders of Allowed Claims, together with other payments required under the Plan, including to the Majority Shareholder, in an aggregate amount of approximately $33.7 million. These payments constituted the full distributions payable to the Allowed Syms and Filene’s Class 3 (Convenience Claims) and the Allowed Syms Unsecured Creditors in Syms Class 4 General Unsecured Claims, and the Syms Class 5 Union Pension Plan, all as defined in the Plan. Because holders of Allowed Filene’s, LLC Class 5(b)(General Unsecured (Long-Term) Claims) (as defined in the Plan) are entitled to a 75% recovery, the Company has recorded the estimated net settlement amount of such claims.

The process of reconciling claims is different from the process of actually resolving claims. Accordingly, the above estimates are based primarily on the Company’s identification and reconciliation of the amounts of asserted claims to the Company’s books and records, and not on the negotiation or settlement of specific claims. Because of the large number of claims filed and the ongoing reconciliation and settlement processes, the ultimate amount of allowed claims and the ultimate amount of distributions under the Plan could be materially different from the Company’s current estimates.

The Company believes that it would be able to fund its operations through net cash proceeds from property sales; however, the Plan imposes restrictions on the amount of operating expenses that the Company is allowed to incur and pay from such net cash proceeds. As previously discussed, the Company’s $5 million corporate overhead reserve initially contemplated by the Plan has been depleted, primarily due to greater than expected professional fees, and the Company has obtained the consent of the holder of the Company’s Series A Preferred Stock, who has the sole authority to approve an increase in the operating reserves, to increase the corporate overhead reserve to $11 million, subject to certain limitations and a reduction of up to approximately $0.8 million if certain anticipated expenses are not incurred. Up to $2.5 million of corporate overhead expenses previously paid by the Company from generally available cash will count toward and be reimbursed from the increased corporate overhead reserve following receipt of net cash proceeds from future property sales. In addition, during fiscal 2013, the Company raised $13.0 million, net of $0.5 million in offering costs, from the issuance of stock, which can be used to fund overhead and other expenses. The Company believes through the sale of its assets and cash on hand, along with the possibility of additional equity and/or debt financing, it has the cash necessary to satisfy its required claims distributions and operating activities.