Note 2 – Basis of Presentation

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.

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
	November 29,		Adjustments				March 1,
Estimated Costs of Liquidation	2014		to Reserves		Payments		2014

Real estate related carrying costs	$	4,658	$	(1,800)	$	(4,503)	$	10,961
Professional fees		3,546	$	2,724	$	(2,844)		3,666
Payroll related costs		1,594	$	352	$	(1,475)		2,717
Other		80	$	(373)	$	(115)		568
	$	9,878	$	903	$	(8,937)	$	17,912

The assumptions underlying the estimated accrued costs of liquidation of $9.9 million as of November 29, 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 is currently anticipated to conclude by July 2015.

The following discussion explains the adjustments to the costs of liquidation reserves as recorded during the thirty-nine week period ended November 29, 2014:

Adjustments to decrease the reserve for real estate related carrying costs of approximately $1.8 million were recorded during the thirty-nine weeks ended November 29, 2014. The adjustments were mainly the result of estimated selling expenses for the Trinity Place Property and the actual selling expenses related to the sale of the Secaucus Lease.

Adjustments to increase the reserve for professional fees of approximately $2.7 million were recorded during the thirty-nine week period ended November 29, 2014. The majority of the increase reflects the increased costs resulting from the complexities of litigation related to the bankruptcy cases.

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 29, 2014 (in thousands):

Adjustments of Assets and Liabilities to Net Realizable Value	March 2, 2014 through November 29, 2014

Adjust real estate to estimated net realizable value	$	25
Adjust other claims to net realizable value		(40)
	$	(15)

The following discussion explains the adjustments to the fair value of assets and liabilities under the liquidation basis of accounting as recorded during the thirty-nine weeks ended November 29, 2014:

During the thirty-nine weeks ended November 29, 2014, there was an increase of approximately $14,000 related to other claims payouts as the Company continues its reconciliation of claims as well as an additional $26,000 of costs related to the sale of common stock in the prior fiscal year.