Net Assets in Liquidation

9 Months Ended

Sep. 30, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Net Assets in Liquidation

Net Assets in LiquidationUpon adoption of the Liquidation Basis on September 1, 2020, the Company has estimated the net assets in liquidation, which represents the expected future cash flows related to the remaining assets and estimated liabilities and operating costs through dissolution. The actual cash inflows and outflows may differ from the estimated amounts.

(in thousands)
Consolidated Net Equity, as of August 31, 2020	$	425,214
Effect of adopting the liquidation basis of accounting:
Change in the estimated value of royalty rights (1)	13,770
Change in the receivable from the sale of Noden (2)	9,056
Increase in intangible assets (3)	28,702
Change in the estimated value of other assets (4)	(4,813)
Estimated liquidation and future operating costs (5)	(25,376)
Total effect of adopting the liquidation basis of accounting	21,339
Net assets in liquidation, as of September 1, 2020	$	446,553

(1) The royalty assets, consisting of Assertio and University of Michigan (“U-M”), are valued using undiscounted estimated cash receipts until the estimated date of sale plus a discounted value of the remaining estimated cash flows to determine the expected cash consideration from such sale. Previously, under the going concern basis of accounting, royalty assets were valued using discounted cash flow models, see Note 7, Fair Value Measurements.

(in thousands)	August 31, 2020		September 1, 2020		Change
	(Going Concern Basis)		(Liquidation Basis)
Assertio	$	200,463	$	211,626	$	11,163
U-M	17,450		20,057		2,607
Total	$	217,913	$	231,683	$	13,770

(2) Adjustments reflect Liquidation Basis which does not discount future estimated cash receipts. Previously, under the going concern basis of accounting we had estimated the fair value of Noden, as an asset held for sale, using a discounted cash flow model, see Note 7, Fair Value Measurements.

(3) The increase in intangible assets represents the difference between the existing assets and liabilities of LENSAR upon adoption of liquidation basis of accounting and its enterprise value that will be distributed to PDL shareholders in the spin-off. The enterprise value was determined through an analysis of comparable public companies combined with cash flow forecasts. Also see Note 10, Intangible Assets and Note 21, Subsequent Events.

(4) Adjustments to other assets include a liquidity discount for the Evofem warrants and the write-off of certain assets that will not be converted to cash such as prepaid expenses, fixed assets and right of use assets.

(5) Represents estimated future expenses related to operating the business through dissolution and settlement of future liabilities including estimated costs to dispose of our assets. Some of the estimated costs to dispose of our assets had already been accrued under the Going Concern Basis and were presented net with our assets held for sale.