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EX-31.1 - EX-31.1 - COMDISCO HOLDING CO INC | a15-20459_1ex31d1.htm |
EX-32.1 - EX-32.1 - COMDISCO HOLDING CO INC | a15-20459_1ex32d1.htm |
EX-21.1 - EX-21.1 - COMDISCO HOLDING CO INC | a15-20459_1ex21d1.htm |
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended September 30, 2015
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to ____________________
Commission file number 000-499-68
COMDISCO HOLDING COMPANY, INC.
(Exact name of registrant as specified in its charter)
Delaware |
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54-2066534 |
(State or other jurisdiction of |
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(I.R.S. employer |
incorporation or organization) |
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identification no.) |
5600 North River Road |
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Rosemont, Illinois |
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60018 |
(Address of principal executive offices) |
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(Zip code) |
Registrants telephone number, including area code: (847) 698-3000 | |
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Securities registered pursuant to Section 12(b) of the Act: | |
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Title of Each Class |
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Name of Each Exchange on Which Registered |
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N/A |
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N/A |
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Securities registered pursuant to Section 12(g) of the Act: |
Common Stock, par value $0.01 per share |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X]
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X]
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act:
Large accelerated filer [ ] |
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Accelerated filer [ ] |
Non-accelerated filer [ ] (Do not check if a smaller reporting company) |
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Smaller reporting company [X] |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes [ ] No [X]
The aggregate market value of common stock held by non-affiliates of the registrant was approximately $6,100,000 based on its closing price per share of $6.45 on March 31, 2015. On March 31, 2015, there were 4,028,951 shares of common stock outstanding. No officer or director beneficially held shares of the Companys Common Stock as of December 3, 2015. Shareholders who owned 5 percent or more of the outstanding common stock at that time have been excluded in that such persons may be deemed affiliates. The determination of affiliate status is not necessarily a conclusive determination for other purposes.
Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date.
Title of Each Class |
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Number of Shares Outstanding at December 3, 2015 | |
Common Stock, par value |
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4,028,951 | |
DOCUMENTS INCORPORATED BY REFERENCE: NONE
COMDISCO HOLDING COMPANY, INC.
2015 ANNUAL REPORT ON FORM 10-K
2015 ANNUAL REPORT ON FORM 10-K
Disclosure Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains, and our periodic filings with the Securities and Exchange Commission (the SEC) and written and oral statements made by the Companys sole officer and director to press, potential investors, securities analysts and others, will contain, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 (the Securities Act) and Section 21E of the Securities Exchange Act of 1934 (the Exchange Act), and the Company intends that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are not historical facts, but rather are predictions and generally can be identified by use of statements that include phrases such as believe, expect, anticipate, estimate, intend, plan, foresee, looking ahead, is confident, should be, will, predicted, likely or other words or phrases of similar import. Similarly, statements that describe or contain information related to matters such as our intent, belief, or expectation with respect to financial performance, claims resolution under the Plan (as defined below), cash availability and cost-cutting measures are forward-looking statements. These forward-looking statements often reflect a number of assumptions and involve known and unknown risks, uncertainties and other factors that could cause our actual results to differ materially from those currently anticipated in these forward-looking statements. In light of these risks and uncertainties, the forward-looking events might or might not occur, which may affect the accuracy of forward-looking statements and cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements.
In this Annual Report on Form 10-K, references to the Company, Comdisco Holding, we, us and our mean Comdisco Holding Company, Inc., its consolidated subsidiaries, including Comdisco, Inc., Comdisco Ventures Fund A, LLC (formerly Comdisco Ventures, Inc.) and its predecessors, except in each case where the context indicates otherwise. References to Comdisco, Inc. mean Comdisco, Inc. and its subsidiaries, prior to the Companys emergence from bankruptcy on August 12, 2002, except where the context indicates otherwise.
Important factors that could cause actual results to differ materially from those suggested by these written or oral forward-looking statements, and that could adversely affect our future financial performance, include the risk factors discussed in Item 1A, Risk Factors. Many of the risk factors that could affect the results of the Companys operations are beyond our ability to control or predict.
Available Information
The Companys website address is www.comdisco.com. The Company makes available through its website its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and all amendments to those reports, as soon as reasonably practicable after such material is electronically filed with the SEC. The Company also makes available through the website its press releases, the Code of Conduct Applicable to its Chief Executive Officer and Authorized Representatives, the Employee Code of Conduct, the Audit Committee Charter, the Disclosure Controls Committee Charter and the Compensation Committee Charter, as well as contact information for the Audit Committee. Information contained on the Companys website is not intended to be part of this Annual Report on Form 10-K.
The Company emerged from Chapter 11 bankruptcy proceedings on August 12, 2002. The purpose of the Company is to sell, collect or otherwise reduce to money in an orderly manner the remaining assets of the corporation. Pursuant to the Companys First Amended Joint Plan of Reorganization (the Plan) and restrictions contained in the Companys Certificate of Incorporation (the Certificate), the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.
The Company filed, on August 12, 2004, a Certificate of Dissolution with the Secretary of State of the State of Delaware to formally extinguish Comdisco Holding Company, Inc.s corporate existence with the State of Delaware except for the purpose of completing the wind down contemplated by the Plan. Capitalized terms used but not defined in the Annual Report on Form 10-K have the meanings as defined in the Plan.
Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis. The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated financial statements and the related notes. Due to the adoption of the liquidation basis of accounting as of October 1, 2014, the comparability of results of operations of current year periods to prior year periods is limited.
The Company is currently projecting December 31, 2016 as the end date for its wind down of operations. It is anticipated that by this date the Company will have, among other things: finalized the settlement of the SIP, received the projected escrow funds from the Ebates transaction, reduced all of its assets to cash, resolved its final federal and state tax obligations, determined its final CDR liability (which will include the impact of the actual distribution by the Litigation Trust to the C-4 creditors), made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan, cancelled such common stock and CDRs and completed all regulatory filings. Accordingly, it has made appropriate expense accruals for such time period in its calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management.
General Development of Business
Comdisco Holding Company, Inc. was formed on August 8, 2002 for the purpose of selling, collecting or otherwise reducing to money in an orderly manner the remaining assets of the Company and all of its direct and indirect subsidiaries, including Comdisco, Inc. The Companys business purpose is limited to the orderly sale or run-off of all its remaining assets. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.
Since emerging from bankruptcy proceedings on August 12, 2002 (See Reorganized Corporate History), the Company has, pursuant to the Plan, focused on the monetization of its remaining assets and the wind down of operations, including, reducing organizational size, distributions to creditors, resolution of outstanding litigation and claims, the settlement of any tax obligations to various taxing authorities and jurisdictions, and the liquidation of legal entities of the Company.
The Company expects net cash provided by operating activities to continue to decrease until the completion of the wind down of its operations. The Company also expects operating expenses to continue as it pursues its business purpose under the Plan. Therefore, comparisons of quarter-to-quarter or year-to-year results of operations should not be relied upon as an indication of the Companys future performance.
The Company has reduced the size and complexity of its organizational and systems infrastructure concurrently with the monetization of its assets. During 2008, the Company received permission to begin the process of abandoning and destroying certain of its stored paper and electronic records for periods prior to January 1, 1997. As of the date of this filing, the Company destroyed substantially all of those records. As of December 3, 2015, the Company had a total of five employees (one full-time and four part-time), a decrease of approximately 99 percent from approximately 600 employees upon emergence from bankruptcy proceedings on August 12, 2002. Three to four consultants periodically assist the Company on a consulting basis.
On August 12, 2004, Randolph I. Thorntons appointment as Initial Disbursing Agent became effective. As Initial Disbursing Agent, Mr. Thornton performs the roles and responsibilities of the Board of Directors and officers of the Company, including all measures that are necessary to complete the administration of the reorganized debtors Plan and Chapter 11 cases. Mr. Thornton serves as Chief Executive Officer, President and Secretary and is the sole director and executive officer of the Company.
Reorganized Corporate History
On July 16, 2001, Comdisco, Inc. and fifty of its domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy court for the Northern District of Illinois Eastern Division (the Bankruptcy court) (consolidated case number 01-24795). Comdisco Holding Company, Inc., as the successor company to Comdisco, Inc., emerged from bankruptcy under the Plan that became effective on August 12, 2002. Prior to the effective date of the Plan, Comdisco, Inc. formed Comdisco Holding Company, Inc., a Delaware corporation (the Company or Comdisco Holding). Comdisco, Inc. emerged as a wholly-owned subsidiary of Comdisco Holding. As a result, Comdisco Holding became the successor to Comdisco, Inc. A copy of the Plan for Comdisco, Inc., as well as other information related to distributions of cash and securities pursuant to the Plan can be found in a Current Report on Form 8-K filed on August 9, 2002 with the SEC by Comdisco, Inc. A copy of the Plan was filed as an exhibit thereto.
General Terms of the Plan of Reorganization
As more fully described in the Plan, the Companys business purpose is limited to the orderly sale or run-off of all of its remaining assets. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose. Capitalized terms used but not defined in this section shall have the meanings as defined in the Plan.
In very general terms, the Plan contemplated six different classes of claims against the Comdisco, Inc. bankruptcy estate with the only remaining relevant classes of claims being described below:
· Class C-4 Claims. The largest class of claims against the Comdisco, Inc. bankruptcy estate, this class was comprised of general unsecured claims other than Class C-3 Claims and included holders of Comdisco, Inc. notes, bonds, credit lines and other trade debt (the C-4 creditors).
· Class C-5A Claims. This class was comprised of equity claims, consisting of holders of shares of Comdisco, Inc. common stock and other Interests as defined in the Plan. All shares of common stock of Comdisco, Inc. were cancelled on August 12, 2002 in accordance with the Plan.
Allowed Claims for Class C-5A received contingent distribution rights (CDRs) that entitle holders to share at increasing percentages in the proceeds realized from the monetization of the Companys assets based upon the present value of distributions made to the C-4 creditors in the bankruptcy estate of Comdisco, Inc. Information on the CDRs can be found in a Registration Statement on Form 8-A filed by the Company on August 12, 2002 with the SEC and in the section entitled Contingent Distribution Rights in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.
Pursuant to a Bankruptcy court order dated March 27, 2003, approximately 4,388,000 CDRs were held by the Companys transfer agent and any distributions relating to these rights are held by the estate of Comdisco, Inc., pending resolution of the Class C-5A Claims related to the shares purchased pursuant to Comdisco, Inc.s Shared Investment Plan (the SIP). Approximately 2,836,000 of the CDRs related to Class C-5A have been assigned to the Litigation Trust (as defined in the Plan) either in conjunction with settlements achieved with certain of the Federal or State SIP Defendants (as defined below), or turned over to the litigation trustee pursuant to an order entered by a Federal Court authorizing turnover of CDR assets. Approximately 868,000 CDRs were assigned to individuals or other trustees. Additionally, 92,000 CDRs related to Class C-5A Claims have been cancelled during the bankruptcy by the Company. The balance of approximately 592,000 CDRs are currently being held by the Companys transfer agent and any distributions relating to these rights are being held by the estate of Comdisco, Inc.
In furtherance of the settlement evidenced by the Global Settlement Agreement (described in SIP Litigation) and as reported in the final report of the litigation trustee filed on October 6, 2015 in the Bankruptcy court, the Company will purchase from the litigation trustee approximately 3,000,000 CDRs and 26 shares of common stock acquired by the litigation trustee during the course of the SIP Litigation (the Assigned Assets). The Company will purchase the Assigned Assets at discounted prices of approximately $0.06898 per CDR and $4.33 per share of common stock, respectively. Shortly thereafter, the Company intends to cancel such acquired CDRs and shares of common stock.
Litigation Trust
The Plan provided that, under certain circumstances, subrogation rights that the Company may have against the SIP Participants (the SIP Participants) be placed in a trust for the benefit of C-4 creditors (the Trust Assets). Under the Plan, the Litigation Trust is solely responsible for collection of amounts due on the promissory notes of the SIP Participants who did not accept the SIP Relief (as defined in the Plan).
In February 1998, pursuant to the SIP, 106 SIP Participants took out full recourse, personal loans to purchase approximately six million shares of Comdisco, Inc.s common stock. In connection therewith, Comdisco, Inc. executed a guaranty dated February 2, 1998 (the Guaranty) providing a guaranty of the loans in the event of default by the SIP Participants to the lenders under the SIP (the SIP Lenders). The Company and the SIP Lenders subsequently reached a settlement on the Guaranty that was approved by the Bankruptcy court on December 9, 2004. The Plan and the litigation trust agreement provided that, under certain circumstances, subrogation rights that the Company may have against the SIP Participants and their respective promissory notes be placed in a trust for the benefit of the C-4 creditors (the Trust Assets). Under the Plan, the Litigation Trust is solely responsible for collection of amounts due on the promissory notes of the sixty-nine SIP Participants who did not accept the SIP Relief (as defined in the Plan). The Company has a limited indemnification obligation to the litigation trustee under the litigation trust agreement.
SIP Litigation: On February 4, 2005, the Litigation Trust commenced lawsuits both in the United States District Court for the Northern District of Illinois (the Federal SIP Lawsuits) and in the Circuit Court of Cook County Illinois (the State SIP Lawsuits) to collect on the remaining SIP Participants promissory notes.
Federal SIP Lawsuits: The Litigation Trust filed and a federal district court judge entered summary judgments (and amended judgments) against all but one of the SIP Participants who were defendants in the federal cases (the Federal SIP Defendants) on their respective SIP promissory notes, and the Litigation Trust commenced collection actions against them. Additionally, the federal district court judge entered orders directing that certain CDRs and related proceeds held by the estate of Comdisco, Inc. and Computershare (f/k/a BNY Mellon) (holder of CDRs) on behalf of those Federal SIP Defendants be turned over to the Litigation Trust. Pursuant to such orders, the Company turned over CDRs and related proceeds and will continue to do so if additional orders are entered.
Following a series of motions, hearings and the completion of discovery, at a hearing on July 8, 2013, Judge Robert Gettleman set a trial date for September 23, 2013. The trials actual start date was September 24, 2013 and the witness testimony and evidentiary phase was substantially completed on October 10, 2013. On March 27, 2014 the post-trial briefing was completed by the parties. The judge heard oral arguments on April 16, 2014 and took the matter under advisement and would alert the parties when he came to either a partial or complete decision. On October 21, 2014, the judge orally ruled and entered judgment in favor of the Federal SIP Defendants. The basis of the judges ruling and judgment was his finding that both the bank and the Company committed an arranging violation under the applicable margin lending regulations. Therefore, the judge ruled that the promissory notes were void and unenforceable. On October 29, 2014, the litigation trustee filed an appeal of the judgment to the United States Court of Appeals for the Seventh Circuit. On November 20, 2014, the Federal SIP Defendants filed a Notice of Appeal of the October 21, 2014 judgment and of an order entered on August 12, 2013. See update in Litigation Trust Reports and Settlement Update below.
State SIP Lawsuits: The Litigation Trust filed summary judgments against all of the SIP Participants who are defendants in the state cases (the State SIP Defendants, and, together with the Federal SIP Defendants, the SIP Defendants). Three of the State SIP Defendants filed Cross Motions for Summary Judgment. A hearing in the Circuit Court of Cook County on all of the summary judgment motions in the state cases was held on May 12, 2010, and the judge granted the summary judgments in favor of the Litigation Trust and denied the various motions for summary judgments filed by the State SIP Defendants.
After a series of hearings, motions and counter-motions, amended pleadings and individual bankruptcies and settlements, the remaining State SIP Defendants and the litigation trustee entered into an agreed Stipulation And Order (the Stipulation) which, among other things, stays the trials in the state cases pending the resolution and any appeal of the trial in the federal cases.
Litigation Trust Reports and Settlement Update: By early 2005, sixty-nine SIP Participants promissory notes were transferred to the Litigation Trust. As reported in various Status Reports of Comdisco Litigation Trustee, of the sixty-nine SIP Participants: forty-one have settled or otherwise resolved their obligation; twelve have filed personal bankruptcy; and, sixteen notes remain outstanding (five in the federal court and eleven in the state court).
On October 1, 2015, the litigation trustee and the Company entered into a Global Settlement Agreement (the GSA) with the remaining SIP Defendants. Such settlement under the GSA does not have a material impact on the consolidated financial statements. On October 6, 2015, the litigation trustee filed with the United States Bankruptcy Court for the Northern District of Illinois Eastern Division a motion (the Motion) seeking the entry of an order to (i) approve a proposed settlement with the remaining federal and state defendants who had executed promissory notes in connection with Comdisco, Inc.s Shared Investment Plan, (ii) approve the filing of the final report of the litigation trustee and (iii) upon the wind down of the Comdisco Litigation Trust and final disbursement of its net proceeds to the beneficiaries, terminate the Comdisco Litigation Trust and discharge the litigation trustee and the Comdisco Litigation Trust Advisory Board. On November 23, 2015, a hearing was held in the Bankruptcy court and the judge granted an order approving the Motion and set a status hearing for April 1, 2016.
For more details regarding the Litigation Trust and related proceedings, please refer to the Status Reports of Comdisco Litigation Trustee filed quarterly in the Bankruptcy court. Any proceeds collected by the Litigation Trust, net of expenses, will be considered Trust Assets and distributed in accordance with the Plan and the litigation trust agreement.
Changes in Governance
On August 12, 2004, Randolph I. Thornton became the sole director and officer of the Company and his appointment as Initial Disbursing Agent became effective. As Initial Disbursing Agent, Mr. Thornton assumed the roles and responsibilities performed by the former Board of Directors and officers of the Company, including all measures which are necessary to complete the administration of the reorganized debtors Plan and Chapter 11 cases.
On November 16, 2015, Randolph I. Thornton renewed the appointment of the following employees, Robert E. T. Lackey, Deborah L. Dompke, Susan Long, Mary Ann Bolster and Michael J. Salerno, as Authorized Representatives of the Company. These individuals derive their authority from Mr. Thornton as sole director and officer of the Company, and report directly to him.
Filing of Certificate of Dissolution
The Company filed on August 12, 2004 a Certificate of Dissolution with the Secretary of State of the State of Delaware to formally extinguish Comdisco Holding Company, Inc.s corporate existence with the State of Delaware except for the purpose of completing the wind down contemplated by the Plan.
Narrative Description of Business
General
Since emerging from Chapter 11 bankruptcy proceedings on August 12, 2002, the Company has, pursuant to the Plan, focused on the monetization of its remaining assets. Therefore, comparisons of quarter-to-quarter or year-to-year results of operations should not be relied upon as an indication of the Companys future performance. Capitalized terms used but not defined in this section shall have the meanings as defined in the Plan. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose. Since emerging from bankruptcy, the Company has not engaged in any new leasing or financing activities, except for previously existing customer commitments and to restructure existing equipment leases and loans to maximize the value of the Companys assets.
Principal Business Location
The Companys operations are primarily conducted through its principal office in Rosemont, Illinois which occupies leased short-term furnished executive office space.
Customers and Competition
Due to the Companys limited business purpose, the Company is not dependent upon a single customer or group of customers to generate future investment or revenue opportunities. In addition, the Companys reorganization plan specifically prohibits the Company from engaging in any business activities inconsistent with its limited business purpose.
Employees
On September 30, 2015, the Company had five U.S. employees (one full-time and four part-time). No employees are represented by a labor union. The Company anticipates further reductions in its workforce as the wind down continues. Three to four consultants periodically assist the Company on a consulting basis.
Other
The Company does not own any patents, trademarks, licenses, franchises or concessions that it considers to be material to the Companys business.
The Companys business is not seasonal and due to the adoption of Liquidation Basis of Accounting, quarter-to-quarter results from operations are not applicable.
The Companys estimate of the fair value of its private company investments was made in consultation with Windspeed Acquisition Fund GP, LLC (Windspeed), a professional management group, who manages the Companys equity investments on an ongoing basis. Windspeed shares in the net receipts from the sale of the Companys equity investments at a set percentage in certain designated portions of the portfolio of companies. The Windspeed February 2004 management agreement was extended on April 5, 2011 (with an effective date of February 21, 2011) until February 20, 2013 (the Initial Extension). The Windspeed management agreement was subsequently extended effective February 21, 2013 through February 20, 2015 and extended again effective February 12, 2015 through February 12, 2017 (the Subsequent Extensions). Prior to the Initial Extension, Windspeed received fixed and declining management fees. Under the terms of the Initial and Subsequent Extensions, Windspeed is not, and will not, be paid any ongoing management fees. In lieu of such management fee payment, 100% of any proceeds from certain designated companies in the portfolio will go to Windspeed. Realized gains on the sale of equity investments are presented on a gross basis. Any management sharing amounts with Windspeed are included in accrued professional fees. The Company has received approximately $89,239,000 in proceeds (prior to management fees and sharing) since the inception of the management agreement with Windspeed. Windspeed has received a combined $15,444,000 in management fees and sharing through September 30, 2015.
During the quarter ended September 30, 2014, it was announced that Ebates, one of the Companys private company Equity Investments, would be acquired by Rakuten, Inc. (Rakuten) a Japanese company. The Plan of Merger was signed on September 24, 2014, pending various conditions, including regulatory approval. As of September 30, 2014, the Company concluded that the offer price should be the primary input into the fair value measurement of Ebates.
On October 9, 2014, Rakuten completed the acquisition and on October 29, 2014, the Company received the initial distribution. The gross proceeds distributed were $17,720,000 of which the Company received $15,144,000 in net proceeds and Windspeed received $2,576,000 in management sharing pursuant to the management agreement. The remaining fair market value amount of approximately $1,911,000, before management sharing, is being held pursuant to the merger documents in an escrow until January 2016. The actual amount to be distributed from the escrow may be impacted by provisions of, and claims asserted against, the escrow.
As a result of the adoption of liquidation basis of accounting, the Ebates transaction was assumed as of October 1, 2014 and was included in the cumulative effect of an accounting change. As such, the net assets in
liquidation were increased $19,349,000 for the estimated net realizable value of equity investments. In addition, the CDR liability was increased by $6,101,000 primarily as a result of the Ebates transaction. See Notes 3, 6 and 10 of Notes to Consolidated Financial Statements (in Liquidation), which are incorporated in this section by reference, for information about the Cumulative Effect of Accounting Change, Equity Investments and Fair Value Measurements, respectively.
Financial Information about Geographic Areas
See Note 2 of Notes to Consolidated Financial Statements (in Liquidation), which is incorporated in this section by reference. All of the companys assets and revenue are in North America.
The following risk factors and other information included in this Annual Report on Form 10-K should be carefully considered. The risks and uncertainties described below are not the only ones the Company confronts. Additional risks and uncertainties not presently known to it or that it currently deems immaterial also may impair the Companys business operations and the implementation of the Plan. If any of the following risks actually occurs, the Companys business, financial condition, net assets in liquidation and the implementation of the Plan could be materially adversely affected.
Uncertainties Inherent in the CDR Liability Calculation
The CDR liability is managements estimate of the amount of the remaining value of the Company to be shared by holders of CDRs at the sharing percentage of 37%. The net assets in liquidation which is used to calculate the CDR liability includes variables (e.g., estimated future operating costs and expenses, estimated future interest income, estimated other asset values, etc.) which are not under the control of the Company. Such variables are inherently uncertain due to the impact of influences such as time, inflation or deflation, interest rate changes, third party credit risks, domestic events, court or tax rulings contrary to the Companys expectations, timing and amounts of distributions to C-4 creditors by the Litigation Trust, and matters that could impact the timing on the wind down of the Company.
Impact of Recoveries by Litigation Trust on the Companys Obligation to Make Payments in Respect of Contingent Distribution Rights
As the present value of distributions to certain C-4 creditors has reached the 100% threshold level of percentage recovery established pursuant to the Plan, holders of CDRs are entitled to receive payments from the Company equal to 37% of each dollar available to be distributed to Comdisco C-4 creditors in accordance with the Plan. All payments by the Company in respect of CDRs are made from the Companys available cash-on-hand and not from funds distributed by the Litigation Trust. The Company expects to maintain cash reserves sufficient to make any required payments pursuant to its CDR liability arising from either the Companys net assets in liquidation or any net distributions from the Litigation Trust to the C-4 creditors. Any actual net distributions by the Litigation Trust to the C-4 creditors will increase the Companys liability to CDR holders. Estimates of such net distributions are currently based on the likely anticipated distribution reported by the litigation trustee in its supplement to the final report filed in the U.S. Bankruptcy Court and any such liability is reflected on the financial statements under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
Final Tax Clearances
The ability of the Company to effectuate timely assessments and receive final tax liabilities, if any, from the applicable state and federal taxing authorities to allow for the closure of the bankruptcy estate.
Uncertainties Inherent in the Determination of Value of the Ebates Escrow
The determination of the value of the Ebates escrow is managements estimate of such value at a moment in time based on information available to management at that time. The estimate of value is inherently uncertain due to factors that could impact the payout from the Ebates escrow. Some of the factors that could impact the timing and amount of the projections are claims and legal expenses assessed against the Ebates escrow.
The Payment of Dividends and Distributions
All funds generated from the Companys remaining assets are required by the Plan to be used to satisfy liabilities of the Company and, to the extent funds are available, to pay dividends on the Companys Common Stock and to make distributions with respect to the CDRs in the manner and priorities set forth in the Plan. Because of the composition and nature of its remaining assets, the Company expects to generate funds from the sale or run-off of its remaining assets at a decreasing rate over time. The Company has material restrictions on its ability, and does not expect or intend, to make any significant investments in new or additional assets. Accordingly, the amount of funds potentially available to pay dividends on the Companys Common Stock and to make distributions with respect to the CDRs is limited to the Companys Net Assets in Liquidation.
Uncertainties in Collections and Recoveries
The Company believes that its collections and recoveries on accounts previously written off could provide future but diminishing cash flows. The amount and timing of such collections and recoveries are dependent upon many factors including any offsets or counterclaims that may be asserted against the Company and the ability of a former lessee or debtor or its respective estate to pay the claim or any portion thereof. Some of these factors are beyond the control of the Company.
Uncertainties Relating to the Bankruptcy Plan and the Limited Business Plan and Impact of the Adoption of Liquidation Basis of Accounting
The Company believes the most critical judgment areas in the application of its accounting policies are the estimated future cash inflows and future outflows. As of October 1, 2014, the Company has adopted the liquidation basis of accounting on a prospective basis which requires the estimation of and accrual of all projected future cash inflows and future outflows associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated statements of net assets in liquidation and the related notes. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows. These estimates could be affected by the timing of the wind down of the estate, adverse tax ruling or changes, adverse court rulings and external events beyond the control of the Company.
The Companys Liquidity is Dependent on Cash on Hand
The Companys liquidity depends on cash on hand.
Limited Public Market for Common Stock
There is currently a limited public market for the Companys Common Stock. Holders of the Companys Common Stock may, therefore, have difficulty selling their Common Stock, should they decide to do so. In addition, there can be no assurances that such markets will continue or that any shares of Common Stock which may be purchased could be sold without incurring a loss. Any such market price of the Common Stock may not necessarily bear any relationship to the Companys net assets in liquidation value or any other established criteria of value, and may not be indicative of the market price for the Common Stock in the future. Further, the market price of the Common Stock may be volatile depending on a number of factors, including the status of the Companys business performance, its limited business purpose, industry dynamics, news announcements or changes in general economic conditions.
Limited Public Market for Contingent Distribution Rights
There is currently a limited public market for the Companys CDRs. Holders of the Companys CDRs may, therefore, have difficulty selling their CDRs, should they decide to do so. In addition, there can be no assurances that such markets will continue or that any CDRs which may be purchased could be sold without incurring a loss. Any such market price of the CDRs may not necessarily bear any relationship to the Companys net assets in liquidation value, assets, past operating results, financial condition or any other established criteria of value, and may not be indicative of the market price for the CDRs in the future. Further, the market price of the CDRs may be volatile
depending on a number of factors, including the status of the Companys business performance, industry dynamics, news announcements or changes in general economic conditions.
Uncertainties Relating to the Wind Down of Operations
The Company has reduced the size and complexity of its organizational and systems infrastructure concurrently with the monetization of its assets. The success of the Companys continuing wind down of operations and implementation of the Order entered by the Bankruptcy court authorizing the organizational systems infrastructure wind down is dependent upon the ability of the Company to effectively maintain its operations with limited personnel.
The Company is currently projecting December 31, 2016 as the end date for its wind down of operations. It is anticipated that by this date the Company will have, among other things: finalized the settlement of the SIP, received the projected escrow funds from the Ebates transaction, reduced all of its assets to cash, resolved its final federal and state tax obligations, determined its final CDR liability (which will include the impact of the actual distribution by the Litigation Trust to the C-4 creditors), made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan, cancelled such common stock and CDRs and completed all regulatory filings. Accordingly, it has made appropriate expense accruals for such time period in its calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management.
Impact of Interest Rates
Changes in interest rates could impact the value of certain of the Companys assets.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
Since October 31, 2004, the Company has leased short-term furnished executive office space for all of its operations at 5600 N. River Road in Rosemont, Illinois. The terms of its rental agreement provide the Company with the ability to match its actual leased space with its declining space requirements. The Company does not own any property.
Bankruptcy Proceeding
The Company continues to appear before the Bankruptcy court from time to time to clarify and administer matters related to the Plan and the wind down of the operations of the Company. On June 28, 2011, the bankruptcy case of Comdisco, Inc., case no. 01-24795, was reassigned from Judge Bruce Black to Judge Jack Schmetterer. On November 23, 2015, a hearing was held in the Bankruptcy court and the judge granted an order approving the Motion and set a hearing for April 1, 2016.
Litigation Trust Ongoing Litigation
The Plan and the litigation trust agreement provided that, under certain circumstances, subrogation rights that the Company may have against the SIP Participants and their respective promissory notes be placed in a trust for the benefit of the C-4 creditors (the Trust Assets). Under the Plan, the Litigation Trust is solely responsible for collection of amounts due on the promissory notes of the SIP Participants who did not accept the SIP Relief (as defined in the Plan). The Company has a limited indemnification obligation to the litigation trustee under the litigation trust agreement.
SIP Litigation - On February 4, 2005, the Litigation Trust commenced lawsuits both in the United States District Court for the Northern District of Illinois (the Federal SIP Lawsuits) and in the Circuit Court of Cook County Illinois (the State SIP Lawsuits) to collect on the remaining SIP Participants promissory notes.
Federal SIP Lawsuits: The Litigation Trust filed and a federal district court judge entered summary judgments (and amended judgments) against all but one of the SIP Participants who were defendants in the federal cases (the Federal SIP Defendants) on their respective SIP promissory notes, and the Litigation Trust commenced collection actions against them. Additionally, the federal district court judge entered orders directing that certain CDRs and related proceeds held by the estate of Comdisco, Inc. and Computershare (f/k/a BNY Mellon) (holder of CDRs) on behalf of those Federal SIP Defendants be turned over to the Litigation Trust. Pursuant to such orders, the Company turned over CDRs and related proceeds and will continue to do so if additional orders are entered.
Following a series of motions, hearings and the completion of discovery, at a hearing on July 8, 2013, Judge Robert Gettleman set a trial date for September 23, 2013. The trials actual start date was September 24, 2013 and the witness testimony and evidentiary phase was substantially completed on October 10, 2013. On March 27, 2014 the post-trial briefing was completed by the parties. The judge heard oral arguments on April 16, 2014 and took the matter under advisement. On October 21, 2014, the judge orally ruled and entered judgment in favor of the Federal SIP Defendants. The basis of the judges ruling and judgment was his finding that both the bank and the Company committed an arranging violation under the applicable margin lending regulations. Therefore, the judge ruled that the promissory notes were void and unenforceable. On October 29, 2014, the litigation trustee filed an appeal of the judgment to the United States Court of Appeals for the Seventh Circuit. On November 20, 2014, the Federal SIP Defendants filed a Notice of Appeal of the October 21, 2014 judgment and of an order entered on August 12, 2013. See update in Litigation Trust Reports and Settlement Update below.
State SIP Lawsuits: The Litigation Trust filed summary judgments against all of the SIP Participants who are defendants in the state cases (the State SIP Defendants, and, together with the Federal SIP Defendants, the SIP Defendants). Three of the State SIP Defendants filed Cross Motions for Summary Judgment. A hearing in the Circuit Court of Cook County on all of the summary judgment motions in the state cases was held on May 12, 2010, and the judge granted the summary judgments in favor of the Litigation Trust and denied the various motions for summary judgments filed by the State SIP Defendants.
After a series of hearings, motions and counter-motions, amended pleadings and individual bankruptcies and settlements, the remaining State SIP Defendants and the litigation trustee entered into an agreed Stipulation And Order (the Stipulation) which, among other things, stays the trials in the state cases pending the resolution and any appeal of the trial in the federal cases.
Litigation Trust Report and Settlement update: By early 2005, sixty-nine SIP Participants promissory notes were transferred to the Litigation Trust. As reported in various Status Reports of Comdisco Litigation Trustee, of the sixty-nine SIP Participants: forty-one have settled or otherwise resolved their obligation; twelve have filed personal bankruptcy; and, sixteen notes remain outstanding (five in the federal court and eleven in the state court).
On October 1, 2015, the litigation trustee and the Company entered into a Global Settlement Agreement (the GSA) with the remaining SIP Defendants. Such settlement under the GSA does not have a material impact of the consolidated financial statements. On October 6, 2015, the litigation trustee filed with the United States Bankruptcy Court for the Northern District of Illinois Eastern Division a Motion seeking the entry of an order to (i) approve a proposed settlement with the remaining federal and state defendants who had executed promissory notes in connection with Comdisco, Inc.s Shared Investment Plan, (ii) approve the filing of the final report of the litigation trustee and (iii) upon the wind down of the Comdisco Litigation Trust and final disbursement of its net proceeds to the beneficiaries, terminate the Comdisco Litigation Trust and discharge the litigation trustee and the Comdisco Litigation Trust Advisory Board. On November 23, 2015, a hearing was held in the Bankruptcy court and the judge granted an order approving the Motion and set a hearing for April 1, 2016.
For more details regarding the Litigation Trust and related proceedings, please refer to the Status Reports of Comdisco Litigation Trustee filed quarterly in the Bankruptcy court. Any proceeds collected by the Litigation Trust, net of expenses, will be considered Trust Assets and distributed in accordance with the Plan and the litigation trust agreement.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
The Companys Common Stock currently trades on the OTCQB under the symbol CDCO. In addition, the CDRs currently trade on the OTCQB under the symbol CDCOR. OTCQB quotations reflect inter-dealer prices, without retail mark-up, markdown or commission and may not necessarily represent actual transactions.
The Plan authorizes, but does not require, the issuance of additional shares of the Companys Common Stock to make distributions to holders of CDRs. The Company has historically chosen to distribute cash to holders of CDRs in lieu of shares of Common Stock (see discussion following for distributions made to holders of CDRs). More information on distributions to holders of CDRs can be found in a Registration Statement on Form 8-A filed by the Company on August 12, 2002 with the SEC and in the section Contingent Distribution Rights in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations.
Common Stock
As of December 3, 2015, there were 224 shareholders of record of the Companys Common Stock. In furtherance of the Global Settlement Agreement (the GSA), the Company will repurchase 26 shares of common stock from the litigation trustee at a discounted price of approximately $4.33 per share. These shares were acquired by the litigation trustee in the SIP Litigation. Shortly thereafter, the Company will cancel those shares.
The following table sets forth the adjusted high and low sales prices for the Common Stock of Comdisco Holding Company, Inc. and cash dividends paid during fiscal 2015 and 2014.
2015 |
|
2014 |
| ||||||||||
Quarter |
|
High |
|
Low |
|
Dividends |
|
High |
|
Low |
|
Dividends |
|
First |
|
$ 6.50 |
|
$ 5.60 |
|
$ 0 |
|
$ 5.50 |
|
$ 4.32 |
|
$ 0 |
|
Second |
|
6.95 |
|
5.95 |
|
2.35 |
|
5.30 |
|
4.90 |
|
0 |
|
Third |
|
6.45 |
|
4.00 |
|
0 |
|
5.10 |
|
4.75 |
|
0 |
|
Fourth |
|
4.30 |
|
4.10 |
|
0 |
|
6.50 |
|
4.88 |
|
0 |
|
The Companys transfer agent and registrar is Computershare (f/k/a BNY Mellon), 480 Washington Boulevard, Jersey City, New Jersey, 07310. The shareholder relations telephone number is (800) 851-9677 and the internet address is http://www.computershare.com.
The Company intends to treat the dividend distributions for federal income tax purposes as part of a series of liquidating distributions in complete liquidation of the Company. Aggregate total dividend distributions on the Companys Common Stock to the date of this report were as follows (in thousands):
|
|
Aggregate |
| |
May 2003 |
|
$ |
307,773 |
|
June 2003 |
|
60,019 |
| |
September 2003 |
|
199,782 |
| |
December 2003 |
|
50,365 |
| |
May 2004 |
|
48,267 |
| |
March 2005 |
|
52,447 |
| |
January 2006 |
|
20,172 |
| |
December 2006 |
|
25,748 |
| |
April 2011 |
|
12,600 |
| |
March 2015 |
|
9,450 |
| |
|
|
$ |
786,623 |
|
Contingent Distribution Rights
Although the CDRs trade over-the-counter, for financial reporting purposes, the Company records CDRs as a liability under both the going concern and liquidation bases of accounting and as an operating expense under the going concern basis of accounting.
The Plan entitled holders of CDRs to previously share at increasing percentages in the proceeds realized from the Companys assets based upon the present value of distributions to certain C-4 creditors in the bankruptcy estate of Comdisco, Inc. However, as of September 30, 2015, the sharing percentage is 37%, which is the maximum sharing percent. As of the date of this filing, there were 1,840 holders of record of the Companys CDRs and there were 148,448,188 outstanding CDRs. In furtherance of the settlement in the GSA, the Company will repurchase approximately 3,000,000 CDRs from the litigation trustee at a discounted purchase price of approximately $0.06898 per CDR. The CDRs were acquired by the litigation trustee in the SIP Litigation. Shortly after the repurchase, the Company will cancel those CDRs. The number of holders of CDRs may, or may not, be affected by such repurchase and cancellation.
The Company maintains sufficient cash reserves for operations and any increase in the estimated CDR liability relating to increases in the Companys net assets in liquidation and any future estimated net distributions from the Litigation Trust to the C-4 creditors. The outcome and the timing of the actual net distributions from the Litigation Trust will impact both the timing and the amount of future liquidating dividends and CDR payments.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. During the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
Aggregate total distributions to the date of this report with respect to the CDRs were as follows (in thousands):
|
|
Aggregate |
|
Per CDR |
|
May 2003 |
|
$ 2,730 |
|
$.01793 |
|
June 2003 |
|
2,468 |
|
.01621 |
|
September 2003 |
|
13,370 |
|
.08780 |
|
December 2003 |
|
7,827 |
|
.05140 |
|
March 2004 |
|
2,848 |
|
.01870 |
|
May 2004 |
|
11,892 |
|
.07810 |
|
December 2004 |
|
14,953 |
|
.09820 |
|
March 2005 |
|
22,171 |
|
.14560 |
|
January 2006 |
|
5,558 |
|
.03650 |
|
March 2006 |
|
3,761 |
|
.02470 |
|
December 2006 |
|
6,852 |
|
.04500 |
|
September 2007 |
|
22,841 |
|
.15000 |
|
September 2008 |
|
893 |
|
.00602 |
|
September 2008 reallocation |
|
0 |
|
.01984 |
|
April 2011 |
|
7,400 |
|
.04985 |
|
March 2015 |
|
5,550 |
|
.03739 |
|
Total CDR payments |
|
$131,114 |
|
$.88324 |
|
See Critical Accounting Policies and Contingent Distribution Rights in Item 7, Managements Discussion and Analysis of Financial Condition and Results of Operations for information on the CDR liability.
Recent Sales of Unregistered Securities
None.
Repurchases of Common Stock
There were no repurchases of Common Stock in the fourth quarter of fiscal 2015 or during the fiscal year 2015. The Company does not regularly repurchase shares nor does the Company have a share repurchase plan. In furtherance of the settlement in the GSA, the Company will repurchase 26 shares of common stock from the litigation trustee at a discounted price of approximately $4.33 per share. These shares were acquired by the litigation trustee in the SIP Litigation. Shortly thereafter, the Company will cancel those shares.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements (in liquidation) and related notes included elsewhere in this Annual Report on Form 10-K for the fiscal year ended September 30, 2015. This discussion and analysis also contains forward-looking statements and should also be read in conjunction with the disclosures and information contained in the sections of this Annual Report on Form 10-K entitled Disclosure Regarding Forward-Looking Statements and Risk Factors Relating to the Company.
The Company emerged from Chapter 11 bankruptcy proceedings on August 12, 2002. The purpose of the Company is to sell, collect or otherwise reduce to money in an orderly manner the remaining assets of the corporation. Pursuant to the Companys First Amended Joint Plan of Reorganization (the Plan) and restrictions
contained in the Companys Certificate of Incorporation (the Certificate), the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.
The Company filed, on August 12, 2004, a Certificate of Dissolution with the Secretary of State of the State of Delaware to formally extinguish Comdisco Holding Company, Inc.s corporate existence with the State of Delaware except for the purpose of completing the wind down contemplated by the Plan. Capitalized terms used but not defined in the Annual Report on Form 10-K have the meanings as defined in the Plan.
Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis. The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated financial statements and the related notes. Due to the adoption of the liquidation basis of accounting as of October 1, 2014, the comparability of results of operations of current year periods to prior year periods is limited.
The Company is currently projecting December 31, 2016 as the end date for its wind down of operations. It is anticipated that by this date the Company will have, among other things: finalized the settlement of the SIP, received the projected escrow funds from the Ebates transaction, reduced all of its assets to cash, resolved its final federal and state tax obligations, determined its final CDR liability (which will include the impact of the actual distribution by the Litigation Trust to the C-4 creditors), made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan, cancelled such common stock and CDRs and completed all regulatory filings. Accordingly, it has made appropriate expense accruals for such time period in its calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management.
General
The Companys operations continued to wind down during the fiscal year 2015. The Companys assets at September 30, 2015 consist primarily of cash and cash-equivalents, receivable from securities sold and other assets.
Equity Investments: The Company sold its remaining preferred stock holdings in private companies during the twelve months ended September 30, 2015 for $433,000 and received net proceeds of $368,000 after Windspeed Acquisition Fund GP, LLC (Windspeed) management sharing of $65,000. Beginning October 1, 2014, these investments were carried at the liquidation basis of accounting in the Companys consolidated statement of net assets in liquidation. During April 2015, the Company discovered that it had received 1,499 shares in NxStage Medical, Inc., a publicly traded company. The shares were received in 1999 as part of a product spinoff from a former customer who subsequently went out of business. During the twelve months ended September 30, 2015, these shares were sold for approximately $22,600 before Windspeed management sharing of approximately $3,400. As of September 30, 2015, the Company does not own any shares in publicly traded companies. See Notes 6 and 10 of Notes to Consolidated Financial Statements (in Liquidation).
The Companys estimate of the fair value of its private company investments were made in consultation with Windspeed, a professional management group, which the Company engaged in February 2004 to manage the Companys equity investments on an ongoing basis. Windspeed shares in the net receipts from the sale of the Companys equity investments at a set percentage in certain designated portions of the portfolio of companies.
The Windspeed management agreement was extended on April 5, 2011 (with an effective date of February 21, 2011) until February 20, 2013 (the Initial Extension). The Windspeed management agreement was subsequently extended effective February 21, 2013 through February 20, 2015 and again extended effective February 12, 2015 through February 12, 2017 (the Subsequent Extensions). Prior to the Initial Extension, Windspeed received fixed and declining management fees. Under the terms of the Initial and Subsequent Extensions, Windspeed is not, and will not, be paid any ongoing management fees. In lieu of such management fee
payment, 100% of any proceeds from certain designated companies in the portfolio will go to Windspeed. Realized and unrealized gains on the sale of equity investments are presented on a gross basis. Any management sharing amounts with Windspeed are included in accrued professional fees. See Note 6 of Notes to Consolidated Financial Statements (in Liquidation) and Critical Accounting Policies.
As of September 30, 2015, the Company did not own any shares in publicly-traded companies within Equity Investments as presented on the consolidated statement of net assets in liquidation. However, the Company held a limited number of securities in trust for a deferred compensation plan which are not available for distribution under the Plan. The following table summarizes the changes in the value of the Companys Equity Investments since September 30, 2014 (in thousands):
|
|
Public |
|
|
Private |
| |
September 30, 2014 estimated net realizable value (2) |
$ |
0 |
|
$ |
20,379 |
| |
Realized net of fees (3)(4) |
|
(23) |
|
|
(20,064) |
| |
Increase (decrease) in unrealized estimated value |
|
23 |
|
|
(315) |
| |
September 30, 2015 estimated gross realizable value |
$ |
0 |
|
$ |
0 |
| |
(1) |
The Company sold its remaining preferred stock holdings in private companies during the twelve months ended September 30, 2015. |
|
|
(2) |
Fair market value was shown on a gross basis (prior to payment of management sharing to Windspeed pursuant to the extended management agreement). |
|
|
(3) |
The Company sold 1,499 shares of NxStage Medical, Inc. during the twelve months ended September 30, 2015. |
|
|
(4) |
Of the total realized amount from the Ebates, Inc. (Ebates) transaction of $19,631,000: the Company received cash proceeds of $15,144,000 after Windspeed sharing; $2,576,000 has been paid to Windspeed; the remaining amount due is $1,911,000, before Windspeed management sharing, and is held in escrow until January 2016 in a receivable from securities sold. |
There is no assurance as to the amount the Company will ultimately realize on the receivable from securities sold which is subject to the risk factors discussed in Item 1A, Risk Factors, entitled Uncertainties Inherent in the Determination of Value of the Ebates Escrow.
Collections and recoveries: As of September 30, 2015, the Company had no significant potential collections and recoveries. Prior recoveries involved former lessees or debtors now in bankruptcy and against whom the Company had filed and was pursuing claims to maximize its recoveries. The Companys cost basis in these accounts was nominal. Additionally, the Company, periodically, recovers unclaimed property from various states.
The amount and timing of such collections and recoveries, if any, are subject to the risk factors discussed in Item 1A, Risk Factors, particularly the risk entitled Uncertainties in Collections and Recoveries.
Subsidiaries: The Company has significantly reduced the number of its domestic and international subsidiaries from ninety-four to two subsidiaries as of December 3, 2015. To the extent that such subsidiaries were Reorganized Debtors, the Company has closed the related estates.
Trust Assets and Litigation Trust
Under the Plan, the litigation trustee is solely responsible for collecting from any remaining SIP Participants who had not accepted the relief offer in the Plan. Any amounts, net of fees and expenses, collected by the litigation trustee whether by judgment or settlement are considered Trust Assets. The litigation trustee has filed periodic reports with the Bankruptcy court, including a final report filed on October 6, 2015, and such reports provided and provide additional information on the collection efforts, any settlements and potential distributions of Trust Asset. The litigation trustee is solely responsible for distributing Trust Assets to C-4 Creditors under the Plan.
During the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
Emergence from Bankruptcy
Since emerging from Chapter 11 bankruptcy proceedings on August 12, 2002, the Company has, pursuant to the Plan, focused on the monetization of its remaining assets. Therefore, comparisons of quarter-to-quarter or year-to-year results of operations should not be relied upon as an indication of the Companys future performance. Capitalized terms used but not defined in this section shall have the meanings as defined in the Plan. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis.
All funds generated from the Companys remaining asset portfolios are required by the Plan to be used to satisfy liabilities of the Company and, to the extent funds are available, to pay dividends on the Companys Common Stock and to make distributions with respect to the CDRs in the manner and priorities set forth in the Plan.
On February 20, 2015, the Company issued a press release announcing that its Board of Directors had declared a cash dividend of $2.3455 per share on the outstanding shares of its Common Stock (an aggregate distribution of approximately $9,450,000). This was paid on March 12, 2015 to common stockholders of record as of March 2, 2015. Comdisco intends to treat the dividend distributions for federal income tax purposes as part of a series of liquidating distributions in complete liquidation of the Company. The Company paid no dividends during the fiscal year ended September 30, 2014.
On February 20, 2015, the Company announced that it would make a cash payment of $0.03739 per CDR, (an aggregate payment of approximately $5,550,000). This was paid on March 12, 2015 to CDR holders of record as of March 2, 2015. The Company made no payment to CDR holders during the fiscal year ended September 30, 2014.
See Item 1, General Terms of the Plan of Reorganization and Part II, Item 5, Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Other than the estimated receivable from securities sold from the Ebates transaction, the Company expects to generate funds from the sale or collection of its remaining assets at a decreasing rate over time.
The Company maintains sufficient cash reserves for operations and any increase in the estimated CDR liability relating to increases in the Companys net assets in liquidation and any future estimated net distributions from the Litigation Trust to the C-4 creditors. The outcome and the timing of the actual net distributions from the Litigation Trust will impact both the timing and the amount of future liquidating dividends and CDR payments.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. During the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution. See below for Critical Accounting Policies and Item 1A, Risk Factors for a discussion of the Impact of Recoveries by Litigation Trust on the Companys Obligation To Make Payments in Respect of Contingent Distribution Rights and Uncertainties Inherent in the CDR Liability Calculation.
The Company has material restrictions on its ability, and does not expect, to make significant investments in new or additional assets. The Company continually evaluates opportunities for the orderly sale and collection of its remaining assets.
The Company is currently projecting December 31, 2016 as the end date for its wind down of operations. It is anticipated that by this date the Company will have, among other things: finalized the settlement of the SIP, received the projected escrow funds from the Ebates transaction, reduced all of its assets to cash, resolved its final federal and state tax obligations, determined its final CDR liability (which will include the impact of the actual distribution by the Litigation Trust to the C-4 creditors), made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan, cancelled such common stock and CDRs and completed all regulatory filings. Accordingly, it has made appropriate expense accruals for such time period in its calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management.
Critical Accounting Policies
The Companys consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles. Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis. As such, the preparation of the fiscal year 2015 financial statements is under the liquidation basis of accounting which requires management to use estimates that affect reported amounts of assets and liabilities, revenues and expenses, and disclosure of contingent assets and liabilities. These estimates are subject to known and unknown risks, uncertainties and other factors that could materially impact the amounts reported and disclosed in the consolidated statement of net assets in liquidation.
The SEC issued Financial Reporting Release No. 60, Cautionary Advice Regarding Disclosure About Critical Accounting Policies, which recommends that companies provide additional disclosure and analysis of those accounting policies considered most critical.
The Company believes the following to be the most critical judgment area in the application of its accounting policies:
· Future Cash Inflows and Future Outflows: As of October 1, 2014, the Company has adopted the liquidation basis of accounting on a prospective basis which requires the estimation of and accrual of all projected future cash inflows and future outflows associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated statements of net assets in liquidation and the related notes. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows.
The above listing is not intended to be a comprehensive list of all the Companys accounting policies. Please refer to the Companys annual Consolidated Financial Statements (in Liquidation) and notes thereto which contain the Companys significant accounting policies and other disclosures required by accounting principles generally accepted in the United States of America.
Basis of Presentation
In this Annual Report on Form 10-K, references to the Company, Comdisco Holding, we, us and our mean Comdisco Holding Company, Inc., its consolidated subsidiaries, including Comdisco, Inc., Comdisco Ventures Fund A, LLC (formerly Comdisco Ventures, Inc.), and its predecessors, except in each case where the context indicates otherwise. References to Comdisco, Inc. mean Comdisco, Inc. and its subsidiaries, prior to the Companys emergence from bankruptcy on August 12, 2002, except where the context indicates otherwise.
Recent Developments
Bankruptcy Proceeding
Status Hearings: The Company continues to appear before the Bankruptcy court from time to time to clarify and administer matters related to the Plan and the wind down of the operations of the Company.
Litigation Trust Ongoing Litigation
The Plan and the litigation trust agreement provided that, under certain circumstances, subrogation rights that the Company may have against the SIP Participants and their respective promissory notes be placed in a trust for the benefit of the C-4 creditors (the Trust Assets). Under the Plan, the Litigation Trust is solely responsible for collection of amounts due on the promissory notes of the SIP Participants who did not accept the SIP Relief (as defined in the Plan). The Company has a limited indemnification obligation to the litigation trustee under the litigation trust agreement.
SIP Litigation: On February 4, 2005, the Litigation Trust commenced lawsuits both in the United States District Court for the Northern District of Illinois (the Federal SIP Lawsuits) and in the Circuit Court of Cook County Illinois (the State SIP Lawsuits) to collect on the remaining SIP Participants promissory notes.
Federal SIP Lawsuits: The Litigation Trust filed and a federal district court judge entered summary judgments (and amended judgments) against all but one of the SIP Participants who were defendants in the federal cases (the Federal SIP Defendants) on their respective SIP promissory notes, and the Litigation Trust commenced collection actions against them. Additionally, the federal district court judge entered orders directing that certain CDRs and related proceeds held by the estate of Comdisco, Inc. and Computershare (f/k/a BNY Mellon) (holder of CDRs) on behalf of those Federal SIP Defendants be turned over to the Litigation Trust. Pursuant to such orders, the Company turned over CDRs and related proceeds and will continue to do so if additional orders are entered.
Following a series of motions, hearings and the completion of discovery, at a hearing on July 8, 2013, Judge Robert Gettleman set a trial date for September 23, 2013. The trials actual start date was September 24, 2013 and the witness testimony and evidentiary phase was substantially completed on October 10, 2013. On March 27, 2014 the post-trial briefing was completed by the parties. The judge heard oral arguments on April 16, 2014 and took the matter under advisement. On October 21, 2014, the judge orally ruled and entered judgment in favor of the Federal SIP Defendants. The basis of the judges ruling and judgment was his finding that both the bank and the Company committed an arranging violation under the applicable margin lending regulations. Therefore, the judge ruled that the promissory notes were void and unenforceable. On October 29, 2014, the litigation trustee filed an appeal of the judgment to the United States Court of Appeals for the Seventh Circuit. On November 20, 2014, the Federal SIP Defendants filed a Notice of Appeal of the October 21, 2014 judgment and of an order entered on August 12, 2013. See update in Litigation Trust Reports and Settlement Update below.
State SIP Lawsuits: The Litigation Trust filed summary judgments against all of the SIP Participants who are defendants in the state cases (the State SIP Defendants, and, together with the Federal SIP Defendants, the SIP Defendants). Three of the State SIP Defendants filed Cross Motions for Summary Judgment. A hearing in the Circuit Court of Cook County on all of the summary judgment motions in the state cases was held on May 12, 2010, and the judge granted the summary judgments in favor of the Litigation Trust and denied the various motions for summary judgments filed by the State SIP Defendants.
After a series of hearings, motions and counter-motions, amended pleadings and individual bankruptcies and settlements, the remaining State SIP Defendants and the litigation trustee entered into an agreed Stipulation And Order (the Stipulation) which, among other things, stays the trials in the state cases pending the resolution and any appeal of the trial in the federal cases.
Litigation Trust Reports and Settlement Update: By early 2005, sixty-nine SIP Participants promissory notes were transferred to the Litigation Trust. As reported in various Status Reports of Comdisco Litigation Trustee, of the sixty-nine SIP Participants: forty-one have settled or otherwise resolved their obligation; twelve have filed personal bankruptcy; and, sixteen notes remain outstanding (five in the federal court and eleven in the state court).
On October 1, 2015, the litigation trustee and the Company entered into a Global Settlement Agreement (the GSA) with the remaining SIP Defendants. Such settlement under the GSA does not have a material impact on the consolidated financial statements. On October 6, 2015, the litigation trustee filed with the United States Bankruptcy Court for the Northern District of Illinois Eastern Division a motion (the Motion) seeking the entry of an order to (i) approve a proposed settlement with the remaining federal and state defendants who had executed promissory notes in connection with Comdisco, Inc.s Shared Investment Plan, (ii) approve the filing of the final report of the litigation trustee and (iii) upon the wind down of the Comdisco Litigation Trust and final disbursement of its net
proceeds to the beneficiaries, terminate the Comdisco Litigation Trust and discharge the litigation trustee and the Comdisco Litigation Trust Advisory Board. On November 23, 2015, a hearing was held in the Bankruptcy court and the judge granted an order approving the Motion and set a hearing for April 1, 2016.
For more details regarding the Litigation Trust and related proceedings, please refer to the Status Reports of Comdisco Litigation Trustee filed quarterly in the Bankruptcy court. Any proceeds collected by the Litigation Trust, net of expenses, will be considered Trust Assets and distributed in accordance with the Plan and the litigation trust agreement.
Records Destruction
On June 26, 2008, the Company obtained an order from the Bankruptcy court authorizing it to destroy or transfer certain of its stored paper and electronic records attributed to periods prior to January 1, 1997. As of the date of this filing, the Company destroyed substantially all of those records. Pursuant to the GSA approved by the Bankruptcy court on November 23, 2015, which became final on December 8, 2015, the Company is authorized to destroy corporate records created prior to January 1, 2008. After its review of their import in the bankruptcy process, the Company will commence such destruction of appropriate records.
Subsidiary Changes
The Companys Canadian subsidiary was liquidated during the fiscal year ended September 30, 2014.
Results of Operations
Due to the adoption of the liquidation basis of accounting as of October 1, 2014, the comparability of results of operations of current year periods to prior year periods is limited. Under the liquidation basis of accounting, the Company is required to present a statement of net assets in liquidation (which replaces the balance sheet) and a statement of changes in net assets in liquidation (which replaces the income statement). To the extent there are any changes in the Companys October 1, 2014 initial estimates, there will be changes reflected in the Statement of Changes in Net Assets in Liquidation. As cash is received or paid, consistent with the Companys initial estimates, there will be no change to the Net Assets in Liquidation which is the amount expected to be available for eventual distribution to the common stockholders. However, any cash distribution to the common stockholders during a fiscal year would be shown as a change in Net Assets in Liquidation during such fiscal year.
Changes in Net Assets in Liquidation (Liquidation Basis) for the year ended September 30, 2015
|
|
Year ended
|
|
Explanation of |
| |
|
|
|
|
|
| |
Net assets in liquidation, beginning of period |
$ |
28,158 |
|
|
| |
Changes in net assets in liquidation |
|
|
|
|
| |
Change in other assets |
|
102 |
|
|
| |
Change in Contingent Distribution Rights Liability |
|
175 |
|
(A) |
| |
Change in Supplemental CDR Liability due to Anticipated Litigation Trust Distribution |
|
(370) |
|
(B) |
| |
Change in accrued liabilities |
|
(193) |
|
(C) |
| |
Change in accrued estimated disposal costs of liquidation |
|
(420) |
|
(D) |
| |
Change in equity investments |
|
40 |
|
|
| |
Liquidating distribution to Common Stockholders |
|
(9,450) |
|
(E) |
| |
Net (decrease) in net assets in liquidation |
|
(10,116) |
|
|
| |
Net assets in liquidation, end of period |
$ |
18,042 |
|
|
| |
(A) Reduction to the CDR liability in the twelve months ended September 30, 2015 is a result of higher accrued estimated record storage and disposal costs in the liquidation and higher accrued liabilities for travel and legal fees.
(B) Increase to the Supplemental CDR Liability due to Anticipated Litigation Trust Distribution is based on anticipated net distributions by the litigation trustee as reported in its supplement to the final report.
(C) Increase in accrued liabilities for estimated future travel and legal fees.
(D) Increase in the accrued estimated record storage and disposal costs in the liquidation is a result of the projected additional length of time to store and then ultimately dispose of the paper records and electronic records.
(E) The Company paid a liquidating distribution to Common Stockholders on March 12, 2015 for approximately $9,450,000.
Income Taxes
See Note 5 Income Taxes of Notes to Consolidated Financial Statements (in Liquidation) for details about the Companys income tax provision (benefit).
The Companys U.S. federal taxes are impacted from its wind down activities, including the liquidation and repatriation of foreign assets. During the fiscal year ended September 30, 2015, the Company paid $211,000 as a result of alternative minimum tax (AMT) due on the taxable income generated from the gain on sale of equity investments. This amount was accrued upon the adoption of the liquidation basis of accounting as of October 1, 2014. The Company also paid $15,000 in payments to the IRS and paid $75,000 in payments to the Illinois Department of Revenue related to the fiscal year ended September 30, 2014. During the fiscal year ended September 30, 2014, the Company recorded $185,000 U.S. tax expense and paid $18,000 estimated payments to the IRS and paid $ 77,000 in estimated payments to the Illinois Department of Revenue.
Net Assets in Liquidation
As of September 30, 2015, net assets in liquidation were approximately $18,042,000, or $4.48 per common share.
Net Earnings (Going Concern)
Net earnings were approximately $855,000, or $0.21 per share-basic and diluted, for the fiscal year ended September 30, 2014.
Off-Balance Sheet Arrangements
The Company does not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon the Companys financial condition or results of operations.
Liquidity and Capital Resources
The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated financial statements in liquidation and the related notes. Actual results could differ from these estimates and may affect net assets in liquidation and actual cash flows.
The Companys liquidity generally depends on cash on hand. The Companys cash flow from operating activities is dependent on a number of variables, including, but not limited to, operating costs and expenses to affect the wind down, income tax obligations, and the ability of the Company to dispose or otherwise convert to cash its
remaining assets. All funds generated from the collection of remaining assets are required by the Plan to be used to satisfy liabilities of the Company and, to the extent funds are available, to pay dividends on the Companys common stock and to make distributions with respect to the CDRs in the manner and priorities set forth in the Plan. Because of the composition and nature of its remaining assets, the Company expects to generate funds from the sale or collection of its remaining assets at a decreasing rate over time.
At September 30, 2015, the Company had unrestricted cash and cash equivalents of approximately $30,126,000, which represents a decrease of approximately $1,866,000 compared to September 30, 2014. Net cash provided by operating activities for the twelve months ended September 30, 2015 was approximately $7,572,000. Net cash used in financing activities for the twelve months ended September 30, 2015 was approximately $9,438,000 for the payment of dividends.
During the twelve months ended September 30, 2015, approximately $15,532,000 in proceeds were generated from the sales of Equity Investments and approximately $293,000 were received from bad debt recoveries, interest income and other inflows. The Companys cash expenditures were primarily operating expenses of approximately $2,402,000 (principally professional services and employee compensation). The Company paid $226,000 to the Internal Revenue Service and paid $75,000 to the Illinois Department of Revenue. The Company made payments to CDR holders in the amount of $5,550,000.
Dividends
The Company intends to treat the dividend distributions for federal income tax purposes as part of a series of liquidating distributions in complete liquidation of the Company. Aggregate total dividend distributions on the Companys Common Stock to the date of this report were as follows (in thousands):
|
|
Aggregate |
| |
May 2003 |
|
$307,773 |
| |
June 2003 |
|
60,019 |
| |
September 2003 |
|
199,782 |
| |
December 2003 |
|
50,365 |
| |
May 2004 |
|
48,267 |
| |
March 2005 |
|
52,447 |
| |
January 2006 |
|
20,172 |
| |
December 2006 |
|
25,748 |
| |
April 2011 |
|
12,600 |
| |
March 2015 |
|
9,450 |
| |
|
|
$786,623 |
| |
Contingent Distribution Rights
Although the CDRs trade over-the-counter, for financial reporting purposes, the Company records CDRs as a liability under both the going concern and liquidation bases of accounting and as an operating expense under the going concern basis of accounting.
The Plan entitled holders of CDRs to previously share at increasing percentages in the proceeds realized from the Companys assets based upon the present value of distributions to certain C-4 creditors in the bankruptcy estate of Comdisco, Inc. However, as of September 30, 2015, the sharing percentage is 37%, which is the maximum sharing percent. As of the date of this filing, there were 1,840 holders of record of the Companys CDRs and there were 148,448,188 outstanding CDRs. In furtherance of the settlement in the GSA, the Company will repurchase approximately 3,000,000 CDRs from the litigation trustee at a discounted purchase price of approximately $0.06898 per CDR. The CDRs were acquired by the litigation trustee in the SIP Litigation. Shortly after the repurchase, the Company will cancel those CDRs. The number of holders of CDRs may, or may not, be affected by such repurchase and cancellation.
The Company maintains sufficient cash reserves for operations and any increase in the estimated CDR liability relating to increases in the Companys net assets in liquidation and any future estimated net distributions from the Litigation Trust to the C-4 creditors. The outcome and the timing of the actual net distributions from the Litigation Trust will impact both the timing and the amount of future liquidating dividends and CDR payments.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. During the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
Aggregate total distributions to the date of this report with respect to the CDRs were as follows (in thousands):
|
|
Aggregate |
|
Per CDR |
| |
May 2003 |
|
$2,730 |
|
$.01793 |
| |
June 2003 |
|
2,468 |
|
.01621 |
| |
September 2003 |
|
13,370 |
|
.08780 |
| |
December 2003 |
|
7,827 |
|
.05140 |
| |
March 2004 |
|
2,848 |
|
.01870 |
| |
May 2004 |
|
11,892 |
|
.07810 |
| |
December 2004 |
|
14,953 |
|
.09820 |
| |
March 2005 |
|
22,171 |
|
.14560 |
| |
January 2006 |
|
5,558 |
|
.03650 |
| |
March 2006 |
|
3,761 |
|
.02470 |
| |
December 2006 |
|
6,852 |
|
.04500 |
| |
September 2007 |
|
22,841 |
|
.15000 |
| |
September 2008 |
|
893 |
|
.00602 |
| |
September 2008 reallocation |
|
0 |
|
.01984 |
| |
April 2011 |
|
7,400 |
|
.04985 |
| |
March 2015 |
|
5,550 |
|
.03739 |
| |
Total CDR payments |
|
$131,114 |
|
$.88324 |
| |
See the risk factors discussed in Item 1A, Risk Factors, particularly the risks entitled Uncertainties Inherent in the CDR Liability Calculation and Impact of Recoveries by Litigation Trust on the Companys Obligation to Make Payments in Respect of Contingent Distribution Rights.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX TO FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders
Comdisco Holding Company, Inc.:
We have audited the accompanying consolidated balance sheet of Comdisco Holding Company, Inc. and subsidiaries (the Company) as of September 30, 2014, and the related consolidated statements of comprehensive income, stockholders equity, and cash flows for the year ended September 30, 2014. In addition, we have audited the accompanying consolidated statement of net assets in liquidation as of September 30, 2015, and the related statements of changes in net assets in liquidation and cash flows for the year ended September 30, 2015. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
As described in note 2 to the financial statements, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. As a result, the Company has changed its basis of accounting for periods subsequent to September 30, 2014 from the going-concern basis to a liquidation basis.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Comdisco Holding Company, Inc. and subsidiaries as of September 30, 2014, the results of its operations and cash flows for the year then ended, its net assets in liquidation as of September 30, 2015, and the changes in its net assets in liquidation and cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles applied on the bases described in the preceding paragraph.
/s/ KPMG LLP
Chicago, Illinois
December 9, 2015
Comdisco Holding Company, Inc.
Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis)
(in thousands)
|
|
September 30, 2015 (Liquidation Basis) |
|
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
30,126 |
|
Cash legally restricted |
|
4,000 |
|
Receivable from securities sold |
|
1,911 |
|
Assets held in trust for deferred compensation plan |
|
500 |
|
Other assets |
|
183 |
|
TOTAL ASSETS |
$ |
36,720 |
|
|
|
|
|
LIABILITIES |
|
|
|
Contingent Distribution Rights Liability |
$ |
10,813 |
|
Supplemental CDR Liability due to Anticipated Litigation Trust Distribution |
|
370 |
|
Accrued compensation |
|
4,077 |
|
Accrued professional fees |
|
1,374 |
|
Other accrued costs |
|
956 |
|
Accrued liability for deferred compensation plan |
|
500 |
|
Accrued estimated disposal costs of liquidation |
|
588 |
|
TOTAL LIABILITIES |
|
18,678 |
|
NET ASSETS IN LIQUIDATION |
$ |
18,042 |
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Changes in Net Assets in Liquidation Year ended September 30, 2015 (Liquidation Basis)
(in thousands)
|
|
Year Ended |
| ||
|
|
|
| ||
Net assets in liquidation, beginning of period |
|
|
$ |
28,158 |
|
Changes in net assets in liquidation |
|
|
| ||
Change in other assets |
|
102 |
| ||
Change in Contingent Distribution Rights Liability |
|
175 |
| ||
Change in Supplemental CDR Liability due to Anticipated Litigation Trust Distribution |
|
(370) |
| ||
Change in accrued liabilities |
|
(193) |
| ||
Change in accrued estimated disposal costs of liquidation |
|
(420) |
| ||
Change in equity investments |
|
40 |
| ||
Liquidating distribution to Common Stockholders |
|
(9,450) |
| ||
Net increase (decrease) in net assets in liquidation |
|
(10,116) |
| ||
Net assets in liquidation, end of period |
|
|
$ |
18,042 |
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Cash Flows Year ended September 30, 2015 (Liquidation Basis)
(in thousands)
|
|
Year Ended |
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
Equity investment proceeds net of sharing |
$ |
15,532 |
|
Bad debt recoveries, interest and other revenue |
|
293 |
|
Selling, general and administrative expenses |
|
(2,402) |
|
Contingent Distribution Rights payments |
|
(5,550) |
|
Income tax payments |
|
(301) |
|
|
|
|
|
Net cash provided by operating activities |
|
7,572 |
|
|
|
|
|
Cash flows from financing: |
|
|
|
Dividends paid on Common Stock |
|
(9,450) |
|
Receipt of uncashed dividends |
|
12 |
|
|
|
|
|
Net cash used in financing |
|
(9,438) |
|
|
|
|
|
Net decrease in cash and cash equivalents |
|
(1,866) |
|
Cash and cash equivalents at beginning of period |
|
31,992 |
|
|
|
|
|
Cash and cash equivalents at end of period |
$ |
30,126 |
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
September 30, 2014 (Going Concern Basis)
(in thousands, except number of shares and share data)
|
|
September 30, 2014 |
|
ASSETS |
|
|
|
Cash and cash equivalents |
$ |
31,992 |
|
Cash legally restricted |
|
4,000 |
|
Equity investments |
|
697 |
|
Assets held in trust for deferred compensation plan |
|
501 |
|
Other assets |
|
248 |
|
Total assets |
$ |
37,438 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS EQUITY |
|
|
|
Accounts payable |
$ |
103 |
|
Income taxes payable |
|
90 |
|
Other liabilities: |
|
|
|
Accrued compensation |
|
1,429 |
|
Contingent Distribution Rights |
|
10,437 |
|
Other liabilities |
|
168 |
|
Total other liabilities |
|
12,034 |
|
Total liabilities |
|
12,227 |
|
Stockholders equity |
|
|
|
Common Stock $.01 par value. Authorized |
|
70 |
|
Additional paid-in capital |
|
28,414 |
|
Accumulated other comprehensive income (loss) |
|
(3) |
|
Accumulated deficit |
|
(3,270) |
|
|
|
|
|
Total stockholders equity |
|
25,211 |
|
|
$ |
37,438 |
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Comprehensive Income (Going Concern Basis)
(in thousands, except per share data)
|
|
Year ended |
|
|
|
2014 |
|
Revenue |
|
|
|
Gain on sale of equity investments |
$ |
1,590 |
|
Miscellaneous income |
|
100 |
|
Interest income |
|
65 |
|
Total revenue |
|
1,755 |
|
Costs and expenses |
|
|
|
Selling, general and administrative |
|
2,480 |
|
Contingent Distribution Rights |
|
(869) |
|
Foreign exchange loss |
|
312 |
|
Bad debt recoveries |
|
(473) |
|
Total costs and expenses |
|
1,450 |
|
Net earnings before income taxes |
|
305 |
|
Income tax (benefit) |
|
(550) |
|
Net earnings |
|
855 |
|
|
|
|
|
Other comprehensive income (loss), net of tax: |
|
|
|
Unrealized gains (losses) on securities: |
|
|
|
Unrealized holding gains arising during the period |
|
1,400 |
|
Reclassification adjustment for gains included in earnings |
|
(1,406) |
|
|
|
|
|
Other comprehensive (loss) |
|
(6) |
|
Comprehensive income |
$ |
849 |
|
Basic and diluted earnings per common share |
$ |
0.21 |
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Stockholders Equity (Going Concern Basis)
(in thousands)
|
|
Common |
|
Additional |
|
Accumulated |
|
Retained |
|
Total |
|
Balance at September 30, 2013 |
|
$ 70 |
|
$ 28,414 |
|
$ 3 |
|
$ (4,125) |
|
$ 24,362 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings |
|
|
|
|
|
|
|
855 |
|
855 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) |
|
|
|
|
|
(6) |
|
|
|
(6) |
|
Total comprehensive income |
|
|
|
|
|
|
|
|
|
849 |
|
Balance at September 30, 2014 |
|
$ 70 |
|
$ 28,414 |
|
$ (3) |
|
$ (3,270) |
|
$ 25,211 |
|
See accompanying notes to consolidated financial statements.
Comdisco Holding Company, Inc.
Consolidated Statement of Cash Flows (Going Concern Basis)
(in thousands)
|
|
Year Ended | |
|
|
|
|
Cash flows from operating activities: |
|
|
|
Equity investment proceeds net of management sharing |
|
$ 1,590 |
|
Interest, bad debt recoveries and other revenue |
|
628 |
|
Selling, general and administrative expenses |
|
(2,244) |
|
Income tax receipts |
|
733 |
|
Income tax payments |
|
(354) |
|
|
|
|
|
Net cash provided by operating activities |
|
353 |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Redemption of short-term investment |
|
4,003 |
|
|
|
|
|
Net cash provided by investing activities |
|
4,003 |
|
|
|
|
|
Effect of exchange rates on cash and cash equivalents |
|
(35) |
|
|
|
|
|
Net increase in cash and cash equivalents |
|
4,321 |
|
Cash and cash equivalents at beginning of period |
|
27,671 |
|
|
|
|
|
Cash and cash equivalents at end of period |
|
$ 31,992 |
|
See accompanying notes to consolidated financial statements.
COMDISCO HOLDING COMPANY, INC.
Consolidated Statement of Cash Flows (Going Concern Basis)
(in thousands)
|
|
Year Ended | |
Reconciliation of net earnings to net cash provided by operating activities: |
|
|
|
Net earnings |
|
$ 855 |
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
Taxes payable and other tax balances |
|
90 |
|
Change in Canadian income tax receivables |
|
(261) |
|
Contingent Distribution Rights |
|
(869) |
|
Selling, general, and administrative expenses |
|
236 |
|
Receivables |
|
7 |
|
Other, including foreign exchange |
|
295 |
|
Net cash provided by operating activities |
|
$ 353 |
|
See accompanying notes to consolidated financial statements.
COMDISCO HOLDING COMPANY, INC.
Notes To Consolidated Financial Statements (in Liquidation)
September 30, 2015 and 2014
Note 1 - Reorganization
On July 16, 2001, Comdisco, Inc. and 50 of its domestic subsidiaries filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court (consolidated case number 01-24795) (the Filing). Comdisco Holding Company, Inc., as the successor company to Comdisco, Inc., emerged from bankruptcy under a confirmed plan of reorganization (the First Amended Joint Plan of Reorganization (the Plan) that became effective on August 12, 2002 (the Effective Date). For financial reporting purposes only, however, the effective date for implementation of fresh-start reporting was July 31, 2002.
Comdisco Holding Company, Inc. was formed on August 8, 2002 for the purpose of selling, collecting or otherwise reducing to money in an orderly manner the remaining assets of the Company and all of its direct and indirect subsidiaries, including Comdisco, Inc. As more fully described in the Plan, the Companys business purpose is limited to the orderly sale or run-off of all its remaining assets. Pursuant to the Plan and restrictions contained in its Certificate, the Company is specifically prohibited from engaging in any business activities inconsistent with its limited business purpose.
Note 2 - Summary of Significant Accounting Policies
Basis of Presentation
In this Annual Report on Form 10-K, references to the Company, Comdisco Holding, we, us and our mean Comdisco Holding Company, Inc., its consolidated subsidiaries, including Comdisco, Inc., Comdisco Ventures Fund A, LLC (formerly Comdisco Ventures, Inc.), and its predecessors, except in each case where the context indicates otherwise. References to Comdisco, Inc. mean Comdisco, Inc. and its subsidiaries, prior to the Companys emergence from bankruptcy on August 12, 2002, except where the context indicates otherwise.
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
Under the Plan, the Company was charged with, and has been, liquidating its assets. While there have been no changes either to the Plan, or the Companys obligations under it, the Company adopted ASU 2013-07, Liquidation Basis of Accounting as of October 1, 2014 and accordingly, determined that liquidation was imminent. Therefore, effective October 1, 2014, the Company applied the liquidation basis of accounting on a prospective basis in conformity with accounting principles generally accepted in the United States of America. The liquidation basis of accounting requires the Company to estimate net cash flows from operations and to accrue all costs associated with implementing and completing the plan of liquidation and requires management to make estimates that affect the amounts reported in the consolidated financial statements and the related notes. To the extent there are any changes in the Companys October 1, 2014 initial estimates, there will be changes reflected in the Statement of Changes in Net Assets in Liquidation. As cash is received or paid, consistent with the Companys initial estimates, there will be no change to the Net Assets in Liquidation which is the amount expected to be available for eventual distribution to the common stockholders. However, any cash distribution to the common stockholders during a fiscal quarter would be shown as a change in Net Assets in Liquidation during such fiscal quarter.
The Company has material restrictions on its ability, and does not expect, to make significant investments in new or additional assets. The Company continually evaluates opportunities for the orderly sale and collection of its remaining assets.
The Company is currently projecting December 31, 2016 as the end date for its wind down of operations. It is anticipated that by this date the Company will have, among other things: finalized the settlement of the SIP, received the projected escrow funds from the Ebates transaction, reduced all of its assets to cash, resolved its final federal and state tax obligations, determined its final CDR liability (which will include the impact of the actual distribution by the Litigation Trust to the C-4 creditors), made distributions of all available cash to holders of its common stock and CDRs in the manner and priorities set forth in the Plan, cancelled such common stock and CDRs and completed all regulatory filings. Accordingly, it has made appropriate expense accruals for such time period in its calculation of Net Assets in Liquidation. However, the projected remaining wind down period could be either shortened or lengthened by other intervening matters not currently known to management. The costs in liquidation will generally be incurred ratably over the remaining anticipated time frame. If the timing of any of these steps changes, the future accrued costs may change. Results could differ from these estimates and may affect the net assets in liquidation and actual cash flows.
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Companys consolidated financial statements upon adoption.
Going Concern Basis of Accounting periods prior to October 1, 2014
The consolidated financial statements for the period ended September 30, 2014, were prepared on the going concern basis of accounting, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.
Prior period financial results have not been restated under the liquidation basis of accounting.
Nature of Operations
Comdisco Holding Company, Inc. was formed on August 8, 2002 for the purpose of selling, collecting or otherwise reducing to money in an orderly manner the remaining assets of the Company and all of its direct and indirect subsidiaries, including Comdisco, Inc. The Company reports its net assets in liquidation in one reporting segment. All of the companys assets and revenue are in North America.
Use of Estimates
The preparation of the consolidated financial statements (in liquidation) in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and
assumptions that affect the reported amounts of net assets in liquidation through completing the plan of liquidation. Actual results could differ from those estimates.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions have been eliminated.
Translation Adjustments
Revenues, costs and expenses were translated at average rates of exchange prevailing during the period. Due to the substantially complete liquidation of its foreign subsidiaries, translation adjustments were included in revenue if the adjustments were a gain and in cost and expenses if the adjustments were a loss in the consolidated statement of comprehensive income as of September 30, 2014. As of September 30, 2014, the Company no longer has assets or liabilities denominated in any foreign currency.
Income Taxes
The Company uses the asset and liability method to account for income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to temporary differences between the financial settlement carrying amount of existing assets and liabilities and their respective tax basis. The Company continues to provide a valuation allowance for the remaining value of the deferred tax assets due to uncertainties regarding future earnings.
Cash and Cash Equivalents
Cash and cash equivalents are comprised of highly liquid debt instruments with original maturities of 90 days or less.
Equity Investments
Marketable equity securities: Under the going concern basis of accounting, the Company classified all marketable equity securities as available-for-sale. These marketable equity securities were carried at fair value, based on quoted market prices, with unrealized gains and losses excluded from earnings and reported in accumulated other comprehensive income (loss).
Equity investments in private companies: Under the going concern basis of accounting, the Companys policy for assessing the carrying value of private company investments was, in consultation with Windspeed Acquisition Fund GP, LLC (Windspeed), to regularly review and estimate the fair value of such investments. The Company also identified and recorded impairment losses on equity investments when market and customer specific events and circumstances indicated the carrying value might be impaired. All write-downs were considered permanent impairments for financial reporting purposes. There were no write-downs of equity securities in the fiscal years ended September 30, 2015 and 2014. All write-downs are considered permanent impairments for financial reporting purposes.
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
Under liquidation basis of accounting, all equity investments are valued at the net realizable value. As of the date of this filing, the Company does not hold any equity investments.
Contingent Distribution Rights
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. During
the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
Going Concern Basis of Accounting periods prior to October 1, 2014
The Company estimated the CDR liability based on the net equity of the Company after taking into consideration future operating costs and expenses, estimated future interest income and the potential net distributions from the Litigation Trust for which estimates were not determinable. Changes in the fair value of investments or recoveries greater than book value were not reflected in the CDR liability until the sale was realized.
See the risk factors discussed in Item 1A, Risk Factors, particularly the risk entitled Uncertainties Inherent in the CDR Liability Calculation.
Net Assets in Liquidation Per Common Share
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
Net assets in liquidation per common share are computed by dividing the net assets in liquidation to common stockholders by the weighted average number of common shares outstanding for the period.
Basic and Diluted Earnings Per Common Share
Going Concern Basis of Accounting periods prior to October 1, 2014
Earnings per common share basic and diluted were computed by dividing the net earnings (loss) to common stockholders by the weighted average number of common shares outstanding for the period.
Note 3. Cumulative Effect of Accounting Change/Net Assets in Liquidation
The following is a reconciliation of Stockholders Equity under the going concern basis of accounting to net assets in liquidation under the liquidation basis of accounting as of October 1, 2014 (in thousands):
Stockholders Equity as of September 30, 2014 |
$ |
25,211 |
|
Increase due to estimated net realizable value of equity investments |
|
19,349 |
|
Increase due to estimated net realizable value of other assets |
|
157 |
|
Increase for CDR liability |
|
(6,101) |
|
Liability for accrued compensation |
|
(4,086) |
|
Liability for accrued professional fees |
|
(4,623) |
|
Liability for accrued other costs |
|
(1,349) |
|
Income taxes payable |
|
(232) |
|
Liability for estimated disposal costs of liquidation |
|
(168) |
|
Adjustment to reflect the change to the liquidation basis of accounting |
|
2,947 |
|
Estimated value of net assets in liquidation as of October 1, 2014 |
$ |
28,158 |
|
In applying liquidation basis of accounting, the Company recognized a net increase of $2,947,000 in its estimated value of net assets in liquidation.
The net assets in liquidation as of September 30, 2015 have been reduced to $18,042,000 primarily due to a liquidating distribution during the twelve months ended September 30, 2015. Therefore, as of September 30, 2015, the projected future liquidating distribution would be approximately $4.48 per common share. This estimate of the liquidating distribution includes projections of costs and expenses to be incurred during the time period estimated to
complete the plan of liquidation. There is inherent uncertainty with these projections, and they could change materially based on the timing of the completion of all the steps necessary for the liquidation.
Note 4 Recently Issued Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (the FASB) or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on the Companys consolidated financial statements upon adoption.
Note 5 - Income Taxes
During the fiscal year ended September 30, 2015, the Company paid $211,000 in estimated payments to the Internal Revenue Service (IRS) as a result of alternative minimum tax (AMT) due on the taxable income generated from the gain on sale of equity investments. This amount was accrued upon the adoption of the liquidation basis of accounting as of October 1, 2014. There was no current Illinois tax expense due as a result of utilizing net operating loss (NOL) carryforwards to offset the taxable income.
During the fiscal year ended September 30, 2014, the Company recorded a net income tax benefit of $550,000 which was a result of U.S. tax expense of $185,000 and an income tax benefit of $735,000 related to its Canadian subsidiary.
During the fiscal year ended September 30, 2015, the Company also paid $15,000 in payments to the IRS and paid $75,000 in payments to the Illinois Department of Revenue related to the fiscal year ended September 30, 2014. During the fiscal year ended September 30, 2014, the Company paid $18,000 estimated payments to the IRS and paid $77,000 in estimated payments to the Illinois Department of Revenue. During the fiscal year ended September 30, 2014, the Companys Canadian subsidiary received tax refunds totaling approximately $733,000 from the provincial government of Ontario, Canada, paid a withholding tax to the Canada Revenue Agency (CRA) on the liquidating distribution in the amount of approximately $257,000 and paid approximately $2,000 in income tax to the provincial government of Alberta, Canada.
Deferred tax assets at September 30, 2015 and 2014 were as follows (in thousands):
|
|
2015 |
|
2014 |
| |||
Deferred tax assets: |
|
|
|
|
| |||
Foreign loss carryforwards |
|
$ 0 |
|
$ 0 |
| |||
U.S. and state NOL carryforward |
|
108,686 |
|
112,902 |
| |||
AMT credit carryforwards |
|
75,824 |
|
75,622 |
| |||
|
|
|
|
|
| |||
Gross deferred tax assets |
|
184,510 |
|
188,524 |
| |||
Less: valuation allowance |
|
(184,510) |
|
(188,524) |
| |||
|
|
|
|
|
| |||
Net deferred tax assets |
|
$ 0 |
|
$ 0 |
| |||
The Company provides a valuation allowance for the remaining value of the deferred tax assets due to it being more likely than not that they will not be utilized in the future.
As of September 30, 2015, the company has federal NOL carryforwards of approximately $102,875,000 expiring between years 2023 and 2033 and domestic state NOL carryforwards of approximately $5,811,000 expiring between years 2016 and 2025.
At September 30, 2015, the Company has available for U.S. federal income tax purposes the following carryforwards (in thousands):
Year scheduled |
|
Net operating |
|
|
|
|
|
2023 |
|
$ 227,448 |
|
2024 |
|
37,101 |
|
2025 |
|
34,055 |
|
2031 |
|
657 |
|
2032 |
|
1,572 |
|
2033 |
|
1,742 |
|
|
|
$ 302,575 |
|
For U.S. federal income tax purposes, the Company has $75,824,000 of AMT credit carryforwards available to reduce regular taxes in future years. AMT credit carryforwards do not have an expiration date. The Company does not believe that it is more likely than not that the Company will generate sufficient future taxable income to realize the benefit of the AMT credit carryforwards. As such, the Company has recognized a valuation allowance of $75,824,000 to offset this deferred tax asset.
The Company files income tax returns in the U.S. federal jurisdiction and the State of Illinois.
As of the date of this filing, the only federal tax years open to exam are fiscal years ended September 30, 2012 through September 30, 2014.
The Companys Canadian subsidiary, CCL, was liquidated during the fiscal year ended September 30, 2014 and recorded approximately $735,000 of net income tax benefit due to the reversal of income tax liabilities. CCL filed its final Canadian tax return and received the final Notice of Assessment dated July 17, 2014 showing a zero balance.
Uncertain Tax Positions:
As of September 30, 2015 and September 30, 2014, the Company no longer has any uncertain tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands) (excluding interest and penalties):
|
|
September 30, |
|
|
|
2014 |
|
Beginning balance |
|
$ 1,371 |
|
Decreases related to settlements of certain tax audits |
|
0 |
|
Increases related to settlements of certain tax audits |
|
0 |
|
Decreases related to prior year tax positions |
|
(1,371) |
|
Increases related to prior year tax positions |
|
0 |
|
Other |
|
0 |
|
Ending balance |
|
$0 |
|
Note 6 Equity Investments
The Companys estimate of the fair value of its private company investments was made in consultation with Windspeed, a professional management group, who manages the Companys equity investments on an ongoing basis. Windspeed shares in the net receipts from the sale of the Companys equity investments at a set percentage in certain designated portions of the portfolio of companies. The Windspeed February 2004 management agreement was extended on April 5, 2011 (with an effective date of February 21, 2011) until February 20, 2013 (the Initial Extension). The Windspeed management agreement was subsequently extended effective February 21, 2013 through February 20, 2015 and extended again effective February 12, 2015 through February 12, 2017 (the Subsequent Extensions). Prior to the Initial Extension, Windspeed received fixed and declining management fees. Under the terms of the Initial and Subsequent Extensions, Windspeed is not, and will not, be paid any ongoing
management fees. In lieu of such management fee payment, 100% of any proceeds from certain designated companies in the portfolio will go to Windspeed. Realized gains on the sale of equity investments are presented on a gross basis. Any management sharing amounts with Windspeed are included in accrued professional fees. The Company has received approximately $89,239,000 in proceeds (prior to management fees and sharing) since the inception of the management agreement with Windspeed. Windspeed has received a combined $15,444,000 in management fees and sharing through September 30, 2015.
Marketable equity investments:
During April 2015, the Company discovered that it had received 1,499 shares in NxStage Medical, Inc., a publicly traded company. The shares were received in 1999 as part of a product spinoff from a former customer who subsequently went out of business. During the twelve months September 30, 2015, these shares were sold for approximately $22,600 before Windspeed management sharing of approximately $3,400. As of September 30, 2015, the Company does not own any shares in publicly traded companies.
In addition, the Company held a limited number of securities in trust for a deferred compensation plan which are not available for distribution under the Plan.
Equity investments in private companies:
Under the going concern basis of accounting, the Companys policy for assessing the carrying value of private company investments was, in consultation with Windspeed, to regularly review and estimate the fair value of such investments. The Company also identified and recorded impairment losses on equity investments when market and customer specific events and circumstances indicated the carrying value might be impaired. All write-downs were considered permanent impairments for financial reporting purposes. There were no write-downs of equity securities in the fiscal years ended September 30, 2015 and 2014.
As of September 30, 2015, the Company had no investments in private companies. The Company sold its remaining preferred stock holdings in private companies during the twelve months ended September 30, 2015 for $433,000 and received net proceeds of $368,000 after Windspeed management sharing of $65,000. See Note 10 of these Notes to Consolidated Financial Statement (In Liquidation) for the fair value disclosure.
Note 7. Other Assets
During the quarter ended September 30, 2014, it was announced that Ebates, Inc. (Ebates) would be acquired by Rakuten, Inc., a Japanese company (Rakuten). The Plan of Merger was signed on September 24, 2014, pending various conditions, including regulatory approval. On October 9, 2014, Rakuten completed the acquisition and on October 29, 2014, the Company received the initial distribution. The gross proceeds distributed were approximately $17,720,000 of which the Company received approximately $15,144,000 in net proceeds and Windspeed received approximately $2,576,000 in management sharing. The Company holds a $1,911,000 receivable from securities sold before Windspeed management sharing as of September 30, 2015 related to the Ebates transaction. Such proceeds are held in escrow under the terms of the merger documents until January 2016. The actual amount to be distributed from the escrow may be impacted by provisions of, and claims asserted against, the escrow.
The Company holds legally restricted cash in the amount of $4,000,000 as of September 30, 2015 and September 30, 2014 which is an indemnification reserve set aside by the Company for any potential indemnified losses in lieu of the litigation trustee purchasing insurance coverage.
Assets held in trust for deferred compensation plan are assets that were held in a Rabbi Trust for the benefit of deferred employee compensation and are not available for distribution under the Plan.
Other assets on the Consolidated Statement of Net Assets in Liquidation include such assets as accounts receivable, tax receivable, estimated recoveries and estimated accrued interest income expected to be received before liquidation.
Note 8. Other Financial Information
The liability for accrued compensation includes payroll and estimated amounts payable under the approved compensation plans. There is a separate liability representing the accrued liability for assets held in trust for the deferred compensation plan that was previously included in the accrued compensation liability as of September 30, 2014.
The liability for accrued professional fees includes projected future costs for outside counsel for the corporate, bankruptcy, liquidation and SEC requirements, outside accounting and audit services, consulting fees, Windspeed management sharing and corporate bankruptcy required work.
The liability for other accrued costs includes: a projected liability pursuant to the Global Settlement Agreement (the GSA); projected future costs for rent, insurance, travel, miscellaneous other corporate expenses; and, an accrued VAT liability for a foreign jurisdiction.
The liability for accrued estimated disposal costs of liquidation includes projected future costs to continue to store and dispose of the Companys paper and electronic records.
Contingent Distribution Rights
Although the CDRs trade over-the-counter, for financial reporting purposes, the Company records CDRs as a liability under both the going concern and liquidation bases of accounting and as an operating expense under the going concern basis of accounting.
The Plan entitled holders of CDRs to previously share at increasing percentages in the proceeds realized from the Companys assets based upon the present value of distributions to certain C-4 creditors in the bankruptcy estate of Comdisco, Inc. However, as of September 30, 2015, the sharing percentage is 37%, which is the maximum sharing percent. As of the date of this filing, there were 1,840 holders of record of the Companys CDRs and there were 148,448,188 outstanding CDRs. In furtherance of the settlement in the GSA, the Company will repurchase approximately 3,000,000 CDRs from the litigation trustee at a discounted purchase price of approximately $0.06898 per CDR. The CDRs were acquired by the litigation trustee in the SIP Litigation. Shortly after the repurchase, the Company will cancel those CDRs. The number of holders of CDRs may, or may not, be affected by such repurchase and cancellation.
As of October 1, 2014, the Company has adopted the liquidation basis of accounting. The CDR liability is an amount that is calculated as Total Assets less Total Liabilities (excluding the CDR liability) times 37%. During the current period, the Company estimated an additional CDR liability in the amount of $370,000 (based on the likely anticipated distribution reported by the litigation trustee of Trust Assets in its supplement to the final report filed with the Bankruptcy court on October 6, 2015) and is reflected on the Consolidated Statement of Net Assets in Liquidation as of September 30, 2015 (Liquidation Basis) under Liabilities at Supplemental CDR Liability Due To Anticipated Litigation Trust Distribution.
The Company made a CDR payment of approximately $5,550,000 during the twelve months ended September 30, 2015.
Note 9 - Common Stock
As of September 30, 2015, the Company had 4,028,951 shares of Common Stock issued and outstanding. In furtherance of the settlement in the GSA, the Company will repurchase 26 shares of common stock from the litigation trustee at a discounted price of approximately $4.33 per share. These shares were acquired by the litigation trustee in the SIP Litigation. Shortly thereafter, the Company will cancel those shares.
Consistent with past practices, the Company intends to treat any future dividend distribution for federal income tax purposes as part of a series of liquidating distributions in complete liquidation of the Company.
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
The Companys Common Stock share amounts for Net Assets in Liquidation per share calculations were as follows (in thousands, except per share data), as of September 30, 2015:
|
|
Year ended |
Average common shares issued |
|
4,200 |
Average common shares retired |
|
(171) |
|
|
4,029 |
Net assets in liquidation |
|
$ 18,042 |
Net assets in liquidation per common share |
|
$ 4.48 |
Going Concern Basis of Accounting periods prior to October 1, 2014
The Companys Common Stock share amounts for basic and diluted earnings per share calculations were as follows (in thousands, except per share data) as of September 30, 2014:
|
|
Year ended |
Average common shares issued |
|
4,200 |
Average common shares retired |
|
(171) |
|
|
4,029 |
Net earnings to common stockholders |
|
$ 855 |
Basic and diluted earnings per common share |
|
$ 0.21 |
Note 10 - Fair Value Measurements
The three levels of inputs used to measure fair value are as follows:
· Level 1 Quoted prices in active markets for identical assets and liabilities.
· Level 2 Quoted prices in active markets for similar assets and liabilities, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
· Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. This includes merger documents, certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.
The Company has included a tabular disclosure for financial assets that are measured at fair value on a recurring basis in the consolidated statement of net assets in liquidation as of the year ending September 30, 2015 and in the consolidated balance sheet as of the year ending September 30, 2014. The Company holds no financial liabilities that are measured at fair value on a recurring basis.
September 30, 2015 | |||||
Level 1 |
Level 2 |
Level 3 |
Total Fair Value | ||
Assets |
|||||
Money market accounts |
$ 29,906,000 |
$ 0 |
$ 0 |
$ 29,906,000 | |
|
|
|
|
|
|
Equity investments (A) |
0 |
0 |
0 |
0 | |
|
Assets held in trust for deferred compensation plan (C) |
500,000 |
0 |
0 |
500,000 |
Total |
$ 30,406,000 |
$ 0 |
$ 0 |
$ 30,406,000 | |
|
|
|
|
|
|
September 30, 2014 | |||||
Level 1 |
Level 2 |
Level 3 |
Total Fair Value | ||
Assets |
|||||
Money market accounts |
$ 31,791,000 |
$ 0 |
$ 0 |
$ 31,791,000 | |
|
|
|
|
|
|
Equity investments (B) |
0 |
19,631,000 |
748,000 |
20,379,000 | |
|
Assets held in trust for deferred compensation plan (C) |
501,000 |
0 |
0 |
501,000 |
Total |
$ 32,292 ,000 |
$ 19,631 ,000 |
$ 748,000 |
$ 52,671,000 | |
|
|
|
|
|
|
(A) As of September 30, 2015, all equity investments have been sold.
(B) As of September 30, 2014, equity investments for Level 2 and 3 were made up of stock in three privately held companies; FMV on a gross basis was $20,379,000 with Windspeed management sharing of $2,965,000 and a net fair value balance of $17,414,000
(C) Assets held in trust for deferred compensation plan were made up of bonds, equity and money market funds.
These assets were held in a Rabbi Trust for the benefit of deferred employee compensation not available for distribution under the Plan.
Reconciliation of financial assets measured at fair value on a recurring basis using Level 3 inputs for the years ended September 30, 2015 and 2014 is as follows:
Fair Value |
Realized |
Change in |
Decrease due to |
Increase due to |
Decrease in cost |
Decrease due to |
Fair Value | |
Level 3 only |
$748,000 |
$ (433,000) |
$ (315,000) |
$ 0 |
$ 0 |
$ 0 |
$ 0 |
$ 0 |
Fair Value |
Realized |
Change in |
Decrease due to |
Increase due to |
Decrease in cost |
Decrease due to |
Fair Value | |
Level 3 only |
$8,875,000 |
$ 0 |
$11,504,000 |
$ 0 |
$ 0 |
$ 0 |
$ (19,631,000) |
$748,000 |
Note 11 Quarterly Financial Data (Unaudited)
Liquidation Basis of Accounting periods beginning and subsequent to October 1, 2014
Summarized quarterly financial data for the fiscal year ended September 30, 2015 is as follows (in thousands except per share data):
|
|
As of |
|
As of |
|
As of |
|
As of |
|
Net Assets in Liquidation |
|
$ 27,984 |
|
$ 18,320 |
|
$ 18,354 |
|
$ 18,042 |
|
Net Assets in Liquidation per common share |
|
$ 6.95 |
|
$ 4.55 |
|
$ 4.56 |
|
$ 4.48 |
|
Going Concern Basis of Accounting periods prior to October 1, 2014
Summarized quarterly financial data for the fiscal year ended September 30, 2014, and as of each respective quarter end, is as follows (in thousands except per share data):
|
|
December 31, |
|
March 31, |
|
June 30, |
|
September 30, | |||
Total revenue |
|
$ 30 |
|
$ |
1,703 |
|
$ |
11 |
|
$ |
11 |
Net earnings (loss) |
|
$ (1,219) |
|
$ |
1,249 |
|
$ |
633 |
|
$ |
192 |
Basic and diluted earnings (loss) per common share |
|
$ (0.30) |
|
$ |
0.31 |
|
$ |
0.16 |
|
$ |
0.04 |
Note 12 - Subsequent Events
Litigation Trust Settlement Update
On October 6, 2015, the litigation trustee filed with the United States Bankruptcy Court for the Northern District of Illinois Eastern Division a motion (the Motion) seeking the entry of an order to (i) approve a proposed settlement with the remaining federal and state defendants who had executed promissory notes in connection with Comdisco, Inc.s Shared Investment Plan, (ii) approve the filing of the final report of the litigation trustee and (iii) upon the wind down of the Comdisco Litigation Trust and final disbursement of its net proceeds to the beneficiaries, terminate the Comdisco Litigation Trust and discharge the litigation trustee and the Comdisco Litigation Trust Advisory Board. On November 23, 2015, a hearing was held in the Bankruptcy court and the judge granted an order approving the Motion and set a hearing for April 1, 2016. The financial impact of the GSA is included in the Statement of Net Assets in Liquidation as of September 30, 2015.
Payments made from Assets Held in Trust for the Deferred Compensation Plan and Accrued Compensation
On October 13, 2015, the Company approved payments from the Assets Held in Trust for the Deferred Compensation Plan and Accrued Compensation. Substantially all the payments were made on November 20, 2015. There is no change in Net Assets in Liquidation as these payments were previously accrued.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
(1) Evaluation of Disclosure Controls and Procedures
Randolph I. Thornton, the principal executive officer and principal financial officer of the Company, has evaluated the effectiveness of the Companys disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on such evaluation, Mr. Thornton has concluded that, as of the end of such period, the Companys disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms and (ii) is accumulated and communicated to the Companys management, including its president and chief financial officer, as appropriate to allow timely decisions regarding required disclosure.
(2) Management Report on Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, the Companys sole officer and effected by the Companys board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
· pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;
· provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and the sole director of the Company; and
· provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Companys assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of the Companys internal control over financial reporting as of September 30, 2015. In making this assessment, management used the criteria established in Internal Control - Integrated Framework (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Based on managements assessment, management believes that, as of September 30, 2015, the Companys internal control over financial reporting is effective.
This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting. Pursuant to the Securities and Exchange Commissions exemption of smaller reporting companies, the Company is permitted to provide only managements report in the annual report.
(3) Change in Internal Controls
There has not been any change in the Companys internal control over financial reporting that occurred during the Companys fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.
Not applicable.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors and Executive Officers
As discussed in Part I above, all the individuals serving on the Board of Directors resigned their position as directors on August 12, 2004 except for Randolph I. Thornton who has continued on as sole director. Also, on the same date, all the officers of the Company resigned their respective officer positions. Before resigning their positions as directors, the Board of Directors appointed Randolph I. Thornton as Chief Executive Officer, President and Secretary of the Company. Mr. Thorntons appointment as the Companys Initial Disbursing Agent also became effective at this time. As Initial Disbursing Agent, Mr. Thornton has assumed the roles and responsibilities performed by the former Board of Directors and officers of the Company, including all measures which are necessary to complete the administration of the reorganized Debtors Plan and Chapter 11 cases. The Companys Board of Directors took this action as the next step in the wind down of operations pursuant to the Plan. Because the Companys equity securities are not listed on any stock exchange or traded on NASDAQ, the Company is not required to comply with the corporate governance requirements mandated by stock exchanges and NASDAQ.
Sole Officer and Director
Randolph I. Thornton (Age 70 - Director since August 2002)
Effective August 12, 2004, Mr. Thornton was appointed Chief Executive Officer, President and Secretary of the Company as well as Initial Disbursing Agent and sole director. Prior to his retirement in January 2004, he was a Managing Director and Senior Credit Officer of Citigroup, Inc. where he managed hundreds of corporate reorganization matters in a thirty-four year career. He currently serves as non-executive Chairman and a member of the board of both Core-Mark International, Inc. and National Energy & Gas Transmission, Inc.
Audit Committee Financial Expert
Since August 12, 2004, Mr. Thornton has been performing the functions of the Audit Committee. Mr. Thornton qualifies as an audit committee financial expert, as defined in Item 407(d)(5)(ii) of Regulation S-K, but is not considered independent as that term is defined in Item 407 of Regulation S-K. The Company is not required to have a three-person audit committee consisting of independent directors because its equity securities are not listed on a stock exchange or traded on NASDAQ.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires our director and executive officer, and persons who beneficially own more than 10 percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of our Common Stock and any changes in that ownership with the SEC. Based solely on our review of copies of the reports filed with the SEC and written representations of our director and officer, we believe all persons subject to Section 16(a) reporting filed the required reports on time in fiscal year 2015.
Code of Ethics
On June 30, 2014, the Company updated and made effective its revised Code of Conduct Applicable to the Chief Executive Officer and Authorized Representatives. The Company updated and made effective its revised Code of Conduct for its employees in June 2014. Copies are available on the Companys website at www.comdisco.com. Any waivers from the Codes of Conduct, or amendments thereto, by the Company will be disclosed through its website and in future filings. To date, the Company has granted no such waivers.
ITEM 11. EXECUTIVE COMPENSATION
Effective August 12, 2004, Randolph I. Thornton was appointed Chief Executive Officer, President and Secretary of the Company as well as Initial Disbursing Agent and sole director. Mr. Thornton is the sole executive officer and is referred to in this section as the named executive officer.
Compensation Discussion and Analysis
All payments to Mr. Thornton are made pursuant to the Disbursing Agent Agreement which specifies an hourly rate for the services provided by the Disbursing Agent and is set at $400 per hour. This approach is consistent with the Companys overall objective of efficiently selling, collecting and otherwise reducing to money the remaining assets of the Company and its subsidiaries. The rate does not vary and does not depend on corporate performance.
Summary Compensation Table
Name and Principal Position |
|
Fiscal |
|
Salary($) |
|
All Other |
|
Total ($) |
| |
Randolph I. Thornton |
|
2015 |
|
-- |
|
117,500 |
|
|
117,500 |
|
Chief Executive Officer, |
|
2014 |
|
-- |
|
104,900 |
|
|
104,900 |
|
President and Secretary |
|
2013 |
|
-- |
|
101,400 |
|
|
101,400 |
|
(1) Amount reflects total payments earned by Mr. Thornton pursuant to the Disbursing Agent Agreement at the rate of $400 per hour.
Plan-Based Awards, Equity Awards and Options
The Company does not have any plan-based awards, equity awards or stock options available to the named executive officer. Accordingly, no plan-based awards, equity awards or stock options were outstanding or aggregated by the named executive officer during fiscal year 2015. The Company does not plan to issue any plan-based awards, equity awards or stock options to the named executive officer in the future.
Pension Benefits, Deferred Compensation and Potential Payments
The Company did not provide any pension benefits or deferred compensation to the named executive officer during fiscal year 2015. The Company does not plan to provide any pension benefits or deferred compensation to the named executive officer in the future. The Disbursing Agent Agreement does not provide for any potential payments other than the hourly rate described above.
Compensation of Directors
The Disbursing Agents compensation for the fiscal year ended September 30, 2015 is set forth in the compensation table above. Mr. Thornton did not receive additional compensation for serving as a director in fiscal year 2015.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERS MATTERS
Common Stock Owned by Certain Beneficial Owners
The following table reflects the number of shares of Common Stock beneficially owned on December 3, 2015 by all persons whom we know to be beneficial owners of 5 percent or more of our Common Stock, based on a review of public filings.
Stockholders owning at least 5 percent of the Companys Common Stock
Name and Address |
|
|
|
Shares |
|
Percent of |
| ||
Berkshire Hathaway, Inc. |
|
(1) |
|
1,538,377 |
|
|
38.18% |
|
|
Davidson Kempner Partners |
|
(2) |
|
946,785 |
|
|
23.50% |
|
|
Haphazard Investors LLC |
|
(3) |
|
327,739 |
|
|
8.13% |
|
|
Poplar Point Capital Management LLC |
|
(4) |
|
303,989 |
|
|
7.5% |
|
|
Firefly Value Partners, LP |
|
(5) |
|
216,587 |
|
|
5.4% |
|
|
(1) The information with respect to 1,538,377 shares of Common Stock beneficially owned by Berkshire Hathaway, Inc. is based on its Form 13F for the period ended December 31, 2011, filed with the SEC on February 14, 2012.
(2) The information with respect to 946,785 shares of Common Stock beneficially owned by Davidson Kempner Partners is based on a Report on its amended Schedule 13G, dated and filed with the SEC on February 14, 2006.
(3) The information with respect to 327,739 shares of Common Stock beneficially owned by Haphazard Investors LLC is based on a Report on its amended Schedule 13G, dated as of January 5, 2015 and filed with the SEC on January 13, 2015.
(4) The information with respect to 303,989 shares of Common Stock beneficially owned by Poplar Point Capital Management LLC is based on a Report on its Schedule 13G, dated as of May 27, 2015 and filed with the SEC on June 2, 2015.
(5) The information with respect to 216,587 shares of Common Stock beneficially owned by Firefly Value Partners, LP is based on a Report on its amended Schedule 13G, dated and filed with the SEC on February 17, 2015.
Common Stock Owned by Directors and Executive Officers
Mr. Thornton (who is the Companys sole officer and director) does not beneficially own any shares of the Companys common stock in the Company as of December 3, 2015. The address of the sole director and named executive officers is c/o Comdisco Holding Company, Inc., 5600 North River Road, Rosemont, Illinois 60018.
Equity Compensation Plan Information
The Company has not reserved any equity securities for compensation to its employees or its sole officer.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
During the Companys prior fiscal year, the Company did not participate in any transaction in which any related person had or would have a direct or indirect material interest. No such transaction is currently proposed. Section 3.4 of the Disbursing Agent Agreement prohibits the Disbursing Agent from directly or indirectly selling or otherwise transferring any of the assets of the Company to a related person.
Randolph I. Thornton, sole director of the Company, is not considered independent as that term is defined in Item 407 of Regulation S-K.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Committee of the Board of Directors
The Audit Committee and the Board of Directors adopted a charter, setting forth the structure, powers and responsibilities of the Audit Committee. The Audit Committee met four times in fiscal year 2015. Mr. Thornton, as sole director and Initial Disbursing Agent, performed the functions of the Audit Committee for the fiscal year 2015. The Company is not required to have a three-person committee consisting of independent directors because its equity securities are not listed on a stock exchange or traded on NASDAQ.
One of Mr. Thorntons primary responsibilities is to provide oversight of the integrity of the Companys financial statements and financial reporting process. To fulfill these oversight responsibilities, Mr. Thornton has reviewed and discussed with management and the independent auditors the audited financial statements (in liquidation) included in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2015, and has reviewed and discussed with the independent auditors the matters required to be discussed by applicable auditing standards adopted by the Public Company Accounting Oversight Board (PCAOB). In addition, Mr. Thornton received from the independent auditors written reports disclosing that they are not aware of any relationships between the auditors and the Company that, in their professional judgment, may reasonably be thought to bear on their independence, required by PCAOB Auditing Standard No. 16, Communication With Audit Committees, as amended. Mr. Thornton also reviewed and discussed with the independent auditors all relationships the auditors have with the Company to determine and satisfy itself regarding the auditors objectivity and independence.
Based on the review and discussions described in this report, Mr. Thornton determined that the Companys audited consolidated financial statements (in liquidation) be included in the Companys Annual Report on Form 10-K for the fiscal year ended September 30, 2015, for filing with the SEC.
This report is submitted on behalf of the Audit Committee:
Randolph I. Thornton
Principal Accountant Audit Fees and Services Fees
The following table describes fees for professional audit services rendered by KPMG LLP (KPMG), the Companys principal accountant, for the audit of the Companys annual financial statements for the fiscal years ended September 30, 2015 and September 30, 2014 and fees billed for other services rendered by KPMG during those periods.
Type of Fee |
|
2015 |
|
2014 |
|
Audit Fees (1) |
|
$188,000 |
|
$184,000 |
|
|
|
|
|
|
|
Total |
|
$188,000 |
|
$184,000 |
|
(1) Audit Fees, including those for statutory audits, include the aggregate fees paid by the Company during the fiscal year indicated for professional services rendered by KPMG for the audit of the Companys annual financial statements and review of financial statements included in the Companys Forms 10-Q.
Procedures For Audit Committee Pre-Approval of Audit
Pursuant to its charter, the Audit Committee of the Companys Board of Directors is responsible for reviewing and approving, in advance, any audit engagement or relationship between the Company and its independent auditors. Mr. Thornton, as sole director and Initial Disbursing Agent, has assumed that responsibility. KPMGs engagement to conduct the audit of the Company was approved by the Audit Committee.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) List of documents filed as part of this report:
1. Financial Statements
See Index to Financial Statements contained in Item 8, Financial Statements and Supplementary Data, above.
2. Financial Statement Schedules
All Financial Statement Schedules have been omitted because (i) the required information is not present in amounts sufficient to require submission of the schedule, (ii) the information required is included in the Financial Statements or the Notes thereto or (iii) the information required in the schedules is not applicable to the Company.
3. Exhibits
The following exhibits are filed herewith or are incorporated by reference to exhibits previously filed with the Commission:
Exhibit |
|
Description of Exhibit |
|
|
|
2.1 |
|
Joint Plan of Reorganization of Comdisco, Inc. and its Affiliated Debtors and Debtors in Possession (Incorporated by reference to Exhibit 99.3 filed with Comdisco, Inc.s Current Report on Form 8-K dated April 26, 2002, as filed with the Commission on May 10, 2002, File No. 1-7725). |
2.2 |
|
First Amended Joint Plan of Reorganization of Comdisco, Inc. and its Affiliated Debtors and Debtors in Possession (Incorporated by reference to Exhibit 2.2 filed with Comdisco, Inc.s Current Report on Form 8-K dated July 30, 2002, as filed with the Commission on August 9, 2002, File No. 1-7725). |
2.3 |
|
Findings of Fact, Conclusions of Law, and Order Under 11 U.S.C. ss.ss.1129(a) and (b) and Fed. R. Bankr. P. 3020 Confirming the First Amended Plan of Reorganization of Comdisco, Inc. and its Affiliated Debtors and Debtors in Possession (Incorporated by reference to Exhibit 2.1 filed with Comdisco, Inc.s Current Report on Form 8-K dated July 30, 2002, as filed with the Commission on August 9, 2002, File No. 1-7725). |
3.1 |
|
Certificate of Incorporation of Registrant, dated August 8, 2002 and amended as of August 12, 2004 (Incorporated by reference to Exhibit 3.1 filed with the Companys Annual Report on Form 10-K dated September 30, 2004, as filed with the Commission on December 14, 2004, File No. 0-49968). |
3.2 |
|
By-Laws of Registrant, adopted as of August 9, 2002 (Incorporated by reference to Exhibit 3.2 filed with the Companys Annual Report on Form 10-K dated September 30, 2002, as filed with the Commission on January 14, 2003, File No. 0-49968). |
4.1 |
|
Rights Agent Agreement between the Registrant and Mellon Investor Services L.L.C., as Rights Agent, dated as of August 12, 2002 (Incorporated by reference to Exhibit 4.5 filed with the Companys Annual Report on Form 10-K dated September 30, 2002, as filed with the Commission on January 14, 2003, File No. 0-49968) |
10.1* |
|
Motion, dated as of May 24, 2002, and Order, dated as of June 18, 2002, Pursuant to 11 U.S.C. Sections 105(a) and 363(b)(1) Approving and Authorizing the Debtors Stay Bonus Plan and Management Incentive Plan, dated June 18, 2002 (Incorporated by reference to Exhibit 10.1 filed with the Companys Annual Report on Form 10-K dated September 30, 2002, as filed with the Commission on January 14, 2003, File No. 0-49968). |
Exhibit |
|
Description of Exhibit |
|
|
|
10.2* |
|
First Letter from Ronald C. Mishler to the Official Committee of Unsecured Creditors of Comdisco, Inc., dated May 29, 2002 (Incorporated by reference to Exhibit 10.2 filed with the Companys Annual Report on Form 10-K dated September 30, 2002, as filed with the Commission on January 14, 2003, File No. 0-49968). |
10.3* |
|
Second Letter from Ronald C. Mishler to the Official Committee of Unsecured Creditors of Comdisco, Inc., dated July 3, 2002 (Incorporated by reference to Exhibit 10.3 filed with the Companys Annual Report on Form 10-K dated September 30, 2002, as filed with the Commission on January 14, 2003, File No. 0-49968). |
10.4 |
|
Motion for an Order in Furtherance of the First Amended Joint Plan of Reorganization of Comdisco, Inc. and its Affiliates Seeking Authority to Complete the Administration of the Reorganized Debtors Reorganization Plan and Chapter 11 Cases, dated February 17 2004, (Incorporated by reference to Exhibit 99.2 filed with the Companys Report on Form 8-K dated February 17, 2004, as filed with the Commission on February 18, 2004, File No. 0-49968) |
10.5 |
|
Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, dated as of February 20, 2004, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC and Comdisco Ventures Fund B, LLC (Incorporated by reference to Exhibit 99.1 filed with the Companys Report on Form 8-K dated February 23, 2004, as filed with the Commission on February 23, 2004, File No. 0-49968) |
10.6 |
|
Limited Liability Company Agreement of Comdisco Ventures Fund B, LLC, dated as of February 20, 2004, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC and Windspeed Acquisition Fund, L.P (Incorporated by reference to Exhibit 99.2 filed with the Companys Report on Form 8-K dated February 23, 2004, as filed with the Commission on February 23, 2004, File No. 0-49968) |
10.7* |
|
Disbursing Agent Agreement. (Incorporated by reference to Exhibit 10.9 filed with the Companys Annual Report on Form 10-K dated December 14, 2004 as filed with the Commission on December 14, 2004, File No. 0-49968.) |
10.8 |
|
Second Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, dated as of April 11, 2006, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC and Comdisco Ventures Fund B, LLC (Incorporated by reference to Exhibit 10.1 filed with the Companys Report on Form 8-K dated April 11, 2006, as filed with the Commission on April 11, 2006, File No. 0-49968) |
10.9 |
|
Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund B, LLC, dated as of April 11, 2006, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC and Windspeed Acquisition Fund, L.P. (Incorporated by reference to Exhibit 10.2 filed with the Companys Report on Form 8-K dated April 11, 2006, as filed with the Commission on April 11, 2006, File No. 0-49968) |
10.10 |
|
Third Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, dated as of March 16, 2009, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC and Comdisco Ventures Fund B, LLC (Incorporated by reference to Exhibit 10.1 filed with the Companys Report on Form 8-K dated March 19, 2009, as filed with the Commission on March 19, 2009, File No. 0-49968) |
10.11 |
|
Fourth Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, dated as of April 5, 2011, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC, Comdisco Ventures Fund B, LLC and Windspeed Acquisition Fund, L.P. (Incorporated by reference to Exhibit 10.1 filed with the Companys Report on Form 8-K dated April 5, 2011, as filed with the Commission on April 7, 2011, File No. 0-49968) |
10.12 |
|
Fifth Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, effective February 21, 2013, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC, Comdisco Ventures Fund B, LLC and Windspeed Acquisition Fund, L.P. (Incorporated by reference to Exhibit 10.1 filed with the Companys Report on Form 10-Q dated February 14, 2013, as filed with the Commission on February 14, 2013, File No. 0-49968) |
10.13 |
|
Sixth Amended and Restated Limited Liability Company Agreement of Comdisco Ventures Fund A, LLC, effective February 12, 2015, by and among Comdisco, Inc., Windspeed Acquisition Fund GP, LLC, Comdisco Ventures Fund B, LLC and Windspeed Acquisition Fund, L.P. (Incorporated by reference to Exhibit 10.1 filed with the Companys Report on Form 10-Q |
Exhibit |
|
Description of Exhibit |
|
|
|
|
|
dated February 13, 2015, as filed with the Commission on February 13, 2015, File No. 0-49968) |
21.1 |
|
Subsidiaries of the registrant (Filed herewith). |
31.1 |
|
Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Exchange Act, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Filed herewith). |
32.1 |
|
Certification of the Chief Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Furnished herewith). |
101.INS** |
|
Instance document (Filed herewith). |
101.SCH** |
|
Schema document (Filed herewith). |
101.CAL** |
|
Calculation linkbase document (Filed herewith). |
101.LAB** |
|
Labels linkbase document (Filed herewith). |
101.PRE** |
|
Presentation linkbase document (Filed herewith). |
101.DEF** |
|
Definition linkbase document (Filed herewith). |
|
* Management contract or compensatory plan or arrangement. |
|
** Pursuant to Regulation S-T, this interactive data file is deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, and otherwise is not subject to liability under these sections. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
COMDISCO HOLDING COMPANY, INC.
Dated: December 9, 2015 |
By: |
/s/ Randolph I. Thornton |
|
Name: |
Randolph I. Thornton |
|
Title: |
Chief Executive Officer and President |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities indicated on December 9, 2015.
SIGNATURE |
DATE | |
|
|
|
By: |
/s/ Randolph I. Thornton |
December 9, 2015 |
Name: |
Randolph I. Thornton |
|
Title: |
Chief Executive Officer and President |
|