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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

 

 

(Mark One)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended July 31, 2016

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: 000-27273

 

 

SYCAMORE NETWORKS, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   04-3410558
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

300 Brickstone Square, Suite 201

Andover, Massachusetts 01810

(Address of principal executive office)

(978) -662-5245

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

 

Name of Each Exchange on which Registered

NONE   NONE

Securities registered pursuant to Section 12(g) of the Act: COMMON STOCK $0.001 PAR VALUE

 

 

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act:    Yes  ☐    No  ☒

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  ☒

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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  ☒    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 Registrant’s 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 the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer      Accelerated Filer  
Non-accelerated Filer   ☐      Smaller reporting company  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☒    No    ☐

The aggregate market value of voting stock held by non-affiliates of the Registrant as of January 30, 2016 was approximately $10,383,683.

As of October 11, 2016 there were 28,882,093 shares outstanding of the Registrant’s common stock, $0.001 par value.

 

 

 


Table of Contents

Table of Contents

 

   Part I   

Item 1.

   Business      4   

Item 1A.

   Risk Factors      6   

Item 1B.

   Unresolved Staff Comments      9   

Item 2.

   Properties      9   

Item 3.

   Legal Proceedings      10   

Item 4.

   Mine Safety Disclosures      10   
   Part II   

Item 5.

   Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities      11   

Item 6.

   Selected Financial Data      12   

Item 7.

   Management’s Discussion and Analysis of Financial Condition and Results of Operations      13   

Item 7A.

   Quantitative and Qualitative Disclosures About Market Risk      16   

Item 8.

   Financial Statements and Supplementary Data      17   

Item 9.

   Changes in and Disagreements with Accountants on Accounting and Financial Disclosure      31   

Item 9A.

   Controls and Procedures      31   

Item 9B.

   Other Information      32   
   Part III   

Item 10.

   Directors, Executive Officers and Corporate Governance      33   

Item 11.

   Executive Compensation      35   

Item 12.

   Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters      37   

Item 13.

   Certain Relationships and Related Transactions and Director Independence      39   

Item 14.

   Principal Accountant Fees and Services      40   
   Part IV   

Item 15.

   Exhibits and Financial Statement Schedules      41   

 

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PART I

ITEM 1. BUSINESS

Prior to February 1, 2013, Sycamore Networks, Inc. (the “Company”) developed and marketed Intelligent Bandwidth Management solutions for fixed line and mobile network operators worldwide and provided services associated with such products (the “Intelligent Bandwidth Management Business”), and, prior to November 1, 2012, the Company also developed and marketed a mobile broadband optimization solution (the “IQstream Business”).

The Company incorporated under the laws of the State of Delaware on February 17, 1998. Our principal executive offices are located at 300 Brickstone Square, Suite 201, Andover, Massachusetts 01810. Our telephone number is (978) 662-5245, and our website address is www.scmrinc.com.

We file Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K with the U.S. Securities and Exchange Commission (the “SEC”). These reports, any amendments to these reports, proxy and information statements and certain other documents we file with the SEC are available through the SEC’s website at www.sec.gov or free of charge on our website as soon as reasonably practicable after we file the documents with the SEC. The public may also read and copy these reports and any other materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

On October 23, 2012, the Company entered into an Asset Purchase and Sale Agreement (the “Asset Sale Agreement”) with Sunrise Acquisition Corp. (now known as Coriant America Inc.), a portfolio company of Marlin Equity Partners (“Buyer”), pursuant to which Buyer agreed to acquire substantially all of the assets (the “Asset Sale”) primarily related to the Intelligent Bandwidth Management Business, including inventory, fixed assets, accounts receivable, intellectual property rights (other than patents and patent applications), contracts, certain real estate leases, the Company’s subsidiaries in Shanghai, the Netherlands and Japan, and certain shared facilities and assets for $18.75 million in cash, subject to a working capital adjustment, and the assumption by Buyer of certain liabilities. The Company’s stockholders authorized the Asset Sale at a Special Meeting of Stockholders held on January 29, 2013 (the “Special Meeting”), and the Asset Sale was completed on January 31, 2013 (the transfer of the Company’s equity interests in its Shanghai subsidiary, which was subject to the receipt of government approval, occurred on March 25, 2013). Upon the closing of the Asset Sale, Buyer acquired substantially all of the Company’s operating assets relating to the Intelligent Bandwidth Management Business, including the Company’s accounts receivable, inventories and prepaid and other assets, and assumed most of the Company’s remaining current liabilities, including substantially all of the Company’s deferred revenue and accrued warranty obligations. In conjunction with the approval of the Asset Sale Agreement, the Company’s Board of Directors (the “Board”) also approved the liquidation and dissolution of the Company (the “Dissolution”) pursuant to a Plan of Complete Liquidation and Dissolution (the “Plan of Dissolution”) following the completion of the Asset Sale. The Plan of Dissolution was also approved by the stockholders at the Special Meeting and, following a review of the Company’s strategic alternatives for all of the Company’s assets and available options for providing value to the Company’s stockholders, the Company filed a certificate of dissolution with the Secretary of State of the State of Delaware (the “Certificate of Dissolution”) on March 7, 2013. For additional information regarding the Dissolution, please see the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on December 28, 2012 and its Current Report on Form 8-K filed with the SEC on March 8, 2013.

In connection with the filing of the Certificate of Dissolution, on March 7, 2013, the Company closed its stock transfer books and discontinued recording transfers of its common stock, $0.001 par value per share (the “Common Stock”). The Common Stock, and stock certificates evidencing shares of the Common Stock, are no longer assignable or transferable on the Company’s books, other than transfers by will, intestate succession or operation of law. The Company also submitted a request to The NASDAQ Stock Market (“NASDAQ”) to suspend trading of the Common Stock on The NASDAQ Global Select Market effective as of the close of trading on March 7, 2013 and, on March 15, 2013, the Company filed a Form 25 with the SEC to delist its Common Stock, which became effective prior to the opening of trading on March 25, 2013. Since the suspension of trading of the Common Stock on The NASDAQ Global Select Market, shares of our Common Stock held in street name with brokers have been trading in the over-the-counter market on the Pink Sheets, an electronic bulletin board established for unlisted securities.

As a result of the completion of the Asset Sale and the Company’s previously announced halting of further development and marketing in connection with the IQstream Business, the Company no longer has any operating assets or revenue. Since the filing of the Certificate of Dissolution, the Company has been operating in accordance with the Plan of Dissolution, which contemplates an orderly wind-down of the Company’s business, including the

 

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sale or monetization of the Company’s remaining non-cash assets and the satisfaction or settlement of its liabilities and obligations, including contingent liabilities and claims. As of July 31, 2016, the Company had one remaining employee. On October 12, 2016, the Board approved the termination of employment of the Company’s sole remaining employee, David Guerrera, as the Company’s President, General Counsel and Secretary, effective as of October 12, 2016. Pursuant to a Services Consulting Agreement between the Company and Mr. Guerrera dated as of October 12, 2016, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.

During fiscal year 2014, the Company completed the sale of its patent portfolios. On February 28, 2014, the Company completed the sale of its portfolio of 40 patents and two patent applications related to the Intelligent Bandwidth Management Business (the “IBM Patents”) for $2.0 million to Dragon Intellectual Property, LLC. On May 22, 2014, the Company completed the sale of its portfolio of three United States patents, six United States patent applications and certain foreign patents and patent applications related to the IQstream Business (the “IQstream Patents”) for $0.3 million to Citrix Systems, Inc. Following the sale of the IQstream Patents, the Company has continued to pursue the sale of certain technology and equipment relating to the IQstream Business; however, the Company does not expect to receive any additional material consideration for its remaining IQstream assets.

In accordance with the Purchase and Sale Agreement by and between the Company and Princeton Tyngsborough Commons, LLC (“Tyngsborough Commons”) dated October 10, 2014, and amended on each of February 24, 2015, March 27, 2015, March 30, 2015, July 30, 2015, September 15, 2015, September 30, 2015 and October 9, 2015 (as amended, the “Purchase Agreement”), on December 4, 2015 the Company completed the sale of approximately 102 acres of undeveloped land located in Tyngsborough, Massachusetts to Tyngsborough Commons for a total purchase price of $2.5 million. In accordance with the terms of the Purchase Agreement, all representations and warranties which survived the closing expired on February 29, 2016.

On April 29, 2016, the Company paid a liquidating cash distribution to stockholders of $0.29 per share of Common Stock, or $8.38 million in the aggregate. The Board declared this liquidating distribution after the Delaware Court of Chancery (the “Court of Chancery”), on February 25, 2016, entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, to make a final determination with respect to the Company’s remaining non-cash assets. In accordance with that order, the Court of Chancery affirmed that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses, of which any portion that is not required to cover such wind down costs and expenses may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties.

On August 2, 2016, the Company completed the sale of all of its equity shares of Tejas Networks Limited, an Indian private company (“Tejas”), to Samena Spectrum Co, a company incorporated under the laws of Mauritius (“Samena”), pursuant to a Share Purchase Agreement dated as of August 2, 2016 (the “Share Purchase Agreement”) for an aggregate purchase price of $3.5 million. The Company received net proceeds of approximately $3.27 million after deduction of Indian withholding and stamp duty taxes in the transaction. The Share Purchase Agreement contains certain representations and warranties, covenants and agreements of each of the Company and Samena, including a covenant of the Company not to adopt a resolution authorizing the completion of the liquidation of Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) prior to the expiration of the 90th calendar day following August 2, 2016, the closing date under the Share Purchase Agreement.

Certain of the representations and warranties of each of the Company and Samena contained in the Share Purchase Agreement, including with respect to the Company’s authority to consummate the transactions contemplated by the Share Purchase Agreement, its title to the Tejas shares and its ability to execute, deliver and perform the Share Purchase Agreement consistent with the terms and conditions of the Plan of Dissolution, survive the closing through January 29, 2017. However, if the board of directors of the Company adopts a resolution on or after November 1, 2016 authorizing the completion of the liquidation of the Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL, the Company’s representations and warranties that survived the closing will expire on the date immediately preceding the date of such resolution and the Company will be free to complete its liquidation and dissolution at that time. All other representations and warranties contained in the Share Purchase Agreement expired at the closing. Each of the Company and Samena has agreed to indemnify and hold harmless the other party against any and all claims, losses and other expenses incurred as a result of any breach of such first party’s representations and warranties contained in the Share Purchase Agreement that survived the closing.

 

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At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for the Company’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distribution to the Company’s stockholders involve substantial risks and uncertainties. Accordingly, it is not possible to predict the exact timing of the completion of the Dissolution, the exact timing of any further distributions to stockholders or the aggregate amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Company’s Statement of Net Assets included in this Annual Report. The Company will continue to analyze its estimates of liquidation expenses on an ongoing basis and determine whether further distributions of assets to its stockholders are appropriate at such times. In addition, Samena may assert a claim for indemnification or commence litigation proceedings in connection with the Share Purchase Agreement. No assurance can be given that Samena or another third party will not seek indemnification under the Share Purchase Agreement or otherwise commence litigation in connection with the sale of the Tejas shares prior to the conclusion of the Dissolution period, which may delay the conclusion of the Dissolution period or decrease the amount available for distribution to the Company’s stockholders.

 

ITEM 1A. RISK FACTORS

Set forth below and elsewhere in this Annual Report on Form 10-K and in other documents we file with the SEC are descriptions of the risks and uncertainties that could cause our actual results to differ materially from the results contemplated by the forward looking statements contained in this Annual Report on Form 10-K.

We cannot predict the timing of the completion of the Dissolution or the timing, amount or nature of any future distributions to our stockholders.

On February 25, 2016, the Court of Chancery entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, and affirming that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses, of which any portion that is not required to cover such wind down costs and expenses may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties. Following entry of the Court of Chancery’s order, on April 29, 2016 the Company paid a liquidating cash distribution of $0.29 per share of the Company’s Common Stock. No assurances can be made as to additional amounts to be distributed, if any, or the timing of any further liquidating distributions, the amount of which is subject to our covering wind-down costs, charges, expenses and liabilities, as well as our ability to dispose of the Company’s remaining non-cash assets within the two-year extension period.

The completion of the Dissolution and any final liquidating distributions could also be delayed or diminished due to other factors, including, without limitation:

 

    if we become a party to any lawsuits or other claims asserted by or against us, including any claims or litigation arising in connection with our decision to continue to pursue the Dissolution or in connection with our indemnification obligations under the Share Purchase Agreement;

 

    if we are unable to resolve any new claims or investigations with creditors or third parties, or if such resolutions take longer than expected; or

 

    if we are unable to reduce our public company reporting requirements under the Exchange Act during the Dissolution period.

Any of the foregoing could delay the completion of the Dissolution, or could delay the distribution of or substantially diminish, or eliminate, the amount available for future distribution to our stockholders. As a result of these factors, we may retain for distribution at a later date some or all of the estimated amounts that we expect to distribute to our stockholders as part of the liquidation process.

 

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The amount available for future distribution to our stockholders could be reduced or eliminated if our expectations regarding our wind-down costs are inaccurate.

Claims, liabilities and expenses from operations (such as administrative costs, salaries, directors’ and officers’ insurance, federal and state income taxes, business and local taxes, legal and accounting fees and miscellaneous office expenses) will continue to be incurred as we seek to wind-down our business and will increase if the Dissolution period is extended beyond November 30, 2016 or if the Company establishes a liquidating trust to liquidate and distribute the remaining assets. Our expectations regarding our expenses may be inaccurate. Any unexpected claims, liabilities or expenses, or any claims, liabilities or expenses that exceed our current estimates, could reduce or eliminate the amount of cash available for ultimate distribution to our stockholders. Any such payments will reduce the assets available for distribution to our stockholders. If available cash is not adequate to provide for our obligations, liabilities, expenses and claims, we may not be able to make any further liquidating distributions to our stockholders.

Our stockholders may be liable to our creditors for part or all of the amount received from us in our liquidating distributions if reserves are inadequate.

On February 25, 2016, the Court of Chancery entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, and affirming that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses. However, this amount may not be adequate to cover all of our claims and obligations prior to the completion of the Dissolution. Under the DGCL, each stockholder could be held liable for claims against the Company, solely in respect of claims brought during the Dissolution period, in an amount not to exceed the lesser of (i) such stockholder’s pro rata share of amounts owed to creditors in excess of the contingency reserve and (ii) the amounts previously received by such stockholder in the Dissolution from us and from any liquidating trust or trusts. Accordingly, in such event, a stockholder could be required to return part or all of the liquidating distributions previously made to such stockholder, and a stockholder could receive nothing from us under the Plan of Dissolution. In addition, although the Board determined that all amounts distributed to our stockholders prior to the filing of the Certificate of Dissolution were appropriately paid out of surplus as defined under the DGCL and otherwise not required to satisfy liabilities to our creditors, to the extent that the contingency reserve is determined to be inadequate for payment of our claims and obligations, and it is further determined that the Board’s determination was incorrect at the time of the declaration of such distributions, it is possible that creditors could seek to recoup such amounts from our stockholders. Moreover, if a stockholder has paid taxes on amounts previously received, a repayment of all or a portion of such amount could result in a situation in which a stockholder may incur a net tax cost if the repayment of the amount previously distributed does not cause a commensurate reduction in taxes payable in an amount equal to the amount of the taxes paid on amounts previously distributed.

We have no employees and rely on the services of consultants to complete the Dissolution, and if we are unable to retain key consultants, our ability to successfully complete the Dissolution may be harmed.

Our ability to successfully implement the Plan of Dissolution is partially dependent upon our ability to retain our remaining consultants. As of July 31, 2016, we had one remaining employee and continued to retain certain former employees in a consulting capacity to assist with the completion of the Dissolution. On October 12, 2016, the Board approved the termination of employment of the Company’s sole remaining employee, David Guerrera, as the Company’s President, General Counsel and Secretary, effective as of October 12, 2016. Pursuant to a Services Consulting Agreement between the Company and Mr. Guerrera dated as of October 12, 2016, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis. The retention of qualified consultants is difficult under present circumstances, and while we have offered these individuals certain financial incentives to continue providing services to the Company, the consulting agreement may be terminated by the Company or the consultants on thirty days’ notice and there is otherwise no legal obligation that would require those individuals to continue to provide services to the Company. Failure to retain these persons could harm the implementation of the Plan of Dissolution. In the event we are unable to retain these consultants, we may be required to engage other consultants to perform their duties or hire employees at a premium salary to perform certain key functions and day-to-day tasks.

We closed our stock transfer books on March 7, 2013 and trading of the Common Stock was suspended on the NASDAQ Global Select Market as of March 7, 2013, each of which may make it difficult for stockholders to trade their shares.

On March 7, 2013 (the “Final Record Date”), we closed our stock transfer books and discontinued recording transfers of shares of the Common Stock on our stock transfer books, except transfers by will, intestate succession or operation of law. Therefore, shares of the Common Stock ceased being freely transferable after the Final Record Date.

 

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All liquidating distributions from us or a liquidating trust, if any, will be made to our stockholders pro rata according to their respective holdings of Common Stock as of the Final Record Date. Following the filing of our Certificate of Dissolution, trading of the Common Stock on The NASDAQ Global Select Market was suspended effective as of the close of trading on March 7, 2013 and, on March 15, 2013, we filed a Form 25 with the SEC to delist our Common Stock, which became effective prior to the opening of trading on March 25, 2013.

Following the suspension of trading of the Common Stock, shares of our Common Stock held in street name with brokers have been trading in the over-the-counter market on the Pink Sheets, an electronic bulletin board established for unlisted securities, under the symbol “SCMR.PK”. The Company has been informed that the Common Stock has been trading under “due-bill” contractual obligations between the seller and purchaser of the stock, who negotiate and rely on themselves with respect to the allocation of stockholder proceeds arising from ownership of the shares. As a result, investors may find it more difficult to dispose of, or obtain accurate quotations for the price of, the Common Stock, if they are able to trade the Common Stock at all. Liquidity in the Company’s shares may be further reduced if and when the Company announces the sale of one or more of its remaining non-cash assets, the resolution of any outstanding claims or disputes, or further liquidating distributions.

The market price of the Common Stock has been, and is likely to continue to be, subject to price volatility.

Trading in the Common Stock is inherently risky and highly speculative and may be informed by the perceived value of any further distributions as part of the liquidation process. Because of the difficulty in estimating the amount and timing of the liquidating distributions, and due to the other risk factors discussed herein, the Common Stock may be subject to significant volatility and may trade above or below the amount of any liquidating distribution(s) that may be made.

We may seek to reduce our public company reporting requirements, which could substantially reduce publicly available information about the Company.

We remain subject to the applicable reporting requirements of the Exchange Act. Compliance with such reporting requirements is economically burdensome, and we are evaluating available options to reduce these expenses, including seeking any relief that may be available from the reporting requirements under the Exchange Act; however, no assurances can be given as to whether we will be able to reduce these expenses or as to the timing of any such reduction. Until such time as we are able to reduce or eliminate our reporting requirements under the Exchange Act, we will continue to incur significant costs in complying with our reporting obligations. If we reduce our reporting obligations, we anticipate that we would continue to file Current Reports on Form 8-K to disclose material events relating to the Dissolution, along with certain other reports that the SEC might require. However, we would not expect to continue to file Quarterly Reports on Form 10-Q or Annual Reports on Form 10-K, which could reduce substantially the amount of public information regarding the Company available to our stockholders.

We may undergo, or may already have undergone, an “ownership change” within the meaning of Section 382 of the Internal Revenue Code of 1986, as amended, which could affect our ability to offset gains, if any, realized from the sale of the Company’s assets against our net operating losses and certain of our tax credit carryovers, which could reduce the amount available for distribution to our stockholders.

Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”) contains rules that limit the ability of a company that undergoes an ownership change to utilize its net operating losses and tax credits existing as of the date of such ownership change. Under the rules, such an ownership change is generally any change in ownership of more than 50% of a company’s stock within a rolling three-year period. The rules generally operate by focusing on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company (“5% Shareholders”) and any change in ownership arising from new issuances of stock by the company.

Recent SEC filings by investors suggest that there may have been significant trading in the Company’s stock by 5% Shareholders. Consequently, the current ownership change percentage in the Company’s stock for purposes of Section 382 of the Code is uncertain, and it is possible that Company may have undergone, or may soon undergo, one or more ownership changes for purposes of Section 382 of the Code.

If we were to undergo one or more “ownership changes” within the meaning of Section 382 of the Code, or if one has already occurred, our net operating losses and certain of our tax credits existing as of the date of each ownership change may be unavailable, in whole or in part, to offset gains, if any, from the sale of the Company’s assets. If we are unable to offset fully for U.S. federal income tax purposes gains, if any, realized in respect of the sale of assets with its tax loss carry-forwards, we may incur U.S. federal income tax liability that could reduce the assets available for distribution to our stockholders.

 

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ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

 

ITEM 2. PROPERTIES

The Company currently leases office space at 300 Brickstone Square, Suite 201, Andover, Massachusetts 01810. We expect that this office space will be adequate to meet the Company’s needs through the completion of the Dissolution.

 

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ITEM 3. LEGAL PROCEEDINGS

Delaware Court of Chancery

On February 12, 2016, the Company filed the Petition in the Court of Chancery, requesting an extension in accordance with the DGCL of up to an additional two years of the Company’s wind down period, or such shorter period as the Board deems necessary, to make a final determination with respect to the Company’s Tejas investment. On February 25, 2016, the Court of Chancery entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, and affirming that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses, of which any portion that is not required to cover such wind down costs and expenses may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties.

 

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

 

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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Stock

On March 7, 2013, we closed our stock transfer books and discontinued recording transfers of shares of the Common Stock on our stock transfer books, except transfers by will, intestate succession or operation of law. Therefore, shares of the Common Stock ceased being freely transferable after March 7, 2013, the Final Record Date. Following the filing of our Certificate of Dissolution, trading of the Common Stock on The NASDAQ Global Select Market was suspended effective as of the close of trading on March 7, 2013 and, on March 15, 2013, we filed a Form 25 with the SEC to delist the Common Stock, which became effective prior to the opening of trading on March 25, 2013. Following the suspension of trading of the Common Stock, shares of our Common Stock held in street name with brokers have been trading in the over-the-counter market on the Pink Sheets, an electronic bulletin board established for unlisted securities, under the symbol “SCMR.PK”. Prior to March 7, 2013, the Common Stock traded on The NASDAQ Global Select Market under the symbol “SCMR”.

There can be no assurance that the Common Stock will continue to be quoted on the Pink Sheets or any other service.

The following table sets forth, for the periods indicated, the range of high and low sale prices for the Company’s common stock as listed on the Pink Sheets.

 

Fiscal year 2016:    High      Low  

Fourth Quarter ended July 31, 2016

   $ 0.1797       $ 0.10   

Third Quarter ended April 30, 2016

   $ 0.55       $ 0.3524   

Second Quarter ended January 30, 2016

   $ 0.62       $ 0.46   

First Quarter ended October 31, 2015

   $ 0.654       $ 0.29   
Fiscal year 2015:    High      Low  

Fourth Quarter ended July 31, 2015

   $ 0.40       $ 0.36   

Third Quarter ended April 25, 2015

   $ 0.42       $ 0.355   

Second Quarter ended January 24, 2015

   $ 0.39       $ 0.35   

First Quarter ended October 25, 2014

   $ 0.38       $ 0.33   

As of October 10, 2016, there were approximately 332 stockholders of record.

Dividend Policy

On October 11, 2012, the Company paid a special cash distribution to its stockholders of $10.00 per share of Common Stock, or $288.82 million in the aggregate. On November 12, 2012, the Company paid a special cash distribution to its stockholders of $2.00 per share of Common Stock, or $57.76 million in the aggregate. On December 20, 2012, the Company paid a special cash distribution to its stockholders of $0.50 per share of Common Stock, or $14.44 million in the aggregate. On February 28, 2013, the Company paid a special cash distribution to its stockholders of $1.81 per share of Common Stock, or $52.28 million in the aggregate. On July 29, 2014, the Company paid a liquidating distribution of $0.24 per share of Common Stock, or $6.93 million in the aggregate. On April 29, 2016, the Company paid a liquidating cash distribution to stockholders of $0.29 per share of Common Stock, or $8.38 million in the aggregate. At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distributions to stockholders involve substantial risks and uncertainties, as discussed above in “Item 1A. Risk Factors”. Accordingly, it is not possible to predict the exact timing of the completion of the Dissolution, the exact timing of any further distributions to stockholders or the aggregate amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the Statement of Net Assets accompanying this Annual Report.

 

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Equity Compensation Plans

In connection with the filing of the Certificate of Dissolution, we terminated our stock option and equity-based compensation plans and cancelled all outstanding and unexercised options effective as of the close of business on March 7, 2013. There are currently no equity awards outstanding under any former equity compensation plan, and no shares are reserved for issuance.

Unregistered Sales of Equity Securities and Use of Proceeds

The Company has not sold, within the last three years, Company securities that were not registered under the Securities Act of 1933, as amended.

Purchase of Equity Securities

The Company did not repurchase any of its equity securities during fiscal year 2016 and has no current intention to do so in the future.

 

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

 

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our financial statements and the related notes thereto included elsewhere in this Annual Report on Form 10-K. Except for the historical information contained herein, we wish to caution you that certain matters discussed in this report constitute forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including, without limitation, those risks and uncertainties discussed under the heading “Item 1A. – Risk Factors” contained in this Annual Report and any other reports filed by us from time to time with the Securities and Exchange Commission. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future results or otherwise. Forward-looking statements include statements regarding our expectations, beliefs, intentions or strategies regarding the future and can be identified by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would” or similar words.

Executive Summary

Prior to February 1, 2013, the Company conducted its Intelligent Bandwidth Management Business, in which it developed and marketed Intelligent Bandwidth Management solutions for fixed line and mobile network operators worldwide and provided services associated with such products, and, prior to November 1, 2012, the Company also conducted its IQstream Business, in which it developed and marketed a mobile broadband optimization solution.

On October 23, 2012, the Company entered into the Asset Sale Agreement , pursuant to which Buyer agreed to acquire substantially all of the assets primarily related to the Intelligent Bandwidth Management Business, including inventory, fixed assets, accounts receivable, intellectual property rights (other than patents and patent applications), contracts, certain real estate leases, the Company’s subsidiaries in Shanghai, the Netherlands and Japan, and certain shared facilities and assets for $18.75 million in cash, subject to a working capital adjustment, and the assumption by Buyer of certain liabilities. The Company’s stockholders authorized the Asset Sale at a Special Meeting of Stockholders held on January 29, 2013, and the Asset Sale was completed on January 31, 2013 (the transfer of the Company’s equity interests in its Shanghai subsidiary, which was subject to the receipt of government approval, occurred on March 25, 2013). Upon the closing of the Asset Sale, Buyer acquired substantially all of the Company’s operating assets relating to the Intelligent Bandwidth Management Business, including the Company’s accounts receivable, inventories and prepaid and other assets, and assumed most of the Company’s remaining current liabilities, including substantially all of the Company’s deferred revenue and accrued warranty obligations.

In conjunction with the approval of the Asset Sale Agreement, the Board also approved the Dissolution pursuant to the Plan of Dissolution following the completion of the Asset Sale. The Plan of Dissolution was also approved by the stockholders at the Special Meeting and, following a review of the Company’s strategic alternatives for all of the Company’s assets and available options for providing value to the Company’s stockholders, the Company filed the Certificate of Dissolution on March 7, 2013. For additional information regarding the Dissolution, please see the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on December 28, 2012 and its Current Report on Form 8-K filed with the SEC on March 8, 2013.

In connection with the filing of the Certificate of Dissolution, on March 7, 2013, the Company closed its stock transfer books and discontinued recording transfers of its Common Stock. The Common Stock, and stock certificates evidencing shares of the Common Stock, are no longer assignable or transferable on the Company’s books, other than transfers by will, intestate succession or operation of law. The Company also submitted a request to NASDAQ to suspend trading of the Common Stock on The NASDAQ Global Select Market effective as of the close of trading on March 7, 2013 and, on March 15, 2013, the Company filed a Form 25 with the SEC to delist its Common Stock, which became effective prior to the opening of trading on March 25, 2013. Since the suspension of trading of the Common Stock on The NASDAQ Global Select Market, shares of our Common Stock held in street name with brokers have been trading in the over-the-counter market on the Pink Sheets, an electronic bulletin board established for unlisted securities.

As a result of the completion of the Asset Sale and the Company’s previously announced halting of further development and marketing in connection with the IQstream Business, the Company no longer has any operating assets or revenue. Since the filing of the Certificate of Dissolution, the Company has been operating in accordance with the Plan of Dissolution, which contemplates an orderly wind-down of the Company’s business, including the sale or monetization of the Company’s remaining non-cash assets and the satisfaction or settlement of its liabilities and obligations, including contingent liabilities and claims. As of July 31, 2016, the Company had one remaining employee.

 

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On October 12, 2016, the Board approved the termination of employment of the Company’s sole remaining employee, David Guerrera, as the Company’s President, General Counsel and Secretary, effective as of October 12, 2016. Pursuant to a Services Consulting Agreement between the Company and Mr. Guerrera dated as of October 12, 2016, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.

During fiscal year 2014, the Company completed the sale of its patent portfolios. On February 28, 2014, the Company completed the sale of the IBM Patents for $2.0 million to Dragon Intellectual Property, LLC. On May 22, 2014, the Company completed the sale of the IQstream Patents for $0.3 million to Citrix Systems, Inc. Following the sale of the IQstream Patents, the Company has continued to pursue the sale of certain technology and equipment relating to the IQstream Business; however, the Company does not expect to receive any additional material consideration for its remaining IQstream assets.

In accordance with the Purchase and Sale Agreement by and between the Company and Tyngsborough Commons dated October 10, 2014, and amended on each of February 24, 2015, March 27, 2015, March 30, 2015, July 30, 2015, September 15, 2015, September 30, 2015 and October 9, 2015 (as amended, the “Purchase Agreement”), on December 4, 2015 the Company completed the sale of approximately 102 acres of undeveloped land located in Tyngsborough, Massachusetts to Tyngsborough Commons for a total purchase price of $2.5 million. In accordance with the terms of the Purchase Agreement, all representations and warranties which survived the closing expired on February 29, 2016.

On July 29, 2014, the Company paid a liquidating cash distribution to stockholders of $0.24 per share of Common Stock, or $6.93 million in the aggregate. The Board declared this distribution after the Delaware Court of Chancery, on July 2, 2014, granted the Company’s petition for a determination that, among other things, the amount set forth in the petition to be retained by the Company for anticipated wind-down costs and expenses and for contingent and unknown liabilities and other possible charges and expenses is sufficient to be retained pursuant to Section 280© of the DGCL. In accordance with the petition, any portion of the retained amount that is not required to cover wind-down costs, charges, expenses or liabilities may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties.

On August 2, 2016, the Company completed the sale of all of its equity shares of Tejas to Samena pursuant to the Share Purchase Agreement for an aggregate purchase price of $3.5 million. Sycamore received net proceeds of approximately $3.27 million after deduction of Indian withholding and stamp duty taxes in the transaction. The Share Purchase Agreement contains certain representations and warranties, covenants and agreements of each of Sycamore and Samena, including a covenant of Sycamore not to adopt a resolution authorizing the completion of the liquidation of Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL prior to the expiration of the 90th calendar day following August 2, 2016, the closing date under the Share Purchase Agreement.

Certain of the representations and warranties of each of Sycamore and Samena contained in the Share Purchase Agreement, including with respect to Sycamore’s authority to consummate the transactions contemplated by the Share Purchase Agreement, its title to the Tejas shares and its ability to execute, deliver and perform the Share Purchase Agreement consistent with the terms and conditions of the previously adopted Plan of Complete Liquidation and Dissolution, survive the closing through January 29, 2017. However, if the board of directors of Sycamore adopts a resolution on or after November 1, 2016 authorizing the completion of the liquidation of the Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL, Sycamore’s representations and warranties that survived the closing will expire on the date immediately preceding the date of such resolution and the Company will be free to complete its liquidation and dissolution at that time. All other representations and warranties contained in the Share Purchase Agreement expired at the closing. Each of Sycamore and Samena has agreed to indemnify and hold harmless the other party against any and all claims, losses and other expenses incurred as a result of any breach of such first party’s representations and warranties contained in the Share Purchase Agreement that survived the closing.

At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distribution to the Company’s stockholders involve substantial risks and uncertainties. Accordingly, it is not possible to predict the exact timing of the completion of the Dissolution, the exact timing of any further distributions to stockholders or the aggregate

 

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amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in Sycamore’s Statement of Net Assets included in this Annual Report. Sycamore will continue to analyze its estimates of liquidation expenses on an ongoing basis and determine whether further distributions of assets to its stockholders are appropriate at such times. In addition, Samena may assert a claim for indemnification or commence litigation proceedings in connection with the Share Purchase Agreement. No assurance can be given that Samena or another third party will not seek indemnification under the Share Purchase Agreement or otherwise commence litigation in connection with the sale of the Tejas shares prior to the conclusion of the Dissolution period, which may delay the conclusion of the Dissolution period or decrease the amount available for distribution to the Company’s stockholders.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations are based upon our financial statements. The preparation of these financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make judgments, assumptions and estimates that affect our net assets and changes in net assets. On an ongoing basis, we evaluate our estimates and assumptions, which, are based on our historical experience and other assumptions that we consider reasonable under the circumstances, and the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Differences between our estimates and the actual results are reflected in the period in which the estimate is changed.

We believe that the following critical accounting policies affect the most significant judgments, assumptions and estimates we used in preparing our financial statements. Changes in these estimates can materially affect our net assets and changes in net assets.

Liquidation Basis of Accounting

On March 24, 2013, the beginning of the fiscal month following the filing of the Certificate of Dissolution, the Company began reporting on a liquidation basis of accounting. Under the liquidation basis of accounting, assets are measured to reflect the estimated amount of cash or other consideration expected to be collected in settling or disposing of the assets. Liabilities are measured in accordance with the measurement provisions of Accounting Standard Codification Topics that otherwise apply. Additionally, the Company accrued estimated costs associated with carrying out the Plan of Dissolution. The measurement of assets and liabilities represent estimates, based on present facts and circumstances, of the realizable value of the assets and the costs associated with carrying out the Plan of Dissolution. The actual values and costs associated with carrying out the Plan of Dissolution may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events.

The table below summarizes the reserve for estimated costs during the Dissolution period as of July 31, 2016 and July 31, 2015 (in thousands). The estimated costs as of July 31, 2016 assumes that the Dissolution period ends on November 30, 2016. The estimated costs as of July 31, 2015 had assumed the Dissolution period was to end on March 7, 2016.

 

     July 31, 2016      July 31, 2015  

Compensation

   $ 297       $ 376   

Professional fees

     171         568   

Other expenses associated with wind-down activities

     108         646   

Insurance

     20         186   
  

 

 

    

 

 

 
   $ 596       $ 1,776   
  

 

 

    

 

 

 

Net Assets in Liquidation and Changes in Net Assets

Net assets in liquidation were $6.53 million and $10.08 million as of July 31, 2016 and July 31, 2015, respectively, a decrease of $3.55 million. The decrease was primarily due to the Company’s payment of a liquidating distribution to stockholders on April 29, 2016 of approximately $8.38 million.

During the year ended July 31, 2016, the Company adjusted its estimate of the realizable value of assets and its estimated settlement amounts of liabilities, resulting in a net increase to net assets of $4.83 million. The realizable value of assets increased by $3.28 million as a result of an increase in the estimated value of our Tejas investment. The Company increased its reserve for estimated costs during the Dissolution period by $0.15 million primarily due to the decision to extend the Dissolution period. The Company also decreased other liabilities by $1.70 million primarily related to taxes in certain state and foreign jurisdictions.

 

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Based on our current best estimate of the realizable value of the Company’s remaining assets relating to the IQstream Business, we have assigned a value of $0 to these assets for purposes of the Statement of Net Assets included in this Annual Report.

At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distribution to the Company’s stockholders involve substantial risks and uncertainties. Accordingly, it is not possible to predict with any certainty the timing of the completion of the Dissolution, the timing of any further distributions to stockholders or the aggregate amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in Sycamore’s Statement of Net Assets included in this Annual Report.

Liquidity and Capital Resources

Year Ended July 31, 2016

Total cash and cash equivalents were $3.84 million as of July 31, 2016 compared to $10.94 million as of July 31, 2015.

Cash and cash equivalents decreased by $7.1 million during fiscal year 2016. During fiscal year 2016, the Company paid $8.38 million to stockholders in a liquidating cash distribution and the Company paid $1.22 million in costs related to the Plan of Dissolution. During that same period, the Company received $2.5 million from the sale of the Tyngsborough Land.

Our primary source of liquidity comes from our cash and cash equivalents. We believe that our cash and cash equivalents will be sufficient to satisfy our anticipated cash requirements through the end of the Dissolution period. However, the Dissolution process involves substantial risks and uncertainties as described further under the heading “Item 1A. – Risk Factors” contained in this Annual Report. Accordingly, the actual amount of cash remaining for distribution to stockholders following completion of the Dissolution could vary significantly from current estimates, and such risks and uncertainties could result in no excess cash available for distribution.

Off-Balance Sheet Arrangements

The Company has no off-balance sheet arrangements.

Employees

As of July 31, 2016, the Company had one employee. On October 12, 2016, the Board approved the termination of employment of the Company’s sole remaining employee, David Guerrera, as the Company’s President, General Counsel and Secretary, effective as of October 12, 2016. Pursuant to a Services Consulting Agreement between the Company and Mr. Guerrera dated as of October 12, 2016, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

 

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

 

Reports of Independent Registered Public Accounting Firm .

     18   

Statement of Net Assets in Liquidation as of July  31, 2016 and July 31, 2015

     20   

Statement of Changes in Net Assets in Liquidation for the years ended July 31, 2016 and July 31, 2015

     21   

Notes to Financial Statements .

     22   

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sycamore Networks, Inc.

We have audited the accompanying statement of net assets in liquidation of Sycamore Networks, Inc. as of July 31, 2016, and the related statement of changes in net assets in liquidation for the year then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit 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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As discussed in Notes 1 and 2 to the financial statements, the stockholders of Sycamore Networks, Inc. approved a plan of liquidation and dissolution on January 29, 2013. The Company filed a Certificate of Dissolution effective March 7, 2013, and the Company commenced liquidation shortly thereafter. As a result, the Company has changed its basis of accounting for periods subsequent to March 23, 2013 from the going concern basis to a liquidation basis.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Sycamore Networks, Inc. as of July 31, 2016, and the changes in its net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America on the liquidation basis described in the preceding paragraph.

/s/ Moody, Famiglietti & Andronico, LLP

Tewksbury, Massachusetts

October 28, 2016

 

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of Sycamore Networks, Inc.

We have audited the accompanying statement of net assets in liquidation of Sycamore Networks, Inc. as of July 31, 2015, and the related statement of changes in net assets in liquidation for the period ended July 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these 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 discussed in Notes 1 and 2 to the financial statements, the stockholders of Sycamore Networks, Inc. approved a plan of liquidation and dissolution on January 29, 2013. The Company filed a Certificate of Dissolution effective March 7, 2013, and the Company commenced liquidation shortly thereafter. As a result, the Company has changed its basis of accounting for periods subsequent to March 23, 2013 from the going concern basis to a liquidation basis.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Sycamore Networks, Inc. as of July 31, 2015, and the changes in its net assets in liquidation for the period ended July 31, 2015, in conformity with accounting principles generally accepted in the United States of America on the liquidation basis described in the preceding paragraph.

/s/ PricewaterhouseCoopers LLP

Boston, Massachusetts

October 27, 2015

 

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Sycamore Networks, Inc.

Statement of Net Assets in Liquidation

(in thousands, except per share data)

 

     July 31, 2016      July 31, 2015  

Assets

     

Cash and cash equivalents

   $ 3,841       $ 10,943   

Land

     —           2,500   

Investment in Tejas

     3,268         —     

Other assets

     58         47   
  

 

 

    

 

 

 

Total assets

     7,167         13,490   
  

 

 

    

 

 

 

Liabilities and Net Assets

     

Accounts Payable

     45         —     

Accrued expenses

     —           47   

Reserve for estimated costs during the Dissolution period

     596         1,776   

Other liabilities

     —           1,587   
  

 

 

    

 

 

 

Total liabilities

     641         3,410   
  

 

 

    

 

 

 

Net assets in liquidation

   $ 6,526       $ 10,080   
  

 

 

    

 

 

 

Shares outstanding

     28,882         28,882   
  

 

 

    

 

 

 

Net assets in liquidation per share

   $ 0.23       $ 0.35   
  

 

 

    

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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Sycamore Networks, Inc.

Statement of Changes in Net Assets in Liquidation

For the years ended July 31, 2016 and July 31, 2015

(in thousands)

 

     Twelve months
ended July 31,
2016
 

Net assets in liquidation as of July 31, 2015

   $ 10,080   

Change in estimated realizable value of assets and liabilities:

  

Liquidating distribution

     (8,376

Increase in estimated costs during the Dissolution period

     (157

Decrease in other liabilities

     1,704   

Increase in estimated realizable value for other assets

     7   

Increase in estimated realizable value for the investment in Tejas

     3,268   
  

 

 

 

Net assets in liquidation as of July 31, 2016

   $ 6,526   
  

 

 

 

 

     Twelve months
ended July 31,
2015
 

Net assets in liquidation as of July 31, 2014

   $ 9,496   

Change in estimated realizable value of assets and liabilities:

  

Decrease in estimated costs during the Dissolution period

     210   

Decrease in other liabilities

     281   

Increase in estimated realizable value for other assets

     93   
  

 

 

 

Net assets in liquidation as of July 31, 2015

   $ 10,080   
  

 

 

 

The accompanying notes are an integral part of the financial statements.

 

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Sycamore Networks, Inc.

Notes to Financial Statements

1. Description of Business

Prior to February 1, 2013, Sycamore Networks, Inc. (the “Company”) developed and marketed Intelligent Bandwidth Management solutions for fixed line and mobile network operators worldwide and provided services associated with such products (the “Intelligent Bandwidth Management Business”), and, prior to November 1, 2012, the Company also developed and marketed a mobile broadband optimization solution (the “IQstream Business”).

On October 23, 2012, the Company entered into an Asset Purchase and Sale Agreement (the “Asset Sale Agreement”) with Sunrise Acquisition Corp. (now known as Coriant America Inc.), a portfolio company of Marlin Equity Partners (“Buyer”), pursuant to which Buyer agreed to acquire substantially all of the assets (the “Asset Sale”) primarily related to the Intelligent Bandwidth Management Business, including inventory, fixed assets, accounts receivable, intellectual property rights (other than patents and patent applications), contracts, certain real estate leases, the Company’s subsidiaries in Shanghai, the Netherlands and Japan, and certain shared facilities and assets for $18.75 million in cash, subject to a working capital adjustment, and the assumption by Buyer of certain liabilities. The Company’s stockholders authorized the Asset Sale at a Special Meeting of Stockholders held on January 29, 2013 (the “Special Meeting”), and the Asset Sale was completed on January 31, 2013 (the transfer of the Company’s equity interests in its Shanghai subsidiary, which was subject to the receipt of government approval, occurred on March 25, 2013). Upon the closing of the Asset Sale, Buyer acquired substantially all of the Company’s operating assets relating to the Intelligent Bandwidth Management Business, including the Company’s accounts receivable, inventories and prepaid and other assets, and assumed most of the Company’s remaining current liabilities, including substantially all of the Company’s deferred revenue and accrued warranty obligations.

In conjunction with the approval of the Asset Sale Agreement, the Company’s Board of Directors (the “Board”) also approved the liquidation and dissolution of the Company (the “Dissolution”) pursuant to a Plan of Complete Liquidation and Dissolution (the “Plan of Dissolution”) following the completion of the Asset Sale. The Plan of Dissolution was also approved by the stockholders at the Special Meeting and, following a review of the Company’s strategic alternatives for all of the Company’s assets and available options for providing value to the Company’s stockholders, the Company filed a certificate of dissolution with the Secretary of State of the State of Delaware (the “Certificate of Dissolution”) on March 7, 2013. For additional information regarding the Dissolution, please see the Company’s Definitive Proxy Statement on Schedule 14A filed with the SEC on December 28, 2012 and its Current Report on Form 8-K filed with the SEC on March 8, 2013.

In connection with the filing of the Certificate of Dissolution, on March 7, 2013, the Company closed its stock transfer books and discontinued recording transfers of its common stock, $0.001 par value per share (the “Common Stock”). The Common Stock, and stock certificates evidencing shares of the Common Stock, are no longer assignable or transferable on the Company’s books, other than transfers by will, intestate succession or operation of law. The Company also submitted a request to The NASDAQ Stock Market (“NASDAQ”) to suspend trading of the Common Stock on The NASDAQ Global Select Market effective as of the close of trading on March 7, 2013 and, on March 15, 2013, the Company filed a Form 25 with the SEC to delist its Common Stock, which became effective prior to the opening of trading on March 25, 2013. Since the suspension of trading of the Common Stock on The NASDAQ Global Select Market, shares of our Common Stock held in street name with brokers have been trading in the over-the-counter market on the Pink Sheets, an electronic bulletin board established for unlisted securities.

As a result of the completion of the Asset Sale and the Company’s previously announced halting of further development and marketing in connection with the IQstream Business, the Company no longer has any operating assets or revenue. Since the filing of the Certificate of Dissolution, the Company has been operating in accordance with the Plan of Dissolution, which contemplates an orderly wind-down of the Company’s business, including the sale or monetization of the Company’s remaining non-cash assets and the satisfaction or settlement of its liabilities and obligations, including contingent liabilities and claims. As of July 31, 2016, the Company had one remaining employee. On October 12, 2016, the Board approved the termination of employment of the Company’s sole remaining employee, David Guerrera, as the Company’s President, General Counsel and Secretary, effective as of October 12, 2016. Pursuant to a Services Consulting Agreement between the Company and Mr. Guerrera dated as of October 12, 2016, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.

 

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During fiscal year 2014, the Company completed the sale of its patent portfolios. On February 28, 2014, the Company completed the sale of its portfolio of 40 patents and two patent applications related to the Intelligent Bandwidth Management Business (the “IBM Patents”) for $2.0 million to Dragon Intellectual Property, LLC. On May 22, 2014, the Company completed the sale of its portfolio of three United States patents, six United States patent applications and certain foreign patents and patent applications related to the IQstream Business (the “IQstream Patents”) for $0.3 million to Citrix Systems, Inc. Following the sale of the IQstream Patents, the Company has continued to pursue the sale of certain technology and equipment relating to the IQstream Business; however, the Company does not expect to receive any additional material consideration for its remaining IQstream assets.

In accordance with the Purchase and Sale Agreement by and between the Company and Princeton Tyngsborough Commons, LLC (“Tyngsborough Commons”) dated October 10, 2014, and amended on each of February 24, 2015, March 27, 2015, March 30, 2015, July 30, 2015, September 15, 2015, September 30, 2015 and October 9, 2015 (as amended, the “Purchase Agreement”), on December 4, 2015 the Company completed the sale of approximately 102 acres of undeveloped land located in Tyngsborough, Massachusetts to Tyngsborough Commons for a total purchase price of $2.5 million. In accordance with the terms of the Purchase Agreement, all representations and warranties which survived the closing expired on February 29, 2016.

On April 29, 2016, the Company paid a liquidating cash distribution to stockholders of $0.29 per share of Common Stock, or $8.38 million in the aggregate. The Board declared this liquidating distribution after the Delaware Court of Chancery (the “Court of Chancery”), on February 25, 2016, entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, to make a final determination with respect to the Company’s remaining non-cash assets. In accordance with that order, the Court of Chancery affirmed that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses, of which any portion that is not required to cover such wind down costs and expenses may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties.

On August 2, 2016, the Company completed the sale of all of its equity shares of Tejas Networks Limited, an Indian private company (“Tejas”), to Samena Spectrum Co, a company incorporated under the laws of Mauritius (“Samena”), pursuant to a Share Purchase Agreement dated as of August 2, 2016 (the “Share Purchase Agreement”) for an aggregate purchase price of $3.5 million. Sycamore received net proceeds of approximately $3.27 million after deduction of Indian withholding and stamp duty taxes in the transaction. The Share Purchase Agreement contains certain representations and warranties, covenants and agreements of each of Sycamore and Samena, including a covenant of Sycamore not to adopt a resolution authorizing the completion of the liquidation of Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the General Corporation Law of the State of Delaware (the “DGCL”) prior to the expiration of the 90th calendar day following August 2, 2016, the closing date under the Share Purchase Agreement.

Certain of the representations and warranties of each of Sycamore and Samena contained in the Share Purchase Agreement, including with respect to Sycamore’s authority to consummate the transactions contemplated by the Share Purchase Agreement, its title to the Tejas shares and its ability to execute, deliver and perform the Share Purchase Agreement consistent with the terms and conditions of the previously adopted Plan of Complete Liquidation and Dissolution, survive the closing through January 29, 2017. However, if the board of directors of Sycamore adopts a resolution on or after November 1, 2016 authorizing the completion of the liquidation of the Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL, Sycamore’s representations and warranties that survived the closing will expire on the date immediately preceding the date of such resolution and the Company will be free to complete its liquidation and dissolution at that time. All other representations and warranties contained in the Share Purchase Agreement expired at the closing. Each of Sycamore and Samena has agreed to indemnify and hold harmless the other party against any and all claims, losses and other expenses incurred as a result of any breach of such first party’s representations and warranties contained in the Share Purchase Agreement that survived the closing.

At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distribution to the Company’s stockholders involve substantial risks and uncertainties. Accordingly, it is not possible to predict the exact timing of the completion of the Dissolution, the exact timing of any further distributions to stockholders or the aggregate amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in Sycamore’s Statement of Net Assets included in this Annual Report.

 

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Sycamore will continue to analyze its estimates of liquidation expenses on an ongoing basis and determine whether further distributions of assets to its stockholders are appropriate at such times. In addition, Samena may assert a claim for indemnification or commence litigation proceedings in connection with the Share Purchase Agreement. No assurance can be given that Samena or another third party will not seek indemnification under the Share Purchase Agreement or otherwise commence litigation in connection with the sale of the Tejas shares prior to the conclusion of the Dissolution period, which may delay the conclusion of the Dissolution period or decrease the amount available for distribution to the Company’s stockholders.

2. Summary of Significant Accounting Policies

The accompanying financial statements reflect the application of certain significant accounting policies as described below. The Company believes these accounting policies are significant because they affect judgments, assumptions and estimates we used in preparing our financial statements. Changes in these estimates can materially affect our net assets and changes in net assets.

Basis of Consolidation and Presentation

The preparation of financial statements 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 assets and liabilities at the dates of the financial statements. Actual results could differ from these estimates.

Following the Company’s filing of the Certificate of Dissolution, on March 24, 2013 the Company adopted the liquidation basis of accounting. See “Liquidation Basis of Accounting” below for further information regarding the Company’s use of the liquidation basis of accounting.

Cash Distributions

The Company paid $8.38 million in a cash distribution to stockholders in fiscal year 2016.

Liquidation Basis of Accounting

On March 24, 2013, the beginning of the fiscal month following the filing of the Certificate of Dissolution, the Company began reporting on a liquidation basis of accounting. Under the liquidation basis of accounting, assets are measured to reflect the estimated amount of cash or other consideration expected to be collected in settling or disposing of the assets. Liabilities are measured in accordance with the measurement provisions of Accounting Standard Codification Topics that otherwise apply. Additionally, the Company accrued estimated costs associated with carrying out the Plan of Dissolution. These estimates are reviewed periodically and adjusted as appropriate.

The measurement of assets and liabilities represent estimates, based on present facts and circumstances, of the realizable value of the assets and the costs associated with carrying out the Plan of Dissolution. The actual values and costs associated with carrying out the Plan of Dissolution may differ from amounts reflected in the financial statements because of the inherent uncertainty in estimating future events. These differences may be material. In particular, the estimates of costs will vary with the length of time necessary to complete the Dissolution process and to resolve any claims. At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. However, the Dissolution process and the payment of any distribution to the Company’s stockholders involve substantial risks and uncertainties. Accordingly, it is not possible to predict the exact timing of the completion of the Dissolution, the exact timing of any further distributions to stockholders or the aggregate amount of any such distributions, and no assurance can be given that the distributions will equal or exceed the estimate of net assets presented in the accompanying Statement of Net Assets.

 

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Cash Equivalents and Investments

Cash equivalents are short-term, highly liquid investments with original or remaining maturity dates of three months or less at the date of acquisition. Cash equivalents are carried at cost plus accrued interest, which approximates fair market value. As of July 31, 2016 and 2015, aggregate cash and cash equivalents consisted of (in thousands):

 

July 31, 2016:    Amortized
Cost
     Gross
Unrealized

Gains
     Gross
Unrealized

Losses
     Fair
Market

Value
 

Cash and cash equivalents

   $ 3,841       $ —         $ —         $ 3,841   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 3,841       $ —         $ —         $ 3,841   
  

 

 

    

 

 

    

 

 

    

 

 

 
July 31, 2015:    Amortized
Cost
     Gross
Unrealized

Gains
     Gross
Unrealized

Losses
     Fair
Market

Value
 

Cash and cash equivalents

   $ 10,943       $ —         $ —         $ 10,943   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 10,943       $ —         $ —         $ 10,943   
  

 

 

    

 

 

    

 

 

    

 

 

 

3. Liquidation Basis of Accounting

Fiscal Year 2016

Net assets in liquidation were $6.53 million and $10.08 million as of July 31, 2016 and July 31, 2015, respectively.

As of July 31, 2016, assets consisted of cash and cash equivalents of $3.84 million, the Tejas investment valued at $3.27 million and other assets of $0.06 million. Based on our current best estimate of the realizable value of the Company’s remaining assets relating to the IQstream Business, we have assigned a value of $0 to these assets for purposes of the Statement of Net Assets.

As of July 31, 2016, liabilities consisted of accounts payable of $0.04 million and our reserve for estimated costs during the Dissolution period of $0.60 million.

The Company accrued estimated costs expected to be incurred in carrying out the Plan of Dissolution. Under Delaware law, the Dissolution period was to last a minimum of three years from the filing of the Certificate of Dissolution (or March 7, 2016). On February 25, 2016, the Court of Chancery entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, to make a final determination with respect to the Company’s remaining non-cash assets. At this time, the Company expects to make a final liquidating distribution and conclude the Dissolution period as promptly as possible following the expiration of the survival period for Sycamore’s representations and warranties and related indemnification obligations under the Share Purchase Agreement, which may occur as early as November 1, 2016. The Company was required to make certain estimates and exercise judgment in determining the accrued costs of liquidation as of July 31, 2016 and July 31, 2015.

The table below summarizes the reserve for estimated costs during the Dissolution period as of July 31, 2016 and July 31, 2015 (in thousands). The estimated costs as of July 31, 2016 assumes that the Dissolution period ends on November 30, 2016. The estimated costs as of July 31, 2015 had assumed the Dissolution period was to end on March 7, 2016:

 

     July 31, 2016      July 31, 2015  

Compensation

   $ 297       $ 376   

Professional fees

     171         568   

Other expenses associated with wind-down activities

     108         646   

Insurance

     20         186   
  

 

 

    

 

 

 
   $ 596       $ 1,776   
  

 

 

    

 

 

 

During the year ended July 31, 2016, the Company adjusted its estimate of the realizable value of assets and its estimated settlement amounts of liabilities, resulting in a net increase to net assets of $4.83 million. The realizable value of assets increased by $3.28 million as a result of an increase in the estimated value of our Tejas investment. The Company increased its reserve for estimated costs during the Dissolution period by $0.15 million primarily due to the decision to extend the Dissolution period. The Company also decreased other liabilities by $1.70 million primarily related to taxes in certain state and foreign jurisdictions.

Fiscal Year 2015

Net assets in liquidation increased $0.58 million during fiscal year 2015.

During the year ended July 31, 2015, the Company adjusted its estimate of the realizable value of assets and its estimated settlement amounts of liabilities, resulting in a net increase to net assets of $0.58 million. The realizable value of assets increased by $0.09 million as a result of an increase in other assets primarily related to a miscellaneous receivable. The Company decreased its reserve for estimated costs during the Dissolution period by

 

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$0.21 million. The decrease was primarily related to lower professional fees of $0.15 million and other expenses of $0.08 million. The decrease was offset in part by an increase in compensation costs of $0.02 million. The Company also decreased accrued expenses and other liabilities by $0.28 million primarily related to taxes in certain state and foreign jurisdictions.

4. Property and Equipment

None.

5. Commitments

Operating Leases

The Company leases office space from Regis Management Group LLC in Andover, Massachusetts. The term of the Regis lease is not greater than twelve months.

6. Income Taxes

The components of the Company’s net deferred tax assets at July 31, 2016 and 2015 are as follows (in thousands):

 

     July 31,  
     2016      2015  

Deferred tax assets:

     

Net operating loss carryforwards

   $ 297,870       $ 298,924   

Credit carryforwards

     20,969         21,301   

Restructuring and related accruals

     —           3,502   

Capital loss carryforwards

     —           672   

Depreciation

     —           971   

Other, net

     —           695   
  

 

 

    

 

 

 

Total net deferred tax assets

     318,839         326,065   

Valuation allowance

     (318,839      (326,065
  

 

 

    

 

 

 

Net deferred tax assets

   $ —         $ —     
  

 

 

    

 

 

 

The Company is currently open to audit under statutes of limitation by the Internal Revenue Service, various foreign jurisdictions, and state jurisdictions for the fiscal years ended July 31, 2009 through July 31, 2016. However, limited adjustments can be made to federal and state tax returns in earlier years in order to reduce net operating loss carryforwards.

As of July 31, 2016, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $846.3 million and $33.47 million, respectively. The federal and state net operating loss carryforwards will expire at various dates through 2034. The Company also has federal and state research and development credit carryforwards of approximately $14.48 million and $9.98 million, respectively, which begin to expire at various dates through 2020.

The occurrence of ownership changes, as defined in Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), is not controlled by the Company, and could significantly limit the amount of net operating loss carryforwards and research and development credits that can be utilized annually to offset future taxable income. The Company completed an updated Section 382 study through July 31, 2011 and the results of this study showed that no ownership change within the meaning of the Code had occurred through July 31, 2011 that would limit the annual utilization of available tax attributes. The Company has not, however, conducted a Section 382 study for any periods after July 31, 2011 and, accordingly, the Company cannot provide any assurance that an ownership change within the meaning of the Code has not occurred since that date.

The Company has evaluated the positive and negative evidence bearing upon the realization of its deferred tax assets and has established a valuation allowance of $318.84 million and $326.06 million as of July 31, 2016 and July 31, 2015, respectively, for such assets, which are comprised principally of net operating loss carryforwards and research and development credits.

 

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Included in the net operating loss carryforwards are stock option deductions of approximately $125.0 million. The benefits of these stock option deductions approximate $47.8 million. As of July 31, 2016 and 2015, the Company had net operating loss carryforwards of approximately $7.1 million related to the exercise of stock options subsequent to the adoption of fair value accounting. This amount represents the excess benefit and has not been included in the gross deferred tax asset reflected for net operating losses.

As of July 31, 2016, the total amount of unrecognized tax benefit is $0 million.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):

 

     2016      2015  

Beginning balance .

   $ 1,587       $ 1,786   

Increase for current year .

     70         82   

Reductions related to expiration of statute of limitations .

     (1,657      (281
  

 

 

    

 

 

 

Ending balance

   $ —         $ 1,587   
  

 

 

    

 

 

 

As of July 31, 2016 and July 31, 2015, the total amount of accrued interest and penalties related to uncertain tax positions is $0 and $0.6 million. The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for federal, international and state income taxes. During the year ended July 31, 2016 the liability was adjusted to $0. This liability is subject to change, perhaps materially.

7. Common Stock

Prior to the Dissolution, the Company was authorized to issue up to 250,000,000 shares of the Common Stock. The holders of the Common Stock are entitled to one vote for each share held. In connection with the filing of the Certificate of Dissolution, effective as of 5:00 p.m. Eastern Time on March 7, 2013, the Company closed its stock transfer books and discontinued recording transfers of the Common Stock. The Common Stock, and stock certificates evidencing the shares of Common Stock, are no longer assignable or transferable on the Company’s books, other than transfers by will, intestate succession or operation of law, and represent only the right to receive distributions in connection with the Dissolution, if any. The Board will determine, in its sole discretion and in accordance with the Plan of Dissolution and applicable law, the timing, amount and kind of all distributions to be made to stockholders.

 

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8. Fair Value Measurements

The fair value measurement rules establish a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

Level 1    Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2    Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3    Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities of the Company measured at fair value on a recurring basis as of July 31, 2016, are summarized as follows (in thousands):

 

            Fair Value Measurements at Reporting Date Using  

Description

   July 31,
2016
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant Unobservable
Inputs
(Level 3)
 

Assets

           

Cash and Cash Equivalents

   $ 3,841       $ 3,841       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 3,841       $ 3,841       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and Cash Equivalents

Cash and cash equivalents of $3.84 million consisting of money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Assets and liabilities of the Company measured at fair value on a recurring basis as of July 31, 2015, are summarized as follows (in thousands):

 

            Fair Value Measurements at Reporting Date Using  

Description

   July 31,
2015
     Quoted Prices in
Active Markets
for Identical
Assets (Level 1)
     Significant Other
Observable
Inputs (Level 2)
     Significant Unobservable
Inputs
(Level 3)
 

Assets

           

Cash and Cash Equivalents

   $ 10,943       $ 10,943       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 10,943       $ 10,943       $ —         $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Cash and Cash Equivalents

Cash and cash equivalents of $10.94 million consisting of money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

 

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9. Commitments and Contingencies

Tyngsborough Land Litigation

On March 26, 2015, the Plaintiffs filed the Complaint in the Land Court Department of the Trial Court of the Commonwealth of Massachusetts against the Company and Charles McAnsin Associates, A Limited Partnership. The Complaint asserted that pursuant to a Reciprocal Easement Agreement, the parties thereto agreed to give each other easements for vehicular access over a certain road. The Complaint further asserted that by an amendment to the Reciprocal Easement Agreement, dated as of October 30, 2000, the parties removed all but one lot owned by the Company’s predecessor-in-title from within the purview of the Reciprocal Easement Agreement, and that consequently the Company had the right to the use of only a portion of the road and with respect to the single lot only.

The Complaint stated a claim to quiet title, and sought relief in the form of: (1) a declaration that the Company has the right as appurtenant to the single lot to use the road for access to that lot; (2) a declaration that the Company has no appurtenant right to use the disputed section of the road for any purpose; (3) a declaration that the Company’s only right to use the disputed section of the road is the right appurtenant to the single lot; (4) a declaration that a development proposed on the Tyngsborough Land would not have access over the disputed section of the road; and (5) an award of the Plaintiffs’ costs. On April 16, 2015, the Company filed a special motion to dismiss the Complaint. On May 8, 2015, the Land Court Department of the Trial Court of the Commonwealth of Massachusetts heard oral argument on the motion to dismiss and, after argument, took the matter under advisement.

On October 5, 2015, the Company, Tyngsborough Commons, the Plaintiffs and certain other parties named therein entered into the Settlement Agreement providing for, among other things: (i) the filing of a motion to stay the Tyngsborough Litigation upon the parties’ entry into the Settlement Agreement; and (ii) in connection with the closing of the sale of the Tyngsborough Land to Tyngsborough Commons (or its permitted assigns), (A) the filing of a stipulation of dismissal, with prejudice, of the Tyngsborough Litigation, upon the payment by the Company and Tyngsborough Commons to the Plaintiffs of an aggregate amount of $125,000 (the Company and Tyngsborough Commons separately agreed that the Company is only required to pay $50,000 of such settlement amount), (B) the termination of the Reciprocal Easement Agreement and (C) the entry into the New Easement Agreement. In connection with the closing of the sale of the Tyngsborough Land on December 4, 2015, the Settlement Agreement was consummated, in connection with which settlement funds were disbursed to the Plaintiffs, a stipulation of dismissal was filed in the Land Court Department of the Trial Court of the Commonwealth of Massachusetts and the termination of the Reciprocal Easement Agreement and the New Easement Agreement were recorded with the Middlesex North Registry of Deeds in Middlesex County, Massachusetts.

Delaware Court of Chancery

On February 12, 2016, the Company filed the Petition in the Court of Chancery, requesting an extension in accordance with the DGCL of up to an additional two years of the Company’s wind down period, or such shorter period as the Board deems necessary, to make a final determination with respect to the Company’s Tejas investment. On February 25, 2016, the Court of Chancery entered an order extending Sycamore’s corporate existence for an additional period of up to two years, ending on March 7, 2018, or such shorter period as the Board deems necessary, and affirming that approximately $3.54 million is sufficient to be retained for anticipated wind down costs and expenses, of which any portion that is not required to cover such wind down costs and expenses may be distributed from time to time to the Company’s stockholders in the discretion of the Board in accordance with its fiduciary duties.

Guarantees

The Company’s guarantees requiring disclosure consist of its indemnification obligations as set forth in the Share Purchase Agreement, indemnification for other claims and indemnification for officers and directors.

Prior to the Asset Sale and the Dissolution, in the normal course of business, the Company agreed to indemnify other parties, including customers, lessors and parties to other transactions with the Company with respect to certain matters. Historically, payments made by the Company under these agreements had not had a material impact on the Company’s operating results or financial position. Furthermore, most of these obligations were assumed by Buyer in connection with the Asset Sale. Accordingly, the Company has not recorded a liability for these agreements as of July 31, 2016 or July 31, 2015, as the Company believes the exposure for any related payments is not material.

We entered into our standard form of indemnification agreement with each of our current and former directors and executive officers, which is in addition to the indemnification provided for in our amended and restated certificate of incorporation, as amended. The Plan of Dissolution also provides that we continue to indemnify such directors and executive officers in accordance with such agreements and our amended and restated certificate of incorporation, as amended. The indemnification agreements, among other things, provide for indemnification of such directors and executive officers for a number of expenses, including attorneys’ fees and other related expenses, as well as certain judgments, fines, penalties and settlement amounts incurred by any such person in any action, suit or proceeding,

 

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including any action by or in the right of the Company, arising out of such person’s service as a director or executive officer of the Company or any other company or enterprise to which the person provided services at our request. The Company did not incur any expense under these arrangements during fiscal year 2016 or fiscal year 2015. Due to the Company’s inability to estimate liabilities in connection with these agreements, if and when they might be incurred, the Company has not recorded any liability for these agreements as of July 31, 2016 or July 31, 2015. During the Dissolution period, we intend to continue to indemnify each of our current and former directors and executive officers to the extent permitted under Delaware law, our amended and restated certificate of incorporation, as amended, and the indemnification agreements. The Company has also continued to maintain directors’ and officers’ insurance coverage since the filing of the Certificate of Dissolution, and intends to maintain such coverage through the end of the Dissolution period.

In connection with the closing of the sale of the Tejas shares, the Company agreed to indemnify Samena for any damages arising out of a breach of certain representations or warranties as set forth in the Share Purchase Agreement, including with respect to the Company’s authority to consummate the transactions contemplated by the Share Purchase Agreement, its title to the Tejas shares and its ability to execute, deliver and perform the Share Purchase Agreement consistent with the terms and conditions of the previously adopted Plan of Complete Liquidation and Dissolution. The Company’s aggregate indemnification liability for breaches of representations or warranties is limited to $3.5 million. All of the Company’s indemnification obligations for breaches of representations or warranties under the Share Purchase Agreement are set to expire no later than January 29, 2017. However, if the board of directors of the Company adopts a resolution on or after November 1, 2016 authorizing the completion of the liquidation of the Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL, the Company’s representations and warranties that survived the closing will expire on the date immediately preceding the date of such resolution and the Company will be free to complete its liquidation and dissolution at that time. The Company has not received any claims for indemnification under the Share Purchase Agreement and therefore has not recorded, nor does it expect to record, any liability in connection with its indemnification obligations under the Share Purchase Agreement.

Other Matters

Prior to April 7, 2016, the Company’s 401(k) was the subject of a scheduled investigation by the U.S. Department of Labor (the “DOL”). On April 7, 2016, the DOL informed the Company that its investigation had concluded and that no further action by the DOL was then contemplated.

10. Subsequent Events

On August 2, 2016, the Company completed the sale of all of its equity shares of Tejas, to Samena pursuant to the Share Purchase Agreement for an aggregate purchase price of $3.5 million. Sycamore received net proceeds of approximately $3.27 million after deduction of Indian withholding and stamp duty taxes in the transaction. The Share Purchase Agreement contains certain representations and warranties, covenants and agreements of each of Sycamore and Samena, including a covenant of Sycamore not to adopt a resolution authorizing the completion of the liquidation of Company’s assets and the making of a final liquidating distribution to the Company’s stockholders in accordance with the DGCL prior to the expiration of the 90th calendar day following August 2, 2016, the closing date under the Share Purchase Agreement, or October 31, 2016.

 

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. Our management (with the participation of our Principal Executive Officer and Principal Financial Officer) evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of July 31, 2016. Disclosure controls and procedures are designed to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported on a timely basis and that such information is accumulated and communicated to management, including the Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based on this evaluation, our Principal Executive Officer and Principal Financial Officer concluded that these disclosure controls and procedures are effective and designed to ensure that the information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the requisite time periods.

Limitations on Effectiveness of Controls. Our management has concluded that our disclosure controls and procedures and internal controls provide reasonable assurance that the objectives of our control system are met. However, our management (including our Principal Executive Officer and Principal Financial Officer) does not expect that the disclosure controls and procedures or internal controls will prevent all error and/or fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, errors and instances of fraud, if any, within the company have been or will be detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple errors or mistakes. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurances that any design will succeed in achieving its stated goals under all potential future conditions. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

Management’s Annual Report on Internal Control over Financial Reporting. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, the Company’s Principal Executive Officer and Principal Financial Officer and effected by the Board, 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 Sycamore;

 

    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 Sycamore are being made only in accordance with authorizations of management and directors of Sycamore; and

 

    Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of Sycamore’s 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 risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of July 31, 2016. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework (2013).

Based on our assessment, management concluded that, as of July 31, 2016, our internal control over financial reporting was effective based on those criteria.

 

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Changes in Internal Control over Financial Reporting. There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B. OTHER INFORMATION

None.

 

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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Set forth below is information concerning our current directors and executive officers and their ages as of July 31, 2016.

 

Name

  

Age

  

Position

David Guerrera    48    President, General Counsel, Secretary and Director
Anthony J. Petrillo    47    Principal Financial Officer and Treasurer
Daniel E. Smith    66    Director
Alan R. Cormier    65    Director

Mr. Guerrera began serving as the Company’s Principal Executive Officer, President and Secretary on a non-employee basis in October 2016, and began serving as a director of the Company in October 2014. From December 2013 to October 2016, Mr. Guerrera served as the Company’s President, General Counsel and Secretary. Prior to that, Mr. Guerrera had served as an attorney in Sycamore’s legal department since August 2006 and, in February 2013, he was appointed Associate Counsel of Sycamore. Individual Qualifications: We believe that Mr. Guerrera’s legal background and his extensive knowledge of the Company acquired during his many years of service with the Company make him uniquely qualified to serve on the Board to assist in the Dissolution of the Company.

Mr. Petrillo began serving as the Company’s Principal Financial Officer and Treasurer on a non-employee basis in December 2014. From April 2013 to December 2014, Mr. Petrillo served as the Company’s Chief Financial Officer and Treasurer. Prior to that, Mr. Petrillo was employed in the Company’s Finance Department since April 2000 and served as the Company’s Corporate Controller since June 2005. Mr. Petrillo was also appointed Assistant Secretary of Sycamore in December 2004.

Mr. Smith has served as a member of the Board since October 1998. Mr. Smith also served as the Company’s President and Chief Executive Officer from October 1998 to April 2013. From October 2007 to November 2007, Mr. Smith also served as the Company’s interim principal financial officer. From June 1997 to July 1998, Mr. Smith was Executive Vice President and General Manager of the Core Switching Division of Ascend Communications, Inc., a provider of wide area network switches and access data networking equipment. Mr. Smith was also a member of the board of directors of Ascend Communications, Inc. during that time. From April 1992 to June 1997, Mr. Smith served as President and Chief Executive Officer and a member of the board of directors of Cascade Communications Corp. Individual Qualifications: We believe that Mr. Smith’s deep understanding of the Company and its remaining assets, which he acquired during his 15 years of service as the prior President and Chief Executive Officer of the Company, make him an invaluable member of the Board.

Mr. Cormier was appointed to serve as a member of our Board of Directors effective April 8, 2013. Since September 2016, Mr. Cormier has served as General Counsel of C&K Components, a provider of electronic switch and interface technology. From July 2016 to August 2016, Mr. Cormier served as a consultant for C&K Components. From December 2013 to June 2016, Mr. Cormier served as Senior Vice President and General Counsel of ModusLink Global Solutions, Inc., a provider of supply chain management services to technology and software companies. From April 8, 2013 to December 20, 2013, Mr. Cormier served as Sycamore’s President, Chief Executive Officer and Secretary. Prior to that, Mr. Cormier served as the Company’s General Counsel from December 2004 through April 2013. He also served as the Company’s Assistant Secretary from December 2004 through October 2006 and as Secretary from November 2006 to April 2013. From July 2000 through March 2004, he was Vice President, General Counsel and Secretary of Manufacturers’ Services Limited, a contract manufacturing company. Mr. Cormier served, from January 2000 through July 2000, as Vice President, General Counsel and Clerk of Dynamics Research Corporation, a provider of information technology, engineering, logistics and other consulting services to federal and state agencies. Prior to that, he spent several years in senior positions in the legal department of Wang Global Corporation (formerly Wang Laboratories, Inc.). Individual Qualifications: We believe that Mr. Cormier’s broad experience in the legal field and his understanding of the Company, which he acquired during his 8 years of service as General Counsel of the Company, make him an invaluable member of the Board to assist in the Dissolution of the Company.

 

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The Company expects that the current officers and directors will continue to serve in their current capacities until the completion of the Dissolution.

Business Code of Ethics and Corporate Governance

We have adopted a business code of ethics and corporate governance that applies to all executive officers, directors and employees of Sycamore, which is available on our website at www.scmrinc.com . Copies are also available in print to stockholders upon request to Sycamore Networks, Inc., Attn: Secretary, 300 Brickstone Square, Suite 201, Andover, Massachusetts 01810. We intend to satisfy the disclosure requirement under Item 10 of Form 8-K regarding an amendment to, or waiver from, a provision of the business code of ethics and corporate governance by posting such information on our website at the address specified above.

Board Committees

Effective as of April 1, 2013, the Company no longer has any standing committees, and the responsibilities and duties previously delegated to the Audit Committee, Compensation Committee and Nominating Committee have been, and will be, undertaken and performed, to the extent applicable, by the full Board.

Compensation Committee Interlocks and Insider Participation

As noted above, the Company no longer has a Compensation Committee. No interlocking relationship exists between any member of the Board and any member of the board or compensation committee of any other company.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act of 1934, as amended, requires our directors, executive officers and holders of more than 10% of our outstanding shares of common stock (collectively, “Reporting Persons”) to file with the Commission initial reports of ownership and reports of changes in ownership of our common stock. Such persons are required by regulations of the Commission to furnish us with copies of all such filings. Based on a review of the copies of such filings received by us with respect to the fiscal year ended July 31, 2016, we believe that all Reporting Persons complied with all Section 16(a) filing requirements in the fiscal year ended July 31, 2016.

 

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ITEM 11. EXECUTIVE COMPENSATION

The table below sets forth, for the fiscal year ended July 31, 2016, the compensation earned by our current Principal Executive Officer, General Counsel and Secretary and our Principal Financial Officer and Treasurer. Mr. Guerrera and Mr. Petrillo are our only executive officers. We refer to these executive officers as our “named executive officers”.

Summary Compensation Table

Summary Compensation Table for Fiscal Year 2016

 

Name and Principal Position

   Year      Salary
($)
    Bonus
($)
    All Other
Compensation
($)
    Total
($)
 

David Guerrera(1)

           

Principal Executive Officer,

     2016         129,113 (2)      30,000 (3)      —          159,113   

President, Secretary and General Counsel

     2015         109,991 (2)      30,000        4,368        144,359   

Anthony J. Petrillo(4)

           

Principal Financial Officer and

     2016         —          —          30,000 (5)      30,000   

Treasurer

     2015         72,873        26,000        274,526        373,399   

 

(1) Mr. Guerrera departed as Sycamore’s President, General Counsel and Secretary on October 12, 2016. Pursuant to a Services Consulting Agreement, Mr. Guerrera will provide certain consulting and other services to the Company relating to the completion of the Dissolution through the end of the Dissolution period, and he will continue to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.
(2) Represents $60,000 of base salary paid to Mr. Guerrera in fiscal year 2016, plus $69,113 in additional compensation pursuant to an arrangement that paid Mr. Guerrera at a rate of $67 per hour for services in excess of 17 hours per week.
(3) Represents the third of three retention bonuses paid to Mr. Guerrera pursuant to his Retention Bonus Agreement (the “Bonus Agreement”) with the Company.
(4) Mr. Petrillo departed as Sycamore’s Chief Financial Officer on December 5, 2014, but has continued to serve as the Company’s Principal Financial Officer and Treasurer on a non-employee basis since December 5, 2014.
(5) Represents $30,000 paid in fiscal year 2016 in accordance with the terms of his Service Consulting Agreement.

Outstanding Equity Awards at Fiscal Year-End

All outstanding and unexercised options and other equity awards were terminated on March 7, 2013 upon the effectiveness of the Dissolution. Accordingly, none of our named executive officers had any outstanding equity awards as of July 31, 2016. No new equity awards are expected to be issued.

Severance and Employment Agreements

Severance Agreement and Discretionary Bonus. In connection with the termination of his employment with the Company on October 12, 2016, Mr. Guerrera became entitled to receive certain payments and benefits pursuant to a Severance Pay Agreement, including (a) an amount equal to 12 months’ worth of his base salary (which was $60,000 as of the date of termination) and (b) outplacement services at the Company’s expense for a period of 26 weeks. Also in connection with the termination of his employment with the Company, the Board of Directors approved the payment of a discretionary cash bonus to Mr. Guerrera in the amount of $100,000.

 

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Consulting Agreements. In connection with the termination of Mr. Guerrera’s employment with the Company, the Company entered into a Services Consulting Agreement with Mr. Guerrera on October 12, 2016, pursuant to which Mr. Guerrera, following the termination of his employment with the Company, has continued to provide certain consulting and other services to the Company relating to the completion of the Dissolution. Under the terms of the Consulting Agreement, Mr. Guerrera is compensated at a rate of $5,000 per month for his services, and he continues to serve as the Company’s President, Secretary and Principal Executive Officer on a non-employee basis.

In connection with the termination of Mr. Petrillo’s employment with the Company, the Company entered into a Services Consulting Agreement with Mr. Petrillo on December 4, 2014, pursuant to which Mr. Petrillo, following the termination of his employment with the Company, has provided certain financial consulting and other services to the Company relating to the completion of the Dissolution. Under the terms of the Consulting Agreement, Mr. Petrillo is compensated at a rate of $2,500 per month, and he continues to serve as the Company’s Principal Financial Officer and Treasurer on a non-employee basis.

Director Compensation

The following table shows the fiscal year 2016 compensation information for our directors who served during such period.

Director Compensation for Fiscal Year 2016

 

Name

   Fees Earned or
Paid in Cash(1)
($)
    Total
($)
 

Daniel E. Smith

     36,000 (2)      36,000   

Alan R. Cormier

     36,000 (3)      36,000   

David Guerrera(4)

     —          —     

 

(1) Reflects amounts earned by our directors for their fiscal year 2016 service on the Board, regardless of when the amounts were paid. Commencing on April 1, 2013, each non-employee director of the Company receives an annual retainer of $36,000, paid on a quarterly basis, for the director’s service on the Board.
(2) Represents fees paid to Mr. Smith for his service as a non-employee director in fiscal year 2016.
(3) Represents fees paid to Mr. Cormier for his service as a non-employee director in fiscal year 2016.
(4) Mr. Guerrera did not receive any compensation for his service as a director of the Company in fiscal year 2016 because he also served as an employee of the Company. Following his termination as an employee of the Company in October 2016, Mr. Guerrera waived his right to any compensation that he might be entitled to as result of his continuing service as a nonemployee director of the Company through the end of the Dissolution period.

 

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth certain information, as of October 3, 2016, with respect to beneficial ownership of our common stock by: (i) each person who, to our knowledge, beneficially owned more than 5% of the shares of our common stock outstanding as of such date, (ii) each of our current directors, (iii) our named executive officers identified in the Summary Compensation Table set forth above and (iv) all directors and executive officers as a group.

For purposes of the following table, beneficial ownership is determined in accordance with the rules of the SEC. Except as otherwise noted in the footnotes below, we believe that each person or entity named in the table has sole voting and investment power with respect to all shares of its common stock shown as beneficially owned by them, subject to applicable community property laws. The percentage of shares of Common Stock outstanding is based on 28,882,093 shares of Common Stock outstanding as of October 3, 2016.

 

Name and Address of Beneficial Owner (1)

   Amount and
Nature of
Beneficial
Ownership
     Percentage of
Outstanding
 

Daniel E. Smith (2)

     3,763,039         13.0   

Alan R. Cormier

     20         *   

Anthony J. Petrillo

     227         *   

David Guerrera

     0         *   

Platyko Partners, LP (2)

     2,112,500         7.3   

Gururaj Deshpande (3)

     4,571,280         15.9   

General Holdings LLC(4)

     4,083,734         14.1   

Farallon Capital Management, L.L.C.(5)

     2,745,000         9.5   

Lloyd I. Miller(6)

     2,217,279         7.7   

Sparta Group MA LLC (3)

     4,567,440         15.8   

All current executive officers and directors as a group (4 persons)

     3,763,286         13.0   

 

* Less than 1% of the total number of outstanding shares of Common Stock.
(1) Except as otherwise noted, the address of each person is: c/o Sycamore Networks, Inc., 300 Brickstone Square, Suite 201, Andover, Massachusetts 01810.
(2) Consists of 573,039 shares owned by Mr. Smith directly, 1,077,500 shares that Mr. Smith owns jointly with his wife, Elizabeth Riley, and 2,112,500 shares held by Platyko Partners, L.P., of which Mr. Smith and his wife serve as general partners.
(3) Includes 4,567,440 shares held by Sparta Group MA LLC Series 4 and 3,840 shares held by the Gururaj Deshpande Grantor Retained Annuity Trust (the “Annuity Trust”). Mr. Deshpande and his wife, Jaishree Deshpande, serve as managers of Sparta Group MA LLC and share voting and investment power over the Common Stock held by Sparta Group MA LLC Series 4. Jaishree Deshpande serves as trustee of the Annuity Trust and exercises sole voting and investment power over the Sycamore shares held therein. Mr. Deshpande disclaims beneficial ownership of the shares held by the Annuity Trust. The address for Sparta Group MA LLC Series 4 is 92 Montvale Ave., Suite 2500, Stoneham, MA 02180.
(4) Based solely on a Schedule 13D filed on August 13, 2015, as amended on September 18, 2015, General Holdings LLC (“General Holdings”) is the beneficial owner of 4,083,734 shares of our Common Stock. Andrew Bellas, by virtue of his position as Manager of General Holdings, may be deemed to have voting and dispositive power with respect to the shares. The address of General Holdings is c/o General Holdings LLC, 96 S. Union #1, Burlington, VT 05401.
(5)

Based solely on a Schedule 13G filed on February 12, 2016. Includes 638,519 shares of our Common Stock held by Farallon Capital Partners, L.P. (“FCP”), 711,300 shares of Common Stock held by Farallon Capital Institutional Partners, L.P. (“FCIP”), 56,700 shares of Common Stock held by Farallon Capital Institutional Partners II, L.P. (“FCIP II”), 76,700 shares of Common Stock held by Farallon Capital Institutional Partners III, L.P. (“FCIP III”), 1,025,700 shares of Common Stock held by Farallon Capital Offshore Investors II, L.P. (“FCOI II”), 40,900 shares of Common Stock held by Farallon Capital (AM) Investors, L.P. (“FCAMI”), 134,881 shares of Common Stock held by Farallon Capital AA Investors, L.P. (“FCAAI,” and together with FCP, FCIP, FCIP II, FCIP III, FCOI II and FCAMI, the “Farallon Funds”), and 60,300 shares of our Common

 

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  Stock held by one or more accounts (the “Managed Accounts”), each as managed by Farallon Capital Management, L.L.C. (the “Management Company”). The Management Company, as investment adviser to the Managed Accounts, may be deemed to be a beneficial owner of all such shares owned by the Managed Accounts. Farallon Partners, L.L.C. (the “Farallon General Partner”), as general partner of each of FCP, FCIP, FCIP II, FCIP III, FCOI II and FCAMI and the sole member of Farallon AA GP, L.L.C (the “FCAAI General Partner”), may be deemed to be a beneficial owner of all such shares owned by the Farallon Funds. The FCAAI General Partner, as general partner of FCAAI, may be deemed to be a beneficial owner of all such shares owned by FCAAI. Michael B. Fisch, Richard B. Fried, Daniel J. Hirsch, David T. Kim, Monica R. Landry, Michael G. Linn, Rajiv A. Patel, Thomas G. Roberts, Jr., Andrew J.M. Spokes, John R. Warren and Mark C. Wehrly (collectively, the “Farallon Individual Reporting Persons”), as managing members of both the Farallon General Partner and the Management Company, and managers of the FCAAI General Partner, with the power to exercise investment discretion, may each be deemed to be a beneficial owner of all such shares owned by the Farallon Funds and the Managed Accounts. Each of the Management Company, the Farallon General Partner, the FCAAI General Partner and the Farallon Individual Reporting Persons disclaims any beneficial ownership of any such shares. The address for the reporting persons is c/o Farallon Capital Management, L.L.C., One Maritime Plaza, Suite 2100, San Francisco, CA 94111.
(6) Based solely on a Schedule 13D filed on September 8, 2015, Lloyd I. Miller III is the beneficial owner of 2,217,279 shares of our Common Stock. Mr. Miller has sole voting and dispositive power with respect to the shares by virtue of his position as (i) the managing member of Milfam LLC, a limited liability company that is the adviser to Trust A-4, which is the owner of record of 985,971 of such shares and the general partner of Milfam I L.P. and Milfam II L.P., which are the owners of record of 241,623 and 389,685 such shares, respectively, and (ii) the manager of LIMFAM LLC, which is the owner of record of 600,000 of such shares. The address of Mr. Miller is 3300 South Dixie Highway, Suite 1-365, West Palm Beach, FL 33405.

Equity Compensation Plan Information

In connection with the filing of the Certificate of Dissolution, we terminated our stock option and equity-based compensation plans and cancelled all outstanding and unexercised options effective as of the close of business on March 7, 2013. There are currently no equity awards outstanding under any former equity compensation plan, and no shares are reserved for issuance.

 

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

In July 2000, we made an investment of $2.2 million in Tejas and, as of August 1, 2016, we owned approximately 5% of the outstanding equity interests in Tejas. Our former Chairman of the Board, Mr. Gururaj Deshpande, also serves as the chairman of the board of directors of Tejas and owns approximately 30% of the equity interests in Tejas. Following the filing of the Certificate of Dissolution, Mr. Deshpande resigned from the Board, effective April 1, 2013, but continues to beneficially own approximately 16% of the shares of the Common Stock. Following review and approval by the Board, on August 2, 2016, we completed the sale of all of our equity shares of Tejas to Samena pursuant to the Share Purchase Agreement for an aggregate purchase price of $3.5 million. For additional information concerning this matter, see “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations—Executive Summary.”

All transactions involving the Company and its officers, directors, principal stockholders and their affiliates, including those since our initial public offering, were approved by the Audit Committee or the Board (including, in the case of the Board, a majority of the disinterested directors on the Board at the time). Any related party transactions in the future will be reviewed and approved by the Board and will be on terms no less favorable to the Company than could be obtained from unaffiliated third parties.

Indemnification of Officers and Directors

We have entered into our standard form of indemnification agreement with each of our directors and executive officers, which is in addition to the indemnification provided for in our amended and restated certificate of incorporation, as amended. The Plan of Dissolution also provides that we continue to indemnify our directors and executive officers in accordance with such agreements and our amended and restated certificate of incorporation, as amended. The indemnification agreements, among other things, provide for indemnification of our directors and executive officers for a number of expenses, including attorneys’ fees and other related expenses, as well as certain judgments, fines, penalties and settlement amounts incurred by any such person in any action, suit or proceeding, including any action by or in the right of the Company, arising out of such person’s services as a director or executive officer of the Company or any other company or enterprise to which the person provided services at our request. During the Dissolution period, we intend to continue to indemnify each of our current and former directors and executive officers to the extent permitted under Delaware law, our amended and restated certificate of incorporation, as amended, and the indemnification agreements. Sycamore has also continued to maintain directors’ and officers’ coverage since the filing of the Certificate of Dissolution, and currently intends to maintain such coverage through the end of the Dissolution Period and to obtain a tail policy following the completion of the Dissolution.

Director Independence

As of July 31, 2016, the Board consisted of Alan R. Cormier, Daniel E. Smith and David Guerrera. The Board has determined that none of Messrs. Smith, Cormier or Guerrera is an independent director under the listing standards of NASDAQ and applicable laws and regulations.

 

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The Company dismissed PricewaterhouseCoopers LLP as the Company’s independent registered accounting firm effective April 1, 2016. On April 1, 2016 the Company appointed Moody, Famiglietti & Andronico, LLP as the Company’s independent registered public accounting firm commencing for its quarter ended April 30, 2016 and its fiscal year ended July 31, 2016. The following is a summary of the fees billed to us by Moody, Famiglietti & Andronico, LLP and PricewaterhouseCoopers LLP for professional services rendered for the fiscal year ended July 31, 2016 and by PricewaterhouseCoopers LLP for professional services rendered for the fiscal year ended July 31, 2015:

 

Fee Category

   Fiscal Year      Fiscal Year  
   2016 Fees      2015 Fees  

Audit Fees

   $ 129,120       $ 203,300   

Audit-Related Fees

   $ 8,000         —     

Tax Fees

   $ 15,000       $ 16,500   

All Other Fees

     —           —     
  

 

 

    

 

 

 

Total Fees

   $ 152,120       $ 219,800   
  

 

 

    

 

 

 

Audit Fees. Consists of the aggregate fees billed for professional services rendered for the audit of our financial statements for the fiscal years ended July 31, 2016 and July 31, 2015, and for reviews of the interim financial statements included in our Quarterly Reports on Form 10-Q. Audit fees totaling $129,120 for the fiscal year ended July 31, 2016 are comprised of $64,120 for services rendered by PricewaterhouseCoopers LLP and $65,000 for services rendered by Moody, Famiglietti & Andronico, LLP.

Audit-Related Fees. Consists of the aggregate fees billed for professional services rendered for audit-related services including consultations on other financial accounting and reporting related matters for the fiscal year ended July 31, 2016. Audit-related fees totaling $8,000 for the fiscal year ended July 31, 2016 are for services rendered by PricewaterhouseCoopers LLP.

Tax Fees. Consists of the aggregate fees billed for professional services relating to tax compliance and other tax services including tax planning and advisory services for the fiscal years ended July 31, 2016 and July 31, 2015. Tax fees totaling $15,000 for the fiscal year ended July 31, 2016 are for services rendered by PricewaterhouseCoopers LLP.

All Other Fees. Consists of aggregate fees billed for all other products and services provided for the fiscal years ended July 31, 2016 and July 31, 2015, for which there were none.

Pre-Approval Policy

The Board’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm. These services may include audit services, audit-related services, tax services and other services. All of the estimates for audit, audit-related fees and tax fees for fiscal years 2016 and 2015 were pre-approved by the Board.

 

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PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a) 1. Financial Statements

The financial statements listed in the accompanying Index to Financial Statements on page 20 are filed as part of this report.

 

  2. Financial Statement Schedules

None

 

  3. Exhibits

 

Number

  

Exhibit Description

    2.1    Asset Purchase and Sale Agreement, dated October 23, 2012, by and between Sycamore Networks, Inc. and Sunrise Acquisition Corp (9)
    2.2    Plan of Complete Liquidation and Dissolution adopted by the Board of Directors of Sycamore Networks, Inc. on October 22, 2012 (10)
    2.3    Non-Competition and Non-Solicitation Agreement, dated January 31, 2013, by and between Sycamore Networks, Inc. and Sycamore Networks Solutions, Inc. (f/k/a Sunrise Acquisition Corp.) (11)
    2.4    Patent Sale Agreement by and between Dragon Intellectual Property, LLC and Sycamore Networks, Inc. dated January 31, 2014 (14)
    2.5    Patent Sale Agreement by and between Citrix Systems, Inc. and Sycamore Networks, Inc. dated May 21, 2014 (15)
    2.6    Share Purchase Agreement between Samena Spectrum Co and Sycamore Networks, Inc., dated as of August 2, 2016 (24)
    3.1    Amended and Restated Certificate of Incorporation of the Company (2)
    3.2    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (2)
    3.3    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (3)
    3.4    Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Company (7)
    3.5    Amended and Restated By-Laws of the Company (5)
    4.1    Specimen Common Stock Certificate (8)
    4.2    See Exhibits 3.1, 3.2, 3.3 and 3.4 for provisions of the Certificate of Incorporation and By-Laws of the Registrant defining the rights of holders of common stock of the Company (2)(3)(7)
    4.3    Certificate of Dissolution, as filed by Sycamore Networks, Inc. with the Secretary of State of the State of Delaware on March 7, 2013 (12)
*10.1   

Form of Indemnification Agreement between Sycamore, the Directors of Sycamore Networks, Inc.

and Executive Officers of Sycamore Networks, Inc., dated as of November 17, 1999, October 15, 2002, October 5, 2004, January 11, 2005, September 6, 2007, August 1, 2007, November 13, 2007 or December 11, 2007 (1)

 

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*10.2      Form of Amended Change of Control Agreement between Sycamore Networks, Inc. and Executive Officers of Sycamore Networks, Inc. dated as of December 18, 2008 (6)
*10.3      Letter Agreement between Sycamore Networks, Inc. and Alan Cormier (4)
  10.4      Services Consulting Agreement by and between Sycamore Networks, Inc. and Paul F. Brauneis dated March 29, 2013 (13)
  10.5      Services Consulting Agreement by and between Sycamore Networks, Inc. and Kevin J. Oye dated March 29, 2013 (13)
  10.6      Retention Bonus Agreement by and between Sycamore Networks, Inc. and Alan R. Cormier dated March 29, 2013 (13)
*10.7      Retention Bonus Agreement by and between Sycamore Networks, Inc. and Anthony Petrillo dated March 29, 2013 (13)
*10.8      Severance Pay Agreement by and between Sycamore Networks, Inc. and Anthony Petrillo dated March 29, 2013 (13)
*10.9      Services Consulting Agreement by and between Sycamore Networks, Inc. and Alan R. Cormier dated December 20, 2013 (16)
*10.10    Retention Bonus Agreement by and between Sycamore Networks, Inc. and David Guerrera dated April 15, 2013 (16)
*10.11    Severance Pay Agreement by and between Sycamore Networks, Inc. and David Guerrera dated April 15, 2013 (16)
  10.12    Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated October 10, 2014 (17)
  10.13    First Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated February 24, 2015 (18)
  10.14    Second Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated March 27, 2015 (19)
  10.15    Third Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated March 30, 2015 (19)
  10.16    Fourth Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated July 30, 2015 (20)
  10.17    Fifth Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated September 15, 2015 (21)
  10.18    Sixth Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated September 30, 2015 (22)
  10.19    Seventh Amendment to Purchase and Sale Agreement by and between Sycamore Networks, Inc. and Princeton Tyngsborough Commons LLC dated October 9, 2015 (23)
  10.20    Settlement Agreement by and between Franklin Equities, LLC, FE Potash 100, LLC, Sycamore Networks, Inc., Princeton Tyngsborough Commons LLC, and with respect to Sections 2-4 and 7-15 and beneficially as to Section 5 only, Potash Properties, LLC dated October 5, 2015 (23)
*10.21    Services Consulting Agreement by and between Sycamore Networks, Inc. and David Guerrera dated October 12, 2016 (25)

 

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  21.1        List of Subsidiaries
  24.1        Power of Attorney (see signature page)
  31.1        Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  31.2        Certification of Principal Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
  32.1        Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
  32.2        Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
100.INS    XBRL Instance Document
100.SCH    XBRL Taxonomy Extension Schema Document
100.CAL    XBRL Taxonomy Extension Calculation Linkbase
100.DEF    XBRL Taxonomy Extension Definition Linkbase
100.LAB    XBRL Taxonomy Extension Label Linkbase
100.PRE    XBRL Taxonomy Extension Presentation Linkbase

 

(1) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended October 30, 1999 filed with the Commission on December 13, 1999.

 

(2) Incorporated by reference to Sycamore Networks, Inc.’s Registration Statement on Form S-1 (Registration Statement No. 333-30630) filed with the Commission on February 17, 2000, as amended.

 

(3) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended January 27, 2001 filed with the Commission on March 13, 2001.

 

(4) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended January 29, 2005 filed with the Commission on February 25, 2005.

 

(5) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended October 27, 2007 filed with the Commission on November 28, 2007.

 

(6) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Commission on December 23, 2008.

 

(7) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Commission on December 21, 2009.

 

(8) Incorporated by reference to Sycamore Networks, Inc.’s Annual Report on Form 10-K for the annual period ended July 31, 2010 filed with the Commission on September 24, 2010.

 

(9) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 23, 2012.

 

(10) Incorporated by reference to Sycamore Networks, Inc.’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 29, 2012.

 

(11) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 1, 2013.

 

(12) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on March 8, 2013.

 

(13) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2013.

 

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(14) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 5, 2014.

 

(15) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 28, 2014.

 

(16) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 23, 2013.

 

(17) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 17, 2014.

 

(18) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 26, 2015.

 

(19) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 1, 2015.

 

(20) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 4, 2015.

 

(21) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 17, 2015.

 

(22) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 5, 2015.

 

(23) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 9, 2015.

 

(24) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2016.

 

(25) Incorporated by reference to Sycamore Networks, Inc.’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 18, 2016.

 

* Denotes a management contract or compensatory plan or arrangement.

 

(b) Exhibits

 

   The Company hereby files as part of this Form 10-K the exhibits listed in the Exhibit Index beginning on page 43.

 

(c) Financial Statement Schedules:

 

   None

 

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SIGNATURES

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, in the Town of Andover, Commonwealth of Massachusetts, on this 28th day of October 2016.

 

SYCAMORE NETWORKS, INC.

By:  

/s/ David Guerrera

 

David Guerrera

Principal Executive Officer, President and Secretary

 

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POWER OF ATTORNEY AND SIGNATURES

Know all persons by these presents, that each person whose signature appears below constitutes and appoints David Guerrera his attorney-in-fact, with the power of substitution, for him in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorney-in-fact, or his substitute or substitutes, may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act, this Annual Report on Form 10-K has been signed below by the following persons in the capacities and on the dates indicated.

 

Signature

  

Title

 

Date

/s/ DAVID GUERRERA

David Guerrera

  

Principal Executive Officer, President, Secretary and Director

  October 28, 2016

/s/ ANTHONY J. PETRILLO

Anthony J. Petrillo

  

Principal Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

  October 28, 2016

/s/ ALAN R. CORMIER

Alan R. Cormier

  

Director

  October 28, 2016

/s/ DANIEL E. SMITH

Daniel E. Smith

  

Director

  October 28, 2016

 

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