NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note
1 — Basis of Presentation
GlassBridge
Enterprises, Inc. (“GlassBridge”, the “Company”, “we”, “us” or “our”)
is a holding company. We actively explore a diverse range of new, strategic asset management business opportunities for our portfolio.
The company’s wholly-owned subsidiary GlassBridge Asset Management, LLC (“GBAM”) is an investment advisor focused
on technology-driven quantitative strategies and other alternative investment strategies.
The
interim Condensed Consolidated Financial Statements of GlassBridge are unaudited but, in the opinion of management, reflect all
adjustments necessary for a fair statement of financial position, results of operations, comprehensive loss and cash flows for
the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal and recurring items. The results
of operations for any interim period are not necessarily indicative of full year results. The Condensed Consolidated Financial
Statements and Notes are presented in accordance with the requirements for Quarterly Reports on Form 10-Q and do not contain certain
information included in our annual Consolidated Financial Statements and Notes presented in accordance with the requirements of
Annual Reports on Form 10-K.
The
unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, and
entities in which the Company owns or controls fifty percent or more of the voting shares and has the right to control. The results
of entities disposed of are included in the unaudited Condensed Consolidated Financial Statements up to the date of the disposal
and, where appropriate, these operations have been reflected as discontinued operations. All inter-company balances and transactions
have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments necessary for a fair
presentation have been included in the interim results reported.
The
preparation of the interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted
in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim Condensed Consolidated
Financial Statements and the reported amounts of revenue and expenses for the reporting periods. Despite our intention to establish
accurate estimates and use reasonable assumptions, actual results may differ from our estimates.
The
December 31, 2018 Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Financial Statements but
does not include all disclosures required by GAAP. This Form 10-Q should be read in conjunction with our Consolidated Financial
Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2018 as filed with the U.S. Securities
and Exchange Commission on April 1, 2019.
The
operating results of our legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions
(the “Legacy Businesses”) and the Nexsan Business (which includes the “Nexsan Group” as defined below),
are presented in our Condensed Consolidated Statements of Operations as discontinued operations for all periods presented. Our
continuing operations in each period presented represents our “Asset Management Business,” which consists of our investment
advisory business conducted through GBAM, as well as corporate expenses and activities not directly attributable to our Legacy
Businesses or the Nexsan Business. Assets and liabilities directly associated with our Legacy Businesses and Nexsan Business and
that are not part of our ongoing operations have been separately presented on the face of our Condensed Consolidated Balance Sheet
as of both September 30, 2019 and December 31, 2018. See Note 4 - Discontinued Operations for further information.
Sale
of international subsidiaries and Imation Latin America Corp.
As
previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
as of April 2, 2019, on March 31, 2019, the Company entered into a securities purchase agreement (the “IMN Capital Agreement”)
with IMN Capital Holdings, Inc., a Delaware corporation (“IMN Capital”) whereby the Company sold its entire ownership
of its international subsidiaries together with its entire ownership in Imation Latin America Corp., a Delaware corporation (the
“Imation Subsidiaries”). As previously disclosed, certain subsidiaries of the Company, including the Imation Subsidiaries,
are parties to certain lawsuits, claims, and other legal proceedings concerning claims and counterclaims relating to excess payments
made by the Imation Subsidiaries relating to copyright levies in European Union (“EU”) member states (the “Subsidiary
Litigation”). Pursuant to the terms and subject to the conditions of the IMN Capital Agreement, IMN Capital acquired from
the Company the Company’s shares representing the Company’s ownership interests in each of the Imation Subsidiaries
(the “Subsidiary Sale”). Following the Subsidiary Sale, the Imation Subsidiaries are no longer affiliates of the Company,
and the Company has no interest in or to the Imation Subsidiaries except as explicitly described in the IMN Capital Agreement.
In consideration for the Subsidiary Sale, the Company shall receive certain compensation from IMN Capital. As defined in the IMN
Capital Agreement, a payment occurrence is the settlement or final adjudication as to all demands, claims, counter-claims, cross-claims,
third-party claims, damages, fees, costs and expenses, brought and raised on any matters arising from or related to the Subsidiary
Litigation (a “Payment Occurrence”). In connection with the Subsidiary Sale, the purchase price furnished by IMN Capital
to the Company (the “Purchase Price”) shall consist of (i) $277,900 payable upon the execution of the IMN Capital
Agreement and (ii) 75% of all net proceeds from Subsidiary Litigation (which, for the avoidance of doubt, shall be calculated
after the payment of (i) the retirement of the Germany pension liability; (ii) contingency fees payable to attorneys engaged in
connection with the Subsidiary Litigation; (iii) fees payable to Mach 5, the litigation financing company and (iv) the payment
of all applicable taxes including income taxes in connection with the Subsidiary Litigation) (such payment, the “Contingent
Payment”). The Company recorded a one-time non-cash gain of approximately $10 million in connection with IMN Capital
Agreement transaction.
Reverse
Stock Split
As
previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
as of August 22, 2019, on August 20, 2019, the Company effected a reverse split of our common stock, par value $0.01 per share
at a ratio of 1:200 (the “Reverse Stock Split”). On August 21, 2019 (the “Effective Date”), our common
stock began trading on the Reverse Stock Split-adjusted basis on the OTCQB at the opening of trading. In connection with the Reverse
Stock Split, our common stock began trading with a new CUSIP number at such time. There was no change to the Company’s stock
symbol. All prior periods have been retroactively adjusted to give effect to the reverse stock split. See Note 10 - Shareholders’
Equity for further information.
Liquidity
and Management Plan
The
Company incurred operating and cash flow losses for several reporting periods and had a working capital deficit of $1.4
million as of September 30, 2019. These losses raised substantial doubt about our ability to continue as a going concern. Although
the working capital deficit is $1.4 million, it included $0.6 million of cash as of September 30, 2019, which in addition
to proceeds of $17,562,700 from the Orix transaction on October 1, 2019, are expected to fund our operations for the next
twelve months and beyond. See Note 14 – Subsequent Events for further information on the Orix transaction.
Note
2 — New Accounting Pronouncements
Adoption
of New Accounting Pronouncements
In
February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a right-of-use (“ROU”) model
that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than
12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition
in the income statement. ASU No. 2016-02 is effective for the Company beginning January 1, 2019, and does not have a material
impact on its consolidated results of operations or financial condition.
In
February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification
of Certain Tax Effects from Accumulated Other Comprehensive Income. This ASU seeks to help entities reclassify certain stranded
income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 (the “Tax
Reform Act”), enacted on December 22, 2017. ASU 2018-02 was issued in response to concerns regarding current guidance in
GAAP that requires deferred tax liabilities and assets to be adjusted for the effect of a change in tax laws or rates with the
effect included in income from continuing operations in the reporting period that includes the enactment date, even in situations
in which the related income tax effects of items in accumulated other comprehensive income were originally recognized in other
comprehensive income, rather than net income, and as a result the stranded tax effects would not reflect the appropriate tax rate.
The amendments of this ASU allow an entity to make a reclassification from accumulated other comprehensive income to retained
earnings for the stranded tax effects, which is the difference between the historical corporate income tax rate of 35.0% and the
newly enacted corporate income tax rate of 21.0%. The amendments in this ASU are effective for the Company beginning January 1,
2019, and do not have a material impact on its consolidated results of operations or financial condition.
In
June 2018, the FASB issued ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, which largely aligns the
measurement and classification guidance for share-based payments to nonemployees with the guidance for share-based payments to
employees. The ASU also clarifies that any share-based payment issued to a customer should be evaluated under ASC 606, Revenue
from Contracts with Customers. The ASU requires a modified retrospective transition approach. For the Company, the ASU is effective
as of January 1, 2019 and does not have a material impact on its consolidated results of operations or financial condition.
In
July 2018, the FASB issued ASU No. 2018-10, Codification Improvements to Topic 842, Leases, which amends ASU No. 2016-02, Leases.
The new ASU includes certain clarifications to address potential narrow-scope implementation issues which the Company is incorporating
into its assessment and adoption of ASU No. 2016-02. This ASU has the same transition requirements and effective date as ASU No.
2016-02, which for the Company is January 1, 2019. This standard does not have a material impact on the Company’s consolidated
results of operations or financial condition.
In
July 2018, the FASB issued ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, which amends ASU No. 2016-02, Leases. The
new ASU offers an additional transition method by which entities may elect not to recast the comparative periods presented in
financial statements in the period of adoption and allows lessors to elect a practical expedient to not separate lease and nonlease
components when certain conditions are met. This ASU has the same transition requirements and effective date as ASU No. 2016-02,
which for the Company is January 1, 2019. This standard does not have a material impact on the Company’s consolidated results
of operations or financial condition.
New
Accounting Pronouncements To Be Adopted
In
August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates,
amends, and adds disclosure requirements for fair value measurements. The amended and new disclosure requirements primarily relate
to Level 3 fair value measurements. For the Company, the ASU is effective as of January 1, 2020. The removal and amendment of
certain disclosures may be early adopted with retrospective application while the new disclosure requirements are to be applied
prospectively. As this ASU relates only to disclosures, there will be no impact to the Company’s consolidated results of
operations and financial condition.
In
August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans, which makes minor
changes to the disclosure requirements related to defined benefit pension and other postretirement plans. The ASU requires a retrospective
transition approach. For the Company, the ASU is effective as of January 1, 2021. As this ASU relates only to disclosures, there
will be no impact to the Company’s consolidated results of operations and financial condition.
Note
3 — Income (Loss) per Common Share
Basic
income (loss) per common share is calculated using the weighted average number of shares outstanding for the period. Unvested
restricted stock and treasury shares are excluded from the calculation of basic weighted average number of common shares outstanding.
Once restricted stock vests, it is included in our common shares outstanding.
Diluted
income (loss) per common share is computed on the basis of the weighted average shares outstanding plus the dilutive effect of
our stock-based compensation plans using the “treasury stock” method. Since the exercise price of our stock options
is greater than the average market price of the Company’s common stock for the period, we did not include dilutive common
equivalent shares for these instruments in the computation of diluted net income (loss) per share because the effect would have
been anti-dilutive.
The
following table sets forth the computation of the weighted average basic and diluted income (loss) per share:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
(In
millions, except for share and per share amounts)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
(loss) from continuing operations
|
|
$
|
(0.5
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
(5.9
|
)
|
|
Income (loss) from
discontinued operations, net of income taxes
|
|
|
(0.2
|
)
|
|
|
9.0
|
|
|
|
10.8
|
|
|
|
9.8
|
|
|
Net income (loss)
|
|
$
|
(0.7
|
)
|
|
$
|
6.9
|
|
|
$
|
8.3
|
|
|
$
|
3.9
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding during the period - basic and diluted (in thousands)
|
|
|
25.1
|
|
|
|
25.4
|
|
|
|
25.6
|
|
|
|
25.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share—
basic and diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(19.86
|
)
|
|
$
|
(82.62
|
)
|
|
$
|
(99.44
|
)
|
|
$
|
(233.75
|
)
|
|
Discontinued operations
|
|
|
(7.95
|
)
|
|
|
354.08
|
|
|
|
421.67
|
|
|
|
388.26
|
|
|
Net income (loss)
|
|
$
|
(27.81
|
)
|
|
$
|
271.46
|
|
|
$
|
322.23
|
|
|
$
|
154.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from calculation
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
|
|
0.0
|
|
Note
4 — Discontinued Operations
On
March 31, 2019, the Company entered into a securities purchase agreement with IMN Capital Holdings, Inc., a Delaware company (“IMN
Capital”) to sell its entire ownership of its international subsidiaries and Imation Latin America Corp., a Delaware corporation
(the “Imation Subsidiaries”) (the “Subsidiary Sale”). In connection with the sale, the purchase price
furnished by IMN Capital to the Company consisted of (i) $277,900 payable upon the execution of the IMN Capital Agreement and
(ii) 75% of all net proceeds from subsidiary litigation (which, for the avoidance of doubt, shall be calculated after the payment
of (i) the retirement of the Germany pension liability; (ii) contingency fees payable to attorneys engaged in connection with
the Subsidiary Litigation; (iii) fees payable to Mach 5, the litigation financing company and (iv) the payment of all applicable
taxes including income taxes in connection with the subsidiary litigation). The Company recorded a one-time non-cash gain of approximately
$10.0 million in connection with IMN Capital Agreement transaction.
The
operating results for the Legacy Businesses and the Nexsan Business are presented in our Condensed Consolidated Statements of
Operations as discontinued operations for all periods presented and reflect revenues and expenses that are directly attributable
to these businesses that were eliminated from our ongoing operations.
The
key components of the results of discontinued operations were as follows:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
(In millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Net revenue
|
|
$
|
—
|
|
|
$
|
5.1
|
|
|
$
|
0.1
|
|
|
$
|
23.9
|
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
3.1
|
|
|
|
0.1
|
|
|
|
13.0
|
|
|
Gross
profit
|
|
|
—
|
|
|
|
2.0
|
|
|
|
—
|
|
|
|
10.9
|
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
0.9
|
|
|
|
0.3
|
|
|
|
8.3
|
|
|
Research and development
|
|
|
—
|
|
|
|
0.5
|
|
|
|
—
|
|
|
|
2.4
|
|
|
Restructuring and other
|
|
|
0.2
|
|
|
|
(2.2
|
)
|
|
|
—
|
|
|
|
(2.5
|
)
|
|
Other (income)
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.6
|
)
|
|
|
(0.8
|
)
|
|
Income (loss) from discontinued operations,
before income taxes
|
|
|
(0.2
|
)
|
|
|
2.8
|
|
|
|
0.3
|
|
|
|
3.5
|
|
|
Income on sale of discontinued businesses,
before income taxes
|
|
|
—
|
|
|
|
6.1
|
|
|
|
9.6
|
|
|
|
6.1
|
|
|
Income tax benefit
|
|
|
—
|
|
|
|
0.1
|
|
|
|
0.9
|
|
|
|
0.2
|
|
|
Gain (Loss) from
discontinued operations, net of income taxes
|
|
$
|
(0.2
|
)
|
|
$
|
9.0
|
|
|
$
|
10.8
|
|
|
$
|
9.8
|
|
Net
income of discontinued operations for the three months ended September 30, 2019 decreased by $9.2 million compared to the same
period last year mainly due to the sale of the Imation Subsidiaries. Net income of discontinued operations for the nine months
ended September 30, 2019 increased by $1.0 million compared to the same period last year mainly due to the sale of the Imation
Subsidiaries.
Current
assets of discontinued operations were $0.0 million as of September 30, 2019. Current assets of discontinued operations as of
December 31, 2018 of $3.2 million included $0.7 million of accounts receivable, $1.0 million related to funds held in escrow
and $0.7 million of other current assets. The decrease of the current assets in 2019 was due to the sale of the Imation Subsidiaries.
Current
liabilities of discontinued operations were $0.9 million as of September 30, 2019. Current liabilities of discontinued operations
of $4.9 million as of December 31, 2018 included $1.7 million of accounts payable, $1.0 million due to CMC and $2.2 million of
other current liabilities. The decrease of the current liabilities in 2019 was due to the sale of the Imation Subsidiaries.
Other
liabilities of discontinued operations were $0.2 million as of September 30, 2019. Other liabilities of discontinued operations
of $2.2 million as of December 31, 2018 included $0.3 million of withholding tax and
$1.1 million of other liabilities. The decrease of the other liabilities in 2019 was due to the sale of the Imation Subsidiaries.
Note
5 — Supplemental Balance Sheet Information
Additional
supplemental balance sheet information is provided as follows:
Other
assets primarily included a $4.0 million strategic investment in equity securities. The strategic investment in equity securities
is consistent with our stated strategy of exploring a diverse range of new strategic asset management business opportunities for
our portfolio. Historically, we accounted for such investment under the cost method of accounting. The adoption of ASU No. 2016-01
in the first quarter of 2018 effectively eliminated the cost method of accounting and the carrying value of this investment is
written down, or impaired, to fair value when a decline in value is considered to be other-than-temporary. Our strategic investment
in equity securities does not have a readily determinable fair value therefore the new guidance was adopted prospectively. As
of September 30, 2019, there were no indicators of impairment for this investment. The Company will assess the investment for
potential impairment on a quarterly basis. In addition, other assets as of September 30, 2019 also include escrowed funds related
to the NXSN transaction of $0.6 million and $0.2 million of other assets. For more information regarding the
NXSN Transaction, please review the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission
as of August 16, 2018.
Other
current liabilities primarily included pension minimum contributions of $1.9 million and $1.9 million and accrued payroll of $0.0
million and $0.2 million as of September 30, 2019 and December 31, 2018, respectively.
Other
liabilities included pension liabilities of $14.4 million and $23.0 million as of September 30, 2019 and December 31, 2018, respectively.
The change in the pension liabilities was due to the Subsidiary Sale.
Note
6 — Restructuring and Other Expense
Restructuring
and other expense was $0.0 million and $0.1 million for the three and nine months ended September 30, 2019, respectively. Restructuring
and other expense was $0.0 million and $0.1 million for the three and nine months ended September 30, 2018, respectively.
Activity
related restructuring accruals was as follows:
|
(In millions)
|
|
Severance
and Related
|
|
|
Accrued balance at December 31, 2018
|
|
$
|
0.1
|
|
|
Charges
|
|
|
0.1
|
|
|
Usage and payments
|
|
|
(0.1
|
)
|
|
Accrued balance at March 31, 2019
|
|
$
|
0.1
|
|
|
Charges
|
|
|
0.0
|
|
|
Usage and payments
|
|
|
(0.0
|
)
|
|
Accrued balance at June 30, 2019
|
|
$
|
0.1
|
|
|
Charges
|
|
|
0.0
|
|
|
Usage and payments
|
|
|
(0.0
|
)
|
|
Accrued balance at September 30,
2019
|
|
$
|
0.1
|
|
Note
7 — Stock-Based Compensation
Stock-based
compensation for continuing operations consisted of the following:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
(In millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Stock-based compensation
expense
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(0.3
|
)
|
We
have stock-based compensation awards consisting of stock options, restricted stock and stock appreciation rights under four plans
(collectively, the “Stock Plans”) which are described in detail in our Annual Report on Form 10-K for the year ended
December 31, 2018. As of September 30, 2019, there were 315,251 shares available for grant under the 2011 Incentive Plan. No further
shares were available for grant under any other stock incentive plan.
Stock
Options
The
following table summarizes our stock option activity:
|
|
|
Stock
Options
|
|
|
Weighted
Average Exercise Price
|
|
|
Outstanding December
31, 2018
|
|
|
113
|
|
|
$
|
16,734.00
|
|
|
Canceled
|
|
|
(113
|
)
|
|
|
16,734.00
|
|
|
Outstanding
September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
|
Exercisable
as of September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
The
weighted average assumptions used in the valuation of options are not applicable for the periods ending September 30, 2019 and
2018 as no options were granted over this time.
As
of September 30, 2019, there was no unrecognized compensation expense related to non-vested stock options granted under our Stock
Plans.
Restricted
Stock
The
following table summarizes our restricted stock activity:
|
|
|
Restricted
Stock
|
|
|
Weighted
Average Grant Date Fair Value Per Share
|
|
|
Nonvested as of December 31, 2018
|
|
|
150
|
|
|
$
|
1,406.00
|
|
|
Granted
|
|
|
—
|
|
|
|
—
|
|
|
Vested
|
|
|
(75
|
)
|
|
|
1,406.00
|
|
|
Forfeited
|
|
|
(75
|
)
|
|
|
1,406.00
|
|
|
Nonvested as of September 30, 2019
|
|
|
—
|
|
|
$
|
—
|
|
The
cost of the awards is determined using the fair value of the Company’s common stock on the date of the grant, and compensation
is recognized on a straight-line basis over the requisite vesting period.
As
of September 30, 2019, the company did not have any unrecognized compensation expense related to non-vested restricted stock granted
under our Stock Plans.
Note
8 — Retirement Plans
Pension
Plans
Beginning
in September 2018, the Company entered into discussions with the U.S. Pension Benefit Guaranty Corporation (the “PBGC”),
a United States government agency established by Title IV of the Employee Retirement Income Security Act of 1974 (“ERISA”)
which insures certain pension plans, for the purpose of obtaining certain relief from the Company’s obligations under the
Plan. The Company and the PBGC entered into an agreement on May 13, 2019 to terminate the Imation Cash Balance Pension Plan (the
“Plan”) based on the PBGC’s findings that (i) the Plan did not meet the minimum funding standard required under
Section 412 of the Internal Revenue Code of 1986, as amended; (ii) the Plan would be unable to pay benefits when due and (iii)
the Plan should be terminated in order to protect the interests of the Plan participants. GlassBridge and all other members of
GlassBridge’s (as seller) controlled group (within the meaning of 29 U.S.C. §1301(a)(14)) (the “Controlled
Group Members”) were jointly and severally liable to the PBGC for all liabilities under Title IV of ERISA in connection
with the Plan’s termination, including unfunded benefit liabilities, due and unpaid Plan contributions, premiums, and interest
on each of the foregoing, as a result of which a lien in favor of the Plan, on all property of each Controlled Group Member, arose
and was perfected by PBGC. On October 1, 2019, the Company entered into a settlement agreement with the PBGC (the “Settlement
Agreement”). Pursuant to the terms and subject to the conditions set forth in the Settlement Agreement, on October
3, 2019, GlassBridge paid $3,000,000 in cash to the PBGC, which was within five days of the date of the execution of
the Settlement Agreement (the “Settlement Payment”). On the 95th day following payment of the Settlement
Payment to the PBGC, the PBGC will be deemed to have released all Controlled Group Members from the PBGC’s lien
(the “Release Date”).
The
Company had one remaining international employee-eligible
retirement plan in Germany (the “German Plan” and all international plans the “International Plans”).
Following the Subsidiary Sale in the first quarter of 2019, the Company no longer has any obligations under the German
Plan or any other prior International Plans.
Note
9 — Income Taxes
For
interim income tax reporting, we are required to estimate our annual effective tax rate and apply it to year-to-date pre-tax income/loss
excluding unusual or infrequently occurring discrete items.
For
the three months ended September 30, 2019, we recorded income tax from continuing operations of $0.0 million on a loss of $0.5
million. For the three months ended September 30, 2018, we recorded income tax of $0.0 million on a loss of $2.1 million. The
effective income tax rate for the three months ended September 30, 2019 differs from the U.S. federal statutory rate of 21% primarily
due to a valuation allowance on various deferred tax assets.
During
July 2019, the Company received an income tax refund of approximately $1.1 million related to the Tax Reform Act’s elimination
of corporate alternative minimum tax and the ability to receive refunds of AMT credit carryovers. Another $1.1 million is still
receivable over a period of three years, in 2020 through 2022.
We
accrue for the effects of uncertain tax positions and the related potential penalties and interest. Our historical liability
was assumed by the buyer of the foreign entities in March 2019; there is no remaining liability as of September 30, 2019.
We
file income tax returns in multiple jurisdictions which are subject to review by various U.S and state taxing authorities.
Our U.S. federal income tax returns for 2016 through 2019, and certain state returns from 2013 to present, are open
to examination.
Note
10 — Shareholders’ Equity
Reverse
Stock Split
As
previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
as of August 22, 2019, on August 20, 2019, the Company filed an Amendment (the “Amendment”) to the Restated Certificate
of Incorporation, as amended, of the Company (the “Articles”) with the Secretary of State of the State of Delaware
to: (i) effect the previously announced reverse split of our common stock, par value $0.01 per share at a ratio of 1:200 (the
“Reverse Stock Split”) and (ii) effect an amendment allowing the stockholders of the Company to act by written consent
in lieu of meeting, subject to certain limitations (the “Written Consent Amendment”).
On
August 21, 2019 (the “Effective Date”), our common stock began trading on the Reverse Stock Split-adjusted basis on
the OTCQB at the opening of trading. In connection with the Reverse Stock Split, our common stock began trading with a new CUSIP
number at such time. There was no change to the Company’s stock symbol.
No
fractional shares of common stock were issued in connection with the Reverse Stock Split. If, as a result of the Reverse
Stock Split, a stockholder would otherwise have held a fractional share, a stockholder, in lieu of the issuance of such
fractional share, was entitled, upon surrender to the exchange agent of a certificate(s) representing its pre-split shares
or upon conversion of its shares held in book-entry, to receive a cash payment equal to the fraction to which the stockholder
would otherwise be entitled, multiplied by $106, which is the closing price per share (as adjusted to give effect to the Reverse
Stock Split) on the OTCQB on the closing date immediately prior to the Effective Date.
EQ
by Equiniti (“EQ”), the Company’s transfer agent, acted as the exchange agent for the Reverse Stock Split,
and provided instructions to stockholders of record regarding the process for exchanging shares. EQ issued all of
the post-Reverse Stock Split shares through their paperless Direct Registration System (“DRS”), also known as “book
entry form.” Eligible book-entry or other electronic positions representing issued and outstanding shares of the Company’s
common stock were automatically adjusted. Stockholders who held certificated shares were mailed a letter
of transmittal to be completed for the exchange of all of their shares. Those stockholders holding common stock in “street
name” received instructions from their brokers.
Treasury
Stock
On
May 2, 2012, the Board authorized a share repurchase program that allowed for the repurchase of 2,500 shares of common stock.
On November 14, 2016, our Board authorized a new share repurchase program under which we may repurchase up to 2,500 shares of
common stock. This authorization replaces the Board’s prior May 2, 2012 share repurchase authorization. Under the share
repurchase program, we may repurchase shares from time to time using a variety of methods, which may include open market transactions
and privately negotiated transactions.
The
Company did not purchase any shares during the three months ended September 30, 2019. Since the inception of the November 14,
2016 authorization, we have repurchased 779 shares of common stock for $0.3 million and, as of September 30, 2019, we had remaining
authorization to repurchase 1,721 additional shares. The treasury stock held as of September 30, 2019 was acquired at an average
price of $8,496.47 per share.
Following
is a summary of treasury share activity:
|
|
|
Treasury
Shares
|
|
|
Balance as of December 31, 2018
|
|
|
2,402
|
|
|
Purchases
|
|
|
450
|
|
|
Restricted stock
grants
|
|
|
—
|
|
|
Forfeitures
and other
|
|
|
75
|
|
|
Balance as of September 30, 2019
|
|
|
2,927
|
|
Accumulated
Other Comprehensive Loss
Accumulated
other comprehensive loss and related activity consisted of the following:
|
(In millions)
|
|
Defined
Benefit Plans
|
|
|
Balance as of December
31, 2018
|
|
$
|
(20.7
|
)
|
|
Amounts
reclassified from accumulated other comprehensive income, net of tax
|
|
|
0.1
|
|
|
Balance as of
September 30, 2019
|
|
$
|
(20.6
|
)
|
Details
of amounts reclassified from accumulated other comprehensive loss and the line item in the Condensed Consolidated Statements of
Operations are as follows:
|
|
|
Amounts
Reclassified from Accumulated
Other
Comprehensive Loss
|
|
|
Affected
Line Item in the Condensed Consolidated Statements of Operations Where (Gain) Loss is Presented
|
|
|
|
Three
Months Ended
September
30,
|
|
|
Nine
Months Ended
September
30,
|
|
|
|
|
(In
millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
Amortization
of net actuarial loss
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
0.1
|
|
|
$
|
0.3
|
|
|
Other
income (expense)
|
|
Cumulative
translation adjustment
|
|
|
—
|
|
|
|
0.9
|
|
|
|
—
|
|
|
|
0.7
|
|
|
Discontinued
operations
|
|
Total
reclassifications for the period
|
|
$
|
—
|
|
|
$
|
1.0
|
|
|
$
|
0.1
|
|
|
$
|
1.0
|
|
|
|
Income
taxes are not provided for cumulative translation adjustment relating to permanent investments in international subsidiaries.
Reclassification adjustments are made to avoid double counting in comprehensive income (loss) items that are also recorded as
part of net income (loss) and are presented net of taxes in the Consolidated Statements of Comprehensive Income (Loss).
Note
11 — Segment Information
The
Legacy Businesses and the Nexsan Business are presented in our Condensed Consolidated Statements of Operations as discontinued
operations and are not included in segment results for all periods presented. See Note 4 - Discontinued Operations for
further information about these divestitures.
On
February 2, 2017, we closed the Capacity and Services Transaction with Clinton. The Capacity and Services Transaction allows GBAM
to access investment capacity within Clinton’s quantitative equity strategy. In addition, we have recently taken steps to
build our own independent organizational foundation while leveraging Clinton’s capabilities and infrastructure. While our
intention is to primarily engage in the management of third-party assets, we may make opportunistic proprietary investments from
time to time that comply with applicable laws and regulations. Since the closing of the Capacity and Services Transaction, we
have focused on our Asset Management Business as our primary operating business segment. See Note 13 - Related Party Transactions
for additional information.
In
March 2017, ARRIVE was formed through a collaboration with Roc Nation, a full-service entertainment company founded by Shawn “JAY
Z” Carter, Primary Venture Partners (“Primary”) and GBAM. Primary will serve as a venture advisor and GlassBridge
will provide institutional and operational support. ARRIVE was created to invest alongside entrepreneurs and early stage businesses.
Among other things, ARRIVE has launched a traditional venture fund in order to, among other activities, support existing portfolio
companies through their subsequent growth stages and anticipates launching other special purpose investment vehicles to invest
in private equity transactions. All revenue realized by GBAM in the reported periods were derived from its ARRIVE investment.
In
June 2017, we launched our first GBAM-managed investment fund (the “GBAM Fund”) which focuses on technology-driven
quantitative strategies and other alternative investment strategies. The fund initially performed in-line with the expectation
for 2017. However, we had a difficult time raising third-party capital due to the overall under-performance of the hedge fund
industry. In Q4, 2018, after an internal business review and deliberations, we decided to temporarily close the GBAM Fund
to save operating costs.
We
have made the determination to consolidate the GBAM Fund and, accordingly, its financial results were included in our Consolidated
Financial Statements as part of the Asset Management Business shown below.
As
of September 30, 2019, the Asset Management Business is our only reportable segment.
We
evaluate segment performance based on revenue and operating loss. The operating loss reported in our segments excludes corporate
and other unallocated amounts. Although such amounts are excluded from the business segment results, they are included in reported
consolidated results. The corporate and unallocated operating loss includes costs which are not allocated to the business segments
in management’s evaluation of segment performance such as litigation settlement expense, corporate expense and other expenses.
For
our Asset Management Business, we include net income from the GBAM Fund activities in our performance evaluation. Net income
from GBAM Fund activities primarily represents realized and unrealized gains and losses for the GBAM Fund.
Net
revenue and operating loss from continuing operations by segment were as follows:
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
(In millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Net revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Management Business
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
Total net revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
|
|
Three
Months Ended
|
|
|
Nine
Months Ended
|
|
|
|
|
September
30,
|
|
|
September
30,
|
|
|
(In
millions)
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
Operating
income (loss) from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset
Management Business
|
|
$
|
—
|
|
|
$
|
(0.9
|
)
|
|
$
|
0.1
|
|
|
$
|
(2.7
|
)
|
|
Total
segment operating income (loss)
|
|
|
—
|
|
|
|
(0.9
|
)
|
|
|
0.1
|
|
|
|
(2.7
|
)
|
|
Corporate
and unallocated
|
|
|
(0.5
|
)
|
|
|
(1.1
|
)
|
|
|
(2.5
|
)
|
|
|
(2.7
|
)
|
|
Restructuring
and other
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
|
(0.1
|
)
|
|
Total
operating loss
|
|
|
(0.5
|
)
|
|
|
(2.0
|
)
|
|
|
(2.5
|
)
|
|
|
(5.5
|
)
|
|
Interest
expense
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(0.1
|
)
|
|
Net
losses from GBAM Fund activities
|
|
|
—
|
|
|
|
(0.2
|
)
|
|
|
—
|
|
|
|
(0.7
|
)
|
|
Other
income (expense), net
|
|
|
—
|
|
|
|
0.1
|
|
|
|
—
|
|
|
|
0.4
|
|
|
Loss
from continuing operations before income taxes
|
|
$
|
(0.5
|
)
|
|
$
|
(2.1
|
)
|
|
$
|
(2.5
|
)
|
|
$
|
(5.9
|
)
|
Note
12 — Litigation, Commitments and Contingencies
The
Company is a party, as either a sole or joint defendant or plaintiff, in various lawsuits, claims and other legal matters that
arise in the ordinary course of conducting business (including litigation relating to our Legacy Businesses and discontinued operations).
All such matters involve uncertainty and accordingly, outcomes that cannot be predicted with assurance. As of September 30, 2019,
we are unable to estimate with certainty the ultimate aggregate amount of monetary liability or financial impact that we may incur
with respect to these matters. It is reasonably possible that the ultimate resolution of these matters, individually or in the
aggregate, could materially affect our financial condition, results of operations and cash flows.
Intellectual
Property Litigation
The
Company is subject to allegations of patent infringement by our competitors as well as non-practicing entities (“NPEs”)
- sometimes referred to as “patent trolls” - who may seek monetary settlements from us, our competitors, suppliers
and resellers. The nature of such litigation is complex and unpredictable and, consequently, the Company is not able to reasonably
estimate with precision the amount of any monetary liability or financial impact that may be incurred with respect to these matters.
As of November 14, 2019, given the exits from the Legacy Businesses, the Company believes that the ultimate resolution of these
matters in the aggregate will not materially adversely affect our financial condition, results of operations and cash flows.
Trade
Related Litigation
On
January 26, 2016, CMC, a supplier of our Legacy Businesses, filed a suit in the District Court of Ramsey County Minnesota, seeking
damages from the Company and the Company’s wholly-owned subsidiary Imation Latin America Corp. (“ILAC”) for
alleged breach of contract. CMC also brought similar claims in Japan and the Netherlands against other of our subsidiaries. As
previously disclosed in the Current Report on Form 8-K we filed with the SEC on September 18, 2017, we entered into a settlement
agreement with CMC on September 15, 2017 resolving all claims relating to the CMC lawsuits. Pursuant to the settlement, (i) we
agreed that our subsidiary Imation Corporation Japan (“ICJ”) will cause the release and payment to CMC of approximately
$9.2 million in attached assets, (ii) ICJ made a payment to CMC of $1.5 million on October 10, 2017, (iii) our subsidiary Imation
Europe B.V. (“IEBV”) will cause the release and payment to CMC of approximately $825,000 in attached assets, (iv)
ICJ issued to CMC an unsecured promissory note (the “CMC Note”) in the amount of $1.5 million, and (v) we guaranteed
CMC ICJ’s obligations under the CMC Note. As of December 31, 2017, both ICJ and Europe B.V. had released the required payments
to CMC. In January 2018, ICJ made a $0.5 million payment to CMC in relation to the $1.5 million CMC Note discussed above. On March
28, 2019, the Company, together with its subsidiaries, including IJC, entered into a pre-pay agreement (the “Pre-Pay Agreement”)
with CMC providing that the Company shall pre-pay the remaining balance of $1,000,000 due and payable under the CMC Note for a
one-time cash payment of $325,000, and CMC accepted such pre-payment in full satisfaction of the Company’s obligations under
the settlement agreement and the CMC Note. The $325,000 payment was made on March 28, 2019.
The
Company has various trade disputes with vendors related to the Legacy Businesses. The Company believes it has made adequate accruals
with respect to the disputes for which such is appropriate according to our accounting policy.
Employee
Matters
On
March 29, 2017, three former Legacy Business employees who were among the approximately 100 similarly situated employees terminated
as a result of the Restructuring Plan filed a lawsuit in the Minnesota State District Court of Ramsey County asserting state law
claims for non-payment of allegedly promised severance benefits. On
February 27, 2019, the Company settled the claim for $86,000.
On November 21, 2018, the Company was served by forty-five former Legacy Business employees
who were asserting claims for unpaid severance allegedly promised to them by the Company. The Company entered into a settlement
agreement as of July 25, 2019, to settle the claim for $150,000.
Copyright
Levies
We
had previously disclosed various copyright levy litigations related to our former subsidiary – IEBV. In connection with
the Subsidiary Sale, the Company is no longer liable for adverse outcomes and may receive Contingent Payouts should IEBV prevail
in litigation.
Indemnification
Obligations
In
the normal course of business, we periodically enter into agreements that incorporate general indemnification language. Performance
under these indemnities would generally be triggered by a breach of terms of the contract or by a supportable third-party claim.
There have historically been no material losses related to such indemnifications. As of September 30, 2019 and December 31, 2018,
estimated liability amounts associated with such indemnifications were not material.
Environmental
Matters
Our
Legacy Business operations and indemnification obligations resulting from our spinoff from 3M subject us liabilities arising from
a wide range of federal, state and local environmental laws. For example, from time to time we have received correspondence from
3M notifying us that we may have a duty to defend and indemnify 3M with respect to certain environmental claims such as remediation
costs. Environmental remediation costs are accrued when a probable liability has been determined and the amount of such liability
has been reasonably estimated. These accruals are reviewed periodically as remediation and investigatory activities proceed and
are adjusted accordingly. We did not have any environmental accruals as of September 30, 2019. Compliance with environmental regulations
has not had a material adverse effect on our financial results.
Note
13 — Related Party Transactions
Certain Arrangements
On
January 31, 2017, the Company held a special meeting of the stockholders of the Company at which the stockholders approved the
issuance of up to 1,500,000 shares (the “Capacity Shares”) of the Company’s common stock (as adjusted to reflect
the Reverse Stock Split), par value $0.01 per share, pursuant to the Subscription Agreement, dated as of November 22, 2016, by
and between the Company and Clinton, as amended by Amendment No. 1 to the Subscription Agreement, dated as of January 9, 2017
(as so amended, the “Subscription Agreement”). Pursuant to the terms of the Subscription Agreement, on February 2,
2017 (the “Initial Closing Date”), the Company entered into the Capacity and Services Transaction with Clinton Group
and GBAM (the “Capacity and Services Transaction”). As consideration for the capacity and services Clinton has agreed
to provide under the Capacity and Services Transaction and pursuant to the terms of the Subscription Agreement, the Company issued
1,250,000 shares of the Company’s common stock (as adjusted to reflect the Reverse Stock Split) to Madison Avenue Capital
Holdings, Inc. (“Madison”), an affiliate of Clinton, on the Initial Closing Date. The closing price of the Company’s
common stock on the Initial Closing Date was $8.10. The Company also entered into a Registration Rights Agreement with Madison
on the Initial Closing Date, relating to the registration of the resale of the Capacity Shares as well as a letter agreement with
Madison pursuant to which Madison has agreed to a three-year lockup with respect to any Capacity Shares issued to it.
The
Company did not have a short term investment balance in Clinton Lighthouse as of September 30, 2019 and December 31, 2018, and
as such did not have any unrealized gains for the three months ended September 30, 2019. Pursuant to the Capacity and Services
Agreement, the Company will no longer incur management or performance fees related to our investment in Clinton Lighthouse.
Management
of the Company
On
January 1, 2019, the Company and Clinton entered into a management service agreement (the “Management Service Agreement”),
pursuant to which Clinton agreed to provide certain services to the Company, including accounting and treasury services, service
of managing the third party fund administrator, IT services, payroll and benefit services and other administration services as
reasonably requested by the Company. The initial term of this Management Service Agreement is six (6) months (the “Initial
Term”) and shall renew for successive renewal terms of three (3) calendar months (each, a “Renewal Term”) unless
either Party provides notice of nonrenewal to the other Party prior to the conclusion of the then current initial term or renewal
term. The Company shall pay Clinton at the rate of $68,750 each quarter for the Initial Term and each Renewal Term.
Daniel
A. Strauss serves as our Chief Executive Officer and Chief Operating Officer, and Francis Ruchalski serves as our Chief Financial
Officer, pursuant to the terms of a the Amended and Restated Services Agreement we entered into with Clinton on March 31, 2019
(the “Amended Services Agreement”) replacing in its entirety that certain Services Agreement we entered into with
Clinton on March 2, 2017 (the “Services Agreement”). The Amended Services Agreement provides that Clinton will make
available certain of its employees to provide services to the Company, including CEO services, COO services and CFO services (the
“Executive Services”). In addition to the Executive Services, Clinton will make available other employees of Clinton
as necessary to manage certain business functions as deemed necessary in the sole discretion of Clinton to provide other management
services (the “Management Services”). Under the Amended Services Agreement, Clinton may designate substitutes for
Mr. Strauss or Mr. Ruchalski or any other employee providing any Management Services. In consideration for the Executive Services
and Management Services, the Company shall provide to Clinton a rate of $243,750 for the initial term, such term being the first
three (3) months following the execution date of the Amended Services Agreement, and to automatically renew for successive renewal
terms of three (3) calendar months each, the fee for each renewal term being $243,750. Clinton will continue to pay Mr. Strauss’s
and Mr. Ruchalski’s compensation and benefits and we have agreed to pay or reimburse their reasonable expenses. Pursuant
to the terms of the Amended Services Agreement, we have also agreed to indemnify Mr. Strauss, Mr. Ruchalski, Clinton, any substitute
for Mr. Strauss, Mr. Ruchalski, or any other Clinton employee providing services under the Master Services Agreement for certain
losses. As of September 30, 2019, the Company paid Clinton $2,087,500 under the Services Agreement and recorded $858,333
and $375,000 within “Selling, general and administrative” in our Condensed Consolidated Statements of Operations
for the nine months ended September 30, 2019 and 2018, respectively.
On
September 30, 2019, Imation entered into an Employment Agreement with Mr. Strauss, effective October 1, 2019 (the “Strauss
Agreement”), providing for, among other things, a base salary to be paid to Mr. Strauss of $175,000 in accord with Imation’s
normal payroll practices, as well as eligibility to participate in the compensation and benefit programs generally available to
Imation’s executive officers.
Sport-BLX, Inc.
During 2019,
the Company entered into three Common Stock Purchase Agreements (the
“Sport-BLX Purchase Agreement”) together with Sport-BLX, Inc., a Delaware corporation, where George E. Hall,
the holder of approximately 25.78% of the Company’s outstanding common stock, is Executive Chairman and CEO (“Sport-BLX”).
As per the January 4, 2019 Sport-BLX Purchase Agreement, the Company agreed to purchase from Sport-BLX 10,526 shares
of Sport-BLX common stock, par value $0.001 per share, at a price equal to $95 per share, for aggregate consideration
of $1,000,000. As per the September 16, 2019 Sport-BLX Purchase Agreement, the Company agreed to purchase from Sport-BLX
679 shares of Sport-BLX common stock, par value $0.001 per share, at a price equal to $263.4074 per share for
aggregate consideration of $178,854. As of September 30, 2019, the Company funded the total consideration
due of $1,178,854.
As
per the October 18, 2019 Sport-BLX Purchase Agreement, Imation
agreed to purchase from Sport-BLX 2,314 shares of Sport-BLX common stock, par value $0.001 per share, at a price equal to $263.4074
per share for aggregate consideration of $609,524.72. Imation funded the total consideration due of $609,524.72 on November 5,
2019.
On October 1, 2019, the Company made a $1,000,000 demand loan to Sport-BLX.
Note
14 — Subsequent Events
As
previously disclosed in a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”)
as of October 7, 2019, on October 1, 2019, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”)
with Orix PTP Holdings, LLC, a Delaware limited liability company (“Orix”). The Purchase agreement provides for the
sale of 201 shares of common stock, par value $0.01 per share (the “Purchased Stock”), constituting 20.1% of all issued
and outstanding stock of Imation Enterprises Corp., a Delaware corporation and formerly wholly owned subsidiary of GlassBridge
(“Imation”) to Orix. The Purchase Agreement further provides for the sale and assignment from GlassBridge to Orix
of (i) that certain promissory note, dated as of September 30, 2019, originally issued by Imation in favor of GlassBridge in consideration
for the assignment by GlassBridge to Imation of the Levy Claims (defined below), in the original principal amount of $9,000,000
(“Levy Note”) and (ii) that certain promissory note, dated as of September 30, 2019, originally issued by Imation
in favor of GlassBridge in connection with the assignment of 11,154 shares of Common Stock, par value 0.0001 per share of Sport-BLX,
Inc., a Delaware corporation, in the original principal amount of $4,000,000 (“Sport-BLX Note” and collectively with
the Levy Note, the “Notes”). Orix acquired the Purchased Stock and the Notes for a total consideration of $17,562,700
(“Cash Consideration”).
The
“Levy Claims” mean the right to receive payments from IMN Capital Holding Inc. in connection with the settlement or
final adjudication (without any ability to further appeal by any party) as to all demands, claims, counterclaims, cross-claims,
third-party-claims, damages, fees (including attorney’s fees), costs and expenses, brought and raised on any matters arising
from the following claims and causes of action:
|
Company
holding the Claim
|
|
Jurisdiction
|
|
Court
or Tribunal
|
|
Matter
Name and Identifying Number
|
|
Imation
Europe BV
|
|
France
|
|
Cour
D’Appel De Paris
|
|
16/08482
-N°
Portalis 35L7-
V-B7A-BYR7B
|
|
|
|
|
|
|
|
|
|
Imation
Europe BV
|
|
Dutch
|
|
District
Court of The Hague
|
|
C/09/489719/HA
ZA 15-659
|
Under
the terms of the Purchase Agreement, the Board of Directors of Imation was expanded from three to five directors, which includes
one director designated by Orix.
Also
pursuant to the terms of the Purchase Agreement, GlassBridge, Orix and Imation entered into a Stockholders’ Agreement dated
as of October 1, 2019 (the “Stockholders Agreement”) pursuant to which Orix may, among other rights and obligations
set forth in the Stockholders Agreement, sell back all of its Purchased Shares to GlassBridge at book value after April 1, 2021
and during the three-month period after such date and shall, during the term of the Stockholders Agreement, have the right to
purchase all or a portion of the shares owned by GlassBridge in Imation at book value plus 20%, subject to the right of GlassBridge
to respond to the notice by Orix to exercise such right by purchasing all of the shares of Orix.
The
foregoing transactions, consummated by the Company, Imation and Orix, as evidenced by the Purchase Agreement, the Notes, the Stockholders
Agreement, and the assignment agreements shall altogether be referred to as the Orix Transactions.
The
following unaudited pro forma condensed consolidated balance sheet for the nine months ended September 30, 2019, which gives effect
to the Orix Transactions and the Settlement Agreement with the PBGC has been prepared to give effect to the Orix Transactions
and the Settlement Agreement as if they had been completed and entered into, respectively, on September 30, 2019, and if the Release
Date (see Note 8 – Retirement Plans) had occurred on September 30, 2019.
The
unaudited pro forma condensed consolidated balance sheet is for informational purposes only and is not necessarily indicative
of what our financial performance or financial position would have been had the transactions been completed on the dates assumed
nor is such unaudited pro forma financial information necessarily indicative of the results expected in any future period.
GLASSBRIDGE
ENTERPRISES, INC.
PRO
FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
(In millions, except per share amounts)
|
|
|
September 30, 2019
|
|
|
Purchase
|
|
|
Settlement
|
|
|
|
|
|
|
|
As Reported
|
|
|
Agreement
|
|
|
Agreement
|
|
|
Pro Forma
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
0.6
|
|
|
$
|
13.9
|
|
|
$
|
(4.3
|
)
|
|
$
|
10.2
|
|
|
Accounts receivable
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
Other current assets
|
|
|
1.5
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1.5
|
|
|
Current assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total current assets
|
|
|
2.2
|
|
|
|
13.9
|
|
|
|
(4.3
|
)
|
|
|
11.8
|
|
|
Other assets
|
|
|
6.0
|
|
|
|
14.7
|
|
|
|
—
|
|
|
|
20.7
|
|
|
Non-current assets of discontinued operations
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
Total assets
|
|
$
|
8.2
|
|
|
$
|
28.6
|
|
|
$
|
(4.3
|
)
|
|
$
|
32.5
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Other current liabilities
|
|
|
2.6
|
|
|
|
—
|
|
|
|
(2.0
|
)
|
|
|
0.6
|
|
|
Current liabilities of discontinued operations
|
|
|
0.9
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.9
|
|
|
Total current liabilities
|
|
|
3.6
|
|
|
|
—
|
|
|
|
(2.0
|
)
|
|
|
1.6
|
|
|
Other liabilities
|
|
|
15.2
|
|
|
|
10.3
|
|
|
|
(14.4
|
)
|
|
|
11.1
|
|
|
Other liabilities of discontinued operations
|
|
|
0.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.2
|
|
|
Total liabilities
|
|
|
19.0
|
|
|
|
10.3
|
|
|
|
(16.4
|
)
|
|
|
12.9
|
|
|
Shareholders’ deficit:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $.01 par value, authorized 25 million shares, none issued
and outstanding
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Common stock, $.01 par value, authorized 50,000, 28,097 issued at September
30, 2019; 28,097 issued at December 31, 2018
|
|
|
0.1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
0.1
|
|
|
Additional paid-in capital
|
|
|
1,049.2
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1,049.2
|
|
|
Accumulated deficit
|
|
|
(1,014.6
|
)
|
|
|
14.3
|
|
|
|
12.1
|
|
|
|
(988.2
|
)
|
|
Accumulated other comprehensive loss
|
|
|
(20.6
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(20.6
|
)
|
|
Treasury stock, at cost: 2,927 shares at September 30, 2019; 2,402
shares at December 31, 2018
|
|
|
(24.9
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(24.9
|
)
|
|
Total GlassBridge Enterprises, Inc. shareholders’
equity (deficit)
|
|
|
(10.8
|
)
|
|
|
14.3
|
|
|
|
12.1
|
|
|
|
15.6
|
|
|
Noncontrolling minority interest
|
|
|
—
|
|
|
|
4.0
|
|
|
|
—
|
|
|
|
4.0
|
|
|
Total liabilities and shareholders’ equity
(deficit)
|
|
$
|
8.2
|
|
|
$
|
28.6
|
|
|
$
|
(4.3
|
)
|
|
$
|
32.5
|
|