Basis of Presentation
 9 Months Ended
Sep. 30, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Basis of Presentation
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, 2017 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, 2017 as filed with the U.S. Securities and Exchange Commission on April 2, 2018.
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, 2018 and December 31, 2017. See Note 4 - Discontinued Operations for further information.
Sale of NXSN
Background of Sale
On August 16, 2018, the Company simultaneously acquired all of the capital stock of NXSN Acquisition Corp. (together with its subsidiaries, “NXSN”) from Humilis Holdings Private Equity LP f/k/a Spear Point Private Equity LP (“Humilis”) and sold all of the capital stock of the Nexsan Group (as defined herein) (collectively, the “NXSN Transaction”) to StorCentric, Inc. (the “Buyer”), a newly-incorporated Delaware company affiliated with Drobo, Inc., a Delaware corporation (“Drobo”). As previously reported, NXSN owned all of the issued and outstanding shares of capital stock (the “Nexsan Shares”) of Nexsan Corporation, a Delaware corporation (“Nexsan”); and Nexsan owns all the outstanding capital stock of the following companies: Nexsan Technologies Limited, an England and Wales entity (“Nexsan UK”), Nexsan Technologies Incorporated, a Delaware corporation (“Nexsan US”), Connected Data, Inc., a California corporation (“Connected Data”), and 6360246 Canada Inc, a Canadian corporation (“First Canadian Entity” and collectively with Nexsan UK, Nexsan US, Connected Data, the “Direct Subsidiaries”); and First Canadian Entity owns all of the outstanding capital stock of Nexsan Technologies Canada, Inc., a Canadian corporation (“Nexsan Canada” and collectively with the Second Canadian Entity, the “Indirect Subsidiaries” and the Indirect Subsidiaries collectively with the Direct Subsidiaries and Nexsan, the “Nexsan Group”).
Prior to the NXSN Transaction, the Corporation owned fifty percent of the common stock of NXSN and a Senior Secured Convertible Note of NXSN dated January 23, 2017 (the “NXSN Note”) in the original principal amount of $25,000,000, which Note was declared in default on November 14, 2017 The NXSN Note is secured in favor of the Corporation by that certain Guaranty and Security Agreement dated as of January 23, 2017 by and among NXSN, Nexsan, the Corporation and the other parties thereto (the “NXSN Security Agreement”) pursuant to which inter alia Nexsan, Connected Data and Nexsan US, collectively, had guaranteed the obligations of NXSN under the NXSN Note (collectively, the “Nexsan Guaranty”). The Corporation had pledged the NXSN Note as security for that certain GlassBridge Enterprises, Inc. Secured Promissory Note dated September 28, 2017 (the “GlassBridge Note”) issued in favor of IOENGINE, LLC, a Delaware limited liability company(“IOENGINE”) in the original principal amount of $4,000,000 pursuant to that certain Pledge Agreement dated September 28, 2017 by and between the Corporation and IOENGINE (the “GlassBridge Pledge Agreement”), in connection with the settlement of litigation with IOENGINE.
The Corporation had acquired from Connected Data a Promissory Note dated May 15, 2015 made by Drobo initially in favor of Connected Data (including the related allonge, the “Drobo Note”).
Description of Sale and Material Agreements
As the first step in the NXSN Transaction, the Corporation caused NXSN to enter into an Exchange Agreement dated as of August 16, 2018 with Humilis (the “NXSN-Humilis Agreement”) pursuant to which NXSN agreed to grant Humilis an option to purchase the Nexsan Shares (the “Share Option”), equal to an aggregate of 140,000,500 shares of NXSN common stock and 5,600,000 shares of NXSN preferred stock, as set forth in an assignable Option Agreement dated as of an even date with the NXSN-Humilis Agreement (the “Option Agreement”) in exchange, inter alia, for the transfer to the Corporation of all of Humilis’ equity interests in NXSN.
Such Option Agreement was then assigned to Humilis Holdings LLC, an affiliate of Humilis, which, in turn, assigned the Option Agreement to Buyer pursuant to an Assignment of Contract by and between Humilis Holdings LLC and Buyer (the “Buyer-Humilis Assignment”), after which Buyer exercised the Share Option in accordance with the terms of the Option Agreement by entering into that certain Stock Purchase Agreement, dated August 16, 2018 (the “SPA”), by and among StorCentric, Inc., as Buyer, NXSN, as Seller, and the Corporation as Parent, contemplating gross proceeds in the amount of $5,675,000 (the “SPA Gross Proceeds”).
Subject to the terms and conditions of the SPA and the ancillary agreements referred to in the SPA (the “Ancillary Agreements”) (i) the Corporation and NXSN caused the Nexsan Guaranty and all encumbrances on the Nexsan Shares and the assets and business of Nexsan and the Nexsan Subsidiaries, including under the NXSN Security Agreement to be released, (ii) NXSN transferred all right, title and interest in and to the Nexsan Shares to Buyer free and clear of all encumbrances, (iii) Buyer paid off any and all amounts due and owing under the GlassBridge Note out of the purchase price otherwise payable to NXSN in accordance with that certain Pre-Pay Agreement dated as of August 13, 2018 by and among IOENGINE, the Corporation and Scott McNulty (the “IOENGINE Pre-Payment Agreement”), being Two Million Two Hundred Fifty Thousand Dollars ($2,250,000; (iv) in accordance with that certain Settlement Agreement and Mutual Release dated August 10, 2018 entered into inter alia, by NXSN, Nexsan US and Humilis (the “NTI A/R Settlement Agreement”) regarding the Receivables Litigation (as defined in the SPA), Nexsan US paid the Payment (as defined therein); (v) Buyer paid NXSN the Consideration described in the SPA to NXSN as payment in full for the purchase of the Shares, (vi) the Corporation delivered a certification that the original signed Drobo Note cannot be located (with appropriate indemnities) to Buyer and the Drobo Note was deemed to be cancelled, and (vii) all obligations of the Nexsan and the Nexsan Subsidiaries toward the Corporation or NXSN (other than the obligations under the SPA) were extinguished.
The SPA also provided for the placement in an Escrow Account $650,000 of the Consideration (the “Escrowed Funds”) to be held as a possible source of indemnification by NXSN and the Corporation for any indemnifiable costs or liabilities arising within 18 months of the NXSN Transaction. The Corporation does not believe any of the Escrowed Funds should be used; and should therefore be remitted to the Corporation on or about February 16, 2020.Furthermore, The SPA provided for the working capital adjustment toward the SPA Gross Proceeds based on the difference between the actual working capital on July 31, 2018 and the working capital target.
Upon deducting the Escrowed Funds and payment made to IOENGINE pursuant to the IOENGINE Pre-Payment Agreement from the SPA Gross Proceeds, the Corporation received a cash payment of Two Million Seven Hundred Seventy-five Thousand Dollars ($2,775,000.00) in connection with the SPA.
The foregoing is a summary of the NXSN Transaction, and is qualified in its entirety by reference to the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission as of August 16, 2018.

Liquidity and Management Plan
The Company incurred operating and cash flow losses for several reporting periods and had a negative working capital balance of $4.8 million as of September 30, 2018. This negative working capital balance raised substantial doubt about our ability to continue as a going concern. However, while the working capital balance is negative overall, it included $6.3 million of cash as of September 30, 2018, which is expected to fund our operations in the next twelve months. As a result, we have undertaken a financial and operational restructuring plan approved by our Board of Directors (the “Board”) prior to the 2018 fiscal year (the “Restructuring Plan”). Operating under the Restructuring Plan includes executing changes to our business model. Management’s execution of the Restructuring Plan, which we believe will alleviate the substantial doubt about our ability to continue as a going concern, is as follows:

•
Nexsan Business:  The Nexsan Business was one of the major factors contributing to negative cash flow in the past. We have divested the Nexsan Business in Q3, 2018 for $5.7 million. We used a portion of the proceeds to pay down debts.

•
Legacy Business:  We settled a substantial majority of our litigation in 2017 which significantly reduces our forecasted expenditures for professional fees and related costs during the next twelve months. We have entered a levy litigation financing agreement with a third party to further reduce legal fees.

•
Pension Liabilities: We are currently in discussions with the Pension Benefit Guaranty Corporation seeking relief from the minimum funding requirements of our U.S. pension plan. As of September 30, 2018, a required contribution of $1.7 million had not been paid and is included in the Company's current liabilities.

•
Corporate:  We made further spending cuts in all areas including costs relating to the compensation of the members of our board and professional fees that are expected to reduce cash outflows by at least $0.5 million per year. Our current liabilities include $5.1 million of levies in Germany that we are disputing. We believe, based on communications from the German collection authorities, that these levy disputes will be settled in our favor within twelve months from the date these financial statements are issued or we will continue to dispute them under a process that will transpire over a period of more than twelve months from the date these financial statements are issued.

We expect that our cash and short term investments and potential cash flow from our Asset Management Business will provide sufficient liquidity to meet our obligations as they become due within one year from the date these financial statements are issued. We also plan to raise additional capital from non-strategic asset sales, or otherwise, if necessary, although no assurance can be made that we will be able to secure such financing, if needed, on favorable terms or at all.