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EX-32.2 - EXHIBIT 32.2 - GlassBridge Enterprises, Inc.imn06302017ex322.htm
EX-32.1 - EXHIBIT 32.1 - GlassBridge Enterprises, Inc.imn06302017ex321.htm
EX-31.2 - EXHIBIT 31.2 - GlassBridge Enterprises, Inc.imn06302017ex312.htm
EX-31.1 - EXHIBIT 31.1 - GlassBridge Enterprises, Inc.imn06302017ex311.htm
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2017
or
o 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: 1-14310

glassbridgelogo.jpg
GLASSBRIDGE ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
41-1838504
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
1099 Helmo Avenue N, Suite 250
Oakdale, Minnesota
 
55128
(Address of principal executive offices)
 
(Zip Code)
(651) 704-4000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
 
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. þ Yes o 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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o
 
Accelerated filer o
 
Non-accelerated filer (Do not check if a smaller reporting company) o
 
Smaller reporting company þ
 
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,961,931 shares of Common Stock, par value $0.01 per share, were outstanding as of August 7, 2017.



GLASSBRIDGE ENTERPRISES, INC.
TABLE OF CONTENTS
 
PAGE
 
EX-31.1
 
EX-31.2
 
EX-32.1
 
EX-32.2
 


2


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for per share amounts)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net revenue
 
$
8.8

 
$
10.6

 
$
18.4

 
$
21.3

Cost of goods sold
 
4.7

 
5.9

 
9.9

 
12.2

Gross profit
 
4.1

 
4.7

 
8.5

 
9.1

Operating expenses:
 
 
 
 
 
 
 
 
Selling, general and administrative
 
7.6

 
8.3

 
16.4

 
18.9

Research and development
 
2.2

 
3.2

 
4.7

 
6.6

Restructuring and other
 
(0.6
)
 
(1.0
)
 
(0.1
)
 
5.8

Total operating expenses
 
9.2

 
10.5

 
21.0

 
31.3

Operating loss from continuing operations
 
(5.1
)
 
(5.8
)
 
(12.5
)
 
(22.2
)
Other income (expense):
 
 
 
 
 
 
 
 
Interest income
 

 
0.2

 

 
0.2

Other income (expense), net
 
(0.7
)
 
(1.1
)
 
(0.7
)
 
(1.0
)
Total other income (expense)
 
(0.7
)
 
(0.9
)
 
(0.7
)
 
(0.8
)
Loss from continuing operations before income taxes
 
(5.8
)
 
(6.7
)
 
(13.2
)
 
(23.0
)
Income tax benefit (provision)
 
(0.1
)
 
0.5

 

 
2.1

Loss from continuing operations
 
(5.9
)
 
(6.2
)
 
(13.2
)
 
(20.9
)
Discontinued operations:
 
 
 
 
 
 
 
 
Gain on sale of discontinued businesses, net of income taxes
 

 

 

 
2.4

Gain (loss) from discontinued operations, net of income taxes
 
(1.2
)
 
0.7

 
(3.2
)
 
(2.4
)
     Reclassification of cumulative translation adjustment
 

 
(0.1
)
 

 
(75.8
)
Gain (loss) from discontinued operations, net of income taxes
 
(1.2
)
 
0.6

 
(3.2
)
 
(75.8
)
Net loss including noncontrolling interest
 
(7.1
)

(5.6
)
 
(16.4
)
 
(96.7
)
      Less: Net loss attributable to noncontrolling interest
 
(2.0
)
 

 
(3.5
)
 

Net loss attributable to GlassBridge Enterprises, Inc.
 
$
(5.1
)
 
$
(5.6
)
 
$
(12.9
)
 
$
(96.7
)
 
 
 
 
 
 
 
 
 
Income (loss) per common share attributable to GlassBridge common shareholders — basic and diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.78
)
 
$
(1.67
)
 
$
(2.16
)
 
$
(5.65
)
Discontinued operations
 
(0.24
)
 
0.16

 
(0.71
)
 
(20.49
)
Net loss
 
$
(1.02
)
 
$
(1.51
)
 
$
(2.87
)
 
$
(26.14
)
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
Basic and diluted
 
5.0

 
3.7

 
4.5

 
3.7

 
 
 
 
 
 
 
 
 
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

3



GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
(Unaudited)
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
 
 
2017
 
2016
 
2017
 
2016
Net loss including noncontrolling interest
 
$
(7.1
)
 
$
(5.6
)
 
$
(16.4
)
 
$
(96.7
)
 
 
 
 
 
 
 
 
 
Other comprehensive (loss) income, net of tax:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net pension adjustments, net of tax:
 
 
 
 
 
 
 
 
Liability adjustments for defined benefit pension plans
 

 
(2.2
)
 

 
(2.1
)
Reclassification of adjustment for defined benefit plans recorded in net loss
 
0.1

 
1.2

 
0.2

 
2.5

Total net pension adjustments
 
0.1

 
(1.0
)
 
0.2

 
0.4

 
 
 
 
 
 
 
 
 
Net foreign currency translation:
 
 
 
 
 
 
 
 
Unrealized foreign currency translation losses
 

 

 

 
(0.8
)
Realized cumulative translation adjustments from disposal of businesses
 

 
0.1

 

 
75.8

Total net foreign currency translation
 

 
0.1

 

 
75.0

 
 
 
 
 
 
 
 
 
Total other comprehensive income (loss), net of tax
 
0.1

 
(0.9
)
 
0.2

 
75.4

 
 
 
 
 
 
 
 
 
Comprehensive loss including noncontrolling interest
 
(7.0
)
 
(6.5
)
 
(16.2
)
 
(21.3
)
Less: Comprehensive loss attributable to noncontrolling interest
 
(2.0
)
 

 
(3.5
)
 

Comprehensive loss attributable to GlassBridge Enterprises, Inc.
 
$
(5.0
)
 
$
(6.5
)
 
$
(12.7
)
 
$
(21.3
)
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

4


GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except per share amounts)
 
 
June 30,
 
December 31,
 
 
2017
 
2016
 
 
(unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
16.2

 
$
10.0

Short term investments
 
3.3

 
22.0

Accounts receivable, net
 
5.6

 
7.7

Inventories
 
5.0

 
4.1

Other current assets
 
4.2

 
3.2

Current assets of discontinued operations
 
11.1

 
10.5

Total current assets
 
45.4

 
57.5

Property, plant and equipment, net
 
2.5

 
2.8

Intangible assets, net
 
12.3

 
3.4

Goodwill
 
3.8

 
3.8

Other assets
 
4.9

 
1.0

Non-current assets of discontinued operations
 
2.5

 
2.8

Total assets
 
$
71.4

 
$
71.3

Liabilities and Shareholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
6.6

 
$
7.1

Other current liabilities
 
17.6

 
16.0

Current liabilities of discontinued operations
 
40.1

 
39.7

Total current liabilities
 
64.3

 
62.8

Other liabilities
 
30.4

 
29.4

Other liabilities of discontinued operations
 
4.2

 
4.4

Total liabilities
 
98.9

 
96.6

Shareholders’ deficit:
 
 
 
 
Preferred stock, $.01 par value, authorized 25 million shares, none issued and outstanding
 

 

Common stock, $.01 par value, authorized 10 million shares, 5.7 million issued
 
0.1

 

Additional paid-in capital
 
1,052.8

 
1,042.8

Accumulated deficit
 
(1,031.8
)
 
(1,019.1
)
Accumulated other comprehensive loss
 
(20.6
)
 
(20.6
)
Treasury stock, at cost: 0.7 million shares at June 30, 2017; 0.7 million shares at December 31, 2016
 
(28.5
)
 
(28.4
)
Total GlassBridge Enterprises, Inc. shareholders’ deficit
 
(28.0
)
 
(25.3
)
Noncontrolling interest
 
0.5

 

Total shareholders’ deficit
 
(27.5
)
 
(25.3
)
Total liabilities and shareholders’ deficit
 
$
71.4

 
$
71.3

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

5


GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
The assets of the consolidated variable interest entity that can be used only to settle obligations of the consolidated variable interest entity (“VIE”) and the liabilities of the entity for which creditors (or beneficial interest holders) do not have recourse to our general credit were as follows:
 
 
June 30,
 
 
2017
 
 
(unaudited)
Assets
 
 
Cash and cash equivalents
 
$
0.3

Accounts receivable, net
 
$
5.4

Inventories
 
$
5.0

Intangible assets, net and Goodwill
 
$
6.9

Other assets
 
$
6.1

Liabilities
 
 
Accounts payable
 
$
5.7

Other current liabilities
 
$
9.0

Other liabilities
 
$
5.0

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

6


GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
 
 
Six Months Ended
 
 
June 30,
 
 
2017
 
2016
Cash Flows from Operating Activities:
 
 
 
 
Net loss including noncontrolling interest
 
$
(16.4
)
 
$
(96.7
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
Depreciation and amortization
 
2.1

 
1.3

Realized cumulative translation adjustment
 

 
75.8

Short term investment
 
18.7

 
(35.7
)
Other, net
 
(0.4
)
 
0.5

Changes in operating assets and liabilities
 
2.6

 
(20.2
)
Net cash provided by (used in) operating activities
 
6.6

 
(75.0
)
Cash Flows from Investing Activities:
 
 
 
 
Capital expenditures
 
(0.6
)
 
(0.2
)
Purchase of equity securities
 
(4.0
)
 

Proceeds from sale of assets and business
 
0.2

 
25.5

Net cash provided by (used in) investing activities
 
(4.4
)
 
25.3

Cash Flows from Financing Activities:
 
 
 
 
Purchase of treasury stock
 

 
(0.2
)
Debt repayments
 

 
(0.2
)
Capital contributions from noncontrolling interest
 
4.0

 

Net cash provided by (used in) financing activities
 
4.0

 
(0.4
)
Effect of exchange rate changes on cash and cash equivalents
 

 
0.2

Net change in cash and cash equivalents
 
6.2

 
(49.9
)
Cash and cash equivalents — beginning of period
 
10.0

 
70.4

Cash and cash equivalents — end of period
 
$
16.2

 
$
20.5

 
 
 
 
 
Supplemental disclosures of non-cash investing and financing activities:
 
 
 
 
Non-cash transaction with Clinton Group, Inc.
 
$
10.1

 
$

The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.

7


GLASSBRIDGE ENTERPRISES, INC.
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. Our wholly-owned subsidiary GlassBridge Asset Management, LLC (“GBAM”) is an investment advisor focused on technology-driven quantitative strategies and other alternative investment strategies. Our partially-owned subsidiary NXSN Acquisition Corp. (together with its subsidiaries, “NXSN”) operates a global enterprise data storage business through its subsidiaries. The Company actively explores a diverse range of new, strategic asset management business opportunities for its portfolio.
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, 2016 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, 2016 as filed with the U.S. Securities and Exchange Commission on March 24, 2017.
The operating results of our legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions (the “Legacy Businesses”), 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 global enterprise data storage business with an emerging enterprise-class, private cloud sync and share product line (the “Nexsan Business”, which consists of the products of NXSN's subsidiaries Nexsan Corporation (together with its subsidiaries other than Connected Data, Inc. ("CDI"), “Nexsan”) and CDI), and 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. Assets and liabilities directly associated with our Legacy Businesses 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 June 30, 2017 and December 31, 2016. See Note 4 - Discontinued Operations for further information.
On January 23, 2017, we closed a transaction (the “NXSN Transaction”) with NXSN, pursuant to which all of the issued and outstanding common stock of Nexsan and CDI was transferred to NXSN in exchange for 50% of the issued and outstanding common stock of NXSN and a $25 million senior secured convertible promissory note (the “NXSN Note”). Spear Point Private Equity LP (“SPPE”), an affiliate of Spear Point Capital Management, LLC ("Spear Point"), owns the remaining 50% issued and outstanding shares of NXSN common stock and shares of NXSN non-voting preferred stock. As a result of the NXSN Transaction, we identified NXSN as a variable interest entity (“VIE”). We consolidate a VIE in our financial statements if we are deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that has the power to direct activities that most significantly impact the activities of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. Following January 23, 2017, NXSN’s financial results are included in our Condensed Consolidated Financial Statements since it was determined that we are the primary beneficiary. Until January 23, 2017, we owned 100% of the equity interest of Nexsan and CDI, their financial results were included in our Condensed Consolidated Financial Statements as wholly-owned subsidiaries. See Note 14 - Segment Information for additional information.

8


On February 2, 2017, we closed a transaction with Clinton Group, Inc. (“Clinton”) which has facilitated the launch of our Asset Management Business, that consists of our investment advisory business conducted through GBAM (the “Capacity and Services Transaction”). See Note 6 - Intangible Assets and Goodwill and Note 16 - Related Party Transactions for further information.
On February 21, 2017, the Company effected a 1:10 reverse split of our common stock, without any change in the par value per share (the “Reverse Stock Split”), and decreased the number of authorized shares of our common stock from 100,000,000 to 10,000,000. All share and per share values of the Company’s common stock for all periods presented are retroactively restated for the effect of the Reverse Stock Split.
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. As of June 30, 2017, we invested $10.0 million in the GBAM Fund. We have made the determination to consolidate the GBAM Fund and, accordingly, its financial results were included in our Condensed Consolidated Financial Statements as part of the Asset Management Business. Our cash and cash equivalents balance as of June 30, 2017 included the $10.0 million invested in the GBAM Fund. See Note 14 - Segment Information for additional information.
The Company’s continued operations and ultimate ability to continue as a going concern will depend on its ability to enhance revenue and operating results, enter into strategic relationships or raise additional capital. The Company can provide no assurances that such plans will occur and if the Company is unable to return to profitability or otherwise raise sufficient capital, there would be a material adverse effect on its business.
Note 2 — Recently Issued or Adopted Accounting Pronouncements
In July 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-11, Simplifying the Measurement of Inventory, which modifies existing requirements regarding measuring inventory at the lower of cost or market. Under existing standards, the market amount requires consideration of replacement cost, net realizable value (“NRV”), and NRV less an approximately normal profit margin. The new ASU replaces market with NRV, defined as estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. This eliminates the need to determine and consider replacement cost or NRV less an approximately normal profit margin when measuring inventory. For GlassBridge, this standard was effective prospectively beginning January 1, 2017, with early adoption permitted. This standard did not have a material impact on the Company’s consolidated results of operations or financial condition.
In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which amends ASU No. 2014-09, Revenue from Contracts with Customers, to clarify principal versus agent guidance in situations in which a revenue transaction involves a third party in providing goods or services to a customer. In such circumstances, an entity must determine whether the nature of its promise to the customer is to provide the underlying goods or services (i.e., the entity is the principal in the transaction) or to arrange for the third party to provide the underlying goods or services (i.e., the entity is the agent in the transaction). To determine the nature of its promise to the customer, the entity must first identify each specified good or service to be provided to the customer and then (before transferring it) assess whether it controls each specified good or service. The new ASU clarifies how an entity should identify the unit of accounting (the specified good or service) for the principal versus agent evaluation, and how it should apply the control principle to certain types of arrangements, such as service transactions, by explaining what a principal controls before the specified good or service is transferred to the customer. ASU No. 2016-08 will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year, concurrent with ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The Company is evaluating the impact this standard will have on the Company’s consolidated results of operations and financial condition.
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718), which simplified certain aspects of the accounting for share-based payment transactions, including income taxes, classification of awards and classification in the statement of cash flows. ASU No. 2016-09 was effective for the Company beginning in its first quarter of 2017. This standard did not have a material impact on the Company’s consolidated results of operations or financial condition.
In April 2016, the FASB issued ASU No. 2016-10, Identifying Performance Obligations and Licensing, which amends ASU No. 2014-09, Revenue from Contracts with Customers. In terms of identifying performance obligations in a revenue arrangement, the amendments clarify how entities would determine whether promised goods or services are separately identifiable from other promises in a contract and, therefore, would be accounted for separately. The guidance would also allow entities to disregard goods or services that are immaterial in the context of a contract and provides an accounting policy election to account for shipping and handling activities as fulfillment costs rather than as additional promised services. With regard to the licensing, the amendments clarify how an entity would evaluate the nature of its promise in granting a license of intellectual property, which determines whether the entity recognizes revenue over time or at a point in time. The standard also

9


clarifies certain other aspects relative to licensing. ASU No. 2016-10 will be effective for fiscal years beginning after December 15, 2017, including interim periods within that year, concurrent with ASU No. 2014-09. The Company is evaluating the impact this standard will have on the Company’s consolidated results of operations and financial condition.
In October 2016, the FASB issued ASU No. 2016-17, Interests Held through Related Parties That Are under Common Control, which modifies existing guidance with respect to how a decision maker that holds an indirect interest in a VIE through a common control party determines whether it is the primary beneficiary of the VIE as part of the analysis of whether the VIE would need to be consolidated. Under the ASU, a decision maker would need to consider only its proportionate indirect interest in the VIE held through a common control party. Previous guidance had required the decision maker to treat the common control party’s interest in the VIE as if the decision maker held the interest itself. As a result of the ASU, in certain cases, previous consolidation conclusions may change. The standard was effective January 1, 2017 with retrospective application to January 1, 2016. This standard did not have a material impact on the Company’s consolidated results of operations or financial condition.
In February 2017, the FASB issued ASU No. 2017-06, Employee Benefit Plan Master Trust Reporting. This ASU provides guidance for reporting by an employee benefit plan for its interest in a master trust. The amendment is effective for fiscal years beginning after December 15, 2018. The amendment should be applied retrospectively with earlier adoption permitted. The Company is in the process of determining the effect of adopting this standard on the Company’s consolidated results of operations and financial condition.
In March 2017, the FASB issued ASU No. 2017-07, Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which amends the requirements related to the presentation of the components of net periodic benefit cost for an entity’s sponsored defined benefit pension and other postretirement plans. This ASU requires entities to (1) disaggregate the current-service-cost component from the other components of net benefit cost (the “other components”) and present it with other current compensation costs for related employees in the income statement and (2) present the other components elsewhere in the income statement and outside of income from operations if such a subtotal is presented. In addition, only service costs are eligible for capitalization. The standard will be effective in fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of adopting this standard on the Company’s consolidated results of operations and financial condition.
In May 2017, the FASB issued ASU No. 2017-09, Scope of Modification Accounting. This ASU provides clarification on when modification accounting should be used for changes to the terms and conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considered non-substantive. The standard will be effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The amendment should be applied prospectively to an award modified on or after the adoption date. The Company is currently assessing the impact of adopting this standard on the Company’s consolidated results of operations and financial condition.
Note 3 — Loss per Common Share
Basic 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 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. As we incurred a net loss for the three months ended June 30, 2017 and 2016, we did not include dilutive common equivalent shares in the computation of diluted net loss per share because the effect would have been anti-dilutive. Stock options are anti-dilutive when the exercise price of these instruments is greater than the average market price of the Company’s common stock for the period.

10


The following table sets forth the computation of the weighted average basic and diluted loss per share:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions, except for per share amounts)
 
2017
 
2016
 
2017
 
2016
Numerator:
 
 
 
 
 
 
 
 
Loss from continuing operations
 
$
(5.9
)
 
$
(6.2
)
 
$
(13.2
)
 
$
(20.9
)
Less: loss attributable to noncontrolling interest
 
(2.0
)
 

 
(3.5
)
 

Net loss from continuing operations attributable to GlassBridge Enterprises, Inc.
 
(3.9
)
 
(6.2
)
 
(9.7
)
 
(20.9
)
Loss from discontinued operations, net of income taxes
 
(1.2
)
 
0.6

 
(3.2
)
 
(75.8
)
Net loss attributable to GlassBridge Enterprises, Inc.
 
$
(5.1
)
 
$
(5.6
)
 
$
(12.9
)
 
$
(96.7
)
Denominator:
 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding during the period - basic and diluted
 
5.0

 
3.7

 
4.5

 
3.7

 
 
 
 
 
 
 
 
 
Loss per common share attributable to GlassBridge common shareholders — basic and diluted:
 
 
 
 
 
 
 
 
Continuing operations
 
$
(0.78
)
 
$
(1.67
)
 
$
(2.16
)
 
$
(5.65
)
Discontinued operations
 
(0.24
)
 
0.16

 
(0.71
)
 
(20.49
)
Net loss
 
$
(1.02
)
 
$
(1.51
)
 
$
(2.87
)
 
$
(26.14
)
 
 
 
 
 
 
 
 
 
Anti-dilutive shares excluded from calculation
 
0.3

 
0.5

 
0.3

 
0.5

Note 4 — Discontinued Operations
The operating results for the Legacy Businesses 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.
GAAP requires accumulated foreign currency translation balances to be reclassified into the Consolidated Statement of Operations once the liquidation of the net assets of a foreign entity is substantially complete. As of March 31, 2016, because we had ceased operations in all of our international legal entities other than those associated with the Nexsan Business, we had determined that the liquidations of our international entities associated with our Legacy Businesses are substantially complete. All remaining activities associated with these entities, including the final disposition of remaining balance sheet amounts and formal dissolution of these entities are being managed and controlled by the Company’s U.S. corporate function. Accordingly, the Company reclassified into discontinued operations $75.7 million and $0.1 million of foreign currency translation losses associated with our Legacy Businesses for the quarter ended March 31, 2016 and June 30, 2016, respectively.
Additionally, in February 2016 the Company sold its IronKey mobile security solutions business to Kingston Digital, Inc. (“Kingston”) and DataLocker Inc. (“DataLocker”) pursuant to two asset purchase agreements which qualified as the sale of a business. The Company recorded a pre-tax gain on the IronKey sale of $3.8 million during the first quarter of 2016.

11


The key components of the results of discontinued operations were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Net revenue
 
$

 
$

 
$

 
$
2.0

Cost of goods sold
 

 

 

 
0.6

  Gross profit
 

 

 

 
1.4

Selling, general and administrative
 
0.9

 
(1.2
)
 
2.9

 
2.8

Research and development
 

 

 

 
0.5

Restructuring and other
 
(0.5
)
 
0.6

 
(0.4
)
 
0.3

Reclassification of cumulative translation adjustment
 

 
0.1

 

 
75.8

Other (income) expense
 
1.0

 
(0.5
)
 
0.9

 
(0.2
)
Income (loss) from discontinued operations, before income taxes
 
(1.4
)
 
1.0

 
(3.4
)
 
(77.8
)
Gain on sale of discontinued businesses, before income taxes
 

 

 

 
3.8

Income tax benefit (provision)
 
0.2

 
(0.4
)
 
0.2

 
(1.8
)
Income (loss) from discontinued operations, net of income taxes
 
$
(1.2
)
 
$
0.6

 
$
(3.2
)
 
$
(75.8
)
Current assets of discontinued operations of $11.1 million as of June 30, 2017 principally include approximately $9.8 million of restricted cash, primarily associated with our disputing of certain payables to a vendor. Current assets of discontinued operations of $10.5 million as of December 31, 2016 principally included approximately $9.4 million of restricted cash, primarily associated with our disputing of certain payables to a vendor. The change in the restricted cash was due to currency translation. See Note 15 - Litigation, Commitments and Contingencies for additional information.
Current liabilities of discontinued operations of $40.1 million as of June 30, 2017 included accounts payable of $21.8 million, $3.0 million of customer credit and rebate accruals, $12.6 million of legal accruals and $2.7 million of other current liability amounts. Current liabilities of discontinued operations of $39.7 million as of December 31, 2016 included $22.8 million of accounts payable, $3.2 million of customer credit and rebate accruals, $11.0 million of legal accruals and $2.7 million of other current liability amounts. See Note 15 - Litigation, Commitments and Contingencies for additional information.
Note 5 — Supplemental Balance Sheet Information
Additional supplemental balance sheet information is provided as follows:
The Company’s accounts receivable are solely related to the Nexsan Business and reported on the Condensed Consolidated Balance Sheet net of reserves and allowances. The reserves and allowances were $0.2 million for the periods ended June 30, 2017 and December 31, 2016. Reserves and allowances include estimated amounts for customer returns, discounts on payment terms and uncollectible accounts.
In the first quarter of 2017, Nexsan sold $1.0 million of Nexsan Business accounts receivable to affiliates of Spear Point for a discounted purchase price of $0.9 million subject to a right to repurchase at the original sales price plus 2% interest per month. In the second quarter of 2017, Nexsan repurchased all of such receivables previously sold in the first quarter.
In the second quarter of 2017, Nexsan sold $1.2 million of new Nexsan Business accounts receivable to affiliates of Spear Point for a discounted purchase price of $1.1 million subject to a right to repurchase at the original sales price plus 2% interest per month. The purchase price discounts associated with the sales of Nexsan Business accounts receivable are recorded in Other income (expense), net in our Condensed Consolidated Statement of Operations. The amount of the accounts receivable sold is not included as an asset on our Condensed Consolidated Balance Sheet.
Other assets include a $4.0 million strategic investment in equity securities, which is consistent with our stated strategy of exploring a diverse range of new strategic asset management business opportunities for our portfolio. We will account for such investments under the cost method of accounting.
Other current liabilities primarily includes deferred revenue of $7.2 million and $6.7 million related to the Nexsan Business, levy accruals of $5.3 million and $4.9 million and accrued payroll of $1.9 million and $2.6 million as of June 30, 2017 and December 31, 2016, respectively.

12


Other liabilities include pension liabilities of $24.7 million and $24.1 million as of June 30, 2017 and December 31, 2016, respectively. 
Note 6 — Intangible Assets and Goodwill
Intangible Assets
Intangible assets consist of developed technology recorded as a result of the acquisition of CDI on October 14, 2015 and intangible assets acquired when we closed the Capacity and Services Transaction with Clinton on February 2, 2017. The Capacity and Services Transaction allows for GBAM to place up to $1 billion of investment capacity under Clinton’s management within Clinton’s quantitative equity strategy for an initial term of five years, for which the Company issued to Clinton’s affiliate Madison Avenue Capital Holdings, Inc. 1,250,000 shares of its common stock as consideration. We recorded the 1,250,000 shares of common stock issued as an intangible asset and calculated a fair value of $10.1 million using our closing stock price on February 2, 2017. We are amortizing the $10.1 million on a straight-line basis over the five year term. See Note 16 - Related Party Transactions for additional information.
(In millions)
 
Capacity Agreement
 
Developed Technology
 
Total
June 30, 2017
 
 
 
 
 
 
Cost
 
$
10.1

 
$
4.3

 
$
14.4

Accumulated amortization
 
(0.9
)
 
(1.2
)
 
(2.1
)
Intangible assets, net
 
$
9.2

 
$
3.1

 
$
12.3

December 31, 2016
 
 
 
 
 
 
Cost
 
$

 
$
4.3

 
$
4.3

Accumulated amortization
 

 
(0.9
)
 
(0.9
)
Intangible assets, net
 
$

 
$
3.4

 
$
3.4

Amortization expense for intangible assets consisted of the following:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Amortization expense
 
$
0.7

 
$
0.2

 
$
1.2

 
$
0.4

Estimated amortization expense for the remainder of 2017 and each of the next four years is as follows:
(In millions)
 
2017
(Remainder)
 
2018
 
2019
 
2020
 
2021
Amortization expense
 
$
1.4

 
$
2.7

 
$
2.7

 
$
2.7

 
$
2.6

Goodwill
The goodwill balance was $3.8 million as of June 30, 2017 and December 31, 2016. The goodwill is solely contained within the Nexsan Business. There are no impairment indicators based on management’s assessment. We will monitor our results and expected cash flows in the future to access whether consideration of an impairment of goodwill may be necessary.

13


Note 7 — Restructuring and Other Expense
The components of our restructuring and other expense included in the Condensed Consolidated Statements of Operations were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Restructuring Expense:
 
 
 
 
 
 
 
 
Severance and related
 
$
0.3

 
$

 
$
0.9

 
$

Other(1)
 
(0.9
)
 

 
(0.9
)
 

Total Restructuring
 
$
(0.6
)
 
$

 
$

 
$

Other Expense:
 
 
 
 
 
 
 
 
Pension settlement/curtailment (Note 9)
 
$

 
$
1.1

 

 
2.3

Asset disposals / write down
 

 
(0.2
)
 

 
0.1

Other(2)
 

 
(1.9
)
 
(0.1
)
 
3.4

Total Other
 
$

 
$
(1.0
)
 
$
(0.1
)
 
$
5.8

Total Restructuring and Other
 
$
(0.6
)
 
$
(1.0
)
 
$
(0.1
)
 
$
5.8

(1) For the three and six months ended June 30, 2017, other predominantly includes $0.3 million reversal of contingent consideration obligations related to the CDI acquisition (see Note 15 - Litigation, Commitments and Contingencies for additional information), $0.4 million reversal of other employee costs and $0.2 million earnest money payment relating to an asset sale. We have considered these costs to be attributable to our corporate activities and, therefore, they are not part of our discontinued operations.
(2) For the three months ended June 30, 2016, other includes a net credit of $1.9 million for a property tax refund for our former corporate campus in Minnesota. For the six months ended June 30, 2016, other includes consulting expenses of $2.1 million and $1.2 million for Realization Services, Inc. (“RSI”) (See Note 16 - Related Party Transactions for additional information) and Otterbourg P.C., respectively, a net credit of $1.9 million for property tax refund for our former corporate campus in Minnesota, as well as $2.0 million for other employee costs and consulting fees directly attributable to our Restructuring Plan. We have considered these costs to be attributable to our corporate activities and, therefore, they are not part of our discontinued operations.
Activity related restructuring accruals was as follows:
(In millions)
 
Severance and Related
Accrued balance at December 31, 2016
 
$

Charges
 
0.6

Usage and payments
 
(0.4
)
Accrued balance at March 31, 2017
 
$
0.2

Charges
 
0.3

Usage and payments
 
(0.2
)
Accrued balance at June 30, 2017
 
$
0.3

Note 8 — Stock-Based Compensation
Stock-based compensation for continuing operations consisted of the following:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Stock-based compensation expense
 
$
0.1

 
$
0.2

 
$
0.1

 
$
0.4

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, 2016. Stock-based compensation expense was less than $0.1 million for the three months ending June 30, 2017, and 0.2 million for the three months ending June 30, 2016. As of June 30, 2017, there were 226,510 shares available for grant under the 2011 Incentive Plan. No further shares were available for grant under any other stock incentive plan.

14


Stock Options
The following table summarizes our stock option activity:
 
 
Stock Options
 
Weighted Average Exercise Price
Outstanding December 31, 2016
 
286,707

 
$
77.50

Granted
 

 

Exercised
 

 

Canceled
 
(21,725
)
 
149.79

Forfeited
 
(6,602
)
 
23.46

Outstanding June 30, 2017
 
258,380

 
$
72.81

Exercisable as of June 30, 2017
 
223,638

 
$
81.94

The outstanding options are non-qualified and generally have a term of ten years. The following table summarizes our weighted average assumptions used in the Black-Scholes valuation of stock options:
 
Six Months Ended
 
June 30,
 
2017
 
2016
Volatility
44.3
%
 
41.0
%
Risk-free interest rate
1.6
%
 
1.8
%
Expected life (months)
72

 
72

Dividend yield

 

As of June 30, 2017, there was $0.2 million of total unrecognized compensation expense related to non-vested stock options granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 1.5 years.
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, 2016
 
79,926

 
$
20.63

Granted
 
86,000

 
5.95

Grant adjustments
 
(324
)
 
38.00

Vested
 
(2,071
)
 
17.57

Forfeited
 
(67,206
)
 
22.84

Nonvested as of June 30, 2017
 
96,325

 
$
5.99

The cost of the awards is determined using the fair market 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 June 30, 2017, there was $0.7 million of total unrecognized compensation expense related to non-vested restricted stock granted under our Stock Plans. That expense is expected to be recognized over a weighted average period of 2.7 years.
Stock Appreciation Rights
During the six months ended June 30, 2017 we did not grant any Stock Appreciation Rights (“SARs”). Outstanding SARs only vest when both stock price and revenue performance conditions specified by the terms of the SARs are met by December 31, 2017. As of June 30, 2017 and December 31, 2016, we had less than 0.1 million and 0.2 million SARs outstanding, respectively. We have not recorded any related compensation expense based on the applicable accounting rules. We will continue to assess these SARs each quarter to determine if any expense should be recorded.

15


Note 9 — Retirement Plans
Pension Plans
During the three and six months ended June 30, 2017, consistent with the funding requirements of our worldwide pension plans, we did not make any contributions to such plans. Effective January 1, 2010, the U.S. plan was amended to exclude new hires and rehires from participating in the plan. In addition, we eliminated benefit accruals under the U.S. plan as of January 1, 2011, thus “freezing” the defined benefit pension plan. Under the plan freeze, no pay credits were made to a participant’s account balance after December 31, 2010. However, interest credits will continue in accordance with the annual update process. We presently anticipate contributing between $0.5 million and $1 million to fund our worldwide pension plans in the next six months.
Components of net periodic pension (credit) cost included the following:
 
 
United States
 
United States
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Interest cost
 
$
0.6

 
$
0.8

 
$
1.2

 
$
1.5

Expected return on plan assets
 
(0.8
)
 
(1.0
)
 
(1.6
)
 
(1.9
)
Amortization of net actuarial loss
 
0.1

 
0.1

 
0.2

 
0.2

Net periodic pension credit
 
(0.1
)
 
(0.1
)
 
(0.2
)
 
(0.2
)
Settlement loss
 

 
1.1

 

 
2.3

Total pension (credit) cost
 
$
(0.1
)
 
$
1.0

 
$
(0.2
)
 
$
2.1

Germany is the Company’s only remaining international plan and the components of net periodic pension (credit) cost for this plan were immaterial for the three months ended June 30, 2017 and 2016.
Note 10 — 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. Tax jurisdictions with losses for which tax benefits cannot be realized are excluded.
For the three and six months ended June 30, 2017, we recorded income tax provision from continuing operations of $0.1 million and $0.0 million. For the three and six months ended June 30, 2016, we recorded income tax benefit of $0.5 million and $2.1 million. The change in the income tax expense from continuing operations for the three months ended June 30, 2017 compared to the same period last year is primarily related to the intraperiod allocation of total tax expense between continuing operations and discontinued operations in the prior year. The effective income tax rate for the three and six months ended June 30, 2017 differs from the U.S. federal statutory rate of 35% primarily due to a valuation allowance on various deferred tax assets.
We file income tax returns in multiple jurisdictions and are subject to review by various U.S and foreign taxing authorities. Our U.S. federal income tax returns for 2014 through 2016 are subject to examination by the Internal Revenue Service. With few exceptions, we are no longer subject to examination by foreign tax jurisdictions or state and local tax jurisdictions for years before 2010. In the event that we have determined not to file tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.
We accrue for the effects of uncertain tax positions and the related potential penalties and interest. Our liability related to uncertain tax positions, which is presented in other liabilities on our Condensed Consolidated Balance Sheets and which includes interest and penalties and excludes certain unrecognized tax benefits that have been netted against deferred tax assets, was $1.1 million and $1.3 million as of June 30, 2017 and December 31, 2016, respectively. These liabilities are associated with our Legacy Businesses and have been included with the separately presented other liabilities of discontinued operations on the face of our Condensed Consolidated Balance Sheet. It is reasonably possible that the amount of the unrecognized tax benefit with respect to certain of our unrecognized tax positions will increase or decrease during the next 12 months; however, it is not possible to reasonably estimate the effect at this time.
Note 11 — Major Customers and Accounts Receivable
Major customers are those customers that account for more than 10% of revenues or accounts receivable. For the three and six months ended June 30, 2017, 24% of revenues were derived from one major Nexsan Business customer and the accounts

16


receivable from this customer represented 13% of total accounts receivable as of June 30, 2017. The loss of this customer could have a material adverse effect on the Company’s operations.
For the three months ended June 30, 2016, 34% of revenues were derived from two major Nexsan Business customers and for the six months ended June 30, 2016, 23% of revenues were derived from one major Nexsan Business customer. The accounts receivable from these customers represented 18% of total accounts receivable as of December 31, 2016.
Note 12 — Fair Value Measurements
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, or the exit price in an orderly transaction between market participants on the measurement date. A three-level hierarchy is used for fair value measurements based upon the observability of the inputs to the valuation of an asset or liability as of the measurement date. Level 1 measurements consist of unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 measurements include quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 3 measurements include significant unobservable inputs. A financial instrument’s level within the hierarchy is based on the highest level of any input that is significant to the fair value measurement. Following is a description of our valuation methodologies used to estimate the fair value for our assets and liabilities.
Assets and Liabilities that are Measured at Fair Value on a Nonrecurring Basis
The Company’s non-financial assets such as goodwill, intangible assets and property, plant and equipment are recorded at fair value when an impairment is recognized or at the time acquired in a business combination. The determination of the estimated fair value of such assets required the use of significant unobservable inputs which would be considered Level 3 fair value measurements. As of June 30, 2017, there were no indicators that would require an impairment of goodwill, intangible assets or property, plant and equipment.
Assets and Liabilities that are Measured at Fair Value on a Recurring Basis
The Company measures certain assets and liabilities at their estimated fair value on a recurring basis, including cash and cash equivalents, our contingent consideration obligations associated with the acquisition of CDI and investments in trading securities (described further below under the “Trading Equity Securities” heading). See Note 15 - Litigation, Commitments and Contingencies for additional information on the CDI contingent consideration. The following table provides information by level for assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016:
 
June 30, 2017
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
Trading securities
$
0.9

$
0.9


$

 
 
 
 
 
 
December 31, 2016
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Unobservable Inputs
(Level 3)
Assets:
 
 
 
 
Trading securities
$
2.5

$
2.5


$

Liabilities:
 
 
 
 
Contingent consideration associated with CDI acquisition
$
0.3

$

$

$
0.3

Trading Equity Securities
On February 8, 2016, the Company entered into a subscription agreement with Clinton Lighthouse Equity Strategies Fund (Offshore) Ltd. (“Clinton Lighthouse”). Clinton Lighthouse is a market neutral fund which provides daily liquidity to its investors. The short term investment was classified as a trading security as we expect to be actively managing this investment at all times with the intention of maximizing our investment returns. Income or loss associated with this trading security as a component of “Other income (expense)” in our Condensed Consolidated Statements of Operations and purchases or sales of

17


this security are reflected as operating activities in our Condensed Consolidated Statements of Cash Flows. As of June 30, 2017, the short term investment balance in Clinton Lighthouse was $2.5 million compared to $19.5 million as of December 31, 2016. The decrease of $17.0 million mainly relates to $16.5 million of redemptions and approximately $0.5 million of unrealized loss for the six months ended June 30, 2017. Unrealized loss for the six months ended June 30, 2016 was approximately $0.3 million, net of $0.4 million accrued fees. We recorded the unrealized losses within “Other income (expense), net” in the Condensed Consolidated Statements of Operations. See Note 16 - Related Party Transactions for more information.
In connection with the adoption of ASU No. 2015-07, Fair Value Measurement (Topic 820), FASB Accounting Standards Codification 820 - Fair Value Measurement and Disclosures no longer requires investments for which fair value is determined based on practical expedient reliance to be reported utilizing the fair value hierarchy. As of June 30, 2017 and December 31, 2016, our short term investments in Clinton Lighthouse and the GBAM Fund were fair valued using the NAV as practical expedient and has been removed from the fair value hierarchy table above.
Other Assets and Liabilities
The carrying value of accounts receivable and accounts payable approximate their fair values due to the short term duration of these items.
Note 13 — Shareholders’ Equity
Common Stock
In connection with the Capacity and Services Transaction with Clinton, we issued to Clinton’s affiliate Madison Avenue Capital Holdings, Inc. 1,250,000 shares of our common stock as consideration for the capacity and services provided by Clinton. We recorded the 1,250,000 shares of common stock issued as an intangible asset and calculated a fair value of $10.1 million using our closing stock price on February 2, 2017. We recorded par value of the shares as common stock and amount in excess of the par value as additional paid-in capital. See Note 16 - Related Party Transactions for additional information.
Treasury Stock
On May 2, 2012, the Company's Board of Directors (the “Board”) authorized a share repurchase program that allowed for the repurchase of 500,000 shares of common stock. On November 14, 2016, our Board authorized a new share repurchase program under which we may repurchase up to 500,000 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.
We did not repurchase any shares during the three and six months ended June 30, 2017. Since the inception of the November 14, 2016 authorization, we have repurchased 24,086 shares of common stock for $0.2 million and, as of June 30, 2017, we had remaining authorization to repurchase 475,914 additional shares. The treasury stock held as of June 30, 2017 was acquired at an average price of $39.19 per share.
Following is a summary of treasury share activity:
 
 
Treasury Shares
Balance as of December 31, 2016
 
744,091

  Restricted stock grants
 
(86,000
)
  Forfeitures and other
 
67,767

Balance as of June 30, 2017
 
725,858


18


Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss and related activity consisted of the following:
(In millions)
 
Defined Benefit Plans
 
Foreign Currency Translation
 
Total
Balance as of December 31, 2016
 
$
(19.6
)
 
$
(1.0
)
 
$
(20.6
)
Amounts reclassified from accumulated other comprehensive income (loss), net of tax
 
0.2

 

 
0.2

Reclassification
 
(0.2
)
 

 
(0.2
)
Net current period other comprehensive (loss) income
 

 

 

Balance as of June 30, 2017
 
$
(19.6
)
 
$
(1.0
)
 
$
(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 June 30,
 
Six Months Ended June 30,
 
(In millions)
 
2017
 
2016
 
2017
 
2016
 
Amortization of net actuarial loss
 
$
0.1

 
$
0.1

 
$
0.2

 
$
0.2

 
Selling, general and administrative
Pension curtailment / settlement loss
 

 
1.1

 

 
2.3

 
Restructuring and other
Subtotal
 
0.1

 
1.2

 
0.2

 
2.5

 
 
Cumulative translation adjustment
 

 
0.1

 

 
75.8

 
Discontinued operations
Total reclassifications for the period
 
$
0.1

 
$
1.3

 
$
0.2

 
$
78.3

 
 
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 loss items that are also recorded as part of net loss and are presented net of taxes in the Consolidated Statements of Comprehensive Loss.
Note 14 — Segment Information
Beginning in the fourth quarter of 2015, in conjunction with our accelerated wind-down of the Company’s Legacy Businesses, the Company changed the manner in which it evaluates the operations of the Company and makes decisions with respect to the allocation of resources. The Company operated in three reportable segments as of December 31, 2015: Storage Media and Accessories; IronKey (which, together with Storage Media and Accessories, we now refer to as our Legacy Businesses); and the Nexsan Business. We sold our IronKey business in February 2016 and have substantially completed the wind-down of the Legacy Businesses as of March 31, 2016. The Legacy Businesses 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.
In connection with the NXSN Transaction (See Note 1 - Basis of Presentation for further information about the NXSN Transaction), all of the issued and outstanding common stock of Nexsan and CDI was transferred to NXSN in exchange for 50% of the issued and outstanding common stock of NXSN and the NXSN Note. SPPE, an affiliate of Spear Point, owns the remaining 50% issued and outstanding shares of NXSN common stock and shares of NXSN non-voting preferred stock. We entered into a stockholders agreement (the “NXSN Stockholders Agreement”) with SPPE and NXSN providing for certain oversight, management and veto rights with respect to NXSN. As a result, we have the right to designate, individually, two of the five directors serving on the NXSN board of directors (the “NXSN Board”), and to designate jointly, with SPPE, an additional independent director to serve on the NXSN Board, until the NXSN Note is paid in full. We also have approval rights with respect to certain actions proposed to be taken by NXSN, including the issuance of additional amendments to its organizational documents and issuances of additional capital stock.

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As a result of the terms and conditions of the NXSN Transaction (including the NXSN Stockholders Agreement and NXSN Note), we identified NXSN as a VIE. We consolidate a VIE in our financial statements if we are deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that has the power to direct activities that most significantly impact the activities of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. Although we and SPPE share the power to direct NXSN’s activities until the NXSN Note is paid in full, we have approval rights under the NXSN Note and NXSN Stockholders Agreement with respect to certain actions proposed to be taken by NXSN. Therefore, we are determined to be the primary beneficiary and following January 23, 2017, NXSN’s financial results are included in our Condensed Consolidated Financial Statements. Until January 23, 2017, we owned 100% of the equity interests of Nexsan and CDI. Their financial results were included in our Condensed Consolidated Financial Statements as wholly-owned subsidiaries.
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. Going forward, we will focus on our Asset Management Business as our primary operating business segment. See Note 16 - Related Party Transactions for additional information.
In June 2017, we launched the GBAM Fund which focuses on technology-driven quantitative strategies and other alternative investment strategies. As of June 30, 2017, we invested $10.0 million in the GBAM Fund. We have made the determination to consolidate the GBAM Fund and, accordingly, its financial results were included in our Condensed Consolidated Financial Statements as part of the Asset Management Business shown below.
As of June 30, 2017, the Nexsan Business and Asset Management Business are our reportable segments.
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.
Net revenue and operating loss from continuing operations by segment were as follows:
 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Net revenue
 
 
 
 
 
 
 
 
Nexsan Business
 
$
8.8

 
$
10.6

 
$
18.4

 
$
21.3

Asset Management Business
 

 

 

 

Total net revenue
 
$
8.8

 
$
10.6

 
18.4

 
$
21.3


 
 
Three Months Ended
 
Six Months Ended
 
 
June 30,
 
June 30,
(In millions)
 
2017
 
2016
 
2017
 
2016
Operating loss from continuing operations
 
 
 
 
 
 
 
 
Nexsan Business
 
$
(3.6
)
 
$
(4.8
)
 
$
(7.9
)
 
$
(10.0
)
Asset Management Business
 
(0.8
)
 

 
(1.7
)
 

Total segment operating loss
 
(4.4
)
 
(4.8
)
 
(9.6
)
 
(10.0
)
Corporate and unallocated
 
(1.3
)
 
(2.0
)
 
(3.0
)
 
(6.4
)
Restructuring and other
 
0.6

 
1.0

 
0.1

 
(5.8
)
Total operating loss
 
(5.1
)
 
(5.8
)
 
(12.5
)
 
(22.2
)
Interest income
 

 
0.2

 

 
0.2

Other income (expense), net
 
(0.7
)
 
(1.1
)
 
(0.7
)
 
(1.0
)
Loss from continuing operations before income taxes
 
$
(5.8
)
 
$
(6.7
)
 
$
(13.2
)
 
$
(23.0
)

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Note 15 — Litigation, Commitments and Contingencies
The Company is subject to 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 June 30, 2017, 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 the 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, as of June 30, 2017, the Company is not able to reasonably estimate the amount of any monetary liability or financial impact that may be incurred with respect to these matters. It is reasonably possible that the ultimate resolution of these matters could materially affect our financial condition, results of operations and cash flows.
On December 31, 2014, IOENGINE, LLC (“IOENGINE”), an NPE, filed suit in the District Court for the District of Delaware alleging infringement of United States Patent No. 8,539,047 by certain products we formerly sold under the IronKey brand. On February 17, 2017, following a trial, the jury returned a verdict against us in the patent infringement case brought by IOENGINE against the Company in the United States District Court for the District of Delaware. The jury awarded the IOENGINE $11.0 million in damages. We strongly disagree with the jury verdict and certain rulings made before trial. We intend to vigorously challenge the verdict and certain of the Court’s pre-trial rulings in post-trial motions, and, if necessary, pursue our rights on appeal. We have conservatively recorded a liability of $11.0 million within “Current liabilities of discontinued operations” on the Company’s Consolidated Balance Sheet as of June 30, 2017 (the “IOENGINE Reserve”). The existence of the IOENGINE Reserve should not be construed as a belief or expectation on our part that all or any part of the jury verdict or any pre-judgement interest thereon in the IOENGINE matter should or will become due and payable.
On May 6, 2016 Nexsan Technologies Incorporated, a subsidiary of NXSN (“NTI”), filed a complaint in United States District Court for the District of Massachusetts seeking a declaratory judgment against EMC Corporation (“EMC”). NTI alleges that NTI has a priority of right to use certain of its UNITY trademarks and that NTI’s prosecution of its trademark applications with the respect to, and to use of, such trademarks does not infringe upon EMC’s trademarks. In addition, NTI seeks and injunctive relief to prevent EMC from threatening NTI with legal action related to use of UNITY trademarks, or making any public statements or statements to potential customers calling into question NTI’s right to use UNITY trademarks. EMC has answered and counterclaimed alleging that NTI’s use of the UNITY trademark, infringes EMC’s common law rights in the UNITY and EMC UNITY trademarks. On April 14, 2017, the court in the EMC UNITY matter ruled that NTI has priority over EMC to the UNITY trademark in relation to computer data storage and associated technologies. NTI intends to continue to assert its rights to the UNITY trademark in further proceedings.
Trade Payables
On January 26, 2016, CMC Magnetic Corp. (“CMC”), a supplier of our Legacy Businesses, filed a suit in the District Court of Ramsey County Minnesota, seeking damages of $6.3 million from the Company and $0.6 million from the Company’s wholly-owned subsidiary Imation Latin America Corp. (“ILAC”) for alleged breach of contract. In June 2016, CMC filed a motion seeking to amend its complaint to increase alleged damages to $7.2 million and add additional defendants including the Company’s directors and officers, which the Company has obligations to defend and indemnify. Thereafter, CMC served its amended complaint and the Company and ILAC answered asserting numerous affirmative defenses and counterclaims. On January 3, 2017, CMC filed a second amended complaint in the action pending in the District Court of Ramsey County Minnesota.  In addition to alleging that the Company is liable for all open CMC invoices worldwide (which CMC alleges totals approximately $23 million), the second amended complaint asserted fiduciary and related claims against former directors and other defendants, which we have an obligation to defend. Following oral arguments regarding certain motions to dismiss the second amended complaint on March 24, 2017, CMC sought leave of the court to further amend the complaint. A third amended complaint was filed on June 9, 2017, which was later “corrected” by CMC in a subsequent filing on June 15, 2017. The third amended complaint essentially asserts the same claims with clarifications requested by the judge at the March 24, 2017 hearing. On July 10, 2017, we filed an answer to CMC’s third amended complaint and asserted counterclaims. The Company intends to defend its position vigorously and has asserted affirmative defenses and counterclaims. The Company and ILAC deny any liabilities and assert counterclaims for breach of warranty, breach of contract, failure to pay rebates and unjust enrichment. CMC has brought similar claims in Japan and the Netherlands against our subsidiaries; we are also denying liabilities and asserting counterclaims on similar grounds in the Japanese and Dutch actions. Our asserted setoffs and counterclaims in the CMC litigations are for amounts that could constitute a substantial portion of, or exceed, CMC’s claims against us.

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The Company is currently disputing trade payables with certain vendors (including CMC) associated with our Legacy Businesses on the basis of vendor non-performance. As of June 30, 2017 and December 31, 2016, based on invoices from these vendors, the Company has recorded, but not made payment, with the respect to $21 million of disputed trade payables, all of which are recorded as “Current liabilities of discontinued operations” on the Company’s Consolidated Balance Sheets. To the extent the Company is able to resolve any of these disputes for an amount lower than the corresponding recorded liabilities, the applicable difference would be recognized as a gain within discontinued operations. In connection with disputed trade payables, certain vendors have attached, seized or otherwise effected restrictions on the Company’s access to approximately $9.8 million and $9.4 million of the Company’s cash, all of which is recorded as restricted cash within “Current assets of discontinued operations” on the Company’s Consolidated Balance Sheet as of June 30, 2017 and December 31, 2016, respectively.
Employee Matters
We received correspondence from former employees of our Legacy Businesses asserting their alleged eligibility to receive severance benefits.  Employee restructuring costs are accrued when a probable liability has been determined and the amount of such liability has been reasonably estimated. We did not have any employee restructuring accruals as of June 30, 2017.  On March 29, 2017, three former Legacy Business employees filed a lawsuit (the “Severance Action”) in the Minnesota State District Court of Ramsey County asserting state law claims for non-payment of allegedly promised severance benefits.  On April 28, 2017, we removed the Severance Action to the U.S. District Court for the District of Minnesota, based on our position that the Severance Action should properly be litigated in federal court because the alleged severance claims are, in essence, based on alleged rights under the Company’s ERISA severance plan.  On May 5, 2017, the Company also moved that the U.S. District Court dismiss the Severance Action based on our position that the plaintiffs’ state law claims are preempted by ERISA and the plaintiffs failed to follow the plan’s appeal procedures as required by ERISA. On July 21, 2017, the U.S. District Court remanded the Severance Action to Minnesota State District Court for further proceedings on the basis that plaintiffs plausibly alleged certain state law claims that may not arise under ERISA. We believe these state law claims are entirely without merit and intend to vigorously defend our position.
Copyright Levies
In many European Union (EU) member countries, the sale of recordable optical media is subject to a private copyright levy. The levies are intended to compensate copyright holders with “fair compensation” for the harm caused by private copies made by natural persons of protected works under the European Copyright Directive, which became effective in 2002 (the “Directive”). Levies are generally charged directly to the importer of the product upon the sale of the products. Payers of levies remit levy payments to collecting societies which, in turn, are expected to distribute funds to copyright holders. Levy systems of EU member countries must comply with the Directive, but individual member countries are responsible for administering their own systems. Since implementation, the levy systems have been the subject of numerous litigation and law-making activities. On October 21, 2010, the Court of Justice of the European Union (the “CJEU”) ruled that fair compensation is an autonomous European law concept that was introduced by the Directive and must be uniformly applied in all EU member states. The CJEU stated that fair compensation must be calculated based on the harm caused to the authors of protected works by private copying. The CJEU ruling made clear that copyright holders are only entitled to fair compensation payments (funded by levy payments made by importers of applicable products, including the Company) when sales of optical media are made to natural persons presumed to be making private copies. Within this disclosure, we use the term “commercial channel sales” when referring to products intended for uses other than private copying and “consumer channel sales” when referring to products intended for uses including private copying.
Since the Directive was implemented in 2002, we estimate that we have paid in excess of $100 million in levies to various ongoing collecting societies related to commercial channel sales. Based on the CJEU’s October 2010 ruling and subsequent litigation and law-making activities, we believe that these payments were not consistent with the Directive and should not have been paid to the various collecting societies. Accordingly, subsequent to the October 21, 2010 CJEU ruling, we began withholding levy payments to the various collecting societies and, in 2011, we reversed our existing accruals for unpaid levies related to commercial channel sales. However, we continued to accrue, but not pay, a liability for levies arising from consumer channel sales, in all applicable jurisdictions except Italy and France due to certain court rulings in those jurisdictions. As of June 30, 2017 and December 31, 2016, we had accrued liabilities of $5.3 million and $4.9 million, respectively, associated with levies related to consumer channel sales for which we are withholding payment. These accruals are recorded as “Other current liabilities” on the Company’s Consolidated Balance Sheets (and not within discontinued operations). The Company’s management oversees copyright levy matters and continues to explore options to resolve these matters.
Since the October 2010 CJEU ruling, we evaluate quarterly on a country-by-country basis whether (i) levies should be accrued on current period commercial and/or consumer channel sales; and, (ii) whether accrued, but unpaid, copyright levies on prior period consumer channel sales should be reversed. Our evaluation is made on a jurisdiction-by-jurisdiction basis and considers ongoing and cumulative developments related to levy litigation and law making activities within each jurisdiction as well as throughout the EU. See following for discussion of reversals of copyright levies in 2013.

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Italy. In December 2015, we settled our claim for reimbursement of the levies that the Company had paid for sales into its commercial channel with the Italian collecting society, S.I.A.E. The settlement was for $1.0 million and is recorded as a reduction in cost of sales. There are no ongoing levy disputes with respect to Italy.
France. We have overpaid levies related to sales into the Company’s commercial channel in an amount of $55.1 million. We adopted a practice of offsetting ongoing levy liability with the French collecting society for GlassBridge’s sales in the consumer channel against the $55.1 million we have overpaid for copyright levies in France (due to us paying levies on commercial channels sales prior to the October 21, 2010 CJEU ruling). During the fourth quarter of 2013, GlassBridge reversed $9.5 million of French copyright levies (existing at the time of a 2013 French court decision) that arose from consumer channel sales that had been accrued but not paid to cost of sales. As of June 30, 2017 the Company had offset approximately $14.4 million.
We believe that we have utilized a methodology, and have sufficient documentation and evidence, to fully support our estimates that we have overpaid $55.1 million to the French collection society of levies on commercial channel sales and that we have incurred (but not paid) $14.4 million of levies on consumer channel sales in France. However, such amounts are currently subject to challenge in court and there is no certainty that our estimates would be upheld and supported. In December 2012, GlassBridge filed a complaint against the French collection society, Copie France, for reimbursement of the $55.1 million in commercial channel levies that GlassBridge had paid prior to October 2010. A hearing occurred on December 8, 2015, in the High Court of Justice (Tribunal de Grande Instance de Paris) on GlassBridge Europe’s claim and Copie France’s counterclaim. On April 8, 2016, the Paris District Court rejected all of GlassBridge Europe’s claims finding that the European Union law arguments raised by GlassBridge were inapplicable and relied solely on French law to grant Copie France’s counterclaims. GlassBridge Europe has filed a notice of appeal which suspends enforcement of the ruling. GlassBridge believes Copie France’s counterclaims are without merit and intends to defend its position vigorously. Despite the April 2016 ruling of the Paris District Court, the Company does not believe it to be probable that it will have to make any copyright levy payments in the future to Copie France and, accordingly, has not recorded an accrual for this matter.
Canada. The Canadian Private Copying Collective (“CPCC”) is alleging that GlassBridge Enterprises Corp. has not previously reported certain prior sales of Legacy Business products that should have been subject to copyright levies and seeks damages of approximately CAD 1 million and penalties and interest of approximately CAD 5 million. GlassBridge believes CPCC’s claims are without merit and intends to defend its position vigorously. The Company does not believe it to be probable that it will have to make any copyright levy payments in the future to CPCC and, according, has not recorded an accrual for this matter.
Other Jurisdictions. During the first quarter of 2015, GlassBridge reversed $2.8 million accrual for German copyright levies on optical products as the result of a favorable German court decision retroactively setting levy rates at a level much lower than the rates sought by the German collecting society. The reversal was recorded as a reduction of cost of sales. At June 30, 2017, the further recovery of some or all of the copyright levies previously paid on commercial sales in EU jurisdictions represents a gain contingency that has not yet met the required criteria for recognition in our financial statements. There is no assurance that we will realize any of this gain contingency. We have an estimated $5.0 million of accrued but unpaid levies associated with consumer sales in EU jurisdictions other than Italy and France that we continue to carry on our books.
The Company is subject to several pending or threatened legal actions by the individual European national levy collecting societies in relation to private copyright levies under the Directive. Those actions generally seek payment of the commercial and consumer optical levies withheld by GlassBridge. GlassBridge has corresponding claims in those actions seeking reimbursement of levies improperly collected by those collecting societies. We are subject to threatened actions by certain customers of GlassBridge seeking reimbursement of funds they allege relate to commercial levies that they claim they should not have paid. Although these actions are subject to the uncertainties inherent in the litigation process, based on the information presently available to us, management does not expect that the ultimate resolution of these actions will have a material adverse effect on our financial condition, results of operations or cash flows. We anticipate that additional court decisions may be rendered in 2017 that may directly or indirectly impact our levy exposure in specific European countries which could cause us to review our levy exposure in those countries.
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 June 30, 2017 and 2016, 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

23


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 June 30, 2017. Compliance with environmental regulations has not had a material adverse effect on our financial results.
Contingencies
On October 14, 2015, the Company acquired 100% of the stock of CDI for a total purchase price of $6.7 million. The purchase price included future contingent consideration totaling up to $5 million (considered to have an estimated fair value of $0.8 million at the time of acquisition). We used the real option valuation technique for calculating the estimated fair value of contingent consideration with a 15% discount rate. The contingent consideration arrangement included the potential for three separate payments of cash and unregistered shares of GlassBridge common stock to the extent that certain defined revenue targets were achieved for the three consecutive six-month periods commencing January 1, 2016. The period of measurement for the third and final payment was January 1, 2017 to June 30, 2017, and the revenue target was not met for this or any other period. Accordingly, we have not made any contingent purchase price payments for CDI as of June 30, 2017. The Company reversed the remaining accruals for $0.3 million and the 57,482 shares for issuance. Upon the acquisition of CDI, we integrated CDI with the Nexsan Business, both operationally and with respect to its management team. In addition, the Company contributed all of the issued and outstanding stock of CDI to Nexsan prior to the consummation of the NXSN Transaction which closed on January 23, 2017. See Note 14 - Segment Information for more information.
Note 16 — Related Party Transactions
Mr. Kasoff serves as president of RSI, a management consulting firm specializing in assisting companies and capital stakeholders in troubled business environments. Pursuant to a consulting agreement between the Company and RSI dated August 17, 2015 and subsequent amendments, RSI performed consulting services for the Company for the period from August 8, 2015 to March 30, 2016, including assisting the Company with a review and assessment of the Company’s business and the formulation of a business plan to enhance shareholder value going forward. On July 15, 2016, the Company entered into a consulting agreement with RSI to perform consulting services from July 18, 2016 through August 14, 2016 with an option for a three week extended term. Under the consulting agreement, RSI could receive consulting fees of up to $125,000 per week during the initial term. Consulting fees for the extended term, if elected by the Company, could not exceed $500,000. RSI received consulting fees of $2.1 million (up to $172,000 per week) and none for the six months ended June 30, 2016 and 2017, respectively, which are recorded in restructuring and other charges. No consulting fees were paid to RSI for the three months ended June 30, 2016 and 2017. Mr. Kasoff resigned from his position as the Company’s Chief Restructuring Officer on September 8, 2016 and from the Company’s Board on February 2, 2017.
On October 14, 2015, the Company acquired substantially all of the equity of CDI for approximately $6.7 million in cash, shares of the Company’s common stock and repayment of debt. Mr. Barrall is the founder and, at the time of acquisition, was also the Chief Executive Officer of CDI. In consideration for his CDI common shares and options to purchase CDI common shares, Mr. Barrall received approximately $184,000 at the time of the acquisition and he was eligible to receive up to an additional $260,000 to the extent certain CDI revenue targets are achieved for the 3 consecutive six-month periods commencing January 1, 2016. As of June 30, 2017, none of the revenue targets were met and no such additional payments had been made to Mr. Barrall.
On February 8, 2016, the Company entered into a subscription agreement to invest up to $20 million of its excess cash from various Company subsidiaries in Clinton Lighthouse. Clinton Lighthouse is a market neutral fund which provides daily liquidity to its investors. Clinton Lighthouse is managed by Clinton. Pursuant to the arrangement, Clinton agreed to waive its customary management fee and agreed to the receipt of any consideration pursuant to incentive compensation in the form of the Company’s common stock at a value of $10.00 per share (as adjusted to reflect the Reverse Stock Split). The closing price of the Company’s common stock on February 8, 2016 was $6.50 (as adjusted to reflect the Reverse Stock Split). The Board, in conjunction with management, reviewed various funds and voted to approve this investment, with Mr. De Perio abstaining from the vote and recusing himself from all related discussions and deliberations. Mr. De Perio is the Chairman of the Board and a Senior Portfolio Manager at Clinton. On March 17, 2016, the Board approved the elimination of the 25% limitation on the amount of the Company’s excess cash that may be invested, such that the Company may now invest up to $35 million of its excess cash in Clinton Lighthouse. On April 29, 2016, the Company and Clinton entered into an amended and restated letter agreement in order to adjust the price at which the Company’s stock would be valued for purposes of paying the incentive fee thereunder from $10.00 to $18.00 (each as adjusted to reflect the Reverse Stock Split) beginning May 1, 2016, subject to adjustment based on the volume weighted average price of the Company’s common stock. As of June 30, 2017, the Company paid Clinton $0.5 million associated with the performance fees earned in 2016.
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

24


reflect the Reverse Stock Split), par value $0.01 per share (“Common Stock”), 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. 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.
As of June 30, 2017, the short term investment balance in Clinton Lighthouse was $2.5 million compared to $19.5 million as of December 31, 2016. The decrease of $17.0 million mainly relates to $16.5 million of redemptions and approximately $0.5 million of unrealized loss for the six months ended June 30, 2017. Unrealized loss for the six months ended June 30, 2016 was approximately $0.3 million, net of $0.4 million accrued fees. We recorded the unrealized losses within “Other income (expense), net” in the Condensed Consolidated Statements of Operations. Pursuant to the Capacity and Services Agreement, the Company will no longer incur management or performance fees related to our investment in Clinton Lighthouse.
Mr. Strauss serves as our Chief Operating Officer pursuant to the terms of a Services Agreement we entered into with Clinton on March 2, 2017 (the “Services Agreement”). The Services Agreement provides that Clinton will make available one of its employees to serve as Chief Operating Officer of the Company, and any subsidiary of the Company we may designate from time to time, as well as provide to GBAM, our investment adviser subsidiary, certain additional services. Pursuant to the terms of the Services Agreement, we may request that Clinton designate a mutually agreeable replacement employee to serve as Chief Operating Officer or terminate Clinton’s provision of an employee to us for such role. Under the Services Agreement, we have agreed to pay Clinton $125,000 for an initial term concluding on May 31, 2017, which term will automatically renew unless terminated for successive three-month terms at a rate of $125,000 per renewal term. If the Services Agreement is terminated prior to the conclusion of a term, we will be reimbursed for the portion of the prepaid fee attributable to the unused portion of such term. Clinton will continue to pay Mr. Strauss’s compensation and benefits and we have agreed to pay or reimburse Mr. Strauss for his reasonable expenses. Pursuant to the terms of the Services Agreement, we have also agreed to indemnify Mr. Strauss, Clinton, any substitute Chief Operating Officer and certain of their affiliates for certain losses. As of June 30, 2017, the Company paid Clinton $250,000 under this Services Agreement, of which $166,668 is recorded within "Selling, general and administrative" in our Condensed Consolidated Statements of Operations.
Note 17 — Subsequent Events
On July 20, 2017, the Company notified the New York Stock Exchange (the "NYSE") of its intention to voluntarily delist its common stock from the NYSE. After much careful discussion and deliberation, our Board of Directors approved resolutions authorizing the Company to initiate voluntarily delisting from the NYSE. The Board weighed several material factors in reaching this decision, including avoiding the risks that involuntary suspension of trading could cause and the importance of a controlled transition to OTCQX to ensure the continuing availability of a market for trading our common stock. The last trading day on the NYSE was August 1, 2017. Our common stock began trading on the OTCQX Market under the symbol "GLAE" on August 2, 2017.
GlassBridge remains a public company following the delisting and our shares continue to trade publicly.  We will continue to make SEC filings on Forms 10-K, 10-Q and 8-K, and we will remain subject to the SEC rules and regulations applicable to reporting companies under the Exchange Act.  We will maintain an independent Board of Directors with an independent Audit Committee and provide annual financial statements audited by a Public Company Accounting Oversight Board (PCAOB) auditor and unaudited interim financial reports, prepared in accordance with GAAP.

25



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements and Risk Factors
We may from time to time make written or oral forward-looking statements with respect to our future goals, including statements contained in this Form 10-Q, in our other filings with the SEC and in our reports to shareholders.
Certain information which does not relate to historical financial information may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include information concerning the launch of our asset management business and related investment vehicles, strategic initiatives and potential acquisitions, the results of operations of our existing business lines, the impact of legal or regulatory matters on our business, as well as other actions, strategies and expectations, and are identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans,” “seeks,” “estimates,” “projects,” “may,” “will,” “could,” “might,” or “continues” or similar expressions. Such statements are subject to a wide range of risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include various factors set forth from time to time in our filings with the SEC including the following: our need for substantial additional capital in order to fund our business; our ability to realize the anticipated benefits of our restructuring plan and other recent significant changes; the negative impacts of our delisting from the NYSE, including reduced liquidity and market price of our common stock and the number of investors willing to hold or acquire our common stock; significant costs relating to pending and future litigation; our ability to attract and retain talented personnel; the structure or success of our participation in any joint investments; risks associated with any future acquisition or business opportunities; our need to consume resources in researching acquisitions, business opportunities or financings and capital market transactions; our ability to integrate additional businesses or technologies; the impact of our reverse stock split on the market trading liquidity of our common stock; the market price volatility of our common stock; our need to incur asset impairment charges for intangible assets and goodwill; significant changes in discount rates, rates of return on pension assets and mortality tables; our reliance on aging information systems and our ability to protect those systems against security breaches; our ability to integrate accounting systems; changes in European law or practice related to the imposition or collectability of optical levies; changes in tax guidance and related interpretations and inspections by tax authorities; our ability to raise capital from third party investors for our asset management business; the efforts of Clinton’s key personnel and the performance of its overall business; our ability to comply with extensive regulations relating to the launch and operation of our asset management business; our ability to compete in the intensely competitive asset management business; the performance of any investment funds we sponsor or accounts we manage, including any fund or account managed by Clinton; difficult market and economic conditions, including changes in interest rates and volatile equity and credit markets; our ability to achieve steady earnings growth on a quarterly basis in our asset management business; the significant demands placed on our resources and employees, and associated increases in expenses, risks and regulatory oversight, resulting from the potential growth of our asset management business; our ability to establish a favorable reputation for our asset management business; the lack of operating history of our asset manager subsidiary and any funds that we may sponsor; our ability to realize the anticipated benefits of the third-party investment in our partially-owned data storage business; decreasing revenues and greater losses attributable to our partially-owned data storage products; our ability to quickly develop, source and deliver differentiated and innovative products; our dependence on third parties for new product introductions or technologies; our dependence on third-party contract manufacturing services and supplier-provided parts, components and sub-systems; our dependence on key customers, partners and resellers; foreign currency fluctuations and negative or uncertain global or regional economic conditions as well as various factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2016, and from time to time in our filings with the SEC.
Overview
GlassBridge Enterprises, Inc. (“GlassBridge”, the “Company”, “we”, “us” or “our”) is a holding company. Our wholly-owned subsidiary GlassBridge Asset Management, LLC (“GBAM”) is an investment advisor focused on technology-driven quantitative strategies and other alternative investment strategies. Our partially-owned subsidiary NXSN Acquisition Corp. (together with its subsidiaries, “NXSN”) operates a global enterprise data storage business through its subsidiaries. The Company actively explores a diverse range of new, strategic asset management business opportunities for its portfolio.
We closed a transaction (the “NXSN Transaction”) in January 2017 with NXSN Acquisition Corp. (together with its subsidiaries, “NXSN”), pursuant to which all of the issued and outstanding common stock of Connected Data, Inc. ("CDI") and Nexsan Corporation (together with its subsidiaries other than CDI, “Nexsan”) was transferred to NXSN in exchange for 50% of the issued and outstanding common stock of NXSN and a $25 million senior secured convertible promissory note (the “NXSN Note”). The remaining 50% of the issued and outstanding common stock of NXSN is owned by Spear Point Private Equity LP

26


(“SPPE”), an affiliate of Spear Point Capital Management LLC ("Spear Point"). Prior to the consummation of the NXSN Transaction, we contributed all of the issued and outstanding stock of CDI to Nexsan. The NXSN Transaction provides for third-party investment in NXSN to enhance the growth of the NXSN Business (as defined below) and support its recent product developments, eliminates our need to make this investment in the Nexsan Business ourselves and preserves the potential for equity value upside from the Nexsan Business’ ongoing development and market penetration.
In February 2017, we closed a transaction with Clinton Group Inc. (“Clinton”) which has facilitated the launch of our “Asset Management Business”, which consists of our investment advisory business conducted through GBAM (the “Capacity and Services Transaction”). The Capacity and Services Transaction allows for GBAM to access investment capacity within Clinton’s quantitative equity strategy. The Capacity and Services Transaction was structured to provide for the quick and efficient scaling of an asset management business and designed to provide investors with access to quantitative equity strategies. By partnering with Clinton and leveraging Clinton’s proven technology-driven strategy, we intend for GBAM to bypass traditional seeding models, which typically include a lengthy roll out and substantial costs. We intend to use algorithms and other quantitative strategies with the goal of achieving consistent, competitive risk-adjusted returns for GBAM’s investors. 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.
In February 2017, the Company effected a 1:10 reverse split of our common stock, without any change in the par value per share, and decreased the number of authorized shares of our common stock from 100,000,000 to 10,000,000.
With the wind down of our legacy businesses segments, Consumer Storage and Accessories and Tiered Storage an Security Solutions (the “Legacy Businesses”) substantially completed by the start of 2016 and the sale of our IronKey business in February 2016, we had one operating business segment in 2016: the “Nexsan Business,” through which is operated a global enterprise data storage business with an emerging enterprise-class, private cloud sync and share product line. Following the launch of GBAM, we have transitioned to become a publicly-traded alternative asset manager. Going forward, we will focus on our Asset Management Business as our primary operating business segment. In February 2017 we changed our name to GlassBridge Enterprises, Inc. to reflect our new primary focus on asset management.
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. As of June 30, 2017, we invested $10.0 million in the GBAM Fund. Our cash and cash equivalents balance as of June 30, 2017 included the $10.0 million invested in the GBAM Fund.
On July 20, 2017, the Company notified the New York Stock Exchange (the "NYSE") of its intention to voluntarily delist its common stock from the NYSE. After much careful discussion and deliberation, our Board of Directors approved resolutions authorizing the Company to initiate voluntarily delisting from the NYSE. The Board weighed several material factors in reaching this decision, including avoiding the risks that involuntary suspension of trading could cause and the importance of a controlled transition to OTCQX to ensure the continuing availability of a market for trading our common stock. The last trading day on the NYSE was August 1, 2017. Our common stock began trading on the OTCQX Market under the symbol "GLAE" on August 2, 2017.
Important Notices and Disclaimers
This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended to be read in conjunction with our Condensed Consolidated Financial Statements and related Notes that appear elsewhere in this Quarterly Report on Form 10-Q. This MD&A contains forward-looking statements that involve risks and uncertainties. The Company’s actual results could differ materially from those anticipated due to various factors discussed in this MD&A under the caption “Forward-Looking Statements and Risk Factors” and the information contained in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 24, 2017, including in Part 1 Item 1A. Risk Factors of such Annual Report.
Nothing contained in this Quarterly Report on Form 10-Q constitutes an offer to sell or a solicitation to buy any securities in any private investment vehicle managed by GBAM (collectively, the “GlassBridge-Managed Funds”), and may not be relied upon in connection with any offer or sale of securities. Any such offer or solicitation may only be made pursuant to the current Confidential Private Offering Memorandum (or similar document) for any such GlassBridge-Managed Fund, which is provided only to qualified offerees and which should be carefully reviewed prior to investing. GBAM is a newly formed entity and the GlassBridge-Managed Funds are currently either in formation state or have recently launched. GBAM is not currently registered with the SEC as an investment adviser under the U.S. Investment Advisers Act of 1940, as amended, or under similar state laws, and nothing in this Quarterly Report on Form 10-Q constitutes investment advice with respect to securities.

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This Quarterly Report on Form 10-Q includes tradenames and trademarks owned by us or that we have the right to use. Solely for convenience, the trademarks or tradenames referred to in this Quarterly Report on Form 10-Q may appear without the ® or ™ symbols, but such references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to these trademarks and tradenames.

28


Executive Summary
Consolidated Results of Operations for the Three Months Ended June 30, 2017
Net revenue from continuing operations (solely related to the Nexsan Business) of $8.8 million for the three months ended June 30, 2017 was down 17.0% compared with $10.6 million in the same period last year. The decrease was a result of the Company’s decision to reduce operating expenses, including a reduced operations footprint and headcount which impacted the ability to process and fulfill orders and created a backlog during the quarter. Total backlog as of June 30, 2017 was approximately $2.8 million, primarily due to orders received late in the fiscal period that could not be delivered until the following fiscal period.
Operating loss from continuing operations was $5.1 million for the three months ended June 30, 2017 compared with an operating loss of $5.8 million in the same period last year, an improvement of $0.7 million, primarily due to a decrease in Nexsan Business operating expenses and corporate general and administrative expenses, offset by the start-up expenses related to our asset management business.
Basic and diluted loss per share from continuing operations was $0.78 for the three months ended June 30, 2017 compared with a basic and diluted loss per share of $1.67 for the same period last year.
Consolidated Results of Operations for the Six Months Ended June 30, 2017
Net revenue from continuing operations (solely related to the Nexsan Business) of $18.4 million for the six months ended June 30, 2017 was down 13.6% compared with $21.3 million in the same period last year. The decrease was a result of the Company’s decision to reduce operating expenses, including a reduced operations footprint and headcount which impacted the ability to process and fulfill orders and created a backlog during the quarter. Total backlog as of June 30, 2017 was approximately $2.8 million, primarily due to orders received late in the fiscal period that could not be delivered until the following fiscal period.
Operating loss from continuing operations was $12.5 million for the six months ended June 30, 2017 compared with an operating loss of $22.2 million in the same period last year, an improvement of $9.7 million, primarily due to a decrease in Nexsan Business operating expenses and corporate general and administrative expenses, offset by the start-up expenses related to our asset management business.
Basic and diluted loss per share from continuing operations was $2.16 for the six months ended June 30, 2017 compared with a basic and diluted loss per share of $5.65 for the same period last year.
Cash Flow/Financial Condition for the Six Months Ended June 30, 2017
Cash and cash equivalents totaled $16.2 million at June 30, 2017 compared with $10.0 million at December 31, 2016. The increase in the cash balance of $6.2 million was primarily due to $18 million redemptions of our investment in the Clinton Lighthouse Equity Strategies Fund (Offshore) Ltd. (“Clinton Lighthouse”) and other short term investments and a $4 million capital contribution to NXSN Acquisition Corp from SPPE, offset by operating loss and our strategic investment in equity securities. See Note 12 - Fair Value Measurements in our Notes to Condensed Consolidated Financial Statements in Item 1 for further information on the Clinton Lighthouse investment.
Results of Operations
The following discussion relates to continuing operations unless indicated otherwise. The operating results of our former Legacy Businesses 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 in our Notes to Condensed Consolidated Financial Statements in Item 1 for further information on these divestitures.
As a result of the terms and conditions of the NXSN Transaction, we identified NXSN as a variable interest entity (a “VIE”). We consolidate a VIE in our financial statements if we are deemed to be the primary beneficiary of the VIE. The primary beneficiary is the party that has the power to direct activities that most significantly impact the activities of the VIE and has the obligation to absorb losses or the right to benefits from the VIE that could potentially be significant to the VIE. Although we and SPPE share the power to direct NXSN’s activities until the NXSN Note is paid in full, we have approval rights with respect to certain actions proposed to be taken by NXSN. Therefore, we are determined to be the primary beneficiary and following January 23, 2017, NXSN’s financial results are included in our Condensed Consolidated Financial Statements. Until January 23, 2017, we owned 100% of the equity interest of Nexsan and CDI. Their financial results were included in our Condensed Consolidated Financial Statements as wholly-owned subsidiaries.

29


Net Revenue
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Net revenue
 
$
8.8

 
$
10.6

 
(17.0
)%
 
$
18.4

 
$
21.3

 
(13.6
)%
Net revenue for the three months ended June 30, 2017 decreased 17.0% compared with the same period last year due to increased order processing times as a result of operating expense reductions, partially offset by increases in certain product lines.
Net revenue for the six months ended June 30, 2017 decreased 13.6% compared with the same period last year due to increased order processing times as a result of operating expense reductions, partially offset by increases in certain product lines.
See Segment Results for further discussion of our reporting segments and products.
Gross Profit
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Gross profit
 
$
4.1

 
$
4.7

 
(12.8
)%
 
$
8.5

 
$
9.1

 
(6.6
)%
Gross margin
 
46.6
%
 
44.3
%
 
 
 
46.2
%
 
42.7
%
 
 
Gross profit for the three months ended June 30, 2017 decreased $0.6 million as a result of declines in revenue. Gross margin percentage increased by 2.3% compared with the same period last year due to reductions in production costs and product mix changes.
Gross profit for the six months ended June 30, 2017 decreased $0.6 million as a result of declines in revenue. Gross margin percentage increased by 3.5% compared with the same period last year due to reductions in production costs and product mix changes.
Selling, General and Administrative (“SG&A”)
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Selling, general and administrative
 
$
7.6

 
$
8.3

 
(8.4
)%
 
$
16.4

 
$
18.9

 
(13.2
)%
As a percent of revenue
 
86.4
%
 
78.3
%
 
 
 
89.1
%
 
88.7
%
 
 
SG&A expense decreased for the three months ended June 30, 2017 by $0.7 million (or 8.4%) compared with the same period last year primarily due to Nexsan Business cost reductions of $0.8 million and corporate cost reductions of $0.7 million, partially offset by the addition of $0.8 million of expenses related to the start-up cost of our Asset Management Business. Nexsan Business cost reductions primarily relate to headcount reductions. The corporate cost decrease primarily relates to reductions in corporate headcount, information technology spending and legal costs. The Company now maintains a small team at its headquarters in Oakdale, Minnesota.
SG&A expense decreased for the six months ended June 30, 2017 by $2.5 million (or 13.2%) compared with the same period last year primarily due to Nexsan Business cost reductions of $0.8 million and corporate cost reductions of $3.4 million, partially offset by the addition of $1.7 million of expenses related to the start-up cost of our Asset Management Business. Nexsan Business cost reductions primarily relate to headcount reductions. The corporate cost decrease primarily relates to reductions in corporate headcount, information technology spending and legal costs.

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Research and Development (“R&D”)
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Research and development
 
$
2.2

 
$
3.2

 
(31.3
)%
 
$
4.7

 
$
6.6

 
(28.8
)%
As a percent of revenue
 
25.0
%
 
30.2
%
 
 
 
25.5
%
 
31.0
%
 
 
R&D expense decreased by $1 million for the three months ended June 30, 2017 compared with the same period last year. The reduction in R&D expenses was primarily related to favorable exchange rates as R&D facilities are operated in Canada and the United Kingdom, as well as headcount reduction within Nexsan Business legacy products.
R&D expense decreased by $1.9 million for the six months ended June 30, 2017 compared with the same period last year. The reduction in R&D expenses was primarily related to favorable exchange rates as R&D facilities are operated in Canada and the United Kingdom.
Restructuring and Other
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Restructuring and other
 
$
(0.6
)
 
$
(1.0
)
 
(40.0
)%
 
$
(0.1
)
 
$
5.8

 
(101.7
)%
For the three months ended June 30, 2017, restructuring and other was a benefit of $0.6 million which included $0.2 million of proceeds from an asset sale and $0.4 million of accrual reversals. Compared to the same period last year, restructuring and other charges decreased by $0.4 million primarily related to the property tax refund of our former corporate campus in Minnesota.
For the six months ended June 30, 2017, restructuring and other was a benefit of $0.1 million. Compared to the same period last year, restructuring and other charges decreased by $5.9 million primarily related to consulting fees and other employee costs in the prior year, offset by the property tax refund.
See Note 7 - Restructuring and Other Expense in our Notes to Condensed Consolidated Financial Statements in Item 1 for further details on our restructuring and other expenses.
Operating Loss from Continuing Operations
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Operating loss from continuing operations
 
$
(5.1
)
 
$
(5.8
)
 
(12.1
)%
 
$
(12.5
)
 
$
(22.2
)
 
(43.7
)%
As a percent of revenue
 
(58.0
)%
 
(54.7
)%
 
 
 
(67.9
)%
 
(104.2
)%
 
 
Operating loss from continuing operations decreased by $0.7 million for the three months ended June 30, 2017 compared with the same period last year primarily due to $0.7 million reduction in SG&A and $1.0 million decrease in R&D expenses, slightly offset by $0.6 million decrease in gross profit and $0.4 million increase in restructuring and other charges.
Operating loss from continuing operations decreased by $9.7 million for the six months ended June 30, 2017 compared with the same period last year primarily due to $5.9 million decrease in restructuring and other charges, $2.5 million reduction in SG&A and $1.9 million decrease in R&D expenses, slightly offset by $0.6 million decrease in gross profit.

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Other Income (Expense)
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016
 
Interest income
 
$

 
$
0.2

 
NM
 
$

 
$
0.2

 
NM

Other income (expense), net
 
(0.7
)
 
(1.1
)
 
NM
 
(0.7
)
 
(1.0
)
 
(30.0
)%
Total other income (expense)
 
$
(0.7
)
 
$
(0.9
)
 
NM
 
$
(0.7
)
 
$
(0.8
)
 
(12.5
)%
As a percent of revenue
 
(8.0
)%
 
(8.5
)%
 
 
 
(3.8
)%
 
(3.8
)%
 


“NM” - Indicates the Percent Change is not meaningful
Other income (expense) for the three months ended June 30, 2017 was $0.2 million worse compared with the same period last year. The change was primarily driven by the short term investment performance.
Other income (expense) for the six months ended June 30, 2017 was $0.1 million worse compared with the same period last year. The change was primarily driven by the short term investment performance.
Income Tax Benefit
 
 
Three Months Ended
 
 
 
Six Months Ended
 
 
 
 
June 30,
 
Percent Change
 
June 30,
 
Percent Change
(Dollars in millions)
 
2017
 
2016
 
 
2017
 
2016