Discontinued Operations

In September 2015, the Company adopted a restructuring plan (the "Restructuring Plan") approved by the Board of Directors of the Company (the "Board") which began the termination process of our Legacy Businesses. Strategically, our Board and management determined that there was not a viable plan to make the Legacy Businesses successful and, accordingly, we began to aggressively wind down these businesses in an accelerated manner via the Restructuring Plan. On January 4, 2016, the Company closed on the sale of its Memorex trademark and receivables associated with two associated trademark licenses to DPI Inc., a St. Louis-based branded consumer electronics company for $9.4 million. The Restructuring Plan also called for the aggressive rationalization of the Company's corporate overhead and focused on reducing our operating losses. As of December 31, 2016, the wind-down of our Legacy Businesses was substantially complete. We have effectively terminated all employees associated with our Legacy Businesses and ceased all operations, including revenue-producing activities. As of December 31, 2017, we have substantially collected all of our outstanding receivables and settled all of our outstanding payables associated with these businesses.

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 December 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 $75.8 million of foreign currency translation losses associated with our Legacy Businesses for the year ended December 31, 2016.

Additionally, in February 2016 the Company sold its IronKey business to Kingston Digital, Inc. ("Kingston") and DataLocker Inc. ("DataLocker") pursuant to two asset purchase agreements which qualified as the sale of a business. To Kingston, we sold the assets representing the Company's business of developing, designing, manufacturing and selling IronKey mobile security solutions including Windows to Go USB flash drives, Windows to Go use cases and encrypted USB flash drives and external USB hard drives. The sale specifically excluded the software and services aspect of the IronKey business. Kingston paid a purchase price of $4.3 million at closing for certain assets, including inventory, and the Company retained accounts receivable and accounts payable relating to that business. To DataLocker, GlassBridge sold the assets of the Company’s business of software and services for its IronKey products, including services related to Windows to Go USB flash drives. DataLocker paid a purchase price of $0.4 million at closing and agreed to assume certain service obligations in the amount of approximately $2.0 million, as well as pay the Company earn-outs in the event certain service revenue targets are achieved. The potential earn-outs to GlassBridge are determined in each of the three annual periods subsequent to the sale of IronKey, whereby the Company will receive 10% of the amount, if any, whereby revenue exceeds thresholds established under the sale agreement. In December 2016, the Company signed a new agreement with DataLocker to receive a one-time payment of $0.2 million and acknowledges that no further consideration shall be due or payable. The Company recorded a pre-tax gain on the sale of $3.8 million during the first quarter of 2016 and the one-time payment in the fourth quarter 2016.

Results of Discontinued Operations

The operating results for these businesses are presented in our Consolidated Statements of Operations as discontinued operations for all periods presented and reflect revenues and expenses that are directly attributable to these businesses that were eliminated from our ongoing operations.

The key components of the results of discontinued operations were as follows:



	For the Years Ended December 31,
	2017			2016
	(In millions)
Net revenue	$	0.3		$	2.0
Cost of goods sold	0.2			0.6
Gross profit	0.1			1.4
Selling, general and administrative	4.1			6.0
Research and development	—			0.5
Restructuring and other	(13.7		)	8.4
Other net expense	2.0			0.6
Reclassification of cumulative translation adjustment	—			75.8
Income (loss) from discontinued operations, before income taxes	7.7			(89.9		)
Gain on sale of discontinued businesses, before income taxes	—			3.8
Income tax (provision) benefit	(3.4		)	0.7
Income (loss) from discontinued businesses, net of income taxes	$	4.3		$	(85.4	)

For the year ended December 31, 2017, “restructuring and other” predominantly reflects a $7.3 million net gain attributable to the settlement of the lawsuits brought against us by CMC Magnetic Corp. (“CMC”), a $3.3 million net gain attributable to the settlement of the lawsuit brought against us by IOENGINE, LLC (“IOENGINE”), a $2.5 million gain on resolution of customer and vendor balances related to the Legacy Businesses, a $1.2 million gain on an insurance and asset claim recovery and a $0.6 million loss on severance and other charges. See Note 15 - Litigation, Commitments and Contingencies for additional information on the CMC and IOENGINE settlements.

The depreciation and amortization expenses recorded as part of income (loss) from discontinued operations (included in selling, general and administrative expenses in table above) were $0 and $0.3 million for the year ended December 31, 2017 and 2016, respectively.

The income tax (provision) benefit related to discontinued operations was ($3.4) million and $0.7 million for the years ended December 31, 2017 and 2016, respectively. See Note 10 - Income Taxes for additional information.

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 disputed CMC trade payables. Pursuant to the settlement agreement with CMC, we released the restricted cash associated with the disputed CMC trade payables in November 2017. See Note 15 - Litigation, Commitments and Contingencies for additional information.

Current liabilities of discontinued operations of $5.3 million as of December 31, 2017 included accounts payable of $0.9 million, $0.7 million of customer credit and rebate accruals and $3.7 million of other current liabilities. Current liabilities of discontinued operations of $39.7 million as of December 31, 2016 included accounts payable of $22.8 million, $3.2 million of customer credit and rebate accruals, $11.0 million of legal accruals and $2.7 million of other current liabilities.

Other liabilities of discontinued operations of $9.1 million as of December 31, 2017 included $4.1 million due to IOENGINE, $1.0 million due to CMC, $1.0 million of withholding tax, $0.9 million of tax contingencies and $2.1 million of other liabilities. Other liabilities of discontinued operations of $4.4 million as of December 31, 2016 primarily represented other liabilities. See Note 15 - Litigation, Commitments and Contingencies for additional information on the IOENGINE and CMC settlements.