Basis of Presentation

GlassBridge Enterprises, Inc. (“GlassBridge”, the “Company”, “we”, “us” or “our”) is a holding company. We actively explore a diverse range of new, strategic asset management business opportunities for our portfolio. The company’s wholly-owned subsidiary GlassBridge Asset Management, LLC (“GBAM”) is an investment advisor focused on technology-driven quantitative strategies and other alternative investment strategies. Our partially-owned subsidiary NXSN Acquisition Corp. (together with its subsidiaries, “NXSN”) operates a global enterprise data storage business through its subsidiaries.

The interim Condensed Consolidated Financial Statements of GlassBridge are unaudited but, in the opinion of management, reflect all adjustments necessary for a fair statement of financial position, results of operations, comprehensive loss and cash flows for the periods presented. Except as otherwise disclosed herein, these adjustments consist of normal and recurring items. The results of operations for any interim period are not necessarily indicative of full year results. The Condensed Consolidated Financial Statements and Notes are presented in accordance with the requirements for Quarterly Reports on Form 10-Q and do not contain certain information included in our annual Consolidated Financial Statements and Notes presented in accordance with the requirements of Annual Reports on Form 10-K.

The unaudited Condensed Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, and entities in which the Company owns or controls fifty percent or more of the voting shares and has the right to control. The results of entities disposed of are included in the unaudited Condensed Consolidated Financial Statements up to the date of the disposal and, where appropriate, these operations have been reflected as discontinued operations. All inter-company balances and transactions have been eliminated in consolidation and, in the opinion of management, all normal recurring adjustments necessary for a fair presentation have been included in the interim results reported.

The preparation of the interim Condensed Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the interim Condensed Consolidated Financial Statements and the reported amounts of revenue and expenses for the reporting periods. Despite our intention to establish accurate estimates and use reasonable assumptions, actual results may differ from our estimates.

The December 31, 2017 Condensed Consolidated Balance Sheet data was derived from the audited Consolidated Financial Statements but does not include all disclosures required by GAAP. This Form 10-Q should be read in conjunction with our Consolidated Financial Statements and Notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the U.S. Securities and Exchange Commission on April 2, 2018.

The operating results of our legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions (the “Legacy Businesses”), 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 March 31, 2018 and December 31, 2017. 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 of a VIE 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 we made the determination that we are the primary beneficiary of such VIE. Until January 23, 2017, as we owned 100% of the equity interest of Nexsan and CDI, the financial results of Nexsan and CDI were included in our Condensed Consolidated Financial Statements as wholly-owned subsidiaries. See Note 14 - Segment Information for additional information.

On February 2, 2017, we closed a transaction with Clinton Group, Inc. (“Clinton”) that facilitated the launch of our Asset Management Business. Our Asset Management Business consists of our investment advisory business conducted through GBAM (the “Capacity and Services Transaction”). See Note 6 - Intangible Assets and Note 16 - Related Party Transactions for further information.

On February 21, 2017, we 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 our 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 March 31, 2018, we had invested certain of our cash as proprietary capital 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 March 31, 2018 included the proprietary capital invested in the GBAM Fund. See Note 14 - Segment Information for additional information.

Liquidity and Management Plan

The Company incurred operating and cash flow losses for several reporting periods and had a negative working capital balance of $6.8 million as of March 31, 2018. This negative working capital balance included $8.4 million of cash as of March 31, 2018 which is expected to fund our operations in the next twelve months. These conditions raised substantial doubt about our ability to continue as a going concern. As a result, we have undertaken a financial and operational restructuring plan approved by our Board of Directors (the “Board”) prior to the 2018 fiscal year (the “Restructuring Plan”). Operating under the Restructuring Plan includes executing changes to our business model. Management’s execution of the Restructuring Plan, which we believe will alleviate the substantial doubt about our ability to continue as a going concern, is as follows:

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Nexsan Business: We made additional changes to our Nexsan Business operations during the fourth quarter of 2017 that further reduced operating expenses by approximately 40%. These changes principally included downsizing our Nexsan Business work force. Further, our Nexsan Business incurred certain non-recurring charges in 2017 for severance payments and an operating system that has since been eliminated. The combined effect of reducing our work force, eliminating the operating system and the non-recurring severance payments is approximately $10 million on an annual basis. Our negative working capital includes $7.4 million of deferred revenue that gives rise to performance obligations for product support, which we will fulfill in the next twelve months using existing resources.


•	Legacy Business: We settled a substantial majority of our litigation in 2017 which significantly reduces our forecasted expenditures for professional fees and related costs during the next twelve months.

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Corporate: We made further spending cuts in all areas including costs relating to the compensation of the members of our board, that are expected to reduce cash outflows by approximately $0.5 million in the next twelve months. Further, our current liabilities include $5.8 million of levies in Germany that we are disputing. We believe, based on communications from the German collection authorities, that these levy disputes will be settled in our favor within twelve months from the date these financial statements are issued or we will continue to dispute them under a process that will transpire over a period of more than twelve months from the date these financial statement are issued.

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