UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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GLASSBRIDGE ENTERPRISES, INC.
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except for share and per share amounts)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net revenue | $ | $ | $ | $ | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Restructuring and other | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Realized income (loss) on investments | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on Chapter 11 reorganization (See Note 6 – Debt) | ||||||||||||||||
| Bank Loan forgiveness (See Note 6 – Debt) | ||||||||||||||||
| Defined benefit plan adjustment | ( | ) | ||||||||||||||
| Other income, net | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ||||||||||||
| Income (loss) from operations before income taxes | ( | ) | ( | ) | ||||||||||||
| Income (loss) from operations | ( | ) | ( | ) | ||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Less: Net loss attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to GlassBridge Enterprises, Inc. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Income (loss) per common share attributable to GlassBridge Enterprises, Inc. common shareholders — basic and diluted: | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Weighted average common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
| 3 |
GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In millions)
(Unaudited)
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Other comprehensive income, net of tax: | ||||||||||||||||
| Net pension adjustments, net of tax: | ||||||||||||||||
| Reclassification of adjustment for defined benefit plans recorded in net loss | ||||||||||||||||
| Total net pension adjustments | ||||||||||||||||
| Total other comprehensive income, net of tax | ||||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | ) | $ | $ | ||||||||||
| Less: Comprehensive loss attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Comprehensive income (loss) attributable to GlassBridge Enterprises, Inc. | $ | $ | ( | ) | $ | $ | ||||||||||
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 share and per share amounts)
| June 30, | ||||||||
| 2021 | December 31, | |||||||
| (unaudited) | 2020 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Goodwill | ||||||||
| Arrive LLC long term investment | ||||||||
| Other assets and other investments | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| ESW note payable (See Note 6 – Debt) | ||||||||
| Other related parties notes payable (See Note 13 – Related Party Transactions) | ||||||||
| Other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Stock Purchase Agreement notes payable (See Note 13 – Related Party Transactions) | ||||||||
| Bank loan (See Note 6 – Debt) | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity: | ||||||||
| Preferred stock, par value, authorized shares, issued and outstanding | ||||||||
| Common stock, par value, authorized , issued at June 30, 2021; issued at December 31, 2020 | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost: shares at June 30, 2021; shares at December 31, 2020 | ( | ) | ( | ) | ||||
| Total GlassBridge Enterprises, Inc. shareholders’ equity | ( | ) | ( | ) | ||||
| Noncontrolling interest | ||||||||
| Total shareholders’ equity | ( | ) | ||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements.
| 5 |
GLASSBRIDGE ENTERPRISES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
(In millions, except share amounts)
(Unaudited)
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Treasury Stock | Non- controlling | Total Shareholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Shares | Amount | Interest | Equity | ||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||
| Net income (loss) | ( | ) | | |||||||||||||||||||||||||||||||||
| Balance as of June 30, 2021 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Treasury Stock | Non- controlling | Total Shareholders’ | ||||||||||||||||||||||||||||||
| Shares | Amount | Capital | Deficit | Loss | Shares | Amount | Interest | Deficit | ||||||||||||||||||||||||||||
| Balance as of December 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||||||||
| Net loss | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Pension adjustments, net of tax | ||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2020 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | |||||||||||||||||||||||||
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, | ||||||||
| 2021 | 2020 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net income (loss) | $ | $ | ( | ) | ||||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Gain on Chapter 11 reorganization | ( | ) | ||||||
| Bank Loan forgiveness | ( | ) | ||||||
| Loss on sale of investments | ||||||||
| Defined benefit plan adjustment | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Proceeds from sale of unsecured claims from related party pursuant to Chapter 11 reorganization | ||||||||
| Collection of notes receivable from related party pursuant to Chapter 11 reorganization | ||||||||
| Investment in Securities | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities: | ||||||||
| Proceeds from ESW debtor-in-possession note payable | ||||||||
| Proceeds from Orix note payable | ||||||||
| Proceeds from Bank Loan | ||||||||
| Proceeds from other related parties notes payable | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash and cash equivalents | ( | ) | ||||||
| Cash, cash equivalents and restricted cash — beginning of period | ||||||||
| Cash, cash equivalents and restricted cash — end of period | $ | $ | ||||||
| Supplemental disclosures of cash paid (received) during the period: | ||||||||
| Income taxes (net of refunds received) | $ | ( | ) | $ | ||||
| Interest expense | ||||||||
| Non-cash investing and financing activities during the period: | ||||||||
| Extinguishment of ESW note payable in Chapter 11 reorganization | $ | ( | ) | $ | ||||
| Extinguishment of debtor-in-possession loan in Chapter 11 reorganization | ( | ) | ||||||
| Forgiveness of Bank Loan | ( | ) | ||||||
| Total non-cash investing and financing activities during the period | $ | $ | ||||||
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”) owns
and operates an asset management business through various subsidiaries and a sports technology platform through a
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 interim 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 or interest in such entity, 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 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, 2020 Condensed Consolidated Balance Sheet data were derived from the audited Consolidated Financial Statements, but do 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, 2020, as filed with the U.S. Securities and Exchange Commission on August 4, 2021.
The Company’s legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions (the “Legacy Businesses”) and the Nexsan Business, no longer have any activity for any periods presented. Our continuing operations in each period presented represents our “Asset Management Business,” as well as corporate expenses and activities not directly attributable to our Legacy Businesses or the Nexsan Business. Assets and liabilities directly associated with our Legacy Businesses and Nexsan Business and that are not part of our ongoing operations are included in other assets and other investments.
In
January 2021, Adara Enterprises, Corp. (“Adara” or “AEC”) received notice from ESW Holdings, Inc. (“ESW”)
that Adara had defaulted on its obligation to pay at maturity, i.e., on January 20, 2021, $
| 8 |
AEC’s
prepackaged Chapter 11 plan of reorganization was confirmed at a hearing on June 9, 2021 and became effective on June 15, 2021 (the “Effective
Date”). Upon the occurrence of the Effective Date, ESW deposited $
Adara has historically been one of the subsidiaries through which the company has operated its asset management business. The Company, however, remains committed to its asset management business and holds various investments and assets, including Arrive LLC (“Arrive”), in other subsidiaries. The default on the ESW loan agreement is expected to provide additional liquidity for the Business though the prearranged bankruptcy plan described above.
Note 2 — New Accounting Pronouncements
The Company considers the applicability and impact of all Accounting Standards Updates (“ASUs”) issued by the Financial Accounting Standards Board (“FASB”). ASUs not listed below were assessed and determined to be not applicable to the Company’s consolidated results of operations and financial condition.
Adoption of New Accounting Pronouncements
In August 2018, the FASB issued ASU No. 2018-13, Changes to the Disclosure Requirements for Fair Value Measurement, which eliminates, amends, and adds disclosure requirements for fair value measurements. The amended and new disclosure requirements primarily relate to Level 3 fair value measurements. For the Company, the ASU was effective as of January 1, 2020. The removal and amendment of certain disclosures may be early adopted with retrospective application while the new disclosure requirements are to be applied prospectively. As this ASU relates only to disclosures, there was no impact to the Company’s consolidated results of operations and financial condition.
In August 2018, the FASB issued ASU No. 2018-14, Changes to the Disclosure Requirements for Defined Benefit Plans, which makes minor changes to the disclosure requirements related to defined benefit pension and other postretirement plans. The ASU requires a retrospective transition approach. For the Company, the ASU was effective as of January 1, 2021. As this ASU relates only to disclosures, there was no impact to the Company’s consolidated results of operations and financial condition.
Basic income 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 weighted average number of common shares outstanding in all cases. Once restricted stock vests, it is included in our common shares outstanding.
Diluted income per common share is computed on the basis of the weighted average shares outstanding plus the dilutive effect of our stock-based compensation plans, using the “treasury stock” method. Since the exercise price of our stock options is greater than the average market price of the Company’s common stock for the period, we did not include dilutive common equivalent shares for these instruments in the computation of diluted net income per share because the effect would have been anti-dilutive.
| 9 |
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (Dollars in millions, except for per share amounts) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Numerator: | ||||||||||||||||
| Income (loss) from operations | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Less: loss attributable to noncontrolling interest | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net income (loss) attributable to GlassBridge Enterprises, Inc. | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Denominator: | ||||||||||||||||
| Weighted average number of common shares outstanding during the period - basic and diluted (in thousands) | ||||||||||||||||
| Income (loss) per common share attributable to GlassBridge Enterprises, Inc. common shareholders— basic and diluted: | ||||||||||||||||
| Net income (loss) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Anti-dilutive shares excluded from calculation | ||||||||||||||||
Note 4 — Supplemental Balance Sheet Information
Additional supplemental balance sheet information is provided as follows:
Property
and equipment, as of December 31, 2020, consisted of quantitative trading software purchased from GEH Capital, LLC (“GEH”),
a related party. The asset was depreciated on a straight-line basis over a useful life of
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. The difference between the net disposal proceeds, if any, and the net carrying amount is recognized in the statement of operations.
In January 2021, AEC received notice from ESW that Adara had defaulted on its obligations under the ESW Loan Agreement. On April 22, 2021, AEC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Delaware. As part of AEC’s prepackaged Chapter 11 plan of reorganization, which became effective on June 15, 2021, ESW acquired the Company’s interest in the quantitative trading software, and GlassBridge received a license to use the software in connection with the sports industry.
Total
assets, as of June 30, 2021, include a $
Other
assets of $
Other
current liabilities, as of June 30, 2021, include accruals for payroll expense of $
| 10 |
As
of December 31, 2020, the Company had a note payable of $
As
of December 31, 2020, the Company had a $
Stock
purchase agreements as of June 30, 2021 and December 31, 2020 include notes payable of $
Note 5 — Goodwill
The
goodwill balance was $
Note 6 — Debt
Debt and notes payable consists of the following:
| June 30, | ||||||||
| 2021 | December 31, | |||||||
| (unaudited) | 2020 | |||||||
| (In millions) | ||||||||
| Stock Purchase Agreement notes payable (see Note 13 – Related Party Transactions) | ||||||||
| ESW note payable | ||||||||
| Bank loan | ||||||||
| Other related parties notes payable | ||||||||
| Other liabilities | ||||||||
| Total long term debt | ||||||||
In
2019, the Company purchased from Messrs. Hall and De Perio, both of whom are related parties, shares of SportBLX common stock in exchange
for cash and promissory notes (the “Stock Purchase Agreement”). The Stock Purchase Agreement notes payable bear interest
at a
The
Company had multiple notes payable with Orix PTP Holdings, LLC (“Orix”). Notes payable of $
On
July 21, 2020, pursuant to a loan prepayment and security termination agreement, the Company prepaid the $
| 11 |
Also
on July 21, 2020, the Company borrowed $
In January 2021, AEC received notice from ESW that Adara had defaulted on its obligation under the ESW Loan Agreement. On April 22, 2021, AEC filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code in the Bankruptcy Court for the District of Delaware. As part of AEC’s prepackaged Chapter 11 plan of reorganization, which became effective on June 15, 2021, GlassBridge received a release of its guaranty obligations to ESW.
In
connection with the Chapter 11 reorganization, the Company received $
On
May 5, 2020, the Company received funds under the Bank Loan from the Bank in the aggregate amount of $
Other
related parties notes payable of $
On
June 30, 2020, SportBLX issued an unsecured demand note to CSO in the aggregate principal amount of $
On
June 30, 2020, SportBLX issued an unsecured demand note to Mr. De Perio, a related party, in the aggregate principal amount of $
| 12 |
Scheduled maturities of the Company’s long-term debt, as they exist as of June 30, 2021, in each of the next five fiscal years and thereafter are as follows:
| Fiscal years ending in | (in millions) | ||||
| 2021 | $ | ||||
| 2022 | |||||
| 2023 | |||||
| 2024 | |||||
| 2025 | |||||
| 2026 and thereafter | |||||
| Total | |||||
We have stock-based compensation awards consisting of stock options under the 2011 Incentive Plan, which is described in detail in our Annual Report on Form 10-K for the year ended December 31, 2020. As of June 30, 2021, there are no remaining shares available for grant under the 2011 Incentive Plan. No further shares were available for grant under any other stock incentive plan. The Company did not have any stock-based compensation expense for the three and six months ended June 30, 2021 and 2020.
Stock Options
| Stock Options | Weighted Average Exercise Price | |||||||
| Outstanding December 31, 2020 | $ | |||||||
| Outstanding June 30, 2021 | $ | |||||||
| Exercisable as of June 30, 2021 | $ | |||||||
As of June 30, 2021, options to purchase shares are outstanding and shares are exercisable, and the aggregate intrinsic value of all outstanding stock options was million. options were granted or exercised during the six months ended June 30, 2021.
As of June 30, 2021, unrecognized compensation expense related to outstanding stock options was immaterial.
Note 8 — Retirement Plans
GlassBridge
and the U.S. Pension Benefit Guaranty Corporation (the “PBGC”) entered into an agreement on May 13, 2019 to terminate the
Imation Cash Balance Pension Plan (the “Plan”), based on the PBGC’s findings that (i) the Plan did not meet the minimum
funding standard required under Section 412 of the Internal Revenue Code of 1986, as amended; (ii) the Plan would be unable to pay benefits
when due; and (iii) the Plan should be terminated in order to protect the interests of the Plan participants. GlassBridge and all other
members of the Company’s controlled group (within the meaning of 29 U.S.C. §1301(a)(14)) (collectively, and including the
Company, the “Controlled Group Members”)) were jointly and severally liable to the PBGC for all liabilities under Title IV
of ERISA in connection with the Plan’s termination, including unfunded benefit liabilities, due and unpaid Plan contributions,
premiums, and interest on each of the foregoing (the “Pension Liabilities”), as a result of which a lien in favor of the
Plan, on all property of each Controlled Group Member, arose and was perfected by PBGC (the “Lien”). On October 1, 2019,
the Company entered into a settlement agreement (“Settlement Agreement”) with the PBGC. Pursuant to the terms of the Settlement
Agreement, GlassBridge paid $
| 13 |
Note 9 — Income Taxes
For
interim income tax reporting, we are required to estimate our annual effective tax rate and apply it to year-to-date pre-tax income (loss),
excluding unusual or infrequently occurring discrete items. For the three months ended June 30, 2021, we recorded income tax from continuing
operations of $
The
Company received an income tax refund in February 2021 of approximately $
We file income tax returns, in multiple jurisdictions, that are subject to review by various U.S and state taxing authorities. Our U.S. federal income tax returns for 2017 through 2020, and certain state returns from 2015 to present, are open to examination.
Note 10 — Shareholders’ Equity
Treasury Stock
On November 14, 2016, our Board authorized a share repurchase program under which we may repurchase up to shares of common stock, from time to time, using a variety of methods, which may include open market transactions and privately negotiated transactions.
The
Company did not purchase any shares during the three and six months ended June 30, 2021. Since the November 14, 2016 authorization, we
have repurchased shares of common stock for $
As of June 30, 2021 and December 31, 2020, the Company has shares of treasury stock, acquired at an average price of per share.
Note 11 — Segment Information
As of June 30, 2021, the asset management business and sports technology platform 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 that are not allocated to the business segments in management’s evaluation of segment performance, such as litigation settlement expense, corporate expense and other expenses.
| 14 |
Net revenue, operating loss from operations and assets by segment were as follows (unaudited):
| Three Months Ended | Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| (In millions) | 2021 | 2020 | 2021 | 2020 | ||||||||||||
| Net revenue | ||||||||||||||||
| Asset management business | $ | $ | $ | $ | ||||||||||||
| Sports technology platform | ||||||||||||||||
| Total net revenue | ||||||||||||||||
| Operating income (loss) from operations | ||||||||||||||||
| Asset management business | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Sports technology platform | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total segment operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Corporate and unallocated | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Total operating loss | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Realized income (loss) on investments | ( | ) | ( | ) | ( | ) | ||||||||||
| Gain on Chapter 11 reorganization | ||||||||||||||||
| Bank Loan forgiveness | ||||||||||||||||
| Defined benefit plan adjustment | ( | ) | ||||||||||||||
| Other income, net | ||||||||||||||||
| Income (loss) from operations before income taxes | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| June 30, | ||||||||
| 2021 | December 31, | |||||||
| (In millions) | (unaudited) | 2020 | ||||||
| Assets | ||||||||
| Asset management business | $ | $ | ||||||
| Sports technology platform | ||||||||
| Total segment assets | ||||||||
| Corporate and unallocated | ||||||||
| Total consolidated assets | $ | $ | ||||||
Note 12 — Litigation, Commitments and Contingencies
The Company may be a party, as either a sole or joint defendant or plaintiff, in various lawsuits, claims and other legal matters that arise in the ordinary course of conducting business (including litigation relating to our Legacy Businesses and discontinued operations). All such matters involve uncertainty and accordingly, outcomes that cannot be predicted with assurance. As of November 2, 2021, we are unable to estimate with certainty the ultimate aggregate amount of monetary liability or financial impact that we may incur with respect to these matters. It is reasonably possible that the ultimate resolution of these matters, individually or in the aggregate, could materially affect our financial condition, results of operations and cash flows.
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, 2021 and December 31, 2020, estimated liability amounts associated with such indemnifications were not material.
| 15 |
Environmental Matters
Our Legacy Business operations and indemnification obligations resulting from our spinoff from 3M subject us to liabilities arising from a wide range of federal, state and local environmental laws. For example, from time to time we have received correspondence from 3M notifying us that we may have a duty to defend and indemnify 3M with respect to certain environmental claims such as remediation costs. Environmental remediation costs are accrued when a probable liability has been determined and the amount of such liability has been reasonably estimated. These accruals are reviewed periodically as remediation and investigatory activities proceed and are adjusted accordingly. We did not have any environmental accruals as of June 30, 2021. Compliance with environmental regulations has not had a material adverse effect on our financial results.
Note 13 — Related Party Transactions
On January 1, 2019, the Company and Clinton Group Inc. (“Clinton”) entered into a management service agreement (the “Management Service Agreement”), pursuant to which Clinton agreed to provide certain services to the Company.
Prior to being appointed our Chief Executive Officer and Chief Financial Officer, respectively, Daniel A. Strauss served as our Chief Executive Officer, and Francis Ruchalski served as our Chief Financial Officer, pursuant to the terms of the Amended and Restated Services Agreement we entered into with Clinton on March 31, 2019 (the “Amended Services Agreement”). Clinton also made available other employees of Clinton as necessary to manage certain business functions as deemed necessary in the sole discretion of Clinton to provide other management services. The Amended Services Agreement was terminated effective March 31, 2020.
Clinton paid Mr. Strauss and Mr. Ruchalski compensation and benefits under the Amended Services Agreement through December 15, 2019, and they became employees of the Company on December 18, 2019 and December 16, 2019, respectively.
As
of June 30, 2021, the Company paid Clinton $
On
June 5, 2020, SportBLX entered into a subscription agreement (the “Securities Subscription”) with S-BLX Securities for SportBLX’s
proprietary sports-based alternative asset trading platform (the “Platform”), via which the customer, Securities, may issue
sports-related securities that are tradeable by investors. Mr. Hall and Mr. De Perio own
On
June 30, 2020, SportBLX issued Demand Note-4 to CSO in the aggregate principal amount of $
On
June 30, 2020, SportBLX issued Demand Note-5 to Mr. De Perio in the aggregate principal amount of $
On
October 1, 2019, the Company sold to Orix, for $
| 16 |
On
July 20, 2020, pursuant to a Software Assignment Agreement, AEC purchased from GEH Capital, LLC, wholly owned by Mr. Hall, certain of
that company’s quantitative trading software, for $
In
connection with the closing of certain transactions in the third quarter of 2020, the Company paid a $
On
August 1, 2020, the Company entered into a Management Services Agreement to provide certain back office services, including accounting,
treasury, payroll and benefits and other administration services to S-BLX Securities. The agreement has a six month initial term and
will automatically renew for successive renewal terms of three months unless either party provides notice of nonrenewal. In exchange
for the services, S-BLX Securities will pay the Company at a rate of $
On
December 30, 2020, SportBLX paid $
As
of June 30, 2021, SportBLX paid S-BLX Securities $
As
of June 30, 2021, SportBLX owns shares of Series B Common Tokens of SportBLX Thoroughbreds Corp. (“SportBLX Thoroughbreds”),
which represents
Note 14 — Subsequent Events
On
July 31, 2021, Mr. Hall and Mr. De Perio agreed to accept $
Also,
on July 31, 2021, the Company assigned obligations owed to it from Sport-BLX, totaling $
On August 6, 2021, agreements, each dated August 2, 2021, except as otherwise stated, between the Company and the other parties, identified below were released from escrow, thereby becoming effective.
The
Company entered into a Term Loan and Security Agreement (“GHI Loan Agreement”) with Gazellek Holdings I, LLC (“GHI
LLC”), pursuant to which GHI LLC lent $
The
Company is required to prepay the loan upon receiving proceeds from future indebtedness exceeding $
| 17 |
In
connection with the loan, the Company issued to GHI LLC, for $
The following unaudited pro forma condensed consolidated balance sheet for the six months ended June 30, 2021, which gives effect to the transactions described above has been prepared to give effect to the transactions as if they had been completed and entered into, respectively, on June 30, 2021.
The unaudited pro forma condensed consolidated balance sheet is for informational purposes only and is not necessarily indicative of what our financial performance or financial position would have been had the transactions been completed on the dates assumed nor is such unaudited pro forma financial information necessarily indicative of the results expected in any future period.
| 18 |
GLASSBRIDGE ENTERPRISES, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited) (In millions, except per share amounts)
| June 30, 2021 | New Lender | Hall / De Perio | ||||||||||||||||||
| As Reported | Agreements | Agreements | Pro Forma | |||||||||||||||||
| Assets | ||||||||||||||||||||
| Current Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | 0.8 | $ | 3.4 | (a) | $ | (3.0 | ) | (b)(c) | $ | 1.2 | |||||||||
| Accounts receivable, net | 0.1 | 0.1 | ||||||||||||||||||
| Total current assets | 0.9 | 3.4 | (3.0 | ) | 1.3 | |||||||||||||||
| Goodwill (provisional) | 8.3 | 8.3 | ||||||||||||||||||
| Arrive LLC long term investment | 12.8 | 12.8 | ||||||||||||||||||
| Other assets and other investments | 0.2 | 0.2 | ||||||||||||||||||
| Total assets | $ | 22.2 | $ | 3.4 | $ | (3.0 | ) | $ | 22.6 | |||||||||||
| Liabilities and Shareholders’ Equity | ||||||||||||||||||||
| Current liabilities: | ||||||||||||||||||||
| Accounts payable | $ | 1.6 | $ | — | $ | — | $ | 1.6 | ||||||||||||
| Note payable, new lender | — | 3.2 | (a) | 3.2 | ||||||||||||||||
| Notes payable, related party | 0.2 | 4.2 | (c) | 4.4 | ||||||||||||||||
| Accrued interest due to related party | 0.4 | (c) | 0.4 | |||||||||||||||||
| Other current liabilities | 1.1 | 1.1 | ||||||||||||||||||
| Total current liabilities | 2.9 | 3.2 | 4.6 | 10.7 | ||||||||||||||||
| Stock Purchase Agreement notes payable | 17.6 | (17.6 | ) | (b) | — | |||||||||||||||
| Other liabilities | 0.2 | 0.2 | ||||||||||||||||||
| Total liabilities | 20.7 | 3.2 | (13.0 | ) | 10.9 | |||||||||||||||
| Shareholders’ equity | ||||||||||||||||||||
| Preferred stock | — | — | ||||||||||||||||||
| Common stock | — | — | ||||||||||||||||||
| Additional paid-in capital | 1,059.6 | 10.0 | (d) | 1,069.6 | ||||||||||||||||
| Additional paid-in capital - Warrants | 0.2 | (a) | 0.2 | |||||||||||||||||
| Accumulated deficit | (1,055.5 | ) | (1,055.5 | ) | ||||||||||||||||
| Treasury stock, at cost | (24.9 | ) | (24.9 | ) | ||||||||||||||||
| Total GlassBridge Enterprises, Inc. shareholders’ equity | (20.8 | ) | 0.2 | 10.0 | (10.6 | ) | ||||||||||||||
| Noncontrolling interest | 22.3 | 22.3 | ||||||||||||||||||
| Total shareholders’ equity | 1.5 | 0.2 | 10.0 | 11.7 | ||||||||||||||||
| Total liabilities and shareholders’ equity | $ | 22.2 | $ | 3.4 | $ | (3.0 | ) | $ | 22.6 | |||||||||||
Unaudited Pro Forma Condensed Balance Sheet Notes:
| (a) | As a result of the GHI Loan Agreement, the Company received cash of $3.2 million, in exchange for a note payable and cash of $0.2 million, for Common Stock Purchase Warrants. | |
| (b) | As a result of the Hall / De Perio agreements, the Company paid Mr. Hall and Mr. De Perio $3.4 million in satisfaction of the $17.6 million owed to them for the Stock Purchase Agreement notes payable. | |
| (c) | Also as a result of the Hall / De Perio agreements, the Company assigned obligations owed to it from its 50.1% subsidiary, Sports-BLX, Inc., totaling $4.2 million, as well as accrued interest of $0.4 million, to Fintech Debt Corp., of which Mr. Hall and Mr. De Perio are controlling stockholders, for $400,000. | |
| (d) | Net result of agreements (a), (b) and (c) to additional paid-in capital. |
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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; 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; 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 tax guidance and related interpretations and inspections by tax authorities; our ability to raise capital from third party investors for our asset management 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; 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 develop and deliver differentiated and innovative products 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, 2020, and from time to time in our filings with the SEC.
Overview
GlassBridge Enterprises, Inc. (“GlassBridge”, the “Company”, “we”, “us” or “our”) owns and operates an asset management business and a sports technology platform. We actively explore a diverse range of new, strategic asset management business opportunities for our portfolio.
On October 1, 2019, the Company sold to Orix PTP Holdings, LLC (“Orix”), for $17,562,700, 20.1% of the outstanding stock of Adara, until then a Company wholly owned subsidiary, together with two promissory notes of Adara Enterprises, Inc. to the Company in total principal amount of $13,000,000. In July 2020, an Adara wholly owned subsidiary assumed the obligations under the notes, and the subsidiary was sold to George E. Hall (“Mr. Hall”), a related party, for $1.00, after the subsidiary had distributed to Adara all of the subsidiary’s assets, except for its general partnership interest in The Sports & Entertainment Fund, L.P., which holds a $17.8 million investment, and the related commodities pool operator registration and $1,790,000 in cash. Also, the Company repurchased the Adara shares from Orix and prepaid a $16 million note that it issued to Orix in March 2020 (the proceeds of which were invested in The Sports & Entertainment Fund, L.P.), together with $171,000 in interest. As a result of an in-kind distribution from Adara, the Company became the direct owner of GlassBridge Arrive Investor, LLC, which is the investment arm of Roc Nation, as well as of 50.1% of the outstanding shares of Sport-BLX, Inc., and preferred interests in the European levies claims. The Company financed the foregoing transactions, in part, from proceeds of an $11,000,000 loan (the “ESW Loan Agreement”) to Adara from ESW Holdings, LLC (“ESW”), which was due January 20, 2021, with $1,100,000 interest.
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In January 2021, Adara received notice from ESW that Adara had defaulted on its obligation to pay at maturity all amounts due to ESW under the ESW Loan Agreement. The ESW Loan Agreement provided that, upon Adara’s default, Adara may elect to cooperate with ESW to effect a prearranged reorganization of Adara in bankruptcy, pursuant to which ESW would acquire all equity in Adara, as reorganized, and indirectly certain of Adara’s assets, most notably property and equipment consisting of quantitative trading software, as well as deferred tax assets resulting from Adara’s net operating losses.
Adara’s prepackaged Chapter 11 plan of reorganization was confirmed at a hearing on June 9, 2021 and became effective on June 15, 2021 (the “Effective Date”). On the Effective Date, ESW deposited $8.5 million, less $325,000 that ESW had previously funded in the form of a post-petition debtor-in-possession loan, into a distribution trust established pursuant to Adara’s Chapter 11 plan to fund the costs of administration associated with Adara’s bankruptcy case and to satisfy valid creditor claims. Neither GlassBridge nor Adara can predict at this time how much, if any, of the $8.5 million will remain after such creditor claims and other administrative expenses. Also on the Effective Date, by order of the Bankruptcy Court, GlassBridge shares of Adara were cancelled, and shares in reorganized Adara were issued as follows: 50% of the equity in reorganized Adara was issued to ESW, and the other 50% of the equity in reorganized Adara was issued to ESW’s affiliate, ESW Capital LLC. Finally, on the Effective Date, GlassBridge received a release of its guaranty obligations to ESW as well as a license to use AEC’s quantitative trading software in connection with the sports industry.
Adara has historically been one of the subsidiaries through which the company has operated its asset management business. The Company, however, remains committed to its asset management business and holds various investments and assets, including Arrive LLC (“Arrive”), in other subsidiaries.
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 August 4, 2021, including in Part 1 Item 1A. Risk Factors of such Annual Report.
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.
| 21 |
Executive Summary
Consolidated Results of Operations for the Three Months Ended June 30, 2021
| ● | Net revenue was $0.0 million for the three months ended June 30, 2021, compared to net revenue of $0.3 million for the three months ended June 30, 2020. | |
| ● | Operating loss was $1.8 and $1.7 million for the three months ended June 30, 2021 and 2020, respectively. | |
| ● | Basic and diluted income per share was $464.29 for the three months ended June 30, 2021, compared with basic and diluted loss per share of $59.37 for the same period last year. |
Consolidated Results of Operations for the Six Months Ended June 30, 2021
| ● | Net revenue was $0.0 million for the six months ended June 30, 2021, compared to net revenue of $0.3 million in the same period last year. | |
| ● | Operating loss was $3.2 million for the six months ended June 30, 2021, compared to an operating loss of $3.8 million in the same period last year. This was a decrease of $0.6 million, primarily due to an effort to reduce overhead. | |
| ● | Basic and diluted income per share was $376.98 for the six months ended June 30, 2021, compared with basic and diluted loss per share of $567.06 for the same period last year. |
Cash Flow/Financial Condition for the Six Months Ended June 30, 2021
| ● | Cash and cash equivalents totaled $0.8 million at June 30, 2021, compared with $1.3 million at December 31, 2020. The decrease in the cash balance of $0.5 million was primarily due to operating expenses. |
Results of Operations
The following discussion relates to continuing operations unless indicated otherwise. “NM” means that the percentage amount is not meaningful.
Net Revenue
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Net revenue | $ | — | $ | 0.3 | (100.0 | )% | $ | — | $ | 0.3 | (100.0 | )% | ||||||||||||
Net revenue for the three and six months ended June 30, 2021 was $0.0 million, compared with net revenue of $0.3 million for the three and six months ended June 30, 2020.
Selling, General and Administrative (“SG&A”)
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Selling, general and administrative | $ | 1.5 | $ | 2.0 | (25.0 | )% | $ | 2.9 | $ | 4.1 | (29.3 | )% | ||||||||||||
| As a percent of revenue | NM | 666.7 | % | NM | 1,366.7 | % | ||||||||||||||||||
SG&A expense decreased for the three months ended June 30, 2021 by $0.5 million (or 25.0%), compared with the same period last year, primarily due to an effort to reduce overhead.
SG&A expense decreased for the six months ended June 30, 2021 by $1.2 million (or 29.3%), compared with the same period last year, primarily due to an effort to reduce overhead.
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Operating Loss from Operations
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Operating loss from operations | $ | (1.8 | ) | $ | (1.7 | ) | (5.9 | )% | $ | (3.2 | ) | $ | (3.8 | ) | (15.8 | )% | ||||||||
| As a percent of revenue | NM | (566.7 | )% | NM | (1,266.7 | )% | ||||||||||||||||||
Operating loss from operations was $1.8 and $1.7 million for the three months ended June 30, 2021 and 2020, respectively.
Operating loss from operations was $3.2 and $3.8 million for the six months ended June 30, 2021 and 2020, respectively. Operating loss from operations decreased by $0.6 million for the six months ended June 30, 2021, compared with the same period last year, primarily due to an effort to reduce overhead.
Other Expense
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Interest expense | $ | (0.8 | ) | $ | (0.6 | ) | 33.3 | % | $ | (1.7 | ) | $ | (1.1 | ) | 54.5 | % | ||||||||
| Realized income (loss) on investments | (0.2 | ) | 0.5 | (140.0 | )% | (0.2 | ) | (1.7 | ) | 88.2 | % | |||||||||||||
| Gain on Chapter 11 reorganization | 13.8 | — | NM | 13.8 | — | NM | ||||||||||||||||||
| Bank Loan forgiveness | 0.4 | — | NM | 0.4 | — | NM | ||||||||||||||||||
| Defined benefit plan adjustment | — | — | NM | — | (8.5 | ) | (100.0 | )% | ||||||||||||||||
| Other income, net | — | — | NM | — | 0.1 | 100.0 | % | |||||||||||||||||
| Total other income (expense) | $ | 13.2 | $ | (0.1 | ) | (13,300.0 | )% | $ | 12.3 | $ | (11.2 | ) | (209.8 | )% | ||||||||||
| As a percent of revenue | NM | (33.3 | )% | NM | (3,733.3 | )% | ||||||||||||||||||
Total other income for the three months ended June 30, 2021 was $13.2 million, compared to $0.1 million of other expense for the same period last year.
Total other income for the six months ended June 30, 2021 was $12.3 million, compared to $11.2 million of other expense for the same period last year.
Income Tax Provision
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Income tax benefit (provision) | $ | — | $ | — | NM | $ | — | $ | — | NM | ||||||||||||||
| Effective tax rate | 0.0 | % | 0.0 | % | 0.0 | % | 0.0 | % | ||||||||||||||||
Income tax for the three months ended June 30, 2021 and 2020 was $0.0 million, due to losses in the period or loss carryovers from prior periods.
Income tax for the six months ended June 30, 2021 and 2020 was $0.0 million, due to losses in the period or loss carryovers from prior periods.
Segment Results
The asset management business and the sports technology platform, SportBLX, are our two reportable segments as of June 30, 2021.
| 23 |
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. Corporate and unallocated amounts include costs that are not allocated to the business segments in management’s evaluation of segment performance, such as litigation settlement expense, corporate expense and other expenses.
Information related to our segments is as follows:
Asset Management Business
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Operating loss | $ | (0.8 | ) | $ | (1.2 | ) | (33.3 | )% | $ | (2.0 | ) | $ | (2.3 | ) | (13.0 | )% | ||||||||
The Company operates its diversified private asset management business through a number of subsidiaries that sponsor our fund offerings. We expect our asset management business to earn revenues primarily by providing investment advisory services to third party investors through our managed funds, as well as separate managed accounts.
Sports Technology Platform
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Operating loss | $ | (0.4 | ) | $ | (0.2 | ) | 100.0 | % | $ | (0.5 | ) | $ | (0.7 | ) | (28.6 | )% | ||||||||
The Company’s sports technology platform enables a marketplace for sports assets, focusing on American professional sports like basketball, baseball and football.
Corporate and Unallocated
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||
| June 30, | Percent | June 30, | Percent | |||||||||||||||||||||
| (Dollars in millions) | 2021 | 2020 | Change | 2021 | 2020 | Change | ||||||||||||||||||
| Corporate and unallocated operating loss | $ | (0.6 | ) | $ | (0.3 | ) | 100.0 | % | $ | (0.7 | ) | $ | (0.8 | ) | (12.5 | )% | ||||||||
For the three months ended June 30, 2021, corporate and unallocated operating loss consists of $0.6 million of corporate general and administrative expenses, a 100.0% increase from the prior year.
For the six months ended June 30, 2021, corporate and unallocated operating loss consists of $0.7 million of corporate general and administrative expenses, a 12.5% decrease from the prior year.
Impact of Changes in Foreign Currency Rates
The impact of changes in foreign currency exchange rates to worldwide revenue was immaterial for the three and six months ended June 30, 2021.
Financial Position
Our cash and cash equivalents balance as of June 30, 2021 was $0.8 million, compared to $1.3 million as of December 31, 2020.
Our accounts payable balance as of June 30, 2021 was $1.6 million, compared to $1.8 million as of December 31, 2020.
Our other current liabilities balance as of June 30, 2021 was $1.1 million, compared to $1.8 million as of December 31, 2020.
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Liquidity and Capital Resources
Cash Flows Provided by (Used in) Operating Activities:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| (Dollars in millions) | 2021 | 2020 | ||||||
| Net income (loss) | $ | 9.1 | $ | (15.0 | ) | |||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation and amortization | 0.3 | 0.3 | ||||||
| Gain on Chapter 11 reorganization | (13.8 | ) | — | |||||
| Bank Loan forgiveness | (0.4 | ) | — | |||||
| Loss on sale of investments | 0.2 | 1.7 | ||||||
| Defined benefit plan adjustment | — | 8.5 | ||||||
| Changes in operating assets and liabilities | 2.1 | 1.4 | ||||||
| Net cash used in operating activities | $ | (2.5 | ) | $ | (3.1 | ) | ||
Cash used in operating activities was $2.5 million for the six months ended June 30, 2021, which was related to ordinary operating expenses. Cash used in operating activities was $3.1 million for the six months ended June 30, 2020, primarily due to the development of the operations of SportBLX and Adara.
Cash Flows Provided by Investing Activities:
| Six Months Ended | ||||||||
| June 30, | ||||||||
| (Dollars in millions) | 2021 | 2020 | ||||||
| Proceeds from sale of unsecured claims from related party pursuant to Chapter 11 reorganization | 0.5 | — | ||||||
| Collection of notes receivable from related party pursuant to Chapter 11 reorganization | 0.7 | — | ||||||
| Investment in securities | — | (10.1 | ) | |||||
| Net cash provided by (used in) investing activities | $ | 1.2 | $ | (10.1 | ) | |||
Investing activities for the six months ended June 30, 2021 included the sale of unsecured claims and the collection of notes receivable from related parties pursuant to the Chapter 11 reorganization. For the six months ended June 30, 2020, cash used in investing activities includes the purchase of securities for The Sports and Entertainment Fund, L.P.
Cash Flows Provided by Financing Activities:
| Three Months Ended | ||||||||
| June 30, | ||||||||
| (Dollars in millions) | 2021 | 2020 | ||||||
| Proceeds from ESW debtor-in-possession note payable | 0.3 | — | ||||||
| Proceeds from Orix note payable | — | 16.0 | ||||||
| Proceeds from Bank Loan | — | 0.4 | ||||||
| Proceeds from other related parties notes payable | — | 0.4 | ||||||
| Net cash provided by financing activities | $ | 0.3 | $ | 16.8 | ||||
Cash provided by financing activities for the six months ended June 30, 2020 related to an Orix note payable, a note payable issued under the Paycheck Protection Program (the “Bank Loan”) and notes payable from other related parties. See Note 6 - Debt and Note 13 – Related Party Transactions for more information.
We have various resources available to us for purposes of managing liquidity and capital needs. Our primary sources of liquidity include our cash and cash equivalents. Our primary liquidity needs relate to funding our operations.
We had $0.8 million cash and cash equivalents on hand as of June 30, 2021.
We expect that our cash, in addition to asset monetization, will provide liquidity sufficient to meet our needs for our operations and our obligations. We also plan to raise additional capital 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.
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Off Balance Sheet Arrangements
As of June 30, 2021, we did not have any material off-balance sheet arrangements.
Critical Accounting Policies and Estimates
A discussion of the Company’s critical accounting policies was provided in Part II — Item 7 in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.
Recent Accounting Pronouncements
See Note 2 - New Accounting Pronouncements in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1, herein, for further information.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Based on an evaluation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2021, the end of the period covered by this report, the Chief Executive Officer, Daniel Strauss, and the Chief Financial Officer, Francis Ruchalski, have concluded that the disclosure controls and procedures were effective.
Changes in Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2021, based on the guidelines established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013). Our internal control over financial reporting includes policies and procedures that provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with U.S. generally accepted accounting principles. During the quarter ended June 30, 2021, management concluded there was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(e) under the Exchange Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 12 - Litigation, Commitments and Contingencies in our Notes to Condensed Consolidated Financial Statements in Part I, Item 1 herein for further information regarding our legal proceedings.
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, 2021, 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. Similarly, the Company is the plaintiff in a number of matters in the United States and elsewhere where the potential outcomes could be materially beneficial to the Company. These outcomes are also uncertain.
Item 1A. Risk Factors.
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required under this item.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
Not applicable.
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Item 6. Exhibits.
The following documents are filed as part of, or incorporated by reference into, this report:
| Exhibit Number | Description of Exhibit | |
| 10.1 | Agreement, dated July 31, 2021, among George E. Hall, Joseph A. De Period, and the Company | |
| 10.2 | Demand Note Assignment, dated July 31, 2021, among the Company, Fintech Debt Corp., and Sport-BLX, Inc. | |
| 10.3 | Term Loan and Security Agreement, dated August 2, 2021, among the Company, the guarantors party thereto, and Gazellek Holdings I, LLC | |
| 10.4 | Consulting Agreement, dated August 2, 2021, among the Company and Gazellek Holdings I, LLC | |
| 10.5 | Common Stock Purchase Warrant, No. W-1, dated August 2, 2021, issued to Gazellek Holdings I, LLC | |
| 10.6 | Common Stock Purchase Warrant, No. W-2, dated August 2, 2021, issued to Gazellek Holdings I, LLC | |
| 10.7 | Amended and Restated Employment Agreement, dated August 1, 2021, between the Company and Daniel Strauss | |
| 31.1 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2 | Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2 | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101 | The following financial information from GlassBridge Enterprises, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2021, formatted in Extensible Business Reporting Language (XBRL): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) the Condensed Consolidated Balance Sheets, (iv) the Condensed Consolidated Statements of Cash Flows, and (v) the Notes to Condensed Consolidated Financial Statements. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GLASSBRIDGE ENTERPRISES, INC. | ||
| Date: November 2, 2021 | /s/ Francis Ruchalski | |
| Name: | Francis Ruchalski | |
| Title: |
Chief Financial Officer (duly authorized officer and principal financial officer) | |
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