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 and a technology platform through majority owned Adara Enterprises, Corp.
f/k/a Imation Enterprises Corp. (“Adara”) and Sport-BLX, Inc. (“SportBLX”). Adara owns all of our asset
management business, operated by Adara Asset Management, LLC (“AAM”) and holds part of our equity
interest in SportBLX. GlassBridge Asset Management, LLC changed its name to Adara Asset Management, LLC in 2020.
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 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 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, 2019 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, 2019, as filed
with the U.S. Securities and Exchange Commission on April 3, 2020.
The
operating results of our legacy business segments, Consumer Storage and Accessories and Tiered Storage and Security Solutions
(the “Legacy Businesses”) and the Nexsan Business (which includes the “Nexsan Group” as defined below),
are presented in our Condensed Consolidated Statements of Operations as discontinued operations for all periods presented. Our
continuing operations in each period presented represents our “Asset Management Business,” which consists of our investment
advisory business conducted through AAM, as well as corporate expenses and activities not directly attributable to our Legacy
Businesses or the Nexsan Business. Assets and liabilities directly associated with our Legacy Businesses and Nexsan Business and
that are not part of our ongoing operations have been separately presented on the face of our Consolidated Balance Sheets for
all periods presented. See Note 4 - Discontinued Operations for further information.
Note
2 — New Accounting Pronouncements
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.
New
Accounting Pronouncements To Be Adopted
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 is effective as of January 1, 2021. As this ASU relates only to disclosures, there
will be no impact to the Company’s consolidated results of operations and financial condition.
Note
3 — Income (loss) per Common Share
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.
The
following table sets forth the computation of the weighted average basic and diluted income per share:
|
|
Three Months Ended
|
|
|
March 31,
|
(In millions, except for share and per share amounts)
|
|
2020
|
|
|
2019
|
Numerator:
|
|
|
|
|
|
|
Loss from continuing operations
|
|
$
|
(13.2
|
)
|
|
$
|
(0.9
|
)
|
Less: loss attributable to noncontrolling interest
|
|
|
(0.4
|
)
|
|
|
—
|
|
Net loss from continuing operations attributable to GlassBridge Enterprises,
Inc.
|
|
|
(12.8
|
)
|
|
|
(0.9
|
)
|
Income from discontinued operations, net of income
taxes
|
|
|
—
|
|
|
|
10.5
|
|
Net income (loss) attributable to GlassBridge
Enterprises, Inc.
|
|
$
|
(12.8
|
)
|
|
$
|
9.6
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding
during the period - basic and diluted (in thousands)
|
|
|
25.2
|
|
|
|
25.7
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per common share attributable to GlassBridge common shareholders —
basic and diluted:
|
|
|
|
|
|
|
|
|
Continuing operations
|
|
$
|
(507.69
|
)
|
|
$
|
(36.98
|
)
|
Discontinued operations
|
|
|
—
|
|
|
|
408.72
|
|
Net income (loss)
|
|
$
|
(507.69
|
)
|
|
$
|
371.74
|
|
|
|
|
|
|
|
|
|
|
Anti-dilutive shares excluded from calculation
|
|
|
0.0
|
|
|
|
0.0
|
|
Note
4 — Discontinued Operations
The
operating results for the Legacy Businesses and the Nexsan Business 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.
The
key components of the results of discontinued operations were as follows:
|
|
Three Months Ended
|
|
|
|
March 31,
|
|
(In millions)
|
|
2020
|
|
|
2019
|
|
Net revenue
|
|
$
|
—
|
|
|
$
|
0.1
|
|
Cost of goods sold
|
|
|
—
|
|
|
|
0.1
|
|
Gross profit
|
|
|
—
|
|
|
|
—
|
|
Selling, general and administrative
|
|
|
—
|
|
|
|
0.3
|
|
Other income
|
|
|
—
|
|
|
|
(0.6
|
)
|
Income from discontinued operations, before income taxes
|
|
|
—
|
|
|
|
0.3
|
|
Income on sale of discontinued businesses, before income taxes
|
|
|
—
|
|
|
|
9.6
|
|
Income tax benefit
|
|
|
—
|
|
|
|
0.6
|
|
Income from discontinued operations, net of income taxes
|
|
$
|
—
|
|
|
$
|
10.5
|
|
Net
income of discontinued operations for the three months ended March 31, 2020 decreased by $10.5 million compared to the same period
last year due to the sale of the Imation Subsidiaries.
Note
5 — Supplemental Balance Sheet Information
Additional
supplemental balance sheet information is provided as follows:
As of March 31, 2020,
approximately $16.0 million of the $18.6 million of cash is restricted.
Other
current assets of $0.6 million as of March 31, 2020 include $0.5 million for a tax refund to be received in 2020.
Total
assets of as of March 31, 2020 include a $14.8 million investment in Arrive LLC (“Arrive”). Historically, we accounted for such
investments under the cost method of accounting. The adoption of ASU No. 2016-01 in the first quarter of 2018 effectively eliminated
the cost method of accounting, and the carrying value of this investment is written down, or impaired, to fair value when a decline
in value is considered to be other-than-temporary. Our strategic investment in equity securities does not have a readily determinable
fair value; therefore, the new guidance was adopted prospectively. As of March 31, 2020, there were no indicators of impairment
for this investment. The Company will assess the investment for potential impairment, quarterly.
Other
assets of $1.8 million as of March 31, 2020 include a $0.6 million minimum tax credit.
Note
6 — Debt
Debt
and notes payable consists of the following:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(In millions)
|
|
Pension liability
|
|
$
|
—
|
|
|
$
|
13.5
|
|
Stock purchase agreement
notes payable (see Note 14 – Related Party Transactions)
|
|
|
17.6
|
|
|
|
17.6
|
|
Orix notes payable
|
|
|
29.1
|
|
|
|
13.0
|
|
Deferred financing costs
|
|
|
(2.7
|
)
|
|
|
(2.7
|
)
|
Other liabilities
|
|
|
0.5
|
|
|
|
0.2
|
|
Total long term debt
|
|
|
44.5
|
|
|
|
41.6
|
|
Stock
purchase agreement notes payable bear interest at a 5% annual rate and mature on December 12, 2022. The interest under the notes
is payable in arrears on the first day of each calendar quarter, or, at the Company’s option, in shares of common stock
of the Company at a price reflecting market value.
The
Company has multiple notes payable with Orix. Notes payable of $16 million issued in March of 2020 bear interest at a 5.0% annual
rate and mature on September 18, 2021.
Prior
Orix notes payable of $13 million bear interest at a 7.5% annual rate and mature on September 30, 2026. Principal payments are
due annually, commencing on March 31, 2021 and thereafter on March 31 of each year until maturity. The first two principal installments
are $3,461,538 each and the remaining installments are $519,231 each. All accrued interest is due and payable in arrears, commencing
on September 30, 2020 and thereafter on September 30 of each year until maturity.
Scheduled
maturities of the Company’s long-term debt, as they exist as of March 31, 2020, in each of the next five fiscal years and
thereafter are as follows:
Fiscal years ending in
|
|
(in millions)
|
|
2020
|
|
$
|
—
|
|
2021
|
|
|
22.3
|
|
2022
|
|
|
22.6
|
|
2023
|
|
|
0.8
|
|
2024
|
|
|
0.7
|
|
2025 and thereafter
|
|
|
1.5
|
|
Total
|
|
|
47.2
|
|
Note
7 — Restructuring and Other Expense
Restructuring
expenses generally include severance and related charges, lease termination costs and other costs related to restructuring programs.
Employee-related severance charges are largely based upon distributed employment policies and substantive severance plans. Generally,
these charges are reflected in the period in which the Board approves the associated actions, the actions are probable, and the
amounts are estimable which may occur prior to the communication to the affected employee(s). This estimate considers all information
available as of the date the financial statements are issued.
Restructuring
and other expense was $0.0 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively.
Note
8 — Stock-Based Compensation
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, 2019. As of March 31, 2020, 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 expenses for the three months ended March 31, 2020 and 2019.
Stock
Options
The
following table summarizes our stock option activity:
|
|
Stock Options
|
|
|
Weighted Average Exercise Price
|
|
Outstanding December 31, 2019
|
|
|
879
|
|
|
$
|
106.00
|
|
Vested
|
|
|
(98
|
)
|
|
|
106.00
|
|
Outstanding March 31, 2020
|
|
|
781
|
|
|
$
|
106.00
|
|
Exercisable as of March 31, 2020
|
|
|
579
|
|
|
$
|
106.00
|
|
As
of March 31, 2020 there are 781 shares outstanding and 579 exercisable stock options remaining and the aggregate intrinsic value
of all outstanding stock options was $0.0 million. No options were granted or exercised during the three months ended March 31,
2020.
As
of March 31, 2020, unrecognized compensation expense related to outstanding stock options was immaterial.
Note
9 — Retirement Plans
Pension
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 Seller’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 $3,000,000 in cash to PBGC on October 3, 2019 (the “Settlement
Payment”). Per the terms of the Settlement Agreement and following the Settlement Payment on October 3, 2019, the PBGC released all Controlled Group Members from the Lien as of January 6, 2020.
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. For the three months ended March 31, 2020, we recorded income tax
from continuing operations of $0.0 million on income of $7.4 million. For the three months ended March 31, 2019, we recorded income
tax from continuing operations of $0.0 million on a loss of $0.9 million. The effective income tax rate for the three months ended
March 31, 2020 differs from the U.S. federal statutory rate of 21% primarily due to a valuation allowance on various deferred
tax assets.
During
July 2019, the Company received an income tax refund of approximately $1.1 million related to the Tax Reform Act’s elimination
of corporate alternative minimum tax and the ability to receive refunds of AMT credit carryovers. Another $0.5 million
is still receivable in mid-2020, and the remaining $0.6 million in 2021 through 2022.
We
file income tax returns in multiple jurisdictions which are subject to review by various U.S and state taxing authorities. Our
U.S. federal income tax returns for 2016 through 2019, and certain state returns from 2014 to present, are open to examination.
Note
11 — Shareholders’ Equity
Treasury
Stock
On
May 2, 2012, the Board authorized a share repurchase program that allowed for the repurchase of 2,500 shares of common stock.
On November 14, 2016, our Board authorized a new share repurchase program under which we may repurchase up to 2,500 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.
The
Company did not purchase any shares during the three months ended March 31, 2020. Since the inception of the November 14, 2016
authorization, we have repurchased 780 shares of common stock for $0.3 million and, as of March 31, 2020, we had remaining authorization
to repurchase 1,720 additional shares. The treasury stock held as of March 31, 2020 was acquired at an average price of $8,496.47
per share.
Following
is a summary of treasury share activity:
|
|
Treasury Shares
|
|
Balance as of December 31, 2019
|
|
|
2,927
|
|
Purchases
|
|
|
—
|
|
Restricted stock grants
|
|
|
—
|
|
Forfeitures and other
|
|
|
—
|
|
Balance as of March 31, 2020
|
|
|
2,927
|
|
Accumulated
Other Comprehensive Loss
Accumulated
other comprehensive loss and related activity consisted of the following:
(In millions)
|
|
Defined Benefit Plans
|
|
Balance as of December 31, 2019
|
|
$
|
(20.6
|
)
|
Amounts reclassified from accumulated other comprehensive income, net
of tax
|
|
|
20.6
|
|
Balance as of March 31, 2020
|
|
$
|
—
|
|
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
|
|
|
Three
Months Ended
March
31,
|
|
|
Statements
of Operations Where (Gain) Loss is Presented
|
(In
millions)
|
|
2020
|
|
|
2019
|
|
|
|
Amortization
of net actuarial loss
|
|
$
|
—
|
|
|
$
|
0.1
|
|
|
Other
income (expense)
|
Reclassification of pension liability, net of taxes
|
|
$
|
20.6
|
|
|
$
|
—
|
|
|
Other income (expense)
|
Total reclassifications
for the period
|
|
$
|
20.6
|
|
|
$
|
0.1
|
|
|
|
Reclassification
adjustments are made to avoid double counting in comprehensive income (loss) items that are also recorded as part of net income
(loss) and are presented net of taxes in the Condensed Consolidated Statements of Comprehensive Income (Loss).
Note
12 — Segment Information
The
Legacy Businesses and Nexsan Business are presented in our 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.
As
of March 31, 2020, 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 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, operating loss from continuing operations and assets by segment were as follows:
|
|
|
Three
Months Ended
|
|
|
|
March
31,
|
(In millions)
|
|
|
2020
|
|
|
|
2019
|
|
Net revenue
|
|
|
|
|
|
|
|
|
Asset management business
|
|
$
|
—
|
|
|
$
|
—
|
|
Sports technology platform
|
|
|
—
|
|
|
|
—
|
|
Total net revenue
|
|
$
|
—
|
|
|
$
|
—
|
|
Operating loss from continuing operations
|
|
|
|
|
|
|
|
|
Asset management business
|
|
$
|
(1.1
|
)
|
|
$
|
—
|
|
Sport technology platform
|
|
|
(0.5
|
)
|
|
|
—
|
|
Total segment operating loss
|
|
|
(1.6
|
)
|
|
|
—
|
|
Corporate and unallocated
|
|
|
(0.5
|
)
|
|
|
(0.8
|
)
|
Restructuring and other
|
|
|
—
|
|
|
|
(0.1
|
)
|
Total operating loss
|
|
|
(2.1
|
)
|
|
|
(0.9
|
)
|
Interest expense
|
|
|
(0.5
|
)
|
|
|
—
|
|
Realized losses on investments
|
|
|
(2.2
|
)
|
|
|
—
|
|
Other income, net
|
|
|
0.1
|
|
|
|
—
|
|
Loss from continuing operations before
income taxes
|
|
$
|
(4.7
|
)
|
|
$
|
(0.9
|
)
|
Assets
|
|
|
|
|
|
|
|
|
Asset management business
|
|
$
|
33.4
|
|
|
$
|
4.0
|
|
Sports technology platform
|
|
|
50.8
|
|
|
|
—
|
|
Total segment assets
|
|
|
84.2
|
|
|
|
4.0
|
|
Corporate and unallocated
|
|
|
2.3
|
|
|
|
6.4
|
|
Total consolidated assets
|
|
$
|
86.5
|
|
|
$
|
10.4
|
|
Note
13 — 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 June
29, 2020, 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 has historically been no material losses related to such indemnifications. As of March 31, 2020 and December 31, 2019, 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 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 March 31, 2020. Compliance with environmental regulations
has not had a material adverse effect on our financial results.
Note
14 — 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 Service Agreement through December 15, 2019, and
they became employees of the Company on December 18, 2019 and December 16, 2019, respectively.
As
of March 31, 2020, the Company paid Clinton $2,400,000 under the Amended Services Agreement and the Management Services
Agreement, recorded $312,500 and $462,500 within “Selling, general and administrative” in our Consolidated
Statements of Operations for the three months ended March 31, 2020 and 2019, respectively.
In
January 2019, for total consideration of $1,000,000, Sport-BLX Inc. issued to the Company shares of Sport-BLX common stock, constituting
9.0% of the common stock outstanding after giving effect to the transaction. Immediately before the transaction, George E. Hall
(“Mr. Hall”), SportBLX’s Executive Chairman and CEO, held 65.6% of SportBLX’s outstanding shares. Mr.
Hall owns beneficially approximately 29.1% of the Company’s outstanding common stock.
On
September 13, 2019, the Board approved a success fee to Clinton, in connection with the completion of the Orix Transaction
and the pension settlement. The Board approved a fee equal to 15% of the cash consideration, for Clinton’s work on
the Orix Transaction and 10% of the difference between the gross pension liabilities and the settlement payment. Accordingly,
the Company paid Clinton a success fee of $2,635,000 related to the Orix Transaction and $1,348,385 related to the pension settlement.
On
December 12, 2019, the Company purchased from Mr. Hall 37,924 shares of SportBLX common stock in exchange for $1,346,302 in cash
and a $12,116,718 principal amount promissory note bearing interest at a 5% annual rate, due December 12, 2022. On the same date,
the Company purchased from Joseph A. De Perio (“Mr. De Perio”) 17,076 shares of SportBLX common stock in exchange
for $606,198 in cash and a $5,455,782 principal amount promissory note bearing 5% interest, due December 12, 2022. Interest under
the notes is payable in arrears on the first day of each calendar quarter in cash, or, at the Company’s option, in shares
of common stock of the Company at a price reflecting market value. Mr. De Perio owns 2.47% of the Company’s common stock,
is a member of the Board of Directors of the Company, and is SportBLX’s president.
In
connection with the successful consummation of a settlement with the PBGC, the Board voted on May 3, 2019 to furnish to Clinton
a one-time cash payment of $250,000 in consideration of Clinton’s efforts regarding the same.
On
November 15, 2019, the Company, and Clinton Special Opportunities Fund LLC (“CSO”) entered into a Credit Facility
Letter Agreement (the “Letter Agreement”) pursuant to which the Company extended to CSO a one-year revolving
credit facility in the aggregate principal amount up to $1,000,000. The loan is evidenced by a grid note bearing interest at
a 10% annual rate, which matures November 15, 2020 (the “Note”). CSO’s obligations under the Letter
Agreement and the Note are secured by security interests in all of CSO’s assets, including all of CSO’s Company
common stock, and guaranteed by Mr. Hall, CSO’s sole member. As of March 31, 2020 and December 31, 2019, CSO
borrowed $500,000 and $250,000, respectively, under the Letter Agreement.
On
December 6, 2019, SportBLX issued an unsecured demand note, effective as of October 1, 2019, to the Company in the aggregate principal
amount of up to $1,750,000 (the “Demand Note-1”), which superseded the demand note issued on October 1, 2019, by the
Company in favor of SportBLX for $1,000,000. The Demand Note-1 bears interest at an 8% annual rate and matures upon the earlier
to occur of (a) demand by the Company, or (b) April 1, 2020. As of March 31, 2019, SportBLX borrowed $1,750,000 under the
Demand Note-1.
On
December 27, 2019, SportBLX issued an unsecured demand note, effective as of December 27, 2019, to the Company in the aggregate
principal amount of $250,000 (the “Demand Note-2”). The Demand Note-2 bears interest at an 8% annual rate and matures
upon the earlier to occur of (a) demand by the Company, or (b) April 1, 2020. As of March 31, 2020 SportBLX borrowed
$250,000 under the Demand Note-2.
An extension of Demand
Note-1 and Demand Note-2 is currently being negotiated.
On January 15, 2020, SportBLX issued an
unsecured demand note, effective as of January 15, 2020, to the Company in the aggregate principal amount of $1,000,000 (the “Demand
Note-3”). The Demand Note-2 bears interest at an 8% annual rate and matures upon the earlier to occur of (a) demand by the
Company, or (b) January 15, 2021. As of March 31, 2020 SportBLX borrowed $410,000 under the Demand Note-3.