© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, and welcome to the GlassBridge Enterprises Third Quarter 2018 Financial Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Danny Zheng, Chief Financial Officer. Please go ahead, sir.
Thank you, Laura. Good morning, everyone, and thank you for joining today's earnings call for the third quarter of 2018. I'm your host for today's call, and I'm joined by GlassBridge Chief Operating Officer, Daniel Strauss. We will discuss our ongoing strategic activities and business plan progress, review third quarter results and have opportunity for questions at the end of today's call.
Before that, I would like to remind everyone that certain information discussed on this call that does not relate to historical information might be deemed to be forward-looking statements within the meaning of Private Securities Litigation Act of 1995 (sic) [ Private Securities Litigation Reform Act of 1995 ]. Such statements are subject to risks and uncertainties that could cause results to differ materially from any projected results. Risk factors that could cause results to differ are outlined in the press release issued early today as well as our filings with the SEC.
I would also like to remind everyone that nothing said on this call constitutes an offer to sell or solicitation to buy any securities in any investment vehicles managed by GlassBridge or its subsidiaries. Any offer or solicitation may only be made pursuant to Confidential Private Offering Memorandum, which are provided only to qualified offerees and which should be carefully reviewed prior to investing. With that, I will turn the call over to our Chief Operating Officer, Daniel Strauss. Daniel?
Thank you, Danny, and good morning, everyone. We would like to provide a brief update on the execution of the company's strategic vision and business plan. We continue to move forward, and there are several topics to cover related to our asset management business and holding company initiatives.
As we've discussed over the past several quarters, we remain focused on our goal of building a profitable, publicly traded asset management company, designed to create and sustain long-term equity value. We have repositioned the resources of the company to develop our asset manager business, while remaining focused on minimizing additional expenses. As a recap, we have 2 distinct focuses within our asset management business. First, technology-focused alternative asset management, driven by quantitative trading strategies; and second, our joint venture with Roc Nation, focused primarily on venture capital and private equity opportunities. We continue to engage in discussions with a number of strategic investors regarding our product offerings and have had some success curating and positioning our multiple substrategies into products designed to matching investors' needs. We continue to move forward with our Asia-focused joint venture announced earlier this year to offer dedicated quantitative products tailored for the Asian financial markets. We believe there is opportunity in these regions due to geographic interest in technology-driven products and there has been positive institutional feedback. We are currently in discussions with a number of well-established financial institutions, including several which specialize in digital distribution. We expect to launch a number of bespoke products in the coming weeks. ARRIVE has continued to execute on its business plan of making early-stage investments in consumer-facing businesses, where they can be a value-added partner. The investments ARRIVE has made to date have performed well, and the pipeline for additional investments is robust. ARRIVE has also been focused on growing its business through multiple avenues, including raising third-party capital. In light of recent underperformance in the overall quantitive space and resultant headwinds, we are currently conducting a complete business review. This involves all areas of our business, including implementing cost reduction programs, evaluating the viability of certain initiatives as well as pursuing strategic transactions that can complement or supplement our existing businesses. We will continue to grow the asset management business in a measured way moving forward. Our board continues to be open to all strategic alternatives to maximize shareholder value. We'll provide updates on our business review as well as the status of our attempts at resolution with the PBGC to enable us to operate and grow our business in the most efficient and profitable way possible. Both the GlassBridge quant strategies and ARRIVE transactions offer clients and investors at GlassBridge a differentiated product offering within some of the most attractive areas of the asset management industry. We've been able to call upon the full resources of the Clinton Group to support the evaluation of opportunities as they present themselves. The incremental overhead for the asset management business is significantly lower than our peers, and we will continue to leverage Clinton's infrastructure as we build our business and evaluate these opportunities. We will continue to share updates on these initiatives as appropriate. I'll now turn the call over to Danny to take you through an update on our corporate level activities and financial results. Danny?
Thank you, Daniel. During the third quarter, we completed divestiture of Nexsan business. Gross proceeds from the transition were approximately $5.7 million, including certain repayments of intercompany debts to GlassBridge. In addition, the company announced the prepayment of its entire outstanding obligation under a $4 million promissory note due to IOENGINE, LLC at a reduced price of $2.25 million. The transaction represents the final step in exiting our legacy business. While we have completely exited on legacy business, however, there are still 2 ongoing matters related to the legacy we continue to focus on: the pension liability related to former employees of Imation Corporation and European levy claims. Like many companies with a cash balance pension plan, we are facing increasing pension obligation costs and high pension insurance premiums, while our employee base has shrunk significantly over the last few years. The company did not make the required contribution of $1.7 million that was due on September 15, 2018, due to the pending discussion with Pension Benefit Guaranty Corp, or PBGC. In addition to the foregoing, the company did not pay a required contribution of approximately $400,000 due on October 15, 2018. The above past due payments are recorded as other current liability on our balance sheet. The company is seeking a relief of its funding obligation from PBGC. The future pension obligation is projected to be between $1.5 million to $2 million a year over the next 7 years. If the company is unsuccessful in its attempts to reach an agreement with PBGC, we will have to reevaluate our business strategies and alternatives. Also as we previously reported, we have an over $50 million levy claim against Copie France, a private organization with exclusive legal mandate to collect funds from distribution to copyright holders. We believe our case is very strong based on the European Union directive and subsequent rulings from the Court of Justice of the European Union, or CJEU, interpreted in the directive. This rulings of CJEU, which have a supremacy over member state law have established the Imation Europe has overpaid more than $50 million levy to Copie France. Based on this rulings from CJEU, we started withholding payments from Copie France in 2011. Subsequently in 2012, Imation Europe initiated litigations against Copie France in Paris seeking full reimbursement of the amount that we overpaid in addition to several other claims. In this process, Copie France countersued Imation Europe for the levy we withheld. For 4 years, Copie France managed to delay the litigation hoping that Imation Europe will not have financial resource to continue to pursue the litigation. In April 2016, the District Court in France rendered a negative ruling against Imation Europe and awarded Copie France $17 million for its counterclaim. This was not an unexpected ruling from the Paris District Court since our legal arguments are based on the EU directive, which conflict with the French law.
We immediately appealed the case to Paris Court of Appeals. Unfortunately, several appeals are usually necessary in the member state before eventually getting access to the CJEU, where European law is correctly applied. Although getting access to EU is our prime -- is not our primary objective, it's unfortunate reality that member state courts, neither court in France are reluctant to apply EU law over French law, unless especially forced to do so by CJEU. On October 9, the French Court of Appeal by the Paris District Court refused to acknowledge that EU law supersedes French law and affirmed District Court ruling, which awarded Copie France $17 million. We are now preparing to appeal to France Supreme Court, which is the final stage in the process of reaching to CJEU. To appeal to France Supreme Court, we might be required to first pay the $17 million judgment. We believe Copie France's counterclaim is without merit and intend to defend Imation Europe position vigorously. I will now review financial results in detail. The following financial results are for continuing operations, including our asset management and corporate holding company for the current and prior period, unless otherwise indicated. Following the sales of Nexsan business, the company does not have any revenue and gross margin for the period presented. Selling, general and administrative expense in Q3 2018 were $1.9 million, down 17.4% from Q3 2017, primarily due to corporate cost reductions. GBAM Fund expenses were $0.1 million in Q3 2018 compared to $0.3 million in Q3 2017. GBAM Fund expenses including general and administrative expense for our investment vehicle launched at the end of second quarter in 2017. Operating loss from continuing operations was $2.0 million in Q3 2018 compared to a loss of $2.7 million in Q3 2017, primarily due to reduced corporate expense and legal expenses. Net loss from GBAM Fund activity were $0.2 million in Q3 2018 compared to $1 million gain in Q3 2017. Net gain or loss from GBAM Fund activity including income or loss associated with our proprietary investment in GBAM Fund.
Income tax provision was 0 in this quarter compared to $3.5 million benefit in Q3 last year. Discontinued operation had a gain after tax in Q3 2018 of $9.0 million compared with a gain after tax of $6.1 million in Q3 2017. The gain in this quarter was primarily due to the gain on sales of Nexsan business of $6.1 million and a gain of $2.3 million resulting from IOENGINE Note settlement. Net gain was $6.9 million for Q3 2018 compared to a net gain of $8 million in Q3 2017. Net gain per share was $1.33 in Q3 2018 compared with a gain per share of $1.60 in Q3 2017 based on weighted average shares outstanding of 5.2 million and 5 million shares, respectively.
Cash and short-term investments were $6.3 million as of September 30, 2018, up by $1 million during the quarter, primarily driven by the cash proceeds from Nexsan sales, offset by IOENGINE Note prepayments and operating loss and pension funding contributions. Our liquidity need for the next 12 months including the following: Corporate expense of approximately $2 million to $2.5 million; pension funding of approximately $4 million if we do not obtain funding relief from PBGC and we are required to make the minimal pension contribution; the note payment of $1 million related to a supplier settlement; and any cash shortfall associated with our asset management business.
We expect our cash and anticipate cash refund by approximately $1 million and potential asset recovering from the legacy business ranging from $0.5 million to $1.5 million will provide liquidity sufficient to meet our need for our operations and obligations in the next 12 months. 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. Due to the slow development of our asset management business and the uncertainty of pension funding obligations, we need to aggressively preserve cash to ensure we have sufficient liquidity to secure our business [ projects ]. Since 2015, we have cut the corporate cost and executive compensation by more than 90%, but we need to do more. For example that, we changed our auditor recently to cut the cost by more than 2/3 to less than $100,000 a year. We're clearly evaluating further reductions on the management and the board compensations and exploring cost-saving opportunities on all aspects of our operations. As a part of the cost-saving initiative, we will reduce our expense on the investment relationship that including we would discontinue our quarterly earnings call after this month. You can find the company's updated information through our SEC filing and the periodic press releases. In addition, Daniel, myself and the rest of our management team will be available to take your call and answer any questions. We appreciate your understanding and continuing support. I would now turn it over to Daniel for closing remarks. Daniel?
Thanks, Danny. We remain focused on using the asset management platform we have built to grow our business by raising third-party assets and executing select accretive transactions. We will continue to execute our business plan to drive our business forward. I hope today's call has served to articulate our progress and expected drivers of shareholder value, our asset management efforts and our capital deployment strategy. The board and the management team remain pleased with our progress to date and the velocity and efforts with which our team continues to press forward. We will now take any questions you might have. Operator?
[Operator Instructions] And showing no questions, I would like to turn the conference back over to Daniel Strauss for any closing remarks.
Thank you, everyone, for your time this morning, and as Danny said, we're always available to speak with you. Feel free to reach out to any of us at any time. Thank you, everyone.
Thank you.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.