2022 Q2 Form 10-Q Financial Statement

#000162828022017016 Filed on June 14, 2022

View on sec.gov

Income Statement

Concept 2022 Q2 2022 Q1 2021 Q2
Revenue $51.55M $120.6M $49.43M
YoY Change 4.28% -22.69% -72.13%
Cost Of Revenue $42.30M $107.0M $39.53M
YoY Change 7.01% -10.95% -72.53%
Gross Profit $9.245M $13.60M $9.903M
YoY Change -6.64% -62.06% -70.41%
Gross Profit Margin 17.93% 11.27% 20.03%
Selling, General & Admin $9.214M $23.91M $12.42M
YoY Change -25.8% 9.62% -52.01%
% of Gross Profit 99.66% 175.79% 125.39%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization -$14.64M $11.64M -$8.500M
YoY Change 72.26% 8.85% -168.55%
% of Gross Profit -158.38% 85.56% -85.83%
Operating Expenses $9.214M $27.81M $12.42M
YoY Change -25.8% 2.36% -61.68%
Operating Profit $31.00K -$14.21M -$2.514M
YoY Change -101.23% -263.7% -335.61%
Interest Expense $848.0K $7.980M $619.0K
YoY Change 37.0% 1.98% -92.74%
% of Operating Profit 2735.48%
Other Income/Expense, Net $1.306M -$8.043M -$465.0K
YoY Change -380.86% -19.46% -91.9%
Pretax Income $1.337M -$22.25M -$2.979M
YoY Change -144.88% 1605.29% -36.26%
Income Tax $11.03M $723.0K $6.315M
% Of Pretax Income 825.13%
Net Earnings $30.20M -$22.98M -$27.63M
YoY Change -209.31% 946.31% 348.6%
Net Earnings / Revenue 58.59% -19.05% -55.89%
Basic Earnings Per Share $0.50 -$0.39 -$0.45
Diluted Earnings Per Share $504.6K -$0.39 -$0.45
COMMON SHARES
Basic Shares Outstanding 59.85M shares 59.75M shares 62.26M shares
Diluted Shares Outstanding 59.85M shares 59.75M shares 62.26M shares

Balance Sheet

Concept 2022 Q2 2022 Q1 2021 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $49.91M $64.65M $97.58M
YoY Change -48.85% -26.2% 8.18%
Cash & Equivalents $49.91M $64.65M $61.99M
Short-Term Investments
Other Short-Term Assets $11.91M $25.54M $33.16M
YoY Change -64.08% -18.42% -20.09%
Inventory $9.837M $19.43M $15.67M
Prepaid Expenses
Receivables $43.93M $68.97M $72.05M
Other Receivables $0.00 $0.00 $0.00
Total Short-Term Assets $115.6M $178.6M $218.5M
YoY Change -47.09% -18.58% -6.74%
LONG-TERM ASSETS
Property, Plant & Equipment $3.768M $48.96M $66.62M
YoY Change -94.34% -30.73% -21.72%
Goodwill $231.5M $231.5M
YoY Change -9.98% -9.98%
Intangibles
YoY Change
Long-Term Investments
YoY Change
Other Assets $6.123M $6.364M $7.062M
YoY Change -13.3% -1.82% -10.61%
Total Long-Term Assets $31.71M $444.1M $475.4M
YoY Change -93.33% -12.33% -13.63%
TOTAL ASSETS
Total Short-Term Assets $115.6M $178.6M $218.5M
Total Long-Term Assets $31.71M $444.1M $475.4M
Total Assets $147.3M $622.7M $693.9M
YoY Change -78.77% -14.22% -11.57%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $32.36M $57.33M $56.76M
YoY Change -42.99% 0.97% -23.58%
Accrued Expenses $29.41M $104.9M $107.6M
YoY Change -72.67% -5.73% -0.31%
Deferred Revenue $3.099M $3.560M $2.748M
YoY Change 12.77% -32.73% -27.87%
Short-Term Debt $0.00 $0.00 $0.00
YoY Change -100.0%
Long-Term Debt Due $361.0M $5.612M
YoY Change 6367.14% 39.74%
Total Short-Term Liabilities $92.16M $567.3M $219.8M
YoY Change -58.08% 154.05% -19.89%
LONG-TERM LIABILITIES
Long-Term Debt $10.57M $10.14M $368.6M
YoY Change -97.13% -97.27% -1.89%
Other Long-Term Liabilities $4.693M $7.643M $11.20M
YoY Change -58.11% -31.67% 18.37%
Total Long-Term Liabilities $29.38M $56.94M $419.2M
YoY Change -92.99% -86.43% -2.71%
TOTAL LIABILITIES
Total Short-Term Liabilities $92.16M $567.3M $219.8M
Total Long-Term Liabilities $29.38M $56.94M $419.2M
Total Liabilities $121.5M $624.2M $639.1M
YoY Change -80.98% -2.91% -9.39%
SHAREHOLDERS EQUITY
Retained Earnings -$7.494B -$7.524B -$7.469B
YoY Change 0.34% 1.12% 0.48%
Common Stock $604.0K $605.0K $631.0K
YoY Change -4.28% -3.97% 1.12%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity -$9.427M -$36.74M $19.58M
YoY Change
Total Liabilities & Shareholders Equity $147.3M $622.7M $693.9M
YoY Change -78.77% -14.22% -11.57%

Cashflow Statement

Concept 2022 Q2 2022 Q1 2021 Q2
OPERATING ACTIVITIES
Net Income $30.20M -$22.98M -$27.63M
YoY Change -209.31% 946.31% 348.6%
Depreciation, Depletion And Amortization -$14.64M $11.64M -$8.500M
YoY Change 72.26% 8.85% -168.55%
Cash From Operating Activities $17.90M -$12.74M -$10.15M
YoY Change -276.32% -37.96% -122.47%
INVESTING ACTIVITIES
Capital Expenditures $7.010M -$3.410M $1.258M
YoY Change 457.23% 210.0% -213.33%
Acquisitions
YoY Change
Other Investing Activities -$963.0K $902.0K $69.00K
YoY Change -1495.65% -790.0%
Cash From Investing Activities $6.047M -$2.508M $1.327M
YoY Change 355.69% 128.0% -218.48%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities 2.457M -2.054M 2.466M
YoY Change -0.36% 0.2% -86.25%
NET CHANGE
Cash From Operating Activities 17.90M -12.74M -10.15M
Cash From Investing Activities 6.047M -2.508M 1.327M
Cash From Financing Activities 2.457M -2.054M 2.466M
Net Change In Cash 26.41M -17.31M -6.360M
YoY Change -515.19% -26.95% -110.26%
FREE CASH FLOW
Cash From Operating Activities $17.90M -$12.74M -$10.15M
Capital Expenditures $7.010M -$3.410M $1.258M
Free Cash Flow $10.89M -$9.334M -$11.41M
YoY Change -195.45% -51.99% -124.65%

Facts In Submission

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NATURE OF OPERATIONS<div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Steel Connect, Inc., (the “Company”) is a holding company which operates through its wholly-owned subsidiary, ModusLink Corporation ("ModusLink" or "Supply Chain").</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">ModusLink Corporation provides digital and physical supply chain solutions to many of the world's leading brands across a diverse range of industries, including consumer electronics, telecommunications, computing and storage, software and content, consumer packaged goods, medical devices, retail and luxury and connected devices. With a global footprint spanning North America, Europe and the Asia Pacific, ModusLink’s solutions and services are designed to improve end-to-end supply chains in order to drive growth, lower costs, and improve profitability. </span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%">Disposition of IWCO Direct </span></div><div><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On February 25, 2022, the Company entered into a transaction agreement (the “Transaction Agreement”) with (a) IWCO Direct Holding Inc. (''IWCO Direct" or "Direct Marketing") and its indirect subsidiaries, (b) Cerberus Business Finance, LLC, in its capacities as collateral agent and administrative agent under a financing agreement (in such capacities, the “Agent”), dated as of December 15, 2017, between IWCO Direct, IWCO Direct’s direct and indirect subsidiaries, the Agent and the lenders party thereto (the “Lenders”) (the “Financing Agreement”), (c) the Lenders, (d) the Lenders or their respective designees listed on the signature pages to the Transaction Agreement under the caption “Participating Lender Purchasers” (the “Participating Lender Purchasers”), (e) SPH Group Holdings LLC (the “Sponsor”) and (f) Instant Web Holdings, LLC (the “Buyer”), an entity owned by the Participating Lender Purchasers. On the Effective Date (as defined in the Transaction Agreement) and pursuant to the terms of the Transaction Agreement, the Company transferred all of its interests in IWCO Direct to the Buyer as part of a negotiated restructuring of the capital structure and certain financial obligations of IWCO Direct under the Financing Agreement as contemplated by the Transaction Agreement. See Notes 2 and 4 for further details regarding the disposition of IWCO Direct.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%">Liquidity and Capital Resources</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">Historically, the Company has financed its operations and met its capital requirements primarily through funds generated from operations, the sale of its securities, borrowings from lending institutions and sale of facilities that were not fully utilized. The Company believes it has access to adequate resources to meet its needs for normal operating costs, capital expenditures and working capital for its existing business for at least twelve months from the date of this filing. </span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">As of April 30, 2022, these resources include current cash and cash equivalents, and ModusLink's credit agreement with Umpqua Bank (the “Umpqua Revolver”), as lender and as agent. The Umpqua Revolver provides for a maximum credit commitment of $12.5 million and a sublimit of $5.0 million for letters of credit and expires on March 16, 2024. There was no balance outstanding on the Umpqua Revolver as of April 30, 2022. See Note 9 for further details regarding the Umpqua Revolver. </span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">As of April 30, 2022 and July 31, 2021, the Company had cash and cash equivalents of $49.9 million and $58.1 million, respectively. As of April 30, 2022, the Company had a working capital surplus of $23.4 million. </span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%">Impact of COVID-19</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">The ongoing COVID-19 pandemic (in particular, the emergence of new variants of the virus across the globe) has</span></div><div><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">caused, and continues to cause, significant disruptions in the U.S. and global economies. For example, national and local</span></div><div><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">governments in the United States and around the world continue to implement measures to prevent the spread of COVID-19</span></div><div><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">and its variants, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses,</span></div><div><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">quarantines, curfews, and recommendations to practice physical distancing. Such measures have restricted and continue to restrict individuals’ daily activities and curtail or cease many businesses’ normal operations. The COVID-19 pandemic has adversely impacted, and is likely to further adversely impact, nearly all aspects of our business and markets, including our workforce and the operations of our clients, suppliers, and business partners. Beginning in March 2020, when the World Health Organization categorized COVID-19 as a pandemic and the President of the United States declared the COVID-19 outbreak a national emergency, we experienced impacts to our customers' demand, facility operations, supply chain, availability and productivity of personnel, while also working to comply with rapidly evolving international, federal, state and local restrictions and recommendations on travel and workplace health and safety. We experienced disruptions to our business continuity as a result of temporary closures of certain of ModusLink’s facilities in the third and fourth quarters of fiscal year 2020, as well as the fourth quarter of fiscal year 2021. However, these temporary closures did not have a significant impact on ModusLink’s operations. </span></div><div style="text-indent:36pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:107%">Recently, an outbreak in Mainland China forced temporary lockdown orders from March 14, 2022 to March 20, 2022 in several cities in which ModusLink operates. In April and May 2022, there were further temporary lockdown orders which impacted several ModusLink facilities in China; however, ModusLink was able to resume operations on May 5, 2022 at one site and at another site on May 31, 2022. As of the filing of this quarterly report on Form 10-Q, all of ModusLink’s facilities were open and operating at or near capacity. The lockdowns in China have not had a significant impact to ModusLink’s operations through the filing of this quarterly report on Form 10-Q. I</span><span style="background-color:#ffffff;color:#000000;font-family:'Times',sans-serif;font-size:10pt;font-weight:400;line-height:107%">f the situation continues at this level or worsens, however, it could result in a potential adverse impact on our business, results of operations and financial condition.</span><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:107%"> We will evaluate further actions if circumstances warrant.</span></div><div><span><br/></span></div><div style="text-indent:36pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">Beginning in the second quarter of 2020, with the shutdown of the U.S. economy due to the COVID-19 pandemic, IWCO Direct’s business was also significantly and adversely affected by a material reduction in customer mailing activities. Additionally, although IWCO Direct operated as an essential business, it had reduced operating levels and labor shifts due to lower sales volume during the third quarter of fiscal year 2020.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">To help combat these impacts and mitigate the financial impact of the COVID-19 pandemic on our business, during fiscal year 2020 we took proactive measures by initiating cost reduction actions, including the waiver of board fees, hiring freezes, staffing and force reductions, company-wide salary reductions, bonus payment deferrals and temporary 401(k) match suspension. The temporary waiver of board fees and company-wide salary reduction actions taken in the prior fiscal year were fully restored prior to the beginning of fiscal year 2021, and the majority of salary reductions were repaid prior to the fiscal quarter ended January 31, 2021. </span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">Additionally, against the backdrop of the reduction in IWCO Direct's business, the Company held extensive discussions with Cerberus about amending and extending IWCO Direct’s credit facility with Cerberus under which there was approximately $361.3 million outstanding as of January 31, 2022 that was to mature in December 2022. These discussions ultimately resulted in the disposition of IWCO Direct. For more information, see “Disposition of IWCO Direct” above and Notes 2 and 4 below. We continue our focus on cash management and liquidity, which includes aggressive working capital management.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">We continue to closely monitor the impact of COVID-19 on all aspects of our business and geographies, including its impact on our clients, employees, suppliers, vendors, business partners and distribution channels. We believe that such impacts could include, the continued disruption to the demand for our businesses' products and services; disruptions in or closures of our business operations or those of our customers or suppliers; the impact of the global business and economic environment on liquidity and the availability of capital; increased costs and delays in payments of outstanding receivables beyond normal payment terms; supply chain disruptions; uncertain demand; and the effect of any initiatives or programs that we may undertake to address financial and operational challenges faced by our customers. Despite indications of economic recovery, the severity of the impact of the COVID-19 pandemic on the Company’s business in the fiscal year ending July 31, 2022 and beyond is difficult to predict and will depend on a number of uncertain factors and trends. Such factors and trends include, but are not limited to: the duration and severity of the virus and its current variants; the emergence of new variant strains; the availability and widespread use of vaccines; the impact of the global business and economic environment on liquidity and the availability of capital; the extent and severity of the impact on our customers and suppliers; and U.S. and foreign government actions that have been taken, or may be taken in the future, to mitigate adverse economic or other impacts or to mitigate the spread of the virus and its variants. The Company continues to monitor for any developments or updates to COVID-19 guidelines from public health and governmental authorities, as well as the protection of the health and safety of its personnel, and is continuously working to ensure that its health and safety protocols, business continuity plans and crisis management protocols are in place to help mitigate any negative impacts of the COVID-19 pandemic on the Company’s employees, business or operations. </span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%">Proposed Merger with Steel Holdings</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On November 19, 2020, the Company's Board of Directors (the "Board") received a preliminary, non-binding expression of interest (the "Expression of Interest") from Steel Partners Holdings L.P. ("Steel Holdings") to acquire all of the outstanding shares of common stock not already owned by Steel Holdings or its affiliates for a combination of cash and Steel Holdings 6% Series A Preferred Units, which would imply a value per share of common stock in the range of $0.65 to $0.72 per share. The Board has established a special committee comprised solely of independent directors (the "Acquisition Proposal Special Committee") authorized to retain independent legal and financial advisors and to review, evaluate, negotiate and approve or disapprove the Expression of Interest, and to explore alternative strategies or transactions. The Acquisition Proposal Special Committee announced on January 11, 2021 that it had retained financial advisors and legal counsel. As set forth in the Expression of Interest, the proposed transaction will be subject to the approval of the Acquisition Proposal Special Committee, as well as a non-waivable condition requiring approval of a majority of the outstanding shares of common stock of the Company not owned by Steel Holdings and its affiliates and related parties. The Board resolutions establishing the Acquisition Proposal Special Committee expressly provide that the Board will not approve the proposed transaction contemplated by the Expression of Interest or any alternative thereto without a prior favorable recommendation by the Acquisition Proposal Special Committee.</span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On March 24, 2022, Steel Holdings delivered a revised expression of interest to acquire all of the outstanding shares of common stock not already owned by Steel Holdings or its affiliates (the “Enhanced Proposal”) to the Acquisition Proposal Special Committee, which altered and increased the consideration proposed in its November 19, 2020 proposal. Under the Enhanced Proposal, the stockholders of the Company would receive cash consideration of $1.30 per share, representing a premium of approximately 10% over the closing price of the Company’s common stock on March 23, 2022 and about an 83% premium over the closing share price on November 18, 2020.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On May 27, 2022, Steel Holdings communicated a further revised expression of interest (the “Further Enhanced Proposal”) to the Acquisition Proposal Special Committee, which altered and increased the consideration proposed in the Enhanced Proposal. Under the Further Enhanced Proposal, the stockholders of the Company would receive both (a) cash consideration of $1.35 per share, representing a premium of approximately 12.5% over the closing price of the Company’s common stock on May 31, 2022 and a premium of approximately 92.8% over the closing share price of the Company’s common stock on November 18, 2020, and (b) a contingent value right to receive their pro rata share of proceeds, to the extent such proceeds exceed $80 million, if ModusLink were to be sold during the 2 years period following completion of the proposed combination of Steel Holdings and the Company.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">On June 12, 2022, the Company, Steel Holdings and SP Merger Sub, Inc., a wholly-owned subsidiary of Steel Holdings (“Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”), pursuant to which Merger Sub will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly-owned subsidiary of Steel Holdings. The Merger Agreement provides that each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the Merger (other than dissenting shares and shares owned by the Company, Steel Holdings or any of their respective subsidiaries) will, subject to the terms and conditions set forth in the Merger Agreement, be converted into the right to receive (i) $1.35 in cash, without interest and (ii) one contingent value right to receive a pro rata share of the proceeds received by the Company, Steel Holdings or any of their affiliates with respect to the sale, transfer or other disposition of all or any portion of the assets currently owned by ModusLink within 2 years of the Merger’s closing date, to the extent such proceeds exceed $80 million plus certain related costs and expenses. Steel Holdings and certain of its affiliates have also entered into a Voting and Support Agreement pursuant to which, among other things, they have agreed to vote all shares of common stock and Series C Preferred Stock beneficially owned by them in favor of the adoption of the Merger Agreement and the Merger and any alternative acquisition agreement approved by the Company's board of directors (acting on the recommendation of the Special Committee).</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">The Merger Agreement includes a "go-shop" period that expires at 11:59 p.m. Eastern time on July 12, 2022, during which the Company may actively solicit and consider alternative acquisition proposals. </span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">The closing of the Merger is conditioned upon receipt of approval of the Merger from (i) the holders of a majority in voting power of the outstanding shares of common stock and Series C Preferred Stock of the Company (voting on an as converted to shares of common stock basis), voting together as a single class, (ii) a majority of the outstanding shares of common stock of the Company not owned, directly or indirectly, by Steel Holdings and its affiliates and related parties, and any other officers or directors of the Company and (iii) the holders of a majority of the outstanding shares of Series C Preferred Stock of the Company, voting as a separate class, as well as other customary closing conditions. Accordingly, there can be no assurance that the Company will be able to complete the Merger on the expected timeline or at all. See “Part II, Item 1A. Risk Factors” included in this quarterly report on Form 10-Q.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:112%">The board of directors of the Company (the “Company Board”), acting on the unanimous recommendation of the special committee of the Company Board (the “Special Committee”), and the Board of Directors of Steel Partner Holdings GP Inc., the general partner of Steel Holdings, approved the Merger Agreement and the transactions contemplated by the Merger Agreement (such transactions, collectively, the “Transactions”) and resolved to recommend the stockholders adopt the Merger Agreement and approve the Transactions. The Special Committee, which is comprised solely of independent and disinterested directors of the Company who are unaffiliated with Steel Holdings, exclusively negotiated the terms of the Merger Agreement with Steel Holdings, with the assistance of its independent financial and legal advisors.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">Subject to the satisfaction of all of the conditions to closing, including the receipt of the separate stockholder approvals, the Merger is expected to close in the second half of 2022.</span></div>
CY2022Q2 us-gaap Cash Cash Equivalents And Short Term Investments
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CY2021Q3 us-gaap Cash Cash Equivalents And Short Term Investments
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us-gaap Basis Of Accounting
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BASIS OF PRESENTATIONThe accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of a normal recurring nature) considered necessary for fair presentation have been included. These <div><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and related notes for the year ended July 31, 2021 (Fiscal Year 2021), which are contained in the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission on October 29, 2021, as amended on November 30, 2021 (the "2021 Annual Report'). The results for the nine months ended April 30, 2022 are not necessarily indicative of the results to be expected for the full fiscal year. The year-end condensed consolidated balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by U.S. GAAP.</span></div><div style="text-indent:27pt"><span><br/></span></div><div style="text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">All significant intercompany transactions and balances have been eliminated in consolidation.</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:120%">The Company considers events or transactions that occur after the balance sheet date but before the issuance of financial statements to provide additional evidence relative to certain estimates or to identify matters that require additional disclosure. For the nine months ended April 30, 2022, the Company evaluated subsequent events for potential recognition and disclosure through the date these financial statements were filed.</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:120%">Discontinued operations</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">As discussed in Note 1, on February 25, 2022, the Company completed its disposition of IWCO Direct. The results of IWCO Direct are reclassified as discontinued operations for all periods presented. Additionally, the related assets and liabilities associated with the discontinued operations in the prior year condensed consolidated balance sheet are classified as discontinued operations.</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">All references made to financial data in this quarterly report on Form 10-Q are to the Company's continuing operations, unless otherwise specifically noted.</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%">Reclassification</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On the statement of cash flows for the nine months ended April 30, 2021, the Company reclassified the non-cash portion of lease expense which totaled $7.5 million from Other Assets and Liabilities to Non-cash Lease Expense. This reclassification was made to prior year balances to conform with current reporting and had no impact on net loss or stockholder's equity.</span></div>
us-gaap Prior Period Reclassification Adjustment Description
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<div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-style:italic;font-weight:400;line-height:115%">Reclassification</span></div><div style="margin-top:10pt;text-indent:27pt"><span style="color:#000000;font-family:'Times New Roman',sans-serif;font-size:10pt;font-weight:400;line-height:115%">On the statement of cash flows for the nine months ended April 30, 2021, the Company reclassified the non-cash portion of lease expense which totaled $7.5 million from Other Assets and Liabilities to Non-cash Lease Expense. This reclassification was made to prior year balances to conform with current reporting and had no impact on net loss or stockholder's equity.</span></div>
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CY2021Q2 us-gaap Short Term Lease Cost
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us-gaap Short Term Lease Cost
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us-gaap Short Term Lease Cost
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CY2021Q2 us-gaap Variable Lease Cost
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us-gaap Variable Lease Cost
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CY2021Q2 us-gaap Finance Lease Interest Expense
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us-gaap Finance Lease Interest Expense
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CY2021Q2 us-gaap Lease Cost
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us-gaap Lease Cost
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us-gaap Lease Cost
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us-gaap Finance Lease Interest Payment On Liability
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us-gaap Finance Lease Principal Payments
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52000 USD
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CY2022Q2 us-gaap Debt Instrument Interest Rate Effective Percentage
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us-gaap Interest Expense Debt
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CY2022Q2 us-gaap Revenue Remaining Performance Obligation
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us-gaap Income Tax Reconciliation Change In Enacted Tax Rate
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us-gaap Net Income Loss
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us-gaap Redeemable Preferred Stock Dividends
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us-gaap Net Income Loss Available To Common Stockholders Basic
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us-gaap Net Income Loss Available To Common Stockholders Basic
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CY2022Q2 us-gaap Income Loss From Continuing Operations
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-18335000 USD
mlnk Income Loss From Discontinued Operations And Deconsolidation Gain Loss Net Of Tax
IncomeLossFromDiscontinuedOperationsAndDeconsolidationGainLossNetOfTax
-108000 USD
mlnk Income Loss From Discontinued Operations And Deconsolidation Gain Loss Net Of Tax
IncomeLossFromDiscontinuedOperationsAndDeconsolidationGainLossNetOfTax
-21895000 USD
CY2022Q2 us-gaap Net Income Loss Available To Common Stockholders Basic
NetIncomeLossAvailableToCommonStockholdersBasic
29663000 USD
CY2021Q2 us-gaap Net Income Loss Available To Common Stockholders Basic
NetIncomeLossAvailableToCommonStockholdersBasic
-28148000 USD
us-gaap Net Income Loss Available To Common Stockholders Basic
NetIncomeLossAvailableToCommonStockholdersBasic
-13882000 USD
us-gaap Net Income Loss Available To Common Stockholders Basic
NetIncomeLossAvailableToCommonStockholdersBasic
-34962000 USD
CY2022Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
59853000 shares
CY2021Q2 us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
62263000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
59961000 shares
us-gaap Weighted Average Number Of Shares Outstanding Basic
WeightedAverageNumberOfSharesOutstandingBasic
61898000 shares
CY2022Q2 us-gaap Income Loss From Continuing Operations Per Basic Share
IncomeLossFromContinuingOperationsPerBasicShare
-0.17
CY2021Q2 us-gaap Income Loss From Continuing Operations Per Basic Share
IncomeLossFromContinuingOperationsPerBasicShare
-0.16
us-gaap Income Loss From Continuing Operations Per Basic Share
IncomeLossFromContinuingOperationsPerBasicShare
-0.23
us-gaap Income Loss From Continuing Operations Per Basic Share
IncomeLossFromContinuingOperationsPerBasicShare
-0.21
CY2022Q2 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare
0.67
CY2021Q2 us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare
-0.29
us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare
0
us-gaap Income Loss From Discontinued Operations Net Of Tax Per Basic Share
IncomeLossFromDiscontinuedOperationsNetOfTaxPerBasicShare
-0.35
us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
150223000 USD
us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
178552000 USD
CY2021Q2 us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
49434000 USD
us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
150223000 USD
us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
178552000 USD
CY2022Q2 us-gaap Operating Income Loss
OperatingIncomeLoss
31000 USD
CY2021Q2 us-gaap Operating Income Loss
OperatingIncomeLoss
-2514000 USD
us-gaap Operating Income Loss
OperatingIncomeLoss
652000 USD
us-gaap Operating Income Loss
OperatingIncomeLoss
2536000 USD
CY2022Q2 us-gaap Nonoperating Income Expense
NonoperatingIncomeExpense
1306000 USD
CY2021Q2 us-gaap Nonoperating Income Expense
NonoperatingIncomeExpense
-465000 USD
us-gaap Nonoperating Income Expense
NonoperatingIncomeExpense
-745000 USD
us-gaap Nonoperating Income Expense
NonoperatingIncomeExpense
-5893000 USD
CY2022Q2 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
1337000 USD
CY2021Q2 us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
-2979000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
-93000 USD
us-gaap Income Loss From Continuing Operations Before Income Taxes Extraordinary Items Noncontrolling Interest
IncomeLossFromContinuingOperationsBeforeIncomeTaxesExtraordinaryItemsNoncontrollingInterest
-3357000 USD
CY2022Q2 us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
51548000 USD
CY2021Q2 us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
49434000 USD
CY2022Q2 us-gaap Earnings Per Share Basic And Diluted
EarningsPerShareBasicAndDiluted
0.50
CY2021Q2 us-gaap Earnings Per Share Basic And Diluted
EarningsPerShareBasicAndDiluted
-0.45
us-gaap Earnings Per Share Basic And Diluted
EarningsPerShareBasicAndDiluted
-0.23
us-gaap Earnings Per Share Basic And Diluted
EarningsPerShareBasicAndDiluted
-0.56
CY2022Q2 us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
24200000 shares
CY2021Q2 us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
24200000 shares
us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
24200000 shares
us-gaap Antidilutive Securities Excluded From Computation Of Earnings Per Share Amount
AntidilutiveSecuritiesExcludedFromComputationOfEarningsPerShareAmount
24300000 shares
us-gaap Number Of Reportable Segments
NumberOfReportableSegments
1 segment
CY2022Q2 us-gaap Revenue From Contract With Customer Excluding Assessed Tax
RevenueFromContractWithCustomerExcludingAssessedTax
51548000 USD

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