PARENT COMPANY CONDENSED FINANCIAL INFORMATION

Per the Cerberus Credit Facility, IWCO is permitted to make distributions to the Parent, Steel Connect, Inc., an aggregate amount not to exceed $5.0 million in any fiscal year and pay reasonable documented expenses incurred by the Parent. The Parent is entitled to receive additional cash remittances under a "U.S. Federal Income Tax Sharing Agreement." As the remainder of the restricted net assets, which totaled approximately $9.6 million at July 31, 2019, represent a significant portion of the Company's consolidated total assets, the Company is presenting the following parent company condensed financial information:

STEEL CONNECT, INC. (Parent Only)

BALANCE SHEETS

(in thousands, except share and per share data)



	July 31, 2019			July 31, 2018
ASSETS
Cash and cash equivalents	$	4,083		$	7,978
Prepaid expenses and other current assets	227			120
Total current assets	4,310			8,098
Investments in affiliates	96,940			188,534
Other assets	337			87
Due from subsidiaries	—			13,579
Total assets	$	101,587		$	210,298
LIABILITIES, CONTINGENTLY REDEEMABLE PREFERRED STOCK & STOCKHOLDERS' EQUITY
Accounts payable	$	1,253		$	674
Accrued expenses	2,364			2,274
Convertible Notes payable	—			50,274
Total current liabilities	3,617			53,222
Convertible Notes payable	7,432			14,256
Due to subsidiaries	2,660			—
Total long-term liabilities	10,092			14,256
Total liabilities	13,709			67,478
Contingently redeemable preferred stock, $0.01 par value per share. 35,000 shares authorized, issued and outstanding at July 31, 2019 and 2018	35,186			35,192
Stockholders' equity:
Preferred stock, $0.01 par value per share. 4,965,000 shares authorized at July 31, 2019 and July 31, 2018; zero shares issued and outstanding at July 31, 2019 and 2018	—			—
Common stock, $0.01 par value per share. Authorized 1,400,000,000 shares; 61,805,856 issued and outstanding shares at July 31, 2019; 60,742,859 issued and outstanding shares at July 31, 2018	618			608
Additional paid-in capital	7,477,327			7,467,855
Accumulated deficit	(7,426,287		)	(7,363,569		)
Accumulated other comprehensive income	1,034			2,734
Total stockholders' equity	52,692			107,628
Total liabilities, contingently redeemable preferred stock and stockholders' equity	$	101,587		$	210,298

STEEL CONNECT, INC. (Parent Only)

STATEMENTS OF OPERATIONS

(in thousands)



	Twelve Months Ended July 31,
	2019			2018
Selling, general and administrative	$	12,303		$	16,742
Total operating expenses	12,303			16,742
Operating loss	(12,303		)	(16,742		)
Other income (expense):
Interest expense	(6,081		)	(8,427		)
Other income (expense), net	(306		)	6,807
Total other expense	(6,387		)	(1,620		)
Loss before income taxes	(18,690		)	(18,362		)
Equity (gains) losses of subsidiaries, net of tax	48,079			(54,276		)
Gains on investments in affiliates, net of tax	(42		)	(801		)
Net income (loss)	$	(66,727	)	$	36,715

STEEL CONNECT, INC. (Parent Only)

STATEMENTS OF CASH FLOWS

(in thousands)



	Twelve Months Ended July 31,
	2019			2018
Cash flows from operating activities:
Net income (loss)	$	(66,727	)	$	36,715
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Amortization of deferred financing costs	243			388
Accretion of debt discount	3,433			4,384
Share-based compensation	1,267			10,763
Non-cash (gains) losses, net	7			(354		)
Equity (gains) losses of subsidiaries, net of tax	48,079			(54,276		)
Gains on investments in affiliates and impairments	(42		)	(801		)
Changes in operating assets and liabilities, net of business acquired:
Prepaid expenses and other current assets	(107		)	(36		)
Accounts payable and accrued expenses	669			698
Other assets and liabilities	(250		)	(1,860		)
Net cash used in operating activities	(13,428		)	(4,379		)
Cash flows from investing activities:
Intercompany advances, net	64,332			(22,216		)
Net cash provided by (used in) investing activities	64,332			(22,216		)
Cash flows from financing activities:
Proceeds from issuance of preferred stock	—			35,000
Proceeds from issuance of Convertible Note	14,940			—
Payments on maturity of Convertible Notes	(63,925		)	—
Payment of preferred dividends	(2,129		)	(1,143		)
Purchase of the Company's Convertible Notes	(3,700		)	—
Proceeds from issuance of common stock	15			8
Net cash provided by (used in) financing activities	(54,799		)	33,865
Net increase (decrease) in cash and cash equivalents	(3,895		)	7,270
Cash and cash equivalents at beginning of period	7,978			708
Cash and cash equivalents at end of period	$	4,083		$	7,978