RELATED PARTY TRANSACTIONS

12 Months Ended

Jul. 31, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONSAs of July 31, 2022, SPHG Holdings and its affiliates, including Steel Holdings, HNH and SPL, beneficially owned approximately 50.0% of our outstanding capital stock, including the if-converted value of the SPHG Note and shares of Series C Convertible Preferred Stock that vote on an as-converted basis together with our Common Stock. Warren G. Lichtenstein, our Interim Chief Executive Officer and the Executive Chairman of our Board, is also the Executive Chairman of Steel Holdings GP. Glen Kassan, our Vice Chairman of the Board of Directors and former Chief Administrative Officer, is an employee of Steel Services. Jack L. Howard, the President and a director of Steel Holdings GP, is also a director.

SPHG Note Transaction

On February 28, 2019, the Company entered into that certain SPHG Note Purchase Agreement with SPHG Holdings, whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for a 7.50% Convertible Senior Note due 2024. As of July 31, 2022 and 2021, SPHG Holdings held $14.9 million principal amount of the Company's 7.50% Convertible Senior Note. As of July 31, 2022 and 2021, the net carrying value of the SPHG Note was $11.0 million and $9.3 million, respectively. During the fiscal years ended July 31, 2022 and 2021, the Company recognized interest expense of $2.8 million and $2.4 million, respectively, associated with the SPHG Note.

Preferred Stock Transaction

Refer to Note 19 – “Stockholders’ Equity” for information on the Preferred Stock Purchase Agreement with SPHG Holdings. During each of the fiscal years ended July 31, 2022 and 2021, the Company paid dividends of $2.1 million associated with the Series C Convertible Preferred Stock.

Management Services Agreement

On June 14, 2019, the Company entered into an agreement (the "Management Services Agreement") with Steel Services Ltd. ("Steel Services"), an indirect wholly-owned subsidiary of Steel Holdings. The Management Services Agreement was effective as of June 1, 2019. Pursuant to this agreement, SP Corporate provided the Company and its subsidiaries with the services of certain employees, including certain executive officers and other corporate services. In connection with the IWCO Direct Disposal, the monthly fee under the Management Services Agreement was reduced effective on the Disposal Date primarily for the portion of the fee attributable to IWCO Direct. Total expenses incurred related to the management services agreement for the fiscal years ended July 31, 2022 and 2021 totaled $3.1 million and $4.3 million, respectively. As of July 31, 2022 and 2021, amounts due to Steel Services were $1.0 million and $0.9 million, respectively.

Proposed Merger with Steel Holdings

On June 12, 2022, the Company, Steel Holdings and Merger Sub, entered into the Merger Agreement, pursuant to which Merger Sub will merge with and into the Company, with the Company surviving the Merger as a wholly-owned subsidiary of Steel Holdings. See Note 1 for further discussion regarding the Merger.