RELATED PARTY TRANSACTIONS

3 Months Ended

Oct. 31, 2022

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONSAs of October 31, 2022, SPHG Holdings and its affiliates, including Steel Holdings, Handy & Harman Ltd. and Steel Partners Ltd., beneficially owned approximately 49.9% 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 a SPHG Note Purchase Agreement with SPHG Holdings, whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for the SPHG Note. As of both October 31, 2022 and July 31, 2022, SPHG Holdings held $14.9 million principal amount of the SPHG Note. As of October 31, 2022 and July 31, 2022, the net carrying value of the SPHG Note was $11.6 million and $11.0 million, respectively. During the three months ended October 31, 2022 and 2021, the Company recognized interest expense of $0.8 million and $0.7 million, respectively, associated with the SPHG Note.

Preferred Stock Transaction

On December 15, 2017, the Company entered into a Preferred Stock Purchase Agreement with SPHG Holdings, pursuant to which the Company issued 35,000 shares of the Company's newly created Series C Convertible Preferred Stock to SPHG Holdings at a price of $1,000 per share, for an aggregate purchase consideration of $35.0 million. The terms, rights, obligations and preferences of the Series C Convertible Preferred Stock are set forth in the Series C Certificate of Designations, which has been filed with the Secretary of State of the State of Delaware. During each of the three months ended October 31, 2022 and 2021, the Company paid dividends of $0.5 million associated with the Series C Convertible Preferred Stock.

On or after December 15, 2022, each holder of Preferred Stock can also require the Company to redeem its Preferred Stock in cash at a price equal to the Liquidation Preference (as defined in Series C Certificate of Designations).

STCN Management Services Agreement

On June 14, 2019, the Company entered into an agreement (the "STCN 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 the STCN Management Services Agreement, Steel Services provides the Company and its subsidiaries with the non-exclusive services of certain employees, including certain executive officers and other corporate services. In connection with the IWCO Direct Disposal, the monthly fee under the STCN 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 STCN Management Services Agreement for the three months ended October 31, 2022 and 2021 were $0.6 million and $0.8 million, respectively. As of October 31, 2022 and July 31, 2022, amounts due to Steel Services was $0.8 million and $1.0 million, respectively.

Termination of Proposed Merger with Steel Holdings

On November 15, 2022, Steel Holdings terminated the Merger Agreement with Steel Holdings. See Note 1 - "Nature of Operations" for further discussion.