DISCONTINUED OPERATIONS

12 Months Ended

Jul. 31, 2023

Discontinued Operations and Disposal Groups [Abstract]

As discussed in Note 1 - "Nature of Operations", on February 25, 2022, the Company completed the disposition of IWCO Direct. The Company received no cash consideration for the disposition (the entire transaction being referred to as the “IWCO Direct Disposal”). As of the Disposal Date and subject to the terms and conditions of the Transaction Agreement, the parties entered into certain mutual releases as fully set forth in the Transaction Agreement. In addition, as part of the overall transaction, the Buyer issued a note in the principal amount of $6.9 million payable to the Company as consideration for intercompany obligations owed by IWCO Direct to the Company (the “Subordinated Note”). The Subordinated Note is subordinated to the obligations under the Financing Agreement (including any amendments or other modifications thereto) and matures on the date that is the earlier of (a) the later of (i) August 25, 2027 and (ii) the date that is six months after the maturity of the Financing Agreement, or (b) the date that is six months after repayment in full of the obligations under the Financing Agreement. Due to the subordinated nature of the Subordinated Note and the assessment of collectability, the Company determined the fair value of the Subordinated Note was zero.

The Company deconsolidated IWCO Direct as of the Disposal Date as the Company no longer held a controlling financial interest in IWCO Direct as of that date. The Company did not have any amounts included in accumulated other comprehensive loss associated with IWCO Direct at the time of deconsolidation. The disposal of IWCO Direct represents a strategic shift to exit the direct marketing business and its results are reported as discontinued operations for all periods presented.

A summary of the results of the discontinued operations is as follows:


	Fiscal Year Ended July 31,
	2022
Net revenue	$	165,542
Cost of revenue	156,697
Gross profit	8,845
Operating expenses:
Selling, general and administrative	30,744
Amortization of intangible assets(a)	9,303

Total operating expenses	40,047
Operating loss	(31,202)
Other income (expense):
Gain upon deconsolidation of IWCO Direct	35,457

Interest expense	(16,111)
Total other income (expense), net	19,346
Loss from discontinued operations before income taxes	(11,856)
Income tax benefit	10,144
Loss from discontinued operations, net of tax	$	(1,712)

(a) During the fiscal year ended July 31, 2022, the Company recorded $9.3 million of amortization expense for the former Direct Marketing reporting unit.