DEBT

9 Months Ended

Apr. 30, 2024

Debt Disclosure [Abstract]

DEBT

DEBT

The components of debt are presented in the table below:

	Successor
	April 30, 2024		July 31, 2023
	(in thousands)
Unsecured
7.50% Convertible Senior Note due September 1, 2024	$	12,903	$	12,461
Credit Facility
Umpqua Revolver	—		—
Total debt, net	$	12,903	$	12,461

7.50% Convertible Senior Note

On February 28, 2019, the Company entered into a 7.50% Convertible Senior Note Due 2024 Purchase Agreement (the "SPHG Note Purchase Agreement") with SPH Group Holdings LLC ("SPHG Holdings"), whereby SPHG Holdings agreed to loan the Company $14.9 million in exchange for a 7.50% Convertible Senior Note due 2024 (the "SPHG Note"). The SPHG Note was amended on March 9, 2023 (the "Amendment Date"), to extend the maturity date to September 1, 2024. In addition, the Company repaid $2.0 million in principal amount of the SPHG Note during Fiscal Year 2023. Refer to Note 18 - "Fair Value Measurements" for further information.

As of both April 30, 2024 and July 31, 2023, the principal amount of the note was $12.9 million. As of May 1, 2023, or the date of the Exchange Transaction, the Company accounts for the SPHG Note under the fair value option in order to conform with Steel Holdings' basis of accounting, with changes in fair value recognized in earnings. Refer to Note 18 - "Fair Value Measurements" for further information. The fair value of the SPHG Note was reported as a current liability on the condensed consolidated balance sheets beginning in the first quarter of fiscal year 2024, as its maturity is less than twelve months.

Below is a reconciliation of interest expense related to the SPHG Note to total interest expense:

	Successor		Predecessor		Successor		Predecessor
	Three Months Ended April 30,		Three Months Ended April 30,		Nine Months Ended April 30,		Nine Months Ended April 30,
	2024		2023		2024		2023
	(in thousands)
Interest expense related to contractual interest coupon on the SPHG Note	$	243	$	271	$	739	$	844
Interest expense related to accretion of the discount on the SPHG Note(a)	—		632		—		1,688
Interest expense related to revolving credit facilities (see below)	—		11		—		36
Other	—		—		—		20
Total interest expense	$	243	$	914	$	739	$	2,588

(a) Prior to the date of the Exchange Transaction, the discount on the SPHG Note was accreted using the effective interest rate method. The effective interest rate on the SPHG Note was 27.8% prior to the SPHG Note Amendment, and was 23.0% subsequent to the SPHG Note Amendment.

Umpqua Revolver

ModusLink, as borrower, is party to a revolving credit agreement with Umpqua Bank as lender and as agent, which provides for a maximum credit commitment of $12.5 million and a sublimit of $5.0 million for letters of credit (collectively, the "Umpqua Revolver"). On May 1, 2024, ModusLink, entered into a Second Amendment to the Umpqua Revolver (the “Second Amendment”). Among other things, the Second Amendment (i) extended the maturity date with respect to revolving loans from March 31, 2025 to March 31, 2026, (ii) removed certain adjustments in the definition of “Adjusted EBITDA” as set forth in the Umpqua Revolver, (iii) increased the minimum Adjusted Tangible Net Worth (as defined in the credit agreement) and (iv) removed certain caps and conditions on ModusLink’s ability to pay dividends.

As of April 30, 2024, ModusLink was in compliance with the Umpqua Revolver's covenants, and believes it will remain in compliance with the Umpqua Revolver’s covenants for the next twelve months from the filing of this Form 10-Q. As of April 30, 2024, ModusLink had available borrowing capacity of $11.9 million and there was $0.6 million outstanding letters of credit.