This Annual Report on Form 10-K contains
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. For this purpose, any statements contained herein that are not
statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, the words believes, anticipates, plans, expects and similar expressions are intended to
identify forward-looking statements. Factors that could cause actual results to differ materially from those reflected in the forward-looking statements include, but are not limited to, those discussed in Item 1A of this report, Risk
Factors, and elsewhere in this report. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect managements analysis, judgment, belief or expectation only as of the date hereof. We do not
undertake any obligation to update forward-looking statements whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS OVERVIEW
Steel Connect, Inc. (Steel Connect or the Company) together with its consolidated subsidiaries, operates through
its wholly owned subsidiaries, ModusLink Corporation and ModusLink PTS, Inc. (together ModusLink or Supply Chain), and IWCO Direct Holdings, Inc. (IWCO Direct or IWCO). The Company was formerly known
as ModusLink Global Solutions, Inc. until it changed its name to Steel Connect, Inc. effective February 27, 2018.
ModusLink is a leader in global supply chain business process management serving clients in markets such as consumer electronics,
communications, computing, medical devices, software, and retail. ModusLink designs and executes critical elements in its clients global supply chains to improve speed to market, product customization, flexibility, cost, quality and service.
These benefits are delivered through a combination of industry expertise, innovative service solutions, and integrated operations, proven business processes, expansive global footprint and world-class technology. The Company also produces and
licenses an entitlement management solution powered by its enterprise-class Poetic software, which offers a complete solution for activation, provisioning, entitlement subscription and data collection from physical goods (connected products) and
ModusLink has an integrated network of strategically located facilities with 20 sites operating in 21
languages in various countries, including numerous sites throughout North America, Europe and Asia. The Company previously operated under the names ModusLink Global Solutions, Inc., CMGI, Inc. and CMG Information Services, Inc. and was incorporated
in Delaware in 1986. The Companys address is 1601 Trapelo Road, Suite 170, Waltham, Massachusetts 02451.
IWCO Direct delivers highly-effective data-driven marketing solutions for its customers, which represent some of the largest and most respected brands in the world. Its full range of services includes
strategy, creative and execution for omnichannel marketing campaigns, along with one of the industrys most sophisticated postal logistics programs for direct mail. Through its Mail-Gard® division, IWCO Direct also offers business continuity and disaster recovery services to protect against unexpected business interruptions, along with providing print
and mail outsourcing services. IWCO Direct was named the largest direct mail production provider in North America, with the largest platform of continuous digital print technology and a growing direct marketing agency service. Their solutions enable
customers to improve Customer Lifetime Value (CLV), which in turn, has led to and longer customer relationships.
administrative offices in Chanhassen, MN. and has three facilities in Chanhassen, MN., one facility in Little Falls, MN., one facility in Warminster, PA. and two facilities in Hamburg PA.
Historically, the Company has financed its operations and met its capital requirements primarily through funds generated from operations,
the sale of our securities and borrowings from lending institutions. As of July 31, 2018, the Company had available cash and cash equivalents of $92.1 million. At July 31, 2018, IWCO had a readily available borrowing capacity under its Revolving
Facility of $25.0 million. Per the Financing Agreement with Cerberus Business Finance, LLC (the Financing Agreement), 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. The Company believes it will
generate sufficient cash to meet its debt covenants under the Credit Agreement with PNC Bank (the Credit Agreement) and the Financing Agreement to which certain of its subsidiaries are a party, to repay or restructure its 5.25%
Convertible Senior Notes (the Notes), and that it will be able to obtain cash through its current credit facilities and through securitization of certain trade receivables. The Company believes that it has adequate cash and available
resources to meet its obligations for one year from the date of this filing.
The Supply Chain business operations revenue primarily comes from the sale of Adaptive Supply Chain Services to its clients. Among
ModusLinks core supply chain services are fulfillment, digital commerce, packaging, kitting & assembly, reverse