NATURE OF OPERATIONS 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 supply chain business process management company serving clients in markets such as consumer electronics, communications, computing, medical devices, software, and retail. ModusLink designs and executes elements in its clients global supply chains to improve speed to market, product customization, flexibility, cost, quality and service. The Company also produces and licenses an entitlement management solution for activation, provisioning, entitlement subscription and data collection from physical goods (connected products) and digital products. 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. IWCO Direct delivers data-driven marketing solutions for its customers. Its full range of services includes strategy, creative and execution for omnichannel marketing campaigns, along with 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 has 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, borrowings from lending institutions, and sale of facilities that were not fully utilized. The Company believes it has access to adequate resources to meet its needs for normal operating costs, capital expenditures, mandatory debt redemptions and working capital for its existing business for at least twelve months from the date of this filing. These resources include cash and cash equivalents, a credit agreement with PNC Bank (the Credit Agreement) the possible securitization of European and domestic trade receivables, the revolving credit facility and cash, if any, provided by operating activities. At April 30, 2019 and July 31, 2018 , the Company had cash and cash equivalents of $20.4 million and $92.1 million , respectively. As of April 30, 2019 , the Company had a deficiency in working capital which was primarily driven by the Company's $10.0 million outstanding on the revolving credit facility, accrued pricing liabilities which the Company believes will not require a cash outlay in the next twelve months and the additional liabilities assumed because of the acquisition of IWCO Direct during December 2017 (the "IWCO Acquisition"). At April 30, 2019 , the Company had a readily available borrowing capacity under its revolving credit and security agreement with PNC Bank, National Association of $12.5 million . At April 30, 2019 , IWCO had a readily available borrowing capacity under its revolving credit facility by and among MLGS Merger Company, Inc. (MLGS), Instant Web, LLC and Cerberus Business Finance, LLC of $15.0 million . Per that certain financing agreement by and among MLGS, Instant Web, LLC, IWCO and Cerberus Business Finance, LLC (the Financing Agreement) and the credit facilities provided thereunder, IWCO is permitted to make distributions to Steel Connect, an aggregate amount not to exceed $5.0 million in any fiscal year and pay reasonable documented expenses incurred by Steel Connect. Steel Connect 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 and the Financing Agreement to which certain of its subsidiaries are a party and that it will be able to obtain cash through its current credit facilities and through securitization of certain trade receivables, if needed. As discussed below, the Company's 5.25% Convertible Senior Notes (the "Notes") matured on March 1, 2019, with a balance due of $65.6 million , including interest to the March 1, 2019 maturity date. The total $65.6 million balance due was paid in full by the Company from available cash on-hand and $14.9 million from the proceeds of the 7.50% Convertible Senior Note (the "SPHG Note") transaction entered into on February 28, 2019 (the "SPHG Note Transaction"). The Companys historical operating results and working capital deficit indicate substantial doubt exists related to the Companys ability to continue as a going concern. The Company believes that the resources it has in place and has access to, as discussed above, are probable of occurring and mitigating the substantial doubt raised by the Companys historical operating results and satisfying the Companys estimated liquidity needs 12 months from the issuance of the financial statements. However, the Company cannot predict, with certainty, the outcome of its actions to generate liquidity, including the availability of additional debt refinancing or factoring of receivables, or whether such actions would generate the expected liquidity as currently planned.