DISCONTINUED OPERATIONS

12 Months Ended

Feb. 28, 2023

Discontinued Operations and Disposal Groups [Abstract]

DISCONTINUED OPERATIONS

NOTE 2 – DISCONTINUED OPERATIONS

Effective March 15, 2021, a wholly owned subsidiary of the Company and Spireon entered into an agreement (“Sale Agreement”) pursuant to which we sold certain assets and transferred certain liabilities of the LoJack North America business (“LoJack Transaction”) for an upfront cash purchase price of approximately $8.0 million. We received net proceeds of $6.6 million, based on an estimate of certain adjustments to the gross purchase price as of the closing date. On November 9, 2021, the purchase price was reduced by $0.9 million, which was paid to Spireon, due to final working capital adjustments. No further adjustments to the purchase price are expected. We recognized a gain on the sale of the LoJack North America business of $4.1 million during the year ended February 28, 2022.

Concurrent with the closing of the transaction, we also entered into a Transition Services Agreement (the “TSA”) to provide support to Spireon in the transition of customers to its telematics solution and to provide recovery services to the existing installed base of LoJack North America customers, as an agent of Spireon, for a period of six months commencing March 15, 2021. Subsequently, the transition period was extended and then effectively terminated on March 31, 2022. As consideration for these services, Spireon reimbursed us for the direct and certain indirect costs, as well as certain overhead or administrative expenses related to operating the business. Additionally, we entered into a services agreement that commenced April 1, 2022 upon the expiration of the TSA, under which we will provide certain services related to the LoJack North America tower infrastructure for a period no longer than fifty-four months. As consideration for these services, Spireon will pay us a monthly service fee over the stipulated contract term. Further, we entered into a license agreement pursuant to which we license certain intellectual property rights related to the LoJack North America business in the U.S. and Canada to Spireon. In connection with the services provided to Spireon during the years ended February 28, 2023 and 2022, respectively, we incurred a total cost of $3.0 million and $4.4 million of which $1.6 million and $2.3 million was billed to Spireon for the services and the net amount of remaining of $1.4 million and $2.1 million was included within other income (expense) in the consolidated statements of comprehensive loss as these costs represent non-operating expenses.

The operating results and cash flows related to the LoJack North America operations are reflected as discontinued operations in the consolidated statements of comprehensive loss and the consolidated statements of cash flows for the years ended February 28, 2022 and 2021. For the year ended February 28, 2022, we have reported the operating results and cash flows related to the LoJack North America operations through March 14, 2021.

The amounts in the statements of operations that are included in discontinued operations are summarized in the following table (in thousands):

	Year Ended February 28,
	2022			2021
Revenues	$	823		$	32,692
Cost of revenues		950			21,133
Gross profit		(127	)		11,559
Operating expenses:
Research and development		32			1,441
Selling and marketing		167			9,988
General and administrative		75			7,041
Intangible asset amortization		141			2,199
Restructuring		404			2,220
Impairment losses		-			23,822
Total operating expenses		819			46,711
Operating loss from discontinued operations		(946	)		(35,152	)
Gain on sale of discontinued operations		4,103			-
Net income (loss) from discontinued operations, net of tax	$	3,157		$	(35,152	)

The amounts in the statements of cash flows that are included in discontinued operations are summarized in the following table (in thousands):

	Year Ended February 28,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from discontinued operations, net of tax	$	3,157		$	(35,152	)
Adjustments to reconcile net income (loss) from discontinued operations to net cash provided by (used in) operating activities:
Depreciation		-			2,260
Intangible asset amortization		141			2,199
Stock-based compensation		25			1,516
Impairment losses		-			23,822
Gain on sale of discontinued operations		(4,103	)		-
Non-cash operating lease cost		-			4,901
Changes in operating assets and liabilities:
Accounts receivable		452			2,584
Inventories		425			2,585
Prepaid expenses and other current assets		4			(123	)
Accounts payable		(331	)		(1,859	)
Accrued liabilities		(135	)		(1,363	)
Deferred revenue		(30	)		(428	)
Operating lease liabilities		-			(5,354	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		(395	)		(4,412	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		-			(2,338	)
Net proceeds from sale of discontinued operations		5,721			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM DISCONTINUED OPERATIONS		5,721			(2,338	)
Net change in cash and cash equivalents		5,326			(6,750	)