LEGAL PROCEEDINGS

9 Months Ended

Nov. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

LEGAL PROCEEDINGS

NOTE 15 – LEGAL PROCEEDINGS

EVE battery claim

On October 27, 2014, LoJack and LoJack Equipment Ireland DAC (“LJEI”), a wholly owned subsidiary of LoJack, commenced arbitration proceedings against EVE Energy Co., Ltd. (“EVE”). LoJack and LJEI alleged that EVE breached representations and warranties made in supply agreements relating to the quality and performance of battery packs supplied by EVE. On June 2, 2017, we were notified that the Hong Kong International Arbitration Centre rendered a decision and awarded damages to us (the “Damage Award”) for EVE’s breach of contract.

On June 9, 2017, we entered into a settlement agreement with EVE and its controlling shareholder EVE Holdings Limited to resolve the Damage Award by having EVE Holdings Limited, the parent company of EVE, make payments to us in the aggregate amount of approximately $46 million, which amount is net of attorneys’ fees and insurance subrogation payment (the “Settlement”). These amounts are reported as other non-operating income in our consolidated statement of income upon receipt. To date, we have received approximately $28 million of the expected $46 million net amount, of which approximately $15 million was received in June 2017 and $13 million was received in November 2017. The Settlement amounts are reported as other non-operating income in our consolidated statement of comprehensive income for the three- and nine-month periods ended November 30, 2017, respectively. Pursuant to the Settlement, there are two remaining installments due to be received by us on February 28, 2018 and June 7, 2018 of approximately $13 million and $5 million, respectively.

Other matters

As previously disclosed on Form 10-Q for the quarter ended May 31, 2017 that was filed with the U.S. Securities and Exchange Commission on June 27, 2017, we are providing an update to the following other matters:

● We filed motions with the court seeking judgment as a matter of law and for a new trial in response to the patent infringement lawsuit that Omega Patents, LLC, (“Omega”) filed against us. The court denied these motions; and we then filed an appeal at the Court of Appeals for the Federal Circuit. We continue to believe that our products do not infringe any claims of Omega’s patents. While it is not feasible to predict with certainty the outcome of this litigation, its ultimate resolution could be material to our cash flows or results of operations;

● Tracker Connect (Pty) LTD ("Tracker"), LoJack's international licensee in South Africa, commenced arbitration proceedings against LoJack's Irish subsidiary by filing a notice of arbitration. The filing alleges breaches of the parties' license agreement, misrepresentations, and other violation. Tracker seeks monetary damages and recovery of attorneys' fees. On March 3, 2017, LoJack's Irish subsidiary filed its response to the notice, and counterclaims against Tracker for material breaches of the parties' license agreement and bad faith conduct. The arbitral tribunal has been selected and a three-week hearing is scheduled for March 2018.

In addition to the foregoing matters, from time to time as a normal consequence of doing business, various claims and litigation may be asserted or commenced against us. In particular, in the ordinary course of business, we may receive claims concerning contract performance, or claims that our products or services infringe the intellectual property of third parties. While the outcome of any such claims or litigation cannot be predicted with certainty, management does not believe that the outcome of any of such matters existing at the present time would have a material adverse effect on our consolidated results of operations, financial condition and cash flows.