DISCONTINUED OPERATIONS

12 Months Ended

Feb. 28, 2021

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 pursuant to which we sold certain assets and transferred certain liabilities of the LoJack North America business for an upfront cash purchase price of approximately $8.0 million. The purchase price is subject to changes for customary working capital adjustments. As part of the transaction, we also entered into a transition service agreement to support 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. As consideration for these services, Spireon will reimburse 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 to commence on September 15, 2021 under which we will provide certain services related to the LoJack 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 will license certain intellectual property rights related to the LoJack North America business in the U.S. and Canada to Spireon. Net proceeds received from the transaction was approximately $6.8 million, which is still subject to a final working capital adjustment that will occur 90 days after the transaction close date. The resulting gain or loss on sale of discontinued operations is expected to be included within the statement of operations for the quarter ended May 31, 2021.

We have concluded that the LoJack North America operations are discontinued operations as the asset group represents a component of an entity, the component meets the criteria of held for sale as of February 28, 2021, and the disposal represents a strategic shift. As a result, certain items were reclassified as part of discontinued operations for

comparative purposes. The below table presents the amounts by balance sheet classification related to our discontinued operations (in thousands):

	As of February 28/29,
	2021		2020
Carrying amounts of the major classes of assets included in discontinued operations:
Accounts receivable, net	$	5,050	$	7,634
Inventories		1,721		4,306
Prepaid expenses and other current assets		1,101		978
Current assets of discontinued operations	$	7,872	$	12,918
Goodwill	$	-	$	12,023
Other intangible assets, net		-		2,941
Other assets		-		254
Non-current assets of discontinued operations		-		15,218
	$	7,872	$	28,136
Carrying amounts of the major classes of liabilities included in discontinued operations:
Accounts payable	$	1,956	$	3,815
Deferred revenue		1,849		2,277
Other current liabilities		291		1,654
Current liabilities of discontinued operations		4,096		7,746
Other non-current liabilities		1,773		2,808
Non-current liabilities of discontinued operations		1,773		2,808
	$	5,869	$	10,554

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

	Year Ended February 28/29
	2021			2020			2019
Revenues	$	32,692		$	44,334		$	52,262
Cost of revenues		21,133			26,524			30,376
Gross profit		11,559			17,810			21,886
Operating expenses:
Research and development		1,441			2,443			2,115
Selling and marketing		9,988			13,155			12,219
General and administrative		7,041			8,190			8,113
Intangible asset amortization		2,199			6,450			7,505
Restructuring		2,220			1,935			5,716
Impairment losses		23,822			13,389			-
Total operating expenses		46,711			45,562			35,668
Operating loss		(35,152	)		(27,752	)		(13,782	)
Non-operating income		-			-			10,790
Loss from discontinued operations before income taxes		(35,152	)		(27,752	)		(2,992	)
Income tax benefit		-			-			718
Net loss from discontinued operations, net of tax	$	(35,152	)	$	(27,752	)	$	(2,274	)

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

	Year Ended February 28/29
	2021			2020			2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from discontinued operations, net of tax	$	(35,152	)	$	(27,752	)	$	(2,274	)
Adjustments to reconcile net loss from discontinued operations to net cash provided by (used in) operating activities:
Depreciation		2,260			2,225			2,725
Intangible asset amortization		2,199			6,450			7,505
Stock-based compensation		1,516			1,754			1,490
Impairment losses		23,822			14,599			-
Noncash operating lease cost		4,901			3,360			-
Deferred tax assets, net		-			-			(719	)
Changes in operating assets and liabilities:
Accounts receivable		2,584			2,053			(833	)
Inventories		2,585			2,456			400
Prepaid expenses and other current assets		(123	)		2,376			(2,699	)
Accounts payable		(1,859	)		1,158			(156	)
Accrued liabilities		(1,363	)		(627	)		(2,460	)
Deferred revenue		(428	)		(70	)		88
Operating lease liabilities		(5,354	)		(3,275	)		-
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		(4,412	)		4,707			3,067
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		(2,338	)		(891	)		(1,608	)
NET CASH USED IN INVESTING ACTIVITIES FROM DISCONTINUED OPERATOINS		(2,338	)		(891	)		(1,608	)
Net change in cash and cash equivalents		(6,750	)		3,816			1,459