DISCONTINUED OPERATIONS

12 Months Ended

Feb. 28, 2022

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 is expected to conclude in the first quarter of Fiscal 2023. As consideration for these services, Spireon is reimbursing 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 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 transition services provided to Spireon during the year ended February 28, 2022, we incurred a total cost of $4.4 million of which $2.3 million was billed to Spireon for the services under the TSA and the net amount of remaining of $2.1 million was included as a component of other expense in the consolidated statements of comprehensive loss as these costs represent non-operating expenses.

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,
	2021
Carrying amounts of the major classes of assets included in discontinued operations:
Accounts receivable, net	$	5,050
Inventories		1,721
Prepaid expenses and other current assets		1,101
Total assets	$	7,872
Carrying amounts of the major classes of liabilities included in discontinued operations:
Accounts payable	$	1,956
Deferred revenue		1,849
Other current liabilities		291
Current liabilities of discontinued operations		4,096
Other non-current liabilities		1,773
Total liabilities	$	5,869

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
	2022			2021			2020
Revenues	$	823		$	32,692		$	44,334
Cost of revenues		950			21,133			26,524
Gross profit		(127	)		11,559			17,810
Operating expenses:
Research and development		32			1,441			2,443
Selling and marketing		167			9,988			13,155
General and administrative		75			7,041			8,190
Intangible asset amortization		141			2,199			6,450
Restructuring		404			2,220			1,935
Impairment losses		-			23,822			13,389
Total operating expenses		819			46,711			45,562
Operating loss from discontinued operations		(946	)		(35,152	)		(27,752	)
Gain on sale of discontinued operations		4,103			-			-
Net income (loss) from discontinued operations, net of tax	$	3,157		$	(35,152	)	$	(27,752	)

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
	2022			2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from discontinued operations, net of tax	$	3,157		$	(35,152	)	$	(27,752	)
Adjustments to reconcile net income (loss) from discontinued operations to net cash provided by (used in) operating activities:
Depreciation		-			2,260			2,225
Intangible asset amortization		141			2,199			6,450
Stock-based compensation		25			1,516			1,754
Impairment losses		-			23,822			14,599
Gain on sale of discontinued operations		(4,103	)		-			-
Noncash operating lease cost		-			4,901			3,360
Changes in operating assets and liabilities:
Accounts receivable		452			2,584			2,053
Inventories		425			2,585			2,456
Prepaid expenses and other current assets		4			(123	)		2,376
Accounts payable		(331	)		(1,859	)		1,158
Accrued liabilities		(135	)		(1,363	)		(627	)
Deferred revenue		(30	)		(428	)		(70	)
Operating lease liabilities		-			(5,354	)		(3,275	)
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		(395	)		(4,412	)		4,707
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		-			(2,338	)		(891	)
Net proceeds from sale of discontinued operations		5,721			-			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM DISCONTINUED OPERATIONS		5,721			(2,338	)		(891	)
Net change in cash and cash equivalents		5,326			(6,750	)		3,816