10-Q 1 camp-10q_20220531.htm 10-Q camp-10q_20220531.htm
CalAmp Corp. 0000730255 --02-28 false Q1 2023 P9M P1Y P1Y P1Y 8000000 P5Y P2Y P5Y P3Y P60D P30D P4Y P10Y P5Y P6Y P10Y P15Y 2020 2021 2022 2023 2024 http://fasb.org/us-gaap/2022#OtherLiabilitiesCurrent http://fasb.org/us-gaap/2022#OtherLiabilitiesCurrent P5Y4M24D P5Y1M6D P4Y10M24D 0000730255 2022-03-01 2022-05-31 xbrli:shares 0000730255 2022-06-21 iso4217:USD 0000730255 2022-05-31 0000730255 2022-02-28 iso4217:USD xbrli:shares 0000730255 us-gaap:ProductMember 2022-03-01 2022-05-31 0000730255 us-gaap:ProductMember 2021-03-01 2021-05-31 0000730255 camp:ApplicationSubscriptionsAndOtherServicesMember 2022-03-01 2022-05-31 0000730255 camp:ApplicationSubscriptionsAndOtherServicesMember 2021-03-01 2021-05-31 0000730255 2021-03-01 2021-05-31 0000730255 2021-02-28 0000730255 2021-05-31 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2022-02-28 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2021-02-28 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember us-gaap:AccountingStandardsUpdate202006Member 2022-02-28 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2022-03-01 2022-05-31 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2021-03-01 2021-05-31 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2022-05-31 0000730255 us-gaap:CommonStockIncludingAdditionalPaidInCapitalMember 2021-05-31 0000730255 us-gaap:RetainedEarningsMember 2022-02-28 0000730255 us-gaap:RetainedEarningsMember 2021-02-28 0000730255 us-gaap:RetainedEarningsMember us-gaap:AccountingStandardsUpdate202006Member 2022-02-28 0000730255 us-gaap:RetainedEarningsMember 2022-03-01 2022-05-31 0000730255 us-gaap:RetainedEarningsMember 2021-03-01 2021-05-31 0000730255 us-gaap:RetainedEarningsMember 2022-05-31 0000730255 us-gaap:RetainedEarningsMember 2021-05-31 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-02-28 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-02-28 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-03-01 2022-05-31 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-01 2021-05-31 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2022-05-31 0000730255 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-05-31 0000730255 us-gaap:AccountingStandardsUpdate201409Member 2022-03-01 2022-05-31 0000730255 us-gaap:AccountingStandardsUpdate202006Member 2022-03-01 2022-05-31 0000730255 camp:SpireonHoldingsLPMember 2021-03-15 2021-03-15 0000730255 srt:MinimumMember 2022-03-01 2022-05-31 0000730255 srt:MaximumMember 2022-03-01 2022-05-31 0000730255 srt:MinimumMember camp:TelematicsProductsMember 2022-03-01 2022-05-31 0000730255 camp:TelematicsProductsMember srt:MaximumMember 2022-03-01 2022-05-31 0000730255 us-gaap:PrepaidExpensesAndOtherCurrentAssetsMember 2022-05-31 0000730255 us-gaap:OtherAssetsMember 2022-05-31 0000730255 camp:TelematicsDevicesAndAccessoriesMember 2022-03-01 2022-05-31 0000730255 camp:TelematicsDevicesAndAccessoriesMember 2021-03-01 2021-05-31 0000730255 camp:RentalIncomeAndOtherServicesMember 2022-03-01 2022-05-31 0000730255 camp:RentalIncomeAndOtherServicesMember 2021-03-01 2021-05-31 0000730255 camp:RecurringApplicationSubscriptionsMember 2022-03-01 2022-05-31 0000730255 camp:RecurringApplicationSubscriptionsMember 2021-03-01 2021-05-31 0000730255 camp:RecognizedAtPointInTimeMember 2022-03-01 2022-05-31 0000730255 camp:RecognizedAtPointInTimeMember 2021-03-01 2021-05-31 0000730255 camp:RecognizedOverTimeMember 2022-03-01 2022-05-31 0000730255 camp:RecognizedOverTimeMember 2021-03-01 2021-05-31 xbrli:pure 0000730255 2022-06-01 2022-05-31 0000730255 2023-03-01 2022-05-31 0000730255 2022-03-01 2022-02-28 0000730255 2023-03-01 2022-02-28 0000730255 2022-03-01 0000730255 us-gaap:AccountingStandardsUpdate202006Member 2022-03-01 0000730255 camp:LoJackNorthAmericaMember 2021-03-15 0000730255 camp:LoJackNorthAmericaMember 2021-11-09 2021-11-09 0000730255 camp:LoJackNorthAmericaMember 2022-03-01 2022-05-31 0000730255 camp:LoJackNorthAmericaMember 2021-03-01 2022-02-28 0000730255 camp:SpireonHoldingsLPMember 2022-03-01 2022-05-31 0000730255 camp:SpireonHoldingsLPMember 2021-01-01 2021-03-31 0000730255 us-gaap:ServiceMember camp:SpireonHoldingsLPMember 2022-03-01 2022-05-31 0000730255 us-gaap:ServiceMember camp:SpireonHoldingsLPMember 2021-01-01 2021-03-31 0000730255 us-gaap:OtherExpenseMember camp:SpireonHoldingsLPMember 2022-03-01 2022-05-31 0000730255 us-gaap:OtherExpenseMember camp:SpireonHoldingsLPMember 2021-01-01 2021-03-31 0000730255 camp:LoJackNorthAmericaMember 2021-03-01 2021-05-31 0000730255 us-gaap:CashMember 2022-05-31 0000730255 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member 2022-05-31 0000730255 us-gaap:CashAndCashEquivalentsMember us-gaap:CashMember 2022-05-31 0000730255 us-gaap:CashAndCashEquivalentsMember us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:CashAndCashEquivalentsMember us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:CashAndCashEquivalentsMember us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member 2022-05-31 0000730255 us-gaap:CashAndCashEquivalentsMember 2022-05-31 0000730255 us-gaap:OtherAssetsMember us-gaap:CashMember 2022-05-31 0000730255 us-gaap:OtherAssetsMember us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:OtherAssetsMember us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2022-05-31 0000730255 us-gaap:OtherAssetsMember us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member 2022-05-31 0000730255 us-gaap:CashMember 2022-02-28 0000730255 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2022-02-28 0000730255 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member 2022-02-28 0000730255 us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member 2022-02-28 0000730255 us-gaap:CashMember us-gaap:CashAndCashEquivalentsMember 2022-02-28 0000730255 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:CashAndCashEquivalentsMember 2022-02-28 0000730255 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member us-gaap:CashAndCashEquivalentsMember 2022-02-28 0000730255 us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member us-gaap:CashAndCashEquivalentsMember 2022-02-28 0000730255 us-gaap:CashAndCashEquivalentsMember 2022-02-28 0000730255 us-gaap:CashMember us-gaap:OtherAssetsMember 2022-02-28 0000730255 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member us-gaap:OtherAssetsMember 2022-02-28 0000730255 us-gaap:MutualFundMember us-gaap:FairValueInputsLevel1Member us-gaap:OtherAssetsMember 2022-02-28 0000730255 us-gaap:RepurchaseAgreementsMember us-gaap:FairValueInputsLevel2Member us-gaap:OtherAssetsMember 2022-02-28 0000730255 us-gaap:OtherAssetsMember 2022-02-28 0000730255 us-gaap:DevelopedTechnologyRightsMember srt:MinimumMember 2022-03-01 2022-05-31 0000730255 us-gaap:DevelopedTechnologyRightsMember srt:MaximumMember 2022-03-01 2022-05-31 0000730255 us-gaap:TradeNamesMember 2022-03-01 2022-05-31 0000730255 us-gaap:CustomerRelationshipsMember srt:MinimumMember 2022-03-01 2022-05-31 0000730255 us-gaap:CustomerRelationshipsMember srt:MaximumMember 2022-03-01 2022-05-31 0000730255 us-gaap:PatentsMember 2022-03-01 2022-05-31 0000730255 us-gaap:DevelopedTechnologyRightsMember 2022-02-28 0000730255 us-gaap:TradeNamesMember 2022-02-28 0000730255 us-gaap:CustomerRelationshipsMember 2022-02-28 0000730255 us-gaap:PatentsMember 2022-02-28 0000730255 us-gaap:DevelopedTechnologyRightsMember 2022-03-01 2022-05-31 0000730255 us-gaap:CustomerRelationshipsMember 2022-03-01 2022-05-31 0000730255 us-gaap:DevelopedTechnologyRightsMember 2022-05-31 0000730255 us-gaap:TradeNamesMember 2022-05-31 0000730255 us-gaap:CustomerRelationshipsMember 2022-05-31 0000730255 us-gaap:PatentsMember 2022-05-31 0000730255 camp:SoftwareAndSubscriptionServicesMember 2022-02-28 0000730255 camp:TelematicsProductsMember 2022-02-28 0000730255 camp:SoftwareAndSubscriptionServicesMember 2022-03-01 2022-05-31 0000730255 camp:SoftwareAndSubscriptionServicesMember 2022-05-31 0000730255 camp:TelematicsProductsMember 2022-05-31 0000730255 camp:TwoPointZeroZeroPercentageConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2022-03-01 2022-05-31 0000730255 camp:TwoPointZeroZeroPercentageConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2022-05-31 0000730255 camp:DueToFactorsUnderRevenueAssignmentMember 2022-05-31 0000730255 camp:DueToFactorsUnderRevenueAssignmentMember 2022-03-01 2022-05-31 0000730255 camp:TwoPointZeroZeroPercentageConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2022-02-28 0000730255 camp:DueToFactorsUnderRevenueAssignmentMember 2022-02-28 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2022-05-31 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2022-02-28 0000730255 camp:ConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2018-07-31 0000730255 camp:ConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2018-07-01 2018-07-31 0000730255 camp:ConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember 2022-03-01 2022-05-31 0000730255 camp:ConvertibleSeniorUnsecuredNotesDueTwoThousandAndTwentyFiveMember us-gaap:AdditionalPaidInCapitalMember 2018-07-31 0000730255 us-gaap:RevolvingCreditFacilityMember 2018-03-30 0000730255 us-gaap:RevolvingCreditFacilityMember 2018-03-29 2018-03-30 0000730255 us-gaap:RevolvingCreditFacilityMember 2022-03-01 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:FederalHomeLoanBankOfNewYorkMember 2022-03-01 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember us-gaap:LondonInterbankOfferedRateLIBORMember 2022-03-01 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember us-gaap:EurodollarMember 2022-03-01 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember us-gaap:BaseRateMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MaximumMember us-gaap:BaseRateMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember us-gaap:EurodollarMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MaximumMember us-gaap:EurodollarMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MinimumMember us-gaap:PrimeRateMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember srt:MaximumMember us-gaap:PrimeRateMember 2022-05-31 0000730255 us-gaap:RevolvingCreditFacilityMember 2022-05-31 0000730255 us-gaap:CostOfSalesMember 2022-03-01 2022-05-31 0000730255 us-gaap:CostOfSalesMember 2021-03-01 2021-05-31 0000730255 us-gaap:ResearchAndDevelopmentExpenseMember 2022-03-01 2022-05-31 0000730255 us-gaap:ResearchAndDevelopmentExpenseMember 2021-03-01 2021-05-31 0000730255 us-gaap:SellingAndMarketingExpenseMember 2022-03-01 2022-05-31 0000730255 us-gaap:SellingAndMarketingExpenseMember 2021-03-01 2021-05-31 0000730255 us-gaap:GeneralAndAdministrativeExpenseMember 2022-03-01 2022-05-31 0000730255 us-gaap:GeneralAndAdministrativeExpenseMember 2021-03-01 2021-05-31 0000730255 us-gaap:OtherNonoperatingIncomeExpenseMember 2021-03-01 2021-05-31 0000730255 2022-02-27 2022-02-28 0000730255 us-gaap:CustomerConcentrationRiskMember camp:CustomerAMember us-gaap:SalesRevenueSegmentMember camp:IndustrialEquipmentIndustryMember 2022-03-01 2022-05-31 0000730255 us-gaap:CustomerConcentrationRiskMember camp:CustomerAMember us-gaap:SalesRevenueSegmentMember camp:IndustrialEquipmentIndustryMember 2021-03-01 2021-05-31 0000730255 us-gaap:CustomerConcentrationRiskMember camp:CustomerAMember us-gaap:AccountsReceivableMember camp:IndustrialEquipmentIndustryMember 2021-03-01 2021-11-30 0000730255 us-gaap:CustomerConcentrationRiskMember camp:CustomerAMember us-gaap:AccountsReceivableMember camp:IndustrialEquipmentIndustryMember 2021-03-01 2022-02-28 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember srt:MinimumMember 2022-03-01 2022-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierAMember 2022-03-01 2022-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierAMember 2021-03-01 2021-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierBMember 2022-03-01 2022-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierBMember 2021-03-01 2021-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierCMember 2022-03-01 2022-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierCMember 2021-03-01 2021-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierDMember 2022-03-01 2022-05-31 0000730255 us-gaap:InventoriesMember us-gaap:SupplierConcentrationRiskMember camp:SupplierDMember 2021-03-01 2021-05-31 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierAMember 2022-03-01 2022-05-31 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierAMember 2021-03-01 2022-02-28 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierBMember 2022-03-01 2022-05-31 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierBMember 2021-03-01 2022-02-28 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierCMember 2022-03-01 2022-05-31 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierCMember 2021-03-01 2022-02-28 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierDMember 2022-03-01 2022-05-31 0000730255 us-gaap:AccountsPayableMember us-gaap:SupplierConcentrationRiskMember camp:SupplierDMember 2021-03-01 2022-02-28 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2022-03-01 2022-05-31 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2021-03-01 2021-05-31 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2022-05-31 0000730255 camp:TwoThousandAndTwentyFiveConvertibleNotesMember 2021-05-31 camp:Segment 0000730255 us-gaap:OperatingSegmentsMember camp:SoftwareAndSubscriptionServicesMember 2022-03-01 2022-05-31 0000730255 us-gaap:OperatingSegmentsMember camp:TelematicsProductsMember 2022-03-01 2022-05-31 0000730255 us-gaap:OperatingSegmentsMember camp:SoftwareAndSubscriptionServicesMember 2021-03-01 2021-05-31 0000730255 us-gaap:OperatingSegmentsMember camp:TelematicsProductsMember 2021-03-01 2021-05-31 0000730255 us-gaap:CorporateNonSegmentMember 2022-03-01 2022-05-31 0000730255 us-gaap:CorporateNonSegmentMember 2021-03-01 2021-05-31 0000730255 country:US 2022-03-01 2022-05-31 0000730255 us-gaap:EMEAMember 2022-03-01 2022-05-31 0000730255 srt:LatinAmericaMember 2022-03-01 2022-05-31 0000730255 srt:AsiaPacificMember 2022-03-01 2022-05-31 0000730255 camp:AllOtherMember 2022-03-01 2022-05-31 0000730255 country:US 2021-03-01 2021-05-31 0000730255 us-gaap:EMEAMember 2021-03-01 2021-05-31 0000730255 srt:LatinAmericaMember 2021-03-01 2021-05-31 0000730255 srt:AsiaPacificMember 2021-03-01 2021-05-31 0000730255 camp:AllOtherMember 2021-03-01 2021-05-31 0000730255 us-gaap:SubsequentEventMember 2022-06-01 2022-06-01 camp:Legalaction 0000730255 2020-12-17

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to          

COMMISSION FILE NUMBER: 0-12182

 

CALAMP CORP.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

95-3647070

(State or other jurisdiction of

 

(I.R.S. Employer

incorporation or organization)

 

Identification No.)

 

15635 Alton Parkway, Suite 250

 

 

Irvine, California

 

92618

(Address of principal executive offices)

 

(Zip Code)

 

(949) 600-5600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading symbol

Name of Each Exchange On Which Registered

Common stock, $0.01 per share

CAMP

Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes    No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No

The number of shares outstanding of the registrant’s common stock as of June 21, 2022 was 36,157,466.

 


 

 

CALAMP CORP.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MAY 31, 2022

TABLE OF CONTENTS

 

 

 

 

 

Page

Number

 

 

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1.

 

Financial statements

 

3

 

 

 

 

 

 

 

Condensed consolidated balance sheets (unaudited) as of May 31, 2022 and February 28, 2022

 

3

 

 

 

 

 

 

 

Condensed consolidated statements of comprehensive loss (unaudited) for the three months ended May 31, 2022 and 2021

 

4

 

 

 

 

 

 

 

Condensed consolidated statements of cash flows (unaudited) for the three months ended May 31, 2022 and 2021

 

5

 

 

 

 

 

 

 

Condensed consolidated statements of stockholders’ equity (unaudited) for the three months ended May 31, 2022 and 2021

 

6

 

 

 

 

 

 

 

Notes to unaudited condensed consolidated financial statements

 

7

 

 

 

 

 

ITEM 2.

 

Management’s discussion and analysis of financial condition and results of operations

 

24

 

 

 

 

 

ITEM 3.

 

Quantitative and qualitative disclosures about market risk

 

31

 

 

 

 

 

ITEM 4.

 

Controls and procedures

 

31

 

 

 

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

 

Legal proceedings

 

32

 

 

 

 

 

ITEM 1A.

 

Risk factors

 

32

 

 

 

 

 

ITEM 2.

 

Unregistered sales of securities and use of proceeds

 

33

 

 

 

 

 

ITEM 6.

 

Exhibits

 

34

 

2


 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CALAMP CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

(Unaudited)

 

 

 

May 31,

 

 

February 28,

 

Assets

 

2022

 

 

2022

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

59,040

 

 

$

79,221

 

Accounts receivable, net

 

 

66,049

 

 

 

61,544

 

Inventories

 

 

19,281

 

 

 

18,269

 

Prepaid expenses and other current assets

 

 

23,973

 

 

 

22,348

 

Total current assets

 

 

168,343

 

 

 

181,382

 

Property and equipment, net

 

 

37,217

 

 

 

37,674

 

Operating lease right-of-use assets

 

 

11,406

 

 

 

12,327

 

Deferred income tax assets

 

 

3,894

 

 

 

4,165

 

Goodwill

 

 

94,193

 

 

 

94,436

 

Other intangible assets, net

 

 

30,553

 

 

 

31,965

 

Other assets

 

 

29,187

 

 

 

29,632

 

Total assets

 

$

374,793

 

 

$

391,581

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

2,264

 

 

$

2,585

 

Accounts payable

 

 

28,954

 

 

 

31,815

 

Accrued payroll and employee benefits

 

 

9,620

 

 

 

10,929

 

Deferred revenue

 

 

23,691

 

 

 

26,174

 

Other current liabilities

 

 

21,052

 

 

 

18,951

 

Total current liabilities

 

 

85,581

 

 

 

90,454

 

Long-term debt, net of current portion

 

 

226,906

 

 

 

189,703

 

Operating lease liabilities

 

 

12,091

 

 

 

13,382

 

Other non-current liabilities

 

 

21,626

 

 

 

22,640

 

Total liabilities

 

 

346,204

 

 

 

316,179

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Preferred stock, $.01 par value; 3,000 shares authorized; no shares issued or outstanding

 

 

 

 

 

 

Common stock, $.01 par value; 80,000 shares authorized; 36,156 and 36,052 shares

   issued and outstanding at May 31, 2022 and February 28, 2022, respectively

 

 

362

 

 

 

361

 

Additional paid-in capital

 

 

177,917

 

 

 

242,386

 

Accumulated deficit

 

 

(148,499

)

 

 

(165,965

)

Accumulated other comprehensive loss

 

 

(1,191

)

 

 

(1,380

)

Total stockholders' equity

 

 

28,589

 

 

 

75,402

 

Total liabilities and stockholders' equity

 

$

374,793

 

 

$

391,581

 

 

See accompanying notes to condensed consolidated financial statements.

3


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

 

 

 

Three Months Ended

 

 

 

May 31,

 

 

 

2022

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

Products

 

$

39,395

 

 

$

51,997

 

Application subscriptions and other services

 

 

25,331

 

 

 

27,677

 

Total revenues

 

 

64,726

 

 

 

79,674

 

Cost of revenues:

 

 

 

 

 

 

 

 

Products

 

 

25,735

 

 

 

33,654

 

Application subscriptions and other services

 

 

13,344

 

 

 

13,573

 

Total cost of revenues

 

 

39,079

 

 

 

47,227

 

Gross profit

 

 

25,647

 

 

 

32,447

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

 

7,000

 

 

 

6,940

 

Selling and marketing

 

 

11,478

 

 

 

12,462

 

General and administrative

 

 

15,162

 

 

 

13,022

 

Intangible asset amortization

 

 

1,342

 

 

 

1,253

 

Total operating expenses

 

 

34,982

 

 

 

33,677

 

Operating loss

 

 

(9,335

)

 

 

(1,230

)

Non-operating income (expense):

 

 

 

 

 

 

 

 

Investment income (loss)

 

 

(114

)

 

 

648

 

Interest expense

 

 

(1,533

)

 

 

(3,849

)

Other expense, net

 

 

(942

)

 

 

(1,276

)

Total non-operating expenses

 

 

(2,589

)

 

 

(4,477

)

Loss from continuing operations before income taxes

 

 

(11,924

)

 

 

(5,707

)

Income tax provision from continuing operations

 

 

(249

)

 

 

(293

)

Net loss from continuing operations

 

 

(12,173

)

 

 

(6,000

)

Net income from discontinued operations, net of tax

 

 

 

 

 

4,052

 

Net loss

 

$

(12,173

)

 

$

(1,948

)

Loss per share - continuing operations:

 

 

 

 

 

 

 

 

Basic

 

$

(0.34

)

 

$

(0.17

)

Diluted

 

$

(0.34

)

 

$

(0.17

)

Earnings per share - discontinued operations:

 

 

 

 

 

 

 

 

Basic

 

$

-

 

 

$

0.11

 

Diluted

 

$

-

 

 

$

0.11

 

Shares used in computing earnings (loss) per share:

 

 

 

 

 

 

 

 

Basic

 

 

35,723

 

 

 

34,844

 

Diluted

 

 

35,723

 

 

 

34,844

 

Comprehensive income (loss):

 

 

 

 

 

 

 

 

Net loss

 

$

(12,173

)

 

$

(1,948

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Foreign currency translation adjustments

 

 

189

 

 

 

906

 

Total comprehensive loss

 

$

(11,984

)

 

$

(1,042

)

 

See accompanying notes to condensed consolidated financial statements.

4


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

May 31,

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net loss

$

(12,173

)

 

$

(1,948

)

Less: Net income from discontinued operations, net of tax

 

-

 

 

 

4,052

 

Net loss from continuing operations

 

(12,173

)

 

 

(6,000

)

Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation expense

 

4,156

 

 

 

4,230

 

Intangible asset amortization

 

1,342

 

 

 

1,253

 

Stock-based compensation

 

2,960

 

 

 

2,472

 

Amortization of debt issuance costs and discount

 

304

 

 

 

2,606

 

Noncash operating lease cost

 

893

 

 

 

754

 

Revenue assigned to factors

 

(784

)

 

 

(1,365

)

Deferred tax assets, net

 

109

 

 

 

163

 

Other

 

-

 

 

 

215

 

Changes in operating assets and liabilities of continuing operations:

 

 

 

 

 

 

 

Accounts receivable

 

(4,754

)

 

 

(972

)

Inventories

 

(1,105

)

 

 

5,851

 

Prepaid expenses and other assets

 

(1,252

)

 

 

(334

)

Accounts payable

 

(2,692

)

 

 

(6,745

)

Accrued liabilities

 

1,428

 

 

 

2,346

 

Deferred revenue

 

(2,662

)

 

 

(2,813

)

Operating lease liabilities

 

(1,320

)

 

 

(1,188

)

Net cash provided by (used in) operating activities - continuing operations

 

(15,550

)

 

 

473

 

Net cash used in operating activities - discontinued operations

 

-

 

 

 

(395

)

NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

 

(15,550

)

 

 

78

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Capital expenditures

 

(3,630

)

 

 

(3,093

)

Net cash used in investing activities - continuing operations

 

(3,630

)

 

 

(3,093

)

Net cash provided by investing activities - discontinued operations

 

 

 

 

6,616

 

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

 

(3,630

)

 

 

3,523

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Taxes paid related to net share settlement of vested equity awards

 

(425

)

 

 

(1,061

)

Proceeds from exercise of stock options and contributions to employee stock purchase plan

 

-

 

 

 

248

 

NET CASH USED IN FINANCING ACTIVITIES

 

(425

)

 

 

(813

)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

 

(576

)

 

 

(1,228

)

Net change in cash and cash equivalents

 

(20,181

)

 

 

1,560

 

Cash and cash equivalents at beginning of period

 

79,221

 

 

 

94,624

 

Cash and cash equivalents at end of period

$

59,040

 

 

$

96,184

 

 

See accompanying notes to condensed consolidated financial statements.

5


CALAMP CORP.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

 

 

Three Months Ended

 

 

May 31,

 

 

2022

 

 

2021

 

Total stockholders' equity, beginning balances

$

75,402

 

 

$

95,085

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

Beginning balances

 

242,747

 

 

 

234,044

 

Cumulative-effect adjustment related to the adoption of ASU 2020-06

 

(67,003

)

 

 

 

Stock-based compensation expense

 

2,960

 

 

 

2,497

 

Shares issued on net share settlement of equity awards

 

(425

)

 

 

(1,061

)

Exercise of stock options and contributions to employee stock purchase plan

 

 

 

 

248

 

Ending balances

 

178,279

 

 

 

235,728

 

 

 

 

 

 

 

 

 

Accumulated deficit:

 

 

 

 

 

 

 

Beginning balances

 

(165,965

)

 

 

(137,974

)

Cumulative-effect adjustment related to the adoption of ASU 2020-06

 

29,639

 

 

 

 

Net loss

 

(12,173

)

 

 

(1,948

)

Ending balances

 

(148,499

)

 

 

(139,922

)

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

Beginning balances

 

(1,380

)

 

 

(985

)

Foreign currency translation adjustments

 

189

 

 

 

906

 

Ending balances

 

(1,191

)

 

 

(79

)

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balances

$

28,589

 

 

$

95,727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to condensed consolidated financial statements.

 

 

6


 

CALAMP CORP.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THREE MONTHS ENDED MAY 31, 2022 AND 2021

NOTE 1 - DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

CalAmp Corp. (including its subsidiaries unless the context otherwise requires, “CalAmp”, “the Company”, “we”, “our”, or “us”) is a connected intelligence company that leverages a data-driven solutions ecosystem to help people and organizations improve operational performance. We solve complex problems for customers within the market verticals of transportation and logistics, commercial and government fleets, industrial equipment, and consumer vehicles by providing solutions that track, monitor, and recover their vital assets. The data and insights enabled by CalAmp solutions provide real-time visibility into a user’s vehicles, assets, drivers, and cargo, giving organizations greater understanding and control of their operations. Ultimately, these insights drive operational visibility, safety, efficiency, maintenance, and sustainability for organizations around the world. We are a global organization that is headquartered in Irvine, California.

Recent Events

 

COVID-19

 

In March 2020, the World Health Organization declared COVID-19 (“COVID-19” or the “pandemic”) to be a public health pandemic of international concern, which has led to adverse impacts on the U.S. and global economies and continues to impact our supply chain and operations. More recently, we have experienced supply shortages as a result of global supply imbalances driven by component shortages, disruptions in accessible labor, other freight and logistical challenges and other related macro-economic factors. These supply imbalances negatively impacted all parts of our business during fiscal 2022 and have continued into fiscal 2023. It is difficult to predict the extent to which these factors will continue to impact our future business or operating results, which are highly dependent on uncertain future developments, including the severity of the continuing pandemic, the actions taken or to be taken by governments and private businesses in relation to the resolution of supply chain issues and component shortages. Because our business is dependent on telematics product sales, device installations and related subscription-based services, the ultimate effect of these factors may not be fully reflected in our operating results until future periods.

 

Transition of MRM Telematics Customers to Subscription Arrangements

In the second half of fiscal 2022, we prompted a strategic shift with customers who have historically purchased Mobile Resource Management (“MRM”) telematics devices from us. These customers are being transitioned to subscription-based arrangements by way of bundling services with telematics devices under multi-year (generally three years) subscription contracts. Our plan is to transition the MRM business to multi-year subscription contracts over the course of fiscal 2023. As a result, our financial results associated with such subscription arrangements will be reported within our Software & Subscription Services reporting segment prospectively from the effective date of such underlying contracts. In the short term, we expect that this will lead to significant growth in our Software & Subscription Services business with a corresponding decline in our Telematics Products business. Long term we believe this shift will allow us to drive revenue growth as we generate incremental revenue from our existing customer base as well as new customers through current and anticipated broader future subscription service offerings.

Basis of Presentation

In the opinion of our management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary to present fairly our financial position at May 31, 2022 and our results of operations for the three months ended May 31, 2022 and 2021. The results of operations for such periods are not necessarily indicative of results to be expected for the full fiscal year ending February 28, 2023.

Certain notes and other information included in the audited financial statements in our Annual Report on Form 10-K for the fiscal year ended February 28, 2022 are condensed in or omitted from the interim financial statements presented in this Quarterly Report on Form 10-Q. Therefore, these financial statements should be read in conjunction with our 2022 Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on April 28, 2022.

All intercompany transactions and accounts have been eliminated in consolidation.  

Effective March 15, 2021, the Company and Spireon Holdings, L.P. (“Spireon”) entered into a purchase agreement pursuant to which we sold certain assets and transferred certain liabilities of the LoJack U.S. and Canadian SVR (“LoJack North America”) business to Spireon for a purchase price of $8.0 million. Operations for LoJack North America are presented as discontinued operations in the accompanying condensed consolidated financial statements for the three months ended May 31, 2021. See Note 2, Discontinued Operations, for additional information.

Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have considered all known and reasonably available information that existed throughout the three months ended and as of May 31, 2022 in making accounting judgements, estimates and disclosures. We are monitoring the potential effects of the health care related and economic conditions of COVID-19 in assessing certain matters including (but not limited to) supply chain disruptions, decreases in customer demand for our products and services, potential longer-term effects on our customer and distribution channels particularly in the U.S. and relevant end markets as well as

7


other developments. If the impact results in longer term closures of businesses and economic recessionary conditions, we may recognize material asset impairments and charges for uncollectible accounts receivable in future periods.

 

 

Revenue Recognition

 

Revenues from subscription services are recognized ratably on a straight-line basis over the term of the subscription, which generally ranges from two to five years.

 

We recognize revenue from telematics product sales upon the transfer of control of promised products to customers in an amount that reflects the transaction price. Customers generally do not have a right of return except for defective products returned during the warranty period. We record estimated commitments related to customer incentive programs as reductions of revenues.

 

From time to time, we provide various professional services to customers. These services include project management, engineering services and installation services, which are often distinct from other performance obligations and are recognized as the related services are performed. For certain professional service contracts, we recognize revenue based on the proportion of total costs incurred to-date over the estimated cost of the contract, which is an input method.

 

In many customer arrangements, subscription services are bundled with the sale or lease of telematics devices within the same contractual arrangement. To determine the performance obligations under these arrangements, we assess the contractual elements and, in particular, whether the telematics products within the arrangement are distinct. This is an area of judgment that includes the consideration of all elements of the arrangement. Significant factors in determining whether telematics devices are distinct are whether such devices are sold separately, as well as the degree of integration and interdependency between the subscription elements of the arrangement and the associated telematics devices. If we conclude that the telematics devices within a customer arrangement are distinct and therefore represent a separate performance obligation, the total expected consideration associated with the contract is allocated between the performance obligations based upon the relative stand-alone selling price associated with each performance obligation. We base stand-alone selling prices on pricing for the same or similar items.

 

For some customer arrangements, we have concluded that the subscription services and associated telematics devices are not distinct performance obligations and thus represent a single combined performance obligation. For certain other customer arrangements under which devices are leased in combination with subscription services, we consider the arrangement to be predominately a subscription service and thus a combined single performance obligation for purposes of revenue recognition. In both of these circumstances, we generally recognize the total expected consideration as revenue over the term of the subscription. Device related costs associated with arrangements in which title to the device is transferred to the customer under a single combined performance obligation are recorded as deferred costs on the balance sheet and are amortized into cost of revenues over the term of the subscription or the estimated in-service lives of the devices. In contractual arrangements under which we provide devices as part of the subscription contract but we retain control of the devices, the cost of the devices is capitalized as property and equipment and depreciated over the estimated useful life of three to five years.

 

As described above, we are in the process of transitioning our MRM customer base to subscription arrangements. This transition may have an impact on our future determinations around contractual performance obligations as we anticipate selling fewer telematics products that do not include related subscription services.

We exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by us from a customer.

The timing of revenue recognition may differ from the timing on our invoicing to customers. Contract assets are comprised of unbilled amounts for which we have transferred products or provided services to our customers and are classified as accounts receivable. Contract liabilities (deferred revenues) are comprised of billings or payments received from our customers in advance of performance under the contract. During the three months ended May 31, 2022, we recognized $8.5 million in revenue from the deferred revenue balance of $39.7 million as of February 28, 2022.

Incremental costs of obtaining a contract with a customer consist of sales commissions, which are recognized on a straight-line basis over the life of the corresponding contracts. Prepaid sales commissions included in prepaid expenses and other current assets and other assets were $1.7 million and $2.8 million, respectively, as of May 31, 2022.

8


We disaggregate revenue from contracts with customers into reportable segments, geography, type of goods and services and timing of revenue recognition. See Note 14, Segment Information and Geographic Data, for our revenue by segment and geography. The disaggregation of revenue by type of goods and services and by timing of revenue recognition is as follows (in thousands):

 

 

Three Months Ended

 

 

May 31,

 

 

2022

 

 

2021

 

Revenue by type of goods and services:

 

 

 

 

 

 

 

Telematics devices and accessories

$

39,395

 

 

$

51,997

 

Rental income and other services

 

4,270

 

 

 

3,610

 

Recurring application subscriptions

 

21,061

 

 

 

24,067

 

Total

$

64,726

 

 

$

79,674

 

 

 

Three Months Ended

 

 

May 31,

 

 

2022

 

 

2021

 

Revenue by timing of revenue recognition:

 

 

 

 

 

 

 

Revenue recognized at a point in time

$

41,489

 

 

$

54,704

 

Revenue recognized over time

 

23,237

 

 

 

24,970

 

Total

$

64,726

 

 

$

79,674

 

 

Telematics devices and accessories revenues presented in the table above include devices sold in customer arrangements that include both device and subscription services. Revenues related to recurring application subscriptions include subscription revenues as well as amortization of deferred revenue for contractual arrangements under which the subscription services and associated telematics devices were determined to be a single combined performance obligation.

 

Remaining performance obligations for Software & Subscription Services represents contracted revenue that has not yet been recognized, which includes deferred revenue on our consolidated balance sheets and unbilled amounts that will be recognized as revenue in future periods. As of May 31, 2022 and February 28, 2022, we have estimated remaining performance obligations for contractually committed revenues of $216.4 million and $202.0 million respectively. As of May 31, 2022, we expect to recognize approximately 37% of the revenue under these remaining performance obligations in fiscal 2023 and 27% in fiscal 2024. As of February 28, 2022, we expected to recognize approximately 47% of the then remaining performance obligations in fiscal 2023 and 24% in fiscal 2024. We exclude contracts that have original durations of less than one year from the aforementioned remaining performance obligation disclosure.

 

Cash and Cash Equivalents

We consider all highly liquid investments with maturities at date of purchase of three months or less to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable consists of amounts due to us from sales arrangements executed in our normal business activities and are recorded at invoiced amounts or in some cases amounts expected to be invoiced. Our payment terms generally range between 30 to 60 days of our invoice date with a few exceptions that extend the credit terms up to 90 days, and we do not offer financing options. We present the aggregate accounts receivable balance net of an allowance for doubtful accounts. Generally, collateral and other security is not obtained for outstanding accounts receivable. Credit losses, if any, are recognized based on management’s evaluation of historical collection experience, customer-specific financial conditions as well as an evaluation of current industry trends and general economic conditions. Past due balances are assessed by management on a periodic basis and balances are written off when the customer’s financial condition no longer warrants pursuit of collection. Actual collections may differ from estimated amounts.

Due to the COVID-19 pandemic and other related macro-economic factors, there has been uncertainty and disruption in the global economy and financial markets. Except for the increase in expected credit losses, we are not aware of any specific event or circumstances that would require an update to our estimates or assumptions or a revision of the carrying value of our assets or liabilities as of the date of this quarterly report. These estimates and assumptions may change as new events occur and additional information is obtained. As a result, actual results could differ materially from these estimates and assumptions.

We group all accounts receivables and lease receivables into a single portfolio and analyze the credit risk associated with our accounts receivables and lease receivables. Our historical loss rates have not shown any significant differences between customer industries or geographies. As disclosed in Note 15, Segment Information and Geographic Data, we do not have significant international geographic concentrations of revenue, and, as a result, we do not have significant concentrations of accounts receivables or lease receivables in any single geography outside of the United States. 

9


The allowance for doubtful accounts totaled $2.6 million and $2.6 million as of May 31, 2022 and February 28, 2022, respectively.

Goodwill and Other Long-Lived Assets

Goodwill and long-lived assets to be held and used, including identifiable intangible assets, are reviewed for impairment annually in the fourth quarter or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. These events or changes in circumstances may include a significant deterioration of operating results, changes in business plans or changes in anticipated future cash flows. If an impairment indicator is present, we evaluate recoverability by a comparison of the carrying amount of the assets or reporting unit to the estimated fair value of those assets or reporting unit determined using either an income approach, a market approach, or a combination of both. If the assets are impaired, the impairment recognized is the amount by which the carrying amount exceeds the fair value of the assets.

 

Fair Value Measurements

We apply fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in our financial statements. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly manner in an arm’s-length transaction between market participants at the measurement date. Fair value is estimated by using the following hierarchy:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

Litigation and Other Contingencies

We accrue for litigation and other contingencies whenever we determine that an unfavorable outcome is probable and a liability is reasonably estimable. The amount of the accrual is estimated based on a review of each claim, including the type and facts of the claim and our assessment of the merits of the claim. These accruals are reviewed at least on a quarterly basis and are adjusted to reflect the impact of recent negotiations, settlements, court rulings, advice from legal counsel and other events pertaining to the case. Such accruals, if any, are recorded as general and administrative expenses in our condensed consolidated statements of comprehensive loss. Although we take considerable measures to mitigate our exposure in these matters, litigation is unpredictable; however, we believe that we have valid defenses with respect to pending legal matters against us as well as adequate provisions for probable and estimable losses. All costs for legal services are expensed as incurred.

Foreign Currency Translation

We translate the assets and liabilities of our non-U.S. dollar functional currency subsidiaries into U.S. dollars using exchange rates in effect at the end of each period. Revenue and expenses for these subsidiaries are translated using rates that approximate those in effect during the period. Gains and losses from these translations are recognized in foreign currency translation included in accumulated other comprehensive income (loss) during the period. The aggregate foreign currency transaction exchange rate gain (loss) included in determining income (loss) before income taxes was ($0.3) million and $0.1 million for the three months ended May 31, 2022 and 2021, respectively.

 

Comprehensive Income (Loss)

Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss) (“OCI”). OCI refers to revenue, expenses and gains and losses that under GAAP are recorded as an element of stockholders’ equity and excluded from net income (loss). Our OCI consists of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency.

Recently Adopted Accounting Pronouncements

 

In August 2020, the Financial Accounting Standards Board (“FASB”) issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40), which removes certain separation models for convertible debt instruments and convertible preferred stock that require the separation of a convertible debt instrument into a debt component and an equity or derivative component. Specifically, the new pronouncement removes the separation models for convertible debt with a cash conversion feature or convertible instruments with a beneficial conversion feature. We adopted ASU 2020-06 effective March 1, 2022, the beginning of fiscal 2023, utilizing the modified retrospective approach whereby the cumulative effect of the change in accounting was recognized as an adjustment to the opening balance of retained earnings (accumulated deficit) at the date of adoption. Comparative information has not been restated and continues to be presented in accordance with accounting standards that were in effect for those periods.

Prior to the adoption of ASU 2020-06, we allocated the gross proceeds of the Convertible Notes between the liability and equity components under the cash conversion feature model using the accounting rules in GAAP (ASC 470-20). The carrying amount of the liability component was calculated based on the fair value of a similar debt instrument excluding the embedded conversion option at the issuance date. The carrying

10


amount of the equity component representing the conversion option was calculated by deducting the carrying value of the liability component from the principal amount of the notes as a whole. This difference represented a debt discount and was being amortized to interest expense over the term of the notes using the effective interest rate method. The equity component of the notes was included in stockholders’ equity and was not remeasured as long as it continued to meet the conditions for equity classification.

Effective March 1, 2022, we no longer separately present in equity an embedded conversion feature of such debt. Instead, we account for a convertible debt instrument wholly as debt unless (i) the convertible debt instrument contains features that require bifurcation as a derivative or (ii) the convertible debt instrument was issued at a substantial premium. Prior to the adoption of ASU 2020-06, debt issuance costs attributable to the liability component were amortized to interest expense using the effective interest method and debt issuance costs attributable to the equity component were netted with the equity component in stockholders’ equity. Upon adoption, the entire amount of debt issuance costs is reflected as a contra-liability and amortized as interest expense using the effective interest method over the respective term of the notes. We account for the cost of the capped calls as a reduction to additional paid-in capital.

 

After adopting the new guidance, the use of the if-converted method is required when calculating diluted earnings per share (“EPS”) for convertible instruments and the treasury stock method should no longer be used. Under the new guidance, convertible instruments that may be settled in cash or shares are to be included in the calculation of diluted EPS if the effect is more dilutive, with no option for rebutting the presumption of share settlement based on stated policy or past experience. If we make an irrevocable election to settle the principal of the Convertible Notes in cash and the excess conversion spread in shares, the if-converted method will result in a reduced number of shares issued to reflect only the excess conversion.

 

 The below adoption adjustments were calculated based on the carrying amount of the Convertible Notes as if it had always been treated as a liability only. Furthermore, these adjustments address the debt issuance costs contra-liability and equity (additional paid-in capital) components under the same premise (i.e., as if the total amount of debt issuance costs had always been treated as a contra-liability only). Lastly, we derecognized the deferred income taxes associated with the debt discount and adjusted deferred income taxes relative to unamortized debt issuance costs associated with the Convertible Notes. This resulted in a net increase in gross deferred tax assets of $9.4 million but no impact to the net deferred tax asset balance due to the valuation allowance recorded against our deferred tax assets. We expect lower interest expense related to the Convertible Notes to be recognized in future periods subsequent to adoption as a result of accounting for the Convertible Notes as a single liability measured at amortized cost.

 

The following table summarizes the impact of the adoption of ASU 2020-06 on our consolidated balance sheet on March 1, 2022 (in thousands).

 

 

February 28, 2022

 

 

ASU 2020-06

 

 

March 1, 2022

 

 

As Reported

 

 

Adoption Impact

 

 

As Adjusted

 

Deferred income tax assets, net

$

4,165

 

 

$

-

 

 

 

4,165

 

Total debt (1)

 

192,288

 

 

 

37,365

 

 

 

229,653

 

Additional paid-in-capital

 

242,386

 

 

 

(67,003

)

 

 

175,383

 

Accumulated deficit

$

(165,965

)

 

$

29,639

 

 

$

(136,326

)

 

(1)

Prior to adoption, the carrying value of convertible debt represented the principal amount less unamortized debt discount and unamortized debt issuance costs. After adoption, the carrying value of convertible debt represents the principal amount less unamortized debt issuance costs.

Recently Issued Accounting Pronouncements, Not Yet Adopted

There are currently no accounting standards that have been issued but not yet adopted that we believe will have a significant impact on our unaudited condensed consolidated financial position, results of operations or cash flows.

 

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. We recognized a gain on the sale of the LoJack North America business of $4.1 million during the year ended February 28, 2022.

 

11


 

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 forty-eight 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 three months ended May 31, 2022, we incurred a total cost of $1.3 million of which $0.5 million was billed to Spireon for the services under the TSA and the net amount of $0.8 million is included as a component of other expense in the condensed consolidated statement of comprehensive loss as these costs represent non-operating expenses. During the three months ended March 31, 2021, we incurred a total cost of $2.0 million of which $0.7 million was billed to Spireon for services under the TSA and the net amount of $1.3 million is included in the within other expense in the condensed consolidated statement of comprehensive loss.

 

The operating results and cash flows related to the LoJack North America operations are reflected as discontinued operations in the unaudited condensed consolidated statements of comprehensive loss for the three months ended May 31, 2021, and the unaudited condensed consolidated statements of cash flows for the three months ended May 31, 2021. For the three months ended May 31, 2021, we have reported the operating results and cash flows related to the LoJack North America operations through March 14, 2021:

 

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

 

 

 

Three Months Ended

 

 

 

May 31,

 

 

 

2021

 

Revenues

 

$

823

 

Cost of revenues

 

 

950

 

Gross profit (loss)

 

 

(127

)

Operating expenses:

 

 

 

 

Research and development

 

 

32

 

Selling and marketing

 

 

167

 

General and administrative

 

 

75

 

Intangible asset amortization

 

 

141

 

Restructuring

 

 

404

 

Impairment losses

 

 

 

Total operating expenses

 

 

819

 

Operating loss from discontinued operations

 

 

(946

)

Gain on sale of discontinued operations

 

 

4,998

 

Net income from discontinued operations, net of tax

 

$

4,052

 

 

12


 

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

 

 

Three Months Ended

 

 

May 31,

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income from discontinued operations, net of tax

$

4,052

 

Adjustments to reconcile net income from discontinued operations to net cash used in operating activities:

 

 

 

Intangible asset amortization

 

141

 

Stock-based compensation

 

25

 

Gain on sale of discontinued operations

 

(4,998

)

Changes in operating assets and liabilities:

 

 

 

Accounts receivable

 

452

 

Inventories

 

425

 

Prepaid expenses and other current assets

 

4

 

Accounts payable

 

(331

)

Accrued liabilities

 

(135

)

Deferred revenue

 

(30

)

NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS

 

(395

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Net proceeds from sale of discontinued operations

 

6,616

 

NET CASH PROVIDED BY INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS

 

6,616

 

Net change in cash and cash equivalents

$

6,221

 

 

 

NOTE 3 – CASH, CASH EQUIVALENTS AND INVESTMENTS

The following tables summarize our financial instrument assets (in thousands):

 

 

As of May 31, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Classification

 

 

 

 

 

 

 

 

 

 

 

 

 

 

of Fair Value

 

 

 

 

 

 

Unrealized

 

 

 

 

 

 

Cash and

 

 

 

 

 

 

 

 

 

 

Gains

 

 

Fair

 

 

Cash

 

 

Other

 

 

Cost

 

 

(Losses)

 

 

Value

 

 

Equivalents

 

 

Assets

 

Cash

$

38,175

 

 

$

 

 

$

38,175

 

 

$

38,175

 

 

$

 

Level 1:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

365

 

 

 

 

 

 

365

 

 

</