CALAMP CORP. Our discussion and analysis of financial condition and results of operations is based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted inthe United States of America ("GAAP"). The preparation of these financial statements requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues, costs and expenses during the reporting periods. Actual results could differ materially from these estimates. The critical accounting policies listed below involve our more significant accounting judgments and estimates that are used in the preparation of the consolidated financial statements. These policies are described in greater detail in Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") under Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2021 , as filed with theU.S. Securities and Exchange Commission onApril 22, 2021 , and include the following areas: • Revenue recognition; • Patent litigation and other contingencies; •Goodwill and long-lived assets; and • Deferred income tax assets and uncertain tax positions.
OUR COMPANY
We are a connected intelligence company that helps people and businesses work smarter. We partner with transportation and logistics, industrial equipment, government and automotive industries to deliver insights that enable businesses to make the right decisions. Our applications, platforms and smart devices allow them to track, monitor and recover their vital assets with real-time visibility that reduces costs, maximizes productivity and improves safety. We are a global organization that is headquartered inIrvine, California . We have two reportable segments, Software & Subscription Services and Telematics Products. Our organizational structure is based on a number of factors that our CEO, as the Chief Operating Decision Maker ("CODM"), uses to evaluate and operate the business, which include, but are not limited to, customer base, homogeneity of products, and technology. A description of the reportable business segments is provided below.
Software & Subscription Services
Our Software & Subscription Services segment offers cloud-based application
enablement and telematics service platforms that facilitate integration of our
own applications, as well as those of third parties, through open Application
Programming Interfaces ("APIs") to deliver full-featured mobile IoT solutions to
a wide range of customers and markets. Our scalable proprietary applications and
other subscription services enable rapid and cost-effective development of
high-value solutions for customers all around the globe. Software and
Subscription Services segment revenues include SaaS, professional services,
devices sold with monitoring services and amortization of revenues for
customized devices functional only with application subscriptions that are not
sold separately.
Telematics Products
Our Telematics Products segment offers a portfolio of wireless data
communications products, which includes asset tracking units, mobile telematics
devices, fixed and mobile wireless gateways, and routers. These wireless
networking devices underpin a wide range of our own and third party software and
service solutions worldwide and are critical for applications demanding secure,
reliable and business-critical communications. Telematics Products segment
revenues consist primarily of stand-alone product sales.
Adjusted EBITDA
In addition to our U.S. GAAP results, we present Adjusted EBITDA as a
supplemental non-GAAP measure of our performance. Our CEO, the CODM, uses
Adjusted EBITDA to evaluate and monitor segment performance. A non-GAAP
financial measure is defined as a numerical measure of a company's financial
performance that excludes or includes amounts to be different than the most
directly comparable measure calculated and presented in accordance with GAAP in
the statements of comprehensive income (loss), balance sheets or statements of
cash flows. We define Adjusted EBITDA as earnings before investment income,
interest expenses, taxes, depreciation, amortization, net income (loss) from
discontinued operations, stock-based compensation, acquisition and integration
expenses, non-cash costs and expenses arising from purchase accounting
adjustments, litigation provisions, gain from legal settlement, impairment
losses and certain other adjustments. We believe this non-GAAP financial
information provides additional insight into our ongoing performance and have
therefore chosen to provide this information to investors for a more consistent
basis of comparison to help investors evaluate our results of ongoing operations
and enable more meaningful period-to-period comparisons. Pursuant to the rules
and regulations of the SEC regarding the use of non-GAAP financial measures, we
have provided a reconciliation of non-GAAP financial measures to the most
directly comparable financial measure. See Note 15, Segment Information and
Geographic Data, to the accompanying condensed consolidated financial statements
for additional information related to Adjusted EBITDA by reportable segment and
reconciliation to net income (loss).
26
--------------------------------------------------------------------------------Recent Developments COVID-19 Impact
In
Through fiscal 2021, our revenues were negatively impacted by COVID-19 as various small-to-medium customers postponed their capital expenditures due to the pandemic and related macro-economic uncertainties. The COVID-19 pandemic has also created certain global supply imbalances resulting in supply shortages in certain components that we use. It is difficult to predict the extent to which the pandemic will continue to impact our future business or operating results, which is 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 its containment and the actions taken or to be taken in connection with reopening efforts as containment of the COVID-19 pandemic is achieved. Because our business and operating results depend on telematics product sales, device installations and related subscription-based services, the ultimate effect of the pandemic may not be fully reflected in our operating results until future periods. We have considered all known and reasonably available information that existed throughout the six months ended and as ofAugust 31, 2021 , 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 theU.S. and relevant end markets as well as 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.
Sale of LoJack North America Operations
EffectiveMarch 15, 2021 , the Company andSpireon entered into an agreement pursuant to which we sold certain assets and transferred certain liabilities of theLoJack North America business toSpireon and we received net proceeds fromSpireon of$6.6 million . We recognized a gain on the sale of theLoJack North America business of$5.0 million , which is subject to change in a future period based on the finalization of the purchase price withSpireon . As further described in Note 2, Discontinued Operations, to the accompanying condensed consolidated financial statements, theLoJack North America operations are presented as discontinued operations in the accompanying condensed consolidated financial statements for the three and six months endedAugust 31, 2020 and for the six months endedAugust 31, 2021 . For the six months endedAugust 31, 2021 , we have reported the operating results and cash flows related to theLoJack North America operations throughMarch 14, 2021 .
OPERATING RESULTS
Three months ended
Unless otherwise indicated, the discussion of our results of operations provided
below relates to our continuing operations and we have recast prior period
amounts for purposes of historical comparisons. See Note 2, Discontinued
Operations, to the accompanying condensed consolidated financial statements for
additional information.
Revenue by Segment
Three Months Ended August 31,
2021 2020
(In thousands) $ % of Revenue $ % of Revenue $ Change % Change
Segment
Software &
Subscription
Services $ 41,434 52.4 % $ 33,440 44.9 % $ 7,994 23.9 %
Telematics
Products 37,577 47.6 % 40,957 55.1 % (3,380 ) (8.3 %)
Total $ 79,011 100.0 % $ 74,397 100.0 % $ 4,614 6.2 %
Our Software & Subscription Services enable customers to gather and analyze
critical data used to track, monitor and recover vital mobile assets with
real-time visibility and insights. Our services are focused on three principal
end markets comprised of (i) transportation and logistics, (ii) government and
municipalities, and (iii) connected car services. Although our business was
negatively impacted by the COVID-19 pandemic in the first half of fiscal 2021,
we resumed device installation and activation services soon thereafter thereby
driving revenue growth in subsequent periods including the three months ended
August 31, 2021 .
27
-------------------------------------------------------------------------------- As ofAugust 31, 2021 , our remaining contractual performance obligations were approximately$141 million , compared to$130 million as ofAugust 31, 2020 . The majority of our growth in contractual performance obligations was driven by new customer acquisitions within the government and municipality markets as well as connected car markets. Software & Subscription Services revenue increased by$8.0 million or 23.9% for the three months endedAugust 31, 2021 compared to the same period last year. This increase was primarily due to a$7.6 million increase in transportation and logistics revenues, driven in large part by 3G to 4G equipment upgrades, especially with our larger customers, as well as a$1.2 million increase in connected car services revenues, primarily as a result of increased revenues in the EMEA and LATAM regions. These increases were partially offset by a decrease of$0.6 million in government and municipalities revenues, which was primarily attributable to timing of device installations and activation of services caused by the onset of the COVID-19 pandemic. Recurring revenue was$24.0 million and$25.8 million for the three months endedAugust 31, 2021 and 2020, respectively, and active subscribers increased by 4% in the three months endedAugust 31, 2021 when compared to the prior year period. Telematics Products revenue, comprised primarily of mobile resource management ("MRM") telematics and OEM/network products, decreased by$3.4 million or 8.3% for the three months endedAugust 31, 2021 compared to the same period last year. This decrease was attributable to global supply imbalances driven by the global pandemic which has created supply shortages of silicon wafers and other components used in our products, thereby limiting our ability to fulfill customer orders during the three months endedAugust 31, 2021 . We expect these supply shortages to continue for the foreseeable future as suppliers strive to create additional production capacity. Gross Profit by Segment Three Months Ended August 31, 2021 2020 (In thousands) $ % of Revenue $ % of Revenue $ Change % Change Segment Software & Subscription Services$ 21,332 51.5 %$ 16,639 49.8 %$ 4,693 28.2 %
Telematics
Products 12,038 32.0 % 10,823 26.4 % 1,215 11.2 % Gross profit$ 33,370 42.2 %$ 27,462 36.9 %$ 5,908 21.5 % Consolidated gross profit increased by$5.9 million or 21.5% for the three months endedAugust 31, 2021 compared to the same period last year largely due to increased revenues in our Software & Subscription Services business. Consolidated gross margin increased by 530 basis points for the three months endedAugust 31, 2021 compared to the same period last year due to the increased proportion of overall revenues attributable to Software & Subscription Services as well as increased gross margins across both segments. Software & Subscription Services: Gross profit increased by$4.7 million or 28.2% for the three months endedAugust 31, 2021 compared to the same period last year, primarily as a result of the$8.0 million increase in revenues described above. Gross margin increased by 170 basis points primarily due to higher than average gross margins on certain 4G equipment upgrades to support our subscription services . Telematics Products: Gross profit increased by$1.2 million or 11.2% for the three months endedAugust 31, 2021 compared to the same period last year largely due to the 560 basis point increase in gross margin. The improvement in gross margin was primarily due to a$1.4 million one-time charge in the prior year period related to the resolution of a product performance matter with a customer. As mentioned above, we are presently experiencing adverse impacts to product sales as a result of global supply shortages of certain components, which is also leading to cost increases on many of these components. As a result, in the next couple quarters we may experience lower gross margins if we are unable to effectively offset the impacts of these cost increases. Operating Expenses Three Months Ended August 31, 2021 2020 (In thousands) $ % of Revenue $ % of Revenue $ Change % Change Research and development$ 7,729 9.8 %$ 6,573 8.8 %$ 1,156 17.6 % Selling and marketing 12,047 15.2 % 11,476 15.4 % 571 5.0 % General and administrative 13,198 16.7 % 12,177 16.4 % 1,021 8.4 % Intangible asset amortization 1,394 1.8 % 1,190 1.6 % 204 17.1 % Restructuring - 0.0 % 144 0.2 % (144 ) (100.0 %) Impairment loss - 0.0 % 286 0.4 % (286 ) (100.0 %) Total$ 34,368 43.5 %$ 31,846 42.8 %$ 2,522 7.9 % 28
-------------------------------------------------------------------------------- Consolidated research and development expense increased by$1.2 million or 17.6% for the three months endedAugust 31, 2021 compared to the same period last year due to increased development efforts around expanding our telematics service offering both domestically and internationally. Consolidated research and development expense as a percentage of revenues increased to 9.8% for the three months endedAugust 31, 2021 compared to 8.8% in the prior year period. We plan to continue to invest in research and development of new products and technologies. Consolidated selling and marketing expense increased by$0.6 million or 5.0% for the three months endedAugust 31, 2021 compared to the same period last year primarily due to a$0.3 million increase in compensation costs related to additions to our salesforce to drive sales of our telematics subscription services, as well as a$0.3 million increase in outside professional services costs related to our global marketing and branding efforts. Consolidated general and administrative expenses increased by$1.0 million or 8.4% for the three months endedAugust 31, 2021 compared to the same period last year primarily driven by cost containment measures initiated in the prior year in response to the COVID-19 pandemic.
Amortization of intangibles increased by
As described in Note 8, Restructuring Activities, to the accompanying condensed consolidated financial statements, during fiscal 2019, we commenced a plan to capture certain synergies and cost savings related to streamlining our global operations and sales organization as well as rationalize certain leased properties that were vacant. In connection with this initiative, we incurred adjustments to restructuring charges of$0.1 million during the three months endedAugust 31, 2020 , which were primarily personnel related.
Non-operating Income (Expense)
Investment income decreased to
Interest expense decreased to
Other non-operating expense was$0.7 million for the three months endedAugust 31, 2021 compared to$0.2 million of other income for the three months endedAugust 31, 2020 . The increase in other non-operating expense was primarily due to costs incurred related to the wind down and transition of theLoJack North America business during the three months endedAugust 31, 2021 . In connection with the sale of theLoJack North America business, we entered into a transition services agreement that, as amended, extends throughOctober 15, 2021 under which we will continue to provide certain services toSpireon , most of the cost of which will be reimbursed bySpireon .
Net Income (Loss) from Discontinued Operations, Net of Tax
The sale of theLoJack North America business was completed onMarch 15, 2021 . There was no income or loss from discontinued operations during the three months endedAugust 31, 2021 , but we incurred a net loss from discontinued operations, net of tax of$1.9 million during the three months endedAugust 31, 2020 .
See Note 2, Discontinued Operations, to the accompanying condensed consolidated financial statements for additional information.
Overall Profitability Measures
Net Loss:
GAAP-basis net loss for the three months endedAugust 31, 2021 was$5.4 million compared to a net loss of$9.5 million in the three months endedAugust 31, 2020 . The change in the net loss was primarily driven by higher gross margins and the sale of theLoJack North America business described above under "Net Income (Loss) from Discontinued Operations, Net of Tax," partially offset by increased operating expenses. Adjusted EBITDA: Three Months Ended August 31, (In thousands) 2021 2020 $ Change % Change Segment Software & Subscription Services$ 9,638 $ 7,695 $ 1,943 25.3 % Telematics Products (378 ) (1,726 ) 1,348 78.1 % Corporate Expenses (959 ) (921 ) (38 ) 4.1 % Total Adjusted EBITDA$ 8,301 $ 5,048 $ 3,253 64.4 % Adjusted EBITDA for Software & Subscription Services increased by$1.9 million compared to the same period last year primarily due to increased revenues and improved gross margins. Adjusted EBITDA for Telematics Products increased$1.3 million compared to the same period 29
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last year as a result of improved gross margins which more than offset the decrease in revenues. Corporate Expenses remained consistent year-over-year.
See Note 15, Segment Information and Geography Data, to the accompanying condensed consolidated financial statements for information related to Adjusted EBITDA by reportable segments and a reconciliation to GAAP-basis net income (loss).
Income Tax Provision
We evaluate our estimated annual effective tax rate ("ETR") on a quarterly basis
based on current and forecasted operating results. The relationship between our
income tax provision or benefit and our pretax book income or loss can vary
significantly from period to period considering, among other factors, the
overall level of pretax book income or loss and changes in the blend of
jurisdictional income or loss that is taxed at different rates and changes in
valuation allowances. Consequently, our ETR may fluctuate significantly period
to period and may make quarterly comparisons less than meaningful.
Income tax expense was
Six months endedAugust 31, 2021 compared to six months endedAugust 31, 2020 : Revenue by Segment Six Months Ended August 31, 2021 2020 (In thousands) $ % of Revenue $ % of Revenue $ Change % Change Segment Software & Subscription Services$ 76,477 48.2 %$ 61,213 41.3 %$ 15,264 24.9 % Telematics Products 82,208 51.8 % 86,915 58.7 % (4,707 ) (5.4 %) Total$ 158,685 100.0 %$ 148,128 100.0 %$ 10,557 7.1 % Software & Subscription Services revenue increased by$15.3 million or 24.9% for the six months endedAugust 31, 2021 compared to the same period last year. The increase was largely driven by a$10.5 million increase in transportation and logistics revenues and a$1.7 million increase in government and municipalities revenues, both driven primarily by 3G to 4G equipment upgrades, especially with our larger customers, as well as a$3.3 million increase in connected car services revenues, primarily as a result of increased revenues in the EMEA and LATAM regions. Recurring revenue was$48.1 million and$49.6 million for the six months endedAugust 31, 2021 and 2020, respectively, and active subscribers increased by 4% in the six months endedAugust 31, 2021 when compared to the prior year period. Telematics Products revenue decreased by$4.7 million or 5.4% for the six months endedAugust 31, 2021 compared to the same period last year. This decrease was attributable to global supply imbalances driven by the global pandemic which has created supply shortages of silicon wafers and other components used in our products, thereby limiting our ability to fulfill customer orders during the six months endedAugust 31, 2021 . We expect these supply shortages to continue for the foreseeable future as suppliers strive to create additional production capacity. Gross Profit by Segment Six Months Ended August 31, 2021 2020 (In thousands) $ % of Revenue $ % of Revenue $ Change % Change Segment Software & Subscription Services$ 38,154 49.9 %$ 30,347 49.6 %$ 7,807 25.7 % Telematics Products 27,663 33.7 % 26,220 30.2 % 1,443 5.5 % Gross profit$ 65,817 41.5 %$ 56,567 38.2 %$ 9,250 16.4 % Consolidated gross profit increased by$9.3 million or 16.4% for the six months endedAugust 31, 2021 compared to the same period last year largely due to increased revenues in our Software & Subscription Services business. Consolidated gross margin increased by 330 basis points for the six months endedAugust 31, 2021 compared to the same period last year due to the increased proportion of overall revenues attributable to Software & Subscription Services as well as increased gross margin in our Telematics Products business. Software & Subscription Services: Gross profit increased by$7.8 million or 25.7% for the six months endedAugust 31, 2021 compared to the same period last year, primarily as a result of the$15.3 million increase in revenues described above. Gross margin increased by 30 basis points primarily due to higher than average gross margin on certain 4G equipment upgrades to support our subscription services. 30 -------------------------------------------------------------------------------- Telematics Products: Gross profit increased by$1.4 million or 5.5% for the six months endedAugust 31, 2021 compared to the same period last year largely due to the 350 basis point increase in gross margin. The improvement in gross margin was primarily due to a$1.4 million one-time charge in the prior year period related to the resolution of a product performance matter with a customer. As mentioned above, we are presently experiencing adverse impacts to product sales as a result of global supply shortages of certain components, which is also leading to cost increases on many of these components. As a result, in the next couple quarters we may experience lower gross margins if we are unable to effectively offset the impacts of these cost increases. Operating Expenses Six Months Ended August 31, 2021 2020 (In thousands) $ % of Revenue $ % of Revenue $ Change % Change Research and development$ 14,669 9.2 %$ 12,509 8.4 %$ 2,160 17.3 % Selling and marketing 24,509 15.4 % 21,913 14.8 % 2,596 11.8 % General and administrative 25,884 16.3 % 23,941 16.2 % 1,943 8.1 % Intangible asset amortization 2,647 1.7 % 2,366 1.6 % 281 11.9 % Restructuring 336 0.2 % 2,017 1.4 % (1,681 ) (83.3 %) Impairment loss - 0.0 % 286 0.2 % (286 ) (100.0 %) Total$ 68,045 42.9 %$ 63,032 42.6 %$ 5,013 8.0 % Consolidated research and development expense increased by$2.2 million or 17.3% for the six months endedAugust 31, 2021 compared to the same period last year due to increased development efforts around expanding our telematics service offering both domestically and internationally. Consolidated research and development expense as a percentage of revenues increased to 9.2% for the six months endedAugust 31, 2021 compared to 8.4% in the prior year period. We plan to continue to invest in research and development of new products and technologies. Consolidated selling and marketing expense increased by$2.6 million or 11.8% for the six months endedAugust 31, 2021 compared to the same period last year primarily due to a$1.7 million increase in compensation costs related to additions to our salesforce to drive sales of our telematics subscription services, as well as a$0.9 million increase in outside professional services costs related to our global marketing and branding efforts. Consolidated general and administrative expenses increased by$1.9 million or 8.1% for the six months endedAugust 31, 2021 compared to the same period last year primarily driven by increased compensation costs as a result of the hiring of supply chain management and operations personnel following the closure of our manufacturing facility inOxnard, California .
Amortization of intangibles increased slightly by
As described in Note 8, Restructuring Activities, to the accompanying condensed consolidated financial statements, during fiscal 2019, we commenced a plan to capture certain synergies and cost savings related to streamlining our global operations and sales organization as well as rationalize certain leased properties that were vacant. We incurred restructuring charges from continuing operations of$0.3 million and$2.0 million for this initiative during the six months endedAugust 31, 2021 and 2020, respectively, which were primarily personnel related.
Non-operating Income (Expense)
Investment income increased to$1.1 million for the six months endedAugust 31, 2021 from$0.7 million for the six months endedAugust 31, 2020 . The increase was primarily driven by improved investment returns on invested funds. Interest expense decreased to$7.7 million for the six months endedAugust 31, 2021 from$7.9 million for the six months endedAugust 31, 2020 due to a lower level of borrowings in the current year period. Other non-operating expense was$2.0 million for the six months endedAugust 31, 2021 , compared to other non-operating income of$9 thousand for the six months endedAugust 31, 2020 . This increase in other non-operating expense was primarily due to costs incurred related to the wind down, sale and transition of theLoJack North America business during the six months endedAugust 31, 2021 . In connection with the sale of theLoJack North America business, we entered into a transition services agreement that extends throughOctober 15, 2021 under which we will continue to provide certain services toSpireon , most of the cost of which will be reimbursed to us bySpireon . 31
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Net Income (Loss) from Discontinued Operations, Net of Tax
Net income from discontinued operations, net of tax was$4.1 million for the six months endedAugust 31, 2021 compared to a net loss from discontinued operations, net of tax of$9.7 million during the six months endedAugust 31, 2020 . The net income from discontinued operations for the six months endedAugust 31, 2021 was primarily driven by the$5.0 million gain on sale of discontinued operations, which was completed onMarch 15, 2021 . The net loss from discontinued operations for the six months endedAugust 31, 2020 included impairment losses of$4.3 million .
See Note 2, Discontinued Operations, to the accompanying condensed consolidated financial statements for additional information.
Overall Profitability Measures
Net Loss:
GAAP-basis net loss for the six months endedAugust 31, 2021 was$7.4 million , compared to a net loss of$23.9 million in the six months endedAugust 31, 2020 . The decrease in the net loss was primarily driven by the sale of theLoJack North America business described above under "Net Income (Loss) from Discontinued Operations, Net of Tax," increased revenues and higher gross margins, partially offset by increased operating expenses. Adjusted EBITDA: Six Months Ended August 31, (In thousands) 2021 2020 $ Change % Change Segment Software & Subscription Services$ 15,532 $ 14,168 $ 1,364 9.6 % Telematics Products 3,254 1,489 1,765 118.5 % Corporate Expenses (2,100 ) (2,318 ) 218 (9.4 %) Total Adjusted EBITDA$ 16,686 $ 13,339 $ 3,347 25.1 % Adjusted EBITDA for Software & Subscription Services increased by$1.4 million compared to the same period last year primarily due to higher revenues, largely offset by increased operating expenses as a result of investments we are making to develop, market and sell our telematics solutions. Adjusted EBITDA for Telematics Products increased by$1.8 million compared to the same period last year primarily due to increased gross profit. Corporate Expenses increased slightly year-over-year.
See Note 15, Segment Information and Geographic Data, to the accompanying condensed consolidated financial statements for information related to Adjusted EBITDA by reportable segments and a reconciliation to GAAP-basis net income (loss).
Income Tax Provision
We evaluate our estimated annual effective tax rate ("ETR") on a quarterly basis
based on current and forecasted operating results. The relationship between our
income tax provision or benefit and our pretax book income or loss can vary
significantly from period to period considering, among other factors, the
overall level of pretax book income or loss and changes in the blend of
jurisdictional income or loss that is taxed at different rates and changes in
valuation allowances. Consequently, our ETR may fluctuate significantly period
to period and may make quarterly comparisons less than meaningful.
Income tax expense was $0.6 million for the six months ended August 31, 2021 ,
compared to $0.5 million in the same period last year. The $0.1 million increase
in tax expense was primarily driven by an increase in pre-tax income
attributable to one of our foreign subsidiaries in the current period.
LIQUIDITY AND CAPITAL RESOURCES
Consistent with fiscal 2021, our primary recurring cash needs have been for working capital purposes and payment on debt obligations, and to a lesser extent, capital expenditures. We have historically funded our principal business activities through cash flows generated from operations. As we continue to grow our customer base and increase our revenues, there will be a need for working capital in the future. Our immediate sources of liquidity are cash and cash equivalents, and our revolving credit facility. As ofAugust 31, 2021 , we have$101.1 million of cash and cash equivalents and$50 million available under our revolving credit facility.We expect to continue to finance our operations with cash on hand and cash generated from operations. 32 -------------------------------------------------------------------------------- OnMarch 30, 2018 , we entered into a revolving credit facility withJPMorgan Chase Bank, N.A . that provided for borrowings of up to$50 million . OnMarch 27, 2020 , we entered into an amendment of the$50 million revolving credit facility to extend the term toMarch 30, 2022 . Borrowings under this revolving credit facility bear interest at either a Prime or LIBOR-based variable rate as selected by us on a periodic basis. This revolving credit facility contains financial covenants that require us to maintain a minimum level of earnings before interest, income taxes, depreciation, amortization and other noncash charges (EBITDA) and minimum debt coverage ratios. As ofAugust 31, 2021 , there were no borrowings outstanding on this revolving credit facility. We are a defendant in various legal proceedings, including the Omega and Philips patent infringement claims, involving intellectual property claims and contract disputes in which the final resolutions have not been determined at this time. In connection with these matters, we may be required to enter into license agreements or other settlement arrangements that require us to make significant payments in the future. While it is not feasible to predict with certainty the outcome of these legal proceedings, based on currently available information, we believe that the ultimate resolution of these matters will not have a material adverse effect on our condensed consolidated results of operations, financial condition and cash flows.
See Note 16, Legal Proceedings, of the Notes to Unaudited Condensed Consolidated Financial Statements for additional information on legal proceedings.
Sale of LoJack North America Operations
OnMarch 14, 2021 , we entered into a purchase agreement withSpireon pursuant to which we sold certain assets and transferred certain liabilities of theLoJack North America business for a purchase price of$8.0 million . The transaction was completed effectiveMarch 15, 2021 and we received net proceeds of approximately$6.6 million . We also entered into a Transition Service Agreement withSpireon onMarch 15, 2021 ("TSA") to supportSpireon in the transition ofLoJack North America customers and we will continue to provide recovery services to the existing installed base ofLoJack North America customers as an agent ofSpireon untilOctober 15, 2021 . During this period, we will invoiceSpireon for certain costs incurred in operating this business. We also entered into a post-TSA Services Agreement withSpireon onMarch 15, 2021 ("SA"), under which we will continue to provide certain services related to theLoJack North America radio frequency tower infrastructure upon termination of theTSA for a period of no longer than fifty-four months after the date of the SA, as needed. As consideration for these services,Spireon will pay us a monthly service fee over the stipulated contract term.
PPP Loan
OnApril 16, 2020 , we received proceeds from a loan in the amount of$10 million fromJPMorgan Chase Bank, N.A ., as lender (the "PPP Loan"), pursuant to theSmall Business Association ("SBA") Paycheck Protection Program (the "PPP") of the Coronavirus Aid Relief, and Economic Security Act. At the time we applied for the PPP Loan, we believed that we qualified to receive the funds pursuant to the PPP. OnApril 23, 2020 , the SBA, in consultation with theDepartment of Treasury , issued new guidance that created uncertainty regarding the qualification requirements for a PPP Loan. Out of abundance of caution and in light of the new guidance, we repaid in full the principal and interest on the PPP Loan onApril 27, 2020 .
Future Cash Obligations
During the second quarter of fiscal 2022, there were no significant changes to our estimates of future payments under our fixed contractual obligations and commitments as presented in Part II, Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for our fiscal year endedFebruary 28, 2021 as filed with theSEC onApril 22, 2021 .
Cash flows from operating activities
Cash flows from operating activities consist of net loss adjusted for certain non-cash items, including depreciation, intangible asset amortization, stock-based compensation expense, amortization of discount and debt issue costs, deferred income taxes, amortization of certain revenue assignment arrangements and the effect of changes in components of working capital. Our cash flow from operating activities are attributable to our net loss as well as how well we manage our working capital, which is dictated by the volume of products we purchase from our manufacturers or suppliers and then sell to our customers along with the payment and collection terms that we negotiate with them. We purchase a majority of our products from significant suppliers located inAsia andMexico that generally provide us 60-day payment terms for products purchased. Our significant customers are located inthe United States as well as certain foreign countries. We believe that our relationships with our key customers are good and that these customers are in good financial condition. We generally grant credit to our customers based on their financial viability and our historical collection experience with them. We typically require payment from our customers within 30 to 45 days of our invoice date with a few exceptions that extend the credit terms up to 90 days. Since we are paying our suppliers at or within 60 days of 33
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inventory purchase and our payment terms on our accounts receivable are generally within 45 days, we have historically generated positive cash flows from operating activities.
For the six months endedAugust 31, 2021 , net cash provided by operating activities was$10.5 million and net loss was$7.4 million . Our non-cash expenses from continuing operations, comprised principally of depreciation, intangible asset amortization, stock-based compensation expense, amortization of debt discount and issuance costs, noncash operating lease costs and changes in deferred income taxes totaled$23.9 million . These non-cash expenses were partially offset by non-cash revenues of$2.6 million related to acquired revenue assignment arrangements. Changes in operating assets and liabilities from continuing operations provided$1.0 million of cash, primarily driven by the impact of lower inventory levels, partly offset by a net decrease in accounts payable. Net cash used in discontinued operations was$0.4 million . For the six months endedAugust 31, 2020 , net cash provided by operating activities was$14.1 million and net loss was$23.9 million . Our non-cash expenses from continuing operations, comprised principally of depreciation, intangible asset amortization, stock-based compensation expense, amortization of debt discount and issuance costs, noncash operating lease costs and changes in deferred income taxes totaled$23.7 million . These non-cash expenses were partially offset by non-cash revenues of$3.3 million related to acquired revenue assignment arrangements. Changes in operating assets and liabilities from continuing operations provided$9.4 million of cash, primarily driven by a reduction in accounts receivable balances as a result of the impacts of the COVID-19 pandemic that began during such period, as well as the timing of accounts payable disbursements. Net cash used in discontinued operations was$1.4 million .
Cash flow from investing activities
For the six months endedAugust 31, 2021 and 2020, our net cash used in investing activities of continuing operations was$6.6 million and$5.7 million , respectively. In each of these periods, our primary investing activities consisted of capital expenditures. We expect that we will make additional capital expenditures in the future, including the devices that we lease to customers under subscription agreements in order to support the future growth of our business. Net cash provided by investing activities of discontinued operations was$6.6 million for the six months endedAugust 31, 2021 compared to net cash used in investing activities of discontinued operations of$1.8 million during the six months endedAugust 31, 2020 . The net cash provided by investing activities of discontinued operations during the six months endedAugust 31, 2021 is comprised of cash proceeds received from the sale of theLoJack North America business.
Cash flow from financing activities
For the six months endedAugust 31, 2021 and 2020, our net cash used in financing activities was$3.1 million and$8.2 million , respectively. In each of these periods, we had payments for taxes related to the net share settlement of vested equity awards and the proceeds from the exercise of stock options and contributions to our employee stock purchase plan. During the six months endedAugust 31, 2020 , we repaid our 2020 Convertible Notes of$27.6 million , as well as borrowed$20.0 million from our revolving credit facility.
We continue to monitor the impact of COVID-19 on our operating results and liquidity as the pandemic has had an unfavorable impact on our financial condition and results of operations and we believe the pandemic may continue to have an unfavorable impact going forward.
FORWARD LOOKING STATEMENTS
Forward looking statements in this Form 10-Q which include, without limitation, statements relating to our plans, strategies, objectives, expectations, intentions, projections and other information regarding future performance, are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words "may", "will", "could", "plans", "intends", "seeks", "believes", "anticipates", "expects", "estimates", "judgment", "goal", and variations of these words and similar expressions, are intended to identify forward-looking statements. These forward-looking statements reflect our current views with respect to future events and financial performance and are subject to certain risks and uncertainties that are difficult to predict, including, without limitation, product demand, competitive pressures and pricing declines in our markets, the timing of customer approvals of new product designs, intellectual property infringement claims, interruption or failure of our Internet-based systems used to wirelessly configure and communicate with the tracking and monitoring devices that we sell, the phased implementation of our ERP system, the effect of tariffs on exports fromChina , and other countries, the ongoing effects of the COVID-19 pandemic, and other risks and uncertainties that are set forth in Part I, Item 1A of the Annual Report on Form 10-K for the fiscal year endedFebruary 28, 2021 as filed with theSEC onApril 22, 2021 . Such risks and uncertainties could cause actual results to differ materially from historical or anticipated results. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. 34
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