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. The purchase price is subject to changes for customary working capital adjustments, which is expected to be finalized by no later than October 15, 2021. We recognized a gain on the sale of the LoJack North America business of $5.0 million during the six months ended August 31, 2021. Our determination of the final settlement with Spireon involves certain estimates and judgments based on, among other items, our interpretation and application of key terms of the Sale Agreement. As such, a change in the gain on sale associated with the divestiture of the business could occur in a future period, including upon such finalization of the purchase price with Spireon.

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. In September 2021, the transition period was increased to seven months. As consideration for these services, Spireon will reimburse us for the direct and certain indirect costs, as well as certain overhead or administrative expenses related to operating the business. Additionally, we entered into a services agreement to commence upon the expiration of the TSA under which we will provide certain services related to the LoJack North America tower infrastructure for a period no longer than fifty-four months. As consideration for these services, Spireon will pay us a monthly service fee over the stipulated contract term. Further, we entered into a license agreement pursuant to which we will license certain intellectual property rights related to the LoJack North America business in the U.S. and Canada to Spireon. In connection with the transition services provided to Spireon during the three and six months ended August 31, 2021, respectively, we incurred a total cost of $1.2 million and $3.3 million of which $0.6 million and $1.4 million was billed to Spireon for the services under the TSA and the remaining $0.6 million and $1.9 million is included as a component of “Other expense” in the unaudited condensed consolidated statements of comprehensive loss as these costs represent non-operating expenses.

We concluded that as of February 28, 2021, the LoJack North America operations were discontinued operations as the asset group was a component of an entity, the component met the criteria of held for sale, and the disposal represented a strategic shift.

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 six months ended August 31, 2021 and 2020, respectively and for the three months ended August 31, 2020, and the unaudited condensed consolidated statements of cash flows for the six months ended August 31, 2021 and 2020, respectively. For the six months ended August 31, 2021, we have reported the operating results and cash flows related to the LoJack North America operations through March 14, 2021:

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

	February 28,
	2021
Carrying amounts of the major classes of assets included in discontinued operations:
Accounts receivable, net	$	5,050
Inventories		1,721
Prepaid expenses and other current assets		1,101
Total assets	$	7,872
Carrying amounts of the major classes of liabilities included in discontinued operations:
Accounts payable	$	1,956
Deferred revenue		1,849
Other current liabilities		291
Current liabilities of discontinued operations		4,096
Non-current liabilities		1,773
Total liabilities	$	5,869

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

	Three Months Ended			Six Months Ended
	August 31,			August 31,
	2020			2021			2020
Revenues	$	9,140		$	823		$	15,624
Cost of revenues		5,792			950			10,328
Gross profit (loss)		3,348			(127	)		5,296
Operating expenses:
Research and development		416			32			804
Selling and marketing		2,017			167			4,466
General and administrative		1,722			75			3,627
Intangible asset amortization		654			141			1,370
Restructuring		407			404			442
Impairment losses	-				-			4,289
Total operating expenses		5,216			819			14,998
Operating loss from discontinued operations		(1,868	)		(946	)		(9,702	)
Gain on sale of discontinued operations	-				4,998
Net income (loss) from discontinued operations, net of tax	$	(1,868	)	$	4,052		$	(9,702	)

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

	Six Months Ended
	August 31,
	2021			2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) from discontinued operations, net of tax	$	4,052		$	(9,702	)
Adjustments to reconcile net income (loss) from discontinued operations to net cash used in operating activities:
Depreciation		-			1,487
Intangible asset amortization		141			1,370
Stock-based compensation		25			749
Impairment losses		-			4,289
Gain on sale of discontinued operations		(4,998	)		-
Noncash operating lease cost		-			1,203
Changes in operating assets and liabilities:
Accounts receivable		452			1,453
Inventories		425			1,555
Prepaid expenses and other current assets		4			125
Accounts payable		(331	)		(1,487	)
Accrued liabilities		(135	)		(766	)
Deferred revenue		(30	)		(285	)
Operating lease liabilities		-			(1,384	)
NET CASH USED IN OPERATING ACTIVITIES OF DISCONTINUED OPERATIONS		(395	)		(1,393	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures		-			(1,823	)
Proceeds from sale of discontinued operations		6,616			-
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES OF DISCONTINUED OPERATIONS		6,616			(1,823	)
Net change in cash and cash equivalents	$	6,221		$	(3,216	)