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Discontinued Operation | 9 Months Ended
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Sep. 30, 2020
Discontinued Operations and Disposal Groups [Abstract] |
Discontinued Operation | Discontinued OperationOn March 10, 2020, Travelzoo issued a press release announcing that it will exit its business in Asia Pacific. The decision supports the Company's strategy to focus on value creation for shareholders by focusing on growing the businesses in North America and Europe, where the Company continues to see strong interest from our members in travel deals. The Asia Pacific business shut down and ceased operations as of March 31, 2020, except for the Company's Japan unit, which was held for sale. The Company considers this decision to be a strategic shift in its strategy which will have a major effect on its operations. The Company has classified Asia Pacific as discontinued operations at March 31, 2020. Prior periods have been reclassified to conform with the current presentation. The following table provides a summary of amounts included in discontinued operations for the three and nine months ended September 30, 2020 and 2019 (in thousands):
| Three Months Ended |  | Nine Months Ended
| September 30, |  | September 30,
| 2020 |  | 2019 |  | 2020 |  | 2019
Revenues | $ | — |  |  | $ | 1,672 |  |  | $ | 970 |  |  | $ | 4,915 |
Cost of revenues | — |  |  | 128 |  |  | 6 |  |  | 294 |
Gross profit | — |  |  | 1,544 |  |  | 964 |  |  | 4,621 |
Operating expenses: |  |  |  |  |  |  |
Sales and marketing | — |  |  | 2,266 |  |  | 1,712 |  |  | 6,591 |
Product development | — |  |  | 44 |  |  | — |  |  | 124 |
General and administrative | 69 |  |  | 1,412 |  |  | 3,413 |  |  | 3,412 |
Total operating expenses | 69 |  |  | 3,722 |  |  | 5,125 |  |  | 10,127 |
Loss from operations | (69) |  |  | (2,178) |  |  | (4,161) |  |  | (5,506) |
Other income (loss), net | (161) |  |  | (170) |  |  | 217 |  |  | (428) |
Loss before income taxes | (230) |  |  | (2,348) |  |  | (3,944) |  |  | (5,934) |
Income tax expense | — |  |  | (90) |  |  | — |  |  | (121) |
Net loss | $ | (230) |  |  | $ | (2,258) |  |  | $ | (3,944) |  |  | $ | (5,813) |
The Company recorded severance and disposal costs of $1.6 million during the first quarter of fiscal year 2020 for the shut down and such costs were classified in “general and administrative” in the table above. Certain reclassifications have been made for current and prior periods between the continued operations and the discontinued operations in accordance with U.S. GAAP. Those reclassifications included direct operating expenses and certain inter-company charges that will not continue. $0 and $64,000 of cost of revenues were reclassified from the discontinued operations to continued operations for the three and nine months ended September 30, 2020, respectively. $24,000 and $94,000 of cost of revenues were reclassified from the discontinued operations to continued operations for the three and nine months ended September 30, 2019, respectively. In addition, $0 and $7,000 of operating expenses that were reclassified from discontinued operations to continued operations for the three and nine months ended September 30, 2020, respectively. $150,000 and $129,000 of operating expenses that were reclassified from continued operations to discontinued operations for the three and nine months ended September 30, 2019, respectively. On June 16, 2020, in connection with its Asia Pacific exit plan, the Company completed a sale of 100% of the outstanding capital stock of Travelzoo Japan to the Japan Buyer for consideration of 1 Japanese Yen. The Company recognized a pre-tax loss of $128,000. T he parties also entered into a License Agreement, whereby the Travelzoo Japan btained a license to use the intellectual property of Travelzoo exclusively in Japan in exchange for quarterly royalty payments based on revenue over a 5 year term, with an option to renew. However, Travelzoo Japan is only obligated to pay Travelzoo if Travelzoo Japan has a positive EBITDA (earnings before interest, taxes, depreciation and amortization) adjusted pro forma before royalty expenses, according to Travelzoo Japan’s income statement. The Company will record royalties from Travelzoo Japan on a one-quarter lag basis. However, Travelzoo is not able to estimate whether Travelzoo Japan will generate positive EBITDA b ased on the current uncertainties, and no amount has been recorded for future royalties under this agreement. A n interest free loan was provided to the Japan Buyer for JPY 46.0 million (approximately $430,000) to be repaid over 3 years. On August 24, 2020, the Company completed a sale of 100% of the outstanding capital stock of Travelzoo Singapore, to an unaffiliated entity, AUS Buyer, which is fully owned by Mr. Julian Rembrandt, the former General Manager of South East Asia and Australia of the Company for consideration of Singapore Dollar1. The parties also entered into a License Agreement, whereby the AUS Buyer obtained a license to use the intellectual property of Travelzoo exclusively in Australia, New Zealand and Singapore and non-exclusively in China and Hong Kong for quarterly royalty payments based upon revenue over a 5 year term, with an option to renew. The Company will record royalties from the AUS Buyer on a one-quarter lag basis. However, Travelzoo is not able to estimate whether the AUS Buyer will generate revenues based on the current uncertainties, and no amount has been recorded for future royalties under this agreement. The following table presents information related to the major classes of assets and liabilities that were classified as assets and liabilities from discontinued operations in the Condensed Consolidated Balance Sheets (in thousands):
| September 30, 2020 |  | December 31, 2019
ASSETS |  |  |
Cash, cash equivalents and restricted cash | $ | 301 |  |  | $ | 832 |
Accounts receivable, net | 115 |  |  | 1,797 |
Deposits | — |  |  | 9 |
Prepaid expenses and other | 36 |  |  | 208 |
Deposits and other | 2 |  |  | 248 |
Operating lease right-of-use assets | — |  |  | 746 |
Property and equipment, net | — |  |  | 121 |
Total assets from discontinued operations | $ | 454 |  |  | $ | 3,961 |
LIABILITIES |  |  |
Accounts payable | $ | 729 |  |  | $ | 1,057 |
Accrued expenses and other | 767 |  |  | 1,188 |
Deferred revenue | 13 |  |  | 118 |
Operating lease right-of-use liabilities | — |  |  | 772 |
Total liabilities from discontinued operations | $ | 1,509 |  |  | $ | 3,135 |
The net cash used in operating activities and investing activities for the discontinued operations for the nine months ended September 30, 2020 and 2019, were as follows (in thousands):
| Nine Months Ended
| September 30,
| 2020 |  | 2019
Net cash used in operating activities | $ | (1,821) |  |  | $ | (5,324) |
Net cash used in investing activities | $ | — |  |  | $ | (60) |

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- Definition The entire disclosure related to a disposal group. Includes, but is not limited to, a discontinued operation, disposal classified as held-for-sale or disposed of by means other than sale or disposal of an individually significant component. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 360 -URI http://asc.fasb.org/topic&trid=2155823 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -SubTopic 20 -URI http://asc.fasb.org/subtopic&trid=2122178 + Details
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