Discontinued Operation

On 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 sees 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 is 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 months ended March 31, 2020 and 2019 (in thousands):



	Three Months Ended
	March 31,
	2020			2019
Revenues	$	904		$	1,665
Cost of revenues	6			81
Gross profit	898			1,584

Operating expenses:
Sales and marketing	1,712			2,072
Product development	—			44
General and administrative	2,639			1,067
Total operating expenses	4,351			3,183
Loss from operations	(3,453		)	(1,599		)
Other income (expense), net	534			(144		)
Loss before income taxes	(2,919		)	(1,743		)
Income tax expense	—			82
Net loss	$	(2,919	)	$	(1,825	)

The Company recorded severance and disposal costs of $1.6 million during the three months ended March 31, 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 including $64,000 and $34,000 of cost of revenues that were reclassified from the discontinued operations to continued operations for the three months ended March 31, 2020 and 2019, respectively. In addition, there were $7,000 and $3,000 of operating expenses that were reclassified from discontinued operations to continued operations for the three months ended March 31, 2020 and 2019, respectively.

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):



	March 31, 2020		December 31, 2019
ASSETS
Cash, cash equivalents and restricted cash	$	1,106	$	832
Accounts receivable, net	874		1,797
Deposits	—		9
Prepaid expenses and other	118		208
Deposits and other	121		248
Operating lease right-of-use assets	—		746
Property and equipment, net	32		121
Total assets from discontinued operations	$	2,251	$	3,961
LIABILITIES
Accounts payable	$	835	$	1,057
Accrued expenses and other	1,256		1,188
Deferred revenue	198		118
Operating lease right-of-use liabilities	—		772
Total liabilities from discontinued operations	$	2,289	$	3,135

The net cash used in operating activities and investing activities for the discontinued operations for the three months ended March 31, 2020 and 2019, were as follows (in thousands):



	Three Months Ended
	March 31,
	2020			2019
Net cash used in operating activities	$	(1,026	)	$	(1,576	)
Net cash used in investing activities	$	—		$	(25	)

Net cash used in operating activities for the three months ended March 31, 2020 was $1.0 million, which consisted of net loss of $3.5 million, offset partially by adjustments for non-cash items of $236,000 primarily due to a $150,000 of provision of loss on accounts receivable, and a $2.2 million increase in cash from changes in operating assets and liabilities.

Net cash used in operating activities for the three months ended March 31, 2019 was $1.6 million, which consisted of net loss of $1.8 million, offset partially by adjustments for non-cash items of $24,000 primarily due to a $29,000 of provision of loss on accounts receivable, and a $226,000 increase in cash from changes in operating assets and liabilities.