What changed in this filing

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Item 1. Financial Statements

2021-11-08 compared with 2021-08-04 · 179 added, 172 removed, 715 unchanged (33% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

2021 December 31,

1 unchanged sentence

Cash and cash equivalents $ 65,204 $ 63,061

Accounts receivable, less allowance for doubtful accounts of $ 2,288 and $ 2,814 as of June 30, 2021 and December 31, 2020, respectively

Accounts receivable, less allowance for doubtful accounts of $ 2,045 and $ 2,814 as of September 30, 2021 and December 31, 2020, respectively

Prepaid income taxes 2,882 931

29 unchanged sentences

Stockholders’ equity:

Common stock, $ 0.01 par value ( 20,000 shares author ized;

11,594 shares issued and 11,494 shares outstanding as of June 30, 2021 a nd 11,365 shares issued and outstanding as of December 31, 2020)

Treasury stock (at cost, 100 shares and 0 shares at June 30, 2021 and December 31, 2020, respectively)

Common stock, $ 0.01 par value ( 20,000 shares authorized;

11,923 shares issued and 11,823 shares outstanding as of September 30, 2021 and 11,365 shares issued and outstanding as of December 31, 2020)

Treasury stock (at cost, 100 shares and 0 shares at September 30, 2021 and December 31, 2020, respectively)

Additional paid in capital 3,432 6,239

6 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

34 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

6 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

66 unchanged sentences

Balances, June 30, 2021 11,594 115 ( 1,583 ) 4,988 969 ( 3,487 ) 1,002

Stock-based compensation expense — — — 971 — — 971

Exercise of stock options and taxes paid for net share

settlement 329 3 — ( 2,527 ) — — ( 2,524 )

Foreign currency translation adjustment — — — — — ( 401 ) ( 401 )

Net income—Travelzoo — — — — 2,823 — 2,823

Balances, September 30, 2021 11,923 $ 118 $ ( 1,583 ) $ 3,432 $ 3,792 $ ( 3,888 ) $ 1,871

Common Stock Additional

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Balances, June 30, 2020 11,310 113 4,031 221 ( 4,666 ) ( 301 )

Stock-based compensation expense — — 1,189 — — 1,189

Foreign currency translation adjustment — — — — 532 532

Net loss—Travelzoo — — — ( 1,351 ) — ( 1,351 )

Balances, September 30, 2020 11,310 $ 113 $ 5,220 $ ( 1,130 ) $ ( 4,134 ) $ 69

See accompanying notes to unaudited condensed consolidated financial statements.

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Our Travelzoo website includes Local Deals and Getaways listings that allow our members to purchase vouchers for deals from local businesses such as spas, hotels and restaurants.

We also license the use of these products and our intellectual property in various countries in Asia Pacific, including but not limited to Australia, Japan, Hong Kong and China.

We also license the use of these products and our intellectual property in various countries in Asia Pacific, including but not limited to Australia, New Zealand, Japan, South Korea and Southeast Asia.

We are also the majority shareholder of JFC Travel Group Co.

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For our voucher products, we receive a percentage of the face value of the voucher from the local businesses.

In March 2020, Travelzoo exited its loss-making Asia Pacific business.

APAC Exit and Pivot to Licensing Model

In March 2020, Travelzoo exited its loss-making Asia Pacific business and pivoted to a licensing model, whereby Travelzoo’s business practices and intellectual property are utilized by local licensees to continue to provide high quality insider deals and content to Travelzoo members throughout Asia Pacific.

Such existing members in Asia Pacific will continue to be owned by Travelzoo as the licensor.

The Company’s Asia Pacific business was classified as discontinued operations at March 31, 2020.

Prior periods have been reclassified to conform with the current presentation.

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 K.K, a stock company organized under the laws of Japan (“Travelzoo Japan”), to Mr.

Hajime Suzuki, the former General Manager of Travelzoo Japan (the "Japan Buyer") for consideration of 1 Japanese Yen.

The Company recorded approximately $ 128,000 loss upon disposal of Japan in year ended December 31, 2020.

The parties also entered into a License Agreement, whereby the Travelzoo Japan obtained a license to use the intellectual property of Travelzoo exclusively in Japan in exchange for quarterly royalty payments based on net revenue over a 5 year term, with an option to renew.

An interest free loan was provided to the Japan Buyer for JPY 46 million (approximately $ 430,000 ) to be repaid over 3 years which the Company recorded as other assets on the unaudited condensed consolidated balance sheet as of June 30, 2021.

Additionally, on August 24, 2020, the Company completed a sale of 100 % of the outstanding capital stock of Travelzoo (Singapore) Pty Ltd, a limited company organized under the laws of Singapore (“Travelzoo Singapore”), to an unaffiliated entity, Finest Hotels Pty Ltd, a limited company organized under the laws of Australia (“AUS Buyer”), which is fully owned by Mr.

Julian Rembrandt, the former General Manager of Travelzoo in South East Asia and Australia for consideration of 1 Singapore Dollar.

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 net revenue over a 5 year term, with an option to renew.

There was no gain or loss from the sale of Travelzoo Singapore.

Travelzoo currently has license agreements in Japan and South Korea, as well as Australia, New Zealand and Singapore.

The license agreement for Japan provides a license to the licensee to use the intellectual property of Travelzoo exclusively in Japan in exchange for quarterly royalty payments based on net revenue over a 5 year term, with an option to renew.

The territory subject to the license was amended to also include South Korea.

An interest free loan was provided to the licensee for JPY 46 million (approximately $ 430,000 ) to be repaid over 3 years which the Company recorded as other assets on the unaudited condensed consolidated balance sheet as of September 30, 2021.

The license agreement for Australia, New Zealand and Singapore provides a license to the licensee to use the intellectual property of Travelzoo exclusively in Australia, New Zealand and Singapore for quarterly royalty payments based upon net revenue over a 5 year term, with an option to renew.

The Company records royalties for its licensing arrangements on a one-quarter lag basis.

The Company recognized royalties of $ 0 and $ 9,000 from Travelzoo Japan for the three and six months ended June 30, 2021.

The Company did no t record any royalty for its licensing arrangements from AUS Buyer for the three and six months ended June 30, 2021.

Travelzoo's existing members in Australia, Japan, China, Hong Kong, New Zealand, and Singapore will continue to be owned by Travelzoo as the licensor.

The Company recognized royalties of $ 0 and $ 9,000 from Travelzoo Japan for the three and nine months ended September 30, 2021.

The Company recognized royalties of $ 2,000 for its licensing arrangements from AUS Buyer for the three and nine months ended September 30, 2021.

We expect the royalty payments to increase over time as the effects of the pandemic subside.

WeGo Investment

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(“trivago”) on December 23, 2020.

The original investment agreement with WeGo was executed in April 2018 (the “Original Investment Agreement”).

At that time, Travelzoo invested $ 3.0 million in WeGo for a 25.0 % ownership interest.

In April 2019, the Company invested an additional $ 673,000 in WeGo, which increased the Company's ownership interest to 26.6 %.

In February 2020, Travelzoo signed an amended investment agreement (the “Investment Agreement”) with WeGo, whereby the Company received additional shares (resulting in ownership of 33.7 %) and in exchange, agreed to invest an additional $ 1.7 million if and when WeGo met certain performance targets.

In connection with the Original Investment Agreement, WeGo agreed to spend approximately $ 2.1 million with the Company in marketing pursuant to an Insertion Order (the “Insertion Order”) and in connection with the Investment Agreement, WeGo agreed to spend an additional $ 1.8 million in marketing, once the additional payment was made by the Company (the “Second Insertion Order”).

The Company accounted for this private company investment using the equity method of accounting by recording its share of the results of WeGo in “Other income (loss)”, net on a one-quarter lag basis.

In accounting for the initial investment, the Company allocated $ 1.0 million of its purchase price to tangible assets and allocated approximately $ 485,000 of the purchase price to technology-related intangible assets to be amortized over a 3-year life.

The remaining $ 1.5 million of the purchase price was allocated to goodwill.

For the years ended December 31, 2020 and 2019, the Company recorded $ 384,000 and $ 882,000 for its share of WeGo losses, amortization of basis differences and currency translation adjustment.

This equity method investment is reported as a long-term investment on the Company's consolidated balance sheets.

As of the date of the transaction with trivago, WeGo had not achieved the necessary performance targets.

As part of the Share Purchase Agreement, by and among Travelzoo (Europe) Limited, trivago, and the other shareholders of WeGo (the “trivago SPA”), the obligation of any additional payment by the Company was terminated.

Per the trivago SPA, the Company sold all of its shares in WeGo to trivago for a total purchase price of approximately $ 2.9 million, of which $ 213,000 was placed in escrow for one year.

Per the Share Purchase Agreement, by and among Travelzoo (Europe) Limited, trivago, and the other shareholders of WeGo (the “trivago SPA”), the Company sold all of its shares in WeGo to trivago for a total purchase price of approximately $ 2.9 million, of which $ 213,000 was placed in escrow for one year.

The Company recorded $ 468,000 gain in Other income (loss), net.

6 unchanged sentences

Concurrently with the sale of the shares, the Company also sold the domain name and trademark “weekend.com” to trivago in exchange for a payment of $ 822,000 .

The Company recorded $ 822,000 gain in General and administrative for the sale of the domain name and trademark “weekend.com” in 2020.

The Company recorded $ 822,000 gain in general and administrative expenses for the sale of the domain name and trademark “weekend.com” in 2020.

Jack’s Flight Club

In January 2020, Travelzoo acquired Jack’s Flight Club, which operates Jack’s Flight Club , a subscription service that provides members with information about exceptional airfares.

As of June 30, 2021, Jack’s Flight Club had 1.7 million subscribers.

As of September 30, 2021, Jack’s Flight Club h ad 1.7 million subscribers.

Jack’s Flight Club’s revenues are generated by subscription fees paid by members.

In June 2020, the Company renegotiated certain aspects of that certain Stock Purchase Agreement, dated as of January 13, 2020 (the “SPA”), by and among Travelzoo, Jack’s Flight Club and the sellers party thereto (the “Sellers”) with the Sellers and reached a settlement for the outstanding Promissory Notes, dated as of January 13, 2020, by and between Travelzoo and each Seller (the “Promissory Notes”).

See Note 3 to the unaudited condensed consolidated financial statements for further information.

Ralph Bartel, who founded Travelzoo and who is the Chairman of the Board of Directors of the Company, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro Capital Inc.

As of June 30, 2021, Azzurro is the Company's largest shareholder, holding approximately 39.3 % of the Company's outstanding shares.

(“Azzurro” ).

As of September 30, 2021, Azzurro is the Company's largest shareholder, holding approximately 38.9 % of the Company's outstanding shares.

Financial Statements

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All intercompany accounts and transactions have been eliminated in consolidation.

The financial results of Jack’s Flight Club

have been included in our consolidated financial statements from the date of acquisition.

The financial results of Jack’s Flight Club have been included in our consolidated financial statements from the date of acquisition.

Investments in entities where the Company does not have control, but does have significant influence, are accounted for as equity method investments.

2 unchanged sentences

Actual results could differ materially from those estimates.

The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other future period, and the Company makes no representations related thereto.

The results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021 or any other future period, and the Company makes no representations related thereto.

(b) Recent Accounting Pronouncements

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For these customers, the Company recognizes revenues each time an advertisement is shown or email delivered.

For transaction based revenues, including products such as Local Deals, Getaways, hotel platform and vacation packages, the Company evaluates whether it is the principal (i.e., report revenue on a gross basis) versus an agent (i.e., report revenue on a

The Company reports transaction revenue on a net basis because the supplier is primarily responsible for providing the underlying service, and we do not control the service provided by the supplier prior to its transfer to the customer.

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Deferred revenue primarily consists of customer prepayments and undelivered performance obligations related to the Company’s contracts with multiple performance obligations.

At December 31, 2020, $ 1.3 million was recorded as deferred revenue for Travelzoo North America and Travelzoo Europe, of which $ 595,000 was recognized as revenue during the six months ended June 30, 2021.

At June 30, 2021, the deferred revenue balance was $ 2.2 million, of which $ 756,000 was for Travelzoo North America and Travelzoo Europe and $ 1.5 million was for Jack's Flight Club.

At December 31, 2020, $ 1.3 million was recorded as deferred

revenue for Travelzoo North America and Travelzoo Euro pe, of which $ 620,000 was recognized as revenue during the nine months ended September 30, 2021.

At September 30, 2021, the deferred revenue balance was $ 1.8 million, of which $ 429,000 was for Travelzoo North America and Travelzoo Europe, and the remaining $ 1.4 million was for Jack's Flight Club.

Reserve for Refunds to Members

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The Company now offers fully refundable refunds for vouchers that have not been redeemed or expired .

The expiration dates of vouchers range between July 2021 through December 2023.

The expiration dates of vouchers range between October 2021 through December 2023.

The revenues generated from Local Deals vouchers and entertainment offers are based upon a percentage of the face value of the vouchers, commission on actual sales or a listing fee based on audience reach.

1 unchanged sentence

The Company estimated the refund reserve by using historical and current refund rates by product and by merchant location to calculate the estimated future refunds.

As of June 30, 2021 the Company had approximately $ 20.5 million of unredeemed vouchers that had been sold through June 30, 2021 representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 3.7 million for th ese unredeemed vouchers as of June 30, 2021 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

As of December 31, 2020, the Company had approximately $ 15.2 million of unredeemed vouchers that had been sold during 2020 representing the Company’s commission earned from the

sale and estimated a refund liability of $ 3.9 million for these unredeemed vouchers as of December 31, 2020 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

The Company has recorded Merchant Payables of $ 82.2 million as of June 30, 2021 related to unredeemed vouchers.

Insertion orders and merchant agreements for Local are typically for periods between one month and twelve months and are not automatically renewed except for merchant contracts in foreign locations.

As of September 30, 2021 the Company had approximately $ 18.3 million of unredeemed vouchers that had been sold through September 30, 2021 representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 3.1 million for these unredeemed vouchers as of September 30, 2021 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

As of December 31, 2020, the Company had approximately $ 15.2 million of unredeemed vouchers that had been sold during 2020 representing the Company’s commission earned from the sale and estimated a refund liability of $ 3.9 million for these unredeemed vouchers as of December 31, 2020 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

The Company has recorded Merchant Payables of $ 73.2 million as of September 30, 2021 related to unredeemed vouchers.

Insertion orders and merchant agreements for Travelzoo Local are typically for periods between one month and twelve months and are not automatically renewed except for merchant contracts in foreign locations.

Should any of these factors change, the estimates made by management will also change, which could impact the level of our future reserve for refunds to member.

Specifically, if the financial condition of our advertisers, the business that is providing the vouchered service, were to deteriorate, affecting their ability to provide the services to our members, additional reserves for refunds to members may be required.

Estimated member refunds that are determined to be recoverable from the merchant are recorded in the consolidated statements of operations as a reduction to revenue.

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Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives.

The carrying values of all intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.

The carrying values of all intangible assets are reviewed for impairment whenever events or changes in circumstances

indicate that their carrying amounts may not be recoverable.

The Company evaluated intangible assets in the first quarter of 2020 due to the coronavirus (COVID-19) pandemic and recorded an impairment expense of $ 810,000 .

The Company performed its annual test as of October 31, 2020 and no impairment charge was identified in connection with the annual impairment test.

The Company did not identify any indicators of impairment during the six months ended June 30, 2021.

The Company performed its annual test as of October 31, 2020 and no impairment charge was identified in connection with the annual impairment tes t.

The Company did not identify any indicators of impairment during the nine months ended September 30, 2021.

Goodwill represents the excess of the purchase price of an acquired business over the fair value of the underlying net tangible and intangible assets.

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The Company performed its annual impairment test as of October 31, 2020 and no impairment charge was identified in connection with the annual impairment test .

The Company did not identify any indicators of impairment during the six months ended June 30, 2021.

The Company did not identify any indicators of impairment during the nine months ended September 30, 2021.

Operating Leases

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The measures implemented to contain the global pandemic have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations and cash flows.

The Company’s cash, cash equivalents and accounts receivable are potentially subject to concentration of credit risk.

The Company’s cash, cash equivalents and a ccounts receivable are potentially subject to concentration of credit risk.

Cash and cash equivalents are placed with financial institutions that the management believes are of high credit quality.

1 unchanged sentence

and internationally.

Since the second quarter of 2020, the Company experienced the adverse impact of the global pandemic.

Many of the Company's advertising partners paused, canceled, and stopped advertising with the Company.

Additionally, there has been a significant level of cancellations for the Company's hotel partners and travel package partners as well as refund requests for our vouchers with the Company’s restaurant and spa partners.

The Company has modified its policies and will continue to adopt new policies as the situation evolves.

However, the uncertainties of the pandemic, such as its duration and severity, will likely negatively impact and continue to negatively impact our partners and customer s.

As of June 30, 2021, we had negative working capital of $ 12.7 million primarily due to an increase in accounts payable related to merchants from the sale of vouchers.

The payable to merchants is generally due upon redemption of the vouchers.

The vouchers have maturities that begin in July 2021 through December 2023, and we believe that redemption patterns may be delayed for international vouchers under the current environment.

Based on current projections of redemption activity, we expect that cash on hand as of June 30, 2021 will be sufficient to provide for working capital needs for at least the next twelve months.

However, if redemption activity is more accelerated, or if we are not able to reduce our operating losses, we may need to obtain additional financing to meet our working capital needs in the future.

We believe that we could obtain additional financing if needed, but there can be no assurance that financing will be available on terms that are acceptable to us, if at all.

As of June 30, 2021 and December 31, 2020, the Company did not have any customers that accounted for 10% or more of accounts receivable.

As of September 30, 2021 and December 31, 2020, the Company did not have any customers that accounted for 10% or more of accounts receivable.

Many of the Company’s advertisers and partners are part of the global travel and hospitality industry.

The measures implemented to contain COVID have had, and are expected to continue to have, a significant negative effect on the Company’s business, financial condition, results of operations, and cash flows.

The measures implemented led to many of the Company’s advertisers pausing, canceling, or stopping advertising with us, as well as a high level of cancellations for our hotel partners and travel package partners, and refund requests for vouchers sold by Travelzoo for restaurant and spa partners.

It is difficult to estimate the impact of the COVID pandemic on the Company’s future revenues, results of operations, cash flows, liquidity, or financial condition.

As of September 30, 2021, the Company had merchant payables of $ 73.2 million related to the sale of vouchers.

In the Company’s financial statements presented in this 10-Q report, following GAAP accounting principles, we classified all merchant payables as current.

When all merchant payables are classified as current, there is negative net working capital (which

is defined as current assets minus current liabilities) of $ 18.0 million.

Payables to merchants are generally due upon redemption of vouchers.

The vouchers have maturities from October 2021 through December 2023.

Management believes that redemptions may be delayed for international vouchers in the current environment.

Based on current projections of redemption activity, management expect that cash on hand as of September 30, 2021 will be sufficient to provide for working capital needs for at least the next twelve months.

However, if redemption activity is more accelerated, if the Company’s business is not profitable, or if the Company’s planned targets for cash flows from operations are not met, the Company may need to obtain additional financing to meet its working capital needs in the future.

The Company believes that it could obtain additional financing if needed, but there can be no assurance that financing will be available on terms that are acceptable to the Company, if at all.

Cash, Cash Equivalents and Restricted Cash

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The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the unaudited condensed consolidated balance sheets to the total amounts shown in the unaudited condensed consolidated statements of cash flows:

June 30, December 31,

September 30, December 31,

Cash and cash equivalents $ 65,204 $ 63,061

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Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows $ 66,401 $ 64,385

The Company’s restricted cash was included in noncurrent assets as of June 30, 2021 and December 31, 2020.

The Company’s restricted cash was included in noncurrent assets as of September 30, 2021 and December 31, 2020.

Net Income (Loss) Per Share

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The following table sets forth the calculation of basic and diluted net income (loss) per share (in thousands, except per share amounts):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

Net income (loss) attributable to Travelzoo—continuing operations $ 2,842 $ ( 1,121 ) $ 4,200 $ ( 10,206 )

Net income (loss) attributable to Travelzoo—discontinued operations $ 29 $ ( 795 ) $ 14 $ ( 3,714 )

Net loss attributable to Travelzoo—discontinued operations $ ( 19 ) $ ( 230 ) $ ( 5 ) $ ( 3,944 )

Weighted average common shares—basic 11,648 11,310 11,510 11,353

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Net income (loss) per share—diluted $ 0.22 $ ( 0.12 ) $ 0.32 $ ( 1.25 )

For the three and six months ended June 30, 2021 and 2020, options to purchase 50,000 shares and 3.4 million shares of common stock, respectively, were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive.

For the three and nine months ended September 30, 2021 and 2020, options to purchase 50,000 s hares and 3.4 million shares of common stock, respectively, were not included in the computation of diluted net income (loss) per share because the effect would have been anti-dilutive.

On January 13, 2020, Travelzoo entered into the SPA with the shareholders of Jack’s Flight Club for the purchase of up to 100 % of the outstanding capital stock of Jack’s Flight Club (the “Shares”).

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Goodwill—March 31, 2020 $ 10,944

There has been no change in goodwill for the six months ended June 30, 2021 and no changes since March 31, 2020.

There has been no change in goodwill for the nine months ended September 30, 2021 and no changes since March 31, 2020.

Intangible Assets

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Customer relationships and non-compete agreements are being amortized to operating expenses over their estimated useful lives using the straight-line basis for non-compete agreements or on an accelerated basis for customer relationships.

The following table represents the activities of intangible assets for the six months ended June 30, 2021 (in thousands):

The following table represents the activities of intangible assets for the nine months ended September 30, 2021 (in thousands):

Intangible assets—January 1, 2020 $ —

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Intangible assets- June 30, 2021 3,975

Amortization expense for acquired intangibles was $ 275,000 and $ 395,000 for the three months ended June 30, 2021 and 2020, respectively.

Amortization expense for acquired intangibles was $ 559,000 and $ 610,000 for the six months ended June 30, 2021 and 2020, respectively.

Expected future amortization expense of acquired intangible assets as of June 30, 2021 is as follows (in thousands):

Amortization of intangible assets with definite lives ( 275 )

Intangible assets- September 30, 2021 $ 3,700

Amortization expense for acquired intangibles was $ 275,000 and $ 333,000 for the three months ended September 30, 2021 and 2020, respectively.

Amortization expense for acquired intangibles was $ 833,000 and $ 943,000 for the nine months ended September 30, 2021 and 2020, respectively.

Expected future amortization expense of acquired intangible assets as of September 30, 2021 is as follows (in thousands):

Years ending December 31,

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As previously discussed in “Goodwill”, the Company's impairment test indicated that Jack’s Flight Club’s indefinite lived intangible assets (“Trade name”) was impaired for $ 810,000 for the first quarter of 2020.

The Company performed its annual

impairment testing of Trade name during the fourth fiscal quarter and did not identify any additional impairment in 2020.

The Company did not identify any indicators of impairment during the six months ended June 30, 2021.

The Company performed its annual impairment testing of Trade name during the fourth fiscal quarter and did not identify any additional impairment in 2 020.

The Company did not identify any indicators of impairment during the nine months ended September 30, 2021.

Unaudited Pro Forma Information

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The following table summarizes the pro forma financial information (in thousands):

Three Months Ended Six Months Ended

June 30, 2020 June 30, 2020

Three Months Ended Nine Months Ended

September 30, 2020 September 30, 2020

Revenues $ 13,787 $ 41,239

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This voluntary program is not available for individuals whose promotional shares have been escheated to a state by the Company, except those individuals for which their residence was unknown to the Company.

The Company did not make any payments for the six months ended June 30, 2021 and 2020.

The Company did not make any payments for the nine months ended September 30, 2021 and 2020.

The total cost of this program cannot be reliably estimated because it is based on the ultimate number of valid requests received and future levels of the Company’s common stock price.

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Our leases have remaining lease terms ranging from less than one year to up to nine years .

Refer to Note 11 for Leases as of June 30, 2021.

Refer to Note 11 for Leases as of September 30, 2021.

The Company maintains several standby letters of credit (“LOC”) to serve as collateral issued to certain landlords.

The LOCs are collateralized with cash which is included in the line item “Restricted cash” in the Consolidated Balance Sheets.

The Company has purchase commitments aggregating approximately $ 3.6 million as of June 30, 2021, which represent the minimum obligations the Company has under agreements with certain suppliers.

The Company has purchase commitments aggregating approximately $ 3.4 million as of September 30, 2021, which represent the minimum obligations the Company has under agreements with certain suppliers.

These minimum obligations are less than the Company's projected use for those periods.

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Due to the global pandemic, and difficulty forecasting the calendar year 2021 of income (loss) by jurisdiction, we determined the estimated annual effective rate method would not provide a reliable estimate of the Company’s overall annual effective tax rate.

As such, we have calculated the tax provision using the actual effe ctive rate for the six months ended June 30, 2021 .

The Company's effective tax rate from continuing operations was 27 % and 19 %, respectively, for the three months ended June 30, 2021 and 2020.

The Company's effective tax rate from continuing operations was 58 % and 15 %, respectively, for the six months ended June 30, 2021 and 2020 .

The Company's effective tax rate increased for the three and six months ended June 30, 2021 from the corresponding three and six months ended June 30, 2020, primarily due to changes in deferred tax assets from limitations on deductible stock-based compensation.

As of June 30, 2021, the Company is permanently reinvested in certain of its non-U.S.

As such, we have calculated the tax provision using the actual effe ctive rate for the nine months ended September 30, 2021 .

The Company's effective tax rate from continuing operations was 8 % and 20 %, respectively, for the three months ended September 30, 2021 and 2020.

The Company’s effective tax rate for the three months ended September 30, 2021 decreased from the three months ended September 30, 2020 primarily due to PPP loan forgiveness income generated in the three months ended September 30, 2021 that is exempt from tax.

The Company's effective tax rate from continuing operations was 33 % and 15 %, respectively, for the nine months ended September 30, 2021 and 2020.

The Company's effective tax rate increased for the nine months ended September 30, 2021 compared to the nine months ended September 30, 2020 primarily due to changes in deferred tax assets from limitations on deductible stock-based compensation , offset by PPP Loan forgiveness income exempt from tax.

As of September 30, 2021, the Company is permanently reinvested in certain of its non-U.S.

subsidiaries and does not have a deferred tax liability related to its undistributed foreign earnings.

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The Company maintains liabilities for uncertain tax positions.

At June 30, 2021, the Company had approximately $ 901,000 in total unrecognized tax benefits, which if recognized, would favorably affect the Company’s effective income tax rate.

At September 30, 2021, the Company had approximately $ 961,000 in total unrecognized tax benefits, which if recognized, would favorably affect the Company’s effective income tax rate.

The Company’s policy is to include interest and penalties related to unrecognized tax positions in income tax expense.

To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in the period that such determination is made.

At June 30, 2021 and December 31, 2020, the Company had approximately $ 263,000 and $ 235,000 in accrued interest, and $ 59,000 and $ 0 in accrued penalties, respectively.

At September 30, 2021 and December 31, 2020, the Company had approximately $ 278,000 and $ 235,000 in accrued interest, and $ 89,000 and $ 0 in accrued penalties, respectively.

The Company files income tax returns in the U.S.

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The following table summarizes the changes in accumulated other comprehensive loss (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

3 unchanged sentences

Ending balance $ ( 3,888 ) $ ( 4,134 ) $ ( 3,888 ) $ ( 4,134 )

The Company reclassified $ 599,000 from accumulated other comprehensive income (loss) for the year ended December 31, 2020 due to Asia Pacific was considered as discontinued operation in March 2020.

There were no amounts reclassified from accumulated other comprehensive loss for the three and six months ended June 30, 2021.

The Company reclassified $ 599,000 from accumulated other comprehensive income (loss) for the year ended December 31, 2020 due to Asia Pacific was considered a discontinued operation in March 2020.

There were no amounts reclassified from accumulated other comprehensive loss for the three and nine months ended September 30, 2021.

Accumulated other comprehensive income (loss) consists of foreign currency translation gain or loss.

21 unchanged sentences

Therefore, stock-based compensation related to these options was fully expensed in second quarter of 2020.

In the first quarter of 2021, 300,000 options granted pursuant to the 2017 Option Agreement and 100,000 options granted pursuant to the 2015 Option Agreement were exercised by Mr.

Bartel, 178,349 shares of common stock were issued as the result of a cashless exercise approved by Travelzoo's Board of Directors.

During the three months ended September 30, 2021, 500,000 options granted pursuant to the 2015 Option Agreement and 160,000 options granted pursuant to the 2019 Option Agreement were exercised by Mr.

Bartel, 188,737 shares of common stock were issued as the result of a cashless exercise and 112,901 shares of common stock were issued as the result of net settlement with respect to the exercise price were approved by Travelzoo's Board of Directors.

During the nine months ended September 30, 2021, 600,000 options granted pursuant to the 2015 Option Agreement, 300,000 options granted pursuant to the 2017 Option Agreement and 160,000 options granted pursuant to the 2019 Option Agreement were exercised by Mr.

Bartel, 367,086 shares of common stock were issued as the result of a cashless exercise and 112,901 shares of common stock were

issued as the result of net settlement with respect to the exercise price were approved by Travelzoo's Board of Directors.

Bartel did not exercise options in the second quarter of 2021.

Total stock-based compensation of $ 382,000 and $ 765,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2021, respectively.

Total stock-based compensation of $ 3.6 million was recorded in general and administrative expenses for the second quarter of 2020.

There was no stock-based compensation for this grant for the first quarter of 2020.

As of June 30, 2021, there was approximately $ 765,000 of unrecognized stock-based compensation expense relating to the 2019 Option Agreement and applicable Option Agreement Amendment.

This amount is expected to be recognized over the next six months .

Total stock-based compensation of $ 382,000 was recorded in general and administrative expenses for each of the three months ended September 30, 2021 and 2020, respectively.

Total stock-based compensation of $ 1.1 million and $ 3.9 million was recorded in general and administrative expenses for the nine months ended September 30, 2021 and 2020, respectively.

As of September 30, 2021, there was approximately $ 382,000 of unrecognized stock-based compensation expense relating to the 2019 Option Agreement and applicable Option Agreement Amendment.

This amount is expected to be recognized over the last three months of 2021.

In May 2018, pursuant to executed Option Agreements, the Company granted an employee options to purchase 50,000 shares of common stock with an exercise price of $ 14.70 and annual vesting beginning in May 2019.

The options expire in May 2028.

Total stock-based compensation of $ 11,000 and $ 34,000 was recorded in sales and marketing expense for the three and six months ended June 30, 2020.

Total stock-based compensation of $ 0 and $ 34,000 was recorded in sales and marketing expense for the three and nine months ended September 30, 2020.

Upon the departure of the employee in 2020, 25,000 unvested options were forfeited and 25,000 vested option were canceled.

1 unchanged sentence

The options expire in June 2023.

During the six months ended June 30, 2020, 37,500 unvested options were forfeited and the compensation expense of $ 43,000 was reversed from product development expense upo n the employee’s notification of departure.

During the nine months ended September 30, 2020, 37,500 unvested options were forfeited and the compensation expense of $ 43,000 was reversed from product development expense upo n the employee’s notification of departure.

In May 2019, pursuant to an executed Option Agreement, the Company granted an employee options to purchase 100,000 shares of common stock with an exercise price of $ 19.28 , of which 10,000 options vested and became exercisable in May 2019, 15,000 options vested and became exercisable in September 2019, and the remaining 75,000 will vest in three equal installments beginning in May 2021 and ending in May 2024.

7 unchanged sentences

In 2020, 100,000 unvested options were forfeited upo n an employee’s departure, 75,000 options were exercised and 54,258 shares of common stock were issued as the result of a cashless exercise approved by Travelzoo ’ s Board of Directors.

During the six months ended June 30, 2021, 75,000 unvested options were forfeited upo n an employee’s departure, 50,000 options were exercised and 26,667 shares of common stock were issued as the result of the cashless exercises.

Total stock-based compensation related to these option grants of $ 96,000 and $ 151,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2021.

As of June 30, 2021, there was approximately $ 837,000 of unrecognized stock-based compensation expense relating to these options.

During the nine months ended September 30, 2021, 75,000 unvested options were forfeited upo n an employee’s departure, 100,000 options were exercised and 54,110 shares of common stock were issued as the result of the cashless exercises.

Total stock-based compensation related to these option grants of $ 97,000 and $ 362,000 was recorded in general and administrative expenses for the three months ended September 30, 2021 and 2020.

Total stock-based compensation related to these option grants of $ 248,000 and $ 523,000 was recorded in general and administrative expenses for the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, there was approximately $ 741,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 1.9 years.

3 unchanged sentences

This grant was approved at the 2020 Annual Meeting of the shareholders.

Total stock-based compensation related to these option grants of $ 385,000 and $ 770,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2021, respectively .

As of June 30, 2021, there was approximately $ 1.2 million of unrecognized stock-based compensation expense relating to these options.

Total stock-based compensation related to these option grants of $ 385,000 was recorded in general and administrative expenses for each of the three months ended September 30, 2021 and 2020.

Total stock-based compensation related to these option grants of $ 1.2 million and $ 771,000 was recorded in general and administrative expenses for the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, there was approximately $ 771,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next six months .

On May 29, 2020, pursuant to an executed Option Agreement, the shareholders of the Company approved the grant of stock options to purchase 200,000 shares of common stock to two key employees, with an exercise price of $ 3.49 with annual vesting starting March 30, 2021 and ending on March 31, 2024.

1 unchanged sentence

This amount is expected to be recognized over the next year.

During the three months ended June 30, 2021, 50,000 options were exercised and 24,474 shares of common stock were issued as the result of the cashless exercises.

Total stock-based compensation related to these option grants of $ 49,000 and $ 108,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2021.

As of June 30, 2021, there was approximately $ 540,000 of unrecognized stock-based compensation expense relating to these options.

During the nine months ended September 30, 2021, 50,000 options were exercised and 24,474 shares of common stock were issued as the result of the cashless exercises.

Total stock-based compensation related to these option grants of $ 49,000 and $ 59,000 was recorded in general and administrative expenses for the three months ended September 30, 2021 and 2020.

Total stock-based compensation related to these option grants of $ 157,000 and $ 79,000 was recorded in general and administrative expenses for the nine months ended September 30, 2021 and 2020.

As of September 30, 2021, there was approximately $ 491,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 2.5 years.

1 unchanged sentence

The options expire in January 2026.

Total stock-based compensation related to these option grants of $ 21,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2021 .

As of June 30, 2021, there was approximately $ 554,000 of unrecognized stock-based compensation expense relating to these options.

Total stock-based compensation related to these option grants of $ 62,000 and $ 82,000 was recorded in general and administrative expenses for the three and nine months ended September 30, 2021 .

As of September 30, 2021, there was approximately $ 492,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 3.3 years.

5 unchanged sentences

During the first quarter of 2020, the Company repurchased 169,602 shares of common stock for an aggregate purchase price of $ 1.2 million , which were retired and recorded as a reduction of additional paid-in capital until extinguished with the remaining amount reflected as a reduction of retained earnings.

There were 395,029 shares remaining to be repurchased under this program as of June 30, 2021 .

There were 395,029 shares remaining to be repurchased under this program as of September 30, 2021 .

In March 2021, the Company entered into a Stock Repurchase Agreement with Mr.

Holger Bartel to privately repurchase an aggregate of 100,000 shares of the Company’s common stock for an aggregate purchase price of $ 1.6 million , which were recorded as part of treasury stock as of June 30, 2021.

This transaction was approved by the Compensation Committee of the Board of Directors.

2 unchanged sentences

Historically, the Company managed its business geographically and operated in three reportable segments including Asia Pacific, Europe and North America.

During the six months ended June 30, 2021, the Company classified the results of its Asia Pacific segment as discontinued operations in its condensed consolidated financial statements for current and prior periods presented.

During the nine months ended September 30, 2021, the Company classified the results of its Asia Pacific segment as discontinued operations in its condensed consolidated financial statements for current and prior periods presented.

On January 13, 2020, Travelzoo agreed to the SPA with the Sellers of Jack’s Flight Club to purchase 60 % of the Shares.

8 unchanged sentences

The following is a summary of operating results by business segment (in thousands):

Three Months Ended June 30, 2021 Travelzoo North

Three Months Ended September 30, 2021 Travelzoo North

America Travelzoo Europe Jack’s Flight Club Elimination Consolidated

3 unchanged sentences

Operating profit (loss) $ ( 918 ) $ 600 $ 57 $ — $ ( 261 )

Three Months Ended June 30, 2020 Travelzoo North

Three Months Ended September 30, 2020 Travelzoo North

America Travelzoo Europe Jack’s Flight Club Elimination Consolidated

3 unchanged sentences

Operating profit (loss) $ ( 696 ) $ ( 757 ) $ 250 $ — $ ( 1,203 )

Six Months Ended June 30, 2021 Travelzoo North

Nine Months Ended September 30, 2021 Travelzoo North

America Travelzoo Europe Jack’s Flight Club Elimination Consolidated

3 unchanged sentences

Operating profit (loss) $ 2,654 $ ( 323 ) $ 117 $ — $ 2,448

Six Months Ended June 30, 2020 Travelzoo North

Nine Months Ended September 30, 2020 Travelzoo North

America Travelzoo Europe Jack’s Flight Club Elimination Consolidated

2 unchanged sentences

Total net revenues 26,042 12,461 2,615 — 41,118

Operating profit (loss) $ ( 5,678 ) $ ( 3,024 ) $ ( 3,263 ) $ ( 8 ) $ ( 11,973 )

Operating loss $ ( 6,374 ) $ ( 3,781 ) $ ( 3,013 ) $ ( 8 ) $ ( 13,176 )

Property and equipment are attributed to the geographic region in which the assets are located.

1 unchanged sentence

The following is a summary of assets by business segment (in thousands):

As of June 30, 2021 Travelzoo North

As of September 30, 2021 Travelzoo North

America Travelzoo Europe Jack’s Flight Club Elimination Consolidated

5 unchanged sentences

Total assets excluding discontinued operations $ 138,020 $ 31,659 $ 5,796 $ ( 73,305 ) $ 102,170

For the six months ended June 30, 2021 and 2020, the Company did not have any customers that accounted for 10% or more of revenue.

As of June 30, 2021 and December 31, 2020, the Company did not have any customers that accounted for 10% or more of accounts receivable.

For the nine months ended September 30, 2021 and 2020, the Company did not have any customers that accounted for 10% or more of revenue.

As of September 30, 2021 and December 31, 2020, the Company did not have any customers that accounted for 10% or more of accounts receivable.

The following table sets forth the breakdown of revenues (in thousands) by category and segment.

1 unchanged sentence

Local revenue includes Local Deals vouchers and entertainment offers (vouchers and direct bookings).

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

18 unchanged sentences

The following table sets forth revenue for countries that exceed 10% of total revenue (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

5 unchanged sentences

The following table sets forth property and equipment by geographic area (in thousands):

June 30, December 31,

September 30, December 31,

United States $ 522 $ 912

1 unchanged sentence

Total long-lived assets $ 794 $ 1,347

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 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 and Singapore units, which were 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.

Discontinued Operations

On March 10, 2020, Travelzoo issued a press release announcing that it will exit its loss-making 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.

The Asia Pacific business ceased operations as of March 31, 2020, except for the Company’s Japan and Singapore units, which were held for sale.

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 six months ended June 30, 2021 and 2020 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

The following table provides a summary of amounts included in discontinued operations for the three and six months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

15 unchanged sentences

Those reclassifications included direct operating expenses and certain inter-company charges that will not continue.

$ 64,000 of cost of revenues were reclassified from the discontinued operations to continued operations and $ 7,000 of cost of revenues were reclassified from the continued operations to discontinued operations for the six months ended June 30, 2020 .

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.

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 K.K.

(“Travelzoo Japan”) to Mr.

Hajime Suzuki, the former General Manager of Japan of the Company (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 obtained 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.

T he parties also entered into a License Agreement, whereby Travelzoo Japan obtained a license to use the intellectual property of Travelzoo exclusively in Japan and South Korea 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.

3 unchanged sentences

The Company records royalties for its licensing arrangements on a one-quarter lag basis.

The Company recognized royalties of $ 0 and $ 9,000 from Travelzoo Japan for the three and six months ended June 30, 2021.

The Company recognized royalties of $ 0 and 9,000 from Travelzoo Japan for the three and nine months ended September 30, 2021.

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 1 Singapore Dollar.

On August 24, 2020, the Company completed a sale of 100 % of the outstanding capital stock of Travelzoo (Singapore) Pty Ltd (“Travelzoo Singapore”), to an unaffiliated entity, Finest Hotels Pty Ltd d/b/a Travelzoo (“AUS Buyer”), which is fully owned by Mr.

Julian Rembrandt, the former General Manager of Southeast Asia and Australia of the Company for consideration of 1 Singapore Dollar.

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.

1 unchanged sentence

Licensing revenue is booked with a lag of one quarter.

The Company did not record royalties from Travelzoo Singapore for 2020 or for the three and six months ended June 30, 2021.

The Company recognized royalties of $ 2,000 from Travelzoo Singapore for 2020 or for the three and nine months ended September 30, 2021.

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,

2021 December 31,

7 unchanged sentences

Total liabilities from discontinued operations $ 469 $ 671

The net cash used in operating activities for the discontinued operations for the six months ended June 30, 2021 and 2020, were as follows (in thousands):

Six Months Ended

The net cash used in operating activities for the discontinued operations for the nine months ended September 30, 2021 and 2020, were as follows (in thousands):

Nine Months Ended

September 30,

Net cash used in operating activities $ 10 $ ( 1,821 )

6 unchanged sentences

All of our leases qualify as operating leases.

The following table summarizes the components of lease expense for the three and six months ended June 30, 2021 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

The following table summarizes the components of lease expense for the three and nine months ended September 30, 2021 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2021 2020 2021 2020

4 unchanged sentences

Total lease cost $ 858 $ 1,160 $ 3,051 $ 3,969

For the six months ended June 30, 2021 and 2020, cash payments against the operating lease liabilities total ed $ 2.3 million and $ 1.6 million, respectively.

ROU assets obtained in exchange for lease obligations was $ 1.8 million and $ 3.2 million for six months ended June 30, 2021 and 2020, respectively.

For the nine months ended September 30, 2021 and 2020, cash payments against the operating lease liabilities total ed $ 3.3 million and $ 3.1 million, respectively.

ROU assets obtained in exchange for lease obligations was $ 1.8 million and $ 3.2 million for nine months ended September 30, 2021 and 2020, respectively.

The following table summarizes the presentation in our condensed consolidated balance sheets of our operating leases (in thousands):

June 30, 2021 December 31, 2020

September 30, 2021 December 31, 2020

Operating lease right-of-use assets $ 8,005 $ 8,541

6 unchanged sentences

Years ending December 31,

2021 (excluding the three months ended June 30, 2021) $ 2,028

2021 (excluding the nine months ended September 30, 2021) $ 1,015

Thereafter 5,625

5 unchanged sentences

(a) $ 1.5 million was forgiven in settlement of certain outstanding indemnification claims disputed by the Sellers;

(b) $ 6.8 million, plus accrued interest, was paid to the Sellers by Travelzoo, and (c) the remaining $ 1.7 million to be paid by June 2021 pursuant to new promissory notes with each of the Sellers that contain a 12 % interest rate $ 6.8 million and the accrued interest was paid in the second quarter of 2020, the remaining $ 1.7 million promissory

note and the accrued interest was paid in the fourth quarter of 2020.

Total interest expense for the Promissory Notes of $ 142,000 was paid and recorded in Other income (loss), net in 2020.

4 unchanged sentences

In the second quarter of 2021, the Company settled the $ 535,000 PPP loan, $ 429,000 was forgiven which was recorded as gain in “Other income (loss), net”, the remaining outstanding balance of the loan and interest of $ 111,000 was paid off.

As of June 30, 2021, the $ 3.1 million PPP loan was still outstanding and was recorde d as Notes payable.

On July 1, 2021, the principal and the interest of the $ 3.1 million PPP loan were forgiven and a gain will be recorded in the three months ended September 30, 2021.

On July 1, 2021, the principal and the interest of the $ 3.1 million PPP loan were forgiven and a gain was recorded in “Other income (loss), net”, in the three months ended September 30, 2021 .

It is possible that the SBA could subsequently audit the forgiven loans.

The Company believes it was eligible to participate in PPP, calculated the loan amount correctly, spent loan proceeds on allowable uses and is entitled to loan forgiveness.

The Company will hold onto its financial documents relating to the PPP loans for six years.

The Company will hold onto its financial documents relating to the PPP loans for six years as required.

Related Party Transactions

1 unchanged sentence

On March 12, 2021, the Company, with the approval of the Audit Committee of the Board of Directors, entered into a License Agreement (the “License Agreement”) with Azzurro Brands Inc., a New York corporation (“Azzurro Brands”) that is a wholly-owned subsidiary of Azzurro Capital Inc., the Company’s largest shareholder.

Pursuant to the terms of the License Agreement, the Company was granted the exclusive right and license to use a database of 2.2 million subscribers that Azzurro Brands purchased from a competitor of Travelzoo.

The License Agreement requires that the Company pay a license fee of $ 413,000 per quarter with an initial payment of $ 894,000 due upon execution, which covers the period from execution until September 30, 2021 and the payment was made in the first quarter of 2021.

The second payment of $ 701,000 was made in the second quarter of 2021 which covers the period from October 2021 through March 2022.

Pursuant to the terms of the License Agreement, the Company was granted the exclusive right and license to use a database of 2.2 million non-duplicated subscribers that Azzurro Brands purchased from a competitor of Travelzoo.

The payment of $ 894,000 was made in the first quarter of 2021 and recorded in sales and marketing expenses for the nine months ended September 30, 2021.

The second payment of $ 701,000 was made in the second quarter of 2021 which covers the period from October 2021 through March 2022 and recorded in prepaid expenses and other as of September 30, 2021.

The License Agreement has a term of one ( 1 ) year with an automatic renewal, terminable by either party with sixty ( 60 ) days’ written notice before the end of the term.

9 unchanged sentences

The SRA contains customary terms for transactions of this type, including, but not limited to, representations and warranties made by the Company and Mr.

Subsequent Event

In July 2021, Mr.

Holger Bartel, the Company's Global Chief Executive, exercised an aggregate of 400,000 options using cashless exercise and withholding shares for taxes.

247,234 shares of common stock were withheld for option exercise price and taxes, and 152,766 shares of common stock were issued.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements