What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-12 · 262 added, 184 removed, 709 unchanged (39% of the section changed)

5 unchanged sentences

Cash and cash equivalents $ 19,513 $ 18,693

Accounts receivable, less allowance for doubtful accounts of $ 1,386 and $ 1,468 as of March 31, 2023 and December 31, 2022, respectively

Accounts receivable, less allowance for doubtful accounts of $ 1,345 and $ 1,468 as of June 30, 2023 and December 31, 2022, respectively

10,287 13,820

17 unchanged sentences

Deferred revenue 2,697 2,216

Income tax payable 234 —

Operating lease liabilities 2,395 2,972

5 unchanged sentences

Commitments and contingencies — —

Non-controlling interest 4,603 4,595

Stockholders’ deficit:

Stockholders’ equity:

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

16,505 shares issued and 15,669 shares outstanding and 16,505 shares issued and 15,704 outstanding as of March 31, 2023 and December 31, 2022, respectively)

Treasury stock (at cost, 836 shares at March 31, 2023 and 801 shares at December 31, 2022)

( 7,316 ) ( 7,130 )

15,170 shares issued and outstanding as of June 30, 2023, 16,505 shares issued and 15,704 outstanding as of December 31, 2022)

Treasury stock (at cost, 801 shares at December 31, 2022)

Additional paid in capital 11,816 23,274

3 unchanged sentences

Accumulated other comprehensive loss ( 4,690 ) ( 4,905 )

Total Travelzoo stockholders’ equity 6,429 4,256

Non-controlling interest 4,640 4,595

Total stockholders’ equity 11,069 8,851

3 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Revenues $ 21,128 $ 17,689 $ 42,729 $ 36,142

11 unchanged sentences

Income from continuing operations 2,661 1,048 6,344 3,422

Loss from discontinued operations, net of taxes ( 2 ) ( 11 )

Income (loss) from discontinued operations, net of taxes 2 10 — ( 1 )

Net income 2,663 1,058 6,344 3,421

2 unchanged sentences

Net income attributable to Travelzoo—continuing operations $ 2,624 $ 1,018 $ 6,299 $ 3,388

Net loss attributable to Travelzoo—discontinued operations $ ( 2 ) $ ( 11 )

Income (loss) per share—basic

Net income (loss) attributable to Travelzoo—discontinued operations $ 2 $ 10 $ — $ ( 1 )

Income per share—basic

Continuing operations $ 0.17 $ 0.08 $ 0.41 $ 0.28

Discontinued operations $ — $ — $ — $ —

Net income (loss) per share —basic $ 0.23 $ 0.20

Income (loss) per share—diluted

Net income per share —basic $ 0.17 $ 0.08 $ 0.41 $ 0.28

Income per share—diluted

Continuing operations $ 0.17 $ 0.08 $ 0.40 $ 0.27

Discontinued operations $ — $ — $ — $ —

Income (loss) per share—diluted $ 0.23 $ 0.19

Income per share—diluted $ 0.17 $ 0.08 $ 0.40 $ 0.27

Shares used in per share calculation from continuing operations—basic 15,275 12,513 15,485 12,285

5 unchanged sentences

(In thousands)

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Net income $ 2,663 $ 1,058 $ 6,344 $ 3,421

5 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

16 unchanged sentences

Income tax payable 234 ( 186 )

Other liabilities 819 176

Other liabilities, net 1,419 433

Net cash provided by (used in) operating activities 5,650 ( 16,990 )

7 unchanged sentences

Repurchase of common stock ( 4,870 ) —

Net cash used in financing activities ( 186 ) —

Exercise of stock options, net of taxes paid for net share settlement ( 299 ) 1,885

Net cash provided by (used in) financing activities ( 5,169 ) 1,885

Effect of exchange rate changes on cash, cash equivalents and restricted cash 382 ( 2,176 )

3 unchanged sentences

Supplemental disclosure of cash flow information:

Cash paid for income taxes, net $ 74 $ 259

Cash paid (refund) for income taxes, net $ ( 494 ) $ 771

Cash paid for amounts included in the measurement of lease liabilities $ 1,725 $ 1,715

7 unchanged sentences

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

Shares Amount

Balances, January 1, 2023 16,505 $ 165 $ ( 7,130 ) $ 23,274 $ ( 9,537 ) $ ( 4,753 ) $ 7,142 $ ( 4,905 ) $ 4,256

Balances, March 31, 2023 16,505 $ 165 $ ( 7,316 ) $ 23,670 $ ( 9,537 ) $ ( 4,753 ) $ 10,815 $ ( 4,825 ) $ 8,219 $ 4,603 $ 12,822

Stock-based compensation expense — — — 432 — — — — 432 — 432

Repurchase of common stock — — ( 4,683 ) — — — — ( 4,683 ) — ( 4,683 )

Retirement of treasury stock ( 1,495 ) ( 14 ) 11,999 ( 11,985 ) — — — — — — —

Exercise of stock options and taxes paid for net share 160 1 — ( 301 ) — — — — ( 300 ) — ( 300 )

Foreign currency translation adjustment — — — — — — — 135 135 — 135

Net income–Travelzoo — — — — — 3,673 — 3,673

Net income — — — — — — 2,626 — 2,626 37 2,663

Balances, June 30, 2023 15,170 $ 152 $ — $ 11,816 $ ( 9,537 ) $ ( 4,753 ) $ 13,441 $ ( 4,690 ) $ 6,429 $ 4,640 $ 11,069

Common Stock Treasury Stock Additional

Capital Tax Indemnification Note Receivable from Shareholder Retained

Earnings Accumulated

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

Shares Amount

As Restated As Restated

Balances, March 31, 2022 12,551 $ 126 $ ( 5,488 ) $ 4,957 $ — $ — $ 2,867 $ ( 3,931 ) $ ( 1,469 ) $ 4,604 $ 3,135

Stock-based compensation expense — — — 589 — — — — 589 — 589

Proceeds from exercise of stock options, net of share settlement 540 5 — 1,880 — — — — 1,885 — 1,885

Foreign currency translation adjustment — — — — — — — ( 602 ) ( 602 ) — ( 602 )

Net income — — — — — — 1,028 — 1,028 30 1,058

Balances, June 30, 2022 13,091 $ 131 $ ( 5,488 ) $ 7,426 $ — $ — $ 3,895 $ ( 4,533 ) $ 1,431 $ 4,634 $ 6,065

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

Common Stock Treasury Stock Additional

2 unchanged sentences

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

2 unchanged sentences

Stock-based compensation expense — — — 828 — — — — 828 — 828

Repurchase of common stock — — ( 4,869 ) — — — — ( 4,869 ) — ( 4,869 )

Retirement of treasury stock ( 1,495 ) ( 14 ) 11,999 ( 11,985 ) — — — — — — —

Exercise of stock options and taxes paid for net share 160 1 — ( 301 ) — — — — ( 300 ) — ( 300 )

Foreign currency translation adjustment — — — — — — — 215 215 — 215

Net income–Travelzoo — — — — — — 2,359 — 2,359

Balances, March 31, 2022 12,551 $ 126 $ ( 5,488 ) $ 4,957 $ — $ — $ 2,867 $ ( 3,931 ) $ ( 1,469 )

Net income — — — — — — 6,299 — 6,299 45 6,344

Balances, June 30, 2023 15,170 $ 152 $ — $ 11,816 $ ( 9,537 ) $ ( 4,753 ) $ 13,441 $ ( 4,690 ) $ 6,429 $ 4,640 $ 11,069

Common Stock Treasury Stock Additional

Capital Tax Indemnification Note Receivable from Shareholder Retained

Earnings Accumulated

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

Shares Amount

As Restated As Restated

Balances, January 1, 2022 12,551 $ 126 $ ( 5,488 ) $ 4,415 — — $ 508 $ ( 3,793 ) $ ( 4,232 ) $ 4,600 $ 368

Stock-based compensation expense — — — 1,131 — — — — 1,131 — 1,131

Proceeds from exercise of stock options, net of share settlement 540 5 — 1,880 — — — — 1,885 — 1,885

Foreign currency translation adjustment — — — — — — — ( 740 ) ( 740 ) — ( 740 )

Net income — — — — — — 3,387 — 3,387 34 3,421

Balances, June 30, 2022 13,091 $ 131 $ ( 5,488 ) $ 7,426 $ — $ — $ 3,895 $ ( 4,533 ) $ 1,431 $ 4,634 $ 6,065

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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We work in partnership with more than 5,000 top travel suppliers—our long-standing relationships give Travelzoo members access to irresistible offers.

Our most important products and services are the Travelzoo website (travelzoo.com), the Travelzoo iPhone and Android apps, the Top 20 ® email newsletter, the Travelzoo Network , and Jack’s Flight Club ®.

Our most important products and services are the Travelzoo website (travelzoo.com), the Travelzoo iPhone and Android apps, the Top 20 ® email newsletter, Standalone email newsletters, the Travelzoo Network , and Jack’s Flight Club ®.

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

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In March 2022, we announced the development of Travelzoo META, a subscription service that intends to provide members with exclusive access to innovative, high quality Metaverse travel experiences.

On December 30, 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), a Metaverse experience scouting business to support Travelzoo META.

On December 30, 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), a Metaverse experience scouting and development business to support Travelzoo META.

Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc.

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("Azzurro"), and also completed a private placement of newly issued shares.

Ralph Bartel, who founded the Company, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro.

Azzurro is the Company’s largest shareholder as of the time of this transaction and as of December 31, 2022, Azzurro and Ralph Bartel owned approximately 50.3 % the Company's outstanding shares.

On December 28, 2022, the stockholders of Travelzoo approved the issuance and sale of 3.4 million shares of common stock (the “Shares”) of Travelzoo to Azzurro, in exchange for certain consideration, and on December 30, 2022 (the “Closing Date”), the transaction was consummated.

The closing price of Travelzoo’s common stock on December 30, 2022 was $ 4.45 per share, resulting in an aggregate fair value of $ 15.2 million.

The purchase price was paid as follows:

(a ) $ 1.0 million in cash paid on the Closing Date;

(b) $ 4.8 million paid in the form of a promissory note issued on the Closing Date and payable by June 30, 2023 with accrued interest of 12 %;

and (c) the transfer to the Company of all outstanding capital stock of MTE, which transfer was effected pursuant to a merger of MTE with a wholly-owned subsidiary of the Company on the Closing Date.

(b) $ 4.8 million paid in the form of a promissory note issued on the Closing Date;

and (c) the transfer to the Company of all outstanding capital stock of MTE.

The Company recorded the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders' equity section on the consolidated balance sheet as of December 31, 2022.

As of June 30, 2023, Azzurro paid the interest of $ 285,000 , but has not yet paid the principal amount of the note.

The Company submitted a letter to Azzurro se eking payment and the parties are in the process of negotiating a payment plan.

Should satisfactory terms not be agreed for a payment plan, the Company shall have the right to pursue the shares serving as collateral under the promissory note.

Acquisitions in the unaudit ed condensed consolidated financial statements for further information.

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(“Jack’s Flight Club”), which operates Jack’s Flight Club , a subscription service that provides members with information about exceptional airfares.

As of March 31, 2023, Jack’s Flight Club h ad 2.0 million subscribers.

As of June 30, 2023, Jack’s Flight Club h ad over 2 million subscribers.

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

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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 ), of which $ 133,000 was repaid in 2021, $ 39,000 was repaid during the three months

ended March 31, 2023, and the remaining expected to be paid off in 2023.

The Company recorded this loan as current prepaid expense and other on the condensed consolidated balance sheet as of March 31, 2023.

An interest free loan was provided to the licensee for JPY 46 million (approximately $ 430,000 ), of which $ 133,000 was repaid in 2021, $ 113,000 was repaid during the six months ended June 30, 2023, and the remaining is expected to be paid off in 2023.

The Company recorded this loan as current prepaid expense and other on the condensed consolidated balance sheet as of June 30, 2023.

The Company recognized royalties of

$ 4,000 for its licensing arrangements from the licensee in Japan for the three and six months ended June 30, 2023.

The Company did not recognize any royalty from Travelzoo Japan in 2022.

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 $ 8,000 and $ 5,000 for its licensing arrangements from the licensee in Australia for the three months ended March 31, 2023 and 2022, respectively.

The Company did not recognize any royalty from Travelzoo Japan for the three months ended March 31, 2023 and 2022.

The Company recognized royalties of $ 9,000 and $ 7,000 for its licensing arrangements from the licensee in Australia for the three months ended June 30, 2023 and 2022, respectively.

The Company recognized royalties of $ 17,000 and $ 12,000 for its licensing arrangements from the licensee in Australia for the six months ended June 30, 2023 and 2022 , respectively.

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

Government funding

In January 2022 and July 2022, the Company’s German branch of Travelzoo (Europe) Limited, a wholly-owned subsidiary of the Company (“Travelzoo Germany”), received the notification and payment of approximately $ 1.2 million and $ 494,000 from the German Federal Government Bridging Aid III plan and Bridging Aid III+, respectively.

In January 2022, July 2022 and May 2023, the Company’s German branch of Travelzoo (Europe) Limited, a wholly-owned subsidiary of the Company (“Travelzoo Germany”), received the notification and payment of approximately $ 1.2 million, $ 494,000 and $ 205,000 from the German Federal Government Bridging Aid III plan, Bridging Aid III+ and Bridging Aid IV, respectively.

This program was for companies that suffered a Corona-related decrease in sales of at least 30% in one month compared to the reference month in 2019.

Travelzoo Germany applied for the funding in 2021 and 2022, respectively, and was approved by the German government in January 2022 and July of 2022.

The Company has to submit a final declaration in connection to this grant by June 30, 2023.

Travelzoo Germany applied for the funding in 2021 and 2022, respectively, and was approved by the German government in January 2022 and July of 2022 and May 2023.

The Company has to submit a final declaration in connection with the grant and the declaration date has been extended from June 30, 2023 to December 31, 2023.

The Company believes it was eligible to participate in the plan and is entitled to the payment and does not expect significant changes to the amount already received from the final submission.

The Company recorded $ 1.2 million and $ 494,000 gains in Other income, net in the first and third quarters of 2022, respectively.

The Company also received $ 68,000 job retention related funding from Canada in the three months ended March 31, 2022.

The Company recorded $ 1.2 million, $ 494,000 and $ 205,000 gains in Other income, net in the first and third quarters of 2022 and second quarter of 2023, respectively.

The Company also received $ 85,000 and $ 153,000 job retention related funding from Canada in the three and six months ended June 30, 2022.

Such funding was recorded against salary and related expenses.

The Company did not receive job retention related funding in the three months ended March 31, 2023.

Travelzoo funds its operations primarily with revenues generated from advertising fees and 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 $ 6.0 million as of March 31, 2023.

Cash provided by operating activities was $ 535,000 for the three months ended March 31, 2023.

In response to the global pandemic which severely limited travel , Travelzoo adjusted its refund policy in the second quarter of 2020 so that vouche rs were fully refundable until expiration or redemption by the customer.

This refund policy has mostly been adjusted as of April 1, 2022, back to fully refundable within fourteen days of purchase unless a surcharge is paid at the time of the vouc her purchase for the right to be fully refundable.

As of March 31, 2023, the Company has recorded merchant payables of $ 28.0 million related to unredeemed vouchers with the majority of vouchers expiring in 2023.

Management understands that these conditions could raise doubt over the Company’s ability to meet all of its obligations over the next twelve months, however, management has evaluated these conditions and concluded that management's plans alleviate these concerns.

Management’s plans include, among others, a focus on managing operating expenses while increasing revenues, as well as obtaining additional financing if required.

Revenue and net income increased for the three months ended March 31, 2023 compared to the same period of last year.

The Company is expecting revenue and net income to increase for 2023 based on improving conditions for travel.

Cash and cash equivalents were $ 19.1 million as of March 31, 2023.

Although as mentioned above, all merchant payables are classified as current, the expiration dates of these vouchers range between April 2023 through December 2025 with the majority of the vouchers expiring during 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

However, if redemption and refund activities are more accelerated, or if we are not able to increase operating income, we may need to obtain additional financing to meet our working capital needs in the future.

Management believes that it could raise funds through the issuance of equity securities or through debt securities if necessary.

Management therefore concluded that these actions and plans have alleviated the doubt of the Company's ability to continue as a going concern.

However, the Company cannot predict, with certainty, the outcome of its action to generate liquidity, including the availability of additional financing on reasonable terms and conditions, or whether such actions would generate the expected liquidity as planned.

The Company did not receive job retention related funding in 2023.

Going Concern

In accordance with the requirements of Accounting Standards Update (“ASU”) 2014-15, “Presentation of Financial Statements Going Concern (ASU 2014-15)”, and ASC 205, “Presentation of Financial Statements”, we have the responsibility to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about our ability to meet our future financial obligations.

In its evaluation for this report, management considered our current financial condition and liquidity sources, including current funds available, forecasted future cash flows and our conditional and unconditional obligations due within one year following the date of issuance of this Quarterly Report on Form 10-Q.

We believe we have the ability to meet our obligations for at least one year from the date of issuance of this Form 10-Q.

Accordingly, the accompanying condensed consolidated financial statements have been prepared assuming that we will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course business.

Ralph Bartel, who founded Travelzoo, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro.

Azzurro is the Company’s largest shareholder, and as of March 31, 2023 together with Ralph Bartel, in his individual capacity (together, the “Azzurro Parties"), holds approximately 50.5 % of the Company's outstanding shares.

Azzurro is the Company’s largest shareholder, and as of June 30, 2023 holds approximately 48.9 % of the Company's outstanding shares.

Holger Bartel, the Company's Global CEO, is Ralph Bartel's brother and separately holds 3.4 % of the Company's outstanding shares as of June 30, 2023.

Financial Statements

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In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2022, included in the Company’s Form 10-K filed with the SEC on March 31, 2023.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries.

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Actual results could differ materially from those estimates.

The results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other future period, and the Company makes no representations related thereto.

The results of operations for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023 or any other future period, and the Company makes no representations related thereto.

(b) Recent Accounting Pronouncements

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This update is effective for public business entities for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

For Smaller Reporting Companies (as such term is defined by the SEC), such as Travelzoo, the standard will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

For Smaller Reporting Companies (as such term is defined by the SEC), such as Travelzoo, the standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

Early adoption is permitted for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.

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For fixed-fee website advertising, the Company recognizes revenues ratably over the contracted placement period.

For the Top 20 email newsletter and other email products, the Company recognizes revenues when the emails are delivered to its members.

For the Top 20 email newsletter, Standalone email newsletters and other email products, the Company recognizes revenues when the emails are delivered to its members.

The Company offers advertising on a cost-per-click basis, which means that an advertiser pays the Company only when a user clicks on an advertisement on Travelzoo properties or Travelzoo Network members’ properties.

For these customers, the Company recognizes revenues each time a user clicks on the ad.

The Company also offers advertising on other basis, such as cost-per-impression, which means that an advertiser pays the Company based on the number of times their advertisement is displayed on Travelzoo properties, email advertisements, Travelzoo Network properties, or social media properties.

The Company also offers advertising on other bases, such as cost-per-impression, which means that an advertiser pays the Company based on the number of times their advertisement is displayed on Travelzoo properties, email advertisements, Travelzoo Network properties, or social media properties.

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

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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.

As of December 31, 2022, $ 1.2 million was recorded as deferred revenue for Jack's Flight Club, of which $ 630,000 was recognized in the three months ended March 31, 2023, $ 981,000 was recorded as deferred revenue for Travelzoo North America and Travelzoo Europe, of which $ 250,000 was recognized as revenue in the three months ended March 31, 2023 .

As of March 31, 2023, the deferred revenue balance was $ 3.1 million, of which $ 1.9 million was for Jack's Flight Club and the remaining $ 1.2 million was for Travelzoo North America and Travelzoo Europe.

As of December 31, 2022, $ 1.2 million was recorded as deferred revenue for Jack's Flight Club, of which $ 985,000 was recognized in the six months ended June 30, 2023 , $ 981,000 was recorded as deferred revenue for Travelzoo North America and Travelzoo Europe, of which $ 797,000 was recognized as revenue in the six months ended June 30, 2023 .

As of June 30, 2023, the deferred revenue balance was $ 2.7 million, of which $ 1.8 million was for Jack's Flight Club and the remaining $ 861,000 was for Travelzoo North America and Travelzoo Europe.

Reserve for Refunds to Members

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This refund policy has been adjusted starting April 1, 2022, back to fully refundable within fourteen days of purchase unless a surcharge is paid at the time of the voucher purchase for the right to be fully refundable.

The expiration dates of vouchers range between April 2023 through December 2025 with the majority of vouchers expiring during 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

The expiration dates of vouchers range between July 2023 through December 2025 with the majority of vouchers expiring during 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis and final payment upon expiration may not be due for up to a year after expiration.

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.

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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 March 31, 2023, the Company had approximately $ 7.0 million of unredeemed vouchers that had been sold through March 31, 2023, representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 785,000 for these unredeemed vouchers as of March 31, 2023, which is recorded as a reduction of revenues and is reflected as a current liability in accrued expenses and other on the condensed consolidated balance sheet.

As of June 30, 2023, the Company had approximately $ 6.0 million of unredeemed vouchers that had been sold through June 30, 2023, representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 572,000 for these unredeemed vouchers as of June 30, 2023, which is recorded as a reduction of revenues and is reflected as a current liability in accrued expenses and other on the condensed consolidated balance sheet.

As of December 31, 2022, the Company had approximately $ 8.1 million of unredeemed vouchers that had been sold through 2022 representing the Company’s commission earned from the sale and estimated a refund liability of $ 1.3 million for these unredeemed vouchers as of December 31, 2022, which was recorded as a reduction of revenues and was reflected as a current liability in accrued expenses and other on the condensed consolidated balance sheet.

The Company has recorded Merchant Payables of $ 28.0 million as of March 31, 2023 related to unredeemed vouchers.

The Company has recorded Merchant Payables of $ 23.9 million as of June 30, 2023 related to unredeemed vouchers.

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

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Goodwill is evaluated for impairment annually, and whenever events or changes in circumstances indicate the carrying value of goodwill may not be recoverable.

In testing goodwill for impairment, the Company first uses a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount.

In testing goodwill for impairment, the Company

first uses a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than the carrying amount.

If the qualitative assessment indicates that goodwill impairment is more likely than not, the Company performs an impairment test by comparing the book value of net assets to the fair value of the reporting units.

The Company performed its annual impairment test as of October 31, 2022 and no impairment charge was identified in connection with the annual impairment test .

The Company did no t identify any indicators of impairment during the three months ended March 31, 2023 .

The Company did no t identify any indicators of impairment during the six months ended June 30, 2023.

Operating Leases

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and internationally.

As of March 31, 2023 and December 31, 2022, the Company did not have any customers that accounted for 10% or more of accounts receivables.

As of March 31, 2023, the Company had merchant payables of $ 28.0 million related to the sale of vouchers.

As of June 30, 2023 and December 31, 2022, the Company did not have any customers that accounted for 10% or more of accounts receivables.

As of June 30, 2023, the Company had merchant payables of $ 23.9 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.

1 unchanged sentence

Payables to merchants are generally due upon redemption of vouchers.

The vouchers expire between April 2023 through December 2025 with the majority of vouchers expiring during 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

The vouchers expire between July 2023 through December 2025 with the majority of vouchers expiring during 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis and final payment upon expiration may not be due for up to a year after expiration.

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 March 31, 2023 will be sufficient to provide for working capital needs for at least the next twelve months.

Based on current projections of redemption activity, management expect that cash on hand as of June 30, 2023 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.

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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:

March 31, December 31,

June 30, December 31,

Cash and cash equivalents $ 19,513 $ 18,693

2 unchanged sentences

Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows $ 20,197 $ 19,378

The Company’s restricted cash was included in noncurrent assets as of March 31, 2023 and December 31, 2022.

The Company’s restricted cash was included in noncurrent assets as of June 30, 2023 and December 31, 2022.

Net Income 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

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Net income attributable to Travelzoo—continuing operations $ 2,624 $ 1,018 $ 6,299 $ 3,388

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Weighted average common shares—diluted 15,337 12,637 15,557 12,591

Income (loss) per share—basic

Income per share—basic

Continuing operations $ 0.17 $ 0.08 $ 0.41 $ 0.28

Discontinued operations — — — —

Net income (loss) per share —basic $ 0.23 $ 0.20

Income (loss) per share—diluted

Net income per share —basic $ 0.17 $ 0.08 $ 0.41 $ 0.28

Income per share—diluted

Continuing operations $ 0.17 $ 0.08 $ 0.40 $ 0.27

Discontinued operations — — — —

Net income (loss) per share—diluted $ 0.23 $ 0.19

For the three months ended March 31, 2023 and 2022, options to purchas e 950,000 shares and 50,000 shares of common stock, respectively, were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

Net income per share—diluted $ 0.17 $ 0.08 $ 0.40 $ 0.27

For each of the three and six months ended June 30, 2023 and 2022, options to purchas e 750,000 shares of common stock were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

Stock Purchase Agreement (“SPA”) between Travelzoo and Azzurro Capital Inc., a Related-Party

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and (c) the transfer to the Company of all outstanding capital stock of MTE, which transfer was effected pursuant to a merger of MTE with a wholly-owned subsidiary of the Company on the Closing Date.

The Company records the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders' equity section on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The Company records the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders ’ equity section on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022.

As of June 30, 2023, Azzurro paid the interest of $ 285,000 , but has not yet paid the principal amount of the note.

The Company submitted a letter to Azzurro seeking payment and the parties are in the process of negotiating a paym ent plan.

Should satisfactory terms not be agreed for a payment plan, the Company shall have the right to pursue the shares serving as collateral under the promissory note.

Travelzoo acquired the entire business of MTE.

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The License Agreement was reviewed and unanimously approved by the Audit Committee of the Board of Directors, which consists solely of independent directors.

The purchase price for the transaction was $ 1.75 million, with $ 600,000 paid in cash upon closing in

March 2022 and the remaining $ 1.15 million payable in the form of a credit with Seller relating to prepaid license fees, under the License Agreement.

The purchase price for the transaction was $ 1.75 million, with $ 600,000 paid in cash upon closing in March 2022 and the remaining $ 1.15 million payable in the form of a credit with Seller relating to prepaid license fees, under the License Agreement.

The remaining commitment of the Company under the License Agreement for the then-current remaining term (equal to $ 825,000 ) was eliminated.

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The strategic rationale for the Jack’s Flight Club acquisition was to expand Jack’s Flight Club ’s membership to Travelzoo members worldwide, so the members from Travelzoo could also sign up to receive offers from Jack’s Flight Club.

The Company renegotiated with Jack’s Flight Club in June 2020 and reached a negotiated settlement which resulted a gain in “General and administrative expenses” for the partial forgiveness for the promissory note issued for the acquisition.

renegotiated with Jack’s Flight Club in June 2020 and reached a negotiated settlement which resulted a gain in “General and administrative expenses” for the partial forgiveness for the promissory note issued for the acquisition.

The acquisition has been accounted for using the acquisition method in accordance with ASC 805, Business Combinations.

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The Company performed an annual impairment test in October did not identify any further indicators of impairment as of December 31, 2022.

The Company also did not identify any indicators of impairment during the three months ended March 31, 2023 .

The Company also did not identify any indicators of impairment during the six months ended June 30, 2023 .

Intangible Assets

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No impairment charge was identified and recorded for goodwill in 2022.

The following table represents the activities of intangible assets for the three months ended March 31, 2023 and 2022 (in thousands):

The following table represents the activities of intangible assets for the three and six months ended June 30, 2023 and 2022 (in thousands):

Jack’s Flight Club Secret Escape Spain Secret Escape U.S.

12 unchanged sentences

Intangible assets—March 31, 2023 2,183 288 778

Amortization expense for acquired intangibles was $ 402,000 and $ 433,000 for the three months ended March 31, 2023 and 2022, respectively.

Expected future amortization expense of acquired intangible assets as of March 31, 2023 is as follows (in thousands):

Amortization of intangible assets with definite lives ( 158 ) ( 36 ) ( 194 )

Intangible assets—June 30, 2023 $ 2,025 $ 252 $ 584

Amortization expense for acquired intangibles was $ 388,000 and $ 445,000 for the three months ended June 30, 2023 and 2022, respectively.

Amortization expense for acquired intangibles was $ 790,000 and $ 878,000 for the six months ended June 30, 2023 and 2022, respectively.

Expected future amortization expense of acquired intangible assets as of June 30, 2023 is as follows (in thousands):

Years ending December 31,

2023 (excluding the three months ended March 31, 2023) 1,159

2023 (excluding the six months ended June 30, 2023) 777

The Company performed its annual impairment testing of Trade name as of October 31, 2022 using a relief from royalty method.

As previously discussed, the Company’s impairment test indicated that Jack’s Flight Club’s indefinite lived intangible assets (“Trade name”) was impaired for $ 200,000 in 2022.

No impairment was identified in the three months ended March 31, 2023.

As of March 31, 2023, the carrying value of the Trade name was $ 1.5 million.

No impairment was identified in the six months ended June 30, 2023.

As of June 30, 2023, the carrying value of the Trade name was $ 1.5 million.

Commitments and Contingencies

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The Company accrues for legal contingencies if the Company can estimate the potential liability and if the Company believes it is probable that the case will be ruled against it.

Accruals for legal contingencies were not material as of March 31, 2023 and December 31, 2022.

Accruals for legal contingencies were not material as of June 30, 2023 and December 31, 2022.

If a legal claim for which the Company did not accrue is resolved against it, the Company would record the expense in the period in which the ruling was made.

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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 material payments for the three months ended March 31, 2023 and 2022.

The Company did not make material payments for the six months ended June 30, 2023 and 2022.

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 eight years .

Refer to Note 11 for leases as of March 31, 2023.

Refer to Note 11 for leases as of June 30, 2023.

The Company maintained standby letters of credit (“LOC”) serve as collateral issued to the 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 $ 1.0 million as of March 31, 2023, which represent the minimum obligations the Company has under agreements with certain suppliers.

The Company has purchase commitments aggregating approximately $ 617,000 as of June 30, 2023, 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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In determining the quarterly provisions for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on our expected annual income and statutory tax rates in the U.S., Canada, and the U.K.

The Company's effective tax rate from continuing operations was 27 % and 29 %, respectively, for the three months ended March 31, 2023 and 2022.

The Company’s effective tax rate for the three months ended March 31, 2023 changed from the three months ended March 31, 2022 primarily due to a decrease in non-deductible stock compensation in the three months ended March 31, 2023.

As of March 31, 2023, the Company is permanently reinvested in certain of its non-U.S.

The Company’s effective tax rate from continuing operations was 29 % and 47 %, respectively, for the three months ended June 30, 2023 and 2022.

The Company’s effective tax rate for the three months ended June 30, 2023 changed from the three months ended June 30, 2022 primarily due to a decrease in non-deductible stock compensation in the three months ended June 30, 2023.

The Company ’s effective tax rate was 28 % and 36 %, respectively, for the six months ended June 30, 2023 and 2022.

Our effective tax rate changed for the six months ended June 30, 2023 from the six months ended June 30, 2022 primarily due to a decrease in non-deductible stock compensation in the six months ended June 30, 2023.

As of June 30, 2023, 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.

As of March 31, 2023, the Company had approximately $ 16.9 million in total unrecognized tax benefits, of which up to $ 16.4 million would favorably affect the Company’s effective income tax rate if realized.

As of June 30, 2023, the Company had approximately $ 16.9 million in total unrecognized tax benefits, of which up to $ 16.4 million would favorably affect the Company’s effective income tax rate if realized.

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.

As of March 31, 2023 and December 31, 2022, the Company had approximately $ 746,000 and $ 704,000 in accrued interest and penalties, respectively.

As of June 30, 2023 and December 31, 2022, the Company had approximately $ 602,000 and $ 704,000 in accrued interest and penalties, respectively.

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

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federal and certain state tax examinations for certain years after 2018 and forward and is subject to California tax examinations for years after 2017.

We do not know what our income taxes will be in future periods.

There may be fluctuations that have a material impact on our results of operations.

Our income taxes are dependent on numerous factors such as the geographic mix of our taxable income, federal and state and foreign country tax law and regulations and changes thereto, the determination of whether valuation allowances for certain tax assets are required or not, audits of prior years' tax returns resulting in adjustments, resolution of uncertain tax positions and different treatment for certain items for tax versus books.

We expect fluctuations in our income taxes from year to year and from quarter to q uarter.

Some of the fluctuations may be significant and have a material impact on our results of operations.

On March 27, 2020, the CARES Act, which, along with earlier issued IRS guidance, provides for deferral of certain taxes.

The CARES Act, among other things, also contains numerous other provisions which may benefit the Company.

We continue to assess the effect of the CARES Act and ongoing government guidance related to the global pandemic that may be issued.

Accumulated Other Comprehensive Loss

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Beginning balance $ ( 4,825 ) $ ( 3,931 ) $ ( 4,905 ) $ ( 3,793 )

1 unchanged sentence

Ending balance $ ( 4,690 ) $ ( 4,533 ) $ ( 4,690 ) $ ( 4,533 )

There were no amounts reclassified from accumulated other comprehensive loss for the three months ended March 31, 2023 and 2022.

There were no amounts reclassified from accumulated other comprehensive loss for the three and six months ended June 30, 2023 and 2022.

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

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Bartel (the “Option Agreement Amendments”).

Pursuant to the Option Agreement Amendments and subject to shareholder approval, the exercise price for the options was repriced to the official NASDAQ closing share price on March 30, 2020 (the date of execution of the Option Agreement Amendments, which immediately followed the date of approval of the grants from the Board of Directors of the

Company), which was $ 3.49 .

Additionally, the Option Agreement Amendments made the following increases:

6 unchanged sentences

As of December 31, 2021, stock-based compensation related to the 2019 Option Agreement and applicable Option Agreement Amendment was fully expensed.

Bartel exercised the remaining 540,000 options granted pursuant to the 2019 Option Agreement during the three months ended June 30, 2022 .

Bartel exercised

the remaining 540,000 options granted pursuant to the 2019 Option Agreement during the three months ended June 30, 2022 .

The Company received aggregate cash proceeds of $ 1.9 million.

6 unchanged sentences

In 2021, 125,000 unvested options were forfeited upon employees’ departure, 150,000 options were exercised and 88,917 shares of common stock were issued as the result of the cashless exercises or net settlement with respect to the option exercise price which were approved by Travelzoo’s Board of Directors.

As of March 31, 2023, 150,000 options were outstanding and 75,000 of these options were vested.

Total stock-based compensation related to these option grants of $ 72,000 and $ 71,000 was recorded in general and administrative expenses for the three months ended March 31, 2023 and 2022.

As of March 31, 2023, there was approximately $ 121,000 of unrecognized stock-based compensation expense relating to these options.

During the three months ended June 30, 2023, 50,000 options were exercised and 18,098 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

As of June 30, 2023, 100,000 options were outstanding and 25,000 of these options were vested.

Total stock-based compensation related to these option grants of $ 72,000 was recorded in general and administrative expenses for each of the three months ended June 30, 2023 and 2022.

Total stock-based compensation related to these option grants of $ 145,000 was recorded in general and administrative expenses for each of the six months ended June 30, 2023 and 2022 .

As of June 30, 2023, there was approximately $ 48,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 0.2 years.

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S tock-based compensation related to this grant was fully expensed by the end of the first quarter of 2022.

As of March 31, 2023, 200,000 options were outstanding and all of these options were vested.

During the three months ended June 30, 2023, the remaining 200,000 options were exercised and 121,307 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

On May 29, 2020, pursuant to an execut ed 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.

2 unchanged sentences

In 2022, 50,000 unvested options were forfeited upon one employee’s departure, 25,000 options were exercised and 4,676 shares of common stock were issued as the result of the cashless exercises or net settlement with respect to the option exercise price which were approved by Travelzoo’s Board of Directors.

As of March 31, 2023, 75,000 options were outstanding and 50,000 of these options were vested.

Total stock-based compensation related to these option grants of $ 25,000 and $ 49,000 was recorded in general and administrative expenses for the three months ended March 31, 2023 and 2022.

As of March 31, 2023, there was approximately $ 98,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 1 year.

During the three months ended June 30, 2023, 50,000 options were exercised and 20,075 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

As of June 30, 2023, 25,000 options were outstanding and none of these options were vested.

Total stock-based compensation related to these option grants of $ 24,000 and $ 49,000 was recorded in general and administrative expenses for the three months ended June 30, 2023 and 2022, respectively.

Total stock-based compensation related to these option grants of $ 49,000 and $ 98,000 was recorded in general and administrative expenses for the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, there was approximately $ 74,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 0.8 years.

On June 1, 2021, pursuant to an executed Option Agreement, the shareholders of the Company approved the grant of stock options to purchase 50,000 shares of common stock to one employee, with an exercise price of $ 9.44 , with annual vesting starting January 1, 2022 and ending on January 1, 2025.

The options expire in January 2026.

As of March 31, 2023, 50,000 options were outstanding and 25,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 36,000 was recorded in general and administrative expenses for each of the three months ended March 31, 2023 and 2022 .

As of March 31, 2023, there was approximately $ 251,000 of unrecognized stock-based compensation expense relating to these options.

As of June 30, 2023, 50,000 options were outstanding and 25,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 36,000 was recorded in general and administrative expenses for each of the three months ended June 30, 2023 and 2022, respectively.

Total stock-based compensation related to this option grant of $ 72,000 was recorded in general and administrative expenses for each of the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, there was approximately $ 215,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 1.5 years.

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This grant was approved at the 2022 Annual Meeting of the shareholders.

As of March 31, 2023, 600,000 options were outstanding and 300,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 216,000 was recorded in general and administrative expenses for the three months ended March 31, 2023 .

The Company did not recognize stock-based compensation expense related to this option grant for the three months ended March 31, 2022.

As of March 31, 2023, there was approximately $ 648,000 of unrecognized stock-based compensation expense relating to these options.

As of June 30, 2023, 600,000 options were outstanding and 450,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 216,000 and $ 433,000 was recorded in general and administrative expenses for the three months ended June 30, 2023 and 2022, respectively.

Total stock-based compensation related to this option grant of $ 433,000 was recorded in general and administrative expenses for each of the six months ended June 30, 2023 and 2022, respectively.

As of June 30, 2023, there was approximately $ 433,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 0.5 years.

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The Company did not recognize stock-based compensation expense for this grant as the performance targets were not achieved and thus no shares were vested in 2022.

Total stock-based compensation related to this option grant of $ 30,000 was recorded in sales and marketing expenses and thus 8,333 shares were vested for the three months ended March 31, 2023.

As of March 31, 2023, 100,000 options were outstanding.

As of March 31, 2023, there was approximately $ 338,000 of unrecognized stock-based compensation expense relating to these options.

As of June 30, 2023, 100,000 options were outstanding.

Total stock-based compensation related to this option grant of $ 30,000 and $ 60,000 was recorded in sales and marketing expenses for the three and six months ended June 30, 2023 and thus 16,666 shares were vested .

As of June 30, 2023, there was approximately $ 308,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 2 years.

In March 2023, the Company granted an employee options to purchase 200,000 shares of common stock of the Company, with an exercise price of $ 4.96 and vesting 12.5 % every six months over four years beginning on June 30, 2023 and ending on December 31, 2026.

This grant is subject to final approval at the Annual Meeting of Stockholders to be held in June 2023.

In March 2023, the Company granted its General Counsel and Head of Global Functions, Christina Sindoni Ciocca, options to purchase 200,000 shares of common stock of the Company, with an exercise price of $ 4.96 and vesting 12.5 % every six months over four years beginning on June 30, 2023 and ending on December 31, 2026.

This grant was approved at the Annual Meeting of Stockholders held in June 2023.

The options expire in March 2025.

As of March 31, 2023, 200,000 options were outstanding and 25,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 17,000 was recorded in general and administrative expenses for the three months ended March 31, 2023.

As of March 31, 2023, there was approximately $ 539,000 of unrecognized stock-based compensation expense relating to these options.

As of June 30, 2023, 200,000 options were outstanding and 25,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 52,000 and $ 70,000 was recorded in general and administrative expenses for the three and six months ended June 30, 2023.

As of June 30, 2023, there was approximately $ 487,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 3.5 years.

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In 2022, the Company repurchased 306,375 shares of common stock for an aggregate purchase price of $ 1.6 million, which were recorded as part of treasury stock as of December 31, 2022.

In the three months ended March 31, 2023, the Company repurchased 34,687 shares of common stock for an aggregate purchase price of $ 186,000 , which were recorded as part of treasury stock as of March 31, 2023.

As of March 31, 2023, there were 658,938 shares remaining to be repurchased under this program .

During the three and six months ended June 30, 2023, the Company repurchased 658,938 shares and 693,625 shares of common stock, respectively, for an aggregate purchase price of $ 4.7 million and $ 4.9 million, respectively, which were retired and recorded as a reduction of additional paid-in capital.

This stock repurchase program was completed in the second quarter of 2023.

Segment Reporting and Significant Customer Information

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In March 2022, the Company announced the development of Travelzoo META, a subscription service that intends to provide members with exclusive access to innovative, high quality Metaverse travel experiences.

On December 30, 2022, the Company acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), a Metaverse experience scouting business to support Travelzoo META.

On December 30, 2022, the Company acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), a Metaverse experience scouting and development business to support Travelzoo META.

The Company ’ s chief operating decision maker viewed licensing and Travelzoo META business as New Initiatives and reviewed and evaluated New Initiatives as a separate segment.

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Jack’s Flight Club consists of subscription revenue from premium members to access and receive flight deals from Jack’s Flight Club via email or via Android or Apple mobile applications.

New Initiatives consists of Travelzoo licensing business and Travelzoo META subscription service and scouting business.

New Initiatives consists of Travelzoo licensing business and Travelzoo META subscription service and scouting and development business.

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

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

Three Months Ended March 31, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Elimination Consolidated

Three Months Ended June 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 13,642 $ 6,462 $ 1,011 $ 13 $ 21,128

2 unchanged sentences

Operating profit (loss) $ 3,753 $ ( 239 ) $ 97 $ ( 338 ) $ 3,273

Three Months Ended March 31, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Elimination Consolidated

Three Months Ended June 30, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 12,337 $ 4,395 $ 952 $ 5 $ 17,689

2 unchanged sentences

Operating profit (loss) $ 3,272 $ ( 1,472 ) $ 161 $ ( 180 ) $ 1,781

Six Months Ended June 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 28,209 $ 12,540 $ 1,959 $ 21 $ 42,729

Intersegment revenues (expenses) 682 ( 766 ) 84 — —

Total net revenues 28,891 11,774 2,043 21 42,729

Operating profit (loss) $ 8,269 $ 218 $ 52 $ ( 555 ) $ 7,984

Six Months Ended June 30, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 23,835 $ 10,522 $ 1,775 $ 10 $ 36,142

Intersegment revenues (expenses) 234 ( 234 ) — — —

Total net revenues 24,069 10,288 1,775 10 36,142

Operating profit (loss) $ 5,092 $ ( 1,294 ) $ 184 $ ( 282 ) $ 3,700

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 March 31, 2023 Travelzoo North

As of June 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Elimination Consolidated

5 unchanged sentences

Total assets excluding discontinued operations $ 97,693 $ 19,253 $ 18,737 $ 267 $ ( 68,687 ) $ 67,263

For the three months ended March 31, 2023 and 2022, the Company did not have any customers that accounted for 10% or more of revenue.

As of March 31, 2023 and December 31, 2022, the Company did not have any customers that accounted for 10% or more of accounts receivable.

For the three and six months ended June 30, 2023 and 2022, the Company did not have any customers that accounted for 10% or more of revenue.

As of June 30, 2023 and December 31, 2022, 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

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Travelzoo North America

7 unchanged sentences

Jack’s Flight Club

1,095 952 2,043 1,775

New Initiatives 13 5 21 10

2 unchanged sentences

Jack’s Flight Club

1,095 952 2,043 1,775

New Initiatives 13 5 21 10

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

United States $ 12,749 $ 11,222 $ 26,222 $ 21,865

4 unchanged sentences

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

March 31, December 31,

June 30, December 31,

United States $ 150 $ 274

China (Hong Kong) 318 196

Rest of the world 184 187

6 unchanged sentences

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, 2023 and 2022 (in thousands):

Three Months Ended

The following table provides a summary of amounts included in discontinued operations for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Revenues $ — $ — $ — $ —

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The parties also entered into a License Agreement, whereby 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.

An interest free loan was provided to the Japan Buyer for JPY 46.0 million (approximately 46.0 million) to be repaid over 3 years.

The Japan Buyer repaid $ 133,000 , $ 39,000 was repaid during the three months ended March 31, 2023, and the remaining expected to be paid off in 2023.

The Company recorded this loan as short-term prepaid expense and other on the consolidated balance sheet as of March 31, 2023.

An interest free loan was provided to the licensee for JPY 46 million (approximately $ 430,000 ), of which $ 133,000 was repaid in 2021, $ 113,000 was repaid during six months ended June 30, 2023, and the remaining is expected to be paid off in 2023.

The Company recorded this loan as current prepaid expense and other on the condensed consolidated balance sheet as of June 30, 2023.

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

The Company did not recognize royalties for the three months ended March 31, 2023 and 2022.

The Company recognize royalties $ 4,000 for the three and six months ended June 30, 2023.

The Company did not recognize royalties for the three and six months ended June 30, 2022.

On August 24, 2020, the Company completed a sale of 100 % of the outstanding capital stock of 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.

The non-exclusive license in China and Hong Kong was terminated by Travelzoo.

1 unchanged sentence

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

The Company recorded $ 8,000 and $ 5,000 in licensing revenue from the licensee in Australia, New Zealand, and Singapore for the three months ended March 31, 2023 and 2022, respectively.

The Company recognized royalties of $ 9,000 and $ 7,000 for its licensing arrangements from the licensee in Australia for the three months ended June 30, 2023 and 2022, respectively.

The Company recognized royalties of $ 17,000 and $ 12,000 for its licensing arrangements from the licensee in Australia for the six months ended June 30, 2023 and 2022 , 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):

9 unchanged sentences

Total liabilities from discontinued operations $ 451 $ 452

The net cash used in operating activities for the discontinued operations for the three months ended March 31, 2023 and 2022, were as follows (in thousands):

Three Months Ended

The net cash used in operating activities for the discontinued operations for the six months ended June 30, 2023 and 2022, were as follows (in thousands):

Six Months Ended

Net cash used in operating activities $ ( 1 ) $ ( 21 )

6 unchanged sentences

All of our leases qualify as operating leases.

The following table summarizes the components of lease expense for the three months ended March 31, 2023 and 2022 (in thousands):

Three Months Ended

The following table summarizes the components of lease expense for the three months ended June 30, 2023 and 2022 (in thousands):

Three Months Ended Six Months Ended

June 30, June 30,

2023 2022 2023 2022

Operating lease cost $ 646 $ 558 $ 1,320 $ 1,243

3 unchanged sentences

Total lease cost $ 742 $ 640 $ 1,496 $ 1,460

For the three months ended March 31, 2023 and 2022, cash payments against the operating lease liabilities total ed $ 860,000 and $ 938,000 , respectively.

There was no ROU assets obtained in exchange for lease obligations for three months ended March 31, 2023 and 2022.

Cash payments against the operating lease liabilities total ed $ 1.7 million for each of the six months ended June 30, 2023 and 2022.

There wa s no ROU assets obtained in exchange for lease obligations for six months ended June 30, 2023 and 2022 .

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

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Operating lease right-of-use assets $ 6,292 $ 7,440

6 unchanged sentences

Years ending December 31,

2023 (excluding the three months ended March 31, 2023) $ 2,237

2023 (excluding the three months ended June 30, 2023) $ 1,432

Thereafter 2,925

4 unchanged sentences

The Company’s consolidated financial statements include Jack’s Flight Club where the Company has operating control but owns 60 % of the equity interest.

The non-controlling interest for the three months ended March 31, 2023 and 2022 was as follow (in thousands):

The non-controlling interest for the three and six months ended June 30, 2023 and 2022 was as follow (in thousands):

Non-controlling interest—January 1, 2022 $ 4,600

Net loss attributable to non-controlling interest 4

Net income attributable to non-controlling interest 4

Non-controlling interest—March 31, 2022 4,604

Net loss attributable to non-controlling interest 30

Net income attributable to non-controlling interest 30

Non-controlling interest—June 30, 2022 4,634

Net loss attributable to non-controlling interest 2

Net income attributable to non-controlling interest 2

Non-controlling interest—September 30, 2022 4,636

1 unchanged sentence

Non-controlling interest—December 31, 2022 4,595

Net loss attributable to non-controlling interest 8

Net income attributable to non-controlling interest 8

Non-controlling interest—March 31, 2023 4,603

Net income attributable to non-controlling interest 37

Non-controlling interest—June 30, 2023 $ 4,640

Related Party Transactions

Ralph Bartel, who founded Travelzoo and who is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro.

As of March 31, 2023 , Azzurro is the Company's largest stockholder, and together with Ralph Bartel, in his individual capacity, hold approximately 50.5 % of the Company's outstanding shares.

Holger Bartel, the

Company's Global Chief Executive Officer, is Ralph Bartel's brother and holds approximately 4.2 % of the Company's outstanding shares.

As of June 30, 2023 , Azzurro is the Company’s largest stockholder, and together with Ralph Bartel, in his individual capacity, hold approximately 48.9 % of the Company’s outstanding shares.

Holger Bartel, the Company’s Global Chief Executive Officer, is Ralph Bartel’s brother and holds approximately 3.4 % of the Company’s outstanding shares.

Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc.

8 unchanged sentences

and (c) the transfer to the Company of all outstanding capital stock of MTE, which transfer was effected pursuant to a merger of MTE with a wholly-owned subsidiary of the Company on the Closing Date.

The Company recorded the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders' equity section on the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022.

The related interest of $ 143,000 was recorded in Prepaid expenses and other on the condensed consolidated balance sheet as of March 31, 2023 .

The Company recorded the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders ’ equity section on the condensed consolidated balance sheets as of June 30, 2023 and December 31, 2022.

As of June 30, 2023, Azzurro paid the interest of $ 285,000 , but has not yet paid the principal amount of the note.

The Company submitted a letter to Azzurro seeking payment and the parties are in the process of negotiating a paym ent plan.

Should satisfactory terms not be agreed for a payment plan, the Company shall have the right to pursue the shares serving as collateral under the promissory note.

License Agreement with Azzurro Brands Inc.

17 unchanged sentences

Profits from Sale and Purchase of Travelzoo Common Stock within Six Month Period

On May 23, 2023, Travelzoo was named as a nominal defendant in a complaint for recovery of short swing profits filed in the Southern District of New York under Section 16(b) of the Securities Exchange Act, by Dennis J.

Donoghue and Mark Rubenstein, against Ralph Bartel, the Ralph Bartel 2005 Trust and Azzurro Capital Inc.

Holger Bartel completed sales and purchases of 25,000 shares of Travelzoo common stock within a six month period ended July 29, 2022.

Per Section 16(b) of Securities and Exchange Act, he agreed to immediately remit to the Company $ 46,000 in profits gained from these transactions during the three months ended September 30, 2022.

Subsequent Event

On July 26, 2023, Travelzoo announced that its board of directors has authorized the repurchase of up to 1,000,000 shares of the Company’s outstanding common stock.

Purchases may be made, from time to time, in the open market and will be funded from available cash.

The number of shares to be purchased and the timing of purchases will be based on the level of Travelzoo’s cash balances, general business and market conditions, and other factors, including alternative investment opportunities.

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