What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-08 compared with 2023-08-14 · 187 added, 182 removed, 789 unchanged (32% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

2023 December 31,

1 unchanged sentence

Cash and cash equivalents $ 15,901 $ 18,693

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

Accounts receivable, less allowance for doubtful accounts of $ 1,372 and $ 1,468 as of September 30, 2023 and December 31, 2022, respectively

10,684 13,820

27 unchanged sentences

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

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

14,166 shares issued and outstanding as of September 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)

11 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,

2023 2022 2023 2022

33 unchanged sentences

(In thousands)

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

6 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash flows from operating activities:

Net income $ 8,744 $ 4,218

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization 1,417 1,652

23 unchanged sentences

Repurchase of common stock ( 11,766 ) ( 1,170 )

Proceeds from short swing settlement — 46

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

1 unchanged sentence

Effect of exchange rate changes on cash, cash equivalents and restricted cash 80 ( 3,267 )

Net increase (decrease) in cash, cash equivalents and restricted cash 819 ( 18,309 )

Net decrease in cash, cash equivalents and restricted cash ( 2,796 ) ( 24,444 )

Cash, cash equivalents and restricted cash at beginning of period 19,378 44,989

2 unchanged sentences

Cash paid (refund) for income taxes, net $ ( 228 ) $ 1,234

Right-of-use assets obtained in exchange for lease obligations—operating leases $ 512 $ —

Cash paid for amounts included in the measurement of lease liabilities $ 2,499 $ 2,405

11 unchanged sentences

Shares Amount

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

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

Stock-based compensation expense — — — 359 — — — — 359 — 359

Repurchase of common stock (1)

— — ( 6,999 ) — — — — ( 6,999 ) — ( 6,999 )

Retirement of treasury stock ( 1,000 ) ( 10 ) 6,999 ( 6,989 ) — — — — — — —

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

Tax withholding related to net share settlements of equity awards ( 4 ) — — — — — — — — — —

Foreign currency translation adjustment — — — — — — — ( 113 ) ( 113 ) — ( 113 )

Net income — — — — — — 2,348 — 2,348 52 2,400

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

Balances, September 30, 2023 14,166 $ 142 $ — $ 5,186 $ ( 9,537 ) $ ( 4,753 ) $ 15,789 $ ( 4,803 ) $ 2,024 $ 4,692 $ 6,716

(1) Includes a 1 % excise tax applicable to share repurchases.

Common Stock Treasury Stock Additional

7 unchanged sentences

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

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

Stock-based compensation expense — — 325 — — — — 325 — 325

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

Repurchase of common stock — — ( 1,170 ) — — — — — ( 1,170 ) — ( 1,170 )

Proceeds from short swing settlement — — — 46 — — — — 46 — 46

Foreign currency translation adjustment — — — — — — — ( 811 ) ( 811 ) — ( 811 )

Net income — — — — — — 795 — 795 2 797

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

Balances, September 30, 2022 13,091 $ 131 $ ( 6,658 ) $ 7,797 $ — $ — $ 4,690 $ ( 5,344 ) $ 616 $ 4,636 $ 5,252

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

11 unchanged sentences

Repurchase of common stock (1)

— — ( 11,868 ) — — — — — ( 11,868 ) — ( 11,868 )

Retirement of treasury stock ( 2,495 ) ( 24 ) 18,998 ( 18,974 ) — — — — — — —

2 unchanged sentences

Net income — — — — — — 8,647 — 8,647 97 8,744

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

Balances, September 30, 2023 14,166 $ 142 $ — $ 5,186 $ ( 9,537 ) $ ( 4,753 ) $ 15,789 $ ( 4,803 ) $ 2,024 $ 4,692 $ 6,716

(1) Includes a 1 % excise tax applicable to share repurchases.

Common Stock Treasury Stock Additional

9 unchanged sentences

Stock-based compensation expense — — — 1,456 — — — — 1,456 — 1,456

Repurchase of common stock — — ( 1,170 ) — — — — — ( 1,170 ) — ( 1,170 )

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

Proceeds from short swing settlement — — — 46 — — — — 46 — 46

Foreign currency translation adjustment — — — — — — — ( 1,551 ) ( 1,551 ) — ( 1,551 )

Net income — — — — — 4,182 — 4,182 36 4,218

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

Balances, September 30, 2022 13,091 $ 131 $ ( 6,658 ) $ 7,797 $ — $ — $ 4,690 $ ( 5,344 ) $ 616 $ 4,636 $ 5,252

See accompanying notes to unaudited condensed consolidated financial statements.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

20 unchanged sentences

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.

During the six months ended June 30, 2023, Azzurro paid the interest of $ 285,000 , but did not pay the principal amount of the note.

The Company submitted a letter to Azzurro se eking payment.

In October 2023, the parties agreed upon a new payment plan.

Azzurro shall pay the outstanding principal in five installment payments starting in October 2023 and ending in February 2024.

Interest on the outstanding principal amount shall accrue at a 16 % annual interest rate beginning on July 1, 2023.

Azzurro paid the interest of $ 190,000 in the three months ended September 30, 2023.

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

2 unchanged sentences

(“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, 2023, Jack’s Flight Club h ad over 2 million subscribers.

As of September 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.

5 unchanged sentences

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 ), 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.

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 nine months ended September 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 September 30, 2023.

The Company recognized royalties of $ 9,000 and $ 13,000 for its licensing arrangements from the licensee in Japan for the three and nine months ended September 30, 2023, respectively.

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 $ 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.

The Company recognized royalties of $ 9,000 and $ 8,000 for its licensing arrangements from the licensee in Australia for the three months ended September 30, 2023 and 2022, respectively.

The Company recognized royalties of $ 26,000 and $ 18,000 for its licensing arrangements from the licensee in Australia for the nine months ended September 30, 2023 and 2022 , respectively.

Government funding

1 unchanged sentence

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 and May 2023.

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

1 unchanged sentence

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.

The Company also received $ 10,000 and $ 164,000 job retention related funding from Canada in the three and nine months ended September 30, 2022.

Such funding was recorded against salary and related expenses.

6 unchanged sentences

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 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.

Azzurro is the Company’s largest shareholder, and as of September 30, 2023, holds approximately 48.0 % of the Company's outstanding shares.

Holger Bartel, the Company's Global CEO, is Ralph Bartel's brother and separately holds 3.6 % of the Company's outstanding shares as of September 30, 2023.

Financial Statements

12 unchanged sentences

Actual results could differ materially from those estimates.

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.

The results of operations for the nine months ended September 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

47 unchanged sentences

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 $ 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.

As of December 31, 2022, $ 1.2 million was recorded as deferred revenue for Jack's Flight Club, of which $ 1.2 million was recognized in the nine months ended September 30, 2023 , $ 981,000 was recorded as deferred revenue for Travelzoo North America and Travelzoo Europe, of which $ 886,000 was recognized as revenue in the nine months ended September 30, 2023 .

As of September 30, 2023, the deferred revenue balance was $ 2.8 million, of which $ 1.8 million was for Jack's Flight Club and the remaining $ 1.0 million was for Travelzoo North America and Travelzoo Europe.

Reserve for Refunds to Members

7 unchanged sentences

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

The expiration dates of vouchers range between October 2023 through December 2025;

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.

2 unchanged sentences

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, 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 September 30, 2023, the Company had approximately $ 5.9 million of unredeemed vouchers that had been sold through September 30, 2023, representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 421,000 for these unredeemed vouchers as of September 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 $ 23.9 million as of June 30, 2023 related to unredeemed vouchers.

The Company has recorded merchant payables of $ 23.7 million as of September 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.

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.

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 members.

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 and may adversely affect future revenue as the liability is recorded against revenue.

15 unchanged sentences

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 six months ended June 30, 2023.

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

Operating Leases

13 unchanged sentences

The outbreak of coronavirus (COVID-19) in 2020 had an unprecedented impact on the global travel and hospitality industries.

Governmental authorities implemented numerous measures to try to contain the virus, including restrictions on travel, quarantines, shelter-in-place orders, business restrictions and complete shut-downs.

As the Company and many of our advertisers are part of the global travel and hospitality industries, the measures implemented to contain COVID-19 had a significant negative effect on our business, financial condition, results of operations and cash flows.

7 unchanged sentences

and internationally.

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.

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

As of September 30, 2023, the Company had merchant payables of $ 23.7 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 July 2023 through December 2025 with the majority of vouchers expiring during 2023;

The vouchers expire between October 2023 through December 2025 ;

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 June 30, 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 expects that cash on hand as of September 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.

5 unchanged sentences

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 $ 15,901 $ 18,693

2 unchanged sentences

Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows $ 16,582 $ 19,378

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

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

Net Income Per Share

3 unchanged sentences

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,

2023 2022 2023 2022

13 unchanged sentences

Net income per share—diluted $ 0.16 $ 0.06 $ 0.56 $ 0.33

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

For the three months ended September 30, 2023 and 2022, options to purchas e 950,000 and 850,000 shares of common stock were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

For each of the nine months ended September 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

In connection with the development of Travelzoo META, the Company acquired MTE, a wholly owned subsidiary of 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 was the Company’s largest shareholder as of the time of this transaction, and Azzurro and Ralph Bartel owned as of December 31, 2022 approximately 50.3 % the Company’s outstanding shares.

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

On December 28, 2022, the stockholders of Travelzoo approved the issuance and sale of 3.4 million shares of Travelzoo to Azzurro, in exchange for certain consideration, and on 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 $ 15.2 million.

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:

2 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 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.

During the six months ended June 30, 2023, Azzurro paid the interest of $ 285,000 , but did not pay the principal amount of the note.

The Company submitted a letter to Azzurro se eking payment.

In October 2023, the parties agreed on a payment plan.

Azzurro shall pay the outstanding principal in five installment payments starting in October 2023 and ending in February 2024.

Interest on the outstanding principal amount shall accrue at a 16 % annual interest rate beginning on July 1, 2023.

Azzurro paid the interest of $ 190,000 in the three months ended September 30, 2023.

Travelzoo acquired the entire business of MTE.

3 unchanged sentences

As a result of the MTE acquisition, the Company also assumed MTE’s historical net operating loss carryforwards of approximately $ 64.7 million.

While these net operating losses (NOLs) may be used to offset future taxable income, the Company determined it is appropriate to record an uncertain tax benefit liability in accordance with ASC Topic 740—Income Taxes.

While these net operating losses (NOLs) may be used to offset future taxable income, given certain accounting considerations for the transaction, the Company determined it is appropriate to record an uncertain tax benefit liability in accordance with ASC Topic 740—Income Taxes.

Subject to the provisions of the SPA, Azzurro agreed to indemnify Travelzoo for tax related liabilities in the event of the inability of the Company to utilize any NOLs of MTE as a result of any breach of or inaccuracy in any representation or warranty made by Azzurro, which included the representation that NOLs will be available for use by the Company after the closing for federal and analogous state income tax purposes, including pursuant to section 381(a) of the U.S.

tax code, and that, as of the date of the SPA, no NOLs of MTE are subject to any limitation, restriction or impairment on its use.

Based on the terms of the agreement, the Company believes that with the uncertain tax position recognized related to the acquired NOLs, that the Company has the right to claim losses against Azzurro if NOLs are not able to be utilized.

Based on the terms of the agreement, the Company believes that with the uncertain tax position recognized related to the acquired NOLs, the Company has the right to claim losses against Azzurro if NOLs are not able to be utilized.

Therefore, the Company recorded an indemnification asset of $ 9.5 million for the relative fair value of this indemnification.

44 unchanged sentences

The acquisition related costs were not significant and were expensed as incurred.

Jack’s Flight Club’s result have been included in the accompanying financial statements from their the dates of acquisition.

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 six months ended June 30, 2023 .

Jack’s Flight Club’s results have been included in the accompanying financial statements from the dates of acquisition.

The Company performed an annual impairment test in October and 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 nine months ended September 30, 2023 .

Intangible Assets

19 unchanged sentences

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

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

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

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

14 unchanged sentences

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):

Amortization of intangible assets with definite lives ( 157 ) $ ( 29 ) $ ( 195 )

Intangible assets—September 30, 2023 $ 1,868 $ 223 $ 389

Amortization expense for acquired intangibles was $ 381,000 and $ 440,000 for the three months ended September 30, 2023 and 2022, respectively.

Amortization expense for acquired intangibles was $ 1.2 million and $ 1.3 million for the nine months ended September 30, 2023 and 2022, respectively.

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

Years ending December 31,

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

2023 (excluding the nine months ended September 30, 2023) 396

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 six months ended June 30, 2023.

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

The Company did not identify any indicators of impairment during the nine months ended September 30, 2023.

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

Commitments and Contingencies

1 unchanged sentence

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 June 30, 2023 and December 31, 2022.

Accruals for legal contingencies were not material as of September 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.

12 unchanged sentences

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 six months ended June 30, 2023 and 2022.

The Company did not make material payments for the nine months ended September 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.

4 unchanged sentences

under operating leases.

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 June 30, 2023.

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

Refer to Note 11 for leases as of September 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 $ 617,000 as of June 30, 2023, which represent the minimum obligations the Company has under agreements with certain suppliers.

The Company has purchase commitments aggregating approximately $ 308,000 as of September 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.

1 unchanged sentence

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 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.

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

The Company’s effective tax rate for the three months ended September 30, 2023 changed from the three months ended September 30, 2022 primarily due to an increase in certain foreign losses not benefited in the three months ended September 30, 2023.

The Company ’s effective tax rate was 28 % and 34 %, respectively, for the nine months ended September 30, 2023 and 2022.

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

As of September 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.

2 unchanged sentences

The Company maintains liabilities for uncertain tax positions.

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.

As of September 30, 2023, the Company had approximately $ 22.6 million in total unrecognized tax benefits, of which up to $ 16.3 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 June 30, 2023 and December 31, 2022, the Company had approximately $ 602,000 and $ 704,000 in accrued interest and penalties, respectively.

As of September 30, 2023 and December 31, 2022, the Company had approximately $ 628,000 and $ 704,000 in accrued interest and penalties, respectively.

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

5 unchanged sentences

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,

2023 2022 2023 2022

2 unchanged sentences

Ending balance $ ( 4,803 ) $ ( 5,344 ) $ ( 4,803 ) $ ( 5,344 )

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

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

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

25 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.

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.

During the nine months ended September 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 September 30, 2023, 100,000 options were outstanding, all of which were fully vested.

Total stock-based compensation related to these option grants of $ 48,000 and $ 72,000 was recorded in general and administrative expenses for the three months ended September 30, 2023 and 2022, respectively.

Total stock-based compensation related to these option grants of $ 193,000 and $ 217,000 was recorded in general and administrative expenses for each of the nine months ended September 30, 2023 and 2022, respectively .

As of September 30, 2023, S tock-based compensation related to this grant was fully expensed.

On May 29, 2020, pursu ant to an executed Option Agreement, the shareholders of the Company approved the grant of stock options to purchase 800,000 shares of common stock to Mr.

5 unchanged sentences

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

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.

During the second quarter of 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.

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.

During the nine months ended September 30, 2023, 50,000 options were exercised and 16,619 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

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

Total stock-based compensation related to these option grants of $ 25,000 and $ 0 was recorded in general and administrative expenses for the three months ended September 30, 2023 and 2022, respectively.

Total stock-based compensation related to these option grants of $ 74,000 and $ 98,000 was recorded in general and administrative expenses for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, there was approximately $ 49,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 0.5 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.

On June 1, 2021, pursuant t o 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 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.

As of September 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 September 30, 2023 and 2022, respectively.

Total stock-based compensation related to this option grant of $ 108,000 was recorded in general and administrative expenses for each of the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, there was approximately $ 179,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 1.3 years.

2 unchanged sentences

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

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.

As of September 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 was recorded in general and administrative expenses for each of the three months ended September 30, 2023 and 2022, respectively.

Total stock-based compensation related to this option grant of $ 649,000 was recorded in general and administrative expenses for each of the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, there was approximately $ 216,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 0.3 years.

3 unchanged sentences

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.

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.

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

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

The Company did not record stock-based compensation expense for the three months ended September 30, 2023.

As of September 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 1.8 years.

2 unchanged sentences

The options expire in March 2025.

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.

As of September 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 $ 35,000 and $ 104,000 was recorded in general and administrative expenses for the three and nine months ended September 30, 2023.

As of September 30, 2023, there was approximately $ 452,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 3.3 years.

4 unchanged sentences

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.

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.

The Company repurchased 34,687 shares of common stock in the first quarter of 2023 for $ 186,000 .

The Company repurchased 658,938 shares of common stock in the second quarter of 2023 for $ 4.7 million.

The repurchases were retired and recorded as a reduction of additional paid-in capital.

As of June 30, 2023, the Company finished this stock repurchase program.

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.

The Company repurchased 1,000,000 shares of common stock for an aggregate purchase price of $ 6.9 million which were retired and recorded as a reduction of additional paid-in capital.

This stock repurchase program was completed in the three months ended September 30, 2023.

Segment Reporting and Significant Customer Information

The Company determines its reportable segments based upon the Company ’ s chief operating decision maker managing the performance of the business.

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

During the three months ended March 31, 2020, 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.

Upon acquisition, the Company ’ s chief operating decision maker reviewed and evaluated Jack ’ s Flight Club as a separate segment.

In 2020, Travelzoo entered into royalty-bearing licensing agreements with local licensees for Australia, Japan, New Zealand, and Singapore.

Travelzoo granted licensees the exclusive use of Travelzoo’s brand, but continuously own the existing members as the licensor.

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 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.

The Company currently has four reportable operating segments:

6 unchanged sentences

Management relies on an internal management reporting process that provides revenue and segment operating profit (loss) for making financial decisions and allocating resources.

Management believes that segment revenues and operating profit (loss) are appropriate measures of evaluating the operational performance of the Company’s segments.

Management believes that segment revenues and operating profit (loss) are appropriate measures for evaluating the operational performance of the Company’s segments.

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

Three Months Ended June 30, 2023 Travelzoo North

Three Months Ended September 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

3 unchanged sentences

Operating profit (loss) $ 3,015 $ 267 $ 144 $ ( 317 ) $ 3,109

Three Months Ended June 30, 2022 Travelzoo North

Three Months Ended September 30, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

3 unchanged sentences

Operating profit (loss) $ 1,021 $ ( 551 ) $ 12 $ ( 209 ) $ 273

Six Months Ended June 30, 2023 Travelzoo North

Nine Months Ended September 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

3 unchanged sentences

Operating profit (loss) $ 11,284 $ 485 $ 196 $ ( 872 ) $ 11,093

Six Months Ended June 30, 2022 Travelzoo North

Nine Months Ended September 30, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

6 unchanged sentences

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

As of June 30, 2023 Travelzoo North

As of September 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 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.

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

As of September 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.

Travel revenue includes travel publications ( Top 20 , Travelzoo website, standalone Travelzoo emails , Travelzoo Network ), Getaways vouchers, hotel platform and vacation packages.

Travel revenue includes travel publications ( Top 20 , Travelzoo website, Standalone email newsletters, Travelzoo Network ), Getaways vouchers, hotel platform and vacation packages.

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,

2023 2022 2023 2022

20 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,

2023 2022 2023 2022

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 $ 122 $ 274

8 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 June 30, 2023 and 2022 (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 nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

8 unchanged sentences

Loss from operations ( 5 ) ( 7 ) ( 5 ) ( 15 )

Other income (loss), net ( 1 ) 10 1 7

Other income, net — 12 — 19

Income (loss) before income taxes ( 5 ) 5 ( 5 ) 4

5 unchanged sentences

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 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 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.

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 nine months ended September 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 September 30, 2023.

The Company recognized royalties of $ 9,000 and $ 13,000 for its licensing arrangements from the licensee in Japan for the three and nine months ended September 30, 2023, respectively.

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

3 unchanged sentences

Travelzoo was not able to estimate whether the AUS Buyer will generate revenues based on the current uncertainties, and no amount has been recorded for future royalties under this agreement.

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

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 Company recognized royalties of $ 9,000 and $ 8,000 for its licensing arrangements from the licensee in Australia for the three months ended September 30, 2023 and 2022, respectively.

The Company recognized royalties of $ 26,000 and $ 18,000 for its licensing arrangements from the licensee in Australia for the nine months ended September 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):

September 30,

2023 December 31,

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Total liabilities from discontinued operations $ 453 $ 452

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):

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

Six Months Ended

September 30,

Net cash used in operating activities $ ( 4 ) $ ( 18 )

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 June 30, 2023 and 2022 (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, 2023 and 2022 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

4 unchanged sentences

Total lease cost $ 678 $ 558 $ 2,174 $ 2,018

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 .

Cash payments against the operating lease liabilities total ed $ 2.5 million and $ 2.4 million and for the nine months ended September 30, 2023 and 2022.

ROU assets obtained in exchange for lease obligations was $ 512,000 for the nine months ended September 30, 2023.

There wa s no ROU asset obtained in exchange for lease obligations for nine months ended September 30, 2022.

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

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Operating lease right-of-use assets $ 6,334 $ 7,440

6 unchanged sentences

Years ending December 31,

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

2023 (excluding the nine months ended September 30, 2023) $ 710

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 and six months ended June 30, 2023 and 2022 was as follow (in thousands):

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

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

11 unchanged sentences

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

Net income attributable to non-controlling interest 52

Non-controlling interest—September 30, 2023 $ 4,692

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 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.

As of September 30, 2023 , Azzurro is the Company’s largest stockholder, and together with Ralph Bartel, in his individual capacity, hold approximately 48.0 % of the Company’s outstanding shares.

Holger Bartel, the Company’s Global Chief Executive Officer, is Ralph Bartel’s brother and holds approximately 3.6 % of the Company’s outstanding shares.

Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc.

In connection with the development of Travelzoo META, the Company acquired MTE, a wholly owned subsidiary of 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 to Azzurro, in exchange for certain consideration, and on 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 $ 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.

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.

Stock Purchase Agreement between Travelzoo and Azzurro

In connection with the development of Travelzoo META, on December 28, 2022, the Company acquired MTE, a wholly owned subsidiary of Azzurro, and also completed a private placement of newly issued shares.

As of December 31, 2022, Azzurro and Ralph Bartel owned approximately 50.3 % of the Company’s outstanding shares.

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

License Agreement with Azzurro Brands Inc.

10 unchanged sentences

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.

The remaining

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

Stock Option Agreement

9 unchanged sentences

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.

On October 24, 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.

1 unchanged sentence

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