What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-22 compared with 2023-03-31 · 453 added, 535 removed, 675 unchanged (59% of the section changed)

1 unchanged sentence

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of KPMG LLP - Independent Registered Public Accounting Firm (PCAOB ID:

Report of RSM US LLP - Independent Registered Public Accounting Firm (PCAOB ID:

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Report of Independent Registered Public Accounting Firm

Stockholders and the Board of Directors of Travelzoo

To the Stockholders and the Board of Directors

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Travelzoo and subsidiaries (the Company) as of December 31, 2023, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit), and cash flows for the year then ended December 31, 2023, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year then ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

We also have audited the adjustments to the 2022 consolidated financial statements to retrospectively apply the change in segment composition, as described in Note 12.

In our opinion, such adjustments are appropriate and have been properly applied.

We were not engaged to audit, review, or apply any procedures to the 2022 consolidated financial statements of the Company other than with respect to the adjustments and, accordingly, we do not express an opinion or any other form of assurance on the 2022 consolidated financial statements taken as a whole.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over revenue related to advertising fees

As discussed in Notes 1(b) and 12 to the consolidated financial statements, the Company enters into contracts with advertisers to promote their respective advertisements through the Travelzoo website and emails.

Advertising revenue is recognized by the Company upon the delivery of the emails to its members or each time a user clicks on the respective advertisements.

For the year ended December 31, 2023, the Company recorded $84.5 million in revenues, which included advertising fee revenues from email newsletters and cost-per-click advertising.

We identified the evaluation of the sufficiency of audit evidence over revenue related to advertising fees for email newsletters and cost-per-click advertising as a critical audit matter.

The Company’s reliance on its information technology (IT) system to capture the number of emails and clicks for revenue recognition required a heightened level of auditor judgment due to the extensive automation of the process.

Our audit procedures required the involvement of IT professionals with specialized skills and knowledge and auditor judgment was required to determine the nature and extent of procedures and to evaluate audit evidence obtained.

The following are the primary procedures we performed to address this critical audit matter.

We applied auditor judgment to determine the nature and extent of procedures to be performed.

We involved IT professionals with specialized skills and knowledge, who assisted in evaluating the design and testing the operating effectiveness of certain internal controls over the Company’s revenue process, including general IT controls and IT application controls over the tracking of emails and clicks.

For a sample of transactions, we assessed the recorded revenue by comparing the amounts recognized for consistency with underlying documentation, including contract terms, number of emails or clicks, and subsequent cash, if applicable.

We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of the nature and extent of such evidence.

We have served as the Company’s auditor since 2023.

New York, New York

March 22, 2024

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of Travelzoo

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Travelzoo and its subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income, stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

We have audited, before the effects of the adjustments to retrospectively apply the changes in the Company's disclosures about segments and related information in Note 12, the accompanying consolidated balance sheet of Travelzoo and subsidiaries (the Company) as of December 31, 2022, the related consolidated statements of operations, comprehensive income, stockholders' equity (deficit) and cash flows for the year then ended, and the related notes to the consolidated financial statements (collectively, the financial statements).

The 2022 financial statements before the effects of the adjustments described in Note 12 are not presented herein.

In our opinion, before the effects of the adjustments to retrospectively apply the changes in the Company's disclosures about segments and related information in Note 12, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022, and the results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply any procedures to retrospectively apply the changes in the Company's disclosures about segments and related information in Note 12 and, accordingly we do not express an opinion or any other form of assurance about whether such adjustments are appropriate and have been properly applied.

Those adjustments were audited by other auditors.

Emphasis of Matter

As discussed in Note 17 to the financial statements, the 2022 financial statements have been restated to correct a misstatement.

Basis for Opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

As described in Note 1 of the financial statements, the Company generates its revenues through a significant volume of low-dollar transactions tracked and recorded in a highly automated process within the Company’s internally developed systems.

During 2022, the Company continued to offer voucher refund policy to its consumers given the ongoing restrictions on worldwide travel with certain vouchers remaining fully refundable until the voucher expires or is redeemed by the consumer.

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

Revenues are presented net of the amounts due to the third-party merchants for fulfilling the underlying services and an estimated amount for future refunds.

We identified the Company’s revenue as a critical audit matter as the processes to track and record revenues are highly automated, differ between listings and rely on internally developed systems.

These processes and internally developed systems are complex and require an increased audit effort around assessing the reliability of data and the information technology environment, including the use of our internal information technology specialists.

Additionally, we also identified the Company’s refund reserve as a critical audit matter because of certain significant assumptions management makes in

determining the estimate for future refunds, including expected refunds and redemption activity.

These significant assumptions are forward looking and could be affected by uncertainty in the travel and entertainment industries, and other economic and market conditions.

Our audit procedures related to the Company's revenue included the following, among others:

• We obtained an understanding of the relevant controls related to the automated portion of the revenue process, including management’s review of the data, and tested key information technology and transaction controls for design effectiveness and implementation.

• We utilized our internal information technology specialists to assist in testing the operating effectiveness of the Company’s information technology general and application controls.

• We selected a sample of revenue transactions to test agreement between amounts recognized to contractual agreements and other supporting information of completion of the performance obligations.

• We evaluated the reasonableness of management’s estimate for voucher refunds by performing the following:

◦ Testing the Company’s process used to develop the estimate of the future refunds by comparing current year results to prior year estimates;

◦ Developing an independent range of projected refund activity based on voucher location and time to maturity for comparison to the Company’s estimate;

◦ Evaluating redemption and refund rates occurring subsequent to year end for comparison to the Company’s estimate.

Goodwill and Trade Name Impairment

As described in Notes 1 and 3 of the consolidated financial statements, goodwill and trade name are evaluated for impairment annually.

The Company estimated the fair values of the Jack’s Flight Club reporting unit for goodwill using a combination of valuation techniques, including an income approach (discounted cash flows method) and market approach (guideline company method).

The Company estimated the fair value of the trade name using a relief from royalty method.

These methods required management to make significant estimates including revenues and operating margins projections, the royalty rate, discount rates, long term growth rates, and market multiples.

We identified the Company’s goodwill and trade name impairment evaluation for the Jack’s Flight Club reporting unit as a critical audit matter because of the significant assumptions management makes in the estimate, including revenues and operating margins projections, the royalty rate, discount rates, long term growth rates, and market multiples which require an increased level of audit effort.

Our audit procedures related to the goodwill and trade name impairment evaluation for the Jack’s Flight Club reporting unit included the following, among others:

• With the assistance of our valuation specialists, we evaluated the reasonableness of the Company’s valuation methodology and applicable rates utilized by management by:

◦ Testing the reasonableness of the royalty rate by comparing them to comparable companies.

◦ Assessing the reasonableness of the royalty rate, discount rates and long-term growth rates selected by management and the Company’s appraiser by comparing those to the rates developed with the use of our internal valuation specialist with corroborative market data.

◦ Testing the reasonableness of the selected market participants and multiples selected by comparing to market data and consistency of selections with historical selections.

• We evaluated the reasonableness of management’s revenue and gross margin projections by comparing management’s prior forecasts to historical results for the reporting unit and comparing future forecasts to historical results and market data.

As described in Note 1 to the consolidated financial statements, the global pandemic has had a significant negative effect on the Company and many of its advertisers.

As of December 31, 2022, the Company had negative working capital of $11.9 million and cash used in operating activities was $23.1 million for the year ended December 31, 2022.

These conditions raise doubt over the Company’s ability to meet all of its obligations over the next twelve months.

Management has evaluated these conditions and concluded that its plans have alleviated the doubt of the Company’s ability to continue as a going concern.

We have identified management’s liquidity assessment as a critical audit matter because of certain significant assumptions in management’s plans relating to the timing of redemptions or refunds for previous voucher sales and the related settlement of merchant payables, as well as the forecasted revenues and expenses.

Auditing management’s assumptions, and the timing of these assumptions relating to the Company’s voucher and advertising sales, refund rates of vouchers, redemption of merchant payables and cash flow projections involved a high degree of auditor judgment and an increased level of audit effort.

Our audit procedures related to the Company’s liquidity assessment included the following, among others:

• We evaluated the reasonableness of management’s forecasted revenues and expenses by comparing:

◦ management’s prior forecasts to historical results,

◦ results subsequent to year end to management’s forecasts, and

◦ future forecasts to historical results and forecasted market data.

• We evaluated the reasonableness of management’s forecasted timing of cash flow estimates relating to the timing of refunds and the settlement of the merchant payable, by comparing management’s forecasted redemption and refund estimates to historical redemption and refund rates experienced during the year and subsequent to year end.

• We evaluated management’s projections in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusion reached by management.

Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc., a Related-Party

As described in Note 3 of the consolidated financial statements, the Company consummated the Stock Purchase Agreement with Azzurro Capital Inc.

(“Azzurro”) for the acquisition of Metaverse Travel Experiences, Inc.

(“MTE”), a wholly owned subsidiary of Azzurro.

Azzurro is a related party by virtue of their significant ownership of Travelzoo common stock prior to the transaction.

The Stock Purchase Agreement involved the issuance of 3,410,000 shares of Travelzoo common stock in exchange for $1.0 million of cash, a $4.8 million promissory note receivable and the transfer to the Company of all outstanding capital stock of Metaverse Travel Experiences, Inc.

We have identified the Stock Purchase Agreement between Travelzoo and Azzurro as a critical audit matter as a result of the related party relationship and the significant judgement used by the Company to determine the accounting and reporting implications of this transaction, including the accounting for the assumed net operating losses (NOL’s) acquired from MTE and the recognition of a tax indemnification asset for any losses related to the inability to utilize the NOL’s after the closing by Travelzoo.

Auditing management’s accounting for, and disclosure of, this transaction and the related uncertain tax positions involved a high degree of auditor judgment and an increased level of audit effort and was especially challenging due to the significant judgment required to assess management's evaluation of technical merits under the tax laws.

Our audit procedures related to the Company’s accounting for the MTE transaction and disclosures included the following, among others:

• We reviewed the executed agreements, including the tax indemnification provisions included in the agreement, for their accounting implications and obtained and reviewed the Company’s legal analysis of the tax indemnification provisions performed by the Company’s and external legal counsel.

• We obtained support for authorization and approval of the related party transaction through review of shareholder approval in the proxy and the minutes of the special committee of the board of directors.

• With the assistance of our tax specialist, we evaluated the reasonableness of the technical merits of the tax position related to the acquired NOL’s from MTE and the related uncertain tax positions.

• We tested the schedule of NOL’s acquired from MTE by selecting a sample of years to trace annual losses to historical tax returns filed by MTE.

• We evaluated the reasonableness of management’s assessment of this transaction as an asset acquisition and management’s allocation of the purchase price of the identified assets acquired.

• We evaluated the reasonableness of the allocation of value to the tax indemnification by comparing to contractual agreements and the legal positions provided by the Company and external legal counsel.

• We assessed the adequacy of the Company’s disclosures for this transaction in the notes to the consolidated financial statements, including the classification of the tax indemnification asset.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ RSM US LLP

We have served as the Company's auditor since 2019.

We served as the Company's auditor from 2019 to 2023.

San Jose, California

March 31, 2023

March 31, 2023, except for Note 17 as to which the date is August 14, 2023

CONSOLIDATED BALANCE SHEETS

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Cash and cash equivalents $ 15,713 $ 18,693

Accounts receivable, less allowance for doubtful accounts of $ 1,468 and $ 2,094 as of December 31, 2022 and 2021, respectively

Accounts receivable, net of allowance of $ 1,484 and $ 1,468 as of December 31, 2023 and 2022, respectively

12,965 13,820

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Prepaid expenses and other 1,460 1,289

Prepaid expenses—Related party — 1,150

Assets from discontinued operations 1 11

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Total assets $ 55,382 $ 67,274

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

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Total current liabilities 34,190 47,534

Long-term tax liabilities 4,681 1,569

Long-term operating lease liabilities 6,717 8,326

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Commitments and contingencies (Note 6)

Non-controlling interest 4,595 4,600

Stockholders’ equity (deficit):

Stockholders’ equity:

Preferred stock, $ 0.01 par value per share ( 5,000 shares authorized;

Common stock, $ 0.01 par value ( 20,000 shares authorized as of December 31, 2023 and 2022, respectively;

16,505 shares issued and 15,704 shares outstanding as of December 31, 2022 and 12,551 shares issued and 12,056 shares outstanding as of December 31, 2021)

Treasury stock, at cost ( 801 shares and 495 shares as of December 31, 2022 and 2021)

( 7,130 ) ( 5,488 )

13,575 shares issued and outstanding as of December 31, 2023, 16,505 shares issued and 15,704 shares outstanding as of December 31, 2022 )

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

Additional paid-in capital 439 23,274

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Accumulated other comprehensive loss ( 4,607 ) ( 4,905 )

Total stockholders’ equity (deficit) 4,256 ( 4,232 )

Total liabilities and stockholders’ equity (deficit) $ 67,274 $ 99,727

Total Travelzoo stockholders’ equity 4,186 4,256

Non-controlling interest 4,697 4,595

Total stockholders’ equity 8,883 8,851

Total liabilities and stockholders’ equity $ 55,382 $ 67,274

See accompanying notes to consolidated financial statements.

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Total operating expenses 57,971 53,039

Operating income (loss) 7,557 ( 1,313 )

Operating income 15,572 7,557

Other income, net 1,541 2,401

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Income from continuing operations 12,008 6,688

Loss from discontinued operations, net of tax ( 59 ) ( 13 )

Income (loss) from discontinued operations, net of tax 460 ( 59 )

Net income 12,468 6,629

Net loss attributable to non-controlling interest ( 5 ) ( 9 )

Net income (loss) attributable to non-controlling interest 102 ( 5 )

Net income attributable to Travelzoo $ 12,366 $ 6,634

Net income attributable to Travelzoo—continuing operations $ 11,906 $ 6,693

Net loss attributable to Travelzoo—discontinued operations $ ( 59 ) $ ( 13 )

Income (loss) per share—basic

Net income (loss) attributable to Travelzoo—discontinued operations $ 460 $ ( 59 )

Income per share—basic

Continuing operations $ 0.80 $ 0.54

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Net income per share—basic $ 0.83 $ 0.54

Income (loss) per share—diluted

Income per share—diluted

Continuing operations $ 0.80 $ 0.53

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Capital Tax Indemnification Note Receivable from Shareholder Retained

Earnings (Accumulated Deficit) Accumulated

Earnings Accumulated

Comprehensive

Loss Non-Controlling interest Total

Stockholders’

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Shares Amount

Balances, January 1, 2021 11,365 $ 114 $ — $ 6,239 $ — $ — $ ( 403 ) $ ( 4,059 ) $ 1,891

Stock-based compensation expense — — — 3,748 — — — — 3,748

Repurchase and retirement of common stock — — ( 5,488 ) — — — — — ( 5,488 )

Proceeds from exercise of stock options, net of share settlement 1,186 12 — ( 5,572 ) — — — — ( 5,560 )

Foreign currency translation adjustment — — — — — — — 266 266

Net loss—Travelzoo — — — — — — 911 — 911

Balances, December 31, 2021 12,551 $ 126 $ ( 5,488 ) $ 4,415 $ — $ — $ 508 $ ( 3,793 ) $ — $ ( 4,232 )

Reclassification of non-controlling interest — — — — — — — — 4,600 4,600

Stock-based compensation expense — — — 1,805 — — — — — 1,805

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Balances, December 31, 2022 16,505 165 ( 7,130 ) 23,274 ( 9,537 ) ( 4,753 ) 7,142 ( 4,905 ) 4,595 8,851

Stock-based compensation expense — — — 1,568 — — — — — 1,568

Repurchase of common stock (1)

— — ( 16,781 ) ( 152 ) — — — — — ( 16,933 )

Retirement of treasury stock ( 3,095 ) ( 30 ) 23,911 ( 23,881 ) — —

Exercise of stock options and taxes paid for net share settlement 165 1 — ( 370 ) — — — — — ( 369 )

Proceeds from Note receivable from shareholder — — — — — 3,000 — — — 3,000

Foreign currency translation adjustment — — — — — — — 298 — 298

Net income—Travelzoo — — — — — — 12,366 — 102 12,468

Balances, December 31, 2023 13,575 $ 136 $ — $ 439 $ ( 9,537 ) $ ( 1,753 ) $ 19,508 $ ( 4,607 ) $ 4,697 $ 8,883

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

See accompanying notes to consolidated financial statements.

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Net income $ 12,468 $ 6,629

Adjustments to reconcile net income to net cash provided by operating activities:

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

Depreciation and amortization 1,893 2,189

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Gain on sale of equity investment in WeGo — ( 196 )

Gain on PPP notes payable forgiveness — ( 3,588 )

Net foreign currency effect ( 62 ) 232

Provision for (reversal of) loss on accounts receivable and refund reserve ( 4,367 ) 425

Net recoveries of accounts receivable and refund reserves ( 1,016 ) ( 4,367 )

Changes in operating assets and liabilities:

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Other liabilities 2,401 154

Net cash used in operating activities ( 23,121 ) ( 8,083 )

Net cash provided by (used in) operating activities 10,675 ( 23,121 )

Cash flows from investing activities:

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Purchases of property and equipment ( 255 ) ( 462 )

Net cash provided by (used in) investing activities ( 1,315 ) 104

Net cash used in investing activities ( 39 ) ( 1,315 )

Cash flows from financing activities:

Repurchase of common stock ( 16,781 ) ( 1,642 )

Payment of promissory notes — ( 110 )

Proceeds from payment of promissory note 3,000 —

Proceeds from short swing settlement — 46

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Supplemental disclosure of cash flow information:

Cash paid for income taxes, net $ 1,147 $ 3,115

Cash paid for interest $ — $ 4

Cash paid (refund) for income taxes, net $ ( 1 ) $ 1,147

Right-of-use assets obtained in exchange for lease obligations—operating leases $ 602 $ 1,652

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Non-cash investing and financing activities:

Accrued excise tax for share repurchases $ 152 $ —

Non-cash consideration for purchase of intangible asset $ — $ 1,150

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Summary of Significant Accounting Policies

Basis of Presentation and Summary of Significant Accounting Policies

(a) The Company and Basis of Presentation

Travelzoo (including its subsidiaries and affiliates, the “Company” or "we") is a global Internet media company.

Travelzoo (including its subsidiaries and affiliates, the “Company” or “we”), the club for travel enthusiasts, is a global Internet media company.

Travelzoo® provides its 30 million members with exclusive offers and one-of-a-kind experiences personally reviewed by our deal experts around the globe.

We have our finger on the pulse of outstanding travel, entertainment, and lifestyle experiences.

We have our finger on the pulse of outstanding travel, entertainment and local experiences.

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

Travelzoo attracts a high-quality audience of travel enthusiasts across multiple digital platforms, including email, websites, social media and mobile applications.

The Travelzoo website is visited by 5.4 million to 6.6 million unique visitors each month.

We have over 4.5 million followers on Facebook, Instagram, and Twitter.

Our Apple and Android mobile applications have been downloaded 7.4 million times.

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 iOS 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.

Jack's Flight Club is a subscription service that provides members with information about exceptional airfares.

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 Capital Inc.

("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 $ 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 Metaverse Travel Experiences, Inc.

(“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 consolidated balance sheet as of December 31, 2022.

Accqusitions and Note 13:

Related Party Transactions in the accompanying consolidated financial statements for further information.

Travelzoo membership has historically been free, however, beginning in 2024, new members in the United States, Canada, United Kingdom and Germany are charged an annual fee of $ 40 (or local equivalent), with the 2024 annual fee waived for existing members as of December 31, 2023.

For any subscription revenue derived from paid memberships, we recognize revenue monthly pro rata over the subscription periods.

We also license Travelzoo products, services and intellectual property to licensees in (a) Australia, New Zealand, and Singapore and (b) Japan and South Korea, in each case, where the Company is entitled to quarterly royalty payments based on a percentage of net revenue.

The Company recognized $ 71,000 and $ 25,000 in royalties in 2023 and 2022, respectively.

Under the licensing agreements, Travelzoo's existing members in the applicable territories continue to be owned by the Company.

In March 2022 we announced the development of, and in May 2023 we launched Travelzoo META to extend the range of experiences we offer consumers to the emerging metaverse.

This paid membership service currently provides founding members with a limited edition “Travel Companion” non-fungible token (“NFT”) and future access to beta version metaverse travel experiences, as developed.

On December 30, 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), to support Travelzoo META in sourcing prospective travel experiences.

See Note 3– Acquisitions to th e consolidated financial statements for further information regarding the acquisition of MTE.

Jack’s Flight Club

In January 2020, Travelzoo acquired JFC Travel Group Co.

In January 2020, Travelzoo acquired a 60 % interest in JFC Travel Group Co.

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

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

See Note 3 to th e consolidated financial statements for further information.

See Note 3– Acquisitions to th e consolidated financial statements for further information.

APAC Exit and Pivot to Licensing Model

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

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

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

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

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

An interest free loan was provided to the licensee to be repaid over 3 years for JPY 46 million (approximately $ 430,000 ), of which $ 133,000 was repaid in 2021 and the remaining

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 December 31, 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 $ 25,000 and $ 3,000 for its licensing arrangements from AUS Buyer for the years ended December 31, 2022 and 2021, respectively.

The Company did not record royalties from Travelzoo Japan for the year ended December 31, 2022.

The Company recognized royalties of $ 9,000 from Travelzoo Japan for the year ended December 31, 2021.

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

WeGo Investment

The Company previously held a minority share equal to 33.7 % in weekengo GmbH ("WeGo"), which the Company sold to trivago N.V.

(“trivago”) on December 23, 2020.

Per the Share Purchase Agreement, by and among Travelzoo (Europe) Limited, trivago, and the other shareholders of WeGo (the “trivago SPA”), the Company sold all of its shares in WeGo to trivago for a total purchase price of approximately $ 2.9 million , of which $ 196,000 was placed in escrow for one year.

The Company recorded $ 468,000 gain in Other income (loss), net for the sale of WeGo shares in 2020.

The Company received the full escrow payment of $ 196,000 in January 2022 and recorded the gain in Other income (loss), net for the year ended December 31, 2022.

WeGo agreed to pay in a lump sum the remaining amount outstanding pursuant to the Insertion Order equal to approximately $ 200,000 .

The payment was made and recorded in the first quarter of 2021.

The Second Insertion Order and any obligation for additional payments from WeGo for marketing were terminated.

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

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

The Company recognized royalties of $ 35,000 and $ 25,000 from the licensee for the years ended December 31, 2023 and 2022, respectively.

The license agreement for Japan and South Korea provides the licensee exclusive rights to use Travelzoo products, services, and intellectual property in exchange for quarterly royalty payments based on net revenue over a 5 year term, with an option to renew.

An interest free loan was provided to the licensee for JPY 46 million (approximately $ 430,000 ), of which $ 133,000 was repaid in 2021 and the remaining amount repaid in 2023.

The Company recognized royalties of $ 36,000 and $ 0 from the licensee for the years ended December 31, 2023 and 2022, respectively.

Global Funding for Pandemic

In January 2022 and July 2022, the Com pany’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.

This program was for companies that suffered a pandemic-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 with this grant by June 30, 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.

The Company also received job retention related government funding in 2022 and 2021.

Job retention related funding from Canada was approximately $ 164,000 and $ 400,000 for 2022 and 2021, respectively.

The Company did not receive retention related funding from European locations in 2022.

Job retention related funding from European locations was approximately $ 31,000 for 2021.

Such funding was recorded against salary and related expenses.

Travelzoo funds operations primarily with revenues generated from adverting fees and the sale of vouchers.

The global pandemic has had a significant negative effect on the Company and many of our advertisers.

In the Company’s financial statements presented in this 10-K 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 $ 11.9 million as of December 31, 2022.

C ash used in operating activities was $ 23.1 million for the year ended December 31, 2022 .

In order to entice customers, Travelzoo adjusted its policy in the second quarter of 2020 so that vouchers were fully refundable until expiration or redemption by the customer.

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.

As of December 31, 2022 , the Company has recorded merchant payables of $ 32.6 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 year ended December 31, 2022 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 $ 18.7 million as of December 31, 2022.

Although as mentioned above, all merchant payables are classified as current, the expiration dates of these vouchers range between January 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.

Jack’s Flight Club

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

As of December 31, 2022, Jack’s Flight Club had 1.9 million subscribers.

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

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

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

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 notification and funding of approximately $ 1.2 million, $ 494,000 and $ 205,000 from the German Federal Government under its Bridging Aid III, Bridging Aid III+ and Bridging Aid IV programs, respectively.

These programs were 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, July of 2022, and May 2023.

The Company is required to submit a final declaration in connection with the grants received by September 30, 2024.

The Company believes it was eligible to participate in the programs and is entitled to the funding received and does not expect significant changes to the amounts already received to arise from the final submission.

The Company recorded the $ 1.7 million and $ 205,000 as gains in Other income, net in 2022 and 2023, respectively.

The Company also received $ 164,000 in job retention - related funding from the Canadian government in relation to its Canada office location in 2022.

Such funding was recorded as a reduction of salary and related expenses.

The Company did not receive any such funding in 2023.

The Company did not receive pandemic-related funding from its non-German European locations in either of 2023 or 2022.

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”, the Company is responsible to evaluate at each reporting period, including interim periods, whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations.

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

The Company believes it has the ability to meet its obligations for at least one year from the date of issuance of this Form 10-K.

Accordingly, the accompanying consolidated financial statements have been prepared assuming it will continue as a going concern and contemplates the realization of assets and the satisfaction of liabilities in the normal course of 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 December 30, 2022 together with Ralph Bartel, in his individual capacity (together, the “Azzurro Parties"), holds approximately 50.3 % of the Company's outstanding shares.

Financial Statements

Azzurro is the Company’s largest shareholder, and as of December 31, 2023, holds approximately 40.2 % of the Company's outstanding shares.

Holger Bartel, the Company's Global CEO, is Ralph Bartel's brother and separately holds 3.8 % of the Company's outstanding shares as of December 31, 2023 .

Basis of Presentation and Consolidation

The consolidated financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") in the United States ("U.S.").

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All intercompany accounts and transactions have been eliminated in consolidation.

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with GAAP.

Significant estimates included in the consolidated financial statements and related notes include revenue recognition, refund liability, income taxes, stock-based compensation, loss contingencies, useful lives of property and equipment, purchase price allocation for the business combination and related impairment assessment, relating to the projections and assumptions used.

For our consolidated financial statements as of and for the period ended December 31, 2023 , we evaluated subsequent events and transactions for potential recognition or disclosure through the date that we filed this Form 10-K with the Securities and Exchange Commission (SEC).

Management has made a number of estimates and assumptions relating to the reporting of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare these financial statements in conformity with GAAP.

Significant estimates included in the consolidated financial statements and related notes include income taxes, stock-based compensation, loss contingencies, purchase price allocation for business combinations, and projections and assumptions used in related impairment assessments.

Actual results could differ materially from those estimates.

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The Company follows Accounting Standards Update No.

2014-09, “Revenue from Contracts with Customers” (Topic 606).

Under Topic 606, revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The Company's revenues are primarily advertising fees generated from the publishing of travel and entertainment deals on the Travelzoo website, in the Top 20 email newsletter, in the Standalone email newsletter and through the Travelzoo Network .

The Company also generates transaction-based revenues from the sale of vouchers through our Local Deals and Getaways products and operation of a hotel booking platform, limited offerings of vacation packages and subscription revenues from Jack's Flight Club.

The Company's disaggregated revenues are included in “Note 12:

Segment Reporting and Significant Customer Information”.

2014-09, “Revenue from Contracts with Customers” (Topic 606), under which revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

The Company's revenues are primarily advertising fees generated from the publishing of travel and entertainment deals on the Travelzoo website, in Top 20 email newsletters, in Standalone email newsletters and through the Travelzoo Network .

The Company also generates transaction-based revenues from the sale of vouchers (our Local Deals and Getaways offerings), operation of our hotel booking platform and limited offerings of vacation packages, as well as subscription revenues from Jack's Flight Club and, beginning in 2024, Travelzoo membership fees.

The Company's disaggregated revenues are included in Note 12– Segment Reporting and Significant Customer Information .

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

For Top 20 email newsletter 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 ad 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 advertisement, Travelzoo Network properties, or social media properties.

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

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

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

For Local Deals and Getaways products, the Company earns a fee for acting as an agent for the sale of vouchers that can be redeemed for services with third-party merchants.

Revenues are presented net of the amounts due to the third-party merchants for fulfilling the underlying services and an estimated amount for future refunds.

Since the second quarter of 2020, the Company expanded its vouchers refund policy in order to entice customers given the economic climate at that time to fully refundable until the voucher expires or is redeemed by the customer.

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

For cost-per-click advertising, whereby an advertiser pays the Company when a user clicks on an ad (typically served on Travelzoo properties or Travelzoo Network partner properties), the Company recognizes revenues each time a user clicks on the ad.

The Company also offers clients other advertising models whereby an advertiser pays the Company based on the number of times their advertisement is displayed (whether on Travelzoo properties, email advertisements, Travelzoo Network properties, social platforms or other media properties).

For these instances, the Company recognizes revenues each time an ad is displayed.

For transaction-based revenues, including from products such as Local Deals and Getaways prepaid voucher sales, hotel platform bookings and vacation package sales, the Company evaluates whether it is acting as principal (thereby reporting revenue on a gross basis) versus agent (thereby reporting revenue on a net basis).

Accordingly, the Company reports transaction-based revenues on a net basis, as third-party suppliers are primarily responsible for fulfilling the underlying good or service, which the Company does not control prior to its transfer to the customer.

For Local Deals and Getaways prepaid voucher sales, the Company earns a fee for acting as an agent on the sale, while vouchers can subsequently be redeemed for goods or services with third-party merchants.

Revenues are, accordingly, presented net of amounts due to third-party merchants for fulfilling the underlying goods and services, and net of estimated future refunds to consumers, as the terms of the vouchers permit.

Certain merchant contracts allow the Company to retain the proceeds from unredeemed vouchers.

With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.

Jack’s Flight Club revenue is generated from paid subscriptions by members.

Commission revenues generated from bookings on our hotel platform are recognized ratably over the periods of guest stays, net of an allowance for estimated cancellations, based upon historical patterns.

For bookings of non-cancelable reservations, where the Company’s performance obligation is deemed to be completed upon the successful booking, the Company records commission revenue at such time.

Jack’s Flight Club generates revenues from subscription fees paid by members.

Subscription options are quarterly, semi-annually and annually.

We recognize the revenue monthly pro rata over the subscription period.

Commission revenue related to our hotel platform is recognized ratably over the period of guest stay, net of an allowance for cancellations based upon historical patterns.

For arrangements for booking non-cancelable reservations where the Company’s performance obligation is deemed to be the successful booking of a hotel reservation, the Company records revenue for the commissions upon completion of the hotel booking.

The Company’s contracts with customers may include multiple performance obligations in which the Company allocates revenues to each performance obligation based on its standalone selling price.

The Company determines standalone selling price based on its overall pricing objectives, taking into consideration the type of services, geographical region of the customers, normal rate card pricing and customary discounts.

Standalone selling price is generally determined based on the prices charged to customers when the product is sold separately.

The Company relies upon the following practical expedients and exemptions allowed for in the Topic 606.

The Company expenses sales commissions when incurred because the amortization period would be one year or less.

These costs are recorded in sales and marketing expenses.

In addition, the Company does not disclose the value of unsatisfied performance obligations for (a) contracts with an original expected length of one year or less and (b) contracts for which it recognizes revenues at the amount to which it has the right to invoice for services performed.

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

At December 31, 2021, $ 1.3 million was recorded as deferred revenue for Jack's Flight Club and was fully recognized as revenue during 2022, $ 473,000 was recorded as deferred revenue for Travelzoo North America and Travelzoo Euro pe, of which $ 463,000 was recognized as revenue during 2022.

At December 31, 2022, the deferred revenue balance was $ 2.2 million, of which $ 1.2 million was for Jack's Flight Club, and the remaining $ 981,000 was for Travelzoo North America and Travelzoo Europe.

We recognize subscription revenues ratably over the subscription periods.

In certain instances, the Company’s contracts with customers may include multiple performance obligations, whereby the Company allocates revenues to each performance obligation based on its standalone selling price.

The Company determines standalone selling prices based on overall pricing objectives, taking into consideration the type of goods or services, geographical region of the customers, rate card pricing and customary discounts.

Standalone selling prices are generally determined based on the prices charged to customers when the good or service is sold separately.

The Company relies upon certain practical expedients and exemptions provided for in Topic 606.

The Company expenses sales commissions when incurred, as the amortization period would be one year or less, which are recorded in sales and marketing expenses.

In addition, the Company does not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less, and contracts for which it recognizes revenues at the amount to which it has the right to invoice for services performed.

Deferred revenue primarily consists of customer prepayments and undelivered Company performance obligations related to contracts comprising multiple performance obligations .

At December 31, 2023, deferred revenue was $ 2.0 million, of which $ 1.5 million was for Jack's Flight Club, and $ 569,000 was for Travelzoo North America and Travelzoo Europe.

At December 31, 2022, deferred revenue was $ 2.2 million, of which $ 1.2 million was for Jack's Flight Club, and $ 981,000 was for Travelzoo North America and Travelzoo Europe.

The Company records an estimated reserve for refunds to members based on our historical experience at the time revenue is recorded for Local Deals and Getaways voucher sales.

We consider many key factors such as the historical refunds based upon the time lag since the sale, historical reasons for refunds, time period that remains until the deal expiration date, any changes in refund procedures and estimates of redemptions and breakage.

For publishing revenue, we recognize revenue upon delivery of the emails and delivery of the clicks, over the period of the placement of the advertising.

Insertion orders for publishing revenue are typically for periods between one month and twelve months and are not automatically renewed.

For Getaways vouchers, we recognize a percentage of the face value of the vouchers upon the sale of the vouchers.

Merchant agreements for Getaways advertisers are typically for periods between twelve months and twenty-four months and are not automatically renewed.

In the second quarter of 2020, the Company expanded its vouchers refund policy to fully refundable until the voucher expires or is redeemed by the customer.

The expiration dates of vouchers range between January 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 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.

For Local Deals vouchers, we recognize a percentage of the face value of vouchers upon the sale of the vouchers.

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 December 31, 2022, the Company had approximately $ 8.1 million of unredeemed vouchers that had been sold through December 31, 2022 representing the Company’s commission earned from the sale.

The Company had estimated a refund liability of $ 1.3 million for these unredeemed vouchers as of December 31, 2022 which is recorded as a reduction of revenues and is reflected as a current liability in Accrued expenses and other on the consolidated balance sheet.

As of December 31, 2021, the Company had approximately $ 17.2 million of unredeemed vouchers that had been sold through 2021 representing the Company’s commission earned from the sale and estimated a refund liability of $ 5.2 million for these unredeemed vouchers as of December 31, 2021, which was recorded as a reduction of revenues and was reflected as a current liability in accrued expenses and other on the consolidated balance sheet.

The Company has recorded merchant payables of $ 32.6 million as of December 31, 2022 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.

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.

We record a liability associated with estimated future refunds in accrued expenses on the consolidated balance sheets.

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

Estimated member refunds that are determined not to be recoverable from the merchant are presented as a cost of revenue.

If our judgments regarding estimated member refunds are inaccurate, reported results of operations could differ from the amount we previously accrued.

Merchant Payables

The Company estimates and records a reserve for future refunds on member purchases of Local Deals and Getaways vouchers, at the time revenue is recorded.

We consider various factors such as historical refund timeframes from dates of sale, reasons for refunds, time periods remaining until expiration, changes in refund procedures and estimates of redemptions and breakage.

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 merchant partners, on behalf of whom vouchers are sold, were to deteriorate, affecting their ability to provide the goods or services to our members, additional reserves for refunds to members may be required and may adversely affect future revenues as the liability is recorded against revenue.

In the second quarter of 2020, due to the pandemic and various stay-at-home protocols, the Company modified its voucher refund policy, providing for new voucher sales to be fully refundable until the earlier of voucher redemptions or their expiration dates.

This refund policy was reverted in April 2022 to a 14-day refund period from date of purchase, with a newly introduced option to extend refund eligibility until voucher redemption or expiration, for a surcharge.

As of December 31, 2023 , t he expiration dates of unexpired vouchers ranged from January 2024 through December 2025;

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

As of December 31, 2023, the Company had approximately $ 5.2 million of unredeemed vouchers that had been sold, representing the Company’s commission earned.

The Company estimated and recorded a refund reserve of $ 268,000 for these unredeemed vouchers as of December 31, 2023, which is recorded as a reduction of revenues on the consolidated statements of operations and accrued expenses and other on the consolidated balance sheet.

As of December 31, 2022, the Company had approximately $ 8.1 million of unredeemed vouchers that had been sold, representing the Company’s commission earned, and estimated and recorded a refund reserve of $ 1.3 million for these unredeemed vouchers as of December 31, 2022, as a reduction of revenues on the consolidated statements of operations and accrued expenses and other on the consolidated balance sheet.

If our judgments regarding estimated member refunds are inaccurate, reported results of operations could differ from amounts previously accrued.

Merchant payables of $ 20.6 million as of December 31, 2023 is recorded on the consolidated balance sheet, representing amounts payable to merchants by the Company for vouchers sold but not redeemed.

(d) Business Combinations

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Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred.

(d) Identifiable intangible assets

(e) Identifiable intangible assets

Upon acquisition, identifiable intangible assets are recorded at fair value and are carried at cost less accumulated amortization.

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

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

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

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

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

The Company performs an impairment test by comparing the book value of the reporting unit to the fair value of the reporting units utilizing a combination of valuation techniques, including an income approach (discounted cash flows) and market approach (guideline company method).

The Company performed its annual impairment test as of October 31, 2022 and 2021 and no impairment charge was identified in connection with the annual impairment tests.

(d) Allowance for Doubtful Accounts

The Company records a provision for doubtful accounts based on its historical experience of write-offs and a detailed assessment of our accounts receivable and allowance for doubtful accounts.

In estimating the provision for doubtful accounts, management considers the age of the accounts receivable, historical write-offs, the creditworthiness of the advertiser, the economic conditions of the advertiser’s industry, and general economic conditions, among other factors.

Should any of these factors change, the estimates made by management will also change, which could impact the level of the future provision for doubtful accounts.

Specifically, if the financial condition of our advertisers were to deteriorate, affecting their ability to make payments, additional provision for doubtful accounts may be required.

(e) Advertising Costs

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

The Company performs an impairment test by comparing the book value of the reporting unit to the fair value of the reporting unit utilizing a combination of valuation techniques, including an income approach (discounted cash flows) and market approach (guideline company method).

The Company performed its annual impairment testing as of October 31, 2023 and 2022 and no impairment charges were identified in connection with the annual impairment tests.

(g) Allowance for Expected Losses

The Company records a provision for credit losses based on its historical experience with uncollectible amounts due and a detailed assessment of accounts receivable and allowance for expected credit losses.

In estimating the provision for credit losses, management considers the age of the accounts receivable, historical provisioning and write-offs, creditworthiness of the debtor, the economic conditions of the debtor’s industry and general economic conditions, among other factors.

Should any of these factors change, estimates made by management may also change, which could impact the level of future provisioning for credit losses.

Specifically, if the financial condition of our clients were to deteriorate, affecting their ability to make payments, additional provisioning for credit losses may be required.

(h) Advertising Costs

Advertising costs are expensed as incurred.

Online advertising is expensed as incurred over the period the advertising is displayed.

Advertising costs for Travelzoo North America and Travelzoo Europe amounte d to $ 6.4 million and $ 3.7 million for years ended December 31, 2022 and 2021, respectively.

Advertising and marketing costs for Jack's Flight Club was $ 545,000 and $ 221,000 for the years ended December 31, 2022 and 2021, respectively.

(f) Operating Leases

Advertising costs for Travelzoo North America and Travelzoo Europe amounted to $ 8.1 million and $ 6.4 million for the years ended December 31, 2023 and 2022, respectively.

Advertising costs for Jack's Flight Club were $ 1.5 million and $ 545,000 for the years ended December 31, 2023 and 2022, respectively.

Advertising costs for New Initiatives were $ 238,000 and $ 0 for the years ended December 31, 2023 and 2022, respectively.

(i) Operating Leases

The Company determines if an arrangement contains a lease at inception.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of future minimum lease payments due over the lease term, at commencement date.

The lease payments used to determine the operating lease assets may include lease incentives and stated rent increases.

The Company does not include options to extend or terminate until it is reasonably certain that the option will be exercised.

The Company does not include options to extend or terminate until it is reasonably certain that an option will be exercised.

Lease expense is recognized on a straight-line basis over the lease term.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the lease liabilities as the Company’s leases generally do not provide an implicit rate.

The Company uses its incremental borrowing rate based on the information available at the commencement date in determining lease liabilities, as the Company’s leases generally do not provide an implicit rate.

The Company elected not to recognize leases with an initial term of 12 months or less on its consolidated balance sheets.

The Company’s leases are reflected in operating lease ROU assets, operating lease liabilities and long-term operating lease liabilities in our accompanying consolidated balance sheet as of December 31, 2022.

The Company’s leases are reflected in operating lease ROU assets, operating lease liabilities and long-term operating lease liabilities on our accompanying consolidated balance sheet as of December 31, 2023.

Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

The Company also has a real estate lease agreement which is subleased to a third party.

The Company recognizes sublease income in Other income (expense), net on a straight-line basis over the lease term in its consolidated statements of operations.

(g) Stock-Based Compensation

The Company accounts for its employee stock options under the fair value method, which requires stock-based compensation to be estimated using the fair value on the date of grant using an option-pricing model.

The Company also has a lease agreement for real estate which it subleases to a third party.

The Company recognizes sublease income in Other income (expense), net on a straight-line basis over the sublease term in its consolidated statements of operations.

(j) Stock-Based Compensation

The Company accounts for employee stock option grants under the fair value method, which requires stock-based compensation to be estimated using the fair value on the date of grant, employing an option pricing model.

The value of the portion of the award that is expected to vest is recognized as expense over the related employees’ requisite service periods in the Company’s consolidated statements of operations.

See Note 10 to the cons olidated financial statements for a further discussion on stock-based compensation.

(h) Foreign Currency

See Note 10 to the cons olidated financial statements for a further discussion of stock-based compensation.

(k) Foreign Currency

All foreign subsidiaries use the local currency of their respective countries as their functional currency.

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Realized gains and losses from foreign currency transactions are recognized as gain or loss on foreign currency in the consolidated statements of operations.

Total foreign currency transaction net gain of $ 72,000 and $ 31,000 for 2022 and 2021, respectively, are included in Other income (loss), net in the Company’s consolidated statements of operations.

(i) Income Taxes

Total foreign currency transaction net gains of $ 65,000 and $ 72,000 for 2023 and 2022, respectively, are included in Other income (loss), net in the Company’s consolidated statements of operations.

(l) Income Taxes

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets are recognized for deductible temporary differences, along with net operating loss carryforwards and credit carryforwards, if it is more likely than not that the tax benefits will be realized.

To the extent a deferred tax asset cannot be recognized under the preceding criteria, valuation allowances must be established.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

To the extent a deferred tax asset cannot be recognized under the preceding criteria, valuation allowances are established.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which temporary differences are expected to be recovered or settled.

Significant judgment is required in evaluating the Company's uncertain tax positions and determining the Company's provision for income taxes.

Although the Company believes it has adequately reserved for its uncertain tax positions, no assurance can be given that the final tax outcome of these matters will not be different.

The Company adjusts these reserves in light of changing facts and circumstances, such as the progress or closing of a tax audit or the refinement of an estimate.

Although the Company believes it has adequately reserved for its uncertain tax positions, no assurance can be given that the final outcomes of these matters will not be different.

The Company adjusts its reserves in light of changing facts and circumstances, such as the progress or closing of a tax audit or the refinement of an estimate.

To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the provision for income taxes in the period in which such determination is made.

The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate, as well as the related net interest.

(j) Comprehensive Income

(m) Comprehensive Income

Comprehensive income consists of two components, net income and other comprehensive income (loss).

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Total comprehensive income (loss) for all periods presented has been disclosed in the consolidated statements of comprehensive income.

(k) Certain Risks and Uncertainties

The Company’s business is subject to risks associated with its ability to attract and retain advertisers and offer products or services on compelling terms to our members.

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.

(n) Certain Risks and Uncertainties

The Company’s business is subject to risks associated with its ability to attract and retain advertisers and offer goods or services on compelling terms to our members.

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

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.

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

Additionally, there were significant levels of cancellations for the Company's hotel partners and travel package partners and refund requests for our vouchers.

Now that COVID-19 and its lingering effects have mostly subsided, we are seeing many of our advertisers and partners return to advertising with us and have altered our policies again to align with the changing environment (including reverting to a 14-day return window for vouchers and implementing a surcharge for vouchers to be fully refundable), although with the emergence of new variants, this trend could stop or even reverse which could result in a material adverse impact on our business and financial performance.

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

During the pandemic, many of the Company’s advertising partners paused, canceled and/or stopped advertising.

Additionally, there were significant levels of cancellations by members and partners for hotel and travel packages, and voucher refund requests.

Now that COVID-19 and its lingering effects have largely subsided, many of our advertisers and partners are returning to advertise with us and we have altered certain policies to align with the changing environment (including reverting to a 14-day return window for voucher purchases and implementing a surcharge for vouchers to be fully refundable), although with the emergence of new variants, this trend could stop or even reverse, which could result in a material adverse impact on our business and financial performance.

It is difficult to estimate the impact of the coronavirus, future variants or other events giving rise to a pandemic on the Company’s future revenues, results of operations, cash flows, liquidity or financial condition.

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

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

The accounts receivables are derived from revenue earned from customers located in the U.S.

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

Accounts receivable are derived from revenues earned from customers located in the U.S.

and internationally.

As of December 31, 2022 and 2021 , the Company did not have any customers that accounted for 10% or more of accounts receivable.

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

As of December 31, 2023, the Company had merchant payables of $ 20.6 million related to the sale of vouchers.

In the Company’s financial statements presented in this 10-K 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 $ 11.9 million.

Payables to merchants are generally due upon redemption of vouchers.

The vouchers have maturities from January 2023 through December 2025 with the majority of vouchers expiring in 2023;

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

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 December 31, 2022 will be sufficient to provide for working capital needs for at least the next twelve months.

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

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

(l) Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of highly liquid investments with maturities of three months or less on the date of purchase.

As such, the consolidated balance sheet reflects negative net working capital (defined as current assets minus current liabilities) of $ 3.4 million at December 31, 2023.

Payables to merchants are generally due upon the redemption of vouchers by members who purchased them from the Company.

As of December 31, 2023 , unredeemed vouchers have maturities ranging from January 2024 through December 2025;

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

Based on current projections of future redemption activity, management expects that cash on hand as of December 31, 2023 will be sufficient to provide for working capital needs for at least the next twelve months.

(o) Cash, Cash Equivalents and Restricted Cash

Cash equivalents consist of highly liquid investments with maturities of three months or less from the date of purchase.

Restricted cash includes cash and cash equivalents that is restricted through legal contracts, regulations or our intention to use the cash for a specific purpose.

Our restricted cash primarily relates to refundable deposits and funds held in escrow.

Our restricted cash primarily relates to refundable security deposits for real estate leases and funds held in escrow.

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

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Total cash, cash equivalents and restricted cash in the consolidated statements of cash flows $ 16,389 $ 19,378

(m) Property and Equipment

(p) Property and Equipment

Property and equipment are stated at cost less accumulated depreciation.

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Maintenance and repairs are expensed as incurred.

The Company also includes in fixed assets the capitalized cost of internal-use software and website development, including software used to upgrade and enhance its website and processes supporting the Company’s business in accordance with the framework established by the FASB accounting guidance for accounting for the cost of computer software developed or obtained for internal use and accounting for website development costs.

The Company also includes in fixed assets the capitalized cost of internal-use software and website development, including software used to upgrade and enhance its website and processes supporting the Company’s business, in accordance with the framework established and guidance provided by the FASB relating to accounting for the cost of computer software developed or obtained for internal use, and website development costs.

Costs incurred in the planning stage and operating stage are expensed as incurred, while costs incurred in the application development stage and infrastructure development stage are capitalized, assuming such costs are deemed to be recoverable.

Depreciation is provided using the straight-line method over the estimated useful lives of the assets.

Estimated useful lives are 3 to 5 years for computer hardware and software, capitalized internal-use software and website development costs, and office equipment and office furniture.

Depreciation is determined using the straight-line method over the estimated useful lives of the assets.

Estimated useful lives are 3 to 5 years for computer hardware and software, capitalized internal-use software and website development costs, and office equipment and furniture.

The Company depreciates leasehold improvements over the term of the lease or the estimated useful life of the asset, whichever is shorter.

(n) Impairment of Property and Equipment

(q) Impairment of Property and Equipment

The Company accounts for long-lived assets in accordance with the accounting standard relating to impairment of long-lived assets, which requires an impairment loss to be recognized on assets to be held and used if the carrying amount of a long-lived asset group is not recoverable from its undiscounted cash flows.

The amount of the impairment loss is measured as the difference between the carrying amount and the fair value of the asset group.

The amount of impairment loss is measured as the difference between the carrying amount and the fair value of the asset group.

Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

The Company evaluates long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

No impairment loss was recognized during the year ended December 31, 2022.

(o) Recent Accounting Pronouncements Not Yet Adopted

The Company evaluates long-lived assets for impairment annually and whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable.

No impairment loss was recognized during the year ended December 31, 2023 and 2022.

(r) Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No.

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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.

Entities are required to apply this update on a modified retrospective basis with a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.

The Company is currently evaluating the impact on its financial position and results of operations.

In June 2022, the FASB issued an Accounting Standard Update to clarify the fair value measurement of an equity security that is subject to a contractual sale restriction and requires specific disclosures related to such an equity security.

The new guidance is effective for fiscal years beginning after December 15, 2023, with early adoption permitted.

The Company does not expect it will have a material impact, if any, on our consolidated financial statements.

In October 2021, the FASB issued new guidance requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers .

The new guidance is effective on a prospective basis for fiscal years beginning after December 15, 2022, with early adoption permitted.

The Company does not expect it will have a material impact, if any, on our consolidated financial statements.

The Company adopted the ASU prospectively on January 1, 2023.

This ASU has not and is currently not expected to have a material impact on our consolidated financial statements.

(s) Recent Accounting Pronouncements Not Yet Adopted

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures", which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740):

Improvements to Income Tax Disclosures", to expand the disclosure requirements for income taxes, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation.

ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted and can be applied on either a prospective or retroactive basis.

We are currently evaluating the ASU to determine its impact on our income tax disclosures.

Net Income (Loss) Per Share

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Net income attributable to Travelzoo—continuing operations $ 11,906 $ 6,693

Net loss attributable to Travelzoo—discontinued operations ( 59 ) ( 13 )

Net income (loss) attributable to Travelzoo—discontinued operations 460 ( 59 )

Weighted average common shares—basic 14,897 12,372

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Net income (loss) per share—diluted $ 0.83 $ 0.53

For the year ended December 31, 2022, options to purchase 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.

For the year ended December 31, 2021, options to purchase 50,000 shares of common stock were not included in the computation of diluted net income per share because of the net loss .

For the years ended December 31, 2023 and 2022, options to purchase 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 between Travelzoo and Azzurro Capital Inc., a Related-Party

In connection with the development of Travelzoo META, the Company acquired MTE, a wholly owned subsidiary of Azzurro Capital Inc.

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

In connection with the acquisition of MTE, formerly a wholly-owned subsidiary of Azzurro, the Company completed a private placement of newly issued shares with Azzurro.

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 at the time of the MTE acquisition and, as of December 31, 2022, Azzurro and Ralph Bartel, in his individual capacity, owned approximately 50.3 % the Company's outstanding shares.

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:

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

The consideration for the Shares consisted of the following:

(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 Metaverse Travel Experiences, Inc.

(“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, carrying a 12 % interest rate per annum, issued on the Closing Date and payable by June 30, 2023;

and (c) the transfer to the Company of all outstanding capital stock of MTE, which 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 consolidated balance sheet as of December 31, 2022.

In October 2023, the Company and Azzurro agreed to a payment plan for payment of the promissory note in five installments, ending in February 2024, with interest on the outstanding principal accruing at 16 % per annum beginning on July 1, 2023.

During the year ended December 31, 2023, Azzurro paid $ 3.0 million of principal and $ 604,000 of interest.

The remaining principal amount of $ 1.8 million promissory note is collateralized by the Shares and is expected to be paid in 2024.

Travelzoo acquired the entire business of MTE.

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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 .

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.

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.

Any losses indemnified by Azzurro related to the inability to utilize MTE’s net operating loss carry forwards shall be satisfied by Azzurro returning to the Company the number of shares of common stock of Travelzoo corresponding to the value of the loss.

Any losses indemnified by Azzurro related to the inability to utilize MTE’s net operating loss carryforwards shall be satisfied by Azzurro returning to the Company the number of shares of common stock of Travelzoo corresponding to the value of the loss.

Accordingly, the Company has classified this tax indemnification asset as contra-equity in the accompanying consolidated financial statements.

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

The Company recorded the transactions with both Secret Escape Limited and Metaverse Travel Experiences, Inc.

The Company recorded the transactions with both Secret Escapes Limited and Metaverse Travel Experiences, Inc.

as asset acquisition s as the assets acquired and liabilities assumed do not meet the definition of a business in Accounting Standards Codification (“ASC”) 805-10.

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Travelzoo acquired the database of members and recorded $ 2.2 million intangible assets from both agreements.

Acquisition of Jack's Flight Club

Travelzoo acquired 60 % of the Jack’s Flight Club for an aggregate purchase price of $ 12.0 million in January 2020.

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 in the partial forgiveness of t he promissory note issued for the acquisition.

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

Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their relative fair values.

The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill.

Accordingly, the Company allocated $ 3.5 million to customer relationships, $ 2.5 million to trade name and $ 660,000 to non-compete agreements and the remaining $ 13.1 million to goodwill.

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.

Intangible Assets

The following table represents the fair value and estimated useful lives of intangible assets from the above acquisitions (in thousands):

The following table presents the gross fair values and estimated useful lives of intangible assets (in thousands):

Fair Value Estimated Life (Years)

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Non-compete agreement (Jack's Flight Club) 660 4.0

Intangible assets (Secret Escape Spain member database) 445 3.0

Intangible assets (Secret Escape U.S.

Intangible assets (Secret Escapes Spain member database) 445 3.0

Intangible assets (Secret Escapes U.S.

member database) 1,751 2.3

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The Company’s non-financial assets, such as goodwill, intangible assets and property and equipment, are adjusted to fair value if an impairment is recognized during the period.

The fair value measurements are based on Level 3 inputs.

Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets at fair value.

The goodwill assessment was performed by comparing the fair value of the reporting units to its carrying value.

The fair value estimates for the reporting units, were based on a blended analysis of the present value of future discounted cash flows and market value approach, using Level 3 inputs.

The indefinite-lived intangible assets assessment was valued using the relief-from-royalty method, which includes unobservable inputs, classified as Level 3, including projected revenues and approximately 5 % royalty rate.

The Company recorded a goodwill impairment of $ 2.1 million and a Trade name impairment of $ 810,000 for Jack's Flight Club due to the pandemic in the first quarter of 2020 .

No impairment charge was identified and recorded for 2021.

The Company performed its annual test as of October 31, 2022 and a Trade name impairment charge of $ 200,000 was recorded as “ General and administrative expenses ” for Jack's flight club.

The revenue for Jack's Flight Club was negatively impacted by the pandemic and did not meet the forecasted growth expectation.

The fair value measurements are based on Level 3 inputs which are unobservable inputs based on management assumptions used to measure assets at fair value.

The goodwill assessment was performed by comparing the fair value of the reporting units to their carrying value.

The fair value estimates for the reporting units were based on a blended analysis of the present value of future discounted cash flows and the market value approach, using Level 3 inputs.

The indefinite-lived intangible assets assessment was performed using the relief-from-royalty method, which includes unobservable inputs, classified as Level 3 inputs, including projected revenues and an approximate 5 % royalty rate.

The Company performed an annual impairment test in October 2023 and did not identify any indicators of impairment for the year ended December 31, 2023.

The Company performed its annual test as of October 31, 2022 and a Trade name impairment charge of $ 200,000 was recorded as “ General and administrative expenses ” for Jack's flight club, as revenue for Jack's Flight Club was negatively impacted by the pandemic and did not meet forecasted growth expectations.

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

In 2020, t he Company recorded a goodwill impairment of $ 2.1 million and a Trade name impairment of $ 810,000 for Jack's Flight Club, due to the pandemic .

Amortization of Acquired Intangible Assets

The following table represents the activities of intangible assets for the years ended December 31, 2022 and 2021 (in thousands):

Jack's Flight Club Secret Escape Spain member database Secret Escape U.S.

The following table presents the activities of intangible assets for the years ended December 31, 2023 and 2022 (in thousands):

Jack's Flight Club Secret Escapes Spain member database Secret Escapes U.S.

member database

Intangible assets—January 1, 2021 $ 4,534

Amortization of intangible assets with definite lives ( 1,108 )

Intangible assets—December 31, 2021 3,426

Intangible assets, net—January 1, 2022 $ 3,426 — —

Acquisitions—March 2022 — 445 1,751

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Impairment of trade name—December 31, 2022 ( 200 ) — —

Intangible assets—December 31, 2022 $ 2,351 $ 327 $ 973

Intangible assets, net—December 31, 2022 2,351 327 973

Amortization of intangible assets with definite lives ( 641 ) ( 141 ) ( 778 )

Intangible assets, net—December 31, 2023 $ 1,710 $ 186 $ 195

Amortization expense for acquired intangibles was $ 1.6 million and $ 1.8 million for the years ended December 31, 2023 and 2022, respectively.

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The Company performed its annual impairment testing of Trade name as of October 31, 2023 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 2023.

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

The Company's annual impairment test as of October 31, 2022 indicated that Jack’s Flight Club’s indefinite lived intangible assets (“Trade name”) was impaired and an impairment charge of $ 200,000 was recorded as general and administrative expenses.

On April 24, 2020 and May 5, 2020, the Company received $ 3.1 million and $ 535,000 , respectively, pursuant to loans under the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the Small Business Association.

The loans have a maturity of two ( 2 ) years from the disbursement of the funds and an annual interest rate of 1 %.

The loans had a maturity of two ( 2 ) years from the disbursement of the funds and an annual interest rate of 1 %.

The Company used the funds from these loans only for the purposes included in the PPP, including payroll, employee benefits, and rent, and also intends to apply for forgiveness of a portion of the loans in compliance with the CARES Act.

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

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

In 2021, the Company settled the $ 535,000 PPP loan, $ 494,000 was forgiven and the remaining outstanding principal balance of the loan and interest of $ 111,000 was repaid.

During 2021, the principal and the interest of the $ 3.1 million PPP loan were forgiven .

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

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Balance Sheet Components

Prepaid expenses an d other consist of the following (in thousands):

Prepaid expenses an d other consists of the following (in thousands):

Prepaid expenses $ 1,084 $ 764

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Total prepaid expenses and other $ 1,460 $ 1,289

Property and equipment co nsist of the following (in thousands):

Office equipment and office furniture $ 5,005 $ 7,838

Property and equipment co nsists of the following (in thousands):

Office equipment and furnishings $ 2,141 $ 5,005

Capitalized internal-use software and website development 2,230 4,601

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Computer hardware and software 45 1,728

13,748 18,487

Property and equipment 5,220 13,748

Less accumulated depreciation and amortization ( 4,642 ) ( 13,091 )

Total $ 657 $ 659

Total property and equipment, net $ 578 $ 657

Depreciation expense was $ 291,000 and $ 418,000 for the years ended December 31, 2023 and 2022, respectively.

Amortization of capitalized internal-use software and website development costs w as $ 39,000 and $ 1,000 for the years ended December 31, 2023 and 2022 , respectively.

Changes to the allowance for doubtful accounts and reserve for member refunds are as follows (in thousands):

Amortization of acquired intangible assets is presented in Note 3 above .

Changes to the allowance for credit losses and reserve for member refunds are as follows (in thousands):

accounts Reserve for

Balance at January 1, 2021 $ 2,814 $ 4,085

Balance at December 31, 2021 $ 2,094 $ 5,166

Additions — charged to costs and expenses, or contra revenue 54 15

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Balance at December 31, 2023 $ 1,484 $ 268

Accrued expenses and other consist of the following (in thousands):

Accrued expenses and other consists of the following (in thousands):

Accrued compensation expense 1,381 1,744

Reserve for member refunds $ 268 $ 1,278

Accrued advertising expense 743 538

Accrued compensation expense 1,744 1,743

Other accrued expenses 1,266 1,489

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At December 31, 2023 and 2022, accounts receivable, accounts payable and accrued expenses are not measured at fair value;

however, the Company believes that the carrying amounts of these assets and liabilities are a reasonable estimate of their fair value because of their relative short maturity.

however, the Company believes that the carrying amounts of these assets and liabilities are a reasonable estimate of their fair values because of their relative short maturities.

Commitments and Contingencies

From time to time, the Company is subject to various claims and legal proceedings, either asserted or unasserted, that arise in the ordinary course of business.

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.

The Company accrues for legal contingencies if management can estimate the potential liability and believes it is probable that the matter will be ruled on adversely.

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

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Regardless of outcome, litigation can have an adverse impact on the Company because of defense costs, negative publicity, diversion of management resources and other factors.

The Company was formed as a result of a combination and merger of entities founded by the Company’s principal stockholder, Ralph Bartel.

The Company was formed as a result of a combination and merger of entities founded by Ralph Bartel.

Azzurro, of which the Ralph Bartel 2005 Trust (of which he is the sole beneficiary) is the controlling shareholder, holds approximately 40.2 % of the Company’s outstanding shares as of December 31, 2023.

In 2002, Travelzoo.com Corporation was merged into Travelzoo.

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Thereafter, the Company began to offer a voluntary cash program for those who established that they had satisfied certain prerequisite qualifications for Netsurfers promotional shares as further described below.

During 2010 through 2014, the Company became subject to unclaimed property audits of various states in the United States related to the above unexchanged promotional shares and completed settlements with all states.

Although the Company has settled the unclaimed property claims with all states, the Company may still receive inquiries from certain potential Netsurfers promotional stockholders that had not provided their state of residence to the Company by April 25, 2004.

Therefore, the Company is continuing its voluntary program under which it makes cash payments to individuals related to the promotional shares for individuals whose residence was unknown by the Company and who establish that they satisfy the original conditions required for them to receive shares of Netsurfers, and who failed to submit requests to convert their shares into shares of Travelzoo within the required time period.

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 Compan y.

The Company did not make any payments for 2022 and 2021.

From 2010 through 2014, the Company became subject to unclaimed property audits of various states in the United States related to the above unexchanged promotional shares and completed settlements with all such states.

Although the Company has settled the unclaimed property claims with all such states, the Company may still receive inquiries from certain potential Netsurfers promotional stockholders that had not provided their state of residence to the Company by April 25, 2004.

Therefore, the Company is continuing its voluntary program under which it makes cash payments to individuals related to promotional shares for individuals whose residence was unknown by the Company and who establish that they satisfy the original conditions required for them to receive shares of Netsurfers, and who failed to submit requests to convert their shares into shares of Travelzoo within the required time period.

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

The Company did not make any such payments in 2023 or 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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under operating leases.

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

The C ompany maintained standby letters of credit (“LOC”) serve as collateral issued to the landlords.

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

The C ompany maintains standby letters of credit (“LOC”) to 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.

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Se e Note 14– Leases for more information.

The Company has purchase commitments aggregating approximately $ 1.9 million as of December 31, 2022, which represent the minimum obligations the Company has under agreements with certain third party service providers.

The Company has purchase commitments aggregating approximately $ 535,000 as of December 31, 2023, which represent the minimum obligations the Company has under agreements with certain third-party service providers.

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

Payments may be more than the minimum obligations based on actual use.

The components of income (loss) before income tax expense are as follows (in thousands):

The components of income before income tax expense are as follows (in thousands):

Year Ended December 31,

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$ 17,113 $ 9,958

Income tax expense consists of current and deferred components categorized by federal, state and foreign jurisdictions, as shown below.

Income tax expense consists of current and deferred components, further categorized by federal, state and foreign jurisdictions, as shown below.

The current provision is generally that portion of income tax expense that is currently payable to the taxing authorities.

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Income tax expense differed from the amounts computed by applying the U.S.

federal statutory tax rate applicable to the Company’s level of pretax income as a result of the following (in thousands):

federal statutory tax rates applicable to the Company’s level of pretax income as a result of the following (in thousands):

Year Ended December 31,

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Foreign income taxed at different rates 539 ( 38 )

Foreign tax credit — ( 270 )

PPP loan forgiveness — ( 768 )

Stock-based compensation expenses

Stock-based compensation expense

Total income tax expense $ 5,105 $ 3,270

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Deferred tax assets:

Net operating loss and credit carryforward $ 4,935 $ 9,175

Net operating loss and credit carryforwards $ 3,349 $ 4,935

Operating lease liabilities 1,947 2,417

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Deferred revenue 61 191

Property, equipment and intangible assets 156 —

Capital loss carryforward 404 410

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2022 $ 8,717 — ( 4,262 ) $ 4,455

(*) Amounts not charged (credited) to expenses are charged (credited) to stockholder's equity or deferred tax assets (liabilities).

As of December 31, 2022, the Company has a valuation allowance of approximately $ 4.5 million related to foreign net operating loss (“NOL”) carryforwards of approximately $ 21.3 million primarily related to the Company's Asia Pacific entities for which it is more likely than not that the tax benefit will not be realized.

The amount of the valuation allowance represented a decrease of approximately $ 4.3 million over the amount recorded as of December 31, 2021, and was due to the decrease of deferred tax assets and related release of the valuation allowance for the Travelzoo Australia, Travelzoo (Hong Kong) Limited and Travelzoo Local (Hong Kong), which liquidation were completed during the year ended December 31, 2022.

(*) Amounts not charged (credited) to expenses are charged (credited) to stockholders' equity or deferred tax assets (liabilities).

As of December 31, 2023, the Company has a valuation allowance of approximately $ 2.3 million related to foreign net operating loss (“NOL”) carryforwards of approximately $ 18.2 million primarily related to the Company's Asia Pacific entities (whose operations were classified as discontinued operations as of March 2020), for which it is more likely than not that the tax benefit will not be realized.

The liquidations of Travelzoo Australia, Travelzoo (Hong Kong) Limited and Travelzoo Local (Hong Kong) were completed in 2023, resulting in a write-off of the remaining net deferred tax assets of approximately $ 1.8 million for these entities, offset by the release of the corresponding valuation allowance.

If not utilized, $ 10.9 million of the remaining foreign NOL may be carried forward indefinitely, and $ 7.3 million will exp ire at various times between 2024 and 2027.

As of December 31, 2022, the Company has US federal NOL carryforwards of $ 64.7 million as a result of the transaction with MTE, See Note 3 to the accompanying consolidated financial statements for further information.

If not utilized, $ 7.4 million may be carried forward indefinitely, and $ 57.3 million will expire at various times between 2028 and 2037.

As of December 31, 2022, the Company has state and local NOL carryforwards of $ 34.5 million, which will expire at various times between 2035 and 2042.

As of December 31, 2023, the Company has U.S.

federal NOL carryforwards of $ 48.4 million as a result of the acquisition of MTE discussed in Note 3 above.

If not utilized, $ 7.4 million of the remaining NOL may be carried forward indefinitely, and $ 41.0 million will expire at various times between 2030 and 2037.

As of December 31, 2023, the Company had state and local NOL carryforwards of $ 121.7 million, which expire at various times between 2035 and 2042.

The Company has not recorded these net operating losses because an uncertain tax position has been recorded relating to them.

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

The estimated amount of the unrecognized deferred tax liability attributed to future withholding taxes on dividend distributions of undistributed earnings for certain non-U.S.

The estimated amount of the unrecognized deferred tax liability attributable to future withholding taxes on dividend distributions of undistributed earnings for certain non-U.S.

subsidiaries, which the Company intends to reinvest the related earnings indefinitely in its operations outside the U.S., is approximately $ 775,000 at December 31, 2023.

The total amount of gross unrecognized tax benefits w as $ 23.9 million as of December 31, 2023 , of which up to $ 16.6 million would affect the Company’s effective tax rate if realized.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits in 2021 and 2022 is as follows (in thousands):

Gross unrecognized tax benefits balance at January 1, 2021 $ 774

A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits in 2022 and 2023 is as follows (in thousands):

Gross unrecognized tax benefits balance at December 31, 2021 $ 1,044

Increase related to current year tax positions 15,833

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Gross unrecognized tax benefits balance at December 31, 2022 16,877

Increase related to current year tax positions 15,833

Increase related to prior year tax positions 7,018

Settlements —

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federal and certain state tax examinations for certain years after 2019, and is subject to California tax examinations for years after 2018.

Although the timing of initiation, resolution and/or closure of audits is highly uncertain, it is reasonably possible that the balance of the gross unrecognized tax benefits related to the method of computing income taxes in certain jurisdictions and losses reported on certain income tax returns could significantly change in the next 12 months.

These changes may occur through settlement with the taxing authorities or the expiration of the statute of limitations on the returns filed.

The Company is unable to estimate the range of possible adjustments to the balance of the gross unrecognized tax benefits.

The IRS and taxing authorities can also audit the NOL carryforwards acquired through the MTE acquisition, which were generated starting in 2008.

Although the timing of any initiation, resolution and/or closure of any audits is highly uncertain, it is reasonably possible that the balance of the gross unrecognized tax benefits related to the method of computing income taxes in certain jurisdictions and losses reported on certain income tax returns could significantly change in the next 12 months.

These changes may occur through settlement with taxing authorities or expiration of the statute of limitations on returns filed.

The Company is unable to estimate a range of possible adjustments to the balance of gross unrecognized tax benefits.

Accumulated Other Comprehensive Loss

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

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

Year Ended December 31,

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

Other comprehensive income (loss) due to foreign currency translation, net of tax ( 1,112 ) 266

Other comprehensive income (loss) due to foreign currency translation 298 ( 1,112 )

Ending balance $ ( 4,607 ) $ ( 4,905 )

There were no amounts reclassified from accumulated other comprehensive income (loss) for the years ended December 31, 2023 and 2022.

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

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

Employee Benefit Plan

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Since 2006, the Company has matched employee contributions up to $ 1,500 per year.

Employee contributions are fully vested upon contribution, whereas the Company’s matching contributions are fully vested after the first year of service.

Employee contributions are fully vested upon contribution, whereas the Company’s matching contributions are fully vest after the first year of service.

The Company also has various defined contribution plans for its international employees.

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Stock-Based C ompensation and Stock Options

The value of the portion of the award that is expected to vest is recognized on a straight-line basis as expense over the related employees’ requisite service periods in the Company’s consolidated statements of operations.

In September 2015, pursuant to an executed Option Agreement, the Company granted its Global Chief Executive Officer, Holger Bartel, options to purchase 400,000 shares of common stock of the Company, with an exercise price of $ 8.07 and quarterly vesting beginning on March 31, 2016 (the “2015 Option Agreement”).

The 2015 Option Agreement expires in September 2025.

The options are now fully vested and the stock-based compensation related to these options was fully expensed.

In October 2017, pursuant to an executed Option Agreement, the Company granted Mr.

Bartel options to purchase 400,000 shares of common stock, with an exercise price of $ 6.95 and quarterly vesting beginning on March 31, 2018 (the “2017 Option Agreement”).

The 2017 Option Agreement expires in 2027.

During 2019, 250,000 options granted pursuant to the 2017 Option Agreement were exercised by Mr.

The remaining 150,000 options are fully vested and the stock-based compensation related to these options was fully expensed.

In September 2019, the Company granted Mr.

Bartel options to purchase 400,000 shares of common stock subject to shareholder approval, with an exercise price of $ 10.79 and quarterly vesting beginning on March 31, 2020 and ending on December 31, 2021 (the “2019 Option Agreement” and together with the 2015 Option Agreement and the 2017 Option Agreements, the “Bartel Option Agreements”).

The 2019 Option Agreement expires in 2024.

The value of the portion of awards expected to vest is recognized on a straight-line basis as expense over the related employees’ requisite service periods in the Company’s consolidated statements of operations.

On May 29, 2020, the shareholders of the Company approved certain amendments to the Bartel Option Agreements, which increased and repriced all outstanding, unexercised options granted to Mr.

Bartel (the “Option Agreement Amendments”).

Holger 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 .

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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 December 31, 2022, there was approximately $ 193,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 0.7 years.

No option was exercised in 2022.

In 2023, 50,000 options were exercised and 18,098 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 December 31, 2023, stock-based compensation related to these Option Agreements and applicable Option Agreement Amendments were fully expensed.

On May 29, 2020, pursuant 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.

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In 2021, 600,000 options were exercised and 390,809 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

In 2023, 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.

As of December 31, 2022, stock-based compensation related to this grant was fully expensed.

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

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

The options expire in March 2025.

In 2021, 50,000 options were exercised and 24,474 shares of common stock were issued as the result of the cashless exercises which were approved by Travelzoo’s Board of Directors.

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.

In 2021, 50,000 options were exercised and 24,474 shares of common stock were issued as the result of cashless exercises which were approved by Travelzoo’s Board of Directors.

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 cashless exercise or net settlement with respect to the option exercise price which were approved by Travelzoo’s Board of Directors.

In 2023, 50,000 options were exercised and 16,619 shares of common stock were issued as the result of the cashless exercise which were approved by Travelzoo’s Board of Directors.

As of December 31, 2023, there was approximately $ 25,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 0.3 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 to a n 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 December 31, 2023, there was approximately $ 144,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 2.0 years.

This amount is expected to be recognized over the next 1.0 year.

In March 2022, pursuant to an executed Option Agreement, the Company granted its Global Chief Executive Officer, Holger Bartel, options to purchase 600,000 shares of common stock of the Company, with an exercise price of $ 8.14 and vesting 25 % every six months over two years beginning on June 30, 2022 and ending on December 31, 2023.

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

As of December 31, 2022, there was approximately $ 865,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over the next 1.0 year.

As of December 31, 2023, stock-based compensation related to this grant was fully expensed.

In June 2022, the Company granted an employee options to purchase 100,000 shares of common stock with an exercise price of $ 6.78 and quarterly vesting beginning on September 30, 2022 and ending on June 30, 2025 with vesting based on both time-based service condition and also performance conditions.

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This amount is expected to be recognized over 1.5 years.

The Company recorded $ 1.8 million and $ 3.7 million of stock-based compensation in general and administrative expenses for fiscal years 2022 and 2021, respectively.

The Company utilized the Black-Scholes option pricing model to value the stock options.

The Company used an expected life as defined under the simplified method, which is using an average of the contractual term and vesting period of the stock options.

The risk-free interest rate used for the award is based on the U.S.

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 December 31, 2023, there was approximately $ 417,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 3.0 years.

The Company recorded $ 1.6 million and $ 1.8 million of stock-based compensation in general and administrative expenses for the years ended December 31, 2023 and 2022, respectively.

The Company utilizes the Black-Scholes option pricing model to value the stock options, with an expected life as defined under the simplified method, using an average of the contractual term and vesting period of the stock options, and risk-free interest rates based on the U.S.

Treasury yield curve in effect at the time of grant.

The Company accounted for forfeitures as they occur.

The historical volatility was calculated based upon implied volatility of the Company's historical stock prices.

The fair value of 2022 stock options and modification and 2021 stock options was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

Historical volatility is calculated based upon implied volatility of the Company's historical stock prices.

The Company accounts for forfeitures as they occur.

The fair value of stock options granted in 2023 and 2022 was estimated using the Black-Scholes option pricing model with the following weighted-average assumptions:

Weighted-average fair value of options granted per share $ 2.78 $ 3.00

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Expected life in years 3.6 3.2

As of December 31, 2022, there was approximately $ 1.8 million of unrecognized stock-based compensation expense related to outstanding stock options, expected to be recognized over 1.2 years.

As of December 31, 2023, there was approximately $ 824,000 of unrecognized stock-based compensation expense related to outstanding stock options, expected to be recognized over 0.8 years .

Option activities during the years ended December 31, 2021 and 2023 were as follows:

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(In thousands)

Outstanding at January 1, 2021 3,325,000 $ 3.49 4.39 years

Outstanding at December 31, 2021 1,090,000 $ 3.76 2.92 years

Options Granted 700,000 7.95

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Exercised options ( 325,000 ) $ 3.49

Options forfeited and canceled ( 50,000 ) $ 3.49

Outstanding at December 31, 2023 1,050,000 $ 7.02 3.11 years $ 2,632

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Outstanding at December 31, 2023 and expected to vest thereafter 266,668 $ 5.70 3.51 years $ 1,022

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of year ended December 31, 2022 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2022.

This amount changes based on the fair value of the Company’s stock.

The Company’s policy is to issue shares from the authorized shares to fulfill stock option exercises.

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic values (the difference between the Company’s closing stock price on the last trading day of the year ended December 31, 2023 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders, had all option holders exercised their options on December 31, 2023.

These amounts change based on the fair value of the Company’s stock.

The Company’s policy is to issue shares from authorized shares to fulfill stock option exercises.

Outstanding options at December 31, 2023 were as follows:

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$ 3.49 100,000 0.82 years $ 3.49 75,000 0.68 years

$ 6.78 100,000 4.42 years $ 6.78 — —

$ 4.96 200,000 4.19 years $ 4.96 50,000 4.19 years

$ 6.78 100,000 3.42 years $ 6.78 33,332 3.42 years

$ 8.14 600,000 3.17 years $ 8.14 600,000 3.17 years

$ 9.44 50,000 2.01 years $ 9.44 25,000 2.01 years

Stock Repurchase Program

The Company's stock repurchase programs assist in offsetting the impact of dilution from employee equity compensation and assist with capital allocation.

Management is allowed discretion in the execution of the repurchase program based upon market conditions and consideration of capital allocation.

In May 2019, the Company announced a stock repurchase program authorizing the repurchase of up to 1,000,000 shares of the Company’s outstanding common stock.

The Company repurchased and retired 436,369 shares and 168,602 shares of common stock in 2019 and 2020, respectively.

In 2021, the Company repurchased 395,029 shares of common stock for an aggregate purchase price of $ 3.9 million, which were recorded as part of treasury stock as of December 31, 2021.

The Company's stock repurchase programs assist in offsetting the impact of dilution from employee equity compensation and with capital allocation.

Management is allowed discretion in the execution of repurchase programs, based upon market conditions and consideration of capital allocation.

In June 2022, the Company announced that its Board of Directors approved a stock repurchase program authorizing the repurchase of up to 1,000,000 shares of the Company’s outstanding common stock.

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

The Company repurchased 34,687 shares of common stock in the first quarter of 2023 for $ 186,000 and repurchased 658,938 shares of common stock in the second quarter of 2023 for $ 4.7 million.

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

This stock repurchase program was completed in 2023.

On July 26, 2023, the Company announced that its Board of Directors authorized the repurchase of up to 1,000,000 shares of the Company's outstanding common stock.

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

This stock repurchase program was completed in 2023.

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

Holger Bartel to privately repurchase an aggregate of 100,000 shares of the Company’s common stock for an aggregate purchase price of $ 1.6 million, which were recorded as part of treasury stock as of December 31, 2021.

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

In June 2022, the Company announced that its Board of Directors approved a stock repurchase program authorizing the repurchase of up to 1,000,000 shares of the Company’s outstanding common stock.

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.

On October 24, 2023, the Company announced that its board of directors authorized the repurchase of up to 1,000,000 shares of the Company's outstanding common stock.

The Company repurchased 600,000 shares of common stock for an aggregate purchase price of $ 5.0 million, excluding excise tax due under the Inflation Reduction Act of 2022, with such shares retired and recorded as a reduction of additional paid-in capital.

As of December 31, 2023, there were 400,000 shares remaining to be repurchased under this program.

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 year ended December 31, 2022, the Company classified the results of its Asia Pacific segment as discontinued operations in its consolidated financial statements for current and prior years 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.

The Company currently has three reportable operating segments:

Travelzoo North America, Travelzoo Europe and Jack’s Flight Club.

Travelzoo North America consists of the Company’s operations in Canada and the U.S.

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

During 2023, the Company had four reportable operating segments:

Travelzoo North America, Travelzoo Europe, Jack’s Flight Club and New Initiatives.

Travelzoo North America consists of the Company’s operations in the U.S.

Travelzoo Europe consists of the Company’s operations in France, Germany, Spain and the U.K.

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

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

New Initiatives consists of Travelzoo’s licensing activities in certain Asia Pacific territories, the Travelzoo META subscription service and MTE.

In 2022, the Company managed its business and operated in three reportable segments, including Travelzoo North America, Travelzoo Europe and Jack’s Flight Club.

Following the acquisition of MTE in December 2022 and the development and announcement of Travelzoo META, the Company’s chief operating decision maker evaluated New Initiatives as an additional reportable segment beginning in 2023.

Accordingly, segment operating results reported below for the year ended December 31, 2022 have been restated in accordance with GAAP under the FASB’s Segment Reporting (Topic 280).

Specifically, the 2022 Travelzoo North America segment financial information was adjusted to exclude results related to the 2022 New Initiatives segment, which is now presented separately.

For the year ended December 31, 2023, Travelzoo North America operations comprised 66 % of revenues, Travelzoo Europe operations comprised 29 % of revenues and Jack's Flight Club co mprised 5 % of revenues.

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.

As noted above, the reported financial information for 2022 has been reclassified to conform to the current segment presentation.

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

Year Ended December 31, 2022 Travelzoo North America Travelzoo Europe Jack's Flight Club Elimination Consolidated

Year Ended December 31, 2023 Travelzoo North America Travelzoo Europe Jack's Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 54,837 $ 25,291 $ 4,145 $ 204 $ 84,477

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Operating income (loss) $ 15,254 $ 1,317 $ ( 23 ) $ ( 976 ) $ 15,572

Year Ended December 31, 2021 Travelzoo North America Travelzoo Europe Jack's Flight Club Elimination Consolidated

Year Ended December 31, 2022 Travelzoo North America Travelzoo Europe Jack's Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 47,029 $ 20,068 $ 3,477 $ 25 $ 70,599

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Operating income (loss) $ 10,348 $ ( 1,803 ) $ — $ ( 988 ) $ 7,557

As of December 31, 2022 Travelzoo North America Travelzoo Europe Jack's Flight Club Elimination Consolidated

As of December 31, 2023 Travelzoo North America Travelzoo Europe Jack's Flight Club New Initiatives Elimination Consolidated

Long-lived assets $ 152 $ 106 $ — $ 320 $ — $ 578

Total assets $ 96,865 $ 22,655 $ 19,472 $ 3,570 $ ( 87,181 ) $ 55,381

As of December 31, 2021 Travelzoo North America Travelzoo Europe Jack's Flight Club Elimination Consolidated

As of December 31, 2022 Travelzoo North America Travelzoo Europe Jack's Flight Club New Initiatives Elimination Consolidated

Long-lived assets $ 357 $ 86 $ — $ 214 $ — $ 657

Total assets $ 97,960 $ 19,253 $ 18,737 $ 336 $ ( 69,023 ) $ 67,263

Revenue for each segment is recognized based on the customer location within a designated geographic region.

Revenues for each segment are recognized based on customer locations within a designated geographic region.

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

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

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

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

Local revenue includes Local Deals vouchers and entertainment offers.

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Jack's Flight Club 4,172 3,477

New Initiatives 204 25

Travel 75,863 62,499

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Jack's Flight Club 4,172 3,477

New Initiatives 204 25

Total revenues $ 84,477 $ 70,599

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and international geographies are based upon the country in which the asset is located or owned.

The following table sets forth revenue for individual countries that were 10% or more of total revenue (in thousands):

The following table sets forth revenues for individual countries that comprised 10% or more of total revenue (in thousands):

Year Ended December 31,

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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 Capital Inc.

As of December 31, 2022, Azzurro is the Company's largest stockholder, and together with Ralph Bartel, in his individual capacity (together, the "Azzurro Parties"), hold approximately 50.3 % of the Company's outstanding shares.

Holger Bartel, the Company's Global Chief Executive Officer, is Ralph Bartel's brother and holds approximately 3.3 % of the Company's outstanding shares.

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 December 31, 2023, holds approximately 40.2 % of the Company's outstanding shares.

Holger Bartel, the Company's Global CEO, is Ralph Bartel's brother and separately holds 3.8 % of the Company's outstanding shares as of December 31, 2023 .

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

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 Metaverse Travel Experiences, Inc.

(“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 consolidated balance sheet as of December 31, 2022.

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.

See Note 3 – Acquisitions in the consolidated financial statements for further information.

Service Agreement with Metaverse Travel Experiences, Inc.

On March 1, 2022, Travelzoo (Asia) Limited, a Hong Kong limited company and wholly-owned subsidiary of the Company (“Travelzoo Asia”), entered in a four year Service Agreement (the “Service Agreement”) with a wholly-owned subsidiary of Azzurro Capital Inc., Metaverse Travel Experiences, Inc.

(“MTE”), formerly Azzurro Brands Inc.

Azzurro Capital Inc.

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and subsequent Asset Purchase Agreement

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

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

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Travelzoo renewed the License Agreement in January 2022 for a license fee of $ 413,000 per quarter and made the payment of $ 800,000 to cover the period from April 2022 to September 2022 in the fourth quarter of 2021 and was recorded in Prepaid expenses-Related party, which totaled $ 1.15 million as of December 31, 2021.

On March 17, 2022, the Company, as Buyer, entered into an Asset Purchase Agreement (the “APA”) with Metaverse Travel Experiences, Inc.

f/k/a Azzurro Brands Inc.

On March 17, 2022, the Company, as Buyer, entered into an Asset Purchase Agreement (the “APA”) with Azzurro Brands Inc.

to purchase the database previously utilized by Travelzoo in accordance with the License Agreement.

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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 in 2022.

Stock Repurchase Agreement

Travelzoo, from time to time, engages in share repurchases, and on March 27, 2021, the Company entered into a Stock Repurchase Agreement (the “SRA”) with Holger Bartel, the Company's Global Chief Executive Officer, to repurchase an aggregate of 100,000 shares of the Company’s common stock at a price of $ 15.83 per share.

The SRA provides that the purchase price is based on the 10 -day volume weighted average price calculated using the VWAP function on Bloomberg, from the dates of March 15, 2021 through and including March 26, 2021, less a 5 % discount.

The aggregate purchase price of $ 1.6 million was paid on the first business day following the execution of the SRA and recorded as part of treasury stock as of December 31, 2021 .

Prior to the execution of the SRA and because Mr.

Bartel is an executive officer of the Company, the Company’s Board of Directors and Audit Committee of the Board of Directors delegated to its Compensation Committee, which consists of independent and disinterested directors, the exclusive power and authority to determine whether any potential transaction to acquire shares from Mr.

Bartel was advisable, fair to and in the best interests of the Company and its stockholders, other than Mr.

In connection with its determination, the Compensation Committee engaged independent legal counsel and an independent financial advisor and unanimously approved the SRA.

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

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.

This case is ongoing but as Travelzoo is a nominal defendant, it did not accrue any expense as of December 31, 2023.

The Company has operating leases for real estate and certain equipment.

The Company leases office space in Canada, France, Germany, Spain, the U.K.

The Company leases office space in Canada, Germany, Spain, the U.K.

under operating leases.

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

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

Certain leases include one or more options to renew.

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All of our leases qualify as operating leases.

The following table summarizes the components of lease expense for the year ended December 31, 2022 and 2021 (in thousands):

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

Year Ended December 31,

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Total lease cost $ 2,807 $ 2,646

For the year ended December 31, 2022 and 2021, cash payments against the operating lease liabilities totaled $ 3.2 million and $ 4.3 million, respectively.

ROU assets obtained in exchange for lease obligations was $ 1.7 million and $ 1.8 million for the year ended December 31, 2022 and 2021, respectively.

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

Cash payments against the operating lease liabilities totaled $ 3.2 million for each of the years ended December 31, 2023 and 2022.

ROU assets obtained in exchange for lease obligations was $ 602,000 and $ 1.7 million for the year ended December 31, 2023 and 2022, respectively.

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

Operating lease right-of-use assets $ 6,015 $ 7,440

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Weighted average discount rate 4.3 % 4.3 %

Maturities of lease liabilities were as follows (in thousands):

Maturities of remaining lease liabilities at December 31, 2023 were as follows (in thousands):

Years ending December 31,

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Discontinued Operations

On March 10, 2020, Travelzoo issued a press release announcing that it will exit its business in Asia Pacific.

The decision supports the Company's strategy to focus on value creation for shareholders by focusing on growing the businesses in North America and Europe, where the Company continues to see strong interest from our members in travel deals.

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

The Company considers this decision to be a strategic shift in its strategy which will have a major effect on its operations.

The Company has classified Asia Pacific as discontinued operations at March 31, 2020.

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

The decision supports the Company's strategy to focus on value creation for shareholders by focusing on growing the businesses in North America and Europe.

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

The Company classified Asia Pacific as discontinued operations at March 31, 2020.

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

The following table provides a summary of amounts included in discontinued operations for the year ended December 31, 2022 and 2021 (in thousands):

The following table provides a summary of amounts included in discontinued operations for the years ended December 31, 2023 and 2022 (in thousands):

Year Ended December 31,

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Other income (loss), net 472 ( 35 )

Loss before income taxes ( 35 ) ( 13 )

Income (loss) before income taxes 460 ( 35 )

Income tax expense — 24

Net loss from discontinued operations $ ( 59 ) $ ( 13 )

On June 16, 2020, in connection with its Asia Pacific exit plan, the Company completed a sale of 100 % of the outstanding capital stock of Travelzoo Japan to the Japan Buyer for consideration of 1 Japanese Yen.

Net income (loss) from discontinued operations $ 460 $ ( 59 )

On June 16, 2020, in connection with its Asia Pacific exit plan, the Company completed a sale of 100 % of the outstanding capital stock of Travelzoo Japan to Mr.

Hajime Suzuki (the “Japan Buyer”) for consideration of 1 Japanese Yen.

The Company recognized a pre-tax loss of $ 128,000 .

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

A n interest free loan was provided to the Japan Buyer for JPY 46.0 million (approximately $ 430,000 ) to be repaid over 3 years.

The Japan Buyer repaid $ 133,000 in 2021 and the remaining will be paid off in 2023.

The Company did not receive any royalties from Travelzoo Japan for the year ended December 31, 2022.

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

The Company recognized royalties of $ 9,000 from Travelzoo Japan for the year ended December 31, 2021.

On August 24, 2020, the Company completed a sale of 100 % of the outstanding capital stock of Travelzoo Singapore, to an unaffiliated entity, AUS Buyer, which is fully owned by Mr.

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

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.

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.

T he parties also entered into a License Agreement, whereby Travelzoo Japan obtained rights 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.

A n interest free loan was provided to the licensee for JPY 46.0 million (approximately $ 430,000 ), of which $ 133,000 was repaid in 2021 and the remaining repaid in 2023.

The Company recognized royalties of $ 36,000 and $ 0 for its licensing arrangements from the licensee in Japan for the years ended December 31, 2023 and 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 Company's former General Manager of Southeast Asia and Australia for consideration of 1 Singapore Dollar.

The parties also entered into a License Agreement, whereby the AUS Buyer obta ined 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.

The Company recognized royalties of $ 35,000 and $ 25,000 for its licensing arrangements from AUS Buyer for the years ended December 31, 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 Consolidated Balance Sheets (in thousands):

The following table presents information related to the major classes of assets and liabilities classified as assets and liabilities from discontinued operations in the Consolidated Balance Sheets (in thousands):

2023 December 31,

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Total liabilities from discontinued operations $ 24 $ 452

The net cash used in operating activities and investing activities for the discontinued operations for the for the year ended December 31, 2022 and 2021, were as follows (in thousands):

Net cash used in operating activities and investing activities for discontinued operations for the for the years ended December 31, 2023 and 2022 are as follows (in thousands):

Year Ended December 31,

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Non-Controlling Interest

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 year ended December 31, 2022 and 2021 was as follow (in thousands):

The Company’s consolidated financial statements include Jack's Flight Club, which the Company has operating control over but owns a 60 % equity interest in.

Non-controlling interest for the years ended December 31, 2023 and 2022 was as follows (in thousands):

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

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Non-controlling interest—December 31, 2023 $ 4,697

Restatement of previously issued financial statements.

The Company restated its previously issued Consolidated Financial Statements as of and for the year ended December 31, 2022.

In connection with the preparation of our second quarter 2023 condensed consolidated financial statements, Travelzoo realized that the non-controlling interest (NCI) classification during the first quarter of 2022, the second quarter of 2022, the third quarter of 2022, the year ended December 31, 2022 and the first quarter of 2023 had not been correctly updated.

When the put/call option in the Company’s stock purchase agreement with JFC Travel Group Co.

expired in January 2022, the Company did not reclassify the NCI from temporary equity to permanent equity.

The reclassification of NCI from temporary equity to permanent equity reduced temporary equity and increased permanent equity by $ 4.6 million but did not have any impact on the Company's previously reported total assets, total liabilities and stockholders’ equity (deficit) , results of operations or cash flows.

The impacts from the restatement as of and for the year ended December 31, 2022 are as follows (in thousands):

Consolidated Balance Sheet:

December 31, 2022

As Reported Adjustments As Restated

Non-controlling interest $ 4,595 $ ( 4,595 ) $ —

Stockholders’ equity:

Total Travelzoo stockholders’ equity 4,256 — 4,256

Non-controlling interest — 4,595 4,595

Total stockholders’ equity $ 4,256 $ 4,595 $ 8,851

Consolidated Statement of Stockholders’ Equity:

December 31, 2022

As Reported Adjustments As Restated

Total Travelzoo stockholders’ equity $ 4,256 $ — $ 4,256

Non-controlling interest — 4,595 4,595

Total stockholders’ equity $ 4,256 $ 4,595 $ 8,851

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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-K

Item 8. Financial Statements and Supplementary Data