TRAVELZOO 10-K

Item 8. Financial Statements and Supplementary Data TRAVELZOO INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Report of KPMG LLP - Independent Registered Public Accounting Firm (PCAOB ID: 185) 44 Report of RSM US LLP - Independent Registered Public Accounting Firm (PCAOB ID: 49 ) 46 Consolidated Balance Sheets 47 Consolidated Statements of Operations 48 Consolidated Statements of Comprehensive Income 49 Consolidated Statements of Stockholders’ Equity (Deficit) 50 Consolidated Statements of Cash Flows 51 Notes to Consolidated Financial Statements 53 43 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors Travelzoo: 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. 44 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. /s/ KPMG LLP We have served as the Company’s auditor since 2023. New York, New York March 22, 2024 45 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, 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 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 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 financial statements are free of material misstatement, whether due to error or fraud. 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 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 served as the Company's auditor from 2019 to 2023. San Jose, California March 31, 2023, except for Note 17 as to which the date is August 14, 2023 46 TRAVELZOO CONSOLIDATED BALANCE SHEETS (In thousands, except par value) December 31, 2023 December 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 15,713 $ 18,693 Accounts receivable, net of allowance of $ 1,484 and $ 1,468 as of December 31, 2023 and 2022, respectively 12,965 13,820 Prepaid income taxes 629 1,778 Prepaid expenses and other 1,460 1,289 Assets from discontinued operations 1 11 Total current assets 30,768 35,591 Deposits and other 1,115 5,094 Deferred tax assets 3,196 3,222 Restricted cash 675 675 Operating lease right-of-use assets 6,015 7,440 Property and equipment, net 578 657 Intangible assets, net 2,091 3,651 Goodwill 10,944 10,944 Total assets $ 55,382 $ 67,274 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Accounts payable $ 4,546 $ 4,271 Merchant payables 20,622 32,574 Accrued expenses and other 3,658 5,049 Deferred revenue 2,044 2,216 Operating lease liabilities 2,530 2,972 Income tax payable 766 — Liabilities from discontinued operations 24 452 Total current liabilities 34,190 47,534 Long-term tax liabilities 4,681 1,569 Long-term operating lease liabilities 6,717 8,326 Other long-term liabilities 911 994 Total liabilities 46,499 58,423 Commitments and contingencies (Note 6) Stockholders’ equity: Preferred stock, $ 0.01 par value per share ( 5,000 shares authorized; none issued) — — Common stock, $ 0.01 par value ( 20,000 shares authorized as of December 31, 2023 and 2022, respectively; 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 ) 136 165 Treasury stock, at cost ( 801 shares as of December 31, 2022) — ( 7,130 ) Additional paid-in capital 439 23,274 Tax indemnification ( 9,537 ) ( 9,537 ) Note receivable from shareholder ( 1,753 ) ( 4,753 ) Retained earnings 19,508 7,142 Accumulated other comprehensive loss ( 4,607 ) ( 4,905 ) 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. 47 TRAVELZOO CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts) Year Ended December 31, 2023 2022 Revenues $ 84,477 $ 70,599 Cost of revenues 10,934 10,003 Gross profit 73,543 60,596 Operating expenses: Sales and marketing 37,774 33,072 Product development 2,113 2,064 General and administrative 18,084 17,903 Total operating expenses 57,971 53,039 Operating income 15,572 7,557 Other income, net 1,541 2,401 Income from continuing operations before income taxes 17,113 9,958 Income tax expense 5,105 3,270 Income from continuing operations 12,008 6,688 Income (loss) from discontinued operations, net of tax 460 ( 59 ) Net income 12,468 6,629 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 income (loss) attributable to Travelzoo—discontinued operations $ 460 $ ( 59 ) Income per share—basic Continuing operations $ 0.80 $ 0.54 Discontinued operations $ 0.03 $ — Net income per share—basic $ 0.83 $ 0.54 Income per share—diluted Continuing operations $ 0.80 $ 0.53 Discontinued operations $ 0.03 $ — Net income per share —diluted $ 0.83 $ 0.53 Shares used in per share calculation from continuing operations—basic 14,897 12,372 Shares used in per share calculation from discontinued operations—basic 14,897 12,372 Shares used in per share calculation from continuing operations—diluted 14,964 12,561 Shares used in per share calculation from discontinued operations—diluted 14,964 12,372 See accompanying notes to consolidated financial statements. 48 TRAVELZOO CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2023 2022 Net income $ 12,468 $ 6,629 Other comprehensive income (loss): Foreign currency translation adjustment 298 ( 1,112 ) Total comprehensive income $ 12,766 $ 5,517 See accompanying notes to consolidated financial statements. 49 TRAVELZOO CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) (In thousands) Common Stock Treasury Stock Additional Paid-In Capital Tax Indemnification Note Receivable from Shareholder Retained Earnings Accumulated Other Comprehensive Loss Non-Controlling interest Total Stockholders’ Equity (Deficit) Shares Amount 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 Repurchase of common stock — — ( 1,642 ) — — — — — — ( 1,642 ) Exercise of stock options and taxes paid for net share settlement 544 5 — 1,867 — — — — — 1,872 Proceeds from short swing settlement — — — 46 — — — — — 46 Issuance of common stock for cash, notes and other consideration, net 3,410 34 — 15,141 ( 9,537 ) ( 4,753 ) — — — 885 Foreign currency translation adjustment — — — — — — — ( 1,112 ) — ( 1,112 ) Net income—Travelzoo — — — — — — 6,634 — ( 5 ) 6,629 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. 50 TRAVELZOO CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2023 2022 Cash flows from operating activities: Net income $ 12,468 $ 6,629 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 1,893 2,189 Stock-based compensation 1,568 1,805 Deferred income tax 48 774 Impairment of intangible assets and goodwill — 200 Loss on sale of long-lived assets 10 47 Gain on sale of equity investment in WeGo — ( 196 ) Net foreign currency effect ( 62 ) 232 Net recoveries of accounts receivable and refund reserves ( 1,016 ) ( 4,367 ) Changes in operating assets and liabilities: Accounts receivable 1,086 1,317 Prepaid income taxes 1,189 1,452 Prepaid expenses and other 3,835 1,627 Accounts payable ( 523 ) 902 Merchant payables ( 12,095 ) ( 35,228 ) Accrued expenses and other ( 876 ) ( 496 ) Income tax payable 749 ( 162 ) Other liabilities 2,401 154 Net cash provided by (used in) operating activities 10,675 ( 23,121 ) Cash flows from investing activities: Purchases of intangible assets — ( 1,049 ) Proceeds from repayment of note receivable 216 — Proceeds from sale of equity investment in WeGo — 196 Purchases of property and equipment ( 255 ) ( 462 ) Net cash used in investing activities ( 39 ) ( 1,315 ) Cash flows from financing activities: Repurchase of common stock ( 16,781 ) ( 1,642 ) Proceeds from payment of promissory note 3,000 — Proceeds from short swing settlement — 46 Proceeds from issuance of common stock — 1,006 Proceeds from exercise of stock options, net of taxes paid for net share settlement of equity awards ( 369 ) 1,872 Net cash provided by (used in) financing activities ( 14,150 ) 1,282 Effect of exchange rate changes on cash and cash equivalents 525 ( 2,457 ) Net decrease in cash, cash equivalents and restricted cash ( 2,989 ) ( 25,611 ) Cash, cash equivalents and restricted cash at beginning of year 19,378 44,989 Cash, cash equivalents and restricted cash at end of year $ 16,389 $ 19,378 51 Supplemental disclosure of cash flow information: 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 Cash paid for amounts included in the measurement of lease liabilities $ 3,235 $ 3,224 Non-cash investing and financing activities: Accrued excise tax for share repurchases $ 152 $ — Non-cash consideration for purchase of intangible asset $ — $ 1,150 Common stock issued for Metaverse Travel Experience, Inc. assets $ — $ 63 Common stock issued for note receivable from shareholder $ — $ 4,753 Common stock issued for tax indemnification $ — $ 9,537 See accompanying notes to consolidated financial statements. 52 TRAVELZOO NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1: 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”), 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 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. 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. 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 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. As of December 31, 2023, Jack’s Flight Club had 2.4 million subscribers. Jack’s Flight Club’s revenues are generated by subscription fees paid by members. See Note 3– Acquisitions to th e consolidated financial statements for further information. APAC Exit and Pivot to Licensing Model In March 2020, Travelzoo exited its loss-making Asia Pacific business and pivoted to a licensing model. The Company’s Asia Pacific business was classified as discontinued operations at March 31, 2020. 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. 53 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, 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. Ownership 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 . 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."). The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. 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). 54 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. (b) Revenue Recognition The Company follows Accounting Standards Update No. 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 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. 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 subscription revenues ratably over the subscription periods. 55 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. (c) Reserve for Refunds to Members; 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 The purchase price of an acquisition is allocated to the tangible and intangible assets acquired and liabilities assumed based on their estimated fair values at the acquisition date. To the extent the purchase price exceeds the fair value of the net identifiable tangible and intangible assets acquired and liabilities assumed, such excess is allocated to goodwill. The Company determines the estimated fair values after review and consideration of relevant information, including discounted cash flows, quoted market prices and estimates made by management. The Company records the net assets and results of operations of an acquired entity from the acquisition date and adjusts the preliminary purchase price allocation, as necessary, during the measurement period of up to one year after the acquisition closing date, as it obtains more information as to facts and circumstances existing at the acquisition date impacting asset valuations and liabilities assumed. Acquisition-related costs are recognized separately from the acquisition and are expensed as incurred. 56 (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 annually, and whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. (f) Goodwill 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 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 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 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 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 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 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 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 of stock-based compensation. 57 (k) Foreign Currency All foreign subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities are translated into U.S. dollars at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated into U.S. dollars at average exchange rates for the period. Gains and losses resulting from translation are recorded as a component of accumulated other comprehensive income (loss). 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 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 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 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 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. (m) Comprehensive Income Comprehensive income consists of two components, net income and other comprehensive income (loss). Other comprehensive income (loss) refers to certain changes in equity that are excluded from net income. For the Company, other comprehensive income (loss) includes foreign currency translation adjustments. Total comprehensive income (loss) for all periods presented has been disclosed in the consolidated statements of comprehensive income. (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. 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 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, 2023 and 2022 , the Company did not have any customers that accounted for 10% or more its accounts receivable. 58 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. 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 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): December 31, December 31, 2023 2022 Cash and cash equivalents $ 15,713 $ 18,693 Restricted cash 675 675 Cash, cash equivalents and restricted cash–discontinued operations 1 10 Total cash, cash equivalents and restricted cash in the consolidated statements of cash flows $ 16,389 $ 19,378 (p) Property and Equipment Property and equipment are stated at cost less accumulated depreciation. Additions and improvements are capitalized. 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 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 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. (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 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 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. 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which provides new guidance on the measurement of credit losses for financial assets measured at amortized cost, which includes accounts receivable. The new guidance replaces the existing incurred loss impairment model with an expected loss methodology, which will result in more timely recognition of credit losses. 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 is 59 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 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. Note 2: Net Income (Loss) Per Share Basic net income (loss) per share is computed using the weighted-average number of common shares outstanding for the period. Diluted net income per share is computed by adjusting the weighted-average number of common shares outstanding for the effect of dilutive potential common shares outstanding during the period. Potential common shares included in the diluted calculation consist of incremental shares issuable upon the exercise of outstanding stock options calculated using the treasury stock method. The following table sets forth the calculation of basic and diluted net income (loss) per share (in thousands, except per share amounts): Year Ended December 31, 2023 2022 Numerator: Net income attributable to Travelzoo—continuing operations $ 11,906 $ 6,693 Net income (loss) attributable to Travelzoo—discontinued operations 460 ( 59 ) Denominator: Weighted average common shares—basic 14,897 12,372 Effect of dilutive securities: stock options 67 189 Weighted average common shares—diluted 14,964 12,561 Income (loss) per share—basic Continuing operations $ 0.80 $ 0.54 Discontinued operations 0.03 — Net income (loss) per share —basic $ 0.83 $ 0.54 Income (loss) per share—diluted Continuing operations $ 0.80 $ 0.53 Discontinued operations 0.03 — Net income (loss) per share—diluted $ 0.83 $ 0.53 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. 60 Note 3: Acquisitions Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc., a Related-Party 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 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. On December 28, 2022, the stockholders of Travelzoo approved the issuance and sale of 3.4 million shares of common stock (the “Shares”) of Travelzoo to Azzurro, in exchange for certain consideration, and on December 30, 2022 (the “Closing Date”), the transaction was consummated. The closing price of Travelzoo’s common stock on December 30, 2022 was $ 4.45 per share, resulting in an aggregate fair value of 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, 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. The acquisition was accounted for as an asset acquisition in accordance with ASC Topic 805 – Business Combinations. The fair value of the consideration paid by Travelzoo and allocation of that amount to the underlying assets, on a relative fair value basis, was recorded by the Company as of the Closing Date. Additionally, costs directly related to the MTE acquisition of $ 184,000 were capitalized as a component of the Purchase Price. 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, 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, 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 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. 61 The following table represents the allocation of the total cost of the MTE acquisition to the assets acquired (in thousands): Fair Value Consideration for MTE assets Fair value of Travelzoo common stock issued $ 15,175 Direct transaction costs 184 Less: Cash received from Azzurro Capital Inc. ( 1,000 ) Notes receivable from Azzurro Capital Inc. ( 4,753 ) Total consideration for MTE assets $ 9,606 Relative fair value of the assets acquired Cash and cash equivalents $ 6 Prepaid expenses and other 45 Property and equipment 18 Tax indemnification asset 9,537 Total assets acquired $ 9,606 Travelzoo (Europe) Limited, Sucursal en España, Acquired Secret Escapes Limited’s Spanish Business Unit On March 3, 2022, Travelzoo (Europe) Ltd, Sucursal en España, the Spanish branch of Travelzoo (Europe) Limited, a wholly-owned subsidiary of the Company (“Travelzoo Spain”), entered into a Business Unit Purchase Agreement (“BUPA”) with Secret Escapes Limited (“Secret Escapes”) for the purchase of its Spanish business unit, which included, among other things, a database of approximately 940,000 members. The purchase price was 400,000 Euros, with an earn-out opportunity of an additional 100,000 Euros payable by the Company upon the achievement of certain metrics by the business unit in six months (September 2022). The metrics were not achieved and thus no payments were made on the earn-out. Travelzoo was granted the right to use the Secret Escapes name exclusively in Spain for a continuity period of six ( 6 ) months. The BUPA contained typical representations and warranties and indemnification protections, as well as a restrictive covenant, whereby Secret Escapes agreed to leave the Spanish market for at least three ( 3 ) years, subject to a right to purchase a waiver. Asset Purchase Agreement between Metaverse Travel Experiences, Inc. f/k/a Azzurro Brands Inc. and Travelzoo 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., a New York corporation (the “Seller”) and a wholly-owned subsidiary of Azzurro Capital Inc., the Company’s largest stockholder. Pursuant to the APA, the Company acquired certain assets, primarily comprised of all U.S. members of Secret Escapes Limited, which Seller acquired in March 2021 and licensed exclusively to Travelzoo pursuant to the previously disclosed License Agreement, dated as of March 12, 2021 (the “License Agreement”), in accordance with data privacy and other applicable laws. The License Agreement allowed the Company to exclusively utilize the assets in exchange for a license fee of $ 412,500 per quarter with a one-year term that automatically renewed. The License Agreement was reviewed and unanimously approved by the Audit Committee of the Board of Directors, which consists solely of independent directors. The purchase price for the transaction was $ 1.75 million, with $ 600,000 paid in cash upon closing in March 2022 and the remaining $ 1.15 million payable in the form of a credit with Seller relating to prepaid license fees, under the License Agreement. The 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 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. C ost accumulation model was used to account for the cost of the acquisition and the 100,000 Euros earn-out was considered as contingent consideration based on ASC 805-50. Travelzoo acquired the database of members and recorded $ 2.2 million intangible assets from both agreements. 62 Intangible Assets The following table presents the gross fair values and estimated useful lives of intangible assets (in thousands): Fair Value Estimated Life (Years) Customer relationships (Jack's Flight Club) $ 3,500 5.0 Trade name (Jack's Flight Club) 2,460 indefinite Non-compete agreement (Jack's Flight Club) 660 4.0 Intangible assets (Secret Escapes Spain member database) 445 3.0 Intangible assets (Secret Escapes U.S. member database) 1,751 2.3 Assets Measured at Fair Value on a Non-recurring Basis 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 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 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, net—January 1, 2022 $ 3,426 — — Acquisitions—March 2022 — 445 1,751 Amortization of intangible assets with definite lives ( 875 ) ( 118 ) ( 778 ) Impairment of trade name—December 31, 2022 ( 200 ) — — 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. Expected future amortization expense of acquired intangible assets as of December 31, 2023 is as follows (in thousands): Years ending December 31, 2024 $ 594 2025 47 $ 641 63 The Company performed its annual impairment testing of Trade name as of October 31, 2023 using a relief from royalty method. 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. Note 4: Debt 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 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 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. The Company believes it was eligible to participate in PPP, calculated the loan amount correctly, spent loan proceeds on allowable uses and is entitled to loan forgiveness. The Company will hold onto its financial documents relating to the PPP loans for six years as required. Note 5: Balance Sheet Components Prepaid expenses an d other consists of the following (in thousands): December 31, 2023 2022 Prepaid expenses $ 1,084 $ 764 Notes receivable — current — 232 Deposits 286 153 Other current assets 90 140 Total prepaid expenses and other $ 1,460 $ 1,289 Property and equipment co nsists of the following (in thousands): December 31, 2023 2022 Office equipment and furnishings $ 2,141 $ 5,005 Capitalized internal-use software and website development 2,230 4,601 Leasehold improvements 804 2,414 Computer hardware and software 45 1,728 Property and equipment 5,220 13,748 Less accumulated depreciation and amortization ( 4,642 ) ( 13,091 ) 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. Amortization of acquired intangible assets is presented in Note 3 above . 64 Changes to the allowance for credit losses and reserve for member refunds are as follows (in thousands): Allowance for doubtful accounts Reserve for member refunds Balance at December 31, 2021 $ 2,094 $ 5,166 Additions — charged to costs and expenses, or contra revenue 54 15 Deductions — recoveries of amounts previously reserved ( 470 ) ( 3,006 ) Deductions — write-offs or refunds ( 210 ) ( 897 ) Balance at December 31, 2022 1,468 1,278 Additions — charged to costs and expenses, or contra revenue 172 — Deductions — recoveries of amounts previously reserved ( 133 ) ( 459 ) Deductions — write-offs or refunds ( 23 ) ( 551 ) Balance at December 31, 2023 $ 1,484 $ 268 Accrued expenses and other consists of the following (in thousands): December 31, 2023 2022 Accrued compensation expense 1,381 1,744 Reserve for member refunds $ 268 $ 1,278 Accrued advertising expense 743 538 Other accrued expenses 1,266 1,489 Total accrued expenses and other $ 3,658 $ 5,049 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 values because of their relative short maturities. Note 6: 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 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. If a legal claim for which the Company did not accrue is resolved against it, the Company would record the expense in the period in which the ruling was made. The Company believes that the likelihood of an ultimate amount of liability, if any, for any pending claims of any type (alone or combined) that will materially affect the Company’s financial position, results of operations or cash flows is remote. The ultimate outcome of any litigation is uncertain, however, and unfavorable outcomes could have a material negative impact on the Company’s financial condition and operating results. 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 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. Under and subject to the terms of the merger agreement, holders of promotional shares of Travelzoo.com Corporation (“Netsurfers”) who established that they had satisfied certain prerequisite qualifications were allowed a period of 2 years following the effective date of the merger to receive one share of Travelzoo in exchange for each share of common stock of Netsurfers. In 2004, two years following the effective date of the merger, certain promotional shares remained unexchanged. As the right to exchange these promotional shares expired, no additional shares were reserved for issuance. 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. 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. 65 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. The Company’s common stock price affects the liability because the amount of cash payments under the program is based in part on the recent level of the stock price at the date valid requests are received. The Company does not know how many of the requests for shares originally received by Netsurfers in 1998 were valid, but the Company believes that only a portion of such requests were valid. In order to receive payment under this voluntary program, a person is required to establish that such person validly held shares in Netsurfers. The Company leases office space in Canada, France, Germany, Spain, the U.K., and the U.S. under operating leases. 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. Rent expense was $ 2.8 million and $ 2.6 million for the years ended December 31, 2023 and 2022, respectively. The Company’s rental income from sublease was approximately $ 271,000 and $ 353,000 for the years ended December 31, 2023 and 2022. Se e Note 14– Leases for more information. 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. Note 7: Income Taxes The components of income before income tax expense are as follows (in thousands): Year Ended December 31, 2023 2022 U.S. $ 15,319 $ 9,636 Foreign 1,794 322 $ 17,113 $ 9,958 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. The Company makes estimated payments of these amounts during the year. The deferred tax provision results from changes in the Company’s deferred tax assets (future deductible amounts) and tax liabilities (future taxable amounts), which are presented in the table below: Current Deferred Total (In thousands) Year Ended December 31, 2023 Federal $ 3,267 $ 7 $ 3,274 State 664 72 736 Foreign 1,126 ( 31 ) 1,095 $ 5,057 $ 48 $ 5,105 Year Ended December 31, 2022 Federal $ 1,772 $ 528 $ 2,300 State 376 221 597 Foreign 348 25 373 $ 2,496 $ 774 $ 3,270 66 Income tax expense differed from the amounts computed by applying the U.S. 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, 2023 2022 Federal tax at statutory rates $ 3,594 $ 2,091 State taxes, net of federal income tax benefit 584 471 Change of valuation allowance — ( 34 ) Uncertain tax positions 43 107 Foreign income taxed at different rates 539 ( 38 ) Stock-based compensation expense 30 469 Other 315 204 Total income tax expense $ 5,105 $ 3,270 The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands): December 31, 2023 2022 Deferred tax assets: Net operating loss and credit carryforwards $ 3,349 $ 4,935 Operating lease liabilities 1,947 2,417 State income taxes 109 74 Accruals and allowances 391 627 Stock-based compensation 432 256 Unrealized foreign exchange losses 363 329 Deferred revenue 61 191 Property, equipment and intangible assets 156 — Capital loss carryforward 404 410 Total deferred tax assets 7,212 9,239 Valuation allowance ( 2,878 ) ( 4,455 ) Total deferred tax assets net of valuation allowance 4,334 4,784 Deferred tax liabilities: Operating lease right-of-use assets ( 1,138 ) ( 1,416 ) Property, equipment and intangible assets — ( 146 ) Total deferred tax liabilities ( 1,138 ) ( 1,562 ) Net deferred tax assets $ 3,196 $ 3,222 Changes in the deferred tax assets valuation allowance for the years ended December 31, 2023 and 2022 are as follows (in thousands): Balance at the beginning of the year Charged (Credited) to expenses Charged (Credited) to other account (*) Balance at end of year Deferred tax assets valuation allowance 2023 $ 4,455 ( 1,577 ) $ 2,878 2022 $ 8,717 — ( 4,262 ) $ 4,455 (*) 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. 67 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, 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. As of December 31, 2023, the Company is permanently reinvested in certain non-U.S. subsidiaries and does not have a deferred tax liability related to its undistributed foreign earnings. 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 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 Settlements — Gross unrecognized tax benefits balance at December 31, 2022 16,877 Increase related to prior year tax positions 7,018 Settlements — Gross unrecognized tax benefits balance at December 31, 2023 $ 23,895 The Company’s policy is to include interest and penalties related to unrecognized tax positions in income tax expense. To the extent accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in the period that such determination is made. At December 31, 2023, the Company had approximately $ 803,000 in accrued in terest and penalties. The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is subject to U.S. federal and certain state tax examinations for certain years after 2019, and is subject to California tax examinations for years after 2018. 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. Note 8: Accumulated Other Comprehensive Loss The following table summarizes changes in accumulated balances of other comprehensive loss (in thousands): Year Ended December 31, 2023 2022 Beginning balance $ ( 4,905 ) $ ( 3,793 ) 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 (loss). 68 Note 9: Employee Benefit Plan The Company maintains a 401(k) Profit Sharing Plan & Trust (the “401(k) Plan”) for its employees in the United States. The 401(k) Plan allows employees of the Company to contribute up to 80 % of their eligible compensation, subject to certain limitations. 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 vest after the first year of service. The Company also has various defined contribution plans for its international employees. The Company’s contributions to these benefit plans were approximately $ 673,000 and $ 689,000 for the years ended December 31, 2023 and 2022, respectively. Note 10: Stock-Based C ompensation and Stock Options 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, employing an option-pricing model. 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. 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 . Additionally, the Option Agreement Amendments made the following increases: (a) 400,000 additional options to purchase the Company’s common stock pursuant to the 2015 Option Agreement, (b) 150,000 additional options to purchase the Company’s common stock pursuant to the 2017 Option Agreement, and (c) 400,000 additional options to purchase the Company’s common stock pursuant to the 2019 Option Agreement, which resulted in a total of 1,900,000 options granted to Mr. Bartel pursuant to the Option Agreement Amendments. Mr. Bartel’s amended options pursuant to the 2015 Option Agreement and the 2017 Option Agreement were fully vested upon the execution of the applicable Option Agreement Amendment. Therefore, stock-based compensation related to these options was fully expensed in the second quarter of 2020. In 2021, 800,000 options granted pursuant to the 2015 Option Agreement, 300,000 options granted pursuant to the 2017 Option Agreement and 260,000 options granted pursuant to the 2019 Option Agreement were exercised by Mr. Bartel, 681,902 shares of common stock were issued as the result of a cashless exercise or net settlement with respect to the option exercise price or taxes which were approved by Travelzoo's Board of Directors. As of December 31, 2021, stock-based compensation related to the 2019 Option Agreement and applicable Option Agreement Amendment was fully expensed. Mr. Bartel exercised the remaining 540,000 options granted pursuant to the 2019 Option Agreement in 2022. The Company received aggregate cash proceeds of $ 1.9 million. In September 2019, pursuant to executed Option Agreements, the Company granted six employees stock options to purchase 50,000 shares of common stock each ( 300,000 in the aggregate) with an exercise price of $ 10.79 , of which 75,000 options vest and become exercisable annually starting on September 5, 2020 and ending on December 31, 2023. The options expire in September 2024. On May 29, 2020, the shareholders of the Company approved the grants, as well as certain amendments to the Option Agreements, which increased and repriced all outstanding, unexercised options granted to such employees. Pursuant to the applicable amendments, 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 amendments to the Option Agreements, which immediately followed the date of approval of the grants from the Board of Directors of the Company), which was $ 3.49 , the option grants were each increased to 100,000 each, resulting in 300,000 additional options in the aggregate. In 2020, 100,000 unvested options were forfeited upon an employee's departure, 75,000 options were exercised and 54,258 shares of common stock were issued as the result of a cashless exercise which were approved by Travelzoo’s Board of Directors. 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 . 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. 69 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. Ralph Bartel, Chairman of the Board of Directors of the Company at the time, with an exercise price of $ 3.49 and quarterly vesting beginning June 30, 2020 and ending on March 31, 2022. The options expire in March 2025. This grant was approved at the 2020 Annual Meeting of the shareholders. 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, 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 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 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 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. The options expire in March 2027. This grant was approved at the 2022 Annual Meeting of the shareholders. 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. However, if the performance targets are not met as of the first date on which the time condition is met, the time condition may be extended by one quarter up to three times. The options expire in June 2027. The Company did not recognize stock-based compensation expense for this grant as the performance targets were not achieved and thus no shares were vested in 2022. As of December 31, 2023, there was approximately $ 239,000 of unrecognized stock-based compensation expense relating to these options. This amount is expected to be recognized over 1.5 years. 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. Historical volatility is calculated based upon implied volatility of the Company's historical stock prices. The Company accounts for forfeitures as they occur. 70 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: 2023 2022 Weighted-average fair value of options granted per share $ 2.78 $ 3.00 Historical volatility 75 % 77 % Risk-free interest rate 4.40 % 2.85 % Dividend yield — — Expected life in years 3.6 3.2 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: Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life Aggregate Intrinsic Value (In thousands) Outstanding at December 31, 2021 1,090,000 $ 3.76 2.92 years Options Granted 700,000 7.95 Exercised options ( 565,000 ) 3.49 Options forfeited and canceled ( 50,000 ) 3.49 Outstanding at December 31, 2022 1,175,000 $ 6.40 3.38 years Options Granted 200,000 $ 4.96 Exercised options ( 325,000 ) $ 3.49 Outstanding at December 31, 2023 1,050,000 $ 7.02 3.11 years $ 2,632 Exercisable and fully vested at December 31, 2023 783,332 $ 7.48 2.97 years $ 1,610 Outstanding at December 31, 2023 and expected to vest thereafter 266,668 $ 5.70 3.51 years $ 1,022 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: Exercise Price Options Outstanding Options Outstanding Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price Options Outstanding and Exercisable Options Exercisable Weighted-Average Remaining Contractual Life $ 3.49 100,000 0.82 years $ 3.49 75,000 0.68 years $ 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 71 Note 11: Stock Repurchase Program 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. 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. Note 12: Segment Reporting and Significant Customer Information 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. and Canada. Travelzoo Europe consists of the Company’s operations in France, Germany, Spain and the U.K. 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, 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 Intersegment revenues 1,243 ( 1,270 ) 27 — — Total net revenues $ 56,080 $ 24,021 $ 4,172 $ 204 $ 84,477 Operating income (loss) $ 15,254 $ 1,317 $ ( 23 ) $ ( 976 ) $ 15,572 72 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 Intersegment revenues 613 ( 613 ) — — — Total net revenues $ 47,642 $ 19,455 $ 3,477 $ 25 $ 70,599 Operating income (loss) $ 10,348 $ ( 1,803 ) $ — $ ( 988 ) $ 7,557 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, 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 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. For the years ended December 31, 2023 and 2022, the Company did not have any customers that accounted for 10% or more of revenue. As of December 31, 2023 and 2022, the Company did not have any customers that accounted for 10% or more of accounts receivable. The following table sets forth the breakdown of revenues (in thousands) by category and segment. Travel revenue includes travel publications (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. Year Ended December 31, 2023 2022 Travelzoo North America Travel $ 53,448 $ 44,446 Local 2,632 3,196 Total Travelzoo North America revenues 56,080 47,642 Travelzoo Europe Travel 22,415 18,053 Local 1,606 1,402 Total Travelzoo Europe revenues 24,021 19,455 Jack's Flight Club 4,172 3,477 New Initiatives 204 25 Consolidated Travel 75,863 62,499 Local 4,238 4,598 Jack's Flight Club 4,172 3,477 New Initiatives 204 25 Total revenues $ 84,477 $ 70,599 Revenue by geography is based on the billing address of the advertiser. Long-lived assets attributed to the U.S. and international geographies are based upon the country in which the asset is located or owned. 73 The following table sets forth revenues for individual countries that comprised 10% or more of total revenue (in thousands): Year Ended December 31, 2023 2022 Revenue United States $ 50,891 $ 43,151 United Kingdom 19,486 15,795 Rest of the world 14,100 11,653 Total revenues $ 84,477 $ 70,599 The following table sets forth long-lived assets by geographic area (in thousands): December 31, 2023 2022 United States $ 115 $ 274 Rest of the world 463 383 Total long-lived assets $ 578 $ 657 Note 13: Related Party Transactions 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, 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., MTE, formerly Azzurro Brands Inc. Azzurro Capital Inc. is the Company’s largest shareholder. The Service Agreement was reviewed and unanimously authorized and approved by the Audit Committee of the Board of Directors, which is comprised solely of independent and disinterested directors. Pursuant to the Service Agreement, MTE will source curated Metaverse experiences in exchange for $ 25,000 per month, payable in advance each quarter. $ 250,000 was paid to MTE from Travelzoo (Asia) Limited in 2022 for Metaverse experiences which was expensed as Sales and marketing expenses in 2022 . MTE is also entitled to receive commission equal to 25 % of any subscription revenue generated by the Company. The Service Agreement is for a term of four ( 4 ) years but may be terminated for convenience after two ( 2 ) years. No commission was paid to MTE in 2022. Upon consummation of the Stock Purchase Agreement between the Company and Azzurro Capital Inc. as described above, the Service Agreement was terminated. 74 License Agreement with Azzurro Brands Inc. 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, the Company’s largest shareholder. Pursuant to the terms of the License Agreement, the Company was granted the exclusive right and license to use a database of 2.2 million non-duplicated subscribers that Azzurro Brands purchased from a competitor of Travelzoo. The License Agreement requires that the Company pay a license fee of $ 413,000 per quarter with an initial payment of $ 894,000 due upon execution, which covers the period from execution until September 30, 2021. The License Agreement has a term of one ( 1 ) year with an automatic renewal, terminable by either party with sixty ( 60 ) days’ written notice before the end of the term. The License Agreement contains customary representations and warranties. The payment of $ 894,000 was made in the first quarter of 2021 and recorded in sales and marketing expenses in 2021. The second payment of $ 701,000 was made in the second quarter of 2021 which covers the period from October 2021 through March 2022 and recorded in sales and marketing expenses and prepaid expenses and other. 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 Azzurro Brands Inc. to purchase the database previously utilized by Travelzoo in accordance with the License Agreement. The purchase price for the transaction was $ 1.75 million, with $ 600,000 paid in cash upon closing in March 2022 and the remaining $ 1.15 million payable in the form of a credit with Seller relating to prepaid license fees, under the License Agreement. The remaining commitment of the Company under the License Agreement for the then-current remaining term (equal to $ 825,000 ) was eliminated. Stock Option Agreement In March 2022, the Compensation Committee of the Board of Directors granted Holger Bartel 600,000 stock options that vest through December 31, 2023. This grant was approved by the stockholders of the Company at the 2022 Annual Meeting of Stockholders. Holger Bartel is the brother of Ralph Bartel and is our Global Chief Executive Officer. See Note 10 above for further information. Profits from Sale and Purchase of Travelzoo Common Stock within Six Month Period Holger Bartel completed sales and purchases of 25,000 shares of Travelzoo common stock within a six month period ended July 29, 2022. Per Section 16(b) of Securities and Exchange Act, he agreed to immediately remit to the Company $ 46,000 in profits gained from these transactions in 2022. 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. Note 14: Leases The Company has operating leases for real estate and certain equipment. The Company leases office space in Canada, Germany, Spain, the U.K. and the U.S. under operating leases. 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. In addition, we sublease certain real estate to a third party. All of our leases qualify as operating leases. The following table summarizes the components of lease expense for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Operating lease cost $ 2,349 $ 2,316 Short-term lease cost 149 — Variable lease cost 580 683 Sublease income ( 271 ) ( 353 ) Total lease cost $ 2,807 $ 2,646 75 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): December 31, 2023 2022 Assets: Operating lease right-of-use assets $ 6,015 $ 7,440 Liabilities: Operating lease liabilities $ 2,530 $ 2,972 Long-term operating lease liabilities 6,717 8,326 Total operating lease liabilities $ 9,247 $ 11,298 Weighted average remaining lease term (years) 5.26 5.87 Weighted average discount rate 4.3 % 4.3 % Maturities of remaining lease liabilities at December 31, 2023 were as follows (in thousands): Years ending December 31, 2024 $ 2,701 2025 1,900 2026 1,396 2027 1,350 2028 1,350 Thereafter 1,575 Total lease payments 10,272 Less interest ( 1,025 ) Present value of operating lease liabilities $ 9,247 Note 15: Discontinued Operations On March 10, 2020, Travelzoo issued a press release announcing that it will exit its loss-making business in Asia Pacific. The decision supports the Company's strategy to focus on value creation for shareholders by focusing on growing the businesses in North America and Europe. 76 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 years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 Revenues $ — $ — Cost of revenues — — Gross profit — — Operating expenses: Sales and marketing — — Product development — — General and administrative 12 — Total operating expenses 12 — Loss from operations ( 12 ) — Other income (loss), net 472 ( 35 ) Income (loss) before income taxes 460 ( 35 ) Income tax expense — 24 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 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. 77 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): December 31, 2023 December 31, 2022 ASSETS Cash, cash equivalents and restricted cash $ 1 $ 10 Prepaid expenses and other — 1 Total assets from discontinued operations $ 1 $ 11 LIABILITIES Accounts payable $ — $ 403 Accrued expenses and other — 13 Income tax payable 24 24 Deferred revenue — 12 Total liabilities from discontinued operations $ 24 $ 452 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, 2023 2022 Net cash used in operating activities $ ( 9 ) $ ( 21 ) Note 16: Non-Controlling Interest 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 Net loss attributable to non-controlling interest ( 5 ) Non-controlling interest—December 31, 2022 4,595 Net loss attributable to non-controlling interest 102 Non-controlling interest—December 31, 2023 $ 4,697 Note 17: 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. 78 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 79 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None