What changed in this filing

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Item 1. Financial Statements

2024-05-15 compared with 2023-11-08 · 245 added, 597 removed, 379 unchanged (69% of the section changed)

2 unchanged sentences

(In thousands, except par value)

September 30,

2024 December 31,

1 unchanged sentence

Cash and cash equivalents $ 16,190 $ 15,713

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

Accounts receivable, less allowance for doubtful accounts of $ 1,490 and $ 1,484 as of March 31, 2024 and December 31, 2023, respectively

13,151 12,965

21 unchanged sentences

Total current liabilities 33,514 34,190

Long-term tax liabilities 5,596 4,681

Long-term operating lease liabilities 6,458 6,717

4 unchanged sentences

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

14,166 shares issued and outstanding as of September 30, 2023, 16,505 shares issued and 15,704 outstanding as of December 31, 2022)

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

13,202 shares issued and outstanding as of March 31, 2024, 13,575 shares issued and outstanding as of December 31, 2023)

Additional paid in capital — 439

10 unchanged sentences

(In thousands, except per share amounts)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Revenues $ 21,985 $ 21,601

11 unchanged sentences

Income from continuing operations 4,225 3,683

Income (loss) from discontinued operations, net of taxes ( 5 ) 5 ( 5 ) 4

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

Net income 4,225 3,681

Net income attributable to non-controlling interest 52 2 97 36

Net income (loss) attributable to non-controlling interest ( 11 ) 8

Net income attributable to Travelzoo $ 4,236 $ 3,673

Net income attributable to Travelzoo—continuing operations $ 4,236 $ 3,675

Net income (loss) attributable to Travelzoo—discontinued operations $ ( 5 ) $ 5 $ ( 5 ) $ 4

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

Income per share—basic

13 unchanged sentences

(In thousands)

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Net income $ 4,225 $ 3,681

Other comprehensive income:

Other comprehensive income (loss):

Foreign currency translation adjustment ( 254 ) 80

3 unchanged sentences

(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

Net income $ 4,225 $ 3,681

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

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

Depreciation and amortization 383 478

1 unchanged sentence

Deferred income tax ( 15 ) ( 68 )

Loss on long-lived assets 10 38

Gain on equity investment in WeGo — ( 196 )

Net foreign currency effect 3 3

Reversal of loss on accounts receivable, refund reserve and other ( 944 ) ( 3,402 )

Net recoveries of accounts receivable and refund reserves ( 33 ) ( 712 )

Changes in operating assets and liabilities, net of acquisitions:

5 unchanged sentences

Accrued expenses and other ( 239 ) 13

Deferred revenue 1,211 898

Income tax payable 54 —

Other liabilities, net 197 819

Net cash provided by (used in) operating activities 9,293 ( 20,849 )

Net cash provided by operating activities 4,621 535

Cash flows from investing activities:

Proceeds from repayment of note receivable — 39

Purchases of intangible assets — ( 1,049 )

Proceeds from sale of equity investment in WeGo — 196

Purchases of property and equipment ( 35 ) ( 111 )

2 unchanged sentences

Repurchase of common stock ( 3,872 ) ( 186 )

Proceeds from short swing settlement — 46

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

Net cash provided by (used in) financing activities ( 12,065 ) 761

Net cash used in financing activities ( 3,872 ) ( 186 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 238 ) 171

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

Net increase in cash, cash equivalents and restricted cash 476 448

Cash, cash equivalents and restricted cash at beginning of period 16,389 19,378

1 unchanged sentence

Supplemental disclosure of cash flow information:

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

Cash paid for income taxes, net $ 548 $ 74

Right-of-use assets obtained in exchange for lease obligations—operating leases $ 235 $ —

Cash paid for amounts included in the measurement of lease liabilities $ 857 $ 860

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

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands)

Common Stock Treasury Stock Additional

Capital Tax Indemnification Note Receivable from Shareholder Retained

Earnings Accumulated

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

Shares Amount

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

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

Repurchase of common stock (1)

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

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

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

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

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

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

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

Common Stock Treasury Stock Additional

Capital Tax Indemnification Note Receivable from Shareholder Retained

Earnings Accumulated

Comprehensive

Travelzoo Stockholders’

Equity Non-controlling interest Total

Stockholders’

Shares Amount

As Restated As Restated

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

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

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

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

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

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

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

Non-cash investing and financing activities:

Accrued excise tax for share repurchases $ 36 $ —

Accrued tax withholding related to option exercise $ 249 $ —

See accompanying notes to unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

7 unchanged sentences

Shares Amount

Balances, January 1, 2023 16,505 $ 165 $ ( 7,130 ) $ 23,274 $ ( 9,537 ) $ ( 4,753 ) $ 7,142 $ ( 4,905 ) $ 4,256 $ 4,595 $ 8,851

Balances, December 31, 2023 13,575 $ 136 $ — $ 439 $ ( 9,537 ) $ ( 1,753 ) $ 19,508 $ ( 4,607 ) $ 4,186 $ 4,697 $ 8,883

Stock-based compensation expense — — 95 — — — — 95 — 95

2 unchanged sentences

Retirement of treasury stock ( 400 ) ( 4 ) 3,908 ( 285 ) — — ( 3,619 ) — — — —

Exercise of stock options and taxes paid for net share 156 1 — ( 301 ) — — — — ( 300 ) — ( 300 )

Exercise of stock options and taxes paid for net share settlement 27 — — ( 249 ) — — — — ( 249 ) — ( 249 )

Foreign currency translation adjustment — — — — — — ( 254 ) ( 254 ) — ( 254 )

Net income — — — — — 4,236 — 4,236 ( 11 ) 4,225

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

Balances, March 31, 2024 13,202 $ 132 $ — $ — $ ( 9,537 ) $ ( 1,753 ) $ 20,125 $ ( 4,861 ) $ 4,106 $ 4,686 $ 8,792

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

7 unchanged sentences

Shares Amount

As Restated As Restated

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

Balances, December 31, 2022 16,505 $ 165 $ ( 7,130 ) $ 23,274 $ ( 9,537 ) $ ( 4,753 ) $ 7,142 $ ( 4,905 ) $ 4,256 $ 4,595 $ 8,851

Stock-based compensation expense — — 396 — — — — 396 — 396

Repurchase of common stock — — ( 186 ) — — — — ( 186 ) — ( 186 )

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

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

Foreign currency translation adjustment — — — — — — 80 80 — 80

Net income — — — — — 3,673 — 3,673 8 3,681

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

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

See accompanying notes to unaudited condensed consolidated financial statements.

3 unchanged sentences

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

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

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

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

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

We also license Travelzoo products and our intellectual property to licensees in various countries in Asia Pacific, including but not limited to Australia, Japan and Southeast Asia.

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

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

Stock Purchase Agreement between Travelzoo and Azzurro Capital Inc.

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

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

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 purchase price was paid as follows:

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

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

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

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

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

The Company submitted a letter to Azzurro se eking payment.

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

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

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

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

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

Jack’s Flight Club

In January 2020, Travelzoo acquired 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 September 30, 2023, Jack’s Flight Club h ad over 2 million subscribers.

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

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

APAC Exit and Pivot to Licensing Model

It operates Travelzoo®, the club for travel enthusiasts, and Jack’s Flight Club®, a subscription service that provides information about exceptional airfares.

Travelzoo has more than 30 million members.

Through its websites, e-mails newsletters, iOS and Android apps, and social media channels, Travelzoo provides members information and access to exclusive discounted travel, entertainment, and local offers and experiences.

Offers are researched, negotiated, and personally selected by Travelzoo’s deal experts around the globe.

Offers are sourced from more than 5,000 top travel and entertainment partners.

The Company generates revenues from advertising, membership fees, and other.

In March 2022, the Company began the development of Travelzoo META, a subscription service that is intended to provide Metaverse travel experiences.

APAC Exit and Piv ot 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 in Japan and South Korea, as well as Australia, New Zealand and Singapore.

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

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

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

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

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

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

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

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

Government funding

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

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

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

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

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

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

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

Such funding was recorded against salary and related expenses.

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

Going Concern

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

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

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

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

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

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

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

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

The license agreements the licensees exclusive rights to use Travelzoo products, services and intellectual property quarterly royalty payments based upon net revenue over a 5 year term, with an option to renew.

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

Azzurro Capital Inc.

is the Company’s largest shareholder, and as of March 31, 2024, holds approximately 39.6 % of the Company's outstanding shares.

Holger Bartel, the Company's Global CEO, is Ralph Bartel's brother and separately holds 3.9 % of the Company's outstanding shares as of March 31, 2024.

Financial Statements

3 unchanged sentences

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

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2022, included in the Company’s Form 10-K/A filed with the SEC on August 14, 2023.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and related notes as of and for the year ended December 31, 2023, included in the Company’s Form 10-K filed with the SEC on March 22, 2024.

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

6 unchanged sentences

Actual results could differ materially from those estimates.

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

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024 or any other future period, and the Company makes no representations related thereto.

(b) Recent 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 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.

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.

Below are a summary of the Company's significant accounting policies.

Below is a summary of the Company's significant accounting policies.

For a comprehensive description of our accounting policies, refer to our Annual Report on Form 10-K for the year ended December 31, 2023.

1 unchanged sentence

The Company follows Accounting Standards Update No.

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

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

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

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

The Company's disaggregated revenues are included in “Note 9:

Segment Reporting and Significant Customer Information”.

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

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

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

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

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

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

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

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

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

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

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

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

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 consist of (1) advertising revenues and commissions, derived from and generated in connection with purchases made by Travelzoo members, (2) membership fees and (3) other.

Advertising Revenues

Advertising revenues are 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 commission revenues from the sale of vouchers (our Local Deals and Getaways offerings), operation of our hotel booking platform and limited offerings of vacation packages.

Specifically, 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 advertising 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 advertising 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.

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

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

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

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

Subscription options are quarterly, semi-annually, and annually.

We recognize the revenue on a pro-rated basis based upon the subscription option.

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

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

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

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

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

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

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

These costs are recorded in sales and marketing expenses.

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

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

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

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

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.

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.

Membership Fee Revenues

Membership fee revenues are generated from subscription fees paid by Travelzoo, Jack's Flight Club and Travelzoo META members.

We recognize subscription revenues ratably over the subscription periods.

Travelzoo membership has historically been free, however, on January 1, 2024, Travelzoo introduced an annual membership fee of $ 40 (or local equivalent) for new members in the United States, Canada, United Kingdom and Germany, with the 2024 annual fee waived for existing members as of December 31, 2023.

Other Revenues

Other revenues include licensing fees, fees generated from the existing retail business acquired by the Company when it acquired MTE.

Deferred Revenues

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

As of December 31, 2023, $ 1.5 million was recorded as deferred revenue for Jack's Flight Club, of which $ 769,000 was recognized in the three months ended March 31, 2024 , $ 569,000 was recorded as deferred revenue for Travelzoo North America and Travelzoo Europe, of which $ 441,000 was recognized as revenue in the three months ended March 31, 2024 .

As of March 31, 2024, the deferred revenue balance was $ 3.2 million, of which $ 2.2 million was for Jack's Flight Club and the remaining $ 998,000 was for Travelzoo North America and Travelzoo Europe.

Reserve for Refunds to Members

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company had estimated a refund liability of $ 421,000 for these unredeemed vouchers as of September 30, 2023, which is recorded as a reduction of revenues and is reflected as a current liability in accrued expenses and other on the condensed consolidated balance sheet.

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

The Company has recorded merchant payables of $ 23.7 million as of September 30, 2023 related to unredeemed vouchers.

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

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 advertisers, the business that is providing the vouchered service, were to deteriorate, affecting their ability to provide the services to our members, additional reserves for refunds to members may be required and may adversely affect future revenue as the liability is recorded against revenue.

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

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

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

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

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.

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.

The Company's refund policy is a 14-day refund period from date of purchase, with an option to extend refund eligibility until voucher redemption or expiration, for a surcharge.

As of March 31, 2024 , the expiration dates of unexpired vouchers ranged from April 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 March 31, 2024, the Company had approximately $ 4.5 million of unredeemed vouchers that had been sold, representing the Company’s commission earned.

The Company estimated and recorded a refund reserve of $ 212,000 for these unredeemed vouchers as of March 31, 2024, which is recorded as a reduction of revenues on the condensed consolidated statements of operations and accrued expenses and other on the condensed consolidated balance sheet.

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 from the sale and estimated a refund reserve of $ 268,000 for these unredeemed vouchers as of December 31, 2023, as a reduction of revenues on the condensed consolidated statements of operations and accrued expenses and other on the condensed 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 $ 17.8 million as of March 31, 2024 is recorded on the consolidated balance sheet, representing amounts payable to merchants by the Company for vouchers sold but not redeemed.

Identifiable intangible assets

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

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

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

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

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

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

the carrying amount.

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

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

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

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 no impairment charge was identified in connection with the annual impairment test .

The Company did no t identify any indicators of impairment during the three months ended March 31, 2024.

Operating Leases

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

The Company’s leases are reflected in operating lease ROU assets, operating lease liabilities and long-term operating lease liabilities in our unaudited condensed 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 unaudited condensed consolidated balance sheets.

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

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

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

Certain Risks and Uncertainties

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

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

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

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

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

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

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

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 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.

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

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

and internationally.

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

As of September 30, 2023, the Company had merchant payables of $ 23.7 million related to the sale of vouchers.

As of March 31, 2024 and December 31, 2023, the Company did not have any customers that accounted for 10% or more of accounts receivable.

As of March 31, 2024, the Company had merchant payables of $ 17.8 million related to the sale of vouchers.

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

When all merchant payables are classified as current, there is negative net working capital (which is defined as current assets minus current liabilities) of $ 8.0 million.

Payables to merchants are generally due upon redemption of vouchers.

The vouchers expire between October 2023 through December 2025 ;

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

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

Based on current projections of redemption activity, management expects that cash on hand as of September 30, 2023 will be sufficient to provide for working capital needs for at least the next twelve months.

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

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

As such, the consolidated balance sheet reflects negative net working capital (defined as current assets minus current liabilities) of $ 1.9 million at March 31, 2024.

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

As of March 31, 2024, unredeemed vouchers have maturities ranging from April 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 March 31, 2024 will be sufficient to provide for working capital needs for at least the next twelve months.

Cash, Cash Equivalents and Restricted Cash

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

September 30, December 31,

March 31, December 31,

Cash and cash equivalents $ 16,190 $ 15,713

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Total cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows $ 16,865 $ 16,389

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

The Company’s restricted cash was included in noncurrent assets as of March 31, 2024 and December 31, 2023.

Net Income Per Share

Basic net income per share is computed using the weighted-average number of common shares outstanding for the period.

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.

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

Net income attributable to Travelzoo—continuing operations $ 4,236 $ 3,675

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Net income per share—diluted $ 0.31 $ 0.23

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

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

For the three months ended March 31, 2024 and 2023, options to purchas e 925,000 and 950,000 shares of common stock were not included in the computation of diluted net income per share because the effect would have been anti-dilutive.

Jack’s Flight Club

In January 2020, the Company 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.

Stock Purchase Agreement (“SPA”) between Travelzoo and Azzurro

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

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

On December 28, 2022, the stockholders of Travelzoo approved the issuance and sale of 3.4 million shares of Travelzoo to Azzurro, in exchange for certain consideration, and on the Closing Date, the transaction was consummated.

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

The purchase price was paid as follows:

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 % of the Company’s outstanding shares.

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

The consideration for the Shares consisted of the following:

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

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

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

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

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

The Company submitted a letter to Azzurro se eking payment.

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

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

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

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

Travelzoo acquired the entire business of MTE.

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 carry forwards shall be satisfied by Azzurro returning to the Company the number of shares of common stock of Travelzoo corresponding to the value of the loss.

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

The following table represents the allocation of the total cost of the MTE acquisition to the assets acquired (in thousands):

Consideration for MTE assets

Fair value of Travelzoo common stock issued $ 15,175

Direct transaction costs 184

Cash received from Azzurro Capital Inc.

Notes receivable from Azzurro Capital Inc.

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) Ltd, Sucursal en España Acquired Secret Escapes Limited’s Spanish Business Unit

On March 3, 2022, Travelzoo (Europe) Ltd, Sucursal en Espana, 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.

T ravelzoo 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, the Company’s largest shareholder.

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 Escape Limited and Metaverse Travel Experiences, Inc.

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

Cost 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.

Acquisition of Jack’s Flight Club

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

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

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

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

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

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

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

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

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

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

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

(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 records the $ 4.8 million promissory note as Note receivable from shareholder in the stockholders ’ equity section.

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, 202 3.

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

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

Azzurro paid the interest of $ 70,000 and $ 0 in the three months ended March 31, 2024 and 2023, respectively.

Intangible Assets

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

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

Fair Value Estimated Life (Years)

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Non-compete agreements (Jack’s Flight Club) 660 4.0

Intangible assets (Secret Escape Spain member database) 445 3.0

Intangible assets (Secret Escape U.S.

Intangible assets (Secret Escapes Spain member database) 445 3.0

Intangible assets (Secret Escapes U.S.

member database) 1,751 2.3

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

The fair value measurements are based on Level 3 inputs.

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

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

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

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

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

No impairment charge was identified and recorded for 2021.

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

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

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

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

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, including projected revenues and approximately 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 .

Amortization of Acquired Intangible Assets

The following table represents the activities of intangible assets for the three months ended March 31, 2024 and 2023 (in thousands):

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

Intangible assets—January 1, 2022 3,426

Acquisitions—March 2022 — 445 1,751

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

Amortization of intangible assets with definite lives ( 168 ) ( 39 ) ( 195 )

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Amortization of intangible assets with definite lives ( 158 ) ( 37 ) ( 194 )

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

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

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Intangible assets—March 31, 2024 $ 1,635 $ 138 $ —

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

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

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

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

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

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

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

Amortization expense for acquired intangibles was $ 318,000 and $ 402,000 for the three months ended March 31, 2024 and 2023, respectively.

Expected future amortization expense of acquired intangible assets as of March 31, 2024 is as follows (in thousands):

Years ending December 31,

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

2024 (excluding the three months ended March 31, 2024) 277

The Company performed its annual impairment testing of Trade name as of October 31, 2023 using a relief from royalty method.

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

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

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

No impairment was identified in 2023.

As of March 31, 2024, the carrying value of the Trade name was $ 1.5 million.

The Company did not identify any indicators of impairment during the three months ended March 31, 2024.

Commitments and Contingencies

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

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

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

The Company accrues for legal contingencies if the Company 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 March 31, 2024 and December 31, 2023.

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

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

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

In 2002, Travelzoo.com Corporation (“Netsurfers”) was merged into the Company.

Under and subject to the terms of the merger agreement, holders of promotional shares of 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 the Company 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 states.

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

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

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

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

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

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, Germany, Spain, the U.K., and the U.S.

The Company leases office space in Canada, France, 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 .

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

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

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

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

The Company has purchase commitments aggregating approximately $ 308,000 as of September 30, 2023, which represent the minimum obligations the Company has under agreements with certain suppliers.

The LOCs are collateralized with cash which is included in the line item “Restricted cash” in the condensed consolidated balance sheets.

The Company has purchase commitments aggregating approximately $ 384,000 as of March 31, 2024, which represent the minimum obligations the Company has under agreements with certain suppliers.

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

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

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

These programs were for companies that suffered in the pandemic a 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 $ 1.2 million, $ 494,000 and $ 205,000 gains in Other income, net in the first and third quarters of 2022 and second quarter of 2023, respectively.

In determining the quarterly provisions for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on our expected annual income and statutory tax rates in the U.S., Canada, and the U.K.

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

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

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

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

As of September 30, 2023, the Company is permanently reinvested in certain of its non-U.S.

The Company’s effective tax rate from continuing operations was 26 % and 27 %, respectively, for the three months ended March 31, 2024 and 2023.

The Company’s effective tax rate for the three months ended March 31, 2024 changed from the three months ended March 31, 2023 primarily due to a decrease in certain non-deductible expenses in the three months ended March 31, 2024.

As of March 31, 2024, the Company is permanently reinvested in certain of its non-U.S.

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

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The Company maintains liabilities for uncertain tax positions.

As of September 30, 2023, the Company had approximately $ 22.6 million in total unrecognized tax benefits, of which up to $ 16.3 million would favorably affect the Company’s effective income tax rate if realized.

As of March 31, 2024, the Company had approximately $ 23.9 million in total unrecognized tax benefits, of which up to $ 16.6 million would favorably affect the Company’s effective income tax rate if realized.

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

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

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

As of March 31, 2024 and December 31, 2023, the Company had approximately $ 825,000 and $ 803,000 in accrued interest and penalties, respectively.

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

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

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Ending balance $ ( 4,861 ) $ ( 4,825 )

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

There were no amounts reclassified from accumulated other comprehensive loss for the three months ended March 31, 2024 and 2023.

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

Stock-Based Compensation 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 using an option-pricing model.

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

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

The 2015 Option Agreement expires in September 2025.

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

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

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

The 2017 Option Agreement expires in 2027.

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

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

In September 2019, the Company granted Mr.

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

The 2019 Option Agreement expires in 2024.

All options granted pursuant to the 2015 Option Agreement and 2017 Option Agreement have been exercised.

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

Bartel (the “Option Agreement Amendments”).

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.

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 second quarter of

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.

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

The Company received aggregate cash proceeds of $ 1.9 million.

All options granted pursuant to the 2019 Option Agreement have been exercised.

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 in total and become exercisable annually starting on September 5, 2020 and ending on December 31, 2023.

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.

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.

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

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

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

As of September 30, 2023, 100,000 options were outstanding, all of which were fully vested.

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

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

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

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.

During the three months ended March 31, 2024, 75,000 options were exercised and 27,546 shares of common stock were issued as the result of the cashless exercises or net settlement with respect to the option exercise price which were approved by Travelzoo’s Board of Directors.

As of March 31, 2024, all options granted under these Option Agreements have been exercised or forfeited.

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

Ralph Bartel, Chairman of the Board of Directors of the Company, with an exercise price of $ 3.49 and quarterly vesting beginning June 30, 2020 and ending on March 31, 2022.

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.

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

Total stock-based compensation related to these option grants of $ 385,000 was recorded in general and administrative expenses for the three months ended March 31, 2022.

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

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

S tock-based compensation related to this grant was fully expensed in 2022.

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

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

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

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

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

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

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

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

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

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

As of March 31, 2024, 25,000 options were vested and outstanding.

Total stock-based compensation related to this option grant of $ 25,000 was recorded in general and administrative expenses for each of the three months ended March 31, 2024 and 2023, respectively.

S tock-based compensation related to this grant was fully expensed during the three months ended March 31, 2024.

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

The options expire in January 2026.

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

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

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

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

As of March 31, 2024, 50,000 options were outstanding and 37,500 of these options were vested.

Total stock-based compensation related to this option grant of $ 36,000 was recorded in general and administrative expenses for each of the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was approximately $ 107,000 of unrecognized stock-based compensation expense relating to these options.

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

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

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

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

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

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

This amount is expected to be recognized over 0.3 years.

As of March 31, 2024, 600,000 options were vested and outstanding.

During the three months ended March 31, 2023, $ 216,000 was recorded in general and administrative expenses.

S tock-based compensation related to this grant was fully expensed in 2023.

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

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

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

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

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

As of March 31, 2024, 100,000 options were outstanding and 33,333 of these options were vested.

Total stock-based compensation related to this option grant of $ 0 and $ 30,000 was recorded in sales and marketing expenses for the three months ended March 31, 2024 and 2023, respectively As of March 31, 2024, there was approximately $ 239,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 1.3 years.

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The options expire in March 2025.

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

Total stock-based compensation related to this option grant of $ 35,000 and $ 104,000 was recorded in general and administrative expenses for the three and nine months ended September 30, 2023.

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

As of March 31, 2024, 200,000 options were outstanding and 50,000 of these options were vested.

Total stock-based compensation related to this option grant of $ 35,000 and $ 17,000 was recorded in general and administrative expenses for the three months ended March 31, 2024 and 2023, respectively.

As of March 31, 2024, there was approximately $ 382,000 of unrecognized stock-based compensation expense relating to these options.

This amount is expected to be recognized over 2.8 years.

In March 2024, the Compensation Committee of the Board of Directors granted Holger Bartel 600,000 stock options that vest through December 31, 2025.

On April 26, 2024, pursuant to an executed Option Agreement, the shareholders of the Company approved to grant Holger Bartel, options to purchase 600,000 shares of common stock of the Company, with an exercise price of $ 8.58 and vesting 25 % every six months over two years beginning on June 30, 2024 and ending on December 31, 2025.

The options expire in March 2029.

Stock Repurchase Program

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

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

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 were 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 .

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

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

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

This stock repurchase program was completed in 2023.

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

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

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

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.

During the three months ended March 31, 2024, the Company repurchased 400,000 shares of common stock for an aggregate purchase price of $ 3.9 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 until extinguished with the remaining amount reflected as a reduction of retained earnings.

Segment Reporting and Significant Customer Information

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

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

The Company currently has 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 Canada and the U.S.

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

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

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

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

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

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.

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

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

Three Months Ended September 30, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 13,094 $ 6,397 $ 1,080 $ 28 $ 20,599

Intersegment revenues (expenses) 314 ( 414 ) 100 — —

Total net revenues 13,408 5,983 1,180 28 20,599

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

Three Months Ended September 30, 2022 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 10,273 $ 4,721 $ 847 $ 8 $ 15,849

Intersegment revenues (expenses) 217 ( 217 ) — — —

Total net revenues 10,490 4,504 847 8 15,849

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

Nine Months Ended September 30, 2023 Travelzoo North

Three Months Ended March 31, 2024 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 14,273 $ 6,580 $ 1,100 $ 32 $ 21,985

Intersegment revenues (expenses) 996 ( 1,180 ) 184 — —

Intersegment revenues ( 45 ) 82 ( 37 ) — —

Total net revenues 14,228 6,662 1,063 32 21,985

Operating profit (loss) $ 4,438 $ 1,382 $ ( 99 ) $ ( 130 ) $ 5,591

Nine Months Ended September 30, 2022 Travelzoo North

Three Months Ended March 31, 2023 Travelzoo North

America Travelzoo Europe Jack’s Flight Club New Initiatives Consolidated

Revenues from unaffiliated customers $ 14,567 $ 6,078 $ 948 $ 8 $ 21,601

Intersegment revenues (expenses) 451 ( 451 ) — — —

Intersegment revenues 191 ( 191 ) — — —

Total net revenues 14,758 5,887 948 8 21,601

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

As of September 30, 2023 Travelzoo North

As of March 31, 2024 Travelzoo North

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

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

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

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

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

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Travelzoo North America

Travel $ 12,751 $ 9,660 $ 40,349 $ 32,149

Local 657 830 1,950 2,410

Total Travelzoo North America revenues 13,408 10,490 42,299 34,559

Travelzoo Europe

Travel 5,650 4,230 16,746 13,926

Local 333 274 1,011 866

Total Travelzoo Europe revenues 5,983 4,504 17,757 14,792

Jack’s Flight Club

1,180 847 3,223 2,622

New Initiatives 28 8 49 18

Travelzoo Travel 18,401 13,890 57,095 46,075

Travelzoo Local 990 1,104 2,961 3,276

Jack’s Flight Club

1,180 847 3,223 2,622

New Initiatives 28 8 49 18

For the three months ended March 31, 2024 and 2023, the Company did not have any customers that accounted for 10% or more of revenue.

As of March 31, 2024 and December 31, 2023, 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:

Advertising, Membership Fees, and Other.

Advertising includes travel publications ( Top 20 , Travelzoo website, Standalone email newsletters, Travelzoo Network ), Getaways vouchers, hotel platform, vacation packages, Local Deals vouchers and entertainment offers (vouchers and direct bookings).

Membership Fees includes subscription fees paid by Travelzoo, Jack's Flight Club and Travelzoo META members.

Travelzoo and Jack's Flight Club members.

Other includes licensing fees from license agreements and the existing retail business acquired by the Company in the MTE transaction.

Three Months Ended

Advertising $ 20,850 $ 20,645

Membership Fees 1,104 948

Total revenues $ 21,985 $ 21,601

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Three Months Ended

United States $ 12,771 $ 13,473

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

September 30, December 31,

March 31, December 31,

United States $ 106 $ 115

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Total long-lived assets $ 532 $ 578

Discontinued Operations

On March 10, 2020, Travelzoo issued a press release announcing that it was exiting its loss-making business in Asia Pacific.

The decision supports the Company ’ s strategy to focus on value creation for shareholders by focusing on growing the businesses in North America and Europe.

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

The Company has classified Asia Pacific as discontinued operations at March 31, 2020.

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

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

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

Revenues $ — $ — $ — $ —

Cost of revenues — — — —

Gross profit — — — —

Operating expenses:

Sales and marketing — — — —

Product development — — — —

General and administrative 5 7 5 15

Total operating expenses 5 7 5 15

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

Other income, net — 12 — 19

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

Income tax expense — — — —

Net income (loss) $ ( 5 ) $ 5 $ ( 5 ) $ 4

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 .

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

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

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

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

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

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

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

The parties also entered into a License Agreement, whereby the AUS Buyer obtained a license to use the intellectual property of Travelzoo exclusively in Australia, New Zealand and Singapore and non-exclusively in China and Hong Kong for quarterly royalty payments based upon revenue over a 5 year term, with an option to renew.

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

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

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

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

The following table presents information related to the major classes of assets and liabilities that were classified as assets and liabilities from discontinued operations in the Condensed Consolidated Balance Sheets (in thousands):

September 30,

2023 December 31,

Cash, cash equivalents and restricted cash $ 6 $ 10

Accounts receivable, net — —

Prepaid expenses and other 1 1

Total assets from discontinued operations $ 7 $ 11

Accounts payable $ 404 $ 403

Accrued expenses and other 15 13

Income tax payable 24 24

Deferred revenue 10 12

Total liabilities from discontinued operations $ 453 $ 452

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

Six Months Ended

September 30,

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

The Company has operating leases for real estate and certain equipment.

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under operating leases.

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

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

Certain leases include one or more options to renew.

In addition, we sublease 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 three and nine months ended September 30, 2023 and 2022 (in thousands):

Three Months Ended Nine Months Ended

September 30, September 30,

2023 2022 2023 2022

The following table summarizes the components of lease expense for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended

Operating lease cost $ 532 $ 674

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Total lease cost $ 789 $ 754

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

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

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

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

September 30, 2023 December 31, 2022

Cash payments against the operating lease liabilities total ed $ 857,000 and $ 860,000 for the three months ended March 31, 2024 and 2023, respectively.

ROU assets obtained in exchange for lease obligations was $ 235,000 for the three months ended March 31, 2024.

There wa s no ROU asset obtained in exchange for lease obligations for three months ended March 31, 2023.

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

March 31, 2024 December 31, 2023

Operating lease right-of-use assets $ 5,892 $ 6,015

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Years ending December 31,

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

2024 (excluding the three months ended March 31, 2024) $ 2,044

Thereafter 1,575

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

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

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

The non-controlling interest for the three months ended March 31, 2024 and 2023 was as follows (in thousands):

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

Net income attributable to non-controlling interest 8

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

Net loss attributable to non-controlling interest ( 41 )

Net income attributable to non-controlling interest 5

Non-controlling interest—December 31, 2023 4,697

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Non-controlling interest—March 31, 2024 $ 4,686

Net income attributable to non-controlling interest 37

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

Net income attributable to non-controlling interest 52

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

Related Party Transactions

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

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

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

Stock Purchase Agreement between Travelzoo and Azzurro

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

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

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

License Agreement with Azzurro Brands Inc.

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 required 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 had 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 contained 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 to purchase the database previously utilized by Travelzoo in accordance with 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 shareholders of the Company at the 2022 annual meeting of shareholders.

Holger Bartel is the brother of Ralph Bartel and is our Global Chief Executive Officer .

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

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

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

As of December 31, 2022, Azzurro Capital Inc.

and Ralph Bartel owned approximately 50.3 % of the Company’s outstanding shares.

Acquisitions in the condensed consolidated financial statements for further information.

Sale and Purchase of Travelzoo Common Stock within Six Month Period

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

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

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

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

Subsequent Event

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

On April 29, 2024, Travelzoo announced that its board of directors has authorized the repurchase of up to 1,000,000 shares of the Company’s outstanding common stock.

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

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

What changed 10-Q

Item 1. Financial Statements