Travelzoo 2003 Annual Report Download - page 54

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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Had all stock-based compensation awards granted to employees and directors been accounted for using
the fair value based method, net income and net income per share would have been adjusted to the amounts
reported in the following table.
Year Ended December 31,
2003 2002 2001
Net income as reportedÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,050,126 $853,071 $363,735
Stock-based compensation included in determination of net
incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì
Stock-based compensation determined under the fair-value
based method ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì (1,908) (56,182)
Pro-forma net income as if the fair value based method had
been applied to all awardsÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,050,126 $851,163 $307,553
Pro-forma basic net income per share as if the fair value
based method had been applied to all awards ÏÏÏÏÏÏÏÏÏÏ $ 0.11 $ 0.04 $ 0.02
Pro-forma diluted net income per share as if the fair value
based method had been applied to all awards ÏÏÏÏÏÏÏÏÏÏ $ 0.10 $ 0.04 $ 0.02
The fair value of options granted was calculated as of the grant date using the Black-Scholes method with
the following assumptions:
2003 2002 2001
Numbers of options granted ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 33,589 210,000
Grant date fair value of options ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì $ 0.06 $ 0.27
Grant date fair value of the common stock ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì $ 0.56 $ 0.39
Expected life of the option (in years)ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 5 10
Annual volatility ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 51% 85%
Risk-free interest rates ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì 4.5% 4.5%
Dividend Rate ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ Ì Ì Ì
(m) Website Development Costs
The Company accounts for website development costs in accordance with EITF Issue No. 00-02,
Accounting for Website Development Costs. No internal website development costs that qualify for capitaliza-
tion have been incurred in the years ended December 31, 2003, 2002 and 2001.
(n) Recent Accounting Pronouncements
In August 2001, the Financial Accounting Standards Board (""FASB'') issued SFAS No. 143,
Accounting for Asset Retirement Obligations. SFAS No. 143 addresses Ñnancial accounting and reporting for
obligations associated with retirement of tangible long-lived assets and the associated retirement costs.
SFAS No. 143 was eÅective for the Company beginning in 2003 and the adoption of this statement did not
have a material impact on the consolidated Ñnancial statements.
In April 2002, the Financial Accounting Standards Board issued SFAS No. 145, Rescission of FASB
Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections.
SFAS No. 145 rescinds the requirement that all gains and losses from extinguishment of debt be classiÑed as
an extraordinary item. Additionally, SFAS No. 145 requires that certain lease modiÑcations that have
economic eÅects similar to sale-leaseback transactions be accounted for in the same manner as sale-leaseback
34