Travelzoo 2004 Annual Report Download - page 21

Channels to Travelzoo Inc. in exchange for 8,129,273 shares of Travelzoo Inc. and options to acquire an
additional 2,158,349 shares at $1.00. The merger was accounted for as a combination of entities under
common control using ""as-if pooling-of-interests'' accounting. Under this method of accounting, the assets
and liabilities of Silicon Channels Corporation and Travelzoo Inc. were carried forward to the combined
company at their historical costs. In addition, all prior period Ñnancial statements of Travelzoo Inc. were
restated to include the combined results of operations, Ñnancial position and cash Öows of Silicon Channels
Corporation.
During January 2001, the Board of Directors of Travelzoo.com Corporation proposed that Travelzoo.com
Corporation be merged with Travelzoo Inc. whereby Travelzoo Inc. would be the surviving entity. On
March 15, 2002, the stockholders of Travelzoo.com Corporation approved the merger with Travelzoo Inc. On
April 25, 2002, the certiÑcate of merger was Ñled in Delaware upon which the merger became eÅective and
Travelzoo.com Corporation ceased to exist. Each outstanding share of common stock of Travelzoo.com
Corporation was converted into the right to receive one share of common stock of Travelzoo Inc. Under and
subject to the terms of the merger agreement, stockholders were allowed a period of two years following the
eÅective date of the merger to receive shares of Travelzoo Inc. The records of Travelzoo.com Corporation
showed that, assuming all of the shares applied for by the Netsurfer stockholders were validly issued, there
were 11,295,874 shares of Travelzoo.com Corporation outstanding. As of April 25, 2004, two years following
the eÅective date of the merger, 7,180,342 shares of Travelzoo.com Corporation had been exchanged for
shares of Travelzoo Inc. Prior to that date, the remaining shares which were available for issuance pursuant to
the merger agreement were included in the issued and outstanding common stock of Travelzoo Inc. and
included in the calculation of basic and diluted earnings per share. After April 25, 2004, the Company ceased
issuing shares to the former stockholders of Travelzoo.com Corporation, and no additional shares are reserved
for issuance to any former stockholders, because their right to receive shares has now expired. On April 25,
2004, the number of shares reported as outstanding was reduced from 19,425,147 to 15,309,615 to reÖect
actual shares issued as of the expiration date. As of December 31, 2004, there were 16,233,204 shares of
common stock outstanding, and earnings per share calculations reÖect the reduction of the number of shares
reported as outstanding during the period.
In October 2004, the Company announced a program under which it will make cash payments to persons
who establish that they were stockholders of Travelzoo.com Corporation, and who failed to submit requests for
shares in Travelzoo Inc. within the required time period. See Note 2 to the accompanying consolidated
Ñnancial statements.
The merger of Travelzoo.com Corporation into Travelzoo Inc. was accounted for as a combination of
entities under common control using ""as-if pooling-of-interests'' accounting. Under this method of accounting,
the assets and liabilities of Travelzoo.com Corporation and Travelzoo Inc. were carried forward at their
historical costs. In addition, all prior period Ñnancial statements of Travelzoo Inc. were restated to include the
combined results of operations, Ñnancial position and cash Öows of Travelzoo.com Corporation. The restated
results of operations and cash Öows of Travelzoo Inc. are identical to the combined results of Travelzoo.com
Corporation and Travelzoo Inc.
On August 18, 2004, Travelzoo became listed on the NASDAQ National Market under the symbol
""TZOO.''
In October 2004, the Company completed a private placement oÅering of 750,000 newly-issued shares of
common stock for gross proceeds of $30.0 million to a group of investors. The proceeds from the oÅering are
intended to be used for general corporate purposes, including new product development and marketing
expenditures, and potential acquisitions or strategic investments.
Our Industry
According to the Newspaper Association of America, travel companies spent $1.3 billion in 2004 on
national advertising in newspapers (source: Business Analysis and Research, NAA, 2005). We believe that
newspapers are currently the main medium for travel companies to advertise their oÅers.
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