Travelzoo 2004 Annual Report Download - page 55

TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
Travelzoo fails to publish advertisements as speciÑed in the insertion order, the liability of Travelzoo to the
client shall be limited to, at Travelzoo's sole discretion, a pro rata refund of the advertising fee, the placement
of the advertisements at a later time in a comparable position, or the extension of the term of the insertion
order until the advertising is fully delivered. The Company believes that no signiÑcant obligations exist after
the full delivery of advertising.
The Company had outsourced part of its advertising sales and production activities to DoubleClick, Inc.
(""DoubleClick''). Under the terms of the agreement with DoubleClick, the Company received a portion of
the revenue received by DoubleClick from clients for the display of advertising on the Travelzoo Web site.
The Company recorded these revenues on a net basis. The gross revenue received by DoubleClick from
advertising on the Travelzoo Web site was $-0-, $-0- and $82,939 for the years ended December 31, 2004,
2003, and 2002 respectively. The Company's share of this income, which has been recorded as revenue, was $-
0-, $-0- and $38,534 for the years ended December 31, 2004, 2003, and 2002 respectively. The agreement with
DoubleClick was canceled as of August 23, 2002.
Revenues for advertising sold to clients through agencies are reported at the net amount billed to the
agency.
(c) Net Income Per Share
Net income per share has been calculated in accordance with SFAS No. 128, Earnings per Share. Basic
net income per share is computed using the weighted-average number of common shares outstanding for the
period, including shares reserved for issuance to former stockholders of Travelzoo.com Corporation reported
as outstanding prior to April 25, 2004. Diluted net income per share is computed by adjusting the weighted-
average number of common shares outstanding for the eÅect of potential common shares outstanding during
the period. Potential common shares included in the diluted calculation consist of incremental shares issuable
upon the exercise of outstanding stock options calculated using the treasury stock method.
The following table sets forth the calculation of basic and diluted net income per share:
Year Ended December 31,
2004 2003 2002
Basic net income per share:
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,037,377 $ 2,050,126 $ 853,071
Weighted average common shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,879,227 19,425,147 19,425,147
Basic net income per shareÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.36 $ 0.11 $ 0.04
Diluted net income per share:
Net incomeÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 6,037,377 $ 2,050,126 $ 853,071
Weighted average common shares ÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 16,879,227 19,425,147 19,425,147
EÅect of dilutive securities Ì stock options ÏÏÏÏÏÏ 1,595,548 1,101,804 471,206
Weighted average common and potential common
sharesÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 18,474,775 20,526,951 19,896,353
Diluted net income per share ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $ 0.33 $ 0.10 $ 0.04
(d) Use of Estimates
Management of the Company has made a number of estimates and assumptions relating to the reporting
of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities to prepare
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