Travelzoo 2004 Annual Report Download - page 62

TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
No valuation allowance has been recorded for the deferred tax assets because management believes that
the Company is more likely than not to generate suÇcient future taxable income to realize the related tax
beneÑts.
(5) Stockholders' Equity
As of December 31, 2004 the authorized capital stock of Travelzoo Inc. comprised 40,000,000 shares of
$.01 par value common stock and 5,000,000 shares of $.01 par value preferred stock. As of December 31,
2004, there were 16,233,204 shares outstanding of common stock and no shares of preferred stock issued or
outstanding. 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 described in note 1(a), as part of the consideration exchanged for the outstanding shares of Silicon
Channels Corporation, the Company also issued to the majority stockholder in January 2001 fully vested and
exercisable options to acquire 2,158,349 shares of common stock. The options have an exercise price of $1.00,
are outstanding as of December 31, 2004, and expire in January 2011.
In October 2001, the Company granted to each director fully vested and exercisable options to
purchase 30,000 shares of common stock with an exercise price of $2.00 for their services as a director in 2000
and 2001. A total of 210,000 options were granted. The options expire in October 2011. As of December 31,
2004, 60,000 options remain outstanding. 150,000 of these options were exercised during the year ended
December 31, 2004.
In March 2002, Travelzoo Inc. granted to each director options to purchase 5,000 shares of common
stock with an exercise price of $3.00 that vested in connection with their services as a director in 2002. A total
of 35,000 options were granted. In October 2002, 1,411 options were forfeited upon the resignation of a
director. All other options are vested as of December 31, 2004. The options expire in March 2012. As of
December 31, 2004, 10,000 options remain outstanding. 23,589 of these options were exercised during the year
ended December 31, 2004.
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