Travelzoo 2007 Annual Report Download - page 35

Travelzoo is controlled by Ralph Bartel, who held beneficially approximately 53.7% of the outstanding shares
as of December 31, 2007.
The Company was formed as a result of a combination and merger of entities founded by the Company’s
majority stockholder, Ralph Bartel. In 1998, Mr. Bartel founded Travelzoo.com Corporation, a Bahamas corpo-
ration, which issued 5,155,874 shares via the Internet to approximately 700,000 “Netsurfer stockholders” for no
cash consideration. In 1998, Mr. Bartel also founded Silicon Channels Corporation, a California corporation, to
operate the Travelzoo Web site. During 2001, Travelzoo Inc. was formed as a subsidiary of Travelzoo.com
Corporation, and Mr. Bartel contributed all of the outstanding shares of Silicon Channels Corporation 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 financial statements of Travelzoo Inc. were restated to include the combined results of operations, financial
position and cash flows 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 certificate of merger was filed in Delaware upon which the merger became effective 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 effective 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 effective 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 reflect actual shares issued as of the expiration date. Earnings per share calculations reflect this
reduction of the number of shares reported as outstanding. As of December 31, 2007, there were 14,250,479 shares
of common stock outstanding.
In October 2004, the Company announced a program under which it would 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 financial
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 financial statements of Travelzoo Inc. were restated to include the combined results of
operations, financial position and cash flows of Travelzoo.com Corporation. The restated results of operations and
cash flows of Travelzoo Inc. are identical to the combined results of Travelzoo.com Corporation and Travelzoo Inc.
Travelzoo is listed on the NASDAQ Global Select Market under the symbol “TZOO.”
Our Industry
According to the TNS Media Intelligence, travel companies spent $1.3 billion in 2006 on advertising in
newspapers (source: TNS Media Intelligence, 2007). We believe that newspapers are currently the main medium for
travel companies to advertise their offers.
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