Travelzoo 2010 Annual Report Download - page 84

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The fair value of stock options was estimated using the Black-Scholes option pricing model with the following
weighted-average assumptions:
2009
Weighted-average fair value of options granted per share .......................... $11.56
Historical volatility ...................................................... 93%
Risk-free interest rate ..................................................... 2.56%
Dividend yield .......................................................... —
Expected life in years..................................................... 6.25
As of December 31, 2010, there was approximately $2.6 million of unrecognized stock-based compensation
expense related to outstanding stock options. This amount is expected to be recognized over 3.5 years. To the extent
the actual forfeiture rate is different from what we have anticipated, stock-based compensation related to these
options will be different from our expectations.
Option activity as of December 31, 2010 and changes during the fiscal year ended December 31, 2008, 2009,
and 2010 were as follows:
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value
(In thousands)
Outstanding at January 1, 2008 ..... 2,211,074 $ 1.03 3.11 years $27,974
Exercised ..................... (35,000) $ 2.14
Outstanding at December 31, 2008. . . 2,176,074 $ 1.01 2.09 years $ 9,900
Options granted ................. 300,000 $14.97
Exercised ..................... (2,158,349) $ 1.00
Outstanding at December 31, 2009. . . 317,725 $14.26 9.44 years $ 177
Exercisable and fully vested at
December 31, 2009 ............ 17,725 $ 2.28 1.95 years $ 177
Outstanding at January 1, 2010 ..... 317,725 $14.26
Outstanding at December 31, 2010. . . 317,725 $14.26 8.44 years $ 8,616
Exercisable and fully vested at
December 31, 2010 ............ 17,725 $ 2.28 0.95 years $ 693
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference
between the Company’s closing stock price on the last trading day of fiscal year 2008, 2009, and 2010 and the
exercise price, multiplied by the number of in-the-money options) that would have been received by the option
holders had all option holders exercised their options on December 31, 2008, 2009, and 2010. This amount changes
based on the fair market value of the Company’s stock. The Company’s policy is to issue shares from the authorized
shares to fulfill stock option exercises.
The total intrinsic value of options exercised in the year ended December 31, 2009 was $9.1 million and the
total intrinsic value of options exercised in the year ended December 31, 2008 was $267,000.
57
TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)