Travelzoo 2009 Annual Report Download - page 68

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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009, 2008, and 2007
(1) Summary of Significant Accounting Policies
(a) The Company and Basis of Presentation
Travelzoo Inc. (the “Company” or “Travelzoo”) is a global Internet media company. We inform over
18 million subscribers worldwide, as well as millions of Web site users, about the best travel and entertainment
deals available from thousands of companies. We publish these offers by sourcing, researching, test-booking, and
selecting offers professionally. We provide airlines, hotels, cruise lines, vacation packagers, and other travel and
entertainment companies with a fast, flexible, and cost effective way to reach millions of consumers. Our revenues
are generated from advertising fees. Our publications and products include the Travelzoo Web sites (www.tra-
velzoo.com, www.travelzoo.ca, www.travelzoo.co.uk, www.travelzoo.de, www.travelzoo.com.es, www.travel-
zoo.fr, among others), the Travelzoo Top 20 e-mail newsletter, the Newsflash e-mail alert service, the
SuperSearch pay-per-click travel search tool, and the Travelzoo Network, a network of third-party Web sites that
list deals published by Travelzoo. We also operate Fly.com, a travel search engine that allows users to quickly and
easily find the best prices on flights from hundreds of airlines and online travel agencies.
Starting November 1, 2009, the Travelzoo Web sites in Asia Pacific (cn.travelzoo.com, www.travelzoo.co.jp,
www.travelzoo.com.au, www.travelzoo.com.hk, www.travelzoo.com.tw, among others), the Travelzoo Top 20
e-mail newsletters in Asia Pacific and the Newsflash e-mail alert service in Asia Pacific are published by Travelzoo
(Asia) Limited and Travelzoo Japan K.K., wholly owned subsidiaries of Azzurro Capital Inc., under a license
agreement with the Company.
Travelzoo is controlled by Ralph Bartel, who held beneficially approximately 66.3% of the outstanding shares
as of February 26, 2010.
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries.
All significant intercompany accounts and transactions have been eliminated in consolidation. All foreign
subsidiaries use the local currency of their respective countries as their functional currency. Assets and liabilities
are translated at exchange rates prevailing at the balance sheet dates. Revenues, costs and expenses are translated
into U.S. dollars at average exchange rates for the period.
Certain prior period amounts have been reclassified to conform to current year presentation. Specifically,
$1.1 million for the year ended December 31, 2007 has been reclassified from cost of revenues to general and
administrative expense. These amounts are primarily costs associated with salary and benefits for software
developers and professional services related to software development. Additionally, as described in Note 11,
“Discontinued Operations”, the Company has classified the financial results of its Asia Pacific operating segment as
discontinued operations for all periods presented due to the sale of the assets of its Asia Pacific subsidiaries, which
constituted the Company’s Asia Pacific operating segment, to Travelzoo (Asia) Limited and Travelzoo Japan K.K.,
wholly-owned subsidiaries of Azzurro Capital Inc. The notes to the Company’s consolidated financial statements
relate to continuing operations only, unless otherwise indicated.
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.
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,
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