Travelzoo 2009 Annual Report Download - page 76

into and out of Level 1 and Level 2 fair value measurements and information on purchases, sales, issuances, and
settlements on a gross basis in the reconciliation of Level 3 fair value measurements. The guidance is effective for
annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures that are
effective for annual periods beginning after December 15, 2010. The adoption of this new accounting standard
update did not have a material impact on the Company’s consolidated results of operations or financial condition.
(2) Financial Instruments
At December 31, 2009, restricted cash consisted of a certificate of deposit for $875,000 serving as collateral for
a standby letter of credit for the security deposit of our corporate headquarters. Cash equivalents consist of highly
liquid investments with remaining maturities of three months or less on the date of purchase held in money market
funds. The Company believes that the carrying amounts of these financial assets are a reasonable estimate of their
fair value. The fair value of these financial assets was determined using the following inputs at December 31, 2009
(in thousands):
Total (Level 1) (Level 2) (Level 3)
Quoted Prices in
Active Markets for
Identical Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Fair Value Measurements at Reporting Date Using
Assets:
Money market funds ................. $16,673 $16,673 $— $—
Total ............................ $16,673 $16,673 $— $—
(3) Commitments and Contingencies
The Company leases office space in Canada, France, Germany, Spain, the U.K., and the U.S. under operating
lease agreements which expire between February 28, 2010 and January 31, 2014. Rent expense was $3.8 million,
$3.7 million and $2.4 million for the years ended December 31, 2009, 2008, and 2007, respectively. We are
committed to pay a portion of the related operating expenses under certain of these lease agreements. These
operating expenses are not included in the table below. Certain of these lease agreements have free or escalating rent
payment provisions. We recognize rent expense under such arrangements on a straight line basis. The future
minimum rental payments under these operating leases as of December 31, 2009 were as follows (in thousands):
2010 2011 2012 2013 2014 Total
Minimum rental payments .................. $3,894 $2,923 $2,033 $1,924 $161 $10,935
It is possible that claims may be asserted against the Company in the future by former stockholders of
Travelzoo.com Corporation seeking to receive shares in the Company, whether based on a claim that the two-year
deadline for exchanging their shares was unenforceable or otherwise. In addition, one or more jurisdictions,
including the Bahamas or the State of Delaware, may assert rights to unclaimed shares of the Company under
escheat statutes. If such escheat claims are asserted, the Company intends to challenge the applicability of escheat
rights, in that, among other reasons, the identity, residency and eligibility of the holders in question cannot be
determined. There were certain conditions applicable to the issuance of shares to the Netsurfer stockholders,
including requirements that (i) they be at least 18 years of age, (ii) they be residents of the U.S. or Canada and
(iii) they not apply for shares more than once. The Netsurfer stockholders were required to confirm their compliance
with these conditions, and were advised that failure to comply could result in cancellation of their shares in
Travelzoo.com Corporation. Travelzoo.com Corporation was not able to verify that the applicants met the
requirements referred to above at the time of their applications for issuance of shares. If claims are asserted by
persons claiming to be former stockholders of Travelzoo.com Corporation, the Company intends to assert that their
rights to receive their shares expired two years following the effective date of the merger, as provided in the merger
agreement. The Company also expects to take the position, if escheat or similar claims are asserted in respect of the
unissued shares in the future, that it is not required to issue such shares. Further, even if it were established that
unissued shares were subject to escheat claims, the Company would assert that the claimant must establish that the
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