Travelzoo 2010 Annual Report Download - page 69

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TRAVELZOO INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010, 2009, and 2008
(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 22 million
subscribers worldwide, as well as millions of website users, about the best travel, entertainment and local deals available
from thousands of companies. Our deal experts source, research and test-book offers, recommending only those that
meet Travelzoo’s rigorous quality standards. We provide travel companies, entertainment companies, and local
businesses with a fast, flexible, and cost effective way to reach millions of consumers. Our revenues are generated
primarily from advertising fees. Our publications and products include the Travelzoo websites (www.travelzoo.com,
www.travelzoo.ca, www.travelzoo.co.uk, www.travelzoo.de, www.travelzoo.es, www.travelzoo.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 websites 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. In August 2010, we launched Local Deals, a new service that allows our subscribers to
purchase vouchers for deals from local businesses such as spas and restaurants through the Travelzoo website. Vouchers
are redeemable at the local businesses during the promotional period. We receive a percentage of the face value of the
voucher from the local businesses.
Starting November 1, 2009, the Travelzoo websites 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 have been 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 66.2% of the outstanding shares
as of February 28, 2011.
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, 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
corporation, 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 website. 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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