Travelzoo 2012 Annual Report Download - page 114

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The fair value of these financial assets was determined using the following inputs at December 31, 2012 and 2011 (in thousands):
At December 31, 2012 , accounts receivable and accounts payable are not measured at fair value; however, the Company believes that the
carrying amounts of these assets and liabilities are a reasonable estimate of their fair value. Accounts receivable and accounts payable are
categorized as Level 2.
There have been no changes in Level 1, Level 2 and Level 3 and no changes in valuation techniques for these assets or liabilities for the
period ended December 31, 2012 .
Note 3: Commitments and Contingencies
Beginning on August 9, 2011, two purported class action lawsuits were commenced in the United States District Court for the Southern
District of New York. On January 6, 2012, a Consolidated and Amended Class Action Complaint was filed. The complaint asserts claims under
Section 10(b) and 20(a) pursuant to the Securities Exchange Act of 1934 (“Exchange Act”) alleging that between March 16, 2011 and July 21,
2011, the Company and/or the individual defendants purportedly issued materially false and misleading statements. In particular, the complaint
asserts, among other things, allegations challenging certain statements relating to the Company’s growth. The complaint also makes allegations
regarding the Company’s Getaway business and asserts that certain officers and directors sold stock while in possession of materially adverse
non-public information. The action seeks unspecified damages and the Company is not able to estimate the possible loss or range of losses that
could potentially result from the action. The Company believes that the action is without merit and intends to defend the suits vigorously.
In addition, five shareholder derivative lawsuits, Wang v. Bartel, et al ., Wirth v. Bartel, et al ., Kitt v. Bartel, et al ., Blatt v. Bartel, et al. ,
and Turansky v. Bartel, et al ., were filed in the Southern District of New York based on similar allegations that seek to assert claims under state
law derivatively on behalf of Travelzoo against certain officers and directors of the Company. These derivative actions were consolidated and on
January 6, 2012, a Verified Consolidated Shareholder Derivative Complaint was filed purportedly on behalf of nominal defendant Travelzoo.
The complaint asserts claims for breaches of fiduciary duties, unjust enrichment, abuse of control and gross mismanagement against current and
former directors and officers of the Company. The complaint also asserts a breach of fiduciary duty claim for insider trading against certain
officers and directors, as well as Azzurro Capital Inc. The derivative action makes allegations regarding the Company’s Getaway business and
asserts that certain officers and directors sold stock while in possession of materially adverse non-
public information. Since derivative claims are
an attempt by a plaintiff shareholder to assert claims on behalf of the Company, we do not anticipate any potential loss to the Company from
these actions.
On January 27, 2012, a purported shareholder of Travelzoo commenced a suit in the Supreme Court of New York that allegedly asserts
claims derivatively on behalf of Travelzoo Inc. for breaches of fiduciary duty against Travelzoo’s board of directors. The complaint also asserts
claims for breaches of fiduciary duty and unjust enrichment against Ralph Bartel and Azzurro Capital Inc. The complaint challenges Travelzoo’
s
sale of its Asia Pacific division for $3.6 million
to Azzurro and alleges that the transaction was not entirely fair to the Company. Since derivative
claims are an attempt by a plaintiff shareholder to assert claims on behalf of the Company, we do not anticipate any potential loss to the
Company from these actions.
56
Fair Value Measurements at Reporting Date Using
Quoted Prices in
Active Markets
for Identical
Assets
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
Total
(Level 1)
(Level 2)
(Level 3)
Balance at December 31, 2012:
Money market funds
$
13,866
$
13,866
$
—
$
—
Total
$
13,866
$
13,866
$
—
$
—
Balance at December 31, 2011:
Money market funds
$
5,665
$
5,665
$
—
$
—
Total
$
5,665
$
5,665
$
—
$
—