Travelzoo 2014 Annual Report Download - page 107

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In March 2002, Travelzoo Inc. granted to each director options to purchase 5,000 shares of common stock with an
exercise price of $3.00 per share that vested in connection with their services as a director in 2002. A total of 35,000 options
were granted. In October 2002, 1,411 options were cancelled upon the resignation of a director. The options expired in March
2012. During the years ended December 31, 2011, 2008 and 2004, 5,000 options, 5,000 options and 23,589 options,
respectively, were exercised.
In November 2009, the Company granted to one of its employees options to purchase 300,000 shares of common stock
with an exercise price of $14.97, of which 75,000 options vest and become exercisable annually starting on July 1, 2011. The
options expire in November 2019. As of December 31, 2014, 300,000 of the options are vested and 300,000 options are
outstanding.
In January 2012, the Company granted certain executives stock options to purchase 100,000 shares of common stock
with an exercise price of $28.98, of which 25,000 options vest and become exercisable annually starting on January 23, 2013.
The options expire in January 2022. As of December 31, 2014, 25,000 of the options are vested and 50,000 options are
outstanding. During 2014, 25,000 options were canceled and 25,000 options were forfeited upon the departure of an executive
and the corresponding compensation expense of 186,000 for the forfeited options was reversed.
In July 2013, the Company granted an executive stock options to purchase 75,000 shares of common stock with an
exercise price of $29.58, of which 25,000 options become exercisable annually starting July 1, 2015. The options expire in July
2023. As of December 31, 2014, none of these options were vested and 75,000 options were outstanding.
Total stock-based compensation for fiscal years 2014, 2013 and 2012 was $982,000, $1.4 million and $1.2 million,
respectively.
The Company utilized the Black-Scholes option pricing model to value the stock options granted in 2013, 2012 and 2009.
The Company does not have enough historical exercise data to estimate the expected life of the options and therefore used an
expected life of 6.25 years, as defined under the simplified method, which is using an average of the contractual term and
vesting period of the stock options. The risk-free interest rate used for the award is based on the U.S. Treasury yield curve in
effect at the time of grant. The Company used a forfeiture rate of 0% as the Company does not have enough historical forfeiture
data to estimate the forfeiture rate. 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.
The fair value of 2013 and 2012 stock options was estimated using the Black-Scholes option pricing model with the
following weighted-average assumptions:
2013 2012
Weighted-average fair value of options granted per share $ 18.87 $ 19.08
Historical volatility 70% 74%
Risk-free interest rate 1.70% 1.11%
Dividend yield — —
Expected life in years 6.25 6.25
As of December 31, 2014, there was approximately $248,000 of unrecognized stock-based compensation expense related
to outstanding 2012 stock options, expected to be recognized over 1.1 years and approximately $904,000 of unrecognized
stock-based compensation expense related to outstanding 2013 stock options, expected to be recognized over 2.6 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.