Travelzoo 2014 Annual Report Download - page 62

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27
As discussed in Note 1 to the accompanying consolidated financial statements, since March 2012, the Company became
subject to unclaimed property reviews by most of the other states in the U.S. that relate primarily to the unexchanged
promotional shares, which were not covered by the April 2011 settlement and release agreement with the State of Delaware.
During the three months ended March 31, 2012, the Company recorded a $3.0 million charge related to this unexchanged
promotional shares contingency.
In October 2013, the Company entered into settlement agreements with 35 additional states to resolve those states’ claims
related to similar unclaimed property audits. The multi-state settlement relates to approximately 700,000 additional shares of
the Company that were not claimed by residents of those states following the merger, which those states claimed were subject
to escheat. While the Company disputes the states’ claims, the Company determined that it was in its best interest to resolve the
disputes and settle with these states. The remaining states, which were not included in the multi-state settlement as of October
2013, had potential claims on approximately 400,000 additional shares that were not claimed by residents in those states
following the merger.
During the year ended December 31, 2013, the Company recorded a $22.0 million charge related to the settlements it
entered into and for potential future settlements with the remaining states. During the year ended December 31, 2013, the
Company made cash payments of $12.3 million to the settled states after completion of the required due diligence. During the
year December 31, 2014, the Company settled with the remaining states and made cash payments of $3.7 million to the settled
states after completion of the required due diligence. During the year ended December 31, 2014, the Company released a $7.6
million of the reserve related to potential future settlements with the remaining states in connection with unexchanged
promotional shares based upon the actual settlements with the remaining states under more favorable term than was estimated.
The Company has maintained estimated reserves related to the remaining settled states, which will be paid after completion of
the required due diligence during the three months ending March 31, 2015.
Although the Company has settled the states unclaimed property claims with all states, the Company may still receive
inquiries from certain potential Netsurfer promotional stockholders that had not provided their state of residence to the
Company by April 25, 2004. Therefore, The Company is continuing its voluntary program under which it makes cash payments
to individuals related to the promotional shares for individuals whose residence was unknown by the Company and who
establish that they satisfy the original conditions required for them to receive shares of Travelzoo.com Corporation, and who
failed to submit requests to convert their shares into shares of Travelzoo Inc. within the required time period. This voluntary
program is not available for individuals whose promotional shares have been escheated to a state by the Company, except those
individuals for which their residence was unknown to the Company. The accompanying consolidated financial statements
include a charge for payments under this voluntary program in general and administrative expenses of $6,000 for the year
ended December 31, 2014.
The total cost of this voluntary program is not reliably estimable because it is based on the ultimate number of valid
requests received and future levels of the Company’s common stock price. The Company’s common stock price affects the
potential liability because the amount of cash payments under the program is based in part on the recent level of the stock price
at the date valid requests are received. The Company does not know how many of the requests for shares originally received by
Travelzoo.com Corporation in 1998 were valid, but the Company believes that only a portion of such requests were valid. In
order to receive payment under this voluntary program, a person is required to establish that such person validly held shares in
Travelzoo.com Corporation.