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Acquisitions | 3 Months Ended
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Mar. 31, 2022
Business Combination and Asset Acquisition [Abstract] |
Acquisitions | Acquisitions Travelzoo (Europe) Limited, Sucursal en España Acquired Secret Escapes Limited’s Spanish Business Unit On March 3, 2022, Travelzoo (Europe) Ltd, Sucursal en Espana, the Spanish branch of Travelzoo (Europe) Limited, a wholly-owned subsidiary of the Company (“Travelzoo Spain”), entered into a Business Unit Purchase Agreement (“BUPA”) with Secret Escapes Limited (“Secret Escapes”) for the purchase of its Spanish business unit, which included, among other things, a database of approximately 940,000 members. The purchase price was 400,000 Euros, with an earn-out opportunity of an additional 100,000 Euros payable by the Company upon the achievement of certain metrics by the business unit in six months. Travelzoo was granted the right to use the Secret Escapes name exclusively in Spain for a continuity period of six (6) months. The BUPA contained typical representations and warranties and indemnification protections, as well as a restrictive covenant, whereby Secret Escapes agreed to leave the Spanish market for at least three (3) years, subject to a right to purchase a waiver. Asset Purchase Agreement between Metaverse Travel Experiences, Inc. f/k/a Azzurro Brands Inc. and Travelzoo On March 17, 2022, the Company, as Buyer, entered into an Asset Purchase Agreement (the “APA”) with Metaverse Travel Experiences, Inc. f/k/a Azzurro Brands Inc., a New York corporation (the “Seller”) and a wholly-owned subsidiary of Azzurro Capital Inc., the Company’s largest shareholder. Pursuant to the APA, the Company acquired certain assets, primarily comprised of all U.S. members of Secret Escapes Limited, which Seller acquired in March 2021 and licensed exclusively to Travelzoo pursuant to the previously disclosed License Agreement, dated as of March 12, 2021 (the “License Agreement”), in accordance with data privacy and other applicable laws. The License Agreement allowed the Company to exclusively utilize the assets in exchange for a license fee of $412,500 per quarter with a one-year term that automatically renewed. The License Agreement was reviewed and unanimously approved by the Audit Committee of the Board of Directors, which consists solely of independent directors. The purchase price for the transaction was $1.75 million, with $600,000 payable in cash upon closing and the remaining $1.15 million payable in the form of a credit with Seller relating to prepaid license fees, under the License Agreement. The remaining commitment of the Company under the License Agreement for the then-current remaining term (equal to $825,000) were eliminated. The Company recorded the transactions with both Secret Escape Limited and Metaverse Travel Experiences Inc. as asset acquisitions as the assets acquired and liabilities assumed do not meet the definition of a business in Accounting Standards Codification (“ASC”) 805-10. Cost accumulation model was used to account for the cost of the acquisition and the 100,000 Euros earn-out was considered as contingent consideration based on ASC 805-50. Travelzoo acquired database of members and recorded $2.0 million intangible assets from both agreements. Acquisition of Jack's Flight Club Travelzoo acquired 60% of the Jack’s Flight Club for an aggregate purchase price of $12.0 million in January 2020. The strategic rationale for the Jack’s Flight Club acquisition was to expand Jack’s Flight Club’s membership to Travelzoo members worldwide, so the members from Travelzoo could also sign up to receive offers from Jack’s Flight Club. The Company renegotiated with Jack’s Flight Club in June 2020 and reached a negotiated settlement which resulted a gain in “General and administrative expenses” for the partial forgiveness for the promissory note issued for the acquisition. The acquisition has been accounted for using the acquisition method in accordance with ASC 805, Business Combinations. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible assets and identifiable intangible assets and liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets is recorded as goodwill. Accordingly, the Company allocated $3.5 million to customer relationships, $2.5 million to trade name and $660,000 to non-compete agreements and the remaining $13.1 million to goodwill. The acquisition related costs were not significant and were expensed as incurred. Jack’s Flight Club's result have been included in the accompanying financial statements from their the dates of acquisition. The Company recorded a goodwill impairments of $2.1 million and a Trade name impairment of $810,000 due to the pandemic in the first quarter of 2020. The Company performs annual impairment test in October did not identify any further indicators of impairment. The Company also did not identify any indicators of impairment during the three months ended March 31, 2022. Intangible Assets The following table represents the fair value and estimated useful lives of intangible assets from the above acquisitions (in thousands):
| Fair Value |  | Estimated Life (Years)
Customer relationships (Jack's Flight Club) | $ | 3,500 |  |  | 5.0
Trade name (Jack's Flight Club) | 2,460 |  |  | indefinite
Non-compete agreements | 660 |  |  | 4.0
Intangible assets (Secret Escape Spain member database) | 445 |  |  | 3.0
Intangible assets (Metaverse Travel member database) | 1,751 |  |  | 2.3
The following table represents the activities of intangible assets for the three months ended March 31, 2022 (in thousands):
| Jack's Flight Club |  | Secret Escape Spain |  | Metaverse Travel
Intangible assets- January 1, 2021 | $ | 4,534 |  |  |  |  |
Amortization of intangible assets with definite lives | (284) |  |  |  |  |
Intangible assets- March 31, 2021 | 4,250 |  |  |  |  |
Amortization of intangible assets with definite lives | (275) |  |  |  |  |
Intangible assets- June 30, 2021 | 3,975 |  |  |  |  |
Amortization of intangible assets with definite lives | (275) |  |  |  |  |
Intangible assets- September 30, 2021 | 3,700 |  |  |  |  |
Amortization of intangible assets with definite lives | (274) |  |  |  |  |
Intangible assets- December 31, 2022 | 3,426 |  |  |  |  |
Acquisitions | — |  |  | 445 |  |  | 1,751 |
Amortization of intangible assets with definite lives | (226) |  |  | (12) |  |  | (195) |
Intangible assets- March 31, 2022 | $ | 3,200 |  |  | $ | 433 |  |  | $ | 1,556 |
Amortization expense for acquired intangibles was $433,000 and $284,000 for the three months ended March 31, 2022 and 2021, respectively. Expected future amortization expense of acquired intangible assets as of March 31, 2022 is as follows (in thousands):
Years ending December 31, |
2022 remainder | $ | 1,344 |
2023 | 1,568 |
2024 | 593 |
2025 | 34 |
| $ | 3,539 |

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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