##### Table of Contents





UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2008oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from            to   Commission File No.:
    000-50171
 TRAVELZOO INC.
 (Exact Name of Registrant as
    Specified in Its Charter)
  DELAWARE

36-4415727(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)590 Madison Avenue, 37th Floor,
    New York, New York(Address of Principal
    Executive Offices)

10022(Zip Code)   Registrants telephone number, including area code:
 (212) 484-4900
  SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE
    ACT:
 NONE
  SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE
    ACT:
 Common Stock, $0.01 Par Value
 (Title of Class)
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  12b-2
  Large
    accelerated
    filer  o
    Accelerated
    filer  þ
    Non-accelerated
    filer  o
    Smaller
    reporting company
    o   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE
  Form 10-K




---



##### 





TRAVELZOO
    INC.
  Table of
    Contents
   
 PagePART IItem 1.


Business


2Item 1A.


Risk Factors


10Item 1B.


Unresolved Staff Comments


17Item 2.


Properties


17Item 3.


Legal Proceedings


17Item 4.


Submission of Matters to a Vote of Security
    Holders


17PART IIItem 5.


Market for Registrants Common Equity,
    Related Stockholder Matters and Issuer Purchases of Equity
    Securities


18Item 6.


Selected Consolidated Financial Data


20Item 7.


Managements Discussion and Analysis of
    Financial Condition and Results of Operations


21Item 7A.


Quantitative and Qualitative Disclosures About
    Market Risk


34Item 8.


Financial Statements and Supplementary Data


35Item 9.


Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosures


58Item 9A.


Controls and Procedures


58Item 9B.


Other Information


59PART IIIItem 10.


Directors, Executive Officers and Corporate
    Governance of the Registrant


59Item 11.


Executive Compensation


60Item 12.


Security Ownership of Certain Beneficial Owners
    and Management and Related Stockholder Matters


60Item 13.


Certain Relationships and Related Transactions,
    and Director Independence


60Item 14.


Principal Accountant Fees and Services


60PART IVItem 15.


Exhibits and Financial Statement Schedules


61EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



Forward-Looking
    Statements
   PART I  Item 1.
    Business  Overview
    Travelzoo Travelzoo Top 20 e-mail Newsflash e-mail SuperSearch pay-per-click Travelzoo Network Fly.com Fly.com
  Rent-A-Car.
     2




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##### Table of Contents



Travelzoo
        Our
    Industry
      
    The Internet Is Consumers Preferred Information
    Source.  Market research shows that the Internet
    has become consumers preferred information source for
    travel (source: Forresters North American Technographics
    Travel Online Survey, Q1 2008). 3




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##### Table of Contents




    Benefits of Internet Advertising vs. Print
    Advertising.  Internet advertising provides travel
    companies advantages compared to print advertising. These
    advantages include real-time listings, real-time updates, and
    performance tracking. See  Benefits to Travel
    Companies below.
    New Advertising Opportunities.  The Internet
    allows travel companies to advertise their sales and specials in
    a fast, flexible, and cost-effective manner that has not been
    possible before.
    Suppliers Selling Directly.  We believe that
    many travel suppliers prefer to sell directly to consumers
    through suppliers Web sites versus selling through travel
    agents. Internet advertising attracts consumers to
    suppliers Web sites.  Problems
    Travel Companies Face and Limitations of Newspaper
    Advertising
        
    typically, ads must be submitted 2 to 5 days prior to the
    publication date, which makes it difficult to advertise
    last-minute inventory;
    once an ad is published, it cannot be updated or deleted when an
    offer is sold out;
    once an ad is published, the travel company cannot change a
    price;
    in many markets, the small number of newspapers and other print
    media reduces competition, resulting in high rates for newspaper
    advertising; and
    newspaper advertising does not allow for detailed performance
    tracking.  Our
    Products and Services
  Travelzoo Travelzoo Top 20 e-mail Newsflash e-mail SuperSearch, pay-per-click Travelzoo Network Fly.com
 4




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##### Table of Contents



PublicationProduct

Content

Schedule

Reach/Usage*

Advertiser Benefits

Consumer BenefitsTravelzoo

Web sites

24/7

5.1 million

Broad reach,

24/7 access toWeb sites

in the U.S., Australia, Canada, China, France, Germany, Hong
    Kong, Japan, Spain, Taiwan, and the U.K. listing thousands of
    outstanding sales and specials from more than 1,000 travel and
    entertainment companies



unique
    visitors
    per month

sustained exposure, targeted placements by destination and
    travel segment

deals, ability to search and browse by destination or keywordTravelzoo

Popular e-mail

Weekly

14.1 million

Mass push

Weekly access toTop 20

newsletter listing 20 of the weeks most outstanding deals
    from selected travel and entertainment companies



subscribers

advertising vehicle to quickly stimulate incremental travel

20 outstanding, handpicked deals chosen from among thousandsNewsflash

Regionally-targeted

Within 2

12.0 million

Regional targeting,

Breaking newse-mail alert service with a single time-sensitive and newsworthy
    travel and entertainment offers

hours of
    an offer
    being
    identified

subscribers

100% share of voice for advertiser, flexible publication schedule

offers delivered
    just-in- timeSuperSearch

Travel search

On-demand

4.8 million

Drives qualified

Saves time andtool using a proprietary algorithm to recommend sites and enable
    one-click searching



monthly
    searches

traffic directly to advertiser site on a pay-per-click basis

money by recommending the sites most likely to have great rates
    for a specific itineraryTravelzoo

A network of

24/7

Over 140

Drives qualified

ContextuallyNetwork

third-party Web sites that list outstanding deals published by
    Travelzoo



third-party
    Web sites

users with substantial distribution beyond the Travelzoo audience

relevant travel deals that have been handpicked and
    professionally reviewedFly.com

Travel search

On-demand

Public beta

Provides advertisers

Free access toengine that enables users to find and compare the best flight
    options from multiple sources



launched in
    February
    2009

a low cost distribution channel and retention of the user
    engagement on the advertisers Web site

real-time price comparisons from airlines and online travel
    agencies   *
    
    For TravelzooWeb sites, reach information is based on
    internal Travelzoo calculations using comScore Media Metrix and
    Alexa data. For Top 20, Newsflash, SuperSearch,and Travelzoo Networkreach/usage information is
    based on internal Travelzoo statistics as of December 31,
    2008. 5




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##### Table of Contents



Benefits
    to Travel Companies
    
    Real-Time Listings of Special Offers.  Our
    technology allows travel companies to advertise special offers
    on a real-time basis.
    Real-Time Updates.  Our technology allows
    travel companies to update their listings on a real-time basis.
    Real-Time Performance Reports.  We provide
    travel companies with real-time tracking of the performance of
    their advertising campaigns. Our solution enables travel
    companies to optimize their campaigns by removing or updating
    unsuccessful listings and further promote successful listings.
    Access to Millions of Consumers.  We provide
    travel companies fast access to over 14 million travel
    shoppers.
    Global Reach.  We offer access to Internet
    users across the U.S., Australia, Canada, China, France,
    Germany, Hong Kong, Japan, Spain, Taiwan, and the U.K.  Benefits
    to Consumers
  Travelzoo Travelzoo Top 20 Newsflash, SuperSearch Travelzoo Network Fly.com
  
    Aggregation of Offers From Many Companies.  Our
    TravelzooWeb sites and our Travelzoo Top 20e-mail
    newsletter aggregate information on current offers from more
    than 1,000 travel and entertainment companies. This saves the
    consumer time when searching for travel sales and specials.
    Current Information.  Compared to newspaper
    ads, we provide consumers more current information, since our
    technology enables travel companies to update their listings on
    a real-time basis.
    Reliable Information.  We operate a Test
    Booking Center to check the availability of travel deals
    included in the Travelzoo Top 20before publishing.
    Search Tools.  We provide consumers with the
    ability to search for specific offers.  Growth
    Strategy
    
    Build Strong Brand Awareness.  We believe that
    it is essential to establish a strong brand with Internet users
    and within the travel industry. We currently utilize online
    marketing and direct marketing to promote our brand to
    consumers. In addition, we believe that we build brand awareness
    by product excellence that is promoted by word-of-mouth. We
    utilize sponsorships at industry conferences and public
    relations to promote our brand within the travel industry.
    Increase Reach.  In order to attract more users
    to our products, we intend to expand our advertising campaigns
    as our business grows. We believe that we also can attract more
    users by product excellence that is promoted by word-of-mouth.
    Quality User Base.  We believe that, in
    addition to increasing our reach, we need to maintain the
    quality of our user base. We believe that high quality content
    attracts a quality user base. 6




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##### Table of Contents




    Increase Number of Advertising Clients.  We
    intend to continue to grow our advertising client base by
    expanding the size of our sales force. See
     Sales and Marketing below.
    Excellent Service.  We believe that it is
    important to provide our advertising clients with excellent
    service.
    Replicate Business Model in Foreign
    Markets.  We believe that there is an opportunity
    to replicate our business model in selected foreign markets. We
    believe that there will be an additional market opportunity for
    us. In addition, we believe that we would strengthen our
    strategic position if we offered global advertising solutions to
    existing and new clients.  Clients
    American Airlines

Interstate Hotels & ResortApple Vacations

JetBlue AirwaysAvis Rent A Car

Kimpton HotelsBritish Airways

Liberty TravelBudget Rent A Car

LufthansaCheapTickets

Marriott HotelsDelta Air Lines

Orbitz WorldwideExpedia

Royal CaribbeanFairmont Hotels and Resorts

Spirit AirlinesFunjet Vacations

Starwood Hotels & Resorts WorldwideHarrahs Entertainment

TravelocityHawaiian Airlines

United AirlinesHilton Hotels

Vanguard Rent-A-CarInterContinental Hotels Group

Virgin Atlantic     Sales and
    Marketing
    e-mail
  Technology
  e-mails
 7




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Competition
  pay-per-click
      Government
    Regulation and Legal Uncertainties
    Privacy Concerns. e-mail
  Anti-Spam Legislation. e-mail
 8




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##### Table of Contents



Domain Names.
  Jurisdictions.
  Intellectual
    Property
  Travelzoo Top 20. Travelzoo Top
    20 Travelzoo Top 20 Travelzoo Travelzoo Top 20 Travelzoo
    Employees
    Internet
    Access to Other Information
  Form 10-K, Form 10-Q Form 8-K Form 10-K.
 9




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##### Table of Contents



Item 1A.
    Risk
    Factors  Investing in our common stock involves a high degree of risk.
    Any or all of the risks listed below as well as other variables
    affecting our operating results could have a material adverse
    effect on our business, our quarterly and annual operating
    results or financial condition, which could cause the market
    price of our stock to decline or cause substantial volatility in
    our stock price, in which event the value of your common stock
    could decline. You should also keep these risk factors in mind
    when you read forward-looking statements.
  Risks
    Related to Our Financial Condition and Business Model
  We
    cannot assure you that we will be profitable.
    Fluctuations
    in our operating results may negatively impact our stock
    price.
    
    mismatches between resource allocation and client demand due to
    difficulties in predicting client demand in a new market;
    changes in general economic conditions that could affect
    marketing efforts generally and online marketing efforts in
    particular;
    the magnitude and timing of marketing initiatives, including our
    acquisition of new subscribers and our expansion efforts in
    other regions;


    the introduction, development, timing, competitive pricing and
    market acceptance of our products and services and those of our
    competitors;
    our ability to attract and retain key personnel;
    our ability to manage our anticipated growth and expansion;
    our ability to attract traffic to our Web sites;
    technical difficulties or system downtime affecting the Internet
    generally or the operation of our products and services
    specifically;
    payments which we may make to previous stockholders of
    Travelzoo.com Corporation who failed to submit requests for
    shares in Travelzoo Inc. within the required time
    period; and
    volatility of our operating results in new markets.  Travelzoo
 10




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We
    depend on one client for a substantial part of our
    revenues.
    Our
    business model may not be adaptable to a changing
    market.
    We may
    not be able to obtain sufficient funds to grow our business and
    any additional financing may be on terms adverse to your
    interests.
        Our
    business may be sensitive to recessions.
    Our
    operations could be significantly hindered by the occurrence of
    a natural disaster or other catastrophic event.
   11




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Technological
    or other assaults on our service could harm our
    business.
    Risks
    Related to Our Markets and Strategy
  Our
    international expansion is expected to result in substantial
    operating losses, and is subject to other material
    risks.
    
    trade barriers and changes in trade regulations;
    difficulties in developing, staffing and simultaneously managing
    foreign operations as a result of distance, language and
    cultural differences;
    stringent local labor laws and regulations;
    currency exchange rate fluctuations;
    risks related to government regulation; and
    potentially adverse tax consequences.  We may
    not be able to continue developing awareness of our brand
    name.
  Travelzoo
  Our
    business may be sensitive to events affecting the travel
    industry in general.
   12




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We
    will not be able to attract travel companies or Internet users
    if we do not continually enhance and develop the content and
    features of our products and services.
    We may
    lose business if we fail to keep pace with rapidly changing
    technologies and client needs.
    
    rapidly changing technology in online advertising;
    evolving industry standards, including both formal and de
    factostandards relating to online advertising;
    developments and changes relating to the Internet;
    competing products and services that offer increased
    functionality; and
    changes in travel company and Internet user requirements.    Our
    business and growth will suffer if we are unable to hire and
    retain highly skilled personnel.
    We may
    not be able to effectively manage our expanding
    operations.
    Our
    operations may be adversely affected by changes in our senior
    management.
   13




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Intense
    competition may adversely affect our ability to achieve or
    maintain market share and operate profitably.
  pay-per-click Travelzoo
  Loss
    of any of our key management personnel could negatively impact
    our business.
    We may
    not be able to access third party technology upon which we
    depend.
    Risks
    Related to the Market for our Shares
  Our
    stock price has been volatile historically and may continue to
    be volatile.
     14




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##### Table of Contents



We are
    controlled by a principal stockholder.
    Risks
    Related to Legal Uncertainty
  We may
    become subject to burdensome government regulations and legal
    uncertainties affecting the Internet which could adversely
    affect our business.
    
    user privacy;
    anti-spam legislation;
    consumer protection;
    copyright, trademark and patent infringement;
    pricing controls;
    characteristics and quality of products and services;
    sales and other taxes; and
    other claims based on the nature and content of Internet
    materials.  We may
    be liable as a result of information retrieved from or
    transmitted over the Internet.
  e-mail e-mail e-mail e-mail
  Claims
    may be asserted against us relating to shares not issued in our
    2002 merger.
     15




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Our
    internal controls over financial reporting may not be effective,
    and our independent auditors may not be able to certify as to
    their effectiveness, which could have a significant and adverse
    effect on our business.
    We may
    be unable to protect our registered trademark or other
    proprietary intellectual property rights.
  Travelzoo
  Travelzoo Travelzoo
 16




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##### Table of Contents



We may
    face liability from intellectual property litigation that could
    be costly to prosecute or defend and distract managements
    attention with no assurance of success.
    Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties        Item 3.
    Legal
    Proceedings    Item 4.
    Submission
    of Matters to a Vote of Security Holders   17




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##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
    High


Low2008:Fourth Quarter

$
8.39


$
4.11Third Quarter

$
9.54


$
6.42Second Quarter

$
13.26


$
8.57First Quarter

$
17.20


$
9.612007:Fourth Quarter

$
24.85


$
13.44Third Quarter

$
29.38


$
16.60Second Quarter

$
40.68


$
24.73First Quarter

$
39.20


$
28.67       Dividend
    Policy
    Sales of
    Unregistered Securities
    Repurchases
    of Equity Securities
   18




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##### Table of Contents



Performance
    Graph
    
  Measurement Point


12/31/2003


12/31/2004


12/31/2005


12/31/2006


12/31/2007


12/31/2008Travelzoo Inc.


$
100.00



$
1,096.90



$
252.87



$
344.25



$
157.24



$
63.91NASDAQ Market Index


$
100.00



$
108.59



$
110.08



$
120.56



$
132.39



$
78.72S&P 500 Publishing


$
100.00



$
97.12



$
84.74



$
97.72



$
78.38



$
31.50  19




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##### Table of Contents



Item 6.
    Selected
    Consolidated Financial Data    Consolidated
    Statement of Operations Data:
  Year Ended December 31,2008


2007


2006


2005


2004(In thousands, except per share data)Revenues

$
81,404


$
78,911


$
69,525


$
50,772


$
33,679Income from operations


3,111



20,624



29,753



14,870



11,033Net income (loss)


(4,116
)


9,109



16,803



7,963



6,037Net income (loss) per share  basic

$
(0.29
)

$
0.61


$
1.08


$
0.49


$
0.36Net income (loss) per share  diluted

$
(0.29
)

$
0.57


$
1.01


$
0.45


$
0.33Shares used in per share calculation  basic


14,273



14,847



15,503



16,249



16,879Shares used in per share calculation  diluted


14,273



16,074



16,712



17,731



18,475   Consolidated
    Balance Sheet Data:
  December 31,2008


2007


2006


2005


2004(In thousands)Cash and cash equivalents

$
14,179


$
22,641


$
33,415


$
24,469


$
26,435Short term investments














19,887



10,032Working capital


17,407



26,202



36,472



48,136



40,027Total assets


35,322



37,286



43,700



55,452



43,257Stockholders equity


20,763



25,902



36,817



48,533



40,263  20




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations    Overview
    Travelzoo Travelzoo Top 20 e-mail Newsflash e-mail SuperSearch, pay-per-click Travelzoo Network Fly.com
  Travelzoo Travelzoo
    Top 20 e-mail Newsflash e-mail SuperSearch, pay-per-click Travelzoo Network
      
    Growth of number of subscribers of the Companys
    newsletters and page views of the homepages of the TravelzooWeb sites;
    Operating margin;
    Growth in revenues in the absolute and relative to the growth in
    reach of the Companys publications; and
    Revenue per employee as a measure of productivity.  Critical
    Accounting Policies
   21




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##### Table of Contents



Revenue
    Recognition
      
    Evidence of an arrangement.  We consider an
    insertion order signed by the client or its agency to be
    evidence of an arrangement.
    Delivery.  Delivery is considered to occur when
    the advertising has been displayed and, if applicable, the
    click-throughs have been delivered.
    Fixed or determinable fee.  We consider the fee
    to be fixed or determinable if the fee is not subject to refund
    or adjustment and payment terms are standard.
    Collection is deemed reasonably assured.  We
    conduct a credit review for all transactions at the time of the
    arrangement to determine the creditworthiness of the client.
    Collection is deemed reasonably assured if we expect that the
    client will be able to pay amounts under the arrangement as
    payments become due. If we determine that collection is not
    reasonably assured, then we defer the revenue and recognize the
    revenue upon cash collection. Collection is deemed not
    reasonably assured when a client is perceived to be in financial
    distress, which may be evidenced by weak industry conditions, a
    bankruptcy filing, or previously billed amounts that are past
    due.    Allowance
    for Doubtful Accounts
    Liability
    to Former Stockholders
   22




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##### Table of Contents



Results
    of Operations
    Year Ended December 31,2008


2007


2006Revenues


100.0
%


100.0
%


100.0
%Cost of revenues


3.7



1.2



0.8Gross profit


96.3



98.8



99.2Operating expenses:Sales and marketing


60.4



52.5



42.2General and administrative


32.1



20.2



14.2Total operating expenses


92.5



72.7



56.4Income from operations


3.8



26.1



42.8Other income and expenses, net


1.0



1.9



1.8Income before income taxes


4.8



28.0



44.6Income taxes


9.9



16.5



20.4Net income (loss)


(5.1
)%


11.5
%


24.2
%      23




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##### Table of Contents



Reach
  e-mail Travelzoo Travelzoo
  Year Ended December 31,


Year-Over-Year2008


2007


Growth(1)Subscribers:North AmericaTravelzoo Top 20


10,769,000



10,487,000



3
%Newsflash


8,888,000



8,404,000



6
%EuropeTravelzoo Top 20,


2,176,000



1,346,000



62
%Newsflash


2,075,000



1,249,000



66
%Asia PacificTravelzoo Top 20


1,108,000



214,000



418
%Newsflash


1,019,000



180,000



466
%Page views of homepages of TravelzooWeb sites:North America


28,600,000



33,663,000



(15
)%Europe


7,237,000



8,593,000



(16
)%Asia Pacific


9,087,000



879,000



934
%     (1)
    
    The comparability of year-over-year changes of page views of the
    homepages of TravelzooWeb sites may be limited due to
    the design and navigation of the Web sites. Additionally, we
    believe that the increased use of security software has
    adversely affected the tracking of page views.  Travelzoo Top 20 e-mail Travelzoo e-mail
  Travelzoo Top 20 e-mail Travelzoo Travelzoo Top
    20 e-mail
 24




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##### Table of Contents



Revenues
  Travelzoo Travelzoo Top 20 Newsflash, SuperSearch, Travelzoo Network.
  Travelzoo Travelzoo Top 20 Newsflash SuperSearch, Travelzoo
    Network
      
    Our ability to increase our advertising rates;
    Our ability to sell more advertising to existing clients;
    Our ability to increase the number of clients;
    Our ability to develop new revenue streams; and
    Our ability to launch new products.   25




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##### Table of Contents



Cost
    of Revenues
  Travelzoo Network Travelzoo
    Network Travelzoo
    Network
  Operating
    Expenses
  Sales and
    Marketing
  e-mail e-mail
  e-mail SuperSearch Travelzoo.
   26




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##### Table of Contents



start-up
  General
    and Administrative
          Subscriber
    Acquisition
  Travelzoo Top 20 Newsflash e-mail
    
    Average Cost per Acquisition of a New
    Subscriber:  This is the quarterly costs of
    consumer marketing programs whose purpose was primarily to
    acquire new subscribers, divided by total new subscribers added
    during the quarter.
    New Subscribers:  Total new subscribers who
    signed up for at least one of our
    e-mail
    publications throughout the quarter. This is an unduplicated
    subscriber number, meaning a subscriber who signed up for two or
    more of our publications is only counted once.
    Subscribers Removed From List:  Subscribers who
    were removed from our lists throughout the quarter either as a
    result of their requesting removal, or based on periodic list
    maintenance after we determined that the
    e-mail
    address was likely no longer valid.
    Balance:  This is the number of subscribers at
    the end of the quarter, computed by taking the previous
    quarters subscriber balance, adding new subscribers during
    the current quarter, and subtracting subscribers removed from
    list during the current quarter. 27




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##### Table of Contents



Average Cost per





SubscribersAcquisition of a New





Removed FromPeriod

Subscriber


New Subscribers


List


BalanceQ1 2006

$
2.54



714,643



(317,947
)


9,773,550Q2 2006

$
2.11



737,735



(532,676
)


9,978,609Q3 2006

$
1.86



491,524



(327,471
)


10,142,662Q4 2006

$
1.56



373,559



(288,883
)


10,227,338Q1 2007

$
2.61



730,063



(345,896
)


10,611,505Q2 2007

$
3.03



552,488



(335,304
)


10,828,689Q3 2007

$
3.92



385,408



(255,008
)


10,959,089Q4 2007

$
3.78



279,967



(242,822
)


10,996,234Q1 2008

$
4.97



296,565



(270,427
)


11,022,372Q2 2008

$
3.39



348,506



(303,623
)


11,067,255Q3 2008

$
3.73



360,916



(292,052
)


11,136,119Q4 2008

$
2.75



487,681



(341,057
)


11,282,743     Average Cost per





SubscribersAcquisition of a New





Removed FromPeriod

Subscriber


New Subscribers


List


BalanceQ1 2006

$
2.15



143,666



(16,831
)


424,604Q2 2006

$
2.69



129,438



(34,070
)


519,972Q3 2006

$
1.23



126,566



(29,794
)


616,744Q4 2006

$
2.94



69,489



(30,943
)


655,290Q1 2007

$
3.89



159,439



(31,350
)


783,379Q2 2007

$
4.43



206,003



(39,690
)


949,692Q3 2007

$
2.96



331,903



(32,689
)


1,248,906Q4 2007

$
5.85



165,781



(33,357
)


1,381,330Q1 2008

$
3.90



362,417



(45,152
)


1,698,595Q2 2008

$
4.89



226,156



(31,055
)


1,893,696Q3 2008

$
4.52



253,961



(38,418
)


2,109,239Q4 2008

$
3.32



160,172



(46,736
)


2,222,675     Average Cost per





SubscribersAcquisition of a New





Removed FromPeriod

Subscriber


New Subscribers


List


BalanceQ2 2007

$
2.46



1,068



(4
)


1,064Q3 2007

$
2.23



42,106



(138
)


43,032Q4 2007

$
2.90



180,446



(9,013
)


214,465Q1 2008

$
3.12



393,311



(26,199
)


581,577Q2 2008

$
3.37



369,491



(38,048
)


913,020Q3 2008

$
2.46



194,462



(43,588
)


1,063,894Q4 2008

$
2.66



84,937



(40,522
)


1,108,309    28




---



##### Table of Contents



Segment
    Information
    North
    America
  Year Ended December 31,2008


2007


2006(In thousands)Net revenues

$
71,339


$
73,232


$
66,509Income from operations


21,118



28,959



31,337Income from operations as % of revenues


30
%


40
%


47
%   Travelzoo Travelzoo Top 20 Newsflash SuperSearch Travelzoo Network
  Travelzoo Network
     29




---



##### Table of Contents



e-mail
  Europe
  Year Ended December 31,2008


2007


2006(In thousands)Net revenues

$
9,623


$
5,856


$
3,232Loss from operations


(7,809
)


(5,172
)


(1,586
)Loss from operations as % of revenues


81
%


88
%


49
%     e-mail
  e-mail
  Asia
    Pacific
  Year Ended December 31,2008

2007

2006(In thousands)Net revenues

$
587


$
8


$
Loss from operations


(10,201
)


(3,166
)


    30




---



##### Table of Contents



e-mail
  Interest
    Income
    Income
    Taxes
         31




---



##### Table of Contents



Liquidity
    and Capital Resources
    Year Ended December 31,2008


2007


2006(In thousands)Net cash provided by (used in) operating activities

$
(3,325
)

$
9,894


$
17,308Net cash provided by (used in) investing activities


(4,742
)


(663
)


20,184Net cash provided by (used in) financing activities


185



(19,822
)


(28,579
)Effect of exchange rate changes on cash and cash equivalents


(580
)


(183
)


33Net increase (decrease) in cash and cash equivalents

$
(8,462
)

$
(10,774
)

$
8,946         Travelzoo
 32




---



##### Table of Contents



2009


2010


2011


2012


2013


Thereafter


TotalOperating lease obligations

$
4,327


$
2,579


$
1,994


$
2,033


$
1,924


$
161


$
13,018Purchase obligations


499



194



















693Total commitments

$
4,826


$
2,773


$
1,994


$
2,033


$
1,924


$
161


$
13,711     Growth
    Strategy
    
    Replicate our business model in selected foreign markets in Asia
    Pacific and Europe; and
    Expand the scope of our business model.  Travelzoo Network
    Fly.com
  Recent
    Accounting Pronouncements
  No. 157-2,
 33




---



##### Table of Contents



No. 157-2,
    No. 142-3, (FSP 142-3), FSP 142-3
  Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk     34




---



##### 



Item 8.
    Financial
    Statements and Supplementary Data  TRAVELZOO
    INC.
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
   
 PageReport of Independent Registered Public
    Accounting Firm


36Consolidated Balance Sheets


37Consolidated Statements of Operations


38Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)


39Consolidated Statements of Cash Flows


40Notes to Consolidated Financial Statements


41   35




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     Internal Control 
    Integrated Framework
        Internal Control 
    Integrated Framework
  KPMG
    LLP
    36




---



##### Table of Contents



TRAVELZOO
    INC.
  CONSOLIDATED
    BALANCE SHEETS
  December 31,2008


2007(In thousands, except per share amounts)ASSETSCurrent assets:Cash and cash equivalents

$
14,179


$
22,641Accounts receivable, less allowance for doubtful accounts of
    $358 and $290 at 2008 and 2007, respectively


11,582



9,969Deposits


226



272Prepaid expenses and other current assets


2,726



1,982Deferred tax assets


1,089



1,393Total current assets


29,802



36,257Deposits, less current portion


341



349Restricted cash


875



Property and equipment, net


4,259



622Intangible assets, net


45



58Total assets

$
35,322


$
37,286LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable

$
6,605


$
4,960Accrued expenses


4,962



4,608Deferred revenue


703



450Deferred rent


125



37Total current liabilities


12,395



10,055Deferred tax liabilities


465



Long-term tax liabilities


900



1,256Deferred rent, less current portion


799



73Commitments and contingenciesStockholders equity:Preferred stock, $0.01 par value per share
    (5,000 shares authorized; none issued)






Common stock, $0.01 par value per share (40,000 shares
    authorized; 14,285 and 14,250 shares issued and outstanding
    at 2008 and 2007, respectively)


143



143Additional paid-in capital


185



Retained earnings


21,823



25,939Accumulated other comprehensive loss


(1,388
)


(180
)Total stockholders equity


20,763



25,902Total liabilities and stockholders equity

$
35,322


$
37,286    37




---



##### Table of Contents



TRAVELZOO
    INC.
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
  Year Ended December 31,2008


2007


2006(In thousands, except per share amounts)Revenues

$
81,404


$
78,911


$
69,525Cost of revenues


2,996



957



575Gross profit


78,408



77,954



68,950Operating expenses:Sales and marketing


49,135



41,440



29,378General and administrative


26,162



15,890



9,819Total operating expenses


75,297



57,330



39,197Income from operations


3,111



20,624



29,753Interest income


298



1,309



1,249Gain on foreign currency


500



178



3Income before income tax expense


3,909



22,111



31,005Income tax expense


8,025



13,002



14,202Net income (loss)

$
(4,116
)

$
9,109


$
16,803Net income (loss) per share:Basic net income (loss) per share

$
(0.29
)

$
0.61


$
1.08Diluted net income (loss) per share

$
(0.29
)

$
0.57


$
1.01Shares used in computing basic net income (loss) per share


14,273



14,847



15,503Shares used in computing diluted net income (loss) per share


14,273



16,074



16,712    38




---



##### Table of Contents



TRAVELZOO
    INC.
  CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS
 EQUITY
    AND COMPREHENSIVE INCOME (LOSS)
  AccumulatedAdditional





Other


TotalCommon Stock


Treasury


Paid-In


Retained


Comprehensive


StockholdersShares


Amount


Stock


Capital


Earnings


Income (Loss)


Equity(In thousands)Balances, December 31, 2005


16,250



163







30,645



17,763



(38
)


48,533Repurchase of common stock


(1,000
)






(28,579
)














(28,579
)Retirement of common stock






(10
)


28,579



(28,569
)










Comprehensive income:Foreign currency translation adjustment






















60



60Net income


















16,803







16,803Total comprehensive income


























16,863Balances, December 31, 2006


15,250



153







2,076



34,566



22



36,817Repurchase of common stock


(1,000
)






(19,822
)














(19,822
)Retirement of common stock






(10
)


19,822



(2,076
)


(17,736
)






Comprehensive income:Foreign currency translation adjustment






















(202
)


(202
)Net income


















9,109







9,109Total comprehensive income


























8,907Balances, December 31, 2007


14,250



143











25,939



(180
)


25,902Proceeds from exercises of stock options


35











75











75Tax benefit of non-qualified stock options exercise














110











110Comprehensive loss:Foreign currency translation adjustment






















(1,208
)


(1,208
)Net loss


















(4,116
)






(4,116
)Total comprehensive loss


























(5,324
)Balances, December 31, 2008


14,285


$
143


$



$
185


$
21,823


$
(1,388
)

$
20,763    39




---



##### Table of Contents



TRAVELZOO
    INC.
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Year Ended December 31,2008


2007


2006(In thousands)Cash flows from operating activities:Net income (loss)

$
(4,116
)

$
9,109


$
16,803Adjustments to reconcile net income (loss) to net cash provided
    by (used in) operating activities:Depreciation and amortization


667



193



131Deferred income taxes


769



584



(929
)Provision for losses on accounts receivable


316



(48
)


304Tax benefit of stock option exercises


(110
)






Accrued income for short-term investments










(449
)Net foreign currency effects


(500
)






Changes in operating assets and liabilities:Accounts receivable


(2,443
)


(2,614
)


1,511Deposits


25



(300
)


(95
)Prepaid expenses and other current assets


(650
)


(1,465
)


136Accounts payable


1,054



2,110



440Accrued expenses


877



2,404



(1,278
)Deferred revenue


314



(302
)


449Deferred rent


828



109



Income tax payable






3



285Other non-current liabilities


(356
)


111



Net cash provided by (used in) operating activities


(3,325
)


9,894



17,308Cash flows from investing activities:Purchases of property and equipment


(3,867
)


(627
)


(119
)Purchase of short-term investments










(14,663
)Sale of short-term investments










35,000Purchase of restricted cash


(875
)






Purchases of intangible assets






(36
)


(34
)Net cash provided by (used in) investing activities


(4,742
)


(663
)


20,184Cash flows from financing activities:Proceeds from stock option exercises


75







Tax benefit from exercise of stock options


110







Repurchase of common stock






(19,822
)


(28,579
)Net cash provided by (used in) financing activities


185



(19,822
)


(28,579
)Effect of exchange rate changes on cash and cash equivalents


(580
)


(183
)


33Net increase (decrease) in cash and cash equivalents


(8,462
)


(10,774
)


8,946Cash and cash equivalents at beginning of year


22,641



33,415



24,469Cash and cash equivalents at end of year

$
14,179


$
22,641


$
33,415Supplemental disclosure of cash flow information:Cash paid for income taxes, net of refunds received

$
8,193


$
13,334


$
14,845    40




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
 December 31,
    2008, 2007, and 2006
  (1)
    Summary
    of Significant Accounting Policies  (a)
    The
    Company and Basis of Presentation  Travelzoo Travelzoo Top 20 e-mail Newsflash e-mail SuperSearch pay-per-click Travelzoo Network Fly.com
        Travelzoo
   41




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (b)
    Revenue
    Recognition  Travelzoo Travelzoo
    Top 20 e-mail Newsflash SuperSearch Travelzoo Network.
   42




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      
    Evidence of an arrangement.  The Company
    considers an insertion order signed by the client or its agency
    to be evidence of an arrangement.
    Delivery.  Delivery is considered to occur when
    the advertising has been displayed and, if applicable, the
    click-throughs have been delivered.
    Fixed or determinable fee.  The Company
    considers the fee to be fixed or determinable if the fee is not
    subject to refund or adjustment and payment terms are standard.
    Collection is deemed reasonably assured.  The
    Company conducts a credit review for all transactions at the
    time of the arrangement to determine the creditworthiness of the
    client. Collection is deemed reasonably assured if it is
    expected that the client will be able to pay amounts under the
    arrangement as payments become due. If it is determined that
    collection is not reasonably assured, then revenue is deferred
    and recognized upon cash collection. Collection is deemed not
    reasonably assured when a client is perceived to be in financial
    distress, which may be evidenced by weak industry condition,
    bankruptcy filing, or previously billed amounts that are past
    due.  Travelzoo Top 20 Newsflash
    (c)
    Net
    Income (Loss) Per Share   43




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31,2008


2007


2006Basic net income (loss) per share:Net income (loss)

$
(4,116
)

$
9,109


$
16,803Weighted average common shares


14,273



14,847



15,503Basic net income (loss) per share

$
(0.29
)

$
0.61


$
1.08Diluted net income (loss) per share:Net income (loss)

$
(4,116
)

$
9,109


$
16,803Weighted average common shares


14,273



14,847



15,503Effect of dilutive securities  stock options






1,227



1,209Weighted average common and potential common shares


14,273



16,074



16,712Diluted net income (loss) per share

$
(0.29
)

$
0.57


$
1.01     (d)
    Use of
    Estimates    (e)
    Property
    and Equipment  98-1, No. 00-02,
 44




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    December 31,2008


2007Computer hardware and software

$
1,794


$
439Office equipment and office furniture


1,864



913Capitalized internal-use software and Web site development


1,265



Leasehold improvements


701



695,624



1,421Less accumulated depreciation


1,365



799Total

$
4,259


$
622         (f)
    Intangible
    Assets    December 31,2008


2007Acquired amortized intangible assets:Internet domain names

$
418


$
418Less accumulated amortization


373



360Total

$
45


$
58         Year Ended December 31,2009

$
132010


132011


132012


6$
45  45




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (g)
    Cash
    and Cash Equivalents    (h)
    Advertising
    Costs    (i)
    Income
    Taxes    (j)
    Comprehensive
    Income (Loss)      Year Ended December 31,2008


2007


2006Net income (loss)

$
(4,116
)

$
9,109


$
16,803Other comprehensive income (loss):Foreign currency translation adjustments


(1,208
)


(202
)


60Total comprehensive income (loss)

$
(5,324
)

$
8,907


$
16,863     (k)
    Impairment
    of Long-Lived Assets   46




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (l)
    Stock-Based
    Compensation      (m)
    Foreign
    Currency      (n)
    Certain
    Risks and Uncertainties          (o)
    Recent
    Accounting Pronouncements   47




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  No. 157-2, No. 157-2,
    No. 142-3, (FSP 142-3), FSP 142-3
  (2)
    Financial
    Instruments    Fair Value Measurements at Reporting Date UsingQuoted Prices in





SignificantActive Markets for


Significant Other


UnobservableIdentical Assets


Observable Inputs


InputsTotal


(Level 1)


(Level 2)


(Level 3)Assets:Money market funds

$
10,468


$
10,468


$



$
Total

$
10,468


$
10,468


$



$
   (3)
    Commitments
    and Contingencies   48




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2009

2010

2011

2012

2013

Thereafter

TotalMinimum rental payments

$
4,327


$
2,579


$
1,994


$
2,033


$
1,924


$
161


$
13,018      49




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (4)
    Other
    Balance Sheet Items    Balance at December 31, 2006


726Additions  charged to costs and expenses, net


(48
)Deductions  write-offs


(388
)Balance at December 31, 2007


290Additions  charged to costs and expenses, net


323Deductions  write-offs


(255
)Balance at December 31, 2008

$
358     December 31,2008


2007Income tax receivable

$
1,709


$
999Prepaid expenses


715



978Other current assets


302



5Total prepaid expenses and other current assets

$
2,726


$
1,982     December 31,2008


2007Accrued compensation expense

$
2,235


$
1,159Accrued advertising expense


1,598



2,011Accrued professional services expense


484



541Accrued payments to third-party partners of the Travelzoo
    Network


308



109Other accrued expenses


337



788Total accrued expenses

$
4,962


$
4,608   (5)
    Income
    Taxes    2008


2007


2006U.S.

$
21,762


$
30,891


$
33,196Foreign


(17,853
)


(8,780
)


(2,191
)$
3,909


$
22,111


$
31,005     50




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Current


Deferred


Total(In thousands)2008:Federal

$
6,102


$
796


$
6,898State


1,154



(27
)


1,127$
7,256


$
769


$
8,0252007:Federal

$
9,395


$
483


$
9,878State


3,023



101



3,124$
12,418


$
584


$
13,0022006:Federal

$
11,372


$
(866
)

$
10,506State


3,759



(63
)


3,696$
15,131


$
(929
)

$
14,202       2008


2007


2006Federal tax at statutory rates

$
1,368


$
7,739


$
10,852State taxes, net of federal income tax benefit


733



2,028



2,402Foreign losses not benefited


6,166



3,073



767Non-deductible expenses and other


(242
)


162



181Total income tax expense

$
8,025


$
13,002


$
14,202    51




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2008


2007Deferred tax assets:Foreign net operating loss carryforwards

$
7,793


$
3,154State income taxes


401



1,031Accruals and allowances


346



331Deferred rent


342



4Intangible assets






89Total deferred tax assets


8,882



4,609Valuation allowance


(7,793
)


(3,154
)Total deferred tax assets net of valuation allowance

$
1,089


$
1,455Deferred tax liabilities:Property, equipment and intangible assets

$
(465
)

$
(62
)Total deferred tax liabilities


(465
)


(62
)Net deferred tax assets

$
624


$
1,393      52




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Unrecognized tax benefits balance at January 1, 2007

$
1,107Increase related to prior year tax positions


38Decrease related to prior year tax positions


Increase related to current year tax positions


Settlements


Lapse of statute of limitations


Unrecognized tax benefits balance at December 31, 2007

$
1,145Increase related to prior year tax positions


6Decrease related to prior year tax positions


Increase related to current year tax positions


Settlements


Lapse of statute of limitations


(363
)Unrecognized tax benefits balance at December 31, 2008

$
788       (6)
    Stockholders
    Equity   53




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        (7)
    Stock-based
    Compensation and Stock Options           54




---



##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Weighted-AverageWeighted-Average


Remaining


AggregateShares


Exercise Price


Contractual Life


Intrinsic Value(In thousands)Outstanding at December 31, 2007


2,211,074


$
1.03



3.11 years


$
27,974Exercised


35,000


$
2.14Outstanding at December 31, 2008


2,176,074


$
1.01



2.09 years


$
9,900Exercisable and fully vested at December 31, 2008


2,176,074


$
1.01



2.09 years


$
9,900   in-the-money
      Weighted-Shares


Average


Weighted-Outstanding and


Remaining


AverageExercise Price

Exercisable


Contractual Life


Exercise Price$1.00


2,158,349



2.08 years


$
1.00$2.00


12,725



2.83 years



2.00$3.00


5,000



3.25 years



3.002,176,074



2.09 years


$
1.01   (8)  Segment
    Reporting and Significant Customer Information
        NorthYear Ended December 31, 2008:

America


Europe


Asia Pacific


Elimination


ConsolidatedRevenues from unaffiliated customers

$
71,245


$
9,572


$
587


$



$
81,404Intersegment revenues


94



51







(145
)


Total net revenues


71,339



9,623



587



(145
)


81,404Operating income (loss)


21,118



(7,809
)


(10,201
)


3



3,111   55




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##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  NorthYear Ended December 31, 2007:

America


Europe


Asia Pacific


Elimination


ConsolidatedRevenues from unaffiliated customers

$
73,061


$
5,842


$
8


$



$
78,911Intersegment revenues


171



14







(185
)


Total net revenues


73,232



5,856



8



(185
)


78,911Operating income (loss)


28,959



(5,172
)


(3,166
)


3



20,624   NorthYear Ended December 31, 2006:

America


Europe


Asia Pacific


Elimination


ConsolidatedRevenues from unaffiliated customers

$
66,303


$
3,222


$



$



$
69,525Intersegment revenues


206



10







(216
)


Total net revenues


66,509



3,232







(216
)


69,525Operating income (loss)


31,337



(1,586
)






2



29,753   NorthAs of December 31, 2008

America

Europe

Asia Pacific

Elimination

ConsolidatedProperty and equipment, net:

$
3,890


$
210


$
159


$



$
4,259Total assets


62,094



3,934



2,213



(32,919
)


35,322   NorthAs of December 31, 2007

America

Europe

Asia Pacific

Elimination

ConsolidatedProperty and equipment, net:

$
383


$
70


$
169


$



$
622Total assets


45,801



3,525



2,094



(14,134
)


37,286       Percent ofPercent of Revenues

Account ReceivableYear Ended December 31,

December 31,

December 31,Customer

2008

2007

2006

2008

2007Orbitz Worldwide


13
%


15
%


16
%


16
%


14
%Expedia, Inc.


*



11
%


14
%


*



18
%     *
    
    Less than 10%    (9)
    Employee
    Benefit Plan   56




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##### Table of Contents



TRAVELZOO
    INC.
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (10)
    Related
    Party Transaction      (11)
    Unaudited
    Quarterly Information    Quarters EndedDec 31,


Sept 30,


June 30,


Mar 31,


Dec 31,


Sept 30,


June 30,


Mar 31,2008


2008


2008


2008


2007


2007


2007


2007(In thousands, except per share amounts)Revenues

$
19,880


$
18,807


$
21,769


$
20,948


$
19,113


$
19,943


$
20,115


$
19,740Cost of revenues


963



867



637



529



288



295



225



149Gross profit


18,917



17,940



21,132



20,419



18,825



19,648



19,890



19,591Operating expenses:Sales and marketing


11,639



11,582



12,520



13,394



10,425



10,953



10,745



9,317General and administrative


6,769



6,717



6,930



5,746



5,945



3,756



3,392



2,797Total operating expenses


18,408



18,299



19,450



19,140



16,370



14,709



14,137



12,114Income (loss) from operations


509



(359
)


1,682



1,279



2,455



4,939



5,753



7,477Interest income


22



63



77



136



205



312



428



364Gain (loss) on foreign currency


432



(78
)


(6
)


152



76



67



36



(1
)Income (loss) before income tax expense


963



(374
)


1,753



1,567



2,736



5,318



6,217



7,840Income tax expense


1,091



1,415



2,946



2,573



2,690



3,164



3,371



3,777Net income (loss)

$
(128
)

$
(1,789
)

$
(1,193
)

$
(1,006
)

$
46


$
2,154


$
2,846


$
4,063Basic net income (loss) per share

$
(.01
)

$
(.13
)

$
(.08
)

$
(.07
)

$
.00


$
.15


$
.19


$
.27Diluted net income (loss) per share

$
(.01
)

$
(.13
)

$
(.08
)

$
(.07
)

$
.00


$
.14


$
.17


$
.25  57




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##### Table of Contents



Item 9.
    Changes
    in and Disagreements With Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Rule 13a-15(e).
  Rule 13a-15(f))
  Managements
    Report on Internal Control Over Financial Reporting
      Internal Control  Integrated Framework. Form 10-K.
  HOLGER
    BARTEL
   Chief Executive Officer
  WAYNE
    LEE
   Chief Financial Officer
   58




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III Item 10.
    Directors,
    Executive Officers and Corporate Governance of the
    Registrant      Name

Age

PositionHolger Bartel, Ph.D.


42


Chief Executive OfficerShirley Tafoya


45


President, North America and Senior Vice President of SalesWayne Lee


37


Chief Financial OfficerChristopher Loughlin


35


Executive Vice President, EuropeMax Rayner


48


Chief Information OfficerJason Yap


39


Executive Vice President, Asia Pacific   Holger Bartel, Ph.D
  Shirley Tafoya
  Wayne Lee, CPA
  Christopher Loughlin
  Max Rayner
  Jason Yap
 59




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##### Table of Contents



Item 11.
    Executive
    Compensation    Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters    Item 13.
    Certain
    Relationships and Related Transactions, and Director
    Independence    Item 14.
    Principal
    Accountant Fees and Services   60




---



##### 



PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules    Our Consolidated Financial Statements are included
    in Part II, Item 8:
   
 PageReport of Independent Registered Public
    Accounting Firm


36Consolidated Balance Sheets


37Consolidated Statements of Operations


38Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)


39Consolidated Statements of Cash Flows


40Notes to Consolidated Financial Statements


41    Supplementary Consolidated Financial Statement
    Schedules:
    Exhibits:
   61




---



##### Table of Contents



SIGNATURES
      By:
    /s/  WAYNE
    LEE     Chief Financial Officer
    Form 10-K,
    Signature

Title(s)

Date/s/  RALPH
    BARTELRalph
    Bartel

Chairman of the Board

March 16, 2009/s/  HOLGER
    BARTELHolger
    Bartel

Chief Executive Officer

March 16, 2009/s/  WAYNE
    LEEWayne
    Lee

Chief Financial Officer

March 16, 2009/s/  DAVID
    J. EHRLICHDavid
    J. Ehrlich

Director

March 16, 2009/s/  DONOVAN
    NEALE-MAYDonovan
    Neale-May

Director

March 16, 2009/s/  KELLY
    M. URSOKelly
    M. Urso

Director

March 16, 2009  62




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNumber



Description3
.1



Certificate of Incorporation of Travelzoo Inc. (Incorporated by
    reference to our Pre-Effective Amendment No. 6 to our
    Registration Statement on
    Form S-4
    (File
    No. 333-55026),
    filed February 14, 2002)3
.2



By-laws of Travelzoo Inc. (Incorporated by reference to our
    Pre-Effective Amendment No. 6 to our Registration Statement
    on
    Form S-4
    (File
    No. 333-55026),
    filed February 14, 2002)10
.1*



Employment Agreement, dated as of April 1, 2000, between
    Silicon Channels Corporation and Ralph Bartel (Incorporated by
    reference to Exhibit 10.1 to our Registration Statement on
    Form S-4
    (File No. 333-55026),
    filed February 6, 2001)10
.2*



Stock Option Agreement dated January 22, 2001, between
    Ralph Bartel and Travelzoo Inc. (Incorporated by reference to
    Exhibit 10.2 to our Registration Statement on
    Form S-4
    (File No. 333-55026),
    filed February 6, 2001)10
.3



Form of Director and Officer Indemnification Agreement
    (Incorporated by reference to Exhibit 10.1 on
    Form 10-Q
    (File
    No. 000-50171),
    filed November 9, 2007)10
.4*



Christopher Loughlin Service Agreement, dated as of May 16,
    2005, between Travelzoo UK Ltd and Christopher Loughlin
    (Incorporated by reference to Exhibit 10.1 on
    Form 10-Q
    (File
    No. 000-50171),
    filed August 15, 2005)10
.5*



Christopher Loughlin Amended Service Agreement, effective as of
    July 1, 2006, between Travelzoo (Europe) Limited and
    Christopher Loughlin (Incorporated by reference to
    Exhibit 10.2 on
    Form 10-Q
    (File
    No. 000-50171),
    filed August 9, 2006)10
.6*



Travelzoo Inc. North America Executive Bonus Plan as Amended and
    Restated Effective January 1, 2007. (Incorporated by
    reference to Exhibit 10.1 on
    Form 8-K
    (File
    No. 000-50171),
    filed April 11, 2007)10
.7*



Employment Agreement, dated May 8, 2001 by and between
    Shirley Tafoya and Travelzoo Inc., as amended, and 2007 Addendum
    to Employment Agreement by and between Travelzoo Inc. and
    Shirley Tafoya (Incorporated by reference to Exhibit 10.2
    on
    Form 10-Q
    (File
    No. 000-50171),
    filed April 11, 2007)10
.8*



Employment Agreement, dated as of December 9, 2005, between
    Wayne Lee and Travelzoo Inc. (Incorporated by reference to
    Exhibit 10.3 on
    Form 10-Q
    (File
    No. 000-50171),
    filed May 10, 2007)10
.9*



Amendment to Service Agreement between Travelzoo (Europe)
    Limited and Christopher Loughlin dated as of August 13,
    2007 (Incorporated by reference to Exhibit 10.1 on
    Form 8-K
    (File No. 000-50171),
    filed August 15, 2007)10
.10*



Employment Agreement, effective as of November 5, 2007, by
    and between Travelzoo Inc. and Max Rayner (Incorporated by
    reference to Exhibit 10.1 on
    Form 8-K
    (File
    No. 000-50171),
    filed October 24, 2007)10
.11



Agreement of Lease, effective as of February 1, 2008,
    between Travelzoo Inc. and 590 Madison Avenue, LLC (Incorporated
    by reference to Exhibit 10.1 on
    Form 8-K
    (File
    No. 000-50171),
    filed February 7, 2008)10
.12*



Employment Agreement, effective as of October 1, 2008, by
    and between Travelzoo Inc. and Holger Bartel (Incorporated by
    reference to Exhibit 99.1 on
    Form 8-K
    (File
    No. 000-50171),
    filed September 23, 2008)10
.13*



Amendment No. 1 to Employment Agreement, effective as
    September 23, 2008, by and between Travelzoo Inc. and Max
    Rayner (Incorporated by reference to Exhibit 99.1 on
    Form 8-K
    (File No. 000-50171),
    filed September 29, 2008)10
.14*



Amendment No. 1 to Employment Agreement, effective as
    September 23, 2008, by and between Travelzoo Inc. and Wayne
    Lee (Incorporated by reference to Exhibit 99.2 on
    Form 8-K
    (File No. 000-50171),
    filed September 29, 2008)10
.15*



Service Agreement between Travelzoo Inc. and Thian Seng (Jason)
    Yap dated February 20, 2007 (Incorporated by reference to
    Exhibit 99.1 on
    Form 8-K
    (File
    No. 000-50171),
    filed March 5, 2009)21
.1



Subsidiaries of Travelzoo Inc. 63




---



##### Table of Contents



ExhibitNumber



Description23
.1



Consent of Independent Registered Public Accounting Firm24
.1



Power of Attorney (included on signature page)31
.1



Certification of Chief Executive Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200231
.2



Certification of Chief Financial Officer Pursuant to
    Section 302 of the Sarbanes-Oxley Act of 200232
.1



Certification of Chief Executive Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 200232
.2



Certification of Chief Financial Officer Pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002     *
    
    This exhibit is a management contract or a compensatory plan or
    arrangement.
    
    Filed herewith.
    
    Furnished herewith. 64