Travelzoo 2003 Annual Report Download - page 30

In addition, we plan to signiÑcantly increase our operating expenses to expand our sales and production
departments. If revenues fall below our expectations in any quarter and we are unable to quickly reduce our
spending in response, our operating results would be lower than expected and our stock price may fall.
In addition, we are required under Generally Accepted Accounting Principles to review our intangible
assets for impairment when events or changes in circumstances indicate the carrying value may not be
recoverable. We may be required to record a signiÑcant expense or charge to earnings in our Ñnancial
statements in the period any impairment of intangible assets is determined.
We depend on two clients for a substantial part of our revenues.
In the Ñscal year ended December 31, 2003, two clients accounted for 11% and 10% of our revenues,
respectively. The loss of one client or both clients may result in a signiÑcant decrease in our revenues and
results of operations, which could have a material adverse eÅect on our business.
Our business model is unproven and may not be adaptable to a changing market.
Our current revenue model depends on advertising fees paid by travel companies. If current clients decide
not to continue advertising their sales and specials with us and we are unable to replace them with new clients,
our business may be adversely aÅected. To be successful, we must provide online marketing solutions that
achieve broad market acceptance by travel companies. In addition, we must attract suÇcient Internet users
with attractive demographic characteristics to our products. It is possible that we will be required to further
adapt our business model in response to changes in the online advertising market or if our current business
model is not successful. If we are not able to anticipate changes in the online advertising market or if our
business model is not successful, our business could be materially adversely aÅected.
We may not be able to obtain suÇcient funds to grow our business and any additional Ñnancing may be
on terms adverse to your interests.
We intend to continue to grow our business, and intend to fund our current operations and our anticipated
growth from the cash Öow generated from our operations and our retained earnings. However, these sources
may not be suÇcient to meet our needs. We may not be able to obtain additional Ñnancing on commercially
reasonable terms, or at all.
If additional Ñnancing is not available when required or is not available on acceptable terms, we may be
unable to fund our expansion, successfully promote our brand name, develop or enhance our products and
services, take advantage of business opportunities, or respond to competitive pressures, any of which could
have a material adverse eÅect on our business.
If we choose to raise additional funds through the issuance of equity securities, you may experience
signiÑcant dilution of your ownership interest, and holders of the additional equity securities may have rights
senior to those of the holders of our common stock.
If we obtain additional Ñnancing by issuing debt securities, the terms of these securities could restrict or
prevent us from paying dividends and could limit our Öexibility in making business decisions.
Our business may be sensitive to recessions.
The demand for online advertising may be linked to the level of economic activity and employment in the
U.S. and abroad. SpeciÑcally, our business is dependent on the spending of travel companies. The last
recession decreased consumer travel and caused travel companies to reduce or postpone their marketing
spending generally, and their online marketing spending in particular. If the current economic recovery does
not continue, our business and Ñnancial condition could be materially adversely aÅected.
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