Travelzoo 2010 Annual Report Download - page 61

cash received from the sale of our Asia Pacific business segment. The net cash provided by financing activities in the
year ended December 31, 2009 was from the cash received from the sale of our Asia Pacific business segment and
the cash received from the exercise of stock options.
Our capital requirements depend on a number of factors, including market acceptance of our products and
services, the amount of our resources we devote to development of new products, cash payments to former
stockholders of Travelzoo.com Corporation, expansion of our operations, and the amount of our resources we
devote to promoting awareness of the Travelzoo brand. Since the inception of the program under which we would
make cash payments to people who establish that they were former stockholders of Travelzoo.com Corporation, and
who failed to submit requests to convert shares into Travelzoo Inc. within the required time period, we have incurred
expenses of $2.7 million. While future payments for this program are expected to decrease, the total cost of this
program is still undeterminable because it is dependent on our stock price and on the number of valid requests
ultimately received. Consistent with our growth, we have experienced a substantial increase in our sales and
marketing and general and administrative expenses, and we anticipate that these increases will continue for the
foreseeable future. We believe cash on hand will be sufficient to pay such costs. In addition, we will continue to
evaluate possible investments in businesses, products and technologies, the consummation of any of which would
increase our capital requirements.
Although we currently believe that we have sufficient capital resources to meet our anticipated working capital
and capital expenditure requirements for at least the next 12 months, unanticipated events or a less favorable than
expected development of our business in Europe may require us to sell additional equity or debt securities or
establish credit facilities to raise capital in order to meet our capital requirements.
If we sell additional equity or convertible debt securities, the sale could dilute the ownership of our existing
stockholders. If we issue debt securities or establish a credit facility, our fixed obligations could increase, and we
may be required to agree to operating covenants that would restrict our operations. We cannot be sure that any such
financing will be available in amounts or on terms acceptable to us.
If the development of our business in Europe is less favorable than expected, we may decide to significantly
reduce the size of our operations and marketing expenses in these markets with the objective of reducing cash
outflow. In the year ended December 31, 2010, cash used in operating activities in Europe was $529,000.
On October 31, 2009, the Company completed the sale of its Asia Pacific operating segment to Azzurro Capital
Inc. pursuant to the terms of the Asset Purchase Agreements. The results of operations of the Asia Pacific operating
segment have been classified as discontinued operations for all periods presented. The Company has not had
significant ongoing involvement with the operations of the Asia Pacific operating segment and has not had any
economic interests in the Asia Pacific operating segment following the sale. For the 10 months ended October 31,
2009, cash used in operating activities in Asia Pacific was $3.4 million. Further information concerning the
transaction is provided in the Company’s reports on Form 8-K filed on October 5 and November 3, 2009 and in
Note 11 to the accompanying consolidated financial statements.
The following summarizes our principal contractual commitments as of December 31, 2010 (in thousands):
2011 2012 2013 2014 2015 2016 Total
Operating lease obligations ..... $3,602 $2,793 $2,350 $588 $427 $142 $ 9,902
Purchase obligations .......... 2,016 176 — — — — 2,192
Total commitments ........... $5,618 $2,969 $2,350 $588 $427 $142 $12,094
We also have contingencies related to net unrecognized tax benefits of approximately $1.4 million as of
December 31, 2010, which we are unable to make reasonably reliable estimates on the timing of the cash
settlements with the respective taxing authorities.
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