Travelzoo 2005 Annual Report Download - page 49

Net cash used in by Ñnancing activities was $89,000 for the year ended December 31, 2005. Net cash
provided by Ñnancing activities was $28.5 million in the year ended December 31, 2004. The net cash used in
the year ended December 31, 2005 was due primarily to additional costs from the issuance of common stock in
2004 oÅset by proceeds from stock option exercises. The net cash provided in the year ended December 31,
2004 was due primarily to the proceeds from issuance of common stock in a private placement transaction and
upon exercises of stock options by directors. There were no cash Öows related to Ñnancing activities in the year
ended December 31, 2003.
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 persons who establish that they were former stockholders of Travelzoo.com
Corporation, and who failed to submit requests for our shares within the required time period, we have
incurred expenses of $2.4 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
requests ultimately received. Consistent with our growth, we have experienced a substantial increase in our
sales and marketing expenses since inception, and we anticipate that these increases will continue for the
foreseeable future. We believe cash on hand and generated during those periods will be suÇcient 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 suÇcient capital resources to meet our anticipated working
capital and capital expenditure requirements beyond the next 12 months, unanticipated events and opportuni-
ties may require us to sell additional equity or debt securities or establish new 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 new credit facility,
our Ñxed 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 Ñnancing will be available in amounts or on terms
acceptable to us.
We expect that cash on hand will be suÇcient to Ñnance the expansion of our European operations.
The following summarizes our principal contractual commitments as of December 31, 2005
(in thousands):
2006 2007 2008 2009 Thereafter Total
Operating leases ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,753 $1,448 $Ì $Ì $Ì $3,201
Purchase obligations ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 114 8 Ì Ì Ì 122
Total commitments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,867 $1,456 $Ì $Ì $Ì $3,323
As of December 31, 2005, we have recorded a liability of $11,000 for the estimated minimum liability
that is probable to be paid under a program to make cash payments to former stockholders of Travelzoo.com
Corporation based on claims received as of December 31, 2005. The total liability incurred under this 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 aÅects the 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.
Recent Accounting Pronouncements
In May 2005, the Financial Accounting Standards Board (""FASB'') issued Statement of Financial
Accounting Standards No. 154 (""SFAS 154''), Accounting Changes and Error Corrections, which replaces
Accounting Principles Board No. 20 (""APB 20''), Accounting Changes, and Statement of Financial
Accounting Standards No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS 154
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