Travelzoo 2011 Annual Report Download - page 56

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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 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 is less favorable than expected, we may decide to significantly reduce the size of our
operations and marketing expenses in certain markets with the objective of reducing cash outflow.
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 12 to the accompanying consolidated financial statements.
The following summarizes our principal contractual commitments as of December 31, 2011 (in thousands):
2012 2013 2014 2015 2016
Thereafter Total
Operating lease obligations ..............................
.
$ 4,493 $ 3,298 $ 1,622 $ 1,493 $ 1,137 $ 1,534 $ 13,577
Purchase obligations ........................................
.
733 17 — — — — 750
Total commitments ..........................................
.
$ 5,226 $ 3,315 $ 1,622 $ 1,493 $ 1,137 $ 1,534 $ 14,327
We also have contingencies related to net unrecognized tax benefits of approximately $1.9 million as of December 31, 2011,
which we are unable to make reasonably reliable estimates on the timing of the cash settlements with the respective taxing authorities.
Critical Accounting Policies
We believe that there are a number of accounting policies that are critical to understanding our historical and future
performance, as these policies affect the reported amounts of revenue and the more significant areas involving management’s
judgments and estimates. These significant accounting policies relate to revenue recognition, reserve for subscriber refunds, allowance
for doubtful accounts, income tax and loss contingencies. These policies, and our procedures related to these policies, are described in
detail below.