Travelzoo 2013 Annual Report Download - page 59

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New tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of our services and
our financial results.
Due to the global nature of the Internet, it is possible that various states or foreign countries might attempt to regulate our
transmissions or levy sales, income or other taxes relating to our activities. Tax authorities at the international, federal, state and
local levels are currently reviewing the appropriate treatment of companies engaged in Internet commerce. New or revised
international, federal, state or local tax regulations may subject us or our subscribers to additional sales, income and other taxes.
We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or
revised taxes and, in particular, sales taxes, VAT and similar taxes would likely increase the cost of doing business online and
decrease the attractiveness of advertising and selling goods and services over the Internet. New taxes could also create
significant increases in internal costs necessary to capture data, and collect and remit taxes. Any of these events could have an
adverse effect on our business and results of operations.
We may suffer liability as a result of information retrieved from or transmitted over the Internet and claims related to our
service offerings.
We may be sued for defamation, civil rights infringement, negligence, patent, copyright or trademark infringement,
invasion of privacy, personal injury, product liability, breach of contract, unfair competition, discrimination, antitrust or other
legal claims relating to information that is published or made available on our websites or service offerings we make available
(including provision of an application programming interface platform for third parties to access our website, mobile device
services and geolocation applications). These types of claims have been brought, sometimes successfully, against online
services in the past. The fact that we distribute information via e-mail or text message may subject us to potential risks, such as
liabilities or claims resulting from unsolicited e-mail or spamming, lost or misdirected messages, security breaches, illegal or
fraudulent use of e-mail or interruptions or delays in e-mail or mobile service. These risks are enhanced in certain jurisdictions
outside the U.S., where our liability for such third-party actions may be less clear and we may be less protected. In addition, we
could incur significant costs in investigating and defending such claims, even if we ultimately are not found liable. If any of
these events occurs, our business could be materially and adversely affected.
We are subject to risks associated with information disseminated through our websites and applications, including
consumer data, content that is produced by our editorial staff and errors or omissions related to our product offerings. Such
information, whether accurate or inaccurate, may result in our being sued by our advertisers, merchants, subscribers or third
parties and as a result our revenue and goodwill could be materially and adversely affected.
In addition, we may acquire personal or confidential information from users of our websites and mobile applications,
related to our Local Deals and planned hotel booking platform. Security breaches or the unauthorized disclosure of customer
personal information could result in negative publicity, damage our reputation, expose us to risk of loss or litigation and
possible liability and subject us to regulatory penalties and sanctions. Any failure or perceived failure by us, or our service
providers, to comply with the privacy policies, privacy-related obligations to users or other third parties, or privacy related legal
obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable
information or other user data, may result in governmental enforcement actions, litigation or public statements against the
company by consumer advocacy groups or others and could cause our customers and members to lose trust in the company,
which could have an adverse effect on our business.
Claims have been asserted against us relating to shares not issued in our 2002 merger.
The merger of Travelzoo.com Corporation into the Company became effective on April 25, 2002. Holders of promotional
shares of Travelzoo.com Corporation who established they had satisfied certain prerequisite qualifications were allowed a
period of two years following the effective date to receive one share of Travelzoo Inc. in exchange for each share of common
stock of Travelzoo.com Corporation. After April 25, 2004, two years following the effective date, we ceased issuing shares to
the former stockholders of Travelzoo.com Corporation. Many of the “Netsurfer stockholders,” who had applied to receive
shares of Travelzoo.com Corporation in 1998 for no cash consideration, did not elect to receive their shares which were
issuable in the merger prior to the end of the two-year period. A total of 4,115,532 of our shares which had been reserved for
issuance in the merger were not claimed.
As discussed under Note 1 to the accompanying consolidated financial statements, on April 21, 2011, we settled all
claims by the State of Delaware relating to a previously-announced unclaimed property review relating to shares of Travelzoo
which have not been claimed by former Netsurfers stockholders of Travelzoo.com Corporation, which remained unexchanged
in the 2002 merger, as discussed in the preceding paragraph. Unclaimed shares which were properly issuable would have been
subject to escheat to the State of Delaware because the Company is organized under Delaware law. Under applicable law,