What changed in this filing

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Item 1A. Risk Factors

2022-03-31 compared with 2021-03-31 · 92 added, 94 removed, 433 unchanged (30% of the section changed)

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The COVID-19 pandemic has had, and is expected to continue to have, a material adverse impact on the travel industry and our business and financial performance.

The Company and many of our advertisers and partners are a part of the global travel and hospitality industries, the measures implemented to contain COVID have had, and are expected to continue to have, a significant negative effect on our business, financial condition, results of operations and cash flows.

The measures implemented have led to many of our advertising partners pausing, canceling, or stopping advertising with us, as well as a high level of cancellations for our hotel partners and travel package partners and refund requests for our vouchers with our restaurant and spa partners.

However, we have modified our policies, particularly with our vouchers, to extend expiration dates and allow for full refundability and have received positive feedback from our members.

We continue to adapt our policies as the situation evolves.

Any changes in laws or regulations that further impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring the closure of hotels or other travel-related businesses (such as restaurants and spas) or otherwise restricting travel due to the risk of spreading COVID, may exacerbate the negative impact of COVID on our business, financial condition, results of operations and cash flows.

The ultimate extent of the COVID outbreak and its impact on travel is unknown and difficult to predict with certainty.

The measures implemented to contain COVID-19 have had, and are expected to continue to have, a significant negative effect on our business, financial condition, and results of operations and cash flows.

The measures implemented led to many of our advertisers pausing, canceling, or stopping advertising with us, as well as a high level of cancellations for our hotel partners and travel package partners, and refund requests for vouchers sold by Travelzoo for restaurant and spa partners.

However, we have modified our policies, particularly with our vouchers, to extend expiration dates and allow for full refundability and have received positive feedback from Travelzoo members.

We are also seeing many advertisers and partners starting to return to advertising with us, as the effects of the pandemic subside, although with the emergence of new COVID-19 variants, this trend could stop or even reverse.

We will continue to adapt our business strategy and policies as the situation evolves.

Any changes in laws or regulations that further impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring vaccination, COVID-19 testing requirements in connection with travel, the closure of hotels or other travel-related businesses (such as restaurants and spas) or other restrictions in connection with or as a result of the pandemic, may exacerbate the negative impact of COVID-19 on our business, financial condition, results of operations, and cash flows.

The ultimate extent of the pandemic and its impact on travel is unknown and difficult to predict.

As a result, the full extent of the impact on our business and results of operations is unknown.

The pandemic could continue to hamper global economic activity for an extended period of time, even as restrictions begin to lift or vaccination rates increase, leading to decreased disposable income for consumers, increased and ongoing unemployment and/or a decline in consumer confidence, all of which could significantly reduce discretionary spending on travel.

The pandemic and the emergence of new variants, including Delta and Omicron, could continue to hamper global economic activity for an extended period of time, even as restrictions begin to lift or vaccination rates increase, leading to decreased disposable income for consumers, increased and ongoing unemployment and/or a decline in consumer confidence, all of which could significantly reduce discretionary spending on travel.

In turn, that could have a negative impact on demand for our services.

We also cannot predict the long-term effects of COVID on our clients and partners or the ways that the pandemic may fundamentally change the travel industry and the way that consumers travel.

Although the increase in vaccination rates has allowed many countries to open their borders for travel again, there is inconsistency in testing, vaccination and safety protocols across countries, making trip planning unpredictable and undermining consumer confidence.

Because we operate in various countries (including through our licensing arrangements), we are subject to varying rates of recovery and diverse restrictions and reactions to COVID-19 and vaccinations.

The aforementioned circumstances could result in a material adverse impact on our business, financial condition, results of operations and cash flows, potentially for a prolonged period.

While we have undertaken certain actions to attempt to mitigate the effects of COVID on our business, including but not limited to employee furloughs, aggressive reduction of expenses and re-negotiation of material contracts and leases, our cost-savings activities may lead to disruptions in our business, inability to enhance or preserve our brand awareness, reduced employee morale and productivity, increased attrition, and problems retaining existing and recruiting future employees, all of which could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Additionally, like many other companies, we have instructed or allowed employees to work from home, which, especially if this persists for a prolonged period of time, may have an adverse impact on performance, operations, and systems.

For the reasons set forth above and other reasons that may come to light as the COVID pandemic and containment measures expand, it is difficult to estimate with accuracy the impact to our future revenues, results of operations, cash flows, liquidity or financial condition, but such impacts have been and will continue to be significant and could continue to have a material adverse effect for the foreseeable future.

In the near term, we have seen that the COVID pandemic impacted our financial performance for 2020 and we expect it will continue to have an impact in 2021.

Impairments of goodwill, long-term investments and long-lived assets have a negative impact on our results of operations.

As a result of the deterioration of certain aspects of our business due to COVID, we evaluated goodwill, Intangible assets, long-term investments and long-lived assets for possible impairment as of March 31, 2020 and as of December 31, 2020.

As a result of the deterioration of certain aspects of our business due to COVID-19, we evaluated goodwill, Intangible assets, long-term investments and long-lived assets for possible impairment as of March 31, 2020.

We performed these impairment tests by comparing the carrying value of Jack’s Flight Club net assets to the fair value of the Jack’s Flight Club reporting unit based on an updated discounted cash flow analysis.

We determined that our indefinite lived intangible assets (Trade names) and goodwill were impaired, and therefore we recognized an impairment charge of $2.9 million for the quarter ended March 31, 2020.

We performed its annual impairment testing and determined that no additional impairment was necessary for the year ended December 31, 2020.

The determination of the fair value reflects numerous

assumptions that are subject to various risks and uncertainties.

We performed its annual impairment testing and determined that no additional impairment was necessary for the years ended December 31, 2021 and 2020.

The determination of the fair value reflects numerous assumptions that are subject to various risks and uncertainties.

It requires significant judgments and estimates and actual results could be materially different than those judgments and estimates utilized in the fair value estimate.

Future events and changing market conditions may lead us to re-evaluate the assumptions reflected in the current forecast, particularly the assumptions related to the length and severity of the COVID pandemic and the shape and timing of the subsequent recovery, which may result in a need to recognize additional impairment charges, which could have a material adverse effect on our results of operations.

Future events and changing market conditions may lead us to re-evaluate the assumptions reflected in the current forecast, particularly the assumptions related to the length and severity of the global pandemic and the shape and timing of the subsequent recovery, which may result in a need to recognize additional impairment charges, which could have a material adverse effect on our results of operations.

See Note 3 to the Consolidated Financial Statements for further information related to the impairment charge.

We cannot assure you that we will be profitable.

In the year ended December 31, 2020, we incurred net loss of $14.6 million, of which $13.4 million loss was attributable to Travelzoo.

In the year ended December 31 2019, we generated net income of $4.2 million.

Our profitability was impacted in 2020 due to the global pandemic, and there is no assurance that we will be profitable in the future.

In the year ended December 31, 2021, we generated consolidated net income of $902,000, of which $911,000 income was attributable to Travelzoo .

In the year ended December 31, 2020, we incurred c onsolidated net loss of $14.6 million, of which $13.4 million loss was attributable to Travelzoo.

Our profitability was impacted in 2021 and 2020 due to the global pandemic, and there is no assurance that we will be profitable in the future.

We forecast our future expense levels based on our operating plans and our estimates of future revenues.

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If our revenues grow at a slower rate than we anticipate or decline, or if our spending levels exceed our expectations or cannot be adjusted to reflect slower revenue growth, we may not generate sufficient revenues to be profitable.

Any of these developments could result in a significant decrease in the trading price of our common stock.

Fluctuations in our operating results may negatively impact our stock price.

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We have also historically invested in packaging technology and expansion of our hotel booking platform.

We may in the future invest in the technology for our email products.

We may in the future invest in the technology for our email products or invest in completely new products.

Such product modifications and expansions may result in an increase in costs in the near-term and an increase in cost structure in the long-term, which may be in excess of incremental revenue.

If our expanded product offerings are not embraced by our users or our advertising partners, or if we are unsuccessful in our efforts to monetize these initiatives, our business and financial results could be adversely affected.

If we cannot attract members to our product offerings, including in the face of substantial economic and regulatory uncertainty due to the pandemic, our financial results could be adversely affected.

Fully refundable vouchers may also result in significant refund rates and administrative costs for the Company.

In addition, the hotel booking platform and travel packages will be sensitive to fluctuations in hotel supply, occupancy and average daily rates and a fluctuation in any of these factors could negatively impact our revenue.

If we cannot attract members to our product offerings, including in the face of substantial uncertainty due to the pandemic, our financial results could be affected.

Fully refundable vouchers may also result in significant refunds and costs for the Company.

We can give no assurances that any of our product offerings will yield the benefits we expect and will not result in additional costs.

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This format may require additional investments to maintain and grow the business including the hiring of additional sales force and additional spend on customer service, marketing, technology tracking systems and payment processing.

Such vouchers are typically non-refundable or refundable by the Company within 7-14 days of purchase.

However, the Company expanded its voucher products to include fully refundable vouchers, which allow the consumer to request a refund through the expiration date of the voucher.

Such vouchers had been typically non-refundable or refundable by the Company within 7-14 days of purchase.

In March 2020, the Company expanded its voucher products to include fully refundable vouchers, which allow the consumer to request a refund through the expiration date of the voucher.

This shift has increased the rate at which our existing customers purchase vouchers.

However, we cannot guarantee that this trend will continue.

As market conditions continue to shift, including due to the COVID pandemic, we may see a decline in demand for vouchers due to, among other things, increased competition in the marketplace and a decline in need by consumers for fully refundable travel products.

Historically, the growth in competition has enabled customers to wait until they are ready to use the related vouchers before making purchases.

More recently, changing travel restrictions due to the global pandemic have made it so that many consumers may not be able to use their vouchers in the near-term or at all.

Although we are actively working with our partners to extend travel windows and expiration dates to ensure consumers can use their vouchers and while we are continually evolving our strategy to address the changing market dynamics, we may not always be successful in doing so and the demand for our vouchers may decline and may adversely impact revenues.

As market conditions continue to shift, we may see a decline in demand for vouchers or the Company may strategically move away from this product offering.

Changing travel restrictions due to the global pandemic have made it so that many consumers may not be able to use their vouchers in the near-term or at all.

Although we are actively working with our partners to extend travel windows and expiration dates to ensure

consumers can use their vouchers and while we are continually evolving our strategy, we may not always be successful in doing so and the demand for our vouchers may decline or refund rates may increase and may adversely impact revenues.

Our business could be negatively affected by changes in search engine algorithms or other traffic-generating arrangements.

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As a result, it is increasingly important for us to develop and maintain effective mobile websites optimized for mobile devices.

If we are unable to continue to rapidly innovate and create new, user-friendly and differentiated mobile offerings and efficiently and effectively advertise and distribute on these platforms,

or if our mobile applications are not downloaded and used by travel consumers, we could lose market share to existing competitors or new entrants and our future growth and results of operations could be adversely affected.

If we are unable to continue to rapidly innovate and create new, user-friendly and differentiated mobile offerings and efficiently and effectively advertise and distribute on these platforms, or if our mobile applications are not downloaded and used by travel consumers, we could lose market share to existing competitors or new entrants and our future growth and results of operations could be adversely affected.

We may have exposure to additional tax liabilities .

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tax liability on those earnings which have not previously been repatriated to the U.S.

With the election of President Biden, there could be additional changes to the corporate tax rate in the near future.

With the election of President Biden, there could be additional

changes to the corporate tax rate in the near future.

The interpretation and implementation of the Tax Act and regulations, rules or guidance that have or may be adopted under, or result from, the Tax Act could have a material impact on our business.

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We are also subject to non-income based taxes, such as value-added, payroll, sales, use, net worth, property and goods and services taxes, in the U.S.

and various foreign jurisdictions.

and various foreign jurisdictions, including for Jack’s Flight Club.

From time to time, the Company may by audited by tax authorities with respect to these non-income based taxes and may have exposure to additional non-income based tax liabilities.

These examinations may lead to ordinary course adjustments or proposed adjustments to its taxes or its net operating income or may result in recognition of previously unrecognized tax benefits upon completion of the examination.

These examinations may lead to ordinary course adjustments or proposed adjustments to its taxes or its net operating income or may result in recognition of previously unrecognized tax benefits.

Adverse application of state and local tax laws could have an adverse effect on our business and results of operation.

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It is possible that we will be required to further adapt our business model and products in response to changes in the online advertising market or travel industry or if our current business model is not successful.

For example, uncertainty surrounding the ability to travel would require us to adapt our product offerings to move away from our reliance on advertising fees and to provide consumers with additional flexibility in order to attract them to

If we do not adapt to these trends fully or quickly enough, we may lose revenue as consumer usage of our products and services may decline.

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We can also experience a decline in advertisers providing offers in certain destinations due to natural disasters or travel restrictions.

If we are unable to attract new advertisers in numbers sufficient to grow our business, or if too many advertisers are unwilling to offer compelling terms to our members or favorable payment terms to us, we may sell less advertising, and our operating results will be adversely affected.

If we are unable to attract new advertisers in numbers sufficient to grow our

business, or if too many advertisers are unwilling to offer compelling terms to our members or favorable payment terms to us, we may sell less advertising, and our operating results will be adversely affected.

We may not be able to add enough additional revenue to replace the lost revenue.

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According to accounting standards for revenue recognition, revenue that is subject to refunds or returns is considered variable consideration and must be constrained so that it is probable that a significant reversal will not occur in the future as the uncertainty is resolved.

To comply with this standard, we estimated future refunds and refund rates utilizing a sophisticated model that incorporated qualitative and quantitative factors, including but not limited to, historical refund rates based on deal category, relative risk of refund based on the type of voucher, and changing business and market conditions.

To comply with this standard, we estimated future refunds and refund rates utilizing a sophisticated model that incorporates qualitative and quantitative factors, including but not limited to, historical refund rates based on deal category, relative risk of refund based on voucher type, and changing business and market conditions.

However, due to constantly shifting market factors, particularly due to COVID-19, and limited historical data due to the recent change in policy, accurately predicting the refund rate is difficult, and we can make no guarantees that our estimates will be correct.

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We may not be able to obtain sufficient funds to grow our business and equity or debt financing may be on adverse terms.

For the year ende d December 31, 2020, our cash and cash equivalents increased $44.3 million to $63.1 million, of which $32.0 million was held outside the U.S.

For the year ended December 31, 2021, our cash and cash equivalents was $43.8 million, of which $24.0 million was held outside the U.S.

in our foreign subsidiaries.

As of December 31, 2020, we had negative working capital of $12.8 million primarily due to an increase in merchant payables related to the sale of vouchers.

As of December 31, 2021, we had negative working capital of $22.8 million.

Merchant payables was $68.7 million as of December 31, 2021.

The payable to merchants is generally due upon redemption of the voucher.

The vouchers have maturities that extend from January 2021 through January 2023.

However, if redemption activity is more accelerated, or if we are not able to reduce operating losses, we may need to obtain additional financing to meet our working capital needs in the future.

The vouchers have maturities that extend from January 2022 through December 2025 with the majority of vouchers expiring in 2022 and the remaining primarily expiring in 2023;

provided, that these expiration dates may sometimes be extended on a case-by-case basis.

However, if redemption and refund activities are more accelerated, or if we are not able to reduce operating losses, we may need to obtain additional financing to meet our working capital needs in the future.

We intend to continue to grow our business and fund our current operations using cash on hand.

However, this may not be sufficient to meet our needs, including the payments required to settle various commitments and contingencies, as described under Note 6 to the accompanying consolidated financial statements.

We may not be able to obtain financing on commercially reasonable terms, or at all, especially due to volatile market conditions due to the COVID pandemic.

If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund our strategic objectives, meet our payroll obligations, successfully promote our brand name, develop or enhance our products and services, take advantage of business opportunities or acquisitions, or respond to competitive pressures, any of which could have a material adverse effect on our business.

However, this may not be sufficient to meet our needs, including the payments required to settle merchant payables and various commitments and contingencies, as described under Note 6 to the accompanying consolidated financial statements.

We may not be able to obtain financing on commercially reasonable terms, or at all, especially due to volatile market conditions.

If additional financing is not available when required or is not available on acceptable terms, we may be unable to fund our strategic objectives, meet our payroll obligations, successfully promote our brand, 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 effect on our business.

If we choose to raise funds through the issuance of equity securities, existing stockholders may experience dilution of their ownership interests and holders of the additional equity securities may have rights senior to existing stockholders of our common stock.

If we obtain additional financing by through debt securities, the terms of these arrangements could restrict or prevent us from paying dividends, could require the pledging of the assets of the Company, could subject the Company to restrictive covenants or large fees, and could limit our flexibility in making business decisions.

If we obtain additional financing through debt securities, the terms of these arrangements could restrict or prevent us from paying dividends, could require the pledging of assets, could subject the Company to restrictive covenants or large fees, and could limit our flexibility.

Utilization of governmental stimulus packages may negatively impact our business, operations and/or reputation.

Certain governments have passed or are considering legislation to help businesses through the COVID pandemic through loans, wage subsidies, tax relief or other financial aid.

Certain governments have passed legislation to help businesses through the COVID-19 pandemic with loans, wage subsidies, tax relief or other financial aid.

We are participating in, or have applied to participate in, several government programs, including but not limited to, the programs offered in the United States, Canada, the United Kingdom, Germany, and certain other jurisdictions.

We are continuing to assess whether we will take advantage of any other offerings.

To the extent we do receive any government or other assistance (in the form of government sponsored or private loans), we may be required to agree to certain restrictions, including but not limited to negative covenants, which could impact how we operate the Company and negatively impact the business, as well as result in higher financing costs.

To the extent we do receive any assistance (in the form of government sponsored or private loans), we may be required to agree to certain restrictions, including but not limited to negative covenants, which could impact how we operate and negatively impact the business, as well as result in higher financing costs.

Our reputation could also be harmed.

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Specifically, our business is primarily dependent on the demand for online advertising from travel and entertainment companies.

Events like Middle East conflicts, terrorist attacks, mass shooting incidents, natural disasters, and travel-related health events, such as the COVID pandemic, have a negative impact on the travel industry and affect travelers’ behavior by limiting their ability or willingness to visit certain locations.

Events like Middle East conflicts, terrorist attacks, mass shooting incidents, natural disasters, and travel-related health events, such as the pandemic, have a negative impact on the travel industry and affect travelers’ behavior by limiting

their ability or willingness to visit certain locations.

In addition, advertisers may choose to limit advertising spend on certain destinations, which can adversely impact our business.

We are not in a position to evaluate the net effect of these circumstances on our business as these events are largely unpredictable;

We are not in a position to evaluate the net effect of these circumstances as these events are largely unpredictable;

however, we believe there has been negative impact to our business by such events.

Furthermore, in the longer term, our business might be negatively affected by financial pressures on or changes to the travel industry.

In the longer term, our business might be negatively affected by financial pressures on or changes to the travel industry.

Our operations could be significantly hindered by the occurrence of a natural disaster or other catastrophic event.

Our operations are susceptible to outages due to fire, floods, power loss, telecommunications failures, unexpected technical problems in the systems that power our websites and distribute our email newsletters, break-ins and similar events.

In addition, a significant portion of our network infrastructure is located in Northern California, an area susceptible to earthquakes and other natural disasters.

We do not have multiple site capacity to protect us against any such occurrence.

Outages could cause significant interruptions of our service.

In addition, despite our implementation of network security measures, our servers are vulnerable to computer viruses, physical and electronic break-ins, and similar disruptions from unauthorized tampering with our computer systems.

Additionally, declines or disruptions in the travel industry generally due to a catastrophic event, such as COVID, could adversely affect our business and financial performance.

In addition, despite our implementation of network security measures, and although we have moved most of our IT operations to the cloud, our servers are vulnerable to computer viruses, physical and electronic break-ins, and similar disruptions from unauthorized tampering with our systems.

We do not carry business interruption insurance to compensate us for losses that may occur as a result of any of these events.

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We rely on third parties to provide payment processing services and it could disrupt our business if these companies become unwilling or unable to provide these services to us.

Because the global pandemic has increased the risk profile of travel-related companies, such payment processing services may require larger deposits, impose stricter rules or requirements, or may decide to stop working with companies related to the travel industry altogether.

For example, Travelzoo was required to change processors in certain jurisdictions in 2021 because its previous processor decided to stop working with companies related to the travel industry.

If we are unable to pivot to a new payment processor quickly, this could lead to periods of time where we are unable to accept or process payments from our members, impacting our ability to generate revenue.

We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers and regulations for electronic payment services, such as PSD2 in Europe, which could change or be reinterpreted to make it difficult or impossible for us to comply.

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We adopted this standard in the first quarter of 2018.

The adoptions resulted in a cumulative adjustment to retained earnings and changes in revenue recognition

The adoptions resulted in a cumulative adjustment to retained earnings and changes in revenue recognition policies.

In 2016, FASB issued a new accounting standard related to leases which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability on its balance sheet.

The Company adopted ASU 842 on January 1, 2019, using the alternative modified transition method with no restatement of prior periods or cumulative adjustment to retained earnings.

The Company adopted Accounting Standards Update 842 on January 1, 2019, using the alternative modified transition method with no restatement of prior periods or cumulative adjustment to retained earnings.

We may need to change our accounting processes if we are required to adopt future or proposed changes in principles.

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Furthermore, operating losses in certain jurisdictions may not have any recognizable tax benefit.

These factors could have a material negative impact on our consolidated net income and cash flows, which could result in a significant decrease in the trading price of our common stock.

These factors could have a material negative impact on our consolidated net income and cash flows,

which could result in a significant decrease in the trading price of our common stock.

There are certain additional risks inherent in doing business internationally, including:

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We may not be able to continue developing awareness of our brand names.

We believe that continuing to build awareness of the Travelzoo brand name is critical to achieving widespread acceptance of our business.

We believe that continuing to build awareness of the Travelzoo and Jack’s Flight Club brand names is critical to achieving widespread acceptance of our business.

Brand recognition is a key differentiating factor among providers of online advertising opportunities, and we believe it could become more important as competition in our industry increases.

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If we fail to retain our existing members or acquire new members, our revenue and business will be harmed.

We spe nt $1.6 million and $6.1 million on ma rketing initiatives relating to member acquisition for the years ended December 31, 2020 and 2019, respectively, and expect, once the pandemic begins to subside, to continue to spend significant amounts to acquire members.

Our long-term success depends on our continued ability to increase the overall number of

members and engage those members.

We spent $2.9 million and $1.6 million on marketing initiatives relating to member acquisition for the years ended December 31, 2021 and 2020, respectively, and expect to subside, to continue to spend significant amounts to acquire members.

Our long-term success depends on our continued ability to increase the overall number of members and engage those members.

We cannot assure you that the revenue from members we acquire will ultimately exceed the cost of acquiring new members.

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We may not succeed in developing features, functions, products, or services that travel and entertainment companies and Internet users find attractive.

Our current technology may not meet the future technical requirements of travel and entertainment companies.

This could reduce the number of travel and entertainment companies and Internet users using our products and materially adversely affect our business.

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While we are striving to improve functionality, usability and design in our products, the ongoing enhancements on web and mobile and investment in packaging and other technology may not achieve the desired results we anticipate, and if unsuccessful, could result in a decline in revenues, an increase in costs, and a negative impact on our business.

We may lose business if we fail to keep pace with rapidly changing technologies and client needs.

Our success is dependent on our ability to develop new and enhanced software, services, and related products to meet rapidly evolving technological requirements for online advertising.

Our current technology may not meet the future technical requirements of travel and entertainment companies.

Trends that could have a critical impact on our success include:

rapidly changing technology in online advertising;

evolving industry standards, including both formal and de facto standards relating to online advertising;

developments and changes relating to the Internet;

competing products and services that offer increased functionality;

and changes in travel company, entertainment company, and Internet user requirements.

If we are unable to timely and successfully develop and introduce new products and enhancements to existing products in response to our industry’s changing technological requirements, our business could be materially adversely affected.

Our business and growth will suffer if we are unable to hire and retain highly skilled personnel.

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We compete with large online travel agencies like the Expedia Group and Booking Holdings, as well as thousands of individual travel agencies around the world, that also offer advertising placements and hotel booking platforms and capture consumer interest.

There has been substantial consolidation of the global

travel industry and we believe this trend will continue.

There has been substantial consolidation of the global travel industry and we believe this trend will continue.

Some of our competitors are large and have significant resources and substantial international operations.

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If competitors engage in group buying initiatives in which merchants receive a higher percentage of the face value than we currently offer, we may be forced to pay a higher percentage of the face value than we currently offer, which may reduce our revenue.

We expect to face additional competition as other established and emerging companies, including print media companies, enter the online advertising market.

We expect to face additional competition as other established and emerging companies, including print media companies, enter the online advertising

Competition could result in reduced margins on our services, loss of market share or less use of Travelzoo by advertisers and consumers.

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We may not be able to access third-party technology upon which we depend.

We use data technology and software products from third parties, and technology from our vendors may not continue to be available to us on commercially reasonable terms, or at all.

We use data technology and software products from third parties (such as hosting and cloud services), and technology from our vendors may not continue to be available to us on commercially reasonable terms, or at all.

Our business will suffer if we are unable to access technology, to gain access to additional products or to integrate new technology with our existing systems.

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Compliance with these laws, regulations and similar requirements may be onerous and expensive, and they may be inconsistent from jurisdiction to jurisdiction, further increasing the costs of compliance and doing business.

For example, the Company and Jack’s Flight Club employ employees and engage contractors in various countries and therefore could be subject to misclassification or tax claims related to such arrangements or increased costs to ensure continued compliance as both companies grow and add to their workforce.

Any such costs, which may rise in the future as a result of changes in these laws and regulations or in their interpretation, could individually or in the aggregate make the Company’s services less attractive, delay the introduction of new products, or cause the Company to change or limit its business practices or incur more costs to comply or defend itself.

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The CARD Act and similar state and foreign laws may harm our Local Deals and Getaways business.

Vouchers which are issued under our Local Deals and Getaways may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the Credit CARD Act of 2009 (the "CARD Act"), and state laws governing gift cards, stored value cards and coupons (“gift cards”).

Vouchers may be considered gift cards, gift certificates, stored value cards or prepaid cards (“gift cards”) and therefore governed by, among other laws, the Credit Card Act of 2009 (the “CARD Act”), and state laws governing gift cards.

Other foreign jurisdictions have similar laws in place, in particular European jurisdictions where the European E-Money Directive regulates the business of electronic money institutions.

Many of these laws contain provisions governing the use of gift cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration dates and the imposition of certain fees.

Purported class actions against other companies have been filed in federal and state court claiming that coupons similar to the vouchers are subject to the CARD Act and various state laws governing gift cards and that the defendants have violated these laws by issuing the coupons with expiration dates and other restrictions.

Purported class actions against other companies have been filed claiming that coupons similar to the vouchers are subject to the CARD Act and various state laws governing gift cards and that the defendants have violated these laws by issuing the coupons with expiration dates and other restrictions.

In addition, investigations by certain state attorney general offices have been launched against other companies with regards to similar issues.

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Such developments may materially and adversely affect the profitability or viability of our Local Deals and Getaways vouchers.

Certain gift card laws could require us to materially increase the estimated liability recorded in our financial statements and our net income could be materially and adversely affected.

In certain states and foreign jurisdictions, our Local Deals and Getaways vouchers may be considered a gift card.

Some of these states and foreign jurisdictions include gift cards under their unclaimed and abandoned property laws which require companies to remit to the government the value of the unredeemed balance on the gift cards after a specified period of time

(generally between 1 and 5 years) and impose certain reporting and record keeping obligations.

Certain gift card laws could require us to materially increase the estimated liability recorded in our financial statements and our operating result could be materially and adversely affected.

In certain states and foreign jurisdictions, our vouchers may be considered gift cards.

The analysis of the potential application of the unclaimed and abandoned property laws to our vouchers is complex, involving an analysis of constitutional and statutory provisions and factual issues, including our relationship with members and merchants and our role as it relates to the issuance and delivery of a voucher.

In the event that one or more states or foreign jurisdictions successfully challenges our position on the application of its laws to vouchers, or if the estimates that we use in projecting the likelihood of vouchers being redeemed prove to be inaccurate, our liabilities with respect to unredeemed vouchers may be materially higher than the amounts shown in our financial statements.

If we are required to materially increase the estimated liability recorded in our financial statements with respect to unredeemed gift cards, our net income could be materially and adversely affected.

Moreover, a successful challenge to our position could subject us to penalties or interest on unreported and unremitted sums, and any such penalties or interest would have a further material adverse impact on our net income.

In the event that one or more jurisdictions successfully challenges our position on the application of its laws to vouchers, or if the estimates that we use in projecting the likelihood of vouchers being redeemed prove to be inaccurate, our liabilities with respect to unredeemed vouchers may be materially higher than the amounts shown in our financial statements.

If we are required to materially increase the estimated liability recorded in our financial statements, our net income could be materially and adversely affected.

Moreover, a successful challenge to our position could subject us to penalties or interest, and any such penalties or interest would have a further material adverse impact on our net income.

Tax treatment of companies engaged in Internet commerce may adversely affect the use of our services and our results.

4 unchanged sentences

In June 2018, the U.S.

Supreme Court decided the South Dakota v.

Supreme Court decided the

South Dakota v.

Wayfair, Inc.

1 unchanged sentence

For example, due to media sales for travel agents, clients or partners in certain states with economic nexus provisions (including but not limited to New Mexico, South Dakota, West Virginia and Hawaii), we could have potential tax exposure pursuant to the Wayfair decision.

We are continuing to evaluate states where we could have such exposure.

We are continuing to evaluate states and countries where we could have such exposure, including for the operations of Jack’s Flight Club.

New taxes could also create significant increases in internal costs necessary to capture data and collect and remit taxes.

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Any failure or perceived failure by us, or our service providers, to comply with any privacy-related obligations, or any compromise of security that results in the unauthorized release or transfer of data, may result in governmental enforcement actions, litigation or public statements against the Company by consumer advocacy groups or others and could cause our members to lose trust in us, which could have an adverse effect on our business.

If our security measures are breached, or if our services are subject to attacks that degrade or deny the ability of

users to access our products and services, our products and services may be perceived as not being secure, users and customers may curtail or stop using our products and services, and we may incur significant legal and financial exposure.

If our security measures are breached, or if our services are subject to attacks that degrade or deny the ability of users to access our products and services, our products and services may be perceived as not being secure, users and customers may curtail or stop using our products and services, and we may incur significant legal and financial exposure.

We could also be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, results of operations or financial condition.

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In addition, the costs for third parties to sell vouchers would increase, which may restrict our ability to enlist third parties to issue vouchers.

State and foreign laws regulating money transmission could be expanded to include Travelzoo vouchers or other Travelzoo products or services.

Many states and certain foreign jurisdictions impose license and registration obligations on those companies engaged in the business of money transmission, with varying definitions of what constitutes money transmission.

We currently believe that we are not a money transmitter given our role and the product terms of Travelzoo vouchers or other Travelzoo products or services.

However, a successful challenge to our position or expansion of state or foreign laws could subject us to increased compliance costs and delay our ability to offer our products or services in certain jurisdictions pending receipt of any necessary licenses.

Our internal control over financial reporting may not be effective which could impact our business.

1 unchanged sentence

Travelzoo qualified as a smaller reporting company in 2020 meaning it is not subject to the SOX 404(b) requirement of having an auditor attestation report on internal control over financial reporting.

However, we may be obligated to evaluate our internal control over financial reporting if we are no longer smaller reporting company and we may identify areas of internal control that may need improvement or require remediation efforts.

However, we may be obligated to evaluate our internal control over financial reporting if we are no longer smaller reporting company and we may identify areas of internal control that may

need improvement or require remediation efforts.

Currently, none of our identified areas that need improvement have been categorized as material weaknesses.

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In addition, the stock market in general, and the market prices for Internet-related companies in particular, have experienced volatility that often has been unrelated to the operating performance of such companies.

These broad market and industry fluctuations, such as a recession, interest rate or foreign currency exchange rate fluctuations, political instability (e.g., Brexit), changes in trade policy, trade disputes or a natural disaster, health concerns such as COVID or a terrorist attack affecting a significant market for our business may adversely affect the price of our stock, regardless of our operating performance.

These broad market and industry fluctuations, such as a recession, acts of war (e.g., the conflict in Ukraine), interest rate or foreign currency exchange rate fluctuations, political instability (e.g., Brexit), changes in trade policy, trade disputes or a natural disaster, health concerns such as COVID or a terrorist attack affecting a significant market for our business may adversely affect the price of our stock, regardless of our operating performance.

Negative market conditions could adversely affect our ability to raise additional capital or the value of our stock in connection with merger and acquisition activities.

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Ralph Bartel, who founded Travelzoo and who is a Director of the Company, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro.

As of December 31, 2020, Azzurro is the Company's largest stockholder, holding approximately 40% of the Company's outstanding shares.

As of December 31, 2021, Mr.

Bartel is the Company's largest stockholder, holding approximately 41% of the Company's outstanding shares.

As a result of Mr.

Bartel’s ownership interests and voting power, Mr.

Bartel is in a position to influence, and potentially control, significant corporate actions, including corporate transactions such as mergers, business combinations or dispositions of assets.

This concentrated ownership position could discourage others from initiating any potential merger, takeover or other change of control transaction that may otherwise be beneficial to Travelzoo stockholders.

Unresolved Staff Comments

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors