What changed in this filing

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Item 1A. Risk Factors

2023-03-31 compared with 2022-03-31 · 181 added, 200 removed, 325 unchanged (54% of the section changed)

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Risks Related to Our Financial Condition and Business Model

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 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 COVID pandemic had, and the after-effects of the pandemic may continue to have, a material adverse impact on the travel industry and our business and financial performance.

The COVID pandemic resulted in a significant negative effect on our business, financial condition, and results of operations and cash flows.

Specifically, the measures implemented in 2020 to contain the virus (quarantine restrictions, testing and vaccination requirements, business closures, etc.) led to a steep decline in travel and entertainment demand, which led to (1) many of our advertisers pausing or stopping advertising with us, (2) a high level of cancellations for our hotel partners and travel package partners, and (3) refund requests for vouchers sold by Travelzoo for restaurant and spa partners.

At the time, we modified our policies to respond to the changing circumstances, particularly with our vouchers, where we extended expiration dates and allowed for full refundability, which enabled Travelzoo to mitigate some of the negative effects of the pandemic on Travelzoo’s financial performance.

Now that the pandemic and its lingering effects have mostly subsided, we are seeing most of our advertisers and partners return to advertising with us and have altered our policies again to align with the changing environment (including reverting to a 14-day return window for vouchers and implementing a surcharge for full refundability for vouchers), although with the emergence of new variants, this trend could stop or even reverse.

Any changes in laws or regulations that again impair the ability or desire of individuals to travel, including laws or regulations banning travel, requiring vaccination, COVID testing requirements in connection with travel, the closure of hotels or other travel-related businesses or other restrictions in connection with or as a result of the pandemic, may exacerbate the negative impact 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 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.

The pandemic and the emergence of new variants could continue to hamper global economic activity for an extended period of time, even as restrictions are lifted and 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.

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.

Although all countries have opened 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.

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.

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-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 years ended December 31, 2021 and 2020.

We perform our impairment test annually in October unless there are events that trigger the need for an interim test.

We recorded a $200,000 impairment charge in connection with the indefinite lived intangible assets (JFC Trade name) in the annual impairment test for 2022.

No impairment charge was identified in connection with the annual impairment test for 2021.

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 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.

It requires significant judgments and estimates and actual results could be materially different.

See Note 3 to the Consolidated Financial Statements for fu rther information.

We cannot assure you that we will be profitable.

In the year ended December 31, 2022, we generated consolidated net income of $6.6 million, of which $ 6.6 million income was attributable to Travelzoo .

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.

Our profitability was adversely impacted in 2022 and 2021 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.

Given the impact of the pandemic in 2020, we significantly cut expenses to preserve profitability as much as possible.

In the future, depending on various factors, including but not limited to, market conditions, the improvement of the economy and the return of the travel industry following the pandemic, we may need to continue to cut expenses to preserve profitability or alternatively we may find it necessary to significantly accelerate expenditures in order to meet increased demand or to maintain brand awareness.

We may also expand and upgrade our technology and make investments in existing or new products that may impact our profitability.

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.

In the future, depending on various factors, including but not limited to, market conditions, the improvement of the economy and the return of the travel industry, we may need to continue to cut expenses to preserve profitability or alternatively we may find it necessary to significantly accelerate expenditures to meet increased demand or to maintain brand awareness.

We may also expand and upgrade technology and make investments in existing or new products that may impact our profitability.

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

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

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Expansion of product offerings may result in additional costs that exceed revenue and may trigger additional stock volatility.

In response to the global pandemic, we expanded our voucher product offerings to include fully refundable vouchers.

In March of 2022, we announced the creation of our new Metaverse business and our plans to launch Travelzoo META, a subscription membership service that provides members with exclusive access to Metaverse travel experiences.

In response to the global pandemic, we expanded our voucher product offering to include fully refundable vouchers and have now added a surcharge option where members can pay extra for full refundability.

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

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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 uncertainty due to the pandemic, our financial results could be affected.

If we cannot attract members to our product offerings, our financial results could be affected.

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

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

Our voucher products may be adversely impacted by competition and decreased consumer demand for vouchers.

Our voucher products may be adversely impacted by competition and changing consumer demand for vouchers.

Our Local Deals and Getaways products include the sale of vouchers directly to consumers to advertise promotional offers provided by merchants.

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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, 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.

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

However, as market conditions have continued to shift, we have seen a decline in demand for vouchers again.

We have therefore pivoted back to 14 day voucher refundability, but have also added a surcharge option, where members

can pay an extra fee for full refundability of the voucher.

It is possible in the future that the Company may strategically move away from offering the surcharge or vouchers in general.

It is also possible that travel restrictions may change again, resulting in consumers being unable to utilize their vouchers in the near-term or at all, meaning we would need to again work with partners to extend travel windows and expirations dates or implement again full refundability without a surcharge.

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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We could also face a significant decrease in traffic to our websites and/or increased costs.

Additionally, an area of increased scrutiny, particularly in Europe, involves contractual search term bidding restrictions where one contracting party agrees not to bid on certain key search terms related to the other party (e.g., such other party’s name).

In some of our contracts we or the other party have agreed to bidding restrictions.

Additionally, in some of our contracts we or the other party have agreed to bidding restrictions.

If bidding restrictions are held to be illegal or otherwise unenforceable, our performance marketing costs may increase if bidding on affected key words (especially those related to us) becomes more expensive, which could adversely affect our marketing efficiency and results of operations.

Trends in consumer use of mobile devices continues to create challenges.

Continued widespread use of mobile devices, such as the iPhone and Android-enabled smart phones, and tablets, coupled with the improved web browsing functionality and development of thousands of useful “apps” available on these devices, has been driving substantial traffic and commerce activity to mobile platforms.

We have experienced a significant shift of business to mobile platforms and our advertising partners have also seen a rapid shift of traffic to mobile platforms.

Our major competitors and certain new market entrants are offering mobile applications for travel products and other functionality, including proprietary last-minute discounts for hotel bookings and travel concierge services.

Trends in consumer use of mobile devices continue to create challenges.

Continued widespread use of mobile devices, smart phones, and tablets, coupled with improved web browsing functionality and development of thousands of useful “apps” available on these devices, has been driving substantial traffic and commerce activity to mobile.

We have experienced a significant shift of both business and traffic to mobile.

Advertising and distribution opportunities may be more limited on mobile devices given their smaller screen sizes.

The gross profit earned on a mobile transaction may be less than that earned from a typical desktop transaction due to different target consumers and different purchasing patterns.

Further, given the device sizes and technical limitations of tablets and smartphones, mobile consumers may not be willing to download multiple applications from multiple travel service providers and instead prefer to use one or a limited number for their mobile travel activity.

As a result, the consumer experience with mobile applications, as well as brand recognition and loyalty, are likely to become more important.

We also rely on application marketplaces, or app stores, to drive downloads.

In the future, marketplace operators may make changes that make access to our products more difficult.

We continue to make progress creating mobile offerings which have received strong reviews and have shown solid download trends.

The gross profit earned on a mobile transaction may be less than that earned from a typical desktop transaction.

The consumer experience with mobile applications, as well as brand recognition and loyalty, has become even more important.

We also rely on application marketplaces, to drive downloads.

In the future, marketplaces may make changes that make access to our products more difficult.

We believe that mobile bookings continue to present an opportunity for growth.

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We may have exposure to additional tax liabilities .

As a global company, we are subject to income taxes as well as non-income based tax, in the U.S.

As a global business, we are subject to income taxes as well as non-income based tax, in the U.S.

and various foreign jurisdictions.

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Changes in tax laws or tax rulings may have a significant adverse impact on our effective tax rate.

The 2017 Tax Cut and Jobs Act (“Tax Act”) included significant changes to the U.S.

corporate income tax system including:

a federal corporate rate reduction from 35% to 21%;

limitations on the deductibility of interest expense and executive compensation;

creation of new minimum taxes such as the base erosion anti-abuse tax and Global Intangible Low Taxed Income tax;

and the transition of U.S.

international taxation from a worldwide tax system to a modified territorial tax system, which will result in a one-time U.S.

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.

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.

There could be additional changes to the corporate tax rate in the future.

The interpretation and implementation of regulations, rules or guidance that have or may be adopted could have a material impact on our business.

A number of European Union member states have taken steps to unilaterally introduce a services tax.

In July 2019, France passed legislation that introduced a 3% digital services tax, which is retroactively applicable as of January 1, 2019.

Beginning in April 2020, the government of the United Kingdom implemented a digital services tax which imposes a 2% tax on revenues of search engines, social media services and online marketplaces which derive value from UK users.

Similarly, effective January 16, 2021, Spain will tax digital services at 3% for companies that operate globally and have a significant digital footprint in Spain.

For example, effective in January 2021, Spain began taxing digital services at 3% for companies that operate globally and have a significant digital footprint in Spain.

Many questions remain regarding these digital services taxes.

For example, it is not clear whether digital services taxes can be deducted for income tax purposes or whether there is potential for double taxation on the same transaction.

It is not clear whether digital services taxes can be deducted for income tax purposes or whether there is potential for double taxation on the same transaction.

The interpretation and implementation of these taxes (especially if there is inconsistency in the application of these taxes across tax jurisdictions) could have a materially adverse impact on our business, results of operations and cash flows.

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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.

The Company’s use of the NOLs of MTE is subject to a possible audit by the Internal Revenue Service (“IRS”).

The IRS may disagree with the Company’s position that the NOLs may be fully utilized, resulting in a whole or partial limitation on the use of the NOLs by the Company.

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

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A number of jurisdictions in the U.S.

have initiated lawsuits against other online travel companies, related to, among other things, the payment of hotel occupancy and other taxes (i.e., state and local sales tax).

In addition, a number of municipalities have initiated audit proceedings, issued proposed tax assessments or started inquiries relating to the payment of such taxes.

historically initiated lawsuits against other online travel companies, related to, among other things, the payment of hotel occupancy and other taxes (i.e., state and local sales tax).

In addition, a number of municipalities initiated audit proceedings, issued proposed tax assessments or started inquiries relating to the payment of such taxes.

Given our hotel booking platform and packaging technology consist of an agency model whereby we will facilitate reservations on behalf of a hotel or other supplier, the payment of hotel occupancy taxes and other taxes should be the responsibility of the applicable hotel or packaging partner, which are typically responsible for remitting applicable taxes to the various tax authorities.

Nevertheless, to the extent that any tax authority succeeds in asserting that we have a tax collection responsibility (for hotel bookings, packaging or any other aspects of our business, including Jack’s Flight Club), or we determine that we have one, with respect to future transactions, we may collect any such additional tax obligation from our customers, which would have the effect of increasing the cost to our customers and, consequently, could make our services less competitive (i.e., versus the websites of other online travel companies or hotel company websites) and reduce reservation transactions.

This could have a material adverse effect on our business and results of operations.

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We depend on our ability to attract and retain advertisers that are prepared to offer products or services on compelling terms to our members.

We do not generally have long-term arrangements to guarantee the availability of deals that offer attractive quality, value and variety to consumers or favorable payment terms to us.

We do not generally have long-term arrangements to guarantee the availability of offers that provide attractive quality, value and variety to consumers or favorable payment terms to us.

We must continue to attract and retain advertisers in order to increase revenue and maintain profitability.

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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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A change in our estimate of our refund rates with respect to unredeemed vouchers could result in a change of our reported revenues and an increase in our refund rates could reduce our liquidity and adversely affect our profitability.

In order to adapt to the shift in consumer demand due to COVID-19, we modified our refund policy for Local Deals and Getaways vouchers to allow refunds through the expiration date of the voucher, which is typically at least 6-12 months from the date of purchase.

In order to adapt to the shift in consumer demand due to the pandemic, we modified our refund policy for Local Deals and Getaways vouchers to allow refunds through the expiration date of the voucher, which is typically at least 6-12 months from the date of purchase.

Our previous policy allowed refunds for only 7-14 days after purchase with no limitations.

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If our refund estimates are materially understated, it will result in a reversal of revenues previously reported and we may be required to restate our financial statements for the relevant periods, which could damage our reputation and impact our stock price.

Additionally, although revenues from voucher purchases may increase, due to the modified refund policy the refund rate may also increase, likely above historical levels, resulting in increased liabilities and a reduction in recognizable revenue and liquidity, which could adversely affect our profitability.

If our advertisers do not meet the needs and expectations of our members, our business could suffer.

Our business depends on our reputation for providing high-quality deals, and our brand and reputation may be harmed by actions taken by advertisers, partners, or merchants that are outside our control.

For our Local Deals and Getaways merchants, since we are selling vouchers on behalf of the merchants directly to our members, we face exposure should merchants not fully honor the terms of the deals or the vouchers, including if the merchant were to go out of business or stop providing services for any reason.

As for our travel business, we are collecting an advertising fee from the advertiser and the members are booking the deal directly with the advertiser.

Although the advertiser is responsible directly to the consumer to provide the deal it advertised, our business can be adversely affected should an advertiser fail to comply with the terms of the advertised deal.

From time to time, merchants and advertisers risk the insolvency, bankruptcy or closure of their business and can face regulatory issues (including losing their travel licenses), which can result in the cancellation of travel services booked by consumers through the advertiser.

Advertisers who fail to fulfill the travel services advertised in the promotions ran by us can negatively impact our reputation, and advertisers that fail to pay for the advertisements can also negatively impact revenue growth.

Moreover, any shortcomings of one or more of our advertisers or merchants, particularly with respect to an issue affecting the quality of the deal offered or the products or services sold, may be attributed by our members to us, thus damaging our reputation and brand value and potentially affecting our results of operations.

In addition, negative publicity and member sentiment generated as a result of fraudulent or deceptive conduct by our merchants or partners could damage our reputation, reduce our ability to attract new members or retain our current members, and diminish the value of our brand.

Our business depends on our reputation for providing high-quality offers, and our brand and reputation may be harmed by actions taken by advertisers, partners, or merchants that are outside our control.

For our Local Deals and Getaways merchants, we face exposure should merchants not fully honor the terms of the offers or the vouchers, including if the merchant were to go out of business or stop providing services for any reason.

As for our travel business, although the advertiser is responsible directly to the consumer to provide the offer it advertised, our business can be adversely affected should an advertiser fail to comply with the terms of the advertised offer or provide us with misleading information about the offer that we use in our advertisements.

From time to time, merchants and advertisers risk the insolvency, bankruptcy or closure of their business and can face regulatory issues (including losing their licenses), which can result in the cancellation of services booked by consumers through the advertiser.

Advertisers who fail to fulfill the travel services advertised in the promotions run by us can negatively impact our reputation, and advertisers that fail to pay for the advertisements can also negatively impact revenue growth.

Moreover, any shortcomings of our advertisers or merchants, particularly with respect to an issue affecting the quality of the offer, may be attributed by our members to us, thus damaging our reputation and potentially affecting our results of operations.

In addition, negative publicity and member sentiment generated as a result of fraudulent or deceptive conduct by our merchants or partners could also damage our reputation, reduce our ability to attract new members or retain our current members, and diminish the value of our brand.

Our business relies heavily on email and other messaging services, and any restrictions on the sending of emails or messages or a decrease in member willingness to receive messages could adversely affect our revenue and business.

Our business is highly dependent upon email and other messaging services.

Deals offered through emails and other messages sent by us, or on our behalf by our affiliates, generate a substantial portion of our revenue.

Email offers sent by us, or on our behalf by our affiliates, generate a substantial portion of our revenue.

Because of the importance of email and other messaging services, if we are unable to successfully deliver emails or messages, or if members decline to open our emails or messages, our revenue and profitability could be adversely affected.

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Cookies are valuable tools to improve the customer experience and increase conversion.

Many jurisdictions, including the European Union and more recently, California, have adopted regulations governing the use of "cookies." To the extent any such regulations require "opt-in" consent before certain cookies can be placed on a user's computer or mobile device, our ability to serve certain customers in the manner we currently do might be adversely affected and our ability to continue to improve and optimize performance on our website might be impaired, either of which could negatively affect a consumer's experience using our services and our business, market share and results of operations.

affected and our ability to continue to improve and optimize performance on our website might be impaired, either of which could negatively affect a consumer's experience using our services and our business, market share and results of operations.

Our reported total number of members may be higher than the number of our actual individual members and may not be representative of the number of persons who are active potential customers.

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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.

However, if redemption and refund activities are more accelerated, or if we are not able to increase operating income, 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.

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

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.

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Certain governments have passed legislation to help businesses through the COVID 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.

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.

We have been 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.

To the extent we have received or will receive any assistance, we may be, or may have been required to agree to certain restrictions, audit requirements and/or obligations to reimburse support payments in part or in total, which could negatively impact the business.

Our reputation could also be harmed.

Our business may be sensitive to recessions or events effecting the travel industry generally.

We may be sensitive to recessions or other macroeconomic circumstances or events effecting the travel industry generally.

The demand for online advertising may be linked to the level of economic activity and employment in the U.S.

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 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 as these events are largely unpredictable;

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

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

Events like war or other conflicts (including the war in Ukraine), terrorist attacks, mass shooting incidents, natural disasters, plane crashes, travel-related health events, such as the pandemic, and logistical challenges such as widespread travel disruptions may 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, which can adversely impact our business.

Macroeconomic factors and uncertainties such as rising interest rates, persistently high inflation and/or recession fears may have a negative impact on consumer behavior by reducing consumers’ ability or willingness to engage in discretionary spending on travel.

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

We are not in a position to evaluate the net effect of these circumstances as many of these events and developments cannot be reliably forecasted;

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

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

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

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We accept payments for the sale of vouchers using a variety of methods, including credit cards and debit cards.

We pay interchange and other fees, which may increase over time and raise our operating expenses and lower profitability.

We pay interchange and other fees, which may increase over time, raise our operating expenses, and lower profitability.

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.

Because the global pandemic 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.

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Our reported financial results may be adversely affected by changes in United States generally accepted accounting principles, and we may incur significant costs to adjust our accounting systems and processes to comply.

United States generally accepted accounting principles are subject to interpretation by the Financial Accounting Standards Board, or ("FASB"), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.

In 2014, the FASB issued a new accounting standard related to revenue recognition which changed the way we account for certain of our sales transactions.

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 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 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.

United States generally accepted accounting principles are subject to interpretation by the Financial Accounting Standards Board ("FASB"), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret appropriate accounting principles.

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

The cost of these changes may negatively impact our results of operations during the periods of transition.

The cost of these changes may negatively impact our results of operations during the transition.

Risks Related to Our Markets and Strategy

Our international operations may result in operating losses and are subject to other material risks.

We may continue to invest in marketing as well as additional employees to support our operations (including licensing arrangements), which may generate operating losses.

We may continue to invest in marketing as well as additional employees to support our operations (including licensing arrangements) o r develop new products, such as Travelzoo META, whic h may generate operating losses.

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:

uncertainties and instability in economic and market conditions;

uncertainty regarding how the wider trading, legal, regulatory and labor environments will be impacted by Brexit, including the resulting impact on our business and that of our clients;

exposure to local economic or political instability and threatened or actual acts of terrorism;

compliance with U.S.

regulatory laws and requirements relating to anti-corruption, antitrust or competition, economic sanctions, data privacy, consumer protection, employment and labor laws, health and safety, information reporting and advertising and promotions;

exposure to local economic or political instability and threatened or actual acts of war or terrorism;

compliance with regulatory laws and requirements relating to anti-corruption, antitrust or competition, economic sanctions, data privacy, consumer protection, employment and labor laws, health and safety, information reporting and advertising and promotions;

financial risks from transactions in multiple currencies;

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Moreover, fluctuations in currency exchange rates can impact our revenues.

Foreign currency movements relative to the U.S.

currency movements relative to the U.S.

dollar have negatively impacted our revenues from our operations in Europe.

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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 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.

We believe that continuing to build awareness of the Travelzoo and Jack’s Flight Club brand names, and starting to build awareness of the Travelzoo META brand name, are 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 continues to increase.

In order to maintain and build brand awareness, we must succeed in our marketing efforts.

If we fail to successfully promote and maintain our brand consistently across numerous jurisdictions, incur significant expenses in promoting our brands and fail to generate a corresponding increase in revenue as a result of our branding efforts, or encounter legal obstacles which prevent our continued use of our brand names, our business could be materially adversely affected.

Our marketing spend is influenced by the marketing spend of our competitors as we seek to maintain and increase our brand recognition and to maintain and grow traffic to our platforms through performance marketing channels.

If we fail to successfully promote and maintain our brand consistently across numerous jurisdictions and channels, incur significant expenses in promoting our brands and fail to generate a corresponding increase in revenue as a result of our branding efforts, or encounter legal obstacles which prevent our continued use of our brand names, our business could be materially adversely affected.

Deterioration in our marketing efficiency could result in reduced revenues or revenue growth, or marketing expenses increasing faster than revenues, which would reduce margins and earnings growth.

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

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.

We spent $5.3 million and $2.9 million on marketing initiatives relating to member acquisition for the years ended December 31, 2022 and 2021, respectively, and expect 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.

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It may take us longer than expected to fully realize the anticipated benefits, and those benefits may ultimately be smaller than anticipated, which could adversely affect our business.

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.

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.

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

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We compete with search engines like Google that offer pay-per-click listings.

Additionally, certain search engines have increased their focus on acquiring or launching travel products.

For example, Google has continued to add features and functionality to its flight and hotel metasearch products, which have grown rapidly and has also further integrated its “Book on Google” reservation functionality into its products.

Additionally, certain search engines have increased their focus on acquiring or launching travel products, such as Google Flights.

We compete with newspapers, magazines and other traditional media companies that operate websites which provide online advertising opportunities.

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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.

We also compete with companies that offer similar services to Jack’s Flight Club, like Going (formerly Scott’s Cheap Flights) and Dollar Flight Club.

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

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Some competitors offer a variety of online services, such as food delivery, shopping, gaming or search services, many of which are used by consumers more frequently than online travel services.

As a result, a competitor that has established other, more frequent online interactions with consumers may be able to more easily or cost-effectively acquire customers for its travel services than we can.

If any of these platforms are successful in offering services similar to consumers who would otherwise use our platforms or if we are unable to offer our services to consumers within these super-apps, our customer acquisition efforts could be less effective and our customer acquisition costs could increase, either of which would harm our business and results of operations.

We also have seen that some competitors will accept lower margins, or negative margins, to attract attention and acquire new members.

As a result, a competitor that has established other, more frequent online interactions with consumers may be able to more easily acquire customers for its travel services than we can.

If any of these platforms are successful in offering similar services to consumers who would otherwise use our platforms or if we are unable to offer our services to consumers within these super-apps, our customer acquisition efforts could be less effective and our customer acquisition costs could increase, either of which would harm our business and results of operations.

We also have seen that some competitors will accept lower margins, or even negative margins, to attract attention and acquire new members.

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

We expect to face additional competition as other companies enter the online advertising market.

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 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.

This could cause delays in our development and introduction of new services and related products or enhancements of existing products until equivalent or replacement technology can be accessed, if available, or developed internally, if feasible.

If we experience these delays, our business could be materially adversely affected.

We also rely on certain third-party computer systems and third party service providers, including Global Distribution Systems and computerized central reservation systems, in connection with providing certain of our hotel booking services and travel package offerings.

Any interruption in these services and systems or deterioration in their performance could prevent us from utilizing certain booking services and have an adverse effect on our business, brands and results of operations.

Our business, including Jack’s Flight Club which relies on third parties for flight data, will suffer if we are unable to access technology, to gain access to additional products or to integrate new technology with our existing systems.

This could hinder our existing product offerings, cause delays in our development and introduction of new services and related products or enhancements of existing products until equivalent or replacement technology can be accessed, if available, or developed internally, if feasible.

experience these delays, our business could be materially adversely affected.

We also rely on certain third-party service providers, including Global Distribution Systems and computerized central reservation systems, in connection with providing our hotel booking services and travel package offerings.

Any interruption in these services and systems or deterioration in their performance could have an adverse effect on our business, brands and results of operations.

Our agreements with some third-party service providers are terminable upon short notice and often do not provide recourse for service interruptions.

We are in the process of a multi-year phased migration to integrate and upgrade certain cross-brand global systems and processes.

The implementation of new information technology, payment, enterprise resource planning, or other systems could be disruptive and/or costly or we may experience difficulty successfully integrating new systems into existing systems or migrating to new systems from existing systems, any of which could adversely affect our business and results of operations.

Any failure to implement or adapt to new technologies in a timely manner or at all could adversely affect our ability to compete, increase our consumer acquisition costs or otherwise adversely affect our business, brand, market share, and results of operations.

Acquisitions, investments, licensing arrangements and joint ventures could result in operating difficulties, dilution, and other harmful consequences that may adversely impact our business and results of operations.

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implementation or remediation of controls, procedures, and policies at the acquired company;

integration of the acquired company’s accounting, human resource, and other systems, and coordination of various functions;

transition of operations, users, and customers onto our platforms, if applicable;

failure to obtain required approvals on a timely basis, if at all, or conditions placed upon approval, under competition and antitrust laws which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected goals of an acquisition;

the need to integrate operations across different cultures and languages and to address the particular economic, legal, currency, political, and regulatory risks associated with specific countries;

failure to successfully develop the acquired business or technology;

liability for activities of the acquired company before the acquisition, including intellectual property infringement, violations of laws, commercial disputes, tax liabilities, and other known and unknown liabilities;

litigation or other claims in connection with the acquired company, including claims from employees, customers, former stockholders, or other third parties;

challenges relating to the structure of an investment, such as governance, accountability and decision-making conflicts;

expected and unexpected costs incurred in pursuing acquisitions, including identifying and performing due diligence on potential acquisition targets that may or may not be successful;

entrance into markets in which we have no direct prior experience and increased complexity in our business;

integration of accounting, human resource, and other systems, and coordination of various functions;

transition of operations, users, and customers;

failure to obtain required approvals on a timely basis, if at all, or conditions placed upon approval, which could, among other things, delay or prevent us from completing a transaction, or otherwise restrict our ability to realize the expected goals of an acquisition;

the need to integrate operations across different cultures and languages and to address the particular risks associated with specific countries;

failure to successfully develop the acquired business;

liability for activities of the acquired company;

litigation or other claims in connection with the acquired company;

challenges relating to the structure of an investment;

expected and unexpected costs incurred in pursuing acquisitions;

entrance into markets in which we have no prior experience and increased complexity in our business;

inability to sell disposed assets or impairment of investments, goodwill and other assets acquired or divested;

the need to obtain financial and other information regarding the investee in order to properly account and report for the investment on an on-going basis;

and failure to secure necessary financing in order to complete a purchase or applicable transaction.

and failure to secure necessary financing in order to complete an applicable transaction.

Future acquisitions may also require us to issue additional equity securities, spend our cash, or incur debt (and increased interest expense), liabilities and amortization expenses related to intangible assets or write-offs of goodwill, which could adversely affect our results of operations and dilute the economic and voting rights of our stockholders.

Also, the anticipated benefit of many of our acquisitions may not materialize.

Also, the anticipated benefit of an acquisition may not materialize.

As licensing arrangements typically involve third parties unrelated to the Company operating under our brand name in foreign jurisdictions, we risk, among other things, damage to our reputation or brand image if such third parties are unsuccessful or behave in a way that is contrary to Travelzoo.

For example, the business of MTE which Travelzoo acquired in December 2022 will require management resources to grow strategically and to realize the synergies that we believe exist between MTE and Travelzoo META.

We cannot guarantee that changes in management of MTE will not lead to disruption in the utilization of the contact network that MTE built up in the Metaverse creator community and that MTE as part of Travelzoo will be able to source Metaverse travel experiences as successfully as anticipated.

Risks Related to Legal Uncertainty

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and foreign laws and regulations affect the Company’s activities including, but not limited to, in areas of employment, advertising, digital content, consumer protection, real estate, billing, e-commerce, promotions, intellectual property, tax, anti-corruption, foreign exchange controls and cash repatriation restrictions, data privacy, anti-competition, health and safety, and vacation packaging.

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.

Compliance with these laws, regulations and similar requirements may be onerous and

expensive, and they may be inconsistent across jurisdictions, 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.

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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.

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.

Some of 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.

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.

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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.

Moreover, a successful challenge to our position could subject us to penalties or interest, which 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.

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We cannot predict the effect of any attempts to impose sales, income or other taxes on commerce over the Internet.

New or revised taxes and, in particular, sales taxes, Valued Added Tax (“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.

In June 2018, the U.S.

Supreme Court decided the

South Dakota v.

Wayfair, Inc.

sales tax nexus case and as a result, states now have the ability to adopt laws requiring taxpayers to collect and remit sales tax on a basis of economic nexus, even in states in which the taxpayer has no presence.

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 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.

Any of these events could have an adverse effect on our business and results of operations.

New or revised taxes and, in particular, sales taxes, Valued Added Tax 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.

For example, due to media sales for travel agents, clients or partners in certain states with economic nexus provisions, we could have potential tax exposure.

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

New taxes could also create significant increases in internal costs.

Any of these events could have an adverse effect on our business and results.

We may suffer liability as a result of information 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, violations of disability laws, antitrust or other legal claims relating to information that is published or made available on our websites or service offerings we make available.

These types of claims have been brought, sometimes successfully, against online services companies in the past.

The fact that we distribute information via email may subject us to potential risks, such as liabilities or claims resulting from unsolicited email or spamming, lost or misdirected messages, security breaches, illegal or fraudulent use of email or interruptions or delays in email 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.

We may be sued for legal claims relating to information that is published or made available on our websites or service offerings we make available.

The fact that we distribute information via email may subject us to additional potential risks, such as liabilities or claims resulting from unsolicited email or spamming, security breaches, illegal or fraudulent use of email or

interruptions or delays in email or mobile service, etc..

These risks are enhanced in certain jurisdictions, 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.

We are subject to risks associated with information disseminated through our websites and applications, including 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, which could materially and adversely affect our business.

In addition, we may acquire personal or confidential information, including credit card information, from users of our websites and mobile applications, related to our Local Deals, Getaways and hotel booking platform.

Our existing security measures may not be successful in preventing security breaches.

Outside parties may attempt to fraudulently induce disclosure of sensitive information in order to gain access to our secure systems and networks or to takeover customer accounts by using information obtained elsewhere to attempt to login to customer accounts on our websites.

A party (whether internal, external, an affiliate or unrelated third party) that is able to circumvent our security systems could steal proprietary information.

A security breach at any travel service provider, hotel, payment processor, GDS or other third-party travel supplier could result in negative publicity and exposure.

Such information, whether accurate or inaccurate, may result in a lawsuit, which could materially and adversely affect our business.

In addition, we may acquire confidential information, including credit card information, from users of our websites and mobile applications.

Our existing security measures may not be successful in preventing breaches.

Outside parties may attempt to fraudulently induce disclosure of sensitive information in order to gain access to our secure networks or to takeover customer accounts.

A party that is able to circumvent our security systems could steal proprietary information.

A security breach at any third-party supplier could result in negative publicity and exposure.

While we strive to use commercially acceptable means to protect personal data, no method of transmission over the Internet, or method of electronic storage, is 100% secure.

Cyberattacks are increasing in frequency and sophistication and are constantly evolving.

Cyberattacks are increasing in frequency and sophistication and are evolving.

Consequently, we may be unable to anticipate these attacks or to implement adequate preventative measures.

We have experienced and responded to cyberattacks, which we believe have not had a significant impact on the integrity of our systems or the security of any data maintained by us.

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 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.

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.

For example, the European Union adopted the GDPR, which went into effect in May 2018, California passed the California Consumer Privacy Act, which creates new data privacy rights for users effective in 2020, and on July 16, 2020, the Court of Justice of the European Union invalidated the EU-US Privacy Shield, which now requires that the transfer of information between the EU and the US be reviewed on a case-by-case basis.

We have experienced and responded to cyberattacks, which we believe have not had a significant impact on our systems or the security of any data maintained by us.

Security breaches or the unauthorized disclosure of 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.

There are a number of proposals for enactment or modification of data privacy laws pending or proposed in other jurisdictions.

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Claims have been asserted against us relating to shares not issued in our 2002 merger.

The Company was formed as a result of a combination and merger of entities founded by the Company’s principal stockholder, Ralph Bartel.

In 2002, Travelzoo.com Corporation (“Netsurfers”) was merged into Travelzoo.

Under and subject to the terms of the merger agreement, holders of promotional shares of Netsurfers who established that they had satisfied certain prerequisite qualifications were allowed a period of 2 years following the effective date of the merger to receive one share of Travelzoo in exchange for each share of common stock of Netsurfers.

In 2004, 2 years following the effective date of the merger, certain promotional shares remained unexchanged.

Under and subject to the terms of the merger agreement, holders of promotional shares of Netsurfers who established that they had satisfied certain prerequisites were allowed a period of 2 years following the effective date of the merger to receive one share of Travelzoo in exchange for each share of common stock of Netsurfers.

In 2004, certain promotional shares remained unexchanged.

As the right to exchange these promotional shares expired, no additional shares were reserved for issuance.

Thereafter, the Company began to offer a voluntary cash program for those who established that they had satisfied certain prerequisite qualifications for Netsurfer promotional shares.

Thereafter, the Company began to offer a voluntary cash program for those who established that they had satisfied certain prerequisites for Netsurfers promotional shares.

Beginning in 2010, the Company became subject to unclaimed property audits of various states in the U.S.

related to the unexchanged promotional shares.

Although the Company has settled the claims with all states, the Company may still receive inquiries from certain potential Netsurfer promotional stockholders that had not provided their state of residence to the Company.

Therefore, the Company is continuing its voluntary program under which it makes cash payments to individuals related to the promotional shares for individuals whose residence was unknown by the Company and who establish that they satisfy the original conditions required for them to receive shares of Netsurfers, and who failed to submit requests to convert their shares into shares of Travelzoo within the required time period.

The Company did not make any material payments under this voluntary program in 2021 and 2020.

Although the Company settled the claims with all states, the Company still receives inquiries from certain potential Netsurfers promotional stockholders that had not provided their state of residence to the Company.

Therefore, the Company is continuing its voluntary program under which it makes cash payments to individuals related to the promotional shares for individuals whose residence was unknown by the Company and who establish that they satisfy the original conditions required and who failed to submit requests to convert their shares into shares of Travelzoo within the required time period.

The Company did not make any material payments under this program in 2022 and 2021.

The total cost of this voluntary 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.

Federal laws and regulations, such as the Bank Secrecy Act and the USA PATRIOT Act and similar foreign laws, could be expanded to include Local Deals and Getaways vouchers.

Certain laws and regulations could be expanded to include Travelzoo products or services, including vouchers.

Various federal laws, such as the Bank Secrecy Act and the USA PATRIOT Act and foreign laws and regulations, such as the European Directive on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing, impose certain anti-money laundering requirements on companies that are financial institutions or that provide financial products and services.

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We do not believe that we are a financial institution subject to these regulations based, in part, upon the closed loop nature and other characteristics of vouchers and our role with respect to the distribution of vouchers to members.

However, the Financial Crimes Enforcement Network previously issued final rules regarding the scope and requirements for non-bank parties involved in stored value or prepaid access cards, including obligations on sellers or providers of “prepaid access”.

However, the Financial Crimes Enforcement Network previously issued final rules regarding the scope and requirements for non-bank parties involved in stored value or

prepaid access cards, including obligations on sellers or providers of “prepaid access”.

Under the final rule, providers or sellers of closed loop vouchers, such as those offered through the Local Deals and Getaways programs, would only be subject to registration if the vouchers exceed $2,000 in total value or if they are sold in aggregate amounts exceeding $10,000 to any single person in one day.

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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.

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

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

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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.

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

We may identify conditions that may result in material weaknesses in the future.

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.

For the year ended December 31, 2022, management identified a material weakness in our internal control over financial reporting related to having sufficient resources for the accounting for certain non-routine, non-recurring, unusual or complex transactions within our financial statement closing and reporting process.

Specifically, the Company did not have internal financial staff with sufficient specific expertise to ensure complete and timely financial reporting and disclosures related to technical and complex accounting transactions.

In case of any future non-routine, non-recurring, unusual and complex transactions, we have decided to take the following planned measures:

Engage sufficient outside subject matter experts and specialists to ensure the complete and timely accounting and financial reporting for certain non-routine, unusual or complex transactions and technical matters, where appropriate.

In some cases, multiple experts may be required.

Maintain adequate internal qualified personnel to properly supervise and review the information provided by outside subject matter experts and specialists.

We cannot assure you that these planned measures will be sufficient to avoid potential future material weaknesses.

We are unable to predict the time when we will again have a non-routine, non-recurring, unusual and complex transaction.

We may be unable to protect our registered trademark or other proprietary intellectual property rights and may face liability from intellectual property litigation.

Our success depends to a significant degree upon the protection of the Travelzoo brand name.

We rely on a combination of copyright, trade secret and trademark laws, as well as non-disclosure and other contractual arrangements to protect our intellectual property (“IP”) rights.

The steps we have taken to protect our IP rights, however, may not always succeed in deterring misappropriation of proprietary information.

We have registered the Travelzoo trademark in various jurisdictions.

If we are unable to protect our rights in the mark, a key element of our strategy of promoting Travelzoo as a brand could be disrupted and our business could be adversely affected.

We rely on a combination of copyright and trademark laws, non-disclosure and other contractual arrangements to protect our intellectual property (“IP”) rights.

The steps we have taken to protect our IP rights, however, may not always succeed in deterring misappropriation of proprietary information or preventing improper utilization the Travelzoo brand name.

We have registered the Travelzoo and Jack’s Flight Club trademarks in various jurisdictions.

If we are unable to protect our rights, a key element of our strategy could be disrupted and our business could be adversely affected.

We may not always be able to detect unauthorized use or take appropriate steps to enforce our IP rights.

In addition, the validity, enforceability, and scope of protection of IP in Internet-related industries are uncertain and still evolving.

The laws of countries in which we may market our services in the future are uncertain and may afford little or no effective protection of our IP.

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If this were to occur, our business could be materially adversely affected.

We cannot be certain that our products, content and brand names do not or will not infringe valid patents, copyrights or other IP rights held by third parties.

We cannot be certain that our products, content and brand names do not or will not infringe valid IP rights held by third parties.

We may be subject to legal proceedings and claims from time to time relating to the IP of others in the ordinary course of business.

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During the twelve months ended December 31, 2022, the closing price of our common stock on NASDAQ ranged from $4.11 to $10.33.

Our stock price may fluctuate in response to a number of factors, such as quarterly variations in operating results;

announcements of technological innovations or new products by us or our competitors;

stock price may fluctuate in response to a number of factors, such as quarterly variations in operating results;

announcements by us or our competitors;

changes in financial estimates and recommendations by securities analysts;

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There are several products offered in the market that allow stockholders to hedge stock, pledge their stock for collateral or engage in short selling, which can negatively impact the price of our stock.

The Company does not prohibit stockholder hedging or pledging arrangements but does have strict policies against trading with material non-public information.

The Company does not prohibit these arrangements but does have strict policies against trading with material non-public information.

Our stock price may be volatile given that operating results may vary from the expectations of securities analysts and investors, which are beyond our control.

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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, 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.

These broad market and industry fluctuations, 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.

We have a principal stockholder.

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, 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.

We are a controlled company.

Ralph Bartel, who founded Travelzoo, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro Capital Inc.

Azzurro is the Company’s largest shareholder, and as of December 31, 2022 together with Ralph Bartel, in his individual capacity (together, the “Azzurro Parties"), holds approximately 50.3% of the Company’s outstanding shares.

This means that the Company is a controlled company again.

Azzurro previously held greater than 50% ownership until approximately 2018.

The Company already has in place applicable corporate governance processes and procedures necessary for a controlled company to ensure independence (e.g., board of directors with majority independent directors, committees comprised solely of independent directors, etc.).

Holger Bartel, the Company’s Global Chief Executive Officer, is Ralph Bartel’s brother and holds approximately 3.3% of the Company’s outstanding shares.

It is possible that the interests of the Azzurro Parties may conflict with those of the Company or the stockholders of the Company in the future.

As a result of the Azzurro Parties’ ownership interests and voting power, they are in a position to influence and control significant corporate actions, including corporate transactions such as mergers, business combinations or dispositions of assets.

Our other stockholders will therefore have limited influence and control on matters requiring stockholder approval and this controlling ownership position could discourage others from initiating any potential merger, or takeover 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