TZOO 10-K & 10-Q changes, risk factors and insider trading

In the year ended December 31, 2025, we generated consolidated net income of $5 million, of which $4.7 million income was attributable to Travelzoo. In the year ended December 31, 2024, we generated consolidated net income of $13.7 million, of which $13.6 million income was attributable to Travelzoo. In the year ended December 31, 2023, we generated consolidated net income of $12.5 million, of which $12.4 million income was attributable to Travelzoo. We forecast our future expense levels based on our operating plans and our estimates of future revenues. In the future, depending on various factors, including but not limited to, market conditions, changes in the general economy and the travel industry, we may need to cut expenses to preserve profitability or, alternatively, we may find it necessary to significantly accelerate expenditures to meetacquire increasedClub demand or to maintain brand awareness.Members. We may also expand, upgrade and/or add 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.

Our quarterly and annual operating results may fluctuate significantly in the future due to a variety of factors that could affect our revenues or our expenses in any particular period. You should not rely on our quarter to quarter comparisons of our results of operations, as they are not considered an indication of future performance. Factors that may affect quarterly results include: level of investment in member acquisition, consumer refund rate; mismatches between resource allocation and client demand due to difficulties in predicting client demand; changes in general economic conditions (perceived or actual) that could impair consumer spending; the magnitude and timing of marketing initiatives, including member acquisition and expansion efforts; the introduction, development, timing, competitive pricing and market acceptance of our products and services and those of our competitors; our ability to attract, hire and retain key personnel; our ability to maintain merchant and member satisfaction such that we are able toand continue to attract high-quality merchants and members; our ability to manage our planned growth; our ability to encourage ourmember existing members to engageengagement with our products and services and to convert themnon-paying members to revenue-generatingClub usersMembers; our ability to encourage renewals and retention of Club Members; and technical difficulties or system downtime affecting the Internet or our products and services; and volatility of our operating results in new markets.downtime.

We may significantly decrease our operating expenses in response to changes in general economic conditions, performance and/or declines in consumer demand. We may significantly increase our operating expenses for a certain period if, among other reasons, we see a unique opportunity for a brand marketing campaign, if we find it necessary to respond to increased brand marketing by a competitor, or if we decide to accelerate our acquisition of new members or engagement of existing members. If revenues fall below our expectations in any quarter and we are unable to quickly reduce our operating expenses in response, our operating results would be lower than expected and our stock price may fall.

In December of 2023, we announced that effectiveOn January 1, 2024, we would be movingmoved to a paid membership model, with existing Travelzoo members grandfathered in through the end of the year. InSince Q4 2024,then, we have introduced additional member benefits, including but not limited to, Club Offers,Member early access to the Top 20, airport lounge access for delayed flights and a weekly giveaway.benefits. In March of 2022, we announced the creation of our new Metaverse business,business. followingWe a test and learn strategy, with plans for the launch of a subscription membership service that provides members with exclusive accessplan to include Metaverse travel experiences toas follow.a benefit of Travelzoo membership in 2026. The voucher product typically has a 14-day refund policy, but we may in the future alter or update the product, including refund windows, or invest in upgraded technology or new technology or 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 or our advertisers do not embrace the changes in our product offerings, our financial results could be affected. 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 Local Deals and Getaways products include the sale of vouchers directly to consumers to advertise promotional offers provided by merchants. ThisIn some instances, we pre-purchase vouchers/hotel rooms in bulk. The voucher format may require additional investments to maintain and grow the business including the hiring of additional sales personnel and additional spend on customer service, marketing, technology tracking systems and payment processing.business. Our vouchers typically have a 14-day refundability period,period but as of April 2022,and also have a surcharge option, where members can pay an extra fee for full refundability of the voucher.option. However, since before 2021, we have seen a general decline in demand for voucher products. It is possible in the future that the Company may strategically move away from offering the surcharge option or vouchers in general, or the Company may invest further in voucher offerings to expand them from a product perspective. 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 reliance on digital platforms and changes in search engine algorithms or other traffic-generating arrangements.

We rely heavily on our ability to attract and convert users into Club Members through our websites and mobile apps in a cost-effective manner. We utilize digital advertising platforms (including social media), Internet search engines such as Google, principally (through the purchase of travel-related keywords and through organic/algorithmic search,search) and other online sources to generate additional traffic to our websites. TheThese numberplatforms ofincreasingly incorporate generative AI features, such as AI-generated answers, assistants, and recommendations, that may satisfy user intent without directing users we attract from search engines to our websites isor duemay favor the platform's own or affiliated offerings. In addition, changes in largealgorithms, partranking tomethodologies, howuser andinterfaces, whereaccess informationterms, from,pricing, and links to, our websites are displayed on search engine results pages. The display, including rankings, of unpaid search results can be affected by a number of factors, many of which are not in our control and may change frequently. Search engines frequently update and change the logic that determinesor the placement andof displayAI-generated content by these platforms could reduce the visibility of resultsour ofservices, aincrease user’smember search,acquisition such that the placementcosts or costdecrease oftraffic. links to our websites can be negatively affected. In addition, aA significant amount of traffic is directed to our websites through our participation in pay-per-clickpay-per-click, pay-per-acquisition and display advertising campaigns on social media channels, search engines, travel metasearch engines, and Internet media properties. Pricing and operating dynamics for these traffic sources can experience rapid change, both technically and competitively. Also, we may scale back our expenditures at any time. Moreover, a search or metasearch engine could alter its search algorithms or display of results, causing a website to place lower in search query results. This would adversely affect our business and financial performance, potentially to a material extent. We could also face a significant decrease in traffic to our websiteswebsites, decreased efficiencies and/or increased costs. 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.

A number of European Union member states have taken steps to unilaterally introduce a services tax. For example, effective in January 2021, Spain began taxing digital services at 3% of revenues for companies that operate globally and have a significant digital footprint in Spain. Many questions remain regarding these digital services taxes. 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 material adverse impact on our business, results of operations and cash flows.

The Company’s use of the net operating losses (“NOLs”) of MTE or the NOLs themselves maybemay be audited by the Internal Revenue Service (“IRS”) or other taxing agency. 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.

Our current revenue model depends primarily on advertising fees paid by travel and entertainment companies and still relies significantly on email communications with our members. If current clients/partners decide not to continue or are unable to continue advertising their offers with us and we are unable to replace them with new clients/partners or alternative revenue streams (such as, for example, from the sale of paid memberships), our business may be adversely affected. To be successful, we must provide online marketing solutions that achieve broad market acceptance by travel and entertainment companies. In addition, we must attract sufficient Internet users with attractive demographic characteristics to our products.products via channels, such as social media, that they are frequently using. 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 or planned 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 purchase. If we do not adapt to these trends fully or quickly enough, we may lose revenue as consumer usage may decline. If we are not able to anticipate changes in the online advertising market or if our business model is not successful, our business could be materially adversely affected.

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

“Cookie”, “pixel” and tracking technology laws could negatively impact the way we do business.

ACookies, "cookie"pixels isand aother textsimilar filetracking that is stored on a user's computer or mobile device. Cookiestechnologies are common tools used by thousands of websites and mobile apps to, among other things, store or gather information (e.g., remember log-on details), market to consumers and enhance the user experience. CookiesThey are valuable tools to improve the customer experience and increase conversion. Many jurisdictions, including the European Union and moreseveral recently,U.S. California,states, have adopted regulations governing the use of cookies.tracking technology. To the extent any such regulations require "opt-in" consent before certain cookiestracking cantechnology may be placed on a user's computer or mobile device, our ability to serve certain consumers 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. Additionally,In addition, web and mobile browser developers, such as Apple, Microsoft or Google, have implemented and may continue to implement changes, including requiring additional user permissions, in Januarytheir 2024,browser or device operating system that impair our ability to measure and improve the effectiveness of advertising on our platform. For example, Apple has its Intelligent Tracking Prevention (“ITP”) feature in its Safari browser, which blocks some or all third-party cookies by default on mobile and desktop and has become increasingly restrictive over time. Google beganhas theshifted processits ofapproach from completely phasing out third-party cookies into itsallowing Chromeusers browser.to Wemake expectbrowser-level thatprivacy similarchoices, which could impact our advertising. These web and mobile browser developers have also implemented and may continue to implement changes toand Apple,restrictions Google or otherin browser or mobiledevice platformsfunctionality couldthat occur, further limitinglimit our ability to optimizecommunicate performancewith foror consumers.understand the identity of our members.

For the year ended December 31, 2024,2025, our cash and cash equivalents was $17.1$10 million, of which $13.8$7.8 million was held outside the U.S. in our foreign subsidiaries. As of December 31, 2024,2025, we had negative working capital of $4.7$10.8 million. Merchant payables was $16.3$11.7 million as of December 31, 2024.2025. The payable to merchants is generally due upon redemption of the voucher. The expiration dates of vouchers are through December 20252026; however, these expiration dates may sometimes be extended on a case-by-case basis and final payment may not be due for up to a year after expiration. Additionally, planned investments in member acquisition require significant funds, but we believe that renewals in 2026 and beyond, as well as efficiencies we find in our acquisition activities allowing for a quick payback, should enable us to fund member acquisition with our own cash flow. However, if redemption activities accelerate, if our marketing activities are no longer efficient, if our renewal rates are lower than expected, if our business is not profitable, andor if our planned targets for cash flows from operations are not met, we may need to obtain additional financing in the future. 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 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 require the pledging of assets, could subject the Company to restrictive covenants or large fees, and could limit our flexibility.

The demand for online advertising may be linked to the level of economic activity and employment in the U.S. and abroad. Specifically, our business is primarily dependent on the demand for online advertising from travel and entertainment companies. Events like war, political instabilityinstability, international trade disputes or other conflicts (including the war in Ukraine andUkraine, the Israel-Hamas war and the recent Iran conflict), terrorist attacks, mass shooting incidents, strikes, natural disasters and extreme weather situations (e.g., hurricanes, fires, droughts and floods), plane crashes, major public health events 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 tariffs,the implementation of tariffs (by the United States and other governments), 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.travel (e.g., we have seen some reluctance from our Canadian members to travel to the United States). In turn, that could have a negative impact on demand for our services. Since the majority of our revenue is derived from members and advertisers within the United States, economic conditions in the United States have a greater impact on us. We are not in a position to evaluate the net effect of these circumstances as many of these events cannot be reliably forecasted. In the longer term, our business might be negatively affected by financial pressures on or changes to the travel industry and the economy overall.

We accept payments for the sale of vouchers and for membership fees using a variety of methods, including credit cards and debit cards. 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 (on favorable terms or otherwise) or unable to provide these services to us. Macroeconomic circumstances over which we have no control may result in payment processing services requiring larger deposits, imposing stricter rules or requirements, or deciding to stop working with companies related to the travel industry altogether. 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. In addition, our results can be negatively impacted by purchases made using fraudulent credit cards. Because we act as the merchant of record for certain transactions, we may be held liable for accepting fraudulent credit cards on our websites as well as other payment disputes with our customers. If we have an increase of charge-backs due to the use of fraudulent credit cards on our websites, our business, results of operations and financial condition could be adversely affected. Moreover, under payment card rules and our contracts with our card processors, if there is a security breach of payment card information that we store, we could be liable to the payment card issuing banks for their cost of issuing new cards and related expenses. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and lose our ability to accept credit and debit card payments, process electronic funds transfers, or facilitate other types of online payments, and our business and results of operations could be adversely affected. If one or more of these contracts are terminated and we are unable to replace them on similar terms, or at all, it could adversely affect our results of operations.

There has been an increasedcontinued focus on the ESG practices of companies, including climate change, greenhouse gas emissions, diversity, equity and inclusion, human capital management, data privacy and security, supply chains (including human and civil rights issues), among other topics, by institutional, individual, and other investors, proxy advisory services, regulatory authorities, consumers, employees and other stakeholders. However,This wehas cannotresulted predictin what, whenexpanding and howincreasingly thecomplex newexpectations administrationrelated into thereporting, U.S.diligence, and disclosure on ESG topics. In addition, companies that implement ESG practices may takeface actionspushback tofrom rollbackESG opponents, anti-ESG legislation or otherwiseregulation, reviseand existingnegative laws,public rules or regulations focused on ESG.reactions. These evolving expectations and our efforts and ability to respond to and manage these issues, provide updates on them, and establish and meet appropriate goals, commitments, and targets present numerous risks, any of which may be outside of our control or could have a material adverse impact on our business. Our efforts in this area may result in a significant increase in costs and may not meet expectations, evolving standards or regulatory requirements, which may negatively impact our financial results, our reputation, our ability to attract or retain employees, or business partners, or expose us to various types of legal actions.

We may continue to invest in marketing as well as additional employees to support our operations (including licensing arrangements) or develop new products, such as Travelzoo META or the Travelzoo paidclub membership, which 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. There are certain additional risks inherent in doing business internationally, including: uncertainties and instability in economic and market conditions; 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; longer payment cycles and difficulties in collecting accounts receivable; trade barriers and changes in trade regulations, including new or increased tariffs; difficulties in developing, staffing and simultaneously managing foreign operations as a result of distance, language and cultural differences; stringent local labor laws and regulations; bans on travel among or between various countries; risks related to government regulation, including changing policies in areas such as trade, travel, immigration, and healthcare, among others; and potentially adverse tax consequences. Moreover, fluctuations in currency exchange rates can impact our revenues. Foreign currency movements relative to the U.S. dollar have negatively impacted our revenues from our operations in Europe. The uncertainty and volatility in foreign exchange rates, which may differ across regions, makes it more difficult to forecast industry and consumer trends and the timing and degree of their impact on our markets and business, which in turn could adversely affect our ability to effectively manage our business and adversely affect our results of operations.

We believe that continuing to build awareness of the Travelzoo, Travelzoo META, 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. In order to maintain and build brand awareness, we must succeed in our marketing efforts. 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 revenues as a result of our 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.

We spent $2.5$9.7 million and $7.0$2.5 million on marketing initiatives relating to member acquisition for the years ended December 31, 20242025 and 2023,2024, respectively, and expect to continue to spend significant amounts to acquire members. Our long-term success depends on our continued ability to attract, retain and engage members. We cannot assure you that the revenue from members we acquire will ultimately exceed the cost of acquiring new members. If members do not perceive our offers to be of high value and quality or if we fail to introduce new and more relevant deals, we may not be able to acquire or retain members, especially after the introduction of a paid membership. If we reduce our member acquisition costs, we cannot assure you that this will not adversely impact our ability to acquire new members. If we are unable to acquire new members who purchase our membership and dealsdeals, and renew, in numbers sufficient to grow our business, or if members cease to purchase,purchase or renew, the revenue we generate may decrease and our operating results will be adversely affected. If the level of usage by our members declines or does not grow as expected, we may suffer a decline in growth or revenue. A significant decrease in the level of usage or growth would have an adverse effect on our business, financial condition and results of operations.

There has also been a proliferation of new channels and platforms through which accommodation providers can offer reservations. For example, companies such as Airbnb (which acquired HotelTonight), HomeAway and VRBO (which are both owned by Expedia Group) offer services providing alternative accommodation property owners, particularly individuals, an online place to list their alternative accommodations, which compete with our hotel offers. Further, meta-search services may lower the cost for new companies to enter the market by providing a distribution channel without the cost of promoting the new entrant's brand to drive consumers directly to its website. 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 frequentfrequent, 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 customermember acquisition efforts could be less effective and our customermember 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 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.members. If we are not able to compete effectively with current or future competitors as a result of these and other factors, our business could be materially adversely affected.

The Company is subject to laws and regulations affecting its domestic and international operations in a number of areas. These U.S. 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 across jurisdictions, further increasing the costs of compliance and doing business. For example, Travelzoo 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. In addition, the U.S. Federal Trade Commission and certain states (including California and Minnesota) have introduced or are considering laws aimed at eliminating or regulating "junk fees" that require us to include all mandatory, non-governmental fees and charges in the prices we display, even though these are set by our partners. The costs of compliance, which may arise 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. We have implemented policies and procedures designed to ensure compliance, but there can be no assurance that our employees, contractors, partners, or agents will not violate such laws and regulations or the Company’s policies and procedures. In particular, we cannot predict what, when and how the newcurrent administration in the U.S. may take actions to rollback or otherwise revise existing laws or regulations, or the ultimate impact such changes may have on our results of operations.

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. For these purposes, financial institutions are broadly defined to include money services businesses such as providers of prepaid access cards. Examples of requirements imposed include customer identification and verification programs, suspicious activity monitoring and reporting, record retention policies and transaction reporting. 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”. Under the final rule, providers of closed loop vouchers, such as those offered through the Local Deals and Getaways, 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. Should thethese $2,000 limitlimits be exceeded or should more than $10,000 in aggregate vouchers be sold to any individual person (sales to businesses for resale or distribution are excluded)exceeded, then we may be deemed either a seller or provider of prepaid access subject to regulation. In the event that we become subject to these requirements or any other anti-money laundering laws or regulations imposing obligations on us as a money services business, our regulatory compliance costs to meet these obligations would likely increase which could reduce our net income. In addition, the costs for third parties to sell vouchers would increase, which may restrict our ability to enlist third parties to issue vouchers.

We are unable to predict if we may have future ineffective controls and procedures, if we will be able to effectively and efficiently remediate any such deficiencies and whether these deficiencies or the corresponding remediation efforts could result in a negative impact to our business. The SEC approved amendments in 2018 that raised the cap for status as a “smaller reporting company”. Travelzoo has qualified as a smaller reporting company since 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 do so if we were no longer a smaller reporting company. We are unable to predict if we may have future ineffective controls and procedures, if we will be able to effectively and efficiently remediate any such deficiencies and whether these deficiencies or the corresponding remediation efforts could result in a negative impact to our business.

Ralph Bartel, who founded Travelzoo, is the sole beneficiary of the Ralph Bartel 2005 Trust, which is the controlling shareholder of Azzurro. Azzurro is the Company’s largest shareholder, and as of December 31, 2024,2025, holds approximately 37.5%33.5% of the Company's outstanding shares. Azzurro previously held greater than 50% ownership until approximately 2018 and again from late 2022 until Q2 2023 and should Azzurro purchase additional shares or should the Company repurchase additional shares of its common stock, Azzurro’s ownership percentage could increase again, potentially above 50%, resulting in the Company being a controlled company again. 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 holdsdid lessnot thanhold 1%any of the Company’s outstanding shares.shares as of December 31, 2025. It is possible that the interests of Azzurro may conflict with those of the Company or its other stockholders in the future. As a result of Azzurro’s ownership interests and voting power, they could be in a position to influence significant corporate actions. Our other stockholders will therefore have limited influence and control on matters requiring stockholder approval and this significant ownership position could discourage others from initiating any potential merger or takeover that may otherwise be beneficial to Travelzoo stockholders.

Travelzoo,Travelzoo (including its subsidiaries and affiliates, the club“Company” foror travel enthusiasts,“we”) is a global Internet media company. We operate Travelzoo®, the club for travel enthusiasts, Jack’s Flight Club®, and Travelzoo META. We reach 30 million travelers. Club MembersMembers, who pay a membership fee, receive Club Offers personallynegotiated reviewedand rigorously vetted by our deal experts around the globe. WeOur work in partnershiprelationships with thousands of top travel suppliers—our long-standing relationships give us access to irresistible deals. Our club and its benefits are built around the lifestyle of a travel enthusiast.

Travelzoo membership has historically been free, however, beginning in 2024, new members in the United States, Canada, United Kingdom and Germany are charged an annual fee of $40 (or local equivalent), with the 2024 annual fee waived for existing members as of December 31, 2023. On January 1, 2026, we increased the annual membership fee to $50 in the United States for new members, For existing members, the new pricing will apply from the next renewal of their membership after February 1, 2026. For any subscription revenue derived from the paid membership, we recognize revenue monthly pro rata over the subscription period.

In March 2022 we announced the development of, and in May 2023 we launchedThrough Travelzoo META, we plan to extendinclude Metaverse travel experiences as a benefit of Travelzoo club membership in 2026, allowing us to utilize and leverage all we have learned and developed over the rangepast offew experiencesyears we offer consumers to the emerging metaverse. On December 30, 2022, we acquired Metaverse Travel Experiences, Inc., now Metaverse Travel Experiences, LLC (“MTE”), to supportfor Travelzoo META infor sourcingthe prospectivebenefit travelof experiences.our Club Members. MTE also continues to operate its legacy business in retail and fashion, which is included in but not material to the Company’s consolidated results.results

Revenues from the Travelzoo brand and business are generated primarily from three categories: Advertising,Advertising and Commerce, Membership Fees, and Other.

The "Advertising and Commerce" category consists primarily of (a) advertising fees paid by travel companies for the publishing of their offers on Travelzoo’s media properties, (b) commissioncommissions and revenues generated from the sale of Getaways vouchers and bookings on our hotel platform, and (c) publishing fees from high-quality local businesses, sale of Local Deals vouchers and entertainment offers. Advertising fees may be based on audience reach, placement in email newsletters or on media properties, number of listings, number of clicks, and/or actual sales. We typically recognize advertising revenues upon delivery of emails or clicks, as tracked by our internal platform or third-party platforms, in the period of the applicable insertion orders, which are typically for periods between one month and twelve months and are not automatically renewed. For Getaways vouchers, we recognize a percentage of the face value of vouchers upon sale as commission, net of an allowance for future refunds. Merchant agreements for Getaways advertisers are typically for periods between twelve and twenty-four months and are not automatically renewed. Revenues generated from local business offers are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach. We recognize revenue upon the sale of vouchers, upon notification of the amount of direct bookings or upon delivery of emails. For Local Deals vouchers, we recognize a percentage of the face value of vouchers upon the sale of the vouchers, net of an allowance for refunds. Insertion orders and merchant agreements for Local Deals are typically for periods between one and twelve months and are not automatically renewed.

The "Membership Fees" category consists of subscription fees paid by Travelzoo,Travelzoo and Jack's Flight Club, and Travelzoo METAClub members. Travelzoo® membership has historically been free, however, on January 1, 2024, Travelzoo introduced an annual membership fee of $40 (or local equivalent) for new members in the United States, Canada, United Kingdom and Germany, with the 2024 annual fee waived for existing members as of December 31, 2023. On January 1, 2026, we increased the annual membership fee to $50 for new members in the United States only. For existing members, the new pricing will apply from the next renewal of their membership after February 1, 2026. We recognize subscription revenues ratably over the respective subscription periods. Jack’s Flight Club subscription options are quarterly, semi-annually, and annually. We recognize subscription revenues ratably over the respective subscription periods. For Travelzoo META, a founding membership was launched in 2022 following a test-and-learn strategy.

Factors relating to competitors include the willingness of certain competitors to grow their business unprofitably. Factors relating to the travel industry include lingering effects of the global pandemic, geopolitical tensions affecting consumer travel to certain regions, and risk of future unforeseeable macro events that impact travel, while factors relating to the online advertising business include shifts in consumer use of different digital media formats such as from desktop to mobile, from mobile web to mobile app, and from email to push notifications and SMS text messaging.

Our ability to continue generating revenues through advertising, commissions and subscriptions depends heavily upon our ability to maintain and grow an attractive audience for our publications. We monitor our membership base to assess our efforts to maintain and grow our audience reach. We obtain additional members and activity on our websites by acquiring traffic from Internet search companies. The costs to grow our audience have had, and we expect will continue to have, a significant impact on our financial results and can vary from period to period. With the introduction of membership fees in 2024, our former user acquisition strategies and marketing tactics are no longer applicable for the Travelzoo membership base, and we are developing new usermember acquisition strategies whose timeframes to become effective are inherently uncertain. While we are initially reducing our expenditures on acquiring traffic as we test new strategies for efficacy, in time we may need to increase these expenditures to maintain or grow our audience and reach of our publications. We continue to see a shift in usersmembers accessing our services through mobile devices and social media and, therefore, anticipate continuing to address this growing channel through increased marketing on social media channels.

We do not know what our sales and marketing expenses as a percentage of revenue will be in future periods. Changes in the average cost per acquisition of new members impacts our advertising expenses and sales and marketing expenses as a percentage of revenue, and are not readily predictable. With the introduction of membership fees in 2024, we expectexpected the cost of acquiring new paying members to increase significantly, as compared with the cost of acquiring non-paying members prior to 2024. Initially,In we are reducing our2025, advertising expenditures,expenditures increased significantly as we are no longer offering free memberships for new members and, accordingly, prior user acquisition strategies are not in use. Further, we are early in the development ofimplemented new strategies to acquire payingClub members, so our test budgets have not yet fully scaled.Members. However, as we test new strategies and gain more learnings as to acquiring paying members, our expenditures may increase significantly.fluctuate. In addition, there may be a significant number of members that cancel or we may cancel their subscriptions for various reasons, which may prompt us to spend more on member acquisition in order to replace lost members.

The following table sets forth the breakdown of revenues (in thousands) by category Advertising, Membership Fees, and Other. Advertising includes travel publications (Top 20, Travelzoo website, Standalone email newsletters, Travelzoo Network), Getaways vouchers, hotel platform, vacation packages, Local Deals vouchers and entertainment offers (vouchers and direct bookings). Membership Fees includes subscription fees paid by Travelzoo,Travelzoo and Jack’s Flight Club and Travelzoo META members. Other includes licensing fees from license agreements and the retail business acquired with MTE.

Advertising and Commerce

Cost of revenues decreasedincreased $465,000$7.6 million for the year ended December 31, 20242025 compared to the year ended December 31, 20232024 primarily due to aan decreaseincrease in softwarecosts andrecognized licenseupon costs.the sale of pre-purchased vouchers. Cost of revenues as a percent of revenues declinedincreased from 12.9% in 2023 to 12.5% in 2024.2024 to 19.7% in 2025.

Sales and marketing expenses decreasedincreased $3.3$10.8 million, or 9%,31%, in 20242025 as compared to 2023,2024, primarily due to decreaseincrease in member acquisition. Sales and marketing expenses as a percent of revenues declinedincreased from 44.7%41% in 20232024 to 41.1%49.4% in 2024.2025.

Product development expenses increased by $300,000,$144,000, or 14%,6%, in 20242025 as compared to 2023,2024, primarily due to increasedincrease in salary and related expenses. Product development expenses as a percent of revenues were 2.9%2.8% and 2.5%2.9% in 20242025 and 2023,2024, respectively.

Other income, net consisted primarily of foreign exchange transactions gains and losses, sublease income, German federal government funding for Corona-related pandemic relief, interest income and interest expense. Other income was $588,000$753,000 and $1.5 million$588,000 for the years ended December 31, 20242025 and 2023,2024, respectively.

Our effective tax rate decreasedincreased for 20242025 as compared to 2023,2024, primarily due to ahigher decreaseinterest inexpense non-deductiblerelated stockto compensation.uncertain tax positions. We expect our effective tax rate to fluctuate in future periods depending on the geographic mix of our worldwide income or losses mainly incurred by our operations, statutory tax rate changes that may occur, existing or new uncertain tax matters that may arise and require changes in tax reserves and the need for valuation allowances on certain tax assets, if any. See Note 6–Income Taxes to the accompanying consolidated financial statements included in Part II, Item 8 of this report which is incorporated herein by reference.

North America revenues decreasedincreased $988,000,$5.2 million, or 1.8%,9%, in 20242025 as compared to 2023.2024. This decreaseincrease was primarily due to the decreaseincrease in revenuespaid frommembership fees and sales of pre-purchased vouchers or hotel platform and Local Deals.inventory. North America cost of sales and operating expenses decreasedincreased by $1.9$12 million in 20242025 as compared to 2023,2024, primarily due to a $2.5$5.7 million decreaseincrease in cost of revenue related to purchase of vouchers and gift cards which were sold during the year ended December 31, 2025, and a $4.7 million increase in member acquisition costs and $631K decrease in software expenses, offset by various increases including $811K in salary costs.

Europe revenues increased $50,000,$1.9 million, or 0.2%,8%, in 20242025 as compared to 2023.2024. This increase was primarily due to the increase in paid membership fees and sales of pre-purchased vouchers or hotel inventory. Europe cost of sales and operating expenses decreasedincreased $2.9by $7.3 million in 20242025 as compared to 2023,2024, primarily due to decreaseda $1.9 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the year ended December 31, 2025, a $2.5 million increase in member acquisition costs.costs, and a $1 million increase in salary and related expenses.

Foreign currency movements relative to the U.S. dollar impacted local currency income from our operations in Europe by approximately $106,000negatively $97,000 and negativelypositively $40,000$106,000 in 20242025 and 2023,2024, respectively.

Jack’s Flight Club revenues increased $460,000,$739,000, or 11%,16%, in 20242025 as compared to 20232024 due to increase of subscription fees andpaid increaseby of premiumthe members. Jack’s Flight Club cost of sales and operating expenses increased $690,000$446,000 in 20242025 as compared to 2023,2024, primarily due to an increase in headcount to support Canadian expansion and advertising and marketing expenses.

Cash, cash equivalents and restricted cash increaseddecreased by $1.3$7.0 million to $10.8 million as of December 31, 2025 from $17.7 million as of December 31, 2024 from $16.4 million as of December 31, 2023,2024, primarily due to cash provided by operating activities, offset partially by cash used to repurchase common stock.stock, offset partially by cash provided by operating activities.

Net cash provided by operating activities for 20242025 was $21$5.7 million, as compared to $10.7$21.1 million in 2023,2024, consisting of net income of $13.7$5 million, $2$1.2 million of adjustments for non-cash items and $5.4 million$478,000 used in changes in operating assets and liabilities. Adjustments for non-cash items primarily consist of $907,000$305,000 for depreciation and amortization and $1.6$1.4 million for stock-based compensation, offset partially by $518,000$558,000 of deferred income tax change. Cash used in operating assets and liabilities was primarily due to a $4.1$5.2 million decrease in merchant payables, offset partially by a $950,000 decrease in prepaid expenses and other and $1.9$2.4 million increase in otheraccounts liabilities.receivable and a $2 million increase in deferred revenue.

Net cash provided by operating activities for 20232024 was $10.7$21 million, consisting of net income of $12.5$13.7 million, $2 million and $2.4 millionof adjustments for non-cash items,items offsetand partially by $4.2$5.4 million used in changes in operating assets and liabilities. Adjustments for non-cash items primarily consist of $1.9 million$907,000 for depreciation and amortization and $1.6 million for stock-based compensation, offset partially by a $1.0 million reversal$518,000 of reservedeferred forincome accountstax receivable and refunds.change. Cash used in operating assets and liabilities was primarily due to a $12.1$4.1 million decrease in merchant payables, offset partially by a $3.8 million$950,000 decrease in prepaid expenses and other,other $2.4and $1.9 million increase in other liabilities and $1.2 million decrease in prepaid income taxes.liabilities.

Cash paid for income tax, net of refunds received, in 2024,2025, was $1.9$3.8 million. Cash received for income tax refunds, net of payments in 2023,2024, was $1,000.$1.9 million.

Net cash used in financing activities for 20242025 was $19$13 million primarily for the repurchase of common stock. Net cash used in financing activities for 20232024 was $14.2$18.9 million, whichmillion primarily consisted of $16.8 million for the repurchase of common stock and $3.0 million payment of promissory notes.stock.

We also license Travelzoo products, services and intellectual property to licenseslicensees in (a) Australia, New Zealand, and Singapore and (b) Japan and South Korea, in each case, where the Company is entitled to a quarterly royalty payment based on a percentage of net revenue. Under the licensing agreements, existing Travelzoo members in the applicable territories continue to be owned by the Company.

The “Advertising and Commerce” category consists primarily of (a) advertising fees paid by travel companies for the publishing of their offers on Travelzoo’s media properties, (b) commissions and revenues generated from the sale of Getaways vouchers and bookings on our hotel platform, and (c) publishing fees from high-quality local businesses, sale of Local Deals vouchers and entertainment offers. Advertising fees may be based on audience reach, placement in email newsletters or on media properties, number of listings, number of clicks, and/or actual sales. We typically recognize advertising revenues upon delivery of emails or clicks, as tracked by our internal platform or third-party platforms, in the period of the applicable insertion orders, which are typically for periods between one month and twelve months and are not automatically renewed. For Getaways vouchers, we recognize a percentage of the face value of vouchers upon sale as commission, net of an allowance for future refunds. Merchant agreements for Getaways advertisers are typically for periods between twelve and twenty-four months and are not automatically renewed. Revenues generated from local business offers are based upon a percentage of the face value of the vouchers sold, commission on actual sales or a listing fee based on audience reach. We recognize revenue upon the sale of vouchers, upon notification of the amountnumber of direct bookings or upon delivery of emails. For Local Deals vouchers, we recognize a percentage of the face value of vouchers upon the sale of the vouchers, net of an allowance for refunds. Insertion orders and merchant agreements for Local Deals are typically for periods between one and twelve months and are not automatically renewed.

As of MarchJune 31,30, 2026 and December 31, 2025, the Company had approximately $3.4$2.7 million and $2.9 million of unredeemed vouchers that had been sold, respectively, representing the Company’s commission. The Company estimates a refund reserve using historical and current refund rates by product and by merchant location to calculate estimated future refunds. The Company estimated and recorded a refund reserve of $283,000$118,000 and $188,000 as of MarchJune 31,30, 2026 and December 31, 2025, respectively, for these unredeemed vouchers which is recorded as a reduction of revenues on the condensed consolidated statements of operations, and accrued expense and other on the condensed consolidated balance sheet.

Merchant payables of $13.5$10.7 million as of MarchJune 31,30, 2026 related to unredeemed vouchers is recorded on the condensed consolidated balance sheet, representing amounts payable to merchants by the Company for vouchers sold but not redeemed. Certain merchant contracts, typically in foreign locations, allow the Company to retain the proceeds from unredeemed vouchers upon expiration. With these contracts, the Company estimates the value of vouchers that will ultimately not be redeemed and records the estimate as revenues in the same period.

In addition to the type of membership offered, we believe the average cost per acquisition depends mainly on the advertising rates we pay for media buys, the quality of the members we acquire (based on both clicks and purchases through Travelzoo), our ability to manage our member acquisition efforts successfully, the regions we target to acquire new members and the relative costs for thatthose region,regions, and the degree of competition in our industry.

Advertising and Commerce revenue decreased by $992,000$2.7 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. This decrease was primarily driven by selling less advertising insertion orders, as the Company prioritized the sale of memberships.

Revenues from Membership feesFees increased $2.1$2.0 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 due to the increase in paying members.

Revenues from OtherMembership remainedFees flatincreased $4.1 million for the threesix months ended MarchJune 31,30, 2026 from the threesix months ended MarchJune 31,30, 2025.2025 due to the increase in paying members.

Cost of revenues consists primarily of network expenses related to powering the Company's websites, database services, sending e-mails, amortization of capitalized website development costs, software and license expenses, publishing fees to partners of the Travelzoo Network, costs incurred upon the sale of pre-purchased vouchers and other products, including directly attributable member services (call center), cost of certain membership benefits that are considered integral to the contractual obligation to Club Members, and fees to payment processors. Cost of revenues was $5.2$7.1 million and $4.2$5.2 million, respectively, for the three months ended MarchJune 31,30, 2026 and 2025. Cost of revenues was $12.3 million and $9.3 million, respectively, for the six months ended June 30, 2026 and 2025.

Cost of revenues increased $1.0$1.9 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 primarily due to the increase in costs recognized upon the sale of pre-purchased vouchers.

Sales and marketing expenses consist primarily of advertising and promotional expenses, salary and related expenses associated with sales, marketing and production employees, expenses related to our participation in industry conferences, marketing professional service costs, public relations expenses and facilities costs. Sales and marketing expenses were $11.1$13.7 million and $10.2$11.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Sales and marketing expenses were $24.9 million and $21.7 million for the six months ended June 30, 2026 and 2025, respectively. Advertising expenses consist primarily of online advertising which we refer to as traffic acquisition costcosts and member acquisition costs. For the three months ended MarchJune 31,30, 2026 and 2025, advertising expenses accounted for 22%40% and 15%,25%, respectively, of the total sales and marketing expenses. For the six months ended June 30, 2026 and 2025, advertising expenses accounted for 32% and 20%, respectively, of the total sales and marketing expenses. The goal of our advertising was to acquire new members to our email products, increase the traffic to our websites, increase brand awareness and increase our audience through mobile and social media platforms.

Sales and marketing expenses increased $0.9$2.2 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. The increase was primarily due to the increase in member acquisition costs as a result of management's strategic plan.

Product development expenses consist primarily of salary and related expenses associated with software development employees, fees for professional services, software maintenance, amortization, and facilities costs. Product development expenses were $664,000$602,000 and $634,000$698,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Product development expenses were $1.3 million for the six months ended June 30, 2026 and 2025, respectively.

Product development expenses increaseddecreased $30,000$96,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 primarily due to the increasedecrease in salaryprofessional expense.services costs.

General and administrative expenses consist primarily of salary and related expenses associated with administrative and executive employees, bad debt expense, professional service expenses, legal expenses, amortization of intangible assets, general office expense and facilities costs. General and administrative expenses were $3.8 million and $4.3$4.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively. General and administrative expenses were $8.3 million and $8.8 million for the six months ended June 30, 2026 and 2025, respectively.

General and administrative expenses decreasedremained $493,000flat for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 primarily due to a $305,000 decrease in stock compensation expenses and a $210,000 decrease in bad debt.2025.

OtherGeneral incomeand (loss),administrative netexpenses decreased $634,000$464,000 for the threesix months ended MarchJune 31,30, 2026 from the threesix months ended MarchJune 31,30, 2025 primarily due to thea foreign$251,000 exchangedecrease transactionin loss.payroll expenses and a $248,000 decrease in bad debt.

Our income is generally taxed in the U.S., Canada and U.K. Our income tax provision reflects federal, state and country statutory rates applicable to our worldwide income. Income tax expense (benefit) was $0.9 million$(382,000) and $1.2 million,$740,000, respectively, for the three months ended MarchJune 31,30, 2026 and 2025. Our effective tax rate from continuing operations was 27%15% and 26%,33%, respectively, for the three months ended MarchJune 31,30, 2026 and 2025. The Company’s effective tax rate for the three months ended MarchJune 31,30, 2026 changed from the three months ended MarchJune 31,30, 2025 primarily due to the decrease in operating profit and an increase to interest expense for the uncertain tax position in the three months ended June 30, 2026. Income tax expense was $0.6 million and $1.9 million, respectively, for the six months ended June 30, 2026 and 2025. Our effective tax rate from continuing operations was 59% and 29%, respectively, for the six months ended June 30, 2026 and 2025. The Company’s effective tax rate for the six months ended June 30, 2026 changed from the six months ended June 30, 2025 primarily due to a decrease in operating profit in the threesix months ended MarchJune 31,30, 2026.2026 and an increase in interest expense associated with uncertain tax positions.

North America revenues increaseddecreased by $539,000$453,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. This increasedecrease was primarily due to the decrease in advertising email revenue partially offset by the increase in paid membershipMembership feesFees and Getaways vouchers. North America expenses increased by $0.9$3.9 million for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. The increase was primarily due to a $932,000$1.9 million increase in cost of revenue related to purchase of vouchers and gift cards which were sold during the three months ended MarchJune 31,30, 2026.2026 and a $1.8 million increase in member acquisition costs.

Europe revenues increaseddecreased by $565,000$148,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025. The increasedecrease was primarily due to the decrease in advertising email revenue partially offset by the increase in paid membershipMembership feesFees and GetawayGetaways vouchers. Europe expenses increased by $514,000$168,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 primarily due to a $408,000$330,000 increase in member acquisition costscosts, offset by a $161,000 decrease in salary and a $260,000 increase in cost of revenue related to the purchase of vouchers and gift cards which were sold during the three months ended March 31, 2026.expenses.

Foreign currency movements relative to the U.S. dollar positivelynegatively impacted our local currency income from our operations in Europe by approximately $2,000$22,000 and $11,000$42,000 for the three months ended MarchJune 31,30, 2026 and 2025, respectively. Foreign currency movements relative to the U.S. dollar negatively impacted our local currency income from our operations in Europe by approximately $68,000 and $11,000 for the six months ended June 30, 2026 and 2025, respectively.

Jack’s Flight Club revenues increaseddecreased by $29,000$95,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 due to the increasedecrease in subscription fees paid by the members. Jack’s Flight Club expenses increased by $89,000$95,000 for the three months ended MarchJune 31,30, 2026 from the three months ended MarchJune 31,30, 2025 primarily due to the increase in advertisingemployee expenses.and contractor costs.

As of MarchJune 31,30, 2026, we had $10.6$6.8 million in cash and cash equivalents, of which $7.4$5.4 million was held outside the U.S. in our foreign operations. If this cash is distributed to the U.S., we may be subject to additional foreign withholding taxes in certain circumstances. We also had $754,000 in restricted cash held in the U.S. and U.K. as of MarchJune 31,30, 2026.

Cash, cash equivalents and restricted cash increaseddecreased $562,000$3.2 million from $10.8 million as of December 31, 2025 to $11.3$7.6 million as of MarchJune 31,30, 2026, primarily due to $3.9 million cash provided by operating activities, partially offset by $3.3$5.2 million cash used to repurchase common stock.stock, partially offset by $2.2 million cash provided by operating activities.

As of MarchJune 31,30, 2026, we had merchant payables of $13.5$10.7 million related to unredeemed vouchers. In the Company’s financial statements presented in this 10-Q report, following U.S. generally accepted accounting principles (“GAAP”), we classified all merchant payables as current. When all merchant payables are classified as current, there is negative net working capital (which is defined as current assets minus current liabilities) of $10.8$14.3 million. Payables to merchants are generally due upon redemption of vouchers. As of MarchJune 31,30, 2026, unredeemed vouchers have maturities through MarchJune 20262027; however, expiration dates may be extended on a case-by-case basis and final payment to merchants upon expiration may not be due for up to a year after. Based on current projections of redemption activity, we expect that cash on hand as of MarchJune 31,30, 2026 will be sufficient to provide for working capital needs for at least the next twelve months.

Net cash provided by operating activities is net income adjusted for certain non-cash items and changes in assets and liabilities. Net cash provided by operating activities for the threesix months ended MarchJune 31,30, 2026 was $3.9$2.2 million, which primarily consisted of net income of $2.5$392,000, million,a $154,000$18,000 increasedecrease in non-cash items and a $1.2$1.8 million increase in cash from changes in operating assets and liabilities. Adjustments for non-cash items primarily consisted of $77,000$753,000 decrease in deferred income tax offset partially by a $719,000 for netstock foreignbased currencycompensation effect and $56,000 for depreciation and amortization.expenses. The increase in cash from changes in operating assets and liabilities was primarily due to $2.8a million decrease in accounts receivable, offset partially by $2$4.1 million increase in deferred revenue and $1.9$1.7 million increase in merchantaccrued payables.expenses, offset partially by a $3.9 million decrease in accounts receivable.

Cash paid for income tax, net of refunds received, during the threesix months ended MarchJune 31,30, 2026 and 2025 was $290,000$560,000 and $1.5$2.7 million, respectively.

Net cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 and 2025 was $8,000$14,000 and $21,000,$34,000, respectively. The cash used in investing activities for the threesix months ended MarchJune 31,30, 2026 consisted of purchases of property and equipment.