Travelzoo 2004 Annual Report Download - page 43

General and Administrative
General and administrative expenses consist primarily of compensation for administrative and executive
staÅ, fees for professional services, rent, bad debt expense, payments made to former stockholders of
Travelzoo.com Corporation, amortization of intangible assets and general oÇce expense. General and
administrative expenses increased to $6.2 million for the year ended December 31, 2004 and to $4.3 million for
the year ended December 31, 2003 from $2.3 million for the year ended December 31, 2002. In 2004, general
and administrative expenses increased primarily due to expenses of $1.2 million for cash payments made to
former stockholders of Travelzoo.com Corporation and also due to increases in expenses for oÇce space and
legal and professional services. General and administrative expenses in 2003 include $328,000 of expenses paid
by the Company for a secondary oÅering of common stock to meet the listing requirements of the NASDAQ
SmallCap Market.
We expect that we will incur signiÑcant expenses in 2005 in order to allow management to report on, and
our independent auditors to attest to, our internal controls over Ñnancial reporting, as required by Section 404
for the Sarbanes-Oxley Act of 2002. At this time, the total cost is not reliably estimable as it will be dependent
on the number of areas requiring improvement and on remediation eÅorts where necessary. Currently, none of
our identiÑed areas that need improvement have been categorized as material weaknesses or signiÑcant
deÑciencies. However, we are still in the evaluation process, and we may identify conditions that may result in
signiÑcant deÑciencies or material weaknesses in the future.
We expect our headcount to continue to increase in the future. The Company's headcount is one of the
main drivers of general and administrative expenses. Therefore, we expect our general and administrative
expenses to continue to increase.
If we replicate our business model in foreign markets, this could result in a signiÑcant additional increase
in our general and administrative expenses.
In the year ended December 31, 2004, the Company recorded expenses of $1.2 million related to a
program under which we make cash payments to former stockholders of Travelzoo.com Corporation, who
failed to submit requests for shares in Travelzoo Inc. within the required time period. The expenses are based
on the number of actual valid claims received and the Company's stock price. The Company expects expenses
related to the program to decrease in future periods.
Merger Expenses
Merger expenses consist of expenses relating to the registration statement and proxy statement Ñled with
the SEC relating to the merger of Travelzoo.com Corporation into Travelzoo Inc. which was completed in
2002. As a result, merger expenses was $-0- for the years ended December 31, 2004 and 2003, and $55,000 for
the year ended December 31, 2002. The expenses consisted mostly of fees for professional services, primarily
legal and accounting.
Subscriber Acquisition
The table set forth below provides for each quarter in 2002, 2003, and 2004, an analysis of our average
cost for acquisition of new subscribers for our Travelzoo Top 20 newsletter and our NewsÖash e-mail alert
service.
The table includes the following data:
‚Average Cost per Acquisition of a New Subscriber: This is the quarterly costs of consumer marketing
programs whose purpose was primarily to acquire new subscribers, divided by total new subscribers
added during the quarter.
‚New Subscribers: Total new subscribers who signed up for at least one of our e-mail publications
throughout the quarter. This is an unduplicated subscriber number, meaning a subscriber who signed
up for two or more of our publications is only counted once.
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