Filed by Bowne Pure Compliance
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2008
OR
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o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from: to
Commission File Number: 001-33105
QUEPASA CORPORATION
(Exact name of registrant as specified in its charter)
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NEVADA
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86-0879433 |
(State of Incorporation)
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(I.R.S. Employer Identification No.) |
224 Datura Street, Suite 1100
West Palm Beach, Florida 33401
(Address of Principal Executive Office)
(561) 491-4181
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for
such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. þ Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer o
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Smaller reporting company þ |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Act). o Yes þ No
Indicate the number of shares outstanding of each of the issuers classes of common stock, as of
the latest practicable date.
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Class
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Shares Outstanding as of July 21, 2008 |
Common Stock, $.001 par value per share
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12,653,661 |
QUEPASA CORPORATION AND SUBSIDIARIES
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
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June 30, |
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December 31, |
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2008 |
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2007 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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$ |
7,811,995 |
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$ |
3,673,281 |
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Accounts receivable, net of allowance of $18,000 and $15,000, respectively |
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21,913 |
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38,306 |
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Other current assets |
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86,879 |
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146,876 |
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Total current assets |
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7,920,787 |
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3,858,463 |
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Property and equipment, net |
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812,178 |
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1,023,041 |
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Jet rights, net |
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885,712 |
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Note receivable, $350,000 face amount, non-interest bearing, due January 8,
2011 (less unamortized discount of $91,524 based on imputed interest
rate of 12.75%) |
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258,476 |
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|
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Other assets |
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243,045 |
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133,692 |
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Total assets |
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$ |
9,234,486 |
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$ |
5,900,908 |
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LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT) |
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CURRENT LIABILITIES: |
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Accounts payable |
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$ |
751,638 |
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$ |
887,598 |
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Accrued expenses |
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265,989 |
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306,130 |
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Unearned grant income |
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54,659 |
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65,917 |
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Current portion of long-term debt |
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1,668,808 |
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Total current liabilities |
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1,072,286 |
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2,928,453 |
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Long-term debt |
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5,526,506 |
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Notes payable, net of unamortized discount of $2,361,027 |
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4,774,259 |
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Total liabilities |
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5,846,545 |
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8,454,959 |
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COMMITMENTS AND CONTINGENCIES (see Note 7) |
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STOCKHOLDERS EQUITY (DEFICIT): |
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Preferred stock, $.001 par value; authorized - 5,000,000 shares; 25,000 shares
issued and outstanding at June 30, 2008 |
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25 |
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Common stock, $.001 par value; authorized - 50,000,000 shares; 12,648,836
shares issued and outstanding at June 30, 2008 and 12,284,511 shares issued and outstanding
at December 31, 2007 |
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12,649 |
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12,285 |
|
Additional paid-in capital |
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145,906,974 |
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138,880,462 |
|
Accumulated deficit |
|
|
(142,541,117 |
) |
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|
(141,452,663 |
) |
Accumulated other comprehensive income |
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9,410 |
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|
5,865 |
|
|
|
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Total stockholders equity (deficit) |
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|
3,387,941 |
|
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|
(2,554,051 |
) |
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Total liabilities and stockholders equity (deficit) |
|
$ |
9,234,486 |
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$ |
5,900,908 |
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See notes to unaudited condensed consolidated financial statements.
3
QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
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For the Three Months Ended |
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For the Six Months Ended |
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June 30, |
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June 30, |
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2008 |
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2007 |
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2008 |
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2007 |
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REVENUES |
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$ |
24,774 |
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$ |
73,260 |
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$ |
31,637 |
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$ |
125,742 |
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OPERATING COSTS AND EXPENSES: |
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Sales and marketing |
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55,049 |
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292,788 |
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135,672 |
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762,104 |
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Product and content development |
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703,585 |
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1,070,313 |
|
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1,252,299 |
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2,043,053 |
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General and administrative |
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509,019 |
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1,621,452 |
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1,450,684 |
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3,206,590 |
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Stock based compensation |
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|
1,165,437 |
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|
788,795 |
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2,562,258 |
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1,103,585 |
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Depreciation and amortization |
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113,008 |
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103,658 |
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221,423 |
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|
196,261 |
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TOTAL OPERATING COSTS AND EXPENSES |
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2,546,098 |
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3,877,006 |
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5,622,336 |
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7,311,593 |
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LOSS FROM OPERATIONS |
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|
(2,521,324 |
) |
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|
(3,803,746 |
) |
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|
(5,590,699 |
) |
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|
(7,185,851 |
) |
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OTHER INCOME (EXPENSE): |
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Interest income |
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|
46,925 |
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|
127,438 |
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|
97,504 |
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|
291,824 |
|
Interest expense |
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|
(338,731 |
) |
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(627,813 |
) |
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|
Gain (Loss) on disposal |
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(42,977 |
) |
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|
3,449 |
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|
|
(42,977 |
) |
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|
3,449 |
|
Gain on extinguishment of debt |
|
|
5,056,052 |
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|
|
|
|
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|
5,056,052 |
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|
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|
Other income |
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|
12,084 |
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|
|
1,529 |
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|
19,479 |
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|
14,237 |
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|
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|
|
|
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TOTAL OTHER INCOME (EXPENSE) |
|
|
4,733,353 |
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|
132,416 |
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4,502,245 |
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|
309,510 |
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INCOME (LOSS) BEFORE INCOME TAXES |
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2,212,029 |
|
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|
(3,671,330 |
) |
|
|
(1,088,454 |
) |
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|
(6,876,341 |
) |
Income taxes |
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NET INCOME (LOSS) |
|
$ |
2,212,029 |
|
|
$ |
(3,671,330 |
) |
|
$ |
(1,088,454 |
) |
|
$ |
(6,876,341 |
) |
|
|
|
|
|
|
|
|
|
|
|
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|
Foreign currency translation adjustment |
|
|
1,872 |
|
|
|
(8,527 |
) |
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|
3,545 |
|
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|
36 |
|
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|
COMPREHENSIVE INCOME (LOSS) |
|
$ |
2,213,901 |
|
|
$ |
(3,679,857 |
) |
|
$ |
(1,084,909 |
) |
|
$ |
(6,876,305 |
) |
|
|
|
|
|
|
|
|
|
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|
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|
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BASIC INCOME (LOSS) PER COMMON SHARE |
|
$ |
0.17 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.56 |
) |
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DILUTED INCOME (LOSS) PER COMMON SHARE |
|
$ |
0.17 |
|
|
$ |
(0.30 |
) |
|
$ |
(0.09 |
) |
|
$ |
(0.56 |
) |
|
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|
|
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|
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING: |
|
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|
|
|
|
|
|
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|
|
|
|
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|
BASIC |
|
|
12,647,733 |
|
|
|
12,238,879 |
|
|
|
12,563,155 |
|
|
|
12,189,975 |
|
|
|
|
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|
|
|
|
|
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DILUTED |
|
|
12,712,193 |
|
|
|
12,238,879 |
|
|
|
12,563,155 |
|
|
|
12,189,975 |
|
|
|
|
|
|
|
|
|
|
|
|
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|
See notes to unaudited condensed consolidated financial statements.
4
QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders Equity (Deficit)
For the Six Months Ended June 30, 2008
(Unaudited)
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|
|
|
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|
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|
|
Accumulated |
|
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|
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Additional |
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Other |
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Total |
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|
Preferred Stock |
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Common Stock |
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Paid-in |
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|
Accumulated |
|
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Comprehensive |
|
|
Stockholders |
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|
Shares |
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|
Amount |
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|
Shares |
|
|
Amount |
|
|
Capital |
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|
Deficit |
|
|
Income |
|
|
Equity (Deficit) |
|
|
|
|
|
|
|
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|
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|
|
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|
|
|
|
|
|
|
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|
|
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|
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|
BalanceDecember 31, 2007 |
|
|
|
|
|
$ |
|
|
|
|
12,284,511 |
|
|
$ |
12,285 |
|
|
$ |
138,880,462 |
|
|
$ |
(141,452,663 |
) |
|
$ |
5,865 |
|
|
$ |
(2,554,051 |
) |
Issuance of stock options for compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,279,662 |
|
|
|
|
|
|
|
|
|
|
|
2,279,662 |
|
Re-pricing of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,605,382 |
|
|
|
|
|
|
|
|
|
|
|
1,605,382 |
|
Issuance of common stock for professional services |
|
|
|
|
|
|
|
|
|
|
50,000 |
|
|
|
50 |
|
|
|
218,750 |
|
|
|
|
|
|
|
|
|
|
|
218,800 |
|
Issuance of common stock to directors for compensation |
|
|
|
|
|
|
|
|
|
|
14,325 |
|
|
|
14 |
|
|
|
45,543 |
|
|
|
|
|
|
|
|
|
|
|
45,557 |
|
Issuance of preferred stock |
|
|
25,000 |
|
|
|
25 |
|
|
|
|
|
|
|
|
|
|
|
2,499,975 |
|
|
|
|
|
|
|
|
|
|
|
2,500,000 |
|
Exercise of stock options |
|
|
|
|
|
|
|
|
|
|
300,000 |
|
|
|
300 |
|
|
|
377,200 |
|
|
|
|
|
|
|
|
|
|
|
377,500 |
|
Foreign currency translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,545 |
|
|
|
3,545 |
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,088,454 |
) |
|
|
|
|
|
|
(1,088,454 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BalanceJune 30, 2008 |
|
|
25,000 |
|
|
$ |
25 |
|
|
|
12,648,836 |
|
|
$ |
12,649 |
|
|
$ |
145,906,974 |
|
|
$ |
(142,541,117 |
) |
|
$ |
9,410 |
|
|
$ |
3,387,941 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See notes to unaudited condensed consolidated financial statements.
5
QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Operating activities: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(1,088,454 |
) |
|
$ |
(6,876,341 |
) |
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
221,423 |
|
|
|
196,261 |
|
Gain on extinguishment of debt |
|
|
(5,056,052 |
) |
|
|
|
|
Issuance of stock options and warrants for compensation |
|
|
2,279,662 |
|
|
|
912,097 |
|
Issuance of common stock to directors for compensation |
|
|
45,557 |
|
|
|
191,488 |
|
Issuance of common stock and stock options for professional services |
|
|
218,800 |
|
|
|
|
|
Grant income |
|
|
(11,258 |
) |
|
|
(14,146 |
) |
Loss/ (Gain) on sale of property and equipment |
|
|
42,977 |
|
|
|
(3,449 |
) |
Bad debt expense |
|
|
13,819 |
|
|
|
|
|
Non-cash interest related to note receivable |
|
|
(13,229 |
) |
|
|
|
|
Non-cash interest related to corporate sponsorship agreement |
|
|
379,243 |
|
|
|
|
|
Non-cash interest related to note payable agreements |
|
|
135,287 |
|
|
|
|
|
Amortization of discounts on notes payable and debt issuance costs |
|
|
125,344 |
|
|
|
|
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
2,574 |
|
|
|
9,785 |
|
Other current assets and other assets |
|
|
75,325 |
|
|
|
5,763 |
|
Accounts payable and accrued expenses |
|
|
(176,101 |
) |
|
|
531,729 |
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(2,805,083 |
) |
|
|
(5,046,813 |
) |
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
|
10,601 |
|
|
|
3,449 |
|
Purchase of property and equipment |
|
|
(57,368 |
) |
|
|
(613,789 |
) |
Advance to BRC / La Alianza |
|
|
(350,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(396,767 |
) |
|
|
(610,340 |
) |
|
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options and warrants |
|
|
377,500 |
|
|
|
913,150 |
|
Proceeds from issuance of notes payable |
|
|
7,000,000 |
|
|
|
|
|
Debt issuance costs associated with issuance of notes payable |
|
|
(40,481 |
) |
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities |
|
|
7,337,019 |
|
|
|
913,150 |
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate on cash |
|
|
3,545 |
|
|
|
(1,318 |
) |
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
4,138,714 |
|
|
|
(4,745,321 |
) |
Cash and cash equivalents at beginning of period |
|
|
3,673,281 |
|
|
|
14,093,811 |
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of period |
|
|
7,811,995 |
|
|
|
9,348,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Cash Flow Information: |
|
|
|
|
|
|
|
|
Cash paid for interest |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Disclosure of Non-Cash Investing and Financing Activities: |
|
|
|
|
|
|
|
|
On January 25, 2008, the exercise prices of outstanding warrants were reduced as part
of the issuance of $7,000,000 in notes payable, resulting in a
$1,605,382 discount recorded against the note, and a corresponding increase
in additional paid-in capital. See Note 6 below. |
|
|
|
|
|
|
|
|
|
On June 30, 2008, 25,000 preferred shares were exchanged for $7,556,052 in long-term
debt, resulting in a $25 increase in preferred stock and a $2,499,975 increase in
additional paid-in capital. See Note 5 and Note 8 below. |
See notes to unaudited condensed consolidated financial statements.
6
QUEPASA CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1Description of Business and Summary of Significant Accounting Policies
Quepasa Corporation, a Nevada corporation (the Company), was incorporated in June 1997. In
2007, the Company transitioned from being a bilingual search engine into a Hispanic social network.
With the evolution of the Companys Quepasa.com website into a Hispanic portal and social network,
the future revenue will be predominantly display advertising. The Company re-launched its
Quepasa.com website on February 6, 2008 in beta mode, to be solely a Hispanic social network with
content provided by the user community. The Quepasa.com community provides users with access to an
expansive, bilingual menu of resources that promote social interaction, information sharing, and
other topics of importance to Hispanic users. We offer online marketing capabilities which enable
marketers to display their advertisements in different formats and in different locations on our
website. We work with our advertisers to maximize the effectiveness of their campaigns by
optimizing advertisement formats and placement on the website. The Quepasa.com website is operated
and managed by the Companys wholly-owned Mexico-based subsidiary, Quepasa.com de Mexico.
Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared
pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for
interim financial information and with the instructions to Form 10-Q. Accordingly, they do not
include all of the information required to be included in a complete set of consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America. In the opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating results for the three
and six months ended June 30, 2008 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 2008. The accompanying unaudited condensed
consolidated financial statements should be read in conjunction with the consolidated financial
statements and related notes included in the Companys 2007 Annual Report filed with the SEC on
Form 10-KSB on March 31, 2008.
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiary, Quepasa.com de Mexico. All intercompany accounts and
transactions have been eliminated in consolidation.
Reclassifications
Certain prior period amounts in the unaudited condensed consolidated statements of operations
and comprehensive income (loss) and condensed consolidated statements of cash flows have been reclassified
to conform to the current periods presentation.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of
three months or less to be cash and cash equivalents. The Company continually monitors its
positions with, and the credit quality of, the financial institutions it invests with.
Basic and Diluted Income (Loss) Per Common Share
Basic income (loss) per share is computed by dividing net income (loss) attributable to common
stockholders by the weighted average number of shares of common stock outstanding during the
applicable period. Diluted income (loss) per share is determined in the same manner as basic
earnings per share, except that the number of shares is increased to include potentially dilutive
securities using the treasury stock method. When the effect of the outstanding equity securities is
anti-dilutive, the securities are not included in the calculation of diluted income (loss) per
common share.
7
The computation of basic and diluted income (loss) per common share is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Per Share |
|
|
|
|
|
|
Average |
|
|
Per Share |
|
|
|
Net Income |
|
|
Shares |
|
|
Amount |
|
|
Net Loss |
|
|
Shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
2,212,029 |
|
|
|
12,647,733 |
|
|
$ |
0.17 |
|
|
$ |
(3,671,330 |
) |
|
|
12,238,879 |
|
|
$ |
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
43,609 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock |
|
|
|
|
|
|
12,049 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted stock |
|
|
|
|
|
|
8,802 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
2,212,029 |
|
|
|
12,712,193 |
|
|
$ |
0.17 |
|
|
$ |
(3,671,330 |
) |
|
|
12,238,879 |
|
|
$ |
(0.30 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Per Share |
|
|
|
|
|
|
Average |
|
|
Per Share |
|
|
|
Net Loss |
|
|
Shares |
|
|
Amount |
|
|
Net Loss |
|
|
Shares |
|
|
Amount |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share |
|
$ |
(1,088,454 |
) |
|
|
12,563,155 |
|
|
$ |
(0.09 |
) |
|
$ |
(6,876,341 |
) |
|
|
12,189,975 |
|
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred stock |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
|
$ |
(1,088,454 |
) |
|
|
12,563,155 |
|
|
$ |
(0.09 |
) |
|
$ |
(6,876,341 |
) |
|
|
12,189,975 |
|
|
$ |
(0.56 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8
The following table summarizes the number of dilutive securities outstanding for each of the
periods presented, but not included in the calculation of diluted income (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended June 30, |
|
|
For the Six Months Ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
2008 |
|
|
2007 |
|
Stock options |
|
|
4,797,319 |
|
|
|
1,498,200 |
|
|
|
4,897,319 |
|
|
|
1,498,200 |
|
Warrants |
|
|
4,432,500 |
|
|
|
4,432,500 |
|
|
|
4,432,500 |
|
|
|
4,432,500 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals |
|
|
9,229,819 |
|
|
|
5,930,700 |
|
|
|
9,329,819 |
|
|
|
5,930,700 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recent Accounting Pronouncements
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. This statement
clarifies the definition of fair value of assets and liabilities, establishes a framework for
measuring fair value of assets and liabilities and expands the disclosures on fair value
measurements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007.
However, the FASB deferred the effective date of SFAS No. 157 until the fiscal years beginning
after November 15, 2008 as it relates to the fair value measurement requirements for nonfinancial
assets and liabilities that are initially measured at fair value, but not measured at fair value in
subsequent periods. These nonfinancial assets include goodwill and other indefinite-lived
intangible assets which are included within other assets. In accordance with SFAS No. 157, the
Company has adopted the provisions of SFAS No. 157 with respect to financial assets and liabilities
effective as of January 1, 2008 and its adoption did not have a material impact on its results of
operations or financial condition. The Company is assessing the impact of SFAS No. 157 for
nonfinancial assets and liabilities and expects that this adoption will not have a material impact
on its results of operations or financial condition.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS 159), which is
effective for fiscal years beginning after November 15, 2007. SFAS 159 permits an entity to choose
to measure many financial instruments and certain other items at fair value at specified election
dates. Subsequent unrealized gains and losses on items for which the fair value option has been
elected will be reported in earnings. The adoption of SFAS 159 did not have a material impact on
the Companys consolidated financial position and results of operations.
In December 2007, the FASB issued SFAS No. 141 (revised 2007) Business Combinations (SFAS
No. 141 (R)). SFAS No. 141(R) retains the fundamental requirements of the original pronouncement
requiring that the purchase method be used for all business combinations. SFAS No. 141(R) defines
the acquirer as the entity that obtains control of one or more businesses in the business
combination, establishes the acquisition date as the date that the acquirer achieves control and
requires the acquirer to recognize the assets acquired, liabilities assumed and any non-controlling
interest at their fair values as of the acquisition date. SFAS 141(R) also requires that
acquisition-related costs be recognized separately from the acquisition. SFAS 141(R) is effective
for the Company for fiscal 2010. The Company is currently assessing the impact of SFAS 141(R) on
its consolidated financial position and results of operations.
In December 2007, the FASB issued Statement No. 160, Non-controlling Interests in
Consolidated Financial Statements an amendment of ARB No. 51 (SFAS No. 160). The objective of
SFAS No. 160 is to improve the relevance, comparability, and transparency of the financial
information that a reporting entity provides in its consolidated financial statements by
establishing accounting and reporting standards for the non-controlling interest in a subsidiary
and for the deconsolidation of a subsidiary. SFAS No. 160 applies to all entities that prepare
consolidated financial statements, except not-for-profit organizations. SFAS No. 160 amends ARB 51
to establish accounting and reporting standards for the non-controlling interest in a subsidiary
and for the deconsolidation of a subsidiary. It also amends certain of ARB 51s consolidation
procedures for consistency with the requirements of SFAS No. 141(R). SFAS No. 160 is effective for
fiscal years, and interim periods within those fiscal years, beginning on or after December 15,
2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier adoption is
prohibited. The effective date of SFAS No. 160 is the same as that of the related Statement 141(R).
SFAS No. 160 will be effective for the Companys fiscal 2010. SFAS No. 160 shall be applied
prospectively as of the beginning of the fiscal year in which SFAS No. 160 is initially applied,
except for the presentation and disclosure requirements. The presentation and disclosure
requirements shall be applied retrospectively for all periods presented. The Company is currently
assessing the impact of SFAS 160 on its consolidated financial position and results of operations.
9
In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and
Hedging Activities (SFAS No. 161). SFAS No. 161 amends and expands the disclosure requirement for
FASB Statement No. 133, Derivative Instruments and Hedging Activities (SFAS No. 133). It
requires enhanced disclosure about (i) how and why an entity uses derivative instruments, (ii) how
derivative instruments and related hedge items are accounted for under SFAS No. 133 and its related
interpretations, and (iii) how derivative instruments and related hedge items affect an entitys
financial position, financial performance, and cash flows. SFAS No. 161 is effective for the
Company as of January 1, 2009. The Company is currently assessing the impact of SFAS 160 on its
consolidated financial position and results of operations.
In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting
Principles. SFAS No. 162 identifies the sources of accounting principles and provides entities
with a framework for selecting the principles used in preparation of financial statements that are
presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is
directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of
Financial Accounting Concepts, which are subject to the same level of due process as FASB
Statements of Financial Accounting Standards, below industry practices that are widely recognized
as generally accepted but that are not subject to due process. The Board believes the GAAP
hierarchy should be directed to entities because it is the entity (not its auditors) that is
responsible for selecting accounting principles for financial statements that are presented in
conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the
Companys consolidated financial position and results of operations.
In May 2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts-an interpretation of FASB Statement No. 60. Diversity exists in practice in accounting
for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the
recognition and measurement of claim liabilities. This Statement requires that an insurance
enterprise recognize a claim liability prior to an event of default (insured event) when there is
evidence that credit deterioration has occurred in an insured financial obligation. This Statement
requires expanded disclosures about financial guarantee insurance contracts. The accounting and
disclosure requirements of the Statement will improve the quality of information provided to users
of financial statements. The adoption of FASB 163 is not expected to have a material impact on the
Companys consolidated financial position and results of operations.
In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible
Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement).
APB 14-1 requires the issuer to separately account for the liability and equity components of
convertible debt instruments in a manner that reflects the issuers nonconvertible debt borrowing
rate. The guidance will result in companies recognizing higher interest expense in the statement of
operations due to amortization of the discount that results from separating the liability and
equity components. APB 14-1 will be effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. The Company is
currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements.
In April 2008, the FASB issued FSP 142-3, Determination of the Useful Life of Intangible
Assets, (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal
or extension assumptions used to determine the useful life of a recognized intangible asset under
SFAS No. 142, Goodwill and Other Intangible Assets. FSP 142-3 is effective for fiscal years
beginning after December 15, 2008. The Company is currently assessing the impact of FSP 142-3 on
its consolidated financial position and results of operations.
Note 2Property and Equipment
Property and equipment consist of the following:
|
|
|
|
|
|
|
|
|
|
|
June 30, 2008 |
|
|
December 31, 2007 |
|
Software |
|
$ |
489,449 |
|
|
$ |
489,449 |
|
Computer equipment |
|
|
1,446,217 |
|
|
|
1,390,059 |
|
Vehicles |
|
|
21,927 |
|
|
|
20,697 |
|
Office furniture and equipment |
|
|
138,582 |
|
|
|
214,526 |
|
Other equipment |
|
|
11,463 |
|
|
|
10,821 |
|
|
|
|
|
|
|
|
|
|
|
2,107,638 |
|
|
|
2,125,552 |
|
Less accumulated depreciation |
|
|
(1,295,460 |
) |
|
|
(1,102,511 |
) |
|
|
|
|
|
|
|
Property and equipmentnet |
|
$ |
812,178 |
|
|
$ |
1,023,041 |
|
|
|
|
|
|
|
|
10
Depreciation expense was $214,653 and $145,452 for the six months ended June 30, 2008 and
2007, respectively.
Note 3Jet Rights
In October 2006, as part of a financing transaction to raise capital, Mexicans & Americans
Trading Together, Inc. (MATT Inc.) agreed to provide the Company with the use of a corporate jet
for up to 25 hours per year through October 2016. The Company recognized the fair value of the jet
rights of $1,007,445 as an asset and an increase to additional paid-in capital.
On January 25, 2008, under the provisions of a Note Purchase Agreement between the Company and
MATT Inc., these jet rights were terminated. See Note 6 below.
Note 4Note Receivable
On January 9, 2008, the Company advanced $300,000 and received a $300,000 Multiple Advance
Promissory Note (the BRC Note) from BRC Group, LLC (BRC). BRC owns La Alianza de Futbol Hispano
(La Alianza), an organization involved in the support and development of amateur Hispanic soccer
in the United States. The Company and BRC agreed to the terms of the BRC Note with the
understanding that the Company and BRC would work towards finalizing an agreement, which would
provide for, among other things, the Company becoming the official social networking sponsor for La
Alianza.
On March 27, 2008, the Company entered into a Loan Agreement with BRC for a maximum amount of
$600,000. Among other things, pursuant to the terms of the Loan Agreement: (i) the $300,000
advanced by the Company pursuant to the BRC Note becomes advancement under the terms of the Loan
Agreement; (ii) the Company agreed to advance BRC an additional $50,000 on April 1, 2008; and (iii)
the Company will advance BRC an additional $250,000 on September 1, 2008.
BRC executed a noninterest bearing promissory note on March 27, 2008, in favor of the Company
and agreed to repay all loans made by the Company under the Loan Agreement by January 8, 2011. In
exchange for the noninterest bearing promissory note, BRC granted the Company an Equity Interests
Purchase Warrant and a Right of Purchase and Right of First Refusal Agreement (Warrant Rights).
Also on March 27, 2008, and in connection with the Loan Agreement, the Company entered into a
Website Development and Hosting Agreement with BRC. Pursuant to the terms and conditions of the
agreement the Company will: (i) become an official sponsor of the 2008 La Alianza soccer
tournament; (ii) retain the online rights to the La Alianza soccer tournament for a period of three
years; (iii) host and develop the La Alianza website; (iv) build the La Alianza community within
the Quepasa.com website; and (v) share equally with BRC in the advertising revenues generated from
the La Alianza website.
On April 1, 2008, the Company advanced $50,000 to BRC under the terms of the Loan Agreement.
On April 15, 2008, the Company received notification from BRC that they were in the process of
securing additional funding from another source. As a result, the Company and BRC entered into
negotiations to amend the Loan Agreement. Pursuant to the terms of the amendment, upon securing
additional funding, $50,000 of the total outstanding note shall become due immediately and the
balance of the outstanding note shall be due and payable in full upon the first anniversary of
securing the additional funding. In addition, BRC would not require the additional $250,000
advance scheduled for September 1, 2008 under the terms of the Loan Agreement. As of the date of
this filing, BRC had not finalized the process of securing the additional funding.
As a result of the above transactions, the Company has recorded a discount to the $350,000
outstanding note receivable using a 12.75% imputed interest rate in the amount of $104,753 and
assigned this value to the Warrant Rights, which is included in Other Assets line of the balance
sheet. As of June 30, 2008, the Company has recorded $13,229 of interest income related to the
amortization of the discount to the $350,000 outstanding note.
11
Note 5Long-term Debt
Corporate Sponsorship and Management Services Agreement
On November 20, 2006, in connection with a financing transaction, the Company entered into
Corporate Sponsorship and Management Services Agreement (the CSMSA) with MATT Inc. and Mexicans &
Americans Thinking Together Foundation, Inc. (the Organization). The CSMSA provided that the
Company will develop, operate and host the Organizations website and provide to it all the
services necessary to conduct such operations. During the first three years of the term of the
CSMSA, the Organization agreed to reimburse the Company for its costs and expenses in providing
these services, not to exceed $500,000 per annum. The CSMSA further provided that the Company will
pay the Organizations operating costs through October 2016 (including certain special event costs
commencing in year four), up to a cap of $1,200,000 per annum minus the Companys costs and
expenses for providing the services described above. The Organizations obligations to pay any
costs and expenses due to the Company were guaranteed by MATT Inc. See Common Stock section in Note
8.
The Company established a reasonable estimate of the long-term debt based on the present value
calculation of the expected payout of $1,200,000 per year, or $300,000 per quarter, through October
2016, discounted at a 12% annual rate, which was based on available borrowing rates.
On June 30, 2008, the Company entered into a Termination Agreement (the Transaction) with
the Organization terminating the CSMSA. In consideration for the Transaction, the Company issued
25,000 shares of Series A Convertible Preferred Stock with a liquidation preference of $2,500,000
(the Preferred Stock) to the Organization. The Company also provided the Organization with
piggyback registration rights for the shares of common stock acquired by the Organization upon
conversion of the Preferred Stock.
The effect of the Transaction was to eliminate the Companys current and future obligations
for the Organizations operating costs under the CSMSA for which the Company had recorded a
reasonable estimate of $7,556,052 as of June 30, 2008. The Company recognized a gain on the
extinguishment of the long-term debt of $5,056,052, the difference between the value of the
long-term liabilities and the value of preferred stock issued in exchange for the debt as of June
30, 2008.
Note 6Notes Payable
On January 25, 2008, the Company and MATT Inc. entered into a Note Purchase Agreement (the
MATT Agreement). Pursuant to the terms of the MATT Agreement: (i) MATT Inc. invested $5,000,000
in Quepasa and Quepasa issued MATT Inc. a subordinated promissory note due October 16, 2016 with
4.46% interest per annum (the MATT Note); (ii) the exercise price of MATT Inc.s outstanding
Series 1 Warrant to purchase 1,000,000 shares of the Companys common stock was reduced from $12.50
per share to $2.75 per share; (iii) the exercise price of MATT Inc.s outstanding Series 2 Warrant
to purchase 1,000,000 shares of the Companys common stock was reduced from $15.00 per share to
$2.75 per share; and (iv) the Amended and Restated Support Agreement between the Company and MATT
Inc. was terminated, which terminates MATT Inc.s obligation to provide the Company with the use of
a corporate jet for up to 25 hours per year through October 2016. See Note 3 above. Debt issuance
costs of $24,580 related to this transaction have been capitalized within the Other Assets section
of the balance sheet and will be amortized to interest expense over the life of the note. The
balance of deferred debt issuance costs was $23,370 at June 30, 2008.
On January 25, 2008, the Company and Richard L. Scott Investments, LLC (RSI) entered into a
Note Purchase Agreement (the RSI Agreement). Pursuant to the terms of the RSI Agreement: (i) RSI
invested $2,000,000 in Quepasa and Quepasa issued RSI a subordinated promissory note due March 21,
2016 with 4.46% interest per annum (the RSI Note); (ii) the exercise price of RSIs outstanding
Series 2 Warrant to purchase 500,000 shares of the Companys common stock was reduced from $4.00
per share to $2.75 per share; and (iii) the exercise price of RSIs outstanding Series 3 Warrant to
purchase 500,000 shares of the Companys common stock was reduced from $7.00 per share to $2.75 per
share. Debt issuance costs of $15,901 related to this transaction have been capitalized within the
Other Assets section of the balance sheet and will be amortized to interest expense over the life
of the note. The balance of deferred debt issuance costs was $15,063 at June 30, 2008.
12
Note Purchase Agreements consist of the following at June 30, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MATT |
|
|
RSI |
|
|
Total |
|
Notes Payable, face amount |
|
$ |
5,000,000 |
|
|
$ |
2,000,000 |
|
|
$ |
7,000,000 |
|
Discounts on Notes: |
|
|
|
|
|
|
|
|
|
|
|
|
Revaluation of Warrants |
|
|
(1,341,692 |
) |
|
|
(263,690 |
) |
|
|
(1,605,382 |
) |
Termination of Jet Rights |
|
|
(878,942 |
) |
|
|
|
|
|
|
(878,942 |
) |
Accumulated Amortization |
|
|
109,395 |
|
|
|
13,902 |
|
|
|
123,297 |
|
|
|
|
|
|
|
|
|
|
|
Total Discounts |
|
|
(2,111,239 |
) |
|
|
(249,788 |
) |
|
|
(2,361,027 |
) |
Accrued Interest |
|
|
96,633 |
|
|
|
38,653 |
|
|
|
135,286 |
|
|
|
|
|
|
|
|
|
|
|
Notes Payable, net |
|
$ |
2,985,394 |
|
|
$ |
1,788,865 |
|
|
$ |
4,774,259 |
|
|
|
|
|
|
|
|
|
|
|
Note 7Commitments and Contingencies
Operating Leases
On March 20, 2008, the Company terminated its future lease obligations of $344,495, relating
to one of its operating leases for office space in Scottsdale, Arizona. Under the terms of the
Lease Termination Agreement, the Company paid $64,261 to the Lessor and forfeited the security
deposit in the amount of $44,703.
The Company leases its facilities under three non-cancelable operating leases which expire in
2008 and 2010. Future minimum lease payments under these leases as of June 30, 2008 are as follows:
|
|
|
|
|
Remainder of 2008 |
|
$ |
44,271 |
|
2009 |
|
|
54,832 |
|
2010 |
|
|
13,856 |
|
|
|
|
|
|
|
$ |
112,959 |
|
|
|
|
|
Litigation
From time to time, we are party to certain legal proceedings that arise in the ordinary course
and are incidental to our business. There are currently no such pending proceedings to which we are
a party that our management believes will have a material adverse effect on the Companys
consolidated financial position or results of operations. However, future events or circumstances,
currently unknown to management, will determine whether the resolution of pending or threatened
litigation or claims will ultimately have a material effect on our consolidated financial position,
liquidity or results of operations in any future reporting periods.
Note 8Series A Preferred Stock
On June 30, 2008, the Company entered into a Termination Agreement (the Transaction) with
the Organization terminating the CSMSA, see note 5. In consideration for the Transaction, the
Company issued the Organization 25,000 shares of Preferred Stock, par
value $0.001, with a liquidation preference of $2,500,000. The Company also provided the
Organization with piggyback registration rights for the shares of common stock acquired by the
Organization upon conversion of the Preferred Stock. The Preferred Stock may be converted (i) upon
election of the Company; (ii) upon liquidation; or (iii) upon election of the Organization after
one year. The Preferred Stock may be converted at the Stated Value of $100.00 per share for a
similar value of Common Stock at Fair Market Value, with no fractional shares. Dividends on the
Preferred Stock accrue from the date of issuance at the rate per annum of 4.46% on the Stated Value
and are cumulative. Dividends are payable in a lump sum at liquidation or conversion.
Note 9Stock-Based Compensation
Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS
No. 123 (revised 2004), Share-Based Payment (SFAS 123(R)), using the modified-prospective
transition method. Since all share-based payments made prior to January 1, 2006 were fully vested,
compensation cost recognized during the three and six months ended June 30, 2008 and 2007
represents the compensation cost for all share-based payments granted subsequent to January 1, 2006
based upon the grant-date fair value using the Black-Scholes option pricing model.
13
The fair values of share-based payments are estimated on the date of grant using the
Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is
based on historical volatility of the Companys common stock. The risk-free rate is based on the
U.S. Treasury yield curve in effect at the time of grant. Compensation expense is recognized on a
straight-line basis over the requisite service period of the award.
In December 2007, the Securities and Exchange Commission (SEC) issued Staff Accounting
Bulletin (SAB) No. 110. This guidance allows companies, in certain circumstances, to utilize a
simplified method in determining the expected term of stock option grants when calculating the
compensation expense to be recorded under SFAS 123(R), Share-Based Payment. The simplified method
can be used after December 31, 2007 only if a companys stock option exercise experience does not
provide a reasonable basis upon which to estimate the expected option term. Through 2007, we used
the simplified method to determine the expected option term, based upon the vesting and original
contractual terms of the option. On January 1, 2008, we continued to use the simplified method to
determine the expected option term since the Companys stock option exercise experience does not
provide a reasonable basis upon which to estimate the expected option term.
The assumptions used in calculating the fair value of stock-based awards represent our best
estimates, but these estimates involve inherent uncertainties and the application of management
judgment. As a result, if factors change and we use different assumptions, our stock-based
compensation expense could be materially different in the future.
Stock Option Plans
1998 Stock Option Plan
A summary of employee stock option activity under the 1998 Stock Option Plan during the six
months ended June 30, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted- |
|
|
|
Stock |
|
|
Average |
|
Options |
|
Options |
|
|
Exercise Price |
|
Outstanding at December 31, 2007 (1) |
|
|
814,506 |
|
|
$ |
2.76 |
|
Granted |
|
|
|
|
|
|
|
|
Exercised |
|
|
(300,000 |
) |
|
$ |
1.26 |
|
Forfeited or expired |
|
|
(414,506 |
) |
|
$ |
3.73 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2008 (2) |
|
|
100,000 |
|
|
$ |
3.23 |
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008 (2) |
|
|
98,000 |
|
|
$ |
3.14 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes stock options to purchase 105,000 shares of common stock at a weighted average
exercise price of $1.73 per share being held by consultants. |
|
(2) |
|
Excludes stock options to purchase 100,000 shares of common stock at a weighted average price
of $1.50 per share being held by a consultant. |
In September 2006, the Board of Directors approved, subject to stockholder approval, the 2006
Stock Incentive Plan (See 2006 Stock Incentive Plan section below). On June 27, 2007, the
stockholders approved the 2006 Stock Incentive Plan. As a result, no new awards will be available
for issuance under the 1998 Plan, effective September 2006.
2006 Stock Incentive Plan
On June 27, 2007, the stockholders approved the 2006 Stock Incentive Plan (the 2006 Plan).
All stock options previously granted under the 2006 Plan that were subject to stockholder approval
are now outstanding. Pursuant to the terms of the 2006 Plan, the Company may issue up to 3,700,000
shares of common stock plus an additional number of shares of common stock equal to the number of
shares previously granted under the 1998 Stock Option Plan that either terminate, expire, or lapse
after the date of the Board of Directors approval of the 2006 Plan.
14
In April 2008, our Board of Directors approved a resolution to increase the 2006 Plan by
2,000,000 shares. On June 27, 2008, the stockholders approved an amendment to the 2006 Plan to
authorize the issuance of an additional 2,000,000 shares of common stock. As of June 30, 2008,
there are 2,106,456 shares of common stock reserved for issuance under the 2006 Plan. Pursuant to
the terms of the 2006 Plan, eligible individuals may be granted incentive stock options,
non-qualified stock options, stock appreciation rights, restricted stock, or stock grant awards.
A summary of employee stock option activity under the 2006 Stock Incentive Plan during the six
months ended June 30, 2008 is as follows:
|
|
|
|
|
|
|
|
|
|
|
Number of |
|
|
Weighted- |
|
|
|
Stock |
|
|
Average |
|
Options |
|
Options |
|
|
Exercise Price |
|
Outstanding at December 31, 2007 (1) |
|
|
3,600,319 |
|
|
$ |
3.57 |
|
Granted (2) |
|
|
1,190,000 |
|
|
$ |
2.49 |
|
Exercised |
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(144,000 |
) |
|
$ |
10.00 |
|
|
|
|
|
|
|
|
Outstanding at June 30, 2008 (3) |
|
|
4,646,319 |
|
|
$ |
3.09 |
|
|
|
|
|
|
|
|
Exercisable at June 30, 2008 (4) |
|
|
89,000 |
|
|
$ |
6.84 |
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Excludes stock options to purchase 1,000 shares of common stock at a weighted average price
of $10.00 per share being held by a consultant. |
|
(2) |
|
Excludes stock options to purchase 50,000 shares of common stock at a weighted average
exercise price of $2.57 per share being held by a consultant. |
|
(3) |
|
Excludes stock options to purchase 51,000 shares of common stock at a weighted average
exercise price of $2.72 per share being held by a consultant. |
|
(4) |
|
Excludes stock options to purchase 500 shares of common stock at a weighted average exercise
price of $10.00 per share being held by a consultant. |
The fair value of each employee stock option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
June 30, |
|
|
2008 |
|
2007 |
Risk-free interest rate:
|
|
|
2.9 |
% |
|
|
5.0 |
% |
Expected term:
|
|
6 Years
|
|
5 Years
|
Expected dividend yield:
|
|
|
0 |
% |
|
|
0 |
% |
Expected volatility:
|
|
|
151 |
% |
|
|
156 |
% |
The Company recognized stock-based compensation expense for the issuance of options of
$1,149,374 and $597,307 for the three months ended June 30, 2008 and 2007, respectively, and
$2,279,662 and $912,097 for the six months ended June 30, 2008 and 2007, respectively.
As of June 30, 2008, there was $10,233,120 in total unrecognized compensation cost, which is
expected to be recognized over a weighted average period of 2.3 years.
Unrestricted Shares
During the six months ended June 30, 2008, the Company issued 58,750 shares of unrestricted
common stock to consultants and its non-employee directors under the 2006 Plan. The shares are
fully vested. The fair value of the unrestricted shares is determined based on the closing price of
the Companys stock on the date of issuance. The Company recognized stock-based compensation
expense of $0 and $250,475, respectively, for the unrestricted shares issued during the three and
six months ended June 30, 2008.
15
Restricted Shares
On January 18, 2008, the Board of Directors granted 25,800 shares of restricted common stock
to the Companys non-employee directors for compensation during 2008 under the 2006 Plan. The
restricted shares vest monthly on the last day of the month through December 31, 2008. Restricted
shares activity during the six months ended June 30, 2008 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-Average |
|
|
|
Shares |
|
|
Share Price |
|
Unvested at January 1, 2008 |
|
|
0 |
|
|
|
n/a |
|
Granted |
|
|
25,800 |
|
|
$ |
2.49 |
|
Vested during period |
|
|
(12,900 |
) |
|
$ |
2.49 |
|
Cancelled during period |
|
|
0 |
|
|
|
n/a |
|
|
|
|
|
|
|
|
Unvested at June 30, 2008 |
|
|
12,900 |
|
|
$ |
2.49 |
|
|
|
|
|
|
|
|
|
The fair value of the restricted shares is based on the closing price of the Companys common
stock on the date of the grant. The Company recognized stock-based compensation expense of $16,061
and $32,121 for the restricted shares that vested during the three and six months ended June 30,
2008, respectively. As of June 30, 2008, there was $32,121 in total unrecognized stock -based
compensation expense related to non-vested restricted share grants, which is expected to be
recognized over the last six months of 2008. During the three months ended June 30, 2008, the
Company issued 5,575 of the vested restricted shares, resulting in an increase of $13,882 to
stockholders equity.
Note 10Warrant Re-pricing
In October 2006, the Company issued two series of warrants to purchase 1,000,000 shares of
common stock each at exercise prices of $12.50 and $15.00 per share to MATT Inc. in connection with
the issuance of common stock. On January 25, 2008, the Company and MATT Inc. entered into a Note
Purchase Agreement (the MATT Agreement). Pursuant to the terms of the MATT Agreement the exercise
price of MATT Inc.s outstanding warrants were reduced to $2.75 per share. The warrant re-pricing
resulted in a discount on the Note Payable of $1,341,692, to be amortized over the life of the
note, see Note 6 above. These warrants expire in October 2016 and were still outstanding as of June
30, 2008. The fair value of the warrant re-pricing was determined using the Black-Scholes option
pricing model with the following assumptions:
|
|
|
|
|
Risk-free interest rate: |
|
|
2.81 |
% |
Expected term: |
|
4.36 years |
|
Expected dividend yield: |
|
|
0.00 |
|
Expected volatility: |
|
|
103.55 |
% |
In March 2006, the Company issued three series of warrants to purchase 500,000 shares of
common stock each at exercise prices of $2.87, $4.00 and $7.00 per share to RSI as compensation for
certain strategic initiatives. The first warrant was exercised in 2006. On January 25, 2008, the
Company and RSI entered into a Note Purchase Agreement (the RSI Agreement). Pursuant to the terms
of the RSI Agreement the exercise price of RSIs outstanding warrants were reduced to $2.75 per
share. The warrant re-pricing resulted in a discount on the Note
Payable of $263,690, to be
amortized over the life of the note, see Note 6. The Series 2 and Series 3 warrants were still
outstanding at June 30, 2008 and expire in March 2016. The fair value of the warrant re-pricing was
determined using the Black-Scholes option pricing model with the following assumptions:
|
|
|
|
|
Risk-free interest rate: |
|
|
2.81 |
% |
Expected term: |
|
4.08 years |
|
Expected dividend yield: |
|
|
0.00 |
|
Expected volatility: |
|
|
105.68 |
% |
Note 11Related Party Transactions
Alonso Ancira serves on the Companys Board of Directors as a non-employee director. Mr.
Ancira also serves on the Board of Directors of the Organization and is the Chairman of the Board
of Directors of MATT Inc. The Company has participated in several significant transactions with
MATT Inc. and the Organization; see Note 3 Jet Rights, Note 5 Long-term debt, Note 6 Notes
Payable, Note 8 Preferred Stock, and Note 10 Warrant Re-pricing. MATT Inc. is also the
Companys largest shareholder.
16
Note 12Subsequent Events
On July 22, 2008, the Compensation Committee of the Board of Directors granted 727,500 10-year
stock options to executive officers of the Company and 75,000 10-year stock options to the Chairman
of the Board in his capacity as a consultant under the 2006 Plan. The stock options are
exercisable at $2.07 and vest subject to meeting specific performance milestones on or before
December 31, 2009.
On July 22, 2008, the Company granted 696,500 10-year stock options to employees of the
Company and 10,000 10-year stock options to a consultant under the 2006 Plan. The stock options
are exercisable at $2.07 and vest subject to meeting specific performance milestones on or before
December 31, 2009.
17
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operation
You should read the following discussion in conjunction with our condensed consolidated
financial statements, which are included in Item 1 of this Form 10-Q.
Company Overview
In 2007, Quepasa transitioned from being a bilingual search engine into a bilingual portal and
Hispanic social network. With the evolution of our website into a Hispanic portal and social
network, we expect future revenues will come from predominately display advertising. In December
2006, the portal service of Quepasa was discontinued.
Highlights for the first and second quarters of 2008 included:
|
|
|
In late January 2008, we borrowed $7,000,000, including $5,000,000 from a company
controlled by one of our non-employee directors. The notes are due in 2016; |
|
|
|
|
On February 6, 2008, we re-launched our website in beta mode as a Hispanic social
network; and |
|
|
|
|
On June 30, 2008, we terminated the CSMSA issuing the Organization $2,500,000 of
Preferred Stock and recorded a one-time non-cash gain of $5,056,052 based upon the
difference between the value of the liabilities we eliminated and the value of the
Preferred Stock. |
Critical Accounting Policies, Judgments and Estimates
Our discussion and analysis of our financial condition and results of operations is based upon
our condensed consolidated financial statements, which have been prepared in accordance with
Generally Accepted Accounting Principles. The preparation of these condensed consolidated financial
statements requires us to make estimates, judgments and assumptions that affect the reported
amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent
assets and liabilities. We base our estimates on historical experience and on various other
assumptions that we believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates.
An accounting policy is considered to be critical if it requires an accounting estimate to be
made based on assumptions about matters that are highly uncertain at the time the estimate is made,
and if different estimates that reasonably could have been used, or changes in the accounting
estimate that are reasonably likely to occur, could materially impact the consolidated financial
statements. We believe that the following critical accounting policies reflect the more significant
estimates and assumptions used in the preparation of the consolidated financial statements.
Management has discussed the development and selection of these critical accounting estimates
with the Audit Committee of our Board of Directors. In addition, there are other items within our
financial statements that require estimation, but are not deemed critical as defined above. Changes
in estimates used in these and other items could have a material impact on our financial
statements.
Stock-Based Compensation Expense
See Note 9 Stock-Based Compensation to our condensed consolidated financial statements
included in Item 1 of this Form 10-Q for discussion of stock-based compensation expense.
Contingencies
The Company accrues for contingent obligations, including estimated management support
agreements and legal costs, when the obligation is probable and the amount can be reasonably
estimated. As facts concerning contingencies become known we reassess our position and make
appropriate adjustments to the financial statements. Estimates that are particularly sensitive to
future changes include those related to tax, legal, and other regulatory matters that are subject
to change as events evolve and additional information becomes available.
18
Income Taxes
The Company uses the asset and liability method to account for income taxes. Under this
method, deferred income taxes are determined based on the differences between the tax basis of
assets and liabilities and their reported amounts in the consolidated financial statements which
will result in taxable or deductible amounts in future years and are measured using the currently
enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to
the amount that, based on available evidence, is more likely than not to be realized.
In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No.
48, Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
(FIN 48), which clarifies the accounting for uncertainty in income tax positions. This
Interpretation requires that the Company recognize in its financial statements the impact of a tax
position if that position is more likely than not of being sustained upon audit, based on the
technical merits of the position. The provisions of FIN 48 are effective for the Company on January
1, 2007, with the cumulative effect of the change in accounting principle, if any, recorded as an
adjustment to opening accumulated deficit. The adoption of FIN 48 did not have a material effect on
the Companys consolidated financial position, cash flows, and results of operations.
Recent Accounting Pronouncements
See Note 1 Description of Business and Summary of Significant Accounting Policies to our
condensed consolidated financial statements included in Item 1 of this Form 10-Q for discussion of
recent accounting pronouncements.
Results of Operations
Revenue Sources
During the six months ended June 30, 2008, our revenue was generated from two principal
sources: revenue earned from the sale of banner advertising on our website and subscription sales.
Banner Advertising Revenue: Banner advertising revenue is generated when an advertiser
purchases a banner placement within our quepasa.com website. We recognize revenue related to banner
advertisements upon delivery. Approximately 80% of our revenue came from banner advertising.
Subscription Sales: Subscription sales related to the Internet dating service Corazones.com.
We have not focused our efforts on marketing this website. We recognize revenue from subscription
sales as services are delivered, or ratably over the subscription period.
Operating Expenses
Our principal operating expenses are divided into the following categories:
|
|
|
Product and Content Development Expenses: Product and content development expenses
consist of personnel costs associated with the development, testing and upgrading of our
website and systems, content fees, and purchases of specific technology, particularly
software and hardware related to our infrastructure upgrade. |
|
|
|
|
Sales and Marketing Expenses: Sales and marketing expenses consist primarily of salaries
and expenses of marketing and sales personnel, and other marketing-related expenses
including our mass media-based branding and advertising. |
|
|
|
|
General and Administrative Expenses: General and administrative expenses consist
primarily of costs related to corporate personnel, occupancy costs, general operating costs
and corporate professional fees, such as legal and accounting fees. |
|
|
|
|
Stock Based Compensation Expenses: Stock based compensation is a non-cash expense that
consists primarily of compensation paid for employees, directors, and consultants by the
issuance of stock options or common stock. Expense is calculated based upon the grant-date
fair value using the Black-Scholes option pricing model recognized on a straight-line basis
over the vesting term of the award. |
19
|
|
|
Depreciation and Amortization Expenses: Our depreciation and amortization are non-cash
expenses which have consisted primarily of depreciation related to our property and
equipment and the amortization pertaining to jet rights acquired in 2006 and disposed in
2008. |
|
|
|
|
Other Income (Expense): Other income (expense) consists primarily of interest earned,
interest expense and earned grant income. We have invested our cash in AAA rated, fully
liquid instruments. Interest expense relates to our Corporate Sponsorship Agreement and Note
Purchase Agreements discussed in notes 5 and 6. Earned grant income represents the amortized
portion of a cash grant received from the Mexican government for approved capital
expenditures. The grant is being recognized on a straight-line basis over the useful lives
of the purchased assets. In the three months ended June 30, 2008, we recognized a one-time
non-cash gain resulting from termination of the CSMSA. |
20
Comparison of the three months ended June 30, 2008 with the three months ended June 30, 2007
The following table sets forth a modified version of our Condensed Consolidated Statements of
Operations and Comprehensive Loss that is used in the following discussions of our results of
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change ($) |
|
|
Change (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
24,774 |
|
|
$ |
73,260 |
|
|
$ |
(48,486 |
) |
|
|
-66 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH-BASED OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
55,049 |
|
|
|
292,788 |
|
|
|
(237,739 |
) |
|
|
-81 |
% |
Product and content development |
|
|
703,585 |
|
|
|
1,070,313 |
|
|
|
(366,728 |
) |
|
|
-34 |
% |
General and administrative |
|
|
509,019 |
|
|
|
1,621,452 |
|
|
|
(1,112,433 |
) |
|
|
-69 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash-based operating expenses |
|
|
1,267,653 |
|
|
|
2,984,553 |
|
|
|
(1,716,900 |
) |
|
|
-58 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH BURN |
|
|
(1,242,879 |
) |
|
|
(2,911,293 |
) |
|
|
1,668,414 |
|
|
|
-57 |
% |
Net Cash Monthly Burn Rate |
|
|
(414,293 |
) |
|
|
(970,431 |
) |
|
|
556,138 |
|
|
|
-57 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
1,165,437 |
|
|
|
788,795 |
|
|
|
376,642 |
|
|
|
48 |
% |
Depreciation and amortization |
|
|
113,008 |
|
|
|
103,658 |
|
|
|
9,350 |
|
|
|
9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Cash Operating Expenses |
|
|
1,278,445 |
|
|
|
892,453 |
|
|
|
385,992 |
|
|
|
43 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(2,521,324 |
) |
|
|
(3,803,746 |
) |
|
|
1,282,422 |
|
|
|
-34 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
46,925 |
|
|
|
127,438 |
|
|
|
(80,513 |
) |
|
|
-63 |
% |
Interest expense |
|
|
(338,731 |
) |
|
|
|
|
|
|
(338,731 |
) |
|
|
-100 |
% |
Gain/ (Loss) on disposal |
|
|
(42,977 |
) |
|
|
3,449 |
|
|
|
(46,426 |
) |
|
|
-1346 |
% |
Gain on extinguishment of debt |
|
|
5,056,052 |
|
|
|
|
|
|
|
5,056,052 |
|
|
|
-100 |
% |
Other income |
|
|
12,084 |
|
|
|
1,529 |
|
|
|
10,555 |
|
|
|
690 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE) |
|
|
4,733,353 |
|
|
|
132,416 |
|
|
|
4,600,937 |
|
|
|
3475 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCOME (LOSS) |
|
$ |
2,212,029 |
|
|
$ |
(3,671,330 |
) |
|
$ |
5,883,359 |
|
|
|
-160 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Our revenues were $24,774 for the three months ended June 30, 2008, a decrease of 66% compared
to the second quarter of 2007. In September 2007, we launched a new beta version of our website,
which experienced technical difficulties and performance issues that adversely affected the amount
of traffic visiting our website. In late October 2007, a new senior management team was put into
place and immediately began to address the performance issues with the website. The bulk of the
banner advertising campaigns were discontinued in the fourth quarter of 2007, and efforts to
generate additional banner advertising campaigns were temporarily put on hold while emphasis was
placed on enhancing the functionality and the content of our website. In February 2008, we
re-launched our website in beta mode. We experienced a 222% increase in page views during the
second quarter of 2008 from the first quarter of 2008. We are hopeful that website traffic will
continue to increase in the third and fourth quarters of 2008. We believe there will be a direct
correlation between website traffic and our ability to increase revenue.
As part of our website development strategy, we have focused on establishing a platform for
sustained, viral growthbased on (i) simple user registration and invitation process; and (ii)
effective email deliverability. In June, 2008, we redesigned the sign-up and invitation pages of
our site, resulting in approximately a 50% increase in the number of new users who invited friends
and contacts to join Quepasa.com. In addition, with the help of a third-party consultant, we have
substantially reduced the number of Quepasa.com invitation emails that fail to reach recipients
email inboxes. Improved deliverability together with the redesign of our sign-up and invitation
steps have resulted in meaningful gains in the number of new registered
users and site traffic. While we are hopeful that the low email rejection rate and increase in traffic and
new registered users will continue, we can not assure you that this will occur. If it does not, our future
results of operations may be materially and adversely affected.
21
Operating Costs and Expenses
Sales and Marketing: Sales and marketing expenses decreased $237,739, or 81%, to $55,049 for
the three months ended June 30, 2008. The decrease is primarily attributed to the closing of the
New York sales office and a reduction of our sales force in November 2007, which resulted in a
decrease in salaries of approximately $123,000 versus the second quarter of 2007. In addition, the
discontinuance of advertising efforts in the first half of 2008 resulted in savings of
approximately $114,000 versus the second quarter of 2007.
Product and Content Development: Product and content development expenses decreased $366,728,
or 34%, to $703,585 for the three months ended June 30, 2008. This decrease is attributable to a
focused effort to reduce costs. During the three months ended June 30, 2008, we had decreases in
technology consulting fees of $301,000, salaries within our U.S. operations of $107,000, and
content fees of $39,000, partially offset by an increase in salaries and associated payroll costs
of $75,000 for our product development and technology personnel within Quepasa.com de Mexico,
which, under the direction of our U.S.-based Chief Technology Officer, provides substantially all
of our design, translation services, and website management and development services.
General and Administrative: General and administrative expenses decreased $1,112,433, or 69%,
to $509,019, for the three months ended June 30, 2008. The significant changes consisted of:
|
|
|
a decrease in professional fees of $482,000, made up of decreases in legal fees of
$120,000 and accounting fees of $227,000, due to unusually high activity in 2007, and a
settlement of $135,000 toward legal fees received during the second quarter of 2008; |
|
|
|
|
a decrease in recruiting fees of $288,000, due to reduced hiring during 2008; |
|
|
|
|
a decrease in travel related expenses of $103,000; |
|
|
|
|
a decrease in rent expenses of $83,000, due to the closing our Scottsdale, AZ
headquarters; |
|
|
|
|
a decrease in salaries and related payroll costs of $66,000, due to a reduction in
personnel in our Scottsdale headquarters during the fourth quarter of 2007; and |
|
|
|
|
a decrease in dues and subscriptions of $45,000, a decrease in printing and reproduction
of $42,000, and a decrease in office supplies and maintenance costs of $21,000 attributable
to a focused effort to reduce costs; |
Stock Based Compensation: Stock based compensation expense increased $376,642, or 48%, to
$1,165,437 for the three months ended June 30, 2008. This increase is primarily attributable to
stock options issued to the new senior management team hired during the fourth quarter of 2007 and
the first quarter of 2008. At June 30, 2008, we had $10,233,120 of unrecognized stock based
compensation expense, almost all of which we expect to recognize over the next nine quarters.
Depreciation and Amortization: Depreciation and amortization expense increased $9,350, or 9%,
to $113,008 for the three months ended June 30, 2008. This increase is primarily attributable to
capital purchases from 2007, offset by the termination of the jet rights in the first quarter of
2008 and the associated amortization expense.
Other Income (Expense): Other income increased $4,600,937 to $4,733,353 for the three months
ended June 30, 2008. The increase is mainly attributable to a gain on extinguishment of debt of
$5,056,052 recorded in the second quarter of 2008 as a result of the termination of the CSMSA
discussed in Note 5 of the condensed consolidated financial statements. The gain was partially
offset by $339,000 of interest expense associated with the CSMSA and the Note Purchase Agreements
entered into in the first quarter of 2008 (see note 6 of the condensed consolidated financial
statements), a decrease of $81,000 of interest income associated with lower average cash balances
during the second quarter of 2008 versus the second quarter of 2007, and a $43,000 loss recorded in
the second quarter of 2008 on the disposal of office furniture and equipment associated with the
shutdown of our Scottsdale, AZ headquarters.
22
Comparison of the six months ended June 30, 2008 with the six months ended June 30, 2007
The following table sets forth a modified version of our Condensed Consolidated Statements of
Operations and Comprehensive Loss that is used in the following discussions of our results of
operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the the six months ended June 30, |
|
|
|
2008 |
|
|
2007 |
|
|
Change ($) |
|
|
Change (%) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUES |
|
$ |
31,637 |
|
|
$ |
125,742 |
|
|
$ |
(94,105 |
) |
|
|
-75 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH-BASED OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing |
|
|
135,672 |
|
|
|
762,104 |
|
|
|
(626,432 |
) |
|
|
-82 |
% |
Product and content development |
|
|
1,252,299 |
|
|
|
2,043,053 |
|
|
|
(790,754 |
) |
|
|
-39 |
% |
General and administrative |
|
|
1,450,684 |
|
|
|
3,206,590 |
|
|
|
(1,755,906 |
) |
|
|
-55 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash-based operating expenses |
|
|
2,838,655 |
|
|
|
6,011,747 |
|
|
|
(3,173,092 |
) |
|
|
-53 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET CASH BURN |
|
|
(2,807,018 |
) |
|
|
(5,886,005 |
) |
|
|
3,078,987 |
|
|
|
-52 |
% |
Net Cash Monthly Burn Rate |
|
|
(467,836 |
) |
|
|
(981,001 |
) |
|
|
513,165 |
|
|
|
-52 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CASH OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock based compensation expense |
|
|
2,562,258 |
|
|
|
1,103,585 |
|
|
|
1,458,673 |
|
|
|
132 |
% |
Depreciation and amortization |
|
|
221,423 |
|
|
|
196,261 |
|
|
|
25,162 |
|
|
|
13 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Non-Cash Operating Expenses |
|
|
2,783,681 |
|
|
|
1,299,846 |
|
|
|
1,483,835 |
|
|
|
114 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS |
|
|
(5,590,699 |
) |
|
|
(7,185,851 |
) |
|
|
1,595,152 |
|
|
|
-22 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
97,504 |
|
|
|
291,824 |
|
|
|
(194,320 |
) |
|
|
-67 |
% |
Interest expense |
|
|
(627,813 |
) |
|
|
|
|
|
|
(627,813 |
) |
|
|
-100 |
% |
Gain/ (Loss) on disposal |
|
|
(42,977 |
) |
|
|
3,449 |
|
|
|
(46,426 |
) |
|
|
-1346 |
% |
Gain on extinguishment of debt |
|
|
5,056,052 |
|
|
|
|
|
|
|
5,056,052 |
|
|
|
-100 |
% |
Other income |
|
|
19,479 |
|
|
|
14,237 |
|
|
|
5,242 |
|
|
|
37 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL OTHER INCOME (EXPENSE) |
|
|
4,502,245 |
|
|
|
309,510 |
|
|
|
4,192,735 |
|
|
|
1355 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS |
|
$ |
(1,088,454 |
) |
|
$ |
(6,876,341 |
) |
|
$ |
5,787,887 |
|
|
|
-84 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
Our revenues were $31,637 for the six months ended June 30, 2008; a decrease of 75% compared
to the six months ended June 30, 2007. In September 2007, we launched a new beta version of our
website, which experienced technical difficulties and performance issues that adversely affected
the amount of traffic visiting our website. In late October 2007, a new senior management team was
put into place and immediately began to address the performance issues with the website. The bulk
of the banner advertising campaigns were discontinued in the fourth quarter of 2007, and efforts to
generate additional banner advertising campaigns were temporarily put on hold while emphasis was
placed on enhancing the functionality and the content of our website. In February 2008, we
re-launched our website in beta mode. We experienced a 222% increase in page views during the
second quarter of 2008 from the first quarter of 2008. We are hopeful that website traffic will
continue to increase in the third and fourth quarters of 2008. We believe there will be a direct
correlation between website traffic and our ability to increase revenue.
Operating Costs and Expenses
Sales and Marketing: Sales and marketing expenses decreased $626,432, or 82%, to $135,672 for
the six months ended June 30, 2008. The decrease is primarily attributed to the discontinuance of
advertising efforts in the first six months of 2008, which resulted in savings of approximately
$506,000 versus the first six months of 2007. In addition, we closed the New York sales office and
reduced our sales force in November 2007, which resulted in a decrease in salaries of approximately
$167,000 versus the first six months of 2007. These savings were partially offset by an increase of
$40,000 associated with a Mexican sales office that was opened in May 2007 and, subsequently,
closed in March 2008.
23
Product and Content Development: Product and content development expenses decreased $790,754,
or 39%, to $1,252,299 for the six months ended June 30, 2008. This decrease is attributable to a
focused effort to reduce costs. During the six months ended June 30, 2008, we had decreases in
technology consulting fees of $670,000, content fees of $146,000, salaries within our U.S.
operations of $95,000 and other professional fees of $45,000, partially offset by an increase in
salaries and associated payroll costs of $184,000 for our product development and technology
personnel within Quepasa.com de Mexico, which provides substantially all of our design, translation
services, and website management and development services.
General and Administrative: General and administrative expenses decreased $1,755,906, or 55%,
to $1,450,684 for the six months ended June 30, 2008. The significant changes consisted of:
|
|
|
a decrease in professional fees expense of $831,000, made up of decreases in legal fees
of $306,000 and accounting fees of $389,000, due to unusually high activity in 2007, and a
settlement of $135,000 toward legal fees received during the second quarter of 2008; |
|
|
|
|
a decrease in recruiting fees of $435,000, due to reduced hiring during 2008; |
|
|
|
|
a decrease in salaries and related payroll costs of $127,000, due to a reduction in
personnel in our Scottsdale headquarters during the fourth quarter of 2007; and |
|
|
|
|
a decrease in travel related expenses of $175,000, a decrease in dues and subscriptions
of $77,000, a decrease in printing and reproduction of $73,000, a decrease in office
supplies and maintenance of $35,000, a decrease in licenses and fees of $28,000, a decrease
in insurance costs of $22,000, and a decrease in other general and administrative costs of
$34,000, attributable to a focused effort to reduce costs; |
|
|
|
|
a decrease in rent expense due to the closing of our Scottsdale, AZ headquarters of
$177,000, offset by a one-time lease termination charge of $129,000 in the first quarter of
2008, resulting in a net decrease of $48,000. . |
Stock Based Compensation: Stock based compensation expense increased $1,458,673, or 132%, to
$2,562,258 for the six months ended June 30, 2008. This increase is primarily attributable to stock
options issued to the new senior management team hired during the fourth quarter of 2007 and the
first quarter of 2008.
Depreciation and Amortization: Depreciation and amortization expense increased $25,162, or
13%, to $221,423 for the six months ended June 30, 2008. This increase is attributable to the
depreciation associated with capital purchases from 2007, offset by the termination of the jet
rights in the first quarter of 2008 and the associated amortization expense.
Other Income (Expense): Other income increased $4,192,735 to $4,502,245 for the six months
ended June 30, 2008. The increase is primarily attributable to a gain on extinguishment of debt of
$5,056,052 recorded in the second quarter of 2008 as a result of the termination of the CSMSA
discussed in Note 5 of the condensed consolidated financial statements. The gain was partially
offset by $628,000 of interest expense associated with the CSMSA and the Note Purchase Agreements
entered into in the first quarter of 2008 (see note 6 of the condensed consolidated financial
statements), a decrease of $194,000 of interest income associated with lower average cash balances
during the first six months of 2008 versus the first six months of 2007, and a $43,000 loss
recorded in the second quarter of 2008 on the disposal of office furniture and equipment associated
with the shutdown of our Scottsdale, AZ headquarters.
Liquidity and Capital Resources
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
|
|
|
June 30, |
|
|
|
2008 |
|
|
2007 |
|
Net cash used in operating activities |
|
$ |
(2,805,083 |
) |
|
$ |
(5,046,813 |
) |
Net cash used in investing activities |
|
$ |
(396,767 |
) |
|
$ |
(610,340 |
) |
Net cash provided by financing activities |
|
$ |
7,337,019 |
|
|
$ |
913,150 |
|
24
Cash used in operating activities for the six months ended June 30, 2008 is driven by our net
loss, adjusted for non-cash items. Non-cash adjustments include a gain on the extinguishment of
debt, depreciation and amortization, the issuance of stock options and common stock for
compensation, and interest associated with long-term debt. Net cash used in operations was
$2,805,083 for the six months ended June 30, 2008 compared to $5,046,813 for the first six months
of 2007. For the six months ended June 30, 2008, net cash used by operations consisted primarily of
a net loss of $1,088,454 plus a gain on extinguishment of debt of $5,056,052, offset by non-cash
expenses of $221,423 in depreciation and amortization, $514,530 in non-cash interest, $125,344 in
amortization of discounts on notes payable and debt issuance costs, $42,977 loss on the disposal of
fixed assets, and $2,544,019 related to the issuance of stock options, warrants, and common stock
for compensation and professional services. Additionally, changes in working capital impacted the
net cash used in operating activities. These changes included a decrease in accounts payable and
accrued expenses of $176,101, offset by decreases in other current assets and other assets of
$75,325. Net cash used by operations for the six months ended June 30, 2007 consisted of a net loss
of $6,876,341 offset by non-cash expenses of $196,261 in depreciation and amortization and
$1,103,585 related to the issuance of stock options and warrants for compensation. Changes in
working capital for the six months ended June 30, 2007 included an increase of $531,729 in accounts
payable and accrued expenses.
Net cash used in investing activities for the six months ended June 30, 2008 is primarily
attributable to Investment in BRC/La Alianza of $350,000, see note 4 of the condensed consolidated
financial statements. Our capital expenditures were $57,368 for the six months ended June 30, 2008,
compared to capital expenditures of $613,789 for the same period in 2007.
Net cash provided by financing activities for the six months ended June 30, 2008 came from net
proceeds of $6,959,519 from our borrowing in January 2008. See note 6 of the condensed consolidated
financial statements. Cash proceeds from the exercise of stock options and warrants was $377,500
for the six months ended June 30, 2008, compared to $913,150 for the same period in 2007.
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
December 31, |
|
|
|
2008 |
|
|
2007 |
|
Cash and cash equivalents |
|
$ |
7,811,995 |
|
|
$ |
3,673,281 |
|
Total assets |
|
$ |
9,234,486 |
|
|
$ |
5,900,908 |
|
Percentage of total assets |
|
|
85 |
% |
|
|
62 |
% |
|
|
|
|
|
|
|
We invest excess cash predominately in liquid marketable securities to support our growing
infrastructure needs for operational expansion.
We have substantial capital resource requirements and have generated significant losses since
inception. At June 30, 2008, we had $7,811,995 in cash and cash equivalents compared to $3,673,281
at December 31, 2007, resulting in a net increase in cash and cash equivalents of 4,138,714 for the
first six months of 2008.
The increase in cash for 2008 was primarily attributed to the issuance of subordinated notes
payable in the amount of $7,000,000 in January, 2008, partially offset by cash-based operating
expenses of $2,838,655 during the first six months of 2008.
In October 2007, a new senior management team was put into place. Along with addressing the
website performance issues, the management team focused their attention on reducing costs while
maintaining the efforts to improve the performance of our websites. In November 2007, the
management team terminated the majority of the consulting arrangements, closed the sales office in
New York, and significantly reduced the headcount at the corporate headquarters in Scottsdale.
Based on the reductions initiated in November 2007, the net cash burn rate for the first six months
of 2008 dropped to $467,836 per month, which included one-time charges of $129,000 associated with
the termination of the lease for our Scottsdale headquarters and $78,000 of promotional activities
launched in the second quarter of 2008. We expect a net cash burn rate of approximately $425,000
per month for the remainder of 2008, excluding any promotional activities.
During the first six months of 2008, we obtained proceeds of $377,500 from the exercise of
common stock options and warrants compared to $913,150 from the exercise of stock options and
warrants during the first six months of 2007.
Based on the reduction of the net cash burn rate, we believe that our current cash balances
are sufficient to finance our current level of operations beyond the next 12 months. We have
budgeted additional capital expenditures of approximately $500,000 for the remainder of 2008 and
are currently negotiating alternative financing arrangements as we continue to invest in the
expansion of our product and services offerings. The capital expenditures are primarily for the
construction of two-fully redundant data centers in the Phoenix, Arizona and Dallas, Texas
metropolitan areas.
25
Forward Looking Statements
The statements in this Report relating to the continued viability of our solution to email
problems with a leading Internet service provider and our liquidity are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. Additionally, words
such as expects, anticipates, intends, believes, will and similar words are used to
identify forward-looking statements.
The results anticipated by any or all of these forward-looking statements might not occur.
Important factors, uncertainties and risks that may cause actual results to differ materially from
these forward-looking statements include technological issues relating to our email delivery rates,
delays in product development, changes in social network needs, and issues which generally affect
public trading markets. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as the result of new information, future events or otherwise.
For more information regarding some of the ongoing risks and uncertainties of our business, see the
risk factors contained in Quepasas Form 10-KSB for the year ended December 31, 2007.
26
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable for smaller reporting companies.
Item 4T. Controls and Procedures
Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to provide
reasonable assurance that information required to be disclosed in reports filed under the
Securities Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and reported
within the specified time periods and accumulated and communicated to the Companys management,
including its Principal Executive Officer and Principal Financial Officer, as appropriate, to allow
timely decisions regarding required disclosure.
The Companys management, under the supervision and with the participation of its Principal
Executive Officer and its Principal Financial Officer, evaluated the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) promulgated under
the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, the
Companys Principal Executive Officer and Principal Financial Officer concluded that the Companys
disclosure controls and procedures were effective as of June 30, 2008 to provide reasonable
assurance in the Companys financial reporting.
Remediation of Certain Weaknesses and Changes in Internal Controls
As discussed in the Companys Annual Report on Form 10-KSB for the year ended December 31,
2007, filed with the SEC on March 31, 2008, during the financial reporting process for the fiscal
year end December 31, 2007, certain weaknesses in the Companys internal control over financial
reporting were identified, including inadequate documentation of policies, procedures, and internal
controls; weaknesses in information technology controls and procedures; a lack of sufficient
accounting personnel and expertise to address the Companys expanding and increasingly complex
financial reporting needs; and incorrect accounting treatment of certain expenses and equity
issuances. The Company believes that the primary cause of those control issues stemmed from the
lack of accounting personnel and expertise.
In addition to the new Chief Financial Officer hired in October 2007, the Company hired a new
Vice President of Finance and replaced the Controller during the first quarter of 2008. As a result
of these new hires, the Company believes that the lack of sufficient accounting personnel and
expertise has been addressed. Additionally, in January 2008, the Company hired a Chief Technology
Officer to help address the information technology control issues. During the remainder of 2008,
the new financial management team will continue to address and improve the identified weaknesses in
the Companys internal controls.
Management believes that there are no material inaccuracies or omissions of material fact and,
to the best of its knowledge, believes that the condensed consolidated financial statements for the
quarter ended June 30, 2008, fairly present in all material respects the financial condition and
results of operations for the Company in conformity with accounting principles generally accepted
in the United States of America.
Other than as described above, there have not been any other changes in the Companys internal
control over financial reporting during the quarter ended June 30, 2008, which have materially
affected, or are reasonably likely to materially affect, the Companys internal control over
financial reporting.
Limitations on the Effectiveness of Controls
A control system, no matter how well designed and operated, can provide only reasonable, not
absolute, assurance that the control systems objectives will be met. The Companys management,
including its Principal Executive Officer and its Principal Financial Officer, do not expect that
the Companys disclosure controls will prevent or detect all errors and all fraud. Further, the
design of a control system must reflect the fact that there are resource constraints, and the
benefits of controls must be considered relative to their costs. Because of the inherent
limitations in all control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, within the Company have been detected. These
inherent limitations include the realities that judgments in decision-making can be faulty, and
that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by
the individual acts of some persons, by collusion of two or more people, or by management override
of the controls. The design of any system of controls is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any design will succeed
in achieving its stated goals under all potential future conditions. Over time, controls may become
inadequate because of changes in conditions or deterioration in the degree of compliance with
associated policies or procedures. Because of the inherent limitations in a cost-effective control
system, misstatements due to error or fraud may occur and not be detected.
27
QUEPASA CORPORATION AND SUBSIDIARIES
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are party to certain legal proceedings that arise in the ordinary course
and are incidental to our business. There are currently no such pending proceedings to which we are
a party that our management believes will have a material adverse effect on the Companys
consolidated financial position or results of operations. However, future events or circumstances,
currently unknown to management, will determine whether the resolution of pending or threatened
litigation or claims will ultimately have a material effect on our consolidated financial position,
liquidity or results of operations in any future reporting periods.
Item 1A. Risk Factors
Not applicable for smaller reporting companies.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the six months ended June 30, 2008, we sold securities without registration under the
Securities Act of 1933 in reliance upon exemption provided in Section 4(2) and Rule 506 thereunder
as described below:
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of |
|
|
|
Name of Class |
|
Date Issued |
|
Securities |
|
|
Reason for Issuance |
Holders of Subordinated Promissory Notes |
|
January 25, 2008 |
|
$ |
7,000,000 |
|
|
Notes issued pursuant to the terms of two Note Purchase Agreements |
|
|
|
|
|
|
|
|
|
Holders of Warrants |
|
January 25, 2008 |
|
|
3,000,000 |
|
|
Warrants issued to purchase common stock at an exercise price of $2.75 per share. These warrants replaced previously issued warrants with higher exercise prices. |
|
|
|
|
|
|
|
|
|
Purchaser of Preferred Stock |
|
June 30, 2008 |
|
$ |
2,500,000 |
|
|
Termination of CSMSA. |
Item 3. Defaults upon Senior Securities
None.
Item 4. Submissions of Matters to a Vote of Security Holders
(a) |
|
The Annual Meeting of the stockholders of the Company (the Annual Meeting) was held on June 27, 2008. |
|
(b) |
|
The following directors were elected at the Annual Meeting: |
|
|
|
Lionel Sosa |
|
|
|
|
Dr. Jill Syverson-Stork |
|
|
|
|
Jeffrey Valdez |
The following directors terms of office as a director continued after the Annual Meeting:
|
|
|
John C. Abbott |
|
|
|
|
Alonso Ancira |
|
|
|
|
Ernesto Cruz |
|
|
|
|
Malcolm Jozoff |
28
(c) |
|
The results of the vote taken at the Annual Meeting by ballot and proxies as solicited by the
Company on behalf of the Board of Directors were as follows: |
|
(i) |
|
The results of the election of the nominees for our Board of Directors were as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Nominee |
|
For |
|
|
Against |
|
|
Withheld |
|
Lionel Sosa |
|
|
6,636,094 |
|
|
|
6,525 |
|
|
|
5,950 |
|
Dr. Jill Syverson-Stork |
|
|
6,636,694 |
|
|
|
7,925 |
|
|
|
3,950 |
|
Jeffrey Valdez |
|
|
6,637,594 |
|
|
|
4,925 |
|
|
|
6,050 |
|
|
(ii) |
|
Votes were taken on the following additional proposals, the results of which are tabulated in the table below: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broker |
|
Proposal |
|
For |
|
|
Against |
|
|
Abstain |
|
|
Non-Votes |
|
To amend the
Companys 2006
Stock Incentive
Plan to authorize
the issuance of
additional
2,000,000 shares
under the Plan. |
|
|
4,195,381 |
|
|
|
244,309 |
|
|
|
3,900 |
|
|
|
2,204,979 |
|
To approve and
ratify the
appointment of
Berenfeld Spritzer
Shechter & Sheer
LLP as the
Companys
independent
registered public
accounting firm for
2008. |
|
|
6,643,284 |
|
|
|
985 |
|
|
|
4,300 |
|
|
|
0 |
|
Item 5. Other Information
None
Item 6. Exhibits
See Exhibit Index
29
QUEPASA CORPORATION AND SUBSIDIARIES
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
Quepasa Corporation
|
|
July 25, 2008 |
By: |
/s/ John C. Abbott
|
|
|
|
Name: |
John C. Abbott |
|
|
|
Title: |
Chairman and Chief Executive Officer (Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
July 25, 2008 |
By: |
/s/ Michael D. Matte
|
|
|
|
Name: |
Michael D. Matte |
|
|
|
Title: |
Executive Vice President
and Chief Financial Officer (Principal Financial Officer) |
|
|
30
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibit |
|
|
|
|
|
|
3.1 |
|
|
Certificates of Restated Articles of Incorporation (1) |
|
|
|
|
|
|
3.2 |
* |
|
Certificate of Designation |
|
|
|
|
|
|
3.3 |
|
|
Amended and Restated Bylaws (2) |
|
|
|
|
|
|
10.1 |
|
|
Amendment to the Employment Agreement with John C. Abbott dated March 27, 2008 (3) |
|
|
|
|
|
|
10.2 |
|
|
Amendment to the Employment Agreement with Michael D. Matte dated March 27, 2008 (3) |
|
|
|
|
|
|
10.3 |
|
|
Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and Mexicans &
Americans Trading Together, Inc. (4) |
|
|
|
|
|
|
10.4 |
|
|
Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and Richard L.
Scott Investments, LLC (4) |
|
|
|
|
|
|
10.5 |
|
|
Amendment No. 1 to Series 1 Common Stock Purchase Warrant dated January 25, 2008 by and between
Quepasa Corporation and Mexicans & Americans Trading Together, Inc. (4) |
|
|
|
|
|
|
10.6 |
|
|
Amendment No. 1 to Series 2 Common Stock Purchase Warrant dated January 25, 2008 by and between
Quepasa Corporation and Mexicans & Americans Trading Together, Inc. (4) |
|
|
|
|
|
|
10.7 |
|
|
Amendment No. 1 to Series 2 Common Stock Purchase Warrant dated January 25, 2008 by and between
Quepasa Corporation and Richard L. Scott Investments, LLC (4) |
|
|
|
|
|
|
10.8 |
|
|
Amendment No. 1 to Series 3 Common Stock Purchase Warrant dated January 25, 2008 by and between
Quepasa Corporation and Richard L. Scott Investments, LLC (4) |
|
|
|
|
|
|
10.9 |
|
|
Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and Mexicans &
Americans Trading Together, Inc. (4) |
|
|
|
|
|
|
10.10 |
|
|
Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and Richard L.
Scott Investments, LLC (4) |
|
|
|
|
|
|
10.11 |
|
|
Consulting Agreement with Jeffrey Valdez dated October 24, 2007 (5) |
|
|
|
|
|
|
10.12 |
|
|
Loan Agreement dated March 27, 2008 by and between Quepasa Corporation and BRC Group, LLC. (3) |
|
|
|
|
|
|
10.13 |
|
|
Right of First Refusal dated March 27, 2008 by and between Quepasa Corporation and BRC Group, LLC. (3) |
|
|
|
|
|
|
10.14 |
|
|
Webpage Development and Hosting Agreement dated March 27, 2008 by and between Quepasa Corporation and
BRC Group, LLC. (3) |
|
|
|
|
|
|
10.15 |
|
|
Promissory Note dated March 27, 2008 by BRC Group, LLC. (3) |
|
|
|
|
|
|
10.16 |
|
|
Equity Interests Purchase Warrant dated March 27, 2008 by and between Quepasa Corporation and BRC
Group, LLC. (3) |
|
|
|
|
|
|
10.17 |
|
|
Lease Termination Agreement dated March 10, 2008 by and between Quepasa Corporation and Airpark
Billorado, LLC (3) |
|
|
|
|
|
|
10.18 |
* |
|
Employment Agreement with Louis Bardov dated as of January 22, 2008 |
|
|
|
|
|
|
10.19 |
* |
|
Termination Agreement with Mexicans & Americans Thinking Together Foundation, Inc. and Mexicans &
Americans Trading Together, Inc. dated June 30, 2008. |
|
|
|
|
|
31
|
|
|
|
|
Exhibit |
|
|
No. |
|
Description of Exhibit |
|
|
|
|
|
|
31.1 |
* |
|
Certification of Principal Executive Officer (Section 302) |
|
|
|
|
|
|
31.2 |
* |
|
Certification of Principal Financial Officer (Section 302) |
|
|
|
|
|
|
32.1 |
** |
|
Certification of Principal Executive Officer (Section 906) |
|
|
|
|
|
|
32.2 |
** |
|
Certification of Principal Financial Officer (Section 906) |
|
|
|
* |
|
Filed herewith |
|
** |
|
Furnished herewith |
|
(1) |
|
Incorporated by reference from the Registrants Quarterly Report on Form 10-QSB as filed with
the SEC on August 15, 2007. |
|
(2) |
|
Incorporated by reference from the Registrants Current Report on Form 8-K as filed with the
SEC on July 3, 2007. |
|
(3) |
|
Incorporated by reference from the Registrants Annual Report on Form 10-KSB as filed with
the SEC on March 31, 2008. |
|
(4) |
|
Incorporated by reference from the Registrants Current Report on Form 8-K as filed with the
SEC on January 30, 2008. |
|
(5) |
|
Incorporated by reference
from the Registrants Quarterly Report on Form 10-Q as
filed with the SEC on May 13, 2008. |
Copies of any of the exhibits referred to above will be furnished at no cost to stockholders who
make a written request therefore to Michael D. Matte, Quepasa Corporation, 224 Datura Street, Suite
1100, West Palm Beach, FL 33401.
32