|
1.
|
To approve the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger, the issuance of shares that Quepasa intends to issue in a related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders and the potential issuance of shares of common stock issuable upon conversion of preferred stock we sold in September 2011 (referred to as “Proposal 1” or the “share issuance proposal”);
|
|
2.
|
To approve an increase in Quepasa’s authorized common stock from 50 million to 100 million shares (referred to as “Proposal 2” or the “authorized common shares increase proposal”);
|
|
3.
|
To approve the reincorporation of Quepasa in the state of Delaware (referred to as “Proposal 3” or the “reincorporation proposal”);
|
|
4.
|
To approve an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant (referred to as “Proposal 4” or the “Stock Incentive Plan proposal”);
|
|
5.
|
To approve our name change to Quepasa International Corporation or another similar name (referred to as "Proposal 5" or the “name change proposal”); and
|
|
6.
|
To approve any adjournment of the Special Meeting, for any reason, including, if necessary, to solicit additional proxies if there are not sufficient votes to approve one or more of the proposals (referred to as “Proposal 6” or the “adjournment proposal”).
|
|
Sincerely,
|
|
/s/ John Abbott
|
|
John Abbott
|
|
Chairman of the Board
|
|
1.
|
To approve the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger, the issuance of shares that Quepasa intends to issue in a related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders and the potential issuance of shares of common stock issuable upon conversion of preferred stock we sold in September 2011 (referred to as “Proposal 1” or the “share issuance proposal”);
|
|
2.
|
To approve an increase in Quepasa’s authorized common stock from 50 million to 100 million shares (referred to as “Proposal 2” or the “authorized common shares increase proposal”);
|
|
3.
|
To approve the reincorporation of Quepasa in the state of Delaware (referred to as “Proposal 3” or the “reincorporation proposal”);
|
|
4.
|
To approve an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant (referred to as “Proposal 4” or the “Stock Incentive Plan proposal”);
|
|
5.
|
To approve our name change to Quepasa International Corporation or another similar name (referred to as "Proposal 5" or the “name change proposal”); and
|
|
6.
|
To approve any adjournment of the Special Meeting, for any reason, including, if necessary, to solicit additional proxies in favor of the share issuance proposal if there are not sufficient votes to approve one or more of the proposals (referred to as “Proposal 6” or the “adjournment proposal”).
|
|
By Order of the Board of Directors of Quepasa,
|
|
/s/ John Abbott
|
|
John Abbott
|
|
Chairman of the Board
|
|
October 6, 2011
|
1 | ||
9 | ||
10 | ||
10 | ||
10 | ||
10 | ||
10 | ||
11 | ||
11 | ||
11 | ||
11 | ||
11 | ||
12 | ||
12 | ||
12 | ||
12 | ||
12 | ||
13 | ||
14 | ||
14 | ||
14 | ||
14 | ||
14 | ||
14 | ||
14 | ||
15 | ||
15 | ||
15 | ||
15 | ||
16 | ||
17 | ||
17 | ||
22 | ||
26 | ||
32 | ||
MYYEARBOOK'S MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 39 | |
48 |
51 | ||
51 | ||
51 | ||
57 | ||
57 | ||
57 | ||
58 | ||
58 | ||
62 | ||
62 | ||
62 | ||
62 | ||
63 | ||
63 | ||
myYearbook Executive and Director Compensation | 65 | |
65 | ||
66 | ||
Severance Arrangements | 66 | |
66 | ||
67 | ||
67 | ||
68 | ||
69 | ||
69 | ||
70 | ||
71 | ||
72 | ||
73 | ||
74 | ||
74 | ||
75 | ||
75 | ||
75 | ||
75 | ||
76 | ||
76 | ||
76 | ||
76 | ||
76 | ||
76 | ||
77 | ||
78 | ||
78 | ||
79 | ||
79 | ||
Amendment to the Merger Agreement | 80 | |
80 | ||
85 | ||
88 | ||
88 | ||
88 | ||
89 | ||
89 | ||
89 | ||
89 |
90 | ||
90 | ||
90 | ||
91 | ||
91 | ||
91 | ||
92 | ||
92 | ||
92 | ||
93 | ||
107 | ||
107 | ||
108 | ||
108 | ||
108 | ||
108 | ||
109 | ||
110 | ||
110 | ||
111 | ||
111 | ||
PROPOSAL 5: AMENDMENT TO OUR ARTICLES OF INCORPORATION TO CHANGE OUR NAME TO QUEPASA INTERNATIONAL CORPORATION | 112 | |
113 | ||
114 | ||
114 | ||
114 | ||
114 | ||
114 | ||
115 | ||
116 | ||
|
||
Annex A-1 | Amendment No. 1 to Agreement and Plan of Merger | |
Annex B-1A | Affirmation of Quepasa Voting Agreement | |
Annex B-2A | Affirmation and Amendment of myYearbook Voting Agreement | |
Annex G | Amendment to Articles (Name Change) |
Issue Dates
|
Exercise Price
(to be deducted)
|
Estimated Taxes
(to be deducted)
|
||
January 2007 through December 2007
|
$0.24
|
$0.116
|
||
January 2008 through July 2008
|
$0.34
|
$0.157
|
||
August 2008 through February 2009
|
$0.74
|
$0.280
|
||
March 2009 through February 2010
|
$0.42
|
$0.186
|
||
February 2010 through March 2011
|
$0.91
|
$0.315
|
||
March 2011 through present
|
$1.83
|
$0.358
|
|
·
|
To approve the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger and the issuance of shares that Quepasa intends to issue in the related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders;
|
|
·
|
To approve an increase in Quepasa’s authorized common stock from 50 million to 100 million shares;
|
|
·
|
To approve the reincorporation of Quepasa in Delaware;
|
|
·
|
To approve an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant;
|
|
·
|
To approve our name change to Quepasa International Corporation or another similar name; and
|
|
·
|
To approve any adjournment of the Special Meeting, including, if necessary, to solicit additional proxies in favor of the proposal if there are not sufficient votes to approve one or more of the proposals.
|
Proposal | Vote Required | |||
Ÿ
|
Approval of the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger, the issuance of shares that Quepasa intends to issue in the related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders and the potential issuance of shares of common stock issuable upon conversion of preferred stock we sold in September 2011.
|
Ÿ
|
The affirmative vote of the majority of the votes cast.
|
|
Ÿ
|
Approval of an increase in Quepasa’s authorized common stock from 50 million to 100 million shares.
|
Ÿ
|
The affirmative vote of the holders of a majority of the shares outstanding.
|
|
Ÿ
|
Approval of the reincorporation of Quepasa in Delaware.
|
Ÿ
|
The affirmative vote of the holders of a majority of the shares outstanding.
|
|
Ÿ
|
Approval of an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant.
|
Ÿ
|
The affirmative vote of the majority of the votes cast.
|
|
Ÿ
|
Approval of our name change. |
Ÿ
|
The affirmative vote of the holders of a majority of the shares outstanding.
|
|
Ÿ
|
To approve any adjournment of the Special Meeting, including, if necessary, to solicit additional proxies if there are not sufficient votes to approve one or more of the proposals.
|
Ÿ
|
The affirmative vote of the majority of the votes cast.
|
|
·
|
Quepasa shareholder approval of the share issuance proposal;
|
|
·
|
myYearbook shareholder approval of the Merger; and
|
|
·
|
Satisfaction or waiver of all of the other conditions to completion of the Merger. For a description of these conditions, see the section entitled “The Merger Agreement” beginning on page 67.
|
|
·
|
delivering a signed written notice of revocation to the Corporate Secretary of Quepasa at:
|
|
·
|
signing and delivering a new, valid proxy bearing a later date; or
|
|
·
|
attending the Special Meeting and voting in person, although your attendance alone will not revoke your proxy.
|
|
·
|
to approve the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger, the issuance of shares that Quepasa intends to issue in the related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders and the potential issuance of shares of common stock issuable upon conversion of preferred stock we sold in September 2011 (referred to as “Proposal 1” or the “share issuance proposal”);
|
|
·
|
to approve an increase in Quepasa’s authorized common stock from 50 million to 100 million shares (referred to as “Proposal 2” or the "authorized common shares increase proposal");
|
|
·
|
to approve the reincorporation of Quepasa in Delaware (referred to as “Proposal 3” or the “reincorporation proposal”);
|
|
·
|
to approve an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant (referred to as “Proposal 4” or the “Stock Incentive Plan proposal”);
|
|
·
|
To approve our name change to Quepasa International Corporation or another similar name (referred to as "Proposal 5" or the “name change proposal”); and
|
|
·
|
to approve any adjournment of the Special Meeting, for any reason, including, if necessary, to solicit additional proxies in favor of the share issuance proposal if there are not sufficient votes to approve one or more of the proposals (referred to as “Proposal 6” or the “adjournment proposal”).
|
Assuming $5 Million Capital Raise (1)
|
Assuming $13 Million Capital Raise (1)
|
|||
Existing Quepasa shareholders
|
53.4%
|
50.3%
|
||
Existing myYearbook security holders
|
46.6%
|
43.9%
|
|
·
|
approval by Quepasa shareholders of the share issuance proposal;
|
|
·
|
approval of the Merger and Merger Agreement by the holders of at least the majority of the outstanding shares of myYearbook common stock and 70% of the outstanding shares of myYearbook preferred stock;
|
|
·
|
the registration statement on Form S-4, of which this proxy statement/prospectus is a part, shall have been declared effective by the Securities and Exchange Commission;
|
|
·
|
authorization of listing on the NYSE Amex of the shares of Quepasa common stock to be issued in connection with the Merger, subject to official notice of issuance;
|
|
·
|
completion of an equity financing transaction by Quepasa of at least $10 million in order to partially fund the cash portion of the Merger consideration;
|
|
·
|
no material adverse effect (or any change, event or development that could reasonably be expected to have a material adverse effect) shall have occurred with respect to Quepasa or myYearbook. In the Amendment, Quepasa and myYearbook agreed that the other party’s financial performance and/or web traffic metrics shall not be considered in determining whether a material adverse effect has occurred. They also agreed that no information or events known by the other party on the date of the Amendment or reflected for or reserved on their respective August 31, 2011 financial results shall be considered in determining whether a material adverse effect has occurred;
|
|
·
|
the representations and warranties of the other party in the Merger Agreement shall be true and correct in all material respects (subject to certain limitations and exclusions);
|
|
·
|
all agreements and obligations of the other party shall have been complied with in all material respects;
|
|
·
|
no statute, rule, regulation, writ, order, temporary restraining order or preliminary or permanent injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority, which remains in effect, and prohibits the consummation of the Merger or otherwise makes it illegal; and
|
|
·
|
no person or governmental agency has instituted any action, suit or proceeding which remains pending and which seeks, and which is reasonably likely, to enjoin, restrain or prohibit the consummation of the Merger.
|
|
·
|
the Merger is not completed by January 19, 2012;
|
|
·
|
a statute, rule, regulation or executive order is enacted or entered prohibiting the consummation of the Merger substantially on the terms contemplated by the Merger Agreement;
|
|
·
|
a court or other government entity shall have issued an order, decree or ruling or taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger;
|
|
·
|
the other party has breached any of its representations or warranties or failed to perform any of the obligations to be performed by and under the Merger Agreement and such breach or failure to perform (i) will result in the failure by such party to satisfy the closing conditions with respect to the accuracy of such parties representations and warranties or the performance by such party of its obligations and (ii) is incapable of being cured or has not been cured by the later of 20 business days of written notice of the breach;
|
|
·
|
a “Triggering Event” (described below) has occurred with respect to the other party; or
|
|
·
|
after complying with the terms of the Merger Agreement relating to considering alternative business combination transactions, it determines to pursue an alternative business combination transaction instead of the Merger.
|
|
·
|
The effects of the Merger on our shareholders;
|
|
·
|
The anticipated timing of the completion of the Merger;
|
|
·
|
The anticipated benefits expected from the Merger; and
|
|
·
|
The expected federal tax consequences from the Merger.
|
·
|
unanticipated issues in integrating logistics, information, communications and other systems;
|
·
|
integrating personnel from the two companies while maintaining focus on providing a consistent, high quality level of service;
|
·
|
integrating complex systems, technology, networks and other assets of myYearbook in a seamless manner that minimizes any adverse impact on, suppliers, employees and other constituencies;
|
·
|
performance shortfalls at one or both of the companies as a result of the diversion of management's attention from day-to-day operations caused by activities surrounding the completion of the Merger and integration of the companies’ operations;
|
·
|
potential unknown liabilities, liabilities that are significantly larger than anticipated, unforeseen expenses or delays associated with the Merger and the integration process;
|
·
|
unanticipated changes in applicable laws and regulations;
|
·
|
the impact on Quepasa’s internal controls and compliance with the regulatory requirements under the Sarbanes-Oxley Act of 2002, including, but not limited to, complexities that arise as a result of integrating the accounting system and internal controls of a private with that of a public company; and
|
·
|
complexities associated with managing the larger, combined business.
|
·
|
the attention of Quepasa’s and/or myYearbook’s management may be directed toward the completion of the Merger and related matters and may be diverted from the day-to-day business operations of their respective companies, including from other opportunities that might otherwise be beneficial to them;
|
·
|
certain customers, suppliers, business partners and other persons with whom Quepasa and/or myYearbook have a business relationship may delay or defer certain business decisions or seek to terminate, change or renegotiate their relationship with Quepasa or myYearbook as a result of the Merger, whether pursuant to the terms of their existing agreements or otherwise; and
|
·
|
current and prospective employees may experience uncertainty regarding their future roles with the combined company, which might adversely affect Quepasa’s and/or myYearbook’s ability to retain, recruit and motivate key personnel.
|
·
|
the current market price of Quepasa’s common stock may reflect a market assumption that the Merger will occur or that it will occur by a certain date, and a failure to complete the Merger or a delay in the Merger could result in a negative perception by the market of Quepasa generally and a resulting decline in the market price of Quepasa’s common stock;
|
·
|
Quepasa or myYearbook may experience negative reactions from their respective employees, customers, suppliers and other business partners;
|
·
|
there may be substantial disruption to Quepasa’s and myYearbook’s businesses and a distraction of their respective management teams and employees from day-to-day operations, because matters related to the Merger have required substantial commitments of time and financial and other resources, which could otherwise have been devoted to other opportunities that might have been beneficial;
|
·
|
Quepasa or myYearbook, as the case may be, may be required to pay a substantial termination fee to the other party and/or reimburse its Merger-related expenses if the Merger Agreement is terminated under certain circumstances; and
|
·
|
if the Merger is not completed, each of Quepasa and myYearbook would continue to face the risks that it currently faces as an independent company.
|
·
|
the effective annual interest rate is between 12% and 12.5% per year, which will be a charge against future earnings;
|
·
|
any future cash flow will be required to service the indebtedness and make operating lease payments, thereby reducing the availability of Quepasa’s cash flow to fund working capital, capital expenditures, acquisitions and other general corporate purposes; and
|
·
|
the terms of the indebtedness may limit Quepasa’s ability to obtain additional financing for capital expenditures and working capital needs.
|
·
|
continued growth in the use of Quepasa.com, myYearbook.com and other social networks;
|
·
|
changes in consumer demographics and public tastes and preferences;
|
·
|
the availability and popularity of other forms of entertainment;
|
·
|
the worldwide growth of personal computer, broadband Internet and mobile device users, and the rate of any such growth;
|
·
|
general economic conditions, particularly economic conditions adversely affecting discretionary consumer spending; and
|
·
|
lawsuits by social gaming and other companies claiming that we misappropriated their intellectual property.
|
·
|
Being able to attract users from countries with different local cultures;
|
||
·
|
recruiting and retaining talented and capable management and employees in foreign countries;
|
·
|
challenges caused by distance, language and cultural differences;
|
·
|
developing and customizing games and other offerings that appeal to the tastes and preferences of players in international markets;
|
·
|
competition from local game makers with significant market share in those markets and with a better understanding of player preferences;
|
·
|
protecting and enforcing our intellectual property rights;
|
·
|
negotiating agreements with local distribution platforms that are sufficiently economically beneficial to us and protective of our rights;
|
·
|
the inability to extend proprietary rights in our brand, content or technology into new jurisdictions;
|
·
|
implementing alternative payment methods for virtual goods in a manner that complies with local laws and practices and protects us from fraud;
|
·
|
compliance with applicable foreign laws and regulations, including privacy laws and laws relating to content;
|
·
|
compliance with anti-bribery laws including without limitation, compliance with the Foreign Corrupt Practices Act;
|
·
|
credit risk and higher levels of payment fraud;
|
·
|
currency exchange rate fluctuations;
|
·
|
protectionist laws and business practices that favor local businesses in some countries;
|
·
|
foreign tax consequences;
|
·
|
foreign exchange controls or U.S. tax restrictions that might restrict or prevent us from repatriating income earned in countries outside the United States;
|
·
|
political, economic and social instability;
|
·
|
higher costs associated with doing business internationally;
|
·
|
restrictions on the export or import of technology; and
|
·
|
trade and tariff restrictions.
|
·
|
Facebook discontinues or limits access to its platform by myYearbook and other application developers;
|
·
|
Facebook modifies its terms of service or other policies, including changing how the personal information of its users is made available to application developers on the Facebook platform or shared by users; or
|
·
|
Facebook develops its own competitive offerings.
|
·
|
attract new users and retain existing users at consistent rate;
|
·
|
increase engagement by existing users;
|
·
|
anticipate changes in the social networking industry;
|
·
|
cost-effectively develop and launch applications and games;
|
·
|
launch new products and release enhancements that become popular;
|
·
|
develop and maintain a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased member usage, fast load times and the deployment of new features and applications;
|
·
|
process, store and use data in compliance with governmental regulation and other legal obligations related to privacy;
|
·
|
successfully compete with other companies that are currently in, or may in the future enter, the social networking or entertainment industry;
|
·
|
hire, integrate and retain world class talent;
|
·
|
successfully expand its business, especially internationally and with respect to mobile devices; and
|
||
·
|
monetize mobile devices.
|
Historical | ||||||||||||||||||||||
|
Acquiree | |||||||||||||||||||||
Acquirer
|
Insider |
Pro forma Adjustments
|
Combined
|
|||||||||||||||||||
Quepasa
|
Guides, Inc.
|
Debit
|
Credit
|
Pro forma
|
||||||||||||||||||
ASSETS
|
||||||||||||||||||||||
CURRENT ASSETS:
|
|
|||||||||||||||||||||
Cash and cash equivalents
|
$ | 11,192,510 | $ | 8,849,988 | 10,000,000 | 1 | 18,000,000 | 2 | $ | 10,542,498 | ||||||||||||
1,500,000 | 3 | |||||||||||||||||||||
Accounts receivable, net
|
3,081,726 | 6,383,968 | 9,465,694 | |||||||||||||||||||
Notes receivable - current portion
|
434,457 | - | 434,457 | |||||||||||||||||||
Restricted cash
|
275,000 | - | 275,000 | |||||||||||||||||||
Other current assets
|
202,039 | 593,404 | 795,443 | |||||||||||||||||||
Total current assets
|
15,185,732 | 15,827,360 | 21,513,092 | |||||||||||||||||||
Goodwill
|
4,529,645 | 67,880,229 | 2 | 72,409,874 | ||||||||||||||||||
Property and equipment, net
|
746,338 | 3,699,084 | 4,445,422 | |||||||||||||||||||
Intangible assets
|
- | 1,299,350 | 8,000,000 | 2 | 9,299,350 | |||||||||||||||||
Notes receivable - long-term portion
|
57,480 | - | 57,480 | |||||||||||||||||||
Other assets
|
126,893 | 44,992 | 171,885 | |||||||||||||||||||
Total assets
|
$ | 20,646,088 | $ | 20,870,786 | $ | 107,897,103 | ||||||||||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||||||||||||||||
CURRENT LIABILITIES:
|
||||||||||||||||||||||
Accounts payable
|
$ | 385,019 | 1,790,091 | 2,175,110 | ||||||||||||||||||
Accrued expenses
|
671,782 | 630,499 | 1,302,281 | |||||||||||||||||||
Accrued dividends
|
319,455 | - | 319,455 | |||||||||||||||||||
Deferred revenue
|
73,129 | 59,553 | 132,682 | |||||||||||||||||||
Unearned grant income
|
11,859 | - | 11,859 | |||||||||||||||||||
Current portion of long-term debt
|
- | 2,352,246 | 2,352,246 | |||||||||||||||||||
Total current liabilities
|
1,461,244 | 4,832,389 | 6,293,633 | |||||||||||||||||||
Notes payable, net
|
6,570,788 | 2,348,626 | 8,919,414 | |||||||||||||||||||
Total liabilities
|
8,032,032 | 7,181,015 | 15,213,047 | |||||||||||||||||||
STOCKHOLDERS’ EQUITY:
|
||||||||||||||||||||||
Preferred stock, Series A (4,490,794 shares authorized,
4,096,700 issued, and outstanding)
liquidation preference $4,106,122
|
$ | - | $ | 4,097 | 4,097 | 2 | $ | - | ||||||||||||||
Preferred stock, Series B (4,516,968 shares authorized,
4,318,983 issued and outstanding)
liquidation preference $13,129,708
|
- | 4,319 | 4,319 | 2 | - | |||||||||||||||||
Preferred Voting Convertible stock, Series A, $.001 par value;
1,500,000 shares authorized, 1,000,000 issued, and outstanding.
|
1,000 | 1 | 1,000 | |||||||||||||||||||
Common stock, $.001 par value; 50,000,000 shares authorized;
16,645,781 shares issued and outstanding at June 30, 2011,
35,043,014 shares issued and outstanding as affected for the Merger.
|
16,647 | 35,044 | ||||||||||||||||||||
Common stock, $.001 par value; 1,397,233 shares to be issued | - | - | 1,397 | 1 | ||||||||||||||||||
Common stock, $.001 par value; 17,000,000 shares to be issued. | - | - | 17,000 | 2 | ||||||||||||||||||
Common stock, $.001 par value 27,197,985 shares authorized
12,267,475 shares issued and outstanding
|
- | 12,267 | 12,267 | 2 | - | |||||||||||||||||
Additional paid-in capital
|
182,292,819 | 19,942,375 | 51,610,625 | 2 | 263,843,422 | |||||||||||||||||
9,997,603 | 1 | |||||||||||||||||||||
Accumulated deficit
|
(169,933,329 | ) | (6,273,287 | ) | 6,273,287 | 2 | (171,433,329 | ) | ||||||||||||||
1,500,000 | 3 | |||||||||||||||||||||
Accumulated other comprehensive income
|
237,919 | 237,919 | ||||||||||||||||||||
Total shareholders' equity
|
12,614,056 | 13,689,771 | 92,684,056 | |||||||||||||||||||
Total liabilities and shareholders' equity
|
$ | 20,646,088 | $ | 20,870,786 | $ | 87,400,912 | $ | 87,400,912 | $ | 107,897,103 |
Historical | |||||||||||||||||
|
Acquiree | Pro forma | |||||||||||||||
Acquirer
|
Insider |
Adjustments
|
Combined
|
||||||||||||||
Quepasa
|
Guides, Inc.
|
Debit (Credit)
|
Pro forma
|
||||||||||||||
REVENUES
|
$ | 4,085,211 | $ | 13,383,865 | $ | 17,469,076 | |||||||||||
OPERATING EXPENSES:
|
|||||||||||||||||
Sales and marketing
|
575,097 | 2,344,284 | 2,919,381 | ||||||||||||||
Product and content development
|
3,627,419 | 2,285,548 | 5,912,967 | ||||||||||||||
Games expenses
|
262,469 | - | 262,469 | ||||||||||||||
General and administrative
|
2,794,759 | 7,258,450 | 10,053,209 | ||||||||||||||
Depreciation and amortization
|
355,200 | 1,600,161 | 1,333,333 | 4 | 3,288,694 | ||||||||||||
TOTAL OPERATING EXPENSES
|
7,614,944 | 13,488,443 | 22,436,720 | ||||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
(3,529,733 | ) | (104,578 | ) | (4,967,644 | ) | |||||||||||
OTHER INCOME (EXPENSE):
|
|||||||||||||||||
Interest income
|
34,034 | 11,543 | 45,577 | ||||||||||||||
Interest expense
|
(301,205 | ) | (291,299 | ) | (592,504 | ) | |||||||||||
Other income
|
1,169 | - | 1,169 | ||||||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(266,002 | ) | (279,756 | ) | (545,758 | ) | |||||||||||
LOSS BEFORE INCOME TAXES
|
(3,795,735 | ) | (384,334 | ) | (5,513,402 | ) | |||||||||||
Income tax provision
|
- | (21,590 | ) | (21,590 | ) | ||||||||||||
NET LOSS
|
(3,795,735 | ) | (405,924 | ) | (5,534,992 | ) | |||||||||||
Preferred stock dividends
|
(40,705 | ) | - | (40,705 | ) | ||||||||||||
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS
|
$ | (3,836,440 | ) | $ | (405,924 | ) | $ | (1,333,333 | ) | $ | (5,575,697 | ) | |||||
NET LOSS PER COMMON SHARE, ALLOCABLE TO
COMMON SHAREHOLDERS, BASIC AND DILUTED |
$ | (0.23 | ) | $ | (0.04 | ) | $ | (0.16 | ) | ||||||||
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED |
16,344,063 | 34,741,296 | 34,741,296 |
Historical | |||||||||||||||||||||
|
Acquiree | Pro forma | |||||||||||||||||||
Acquirer
|
Acquiree
|
Insider
|
Adjustments
|
Combined
|
|||||||||||||||||
Quepasa
|
TechFront
|
Guides, Inc.
|
Debit (Credit)
|
Pro forma
|
|||||||||||||||||
REVENUES
|
$ | 6,054,141 | $ | 1,226,271 | $ | 23,664,405 | $ | 30,944,817 | |||||||||||||
OPERATING EXPENSES:
|
|||||||||||||||||||||
Sales and marketing
|
891,980 | 18,497 | 2,690,309 | 3,600,786 | |||||||||||||||||
Product and content development
|
4,774,694 | 1,435,843 | 3,948,385 | 10,158,922 | |||||||||||||||||
General and administrative
|
6,123,083 | 364,777 | 12,306,939 | 18,794,799 | |||||||||||||||||
Depreciation and amortization
|
319,779 | - | 2,953,307 | 2,666,667 | 5 | 6,167,936 | |||||||||||||||
36,607 | 6 | ||||||||||||||||||||
191,576 | 7 | ||||||||||||||||||||
TOTAL OPERATING EXPENSES
|
12,109,536 | 1,819,117 | 21,898,940 | 38,722,443 | |||||||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
(6,055,395 | ) | (592,846 | ) | 1,765,465 | (7,777,626 | ) | ||||||||||||||
OTHER INCOME (EXPENSE):
|
|||||||||||||||||||||
Gain on sale of assets
|
- | - | 1,895,000 | 1,895,000 | |||||||||||||||||
Interest income
|
6,229 | 1 | 25,797 | 32,027 | |||||||||||||||||
Interest expense
|
(603,609 | ) | (211,423 | ) | (512,010 | ) | (1,327,042 | ) | |||||||||||||
Other income
|
2,125 | - | - | 2,125 | |||||||||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(595,255 | ) | (211,422 | ) | 1,408,787 | 602,110 | |||||||||||||||
LOSS BEFORE INCOME TAXES
|
(6,650,650 | ) | (804,268 | ) | 3,174,252 | (7,175,516 | ) | ||||||||||||||
Income tax provision
|
- | (112,914 | ) | (102,954 | ) | (215,868 | ) | ||||||||||||||
NET LOSS
|
(6,650,650 | ) | (917,182 | ) | 3,071,298 | (7,391,384 | ) | ||||||||||||||
Preferred stock dividends
|
(111,500 | ) | - | - | (111,500 | ) | |||||||||||||||
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS
|
$ | (6,762,150 | ) | $ | (917,182 | ) | $ | 3,071,298 | $ | (2,894,850 | ) | $ | (7,502,884 | ) | |||||||
NET LOSS PER COMMON SHARE, ALLOCABLE TO
COMMON SHAREHOLDERS, BASIC AND DILUTED |
$ | (0.52 | ) | $ | (0.09 | ) | $ | (0.24 | ) | ||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED |
13,117,845 | 31,863,801 | 31,863,801 |
Cash and cash equivalents
|
$ | 8,849,988 | ||
Accounts receivable
|
6,383,968 | |||
Property and equipment
|
3,699,084 | |||
Intangible assets
|
9,299,350 | |||
Other current and other assets
|
638,396 | |||
Total assets acquired
|
28,870,786 | |||
Accounts payable and accrued liabilities
|
(2,480,143 | ) | ||
Notes Payable
|
(4,700,872 | ) | ||
Total liabilities assumed
|
(7,181,015 | ) | ||
Goodwill
|
67,880,229 | |||
Total purchase price
|
$ | 89,570,000 |
Debit
|
Credit
|
|||||||||
1 |
Cash
|
$ | 10,000,000 | $ | ||||||
Common Stock
|
1,397 | |||||||||
Preferred Voting Convertible Stock, Series A
|
1,000 | |||||||||
Additional Paid in Capital
|
9,997,603 | |||||||||
To record stock to be issued to raise capital for the myYearbook acquisition
|
||||||||||
2 |
Goodwill
|
67,880,229 | ||||||||
Intangible assets
|
8,000,000 | |||||||||
Preferred Stock, Series A
|
4,097 | |||||||||
Preferred Stock, Series B
|
4,319 | |||||||||
Common Stock - myYearbook
|
12,267 | |||||||||
Cash
|
18,000,000 | |||||||||
Additional Paid in Capital
|
51,610,625 | |||||||||
Accumulated Deficit
|
6,273,287 | |||||||||
Common Stock
|
17,000 | |||||||||
Addition paid in capital - common stock issuance
|
||||||||||
To adjust to fair market value the assets acquired and liabilities assumed pursuant to the proposed Merger Agreement
and record common stock issuance and the cash to be paid as consideration
|
||||||||||
3 |
Cash
|
1,500,000 | ||||||||
Accumulated deficit - Fees
|
1,500,000 | |||||||||
Accumulated deficit - legal fees
|
||||||||||
To record non-recurring acquirer expense incurred in the acquisition
|
||||||||||
4 |
Amortization expense
|
1,333,333 | ||||||||
Accumulated amortization
|
1,333,333 | |||||||||
To record amortization of intangibles allocated from myYearbook proposed acquisition for the six month ended June 30, 2011.
|
||||||||||
5 |
Amortization expense
|
2,666,667 | ||||||||
Accumulated amortization
|
2,666,667 | |||||||||
To record 2010 annual amortization of intangibles allocated from myYearbook proposed acquisition.
|
||||||||||
6 |
Depreciation expense
|
36,607 | ||||||||
Accumulated depreciation
|
36,607 | |||||||||
To record 2010 annual amortization on tangible assets acquired with the XtFt acquisition
|
||||||||||
7 |
Amortization Expense
|
191,576 | ||||||||
Accumulated amortization
|
191,576 | |||||||||
To record 2010 annual amortization of customer contracts acquired with the XTft acquisition
|
||||||||||
Total
|
$ | 91,629,095 | $ | 91,629,095 |
·
|
In January 2009, myYearbook launched the ability to purchase virtual currency directly with a credit card, PayPal or mobile phone. This was the first non-advertising revenue generated on the site.
|
|
·
|
In May 2009, myYearbook launched the “VIP Club”. The VIP Club provides members with a monthly Lunch Money increase, unlocks feature within most applications and awards increased Lunch Money for performing certain actions. VIP Club revenue quickly became a leading source of virtual currency revenue.
|
·
|
In November 2009, myYearbook launched “Live Feed” which became its most popular application and increased member retention and page views. The Live Feed remains the core feature across the website and mobile applications today.
|
|
·
|
In January 2010, myYearbook launched the Live gaming platform. Live is a real-time, synchronous gaming platform that pairs games with live video chat.
|
·
|
In May 2010, myYearbook launched its first mobile application on the iPhone. Through June 2011, the iPhone application has been installed over 800,000 times.
|
|
·
|
In July 2010, myYearbook launched its mobile application for Android. Through June 2011, the Android application has been installed over 1.2 million times. Mobile traffic now accounts for over 40% of total logins to the site.
|
·
|
In March 2011, myYearbook announced that it acquired four mobile games and a mobile technology platform. As of June 2011, the mobile games account for over 11.5 million installs. The mobile technology platform will support a planned social layer across all of myYearbook’s mobile applications and games.
|
·
|
Advertising: myYearbook serves three billion ad impressions each month on the web and 1 billion on mobile devices. myYearbook sells ads to major brand agencies, direct response and cost per action advertisers, ad networks and mobile agencies. myYearbook’s brand and agency advertising is generally directed at companies looking for high-impact ad units and brand engagement from its teen and young adult demographic.
|
·
|
Virtual Currency: myYearbook’s virtual currency revenue consists of direct Lunch Money purchases, “VIP” memberships and currency engagement actions including sales on myYearbook’s cross-platform currency monetization product Social Theater. Social Theater is distributed across platforms outside of myYearbook, including Facebook.
|
·
|
Sales and Marketing Expenses: Sales and marketing expenses consist of web and mobile advertising and branding campaigns, public relations and promotions and safety initiatives.
|
·
|
Information Technology Expenses: Information technology expenses consist of occupancy and utility charges and support for its offsite technology infrastructure, bandwidth and content delivery fees and the purchase of specific technology, particularly software and hardware related to its infrastructure.
|
·
|
General and Administrative Expenses: General and administrative expenses consist of all of myYearbook’s personnel costs, occupancy costs, general operating costs, travel and corporate professional fees such as legal and accounting fees.
|
·
|
Depreciation: myYearbook’s depreciation and amortization are non-cash expenses which have consisted primarily of depreciation related to its property and equipment.
|
·
|
Other Income (Expense): Other income (expense) consists primarily of interest earned, interest expense and gain (loss) on the sale of assets. Interest income relates to its cash and cash equivalents discussed in Note 2 to myYearbook’s Financial Statements. myYearbook invests all of its cash and cash equivalents in fully liquid, money market securities. Interest expense relates to long-term debt discussed in Note 6 to myYearbook’s Financial Statements. The gain on sale of asset relates to the sale of
intellectual property.
|
For the years ended December 31,
|
||||||||||||||||
2010
|
2009
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$
|
23,664,405
|
$
|
15,427,514
|
$
|
8,236,891
|
54
|
%
|
||||||||
Sales and marketing
|
2,690,309
|
1,318,756
|
1,371,553
|
104
|
%
|
|||||||||||
Information technology
|
3,948,385
|
3,292,890
|
655,495
|
20
|
%
|
|||||||||||
General and administrative
|
12,306,939
|
9,394,887
|
2,912,052
|
31
|
%
|
|||||||||||
Depreciation
|
2,953,307
|
2,500,545
|
452,762
|
18
|
%
|
|||||||||||
OPERATING EXPENSES
|
21,898,940
|
16,507,078
|
5,391,862
|
33
|
%
|
|||||||||||
INCOME (LOSS) FROM OPERATIONS
|
1,765,465
|
(1,079,564
|
)
|
2,845,029
|
n/a
|
|||||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest income
|
25,797
|
61,013
|
(35,216
|
)
|
-58
|
%
|
||||||||||
Interest expense
|
(512,010
|
)
|
(539,388
|
)
|
(27,378
|
)
|
5
|
%
|
||||||||
Gain on asset sale
|
1,895,000
|
--
|
1,895,000
|
n/a
|
||||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
1,408,787
|
(478,375
|
)
|
1,887,162
|
n/a
|
|||||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
3,174,252
|
(1,557,939
|
)
|
4,732,191
|
n/a
|
|||||||||||
INCOME TAX PROVISION
|
102,954
|
--
|
102,954
|
n/a
|
||||||||||||
NET INCOME (LOSS)
|
$
|
3,071,298
|
$
|
(1,557,939
|
)
|
$ |
4,629,237
|
n/a
|
Years ended
December 31,
|
||||||||
2010
|
2009
|
|||||||
Sales and marketing
|
$ |
2,015,907
|
$ |
1,585,116
|
||||
Product and content development
|
4,670,192
|
3,828,652
|
||||||
General and administrative
|
2,728,230
|
2,047,637
|
||||||
Total Employee Compensation
|
$ |
9,414,330
|
$ |
7,461,405
|
For the three months ended June 30,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$ | 7,290,546 | $ | 5,656,078 | $ | 1,634,468 | 29 | % | ||||||||
OPERATING EXPENSES
|
||||||||||||||||
Sales and marketing
|
1,346,589 | 703,676 | 642,913 | 91 | % | |||||||||||
Information technology
|
1,147,757 | 959,946 | 187,811 | 20 | % | |||||||||||
General and administrative
|
3,778,321 | 2,942,122 | 836,199 | 28 | % | |||||||||||
Depreciation and amortization
|
785,632 | 746,850 | 38,782 | 5 | % | |||||||||||
OPERATING EXPENSES
|
7,058,299 | 5,352,594 | 1,705,705 | 32 | % | |||||||||||
INCOME FROM OPERATIONS
|
232,247 | 303,484 | (71,237 | ) | -23 | % | ||||||||||
OTHER INCOME (EXPENSE)
|
||||||||||||||||
Interest income
|
6,003 | 6,805 | (802 | ) | -12 | % | ||||||||||
Interest expense
|
(152,357 | ) | (126,354 | ) | (26,003 | ) | 21 | % | ||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(146,354 | ) | (119,549 | ) | (26,805 | ) | 22 | % | ||||||||
INCOME BEFORE INCOME TAXES
|
85,893 | 183,935 | (98,042 | ) | -53 | % | ||||||||||
INCOME TAX PROVISION
|
- | - | - | n/a | ||||||||||||
NET INCOME
|
$ | 85,893 | $ | 183,935 | $ | (98,042 | ) | -53 | % |
Three months ended June 30,
(Unaudited)
|
||||||||
2011
|
2010
|
|||||||
Sales and marketing
|
$ |
666,940
|
$ |
498,996
|
||||
Product and content development
|
1,439,199
|
1,061,536
|
||||||
General and administrative
|
561,824
|
577,107
|
||||||
Total Employee Compensation
|
$ |
2,667,963
|
$ |
2,137,639
|
For the six months ended June 30,
|
||||||||||||||||
2011
|
2010
|
|||||||||||||||
(Unaudited)
|
(Unaudited)
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$ | 13,383,865 | $ | 9,772,542 | $ | 3,611,323 | 37 | % | ||||||||
OPERATING EXPENSES
|
||||||||||||||||
Sales and marketing
|
2,344,284 | 1,177,049 | 1,167,235 | 99 | % | |||||||||||
Information technology
|
2,285,548 | 1,908,094 | 377,454 | 20 | % | |||||||||||
General and administrative
|
7,258,450 | 5,629,858 | 1,628,592 | 29 | % | |||||||||||
Depreciation and amortization
|
1,600,161 | 1,446,187 | 153,974 | 11 | % | |||||||||||
OPERATING EXPENSES
|
13,488,443 | 10,161,188 | 3,327,255 | 33 | % | |||||||||||
LOSS FROM OPERATIONS
|
(104,578 | ) | (388,646 | ) | 284,068 | -73 | % | |||||||||
OTHER INCOME (EXPENSE)
|
||||||||||||||||
Interest income
|
(291,299 | ) | (251,365 | ) | (39,934 | ) | 16 | % | ||||||||
Interest expense
|
11,543 | 13,600 | (2,057 | ) | -15 | % | ||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(279,756 | ) | (237,765 | ) | (41,991 | ) | 18 | % | ||||||||
LOSS BEFORE INCOME TAXES
|
(384,334 | ) | (626,411 | ) | 242,077 | -39 | % | |||||||||
INCOME TAX PROVISION
|
(21,590 | ) | - | - | n/a | |||||||||||
NET LOSS
|
$ | (405,924 | ) | $ | (626,411 | ) | $ | 220,487 | -35 | % |
Six months ended
June 30,
(Unaudited)
|
||||||||
2011
|
2010
|
|||||||
Sales and marketing
|
$ |
1,328,635
|
$ |
1,001,801
|
||||
Product and content development
|
2,837,357
|
2,058,849
|
||||||
General and administrative
|
1,250,372
|
1,252,995
|
||||||
Total Employee Compensation
|
$ |
5,416,364
|
$ |
4,313,645
|
For the Years Ended
December 31,
|
||||||||
2010
|
2009
|
|||||||
Net cash provided by (used in) operating activities
|
$
|
1,974,590
|
$
|
(124,623
|
)
|
|||
Net cash used in investing activities
|
$
|
(1,542,729
|
)
|
$
|
(1,923,093
|
)
|
||
Net cash provided by (used in) financing activities
|
$
|
869,097
|
$
|
(195,120
|
)
|
For the Three Month Periods Ended June 30, (Unaudited)
|
||||||||
2011
|
2010
|
|||||||
Net cash provided by operating activities
|
$
|
1,393,913
|
$
|
332,029
|
||||
Net cash used in investing activities
|
$
|
(1,068,617
|
)
|
$
|
(748,229
|
)
|
||
Net cash provided by financing activities
|
$
|
114,038
|
$
|
184,823
|
For the Six Month Periods Ended June 30, (Unaudited)
|
||||||||
2011
|
2010
|
|||||||
Net cash provided by operating activities
|
$
|
1,945,105
|
$
|
775,119
|
||||
Net cash used in investing activities
|
$
|
(1,779,936
|
)
|
$
|
(1,171,177
|
)
|
||
Net cash provided by financing activities
|
$
|
355,541
|
$
|
386,997
|
For the years ended December 31,
|
||||||||
2010
|
2009
|
|||||||
INCOME/(LOSS) FROM OPERATIONS
|
$
|
1,765,465
|
$
|
(1,079,564
|
)
|
|||
NON CASH OPERATING EXPENSES
|
||||||||
Stock based compensation expense
|
194,101
|
139,505
|
||||||
Depreciation and amortization
|
2,953,307
|
2,500,545
|
||||||
TOTAL NON CASH OPERATING EXPENSES
|
3,147,408
|
2,640,050
|
||||||
EBITDA
|
$
|
4,912,873
|
$
|
1,560,486
|
For the three months
ended June 30,
(Unaudited)
|
||||||||
2011
|
2010
|
|||||||
INCOME FROM OPERATIONS
|
$
|
232,247
|
$
|
303,484
|
||||
NON CASH OPERATING EXPENSES
|
||||||||
Stock based compensation expense
|
43,393
|
48,982
|
||||||
Depreciation and amortization
|
785,633
|
746,850
|
||||||
TOTAL NON CASH OPERATING EXPENSES
|
829,026
|
795,832
|
||||||
EBITDA
|
$
|
1,061,273
|
$
|
1,099,316
|
For the six months
ended June 30,
(Unaudited)
|
||||||||
2011
|
2010
|
|||||||
(LOSS) FROM OPERATIONS
|
$
|
(104,578
|
)
|
$
|
(388,646
|
)
|
||
NON CASH OPERATING EXPENSES
|
||||||||
Stock based compensation expense
|
104,779
|
102,644
|
||||||
Depreciation and amortization
|
1,600,161
|
1,446,187
|
||||||
TOTAL NON CASH OPERATING EXPENSES
|
1,704,940
|
1,548,831
|
||||||
EBITDA
|
$
|
1,600,362
|
$
|
1,160,185
|
|
1.
|
To approve the issuance of shares of Quepasa common stock in connection with the Merger, which includes the issuance of shares to myYearbook security holders as partial consideration for the Merger, the issuance of shares that Quepasa intends to issue in the related financing to help fund the cash portion of the Merger consideration payable to myYearbook security holders and the potential issuance of shares of common stock issuable upon conversion of preferred stock we sold in September 2011;
|
|
2.
|
To approve an increase in Quepasa’s authorized common stock from 50 million to 100 million shares;
|
|
3.
|
To approve the reincorporation of Quepasa in Delaware;
|
|
4.
|
To approve an amendment to Quepasa’s 2006 Stock Incentive Plan authorizing an additional 2,000,000 shares to be available for grant;
|
|
5.
|
To approve our name change to Quepasa International Corporation or another similar name; and
|
|
6.
|
To approve any adjournment of the Special Meeting, for any reason, including, if necessary, to solicit additional proxies in favor of the share issuance proposal if there are not sufficient votes to approve one or more of the proposals.
|
Proposal
|
Vote Required
|
Broker Discretionary
Vote Allowed
|
||
1.
|
Share issuance proposal.
|
The affirmative vote of the majority of the votes cast.
|
No
|
|
2.
|
Authorized common shares increase proposal.
|
The affirmative vote of at least a majority of the outstanding shares.
|
No
|
|
3.
|
Reincorporation proposal.
|
The affirmative vote of at least a majority of the outstanding shares.
|
No
|
|
4.
|
Stock Incentive Plan proposal.
|
The affirmative vote of the majority of the votes cast.
|
No
|
|
5. | Name change proposal. |
The affirmative vote of at least a majority of the outstanding shares.
|
Yes | |
6.
|
Adjournment proposal.
|
The affirmative vote of the majority of the votes cast.
|
Yes
|
|
·
|
"Live" — a real-time, synchronous gaming platform that pairs games with live video chat so users can see with whom they are playing;
|
|
·
|
"Live Feed" — a real-time, location-based activity stream with more than 2 million updates a day;
|
|
·
|
"Blind Date" — the largest compatibility game on the web with 500,000 questions answered every day;
|
|
·
|
"Match" — a matchmaking game that helps users find their secret admirer with more than 4 million matches generated per day; and
|
|
·
|
"Owned!" — an application where flirting meets virtual currency, which turns every photo into a virtual good that other users can bid on.
|
|
·
|
the Board believes it is in the best interests of Quepasa to change its business model by acquiring other social media companies. The myYearbook Merger meets this criteria; myYearbook’s focus on social discovery, social gaming, virtual goods and brand advertising is similar to Quepasa.com, our Hispanic social media website;
|
|
·
|
myYearbook’s retention and monetization expertise which could help improve revenue per user on our site;
|
|
·
|
myYearbook is one of the most trafficked sites in the U.S.;
|
|
·
|
myYearbook’s fast growing mobile application and its in-house developed applications focused on social discovery are aligned directly with our focus;
|
|
·
|
the ability to expand the myYearbook Android and iPhone applications to Quepasa’s user base in order to capitalize on rapidly growing smart phone penetration in the Latin American markets;
|
|
·
|
myYearbook’s revenue growth and 2010 profitability;
|
|
·
|
after the Merger, Quepasa and myYearbook would have a combined user base of over 70 million registered users, which would position Quepasa for significant growth;
|
|
·
|
myYearbook’s large U.S. user base;
|
|
·
|
the ability to provide us and myYearbook with the ability to cross-sell our DSM contests and myYearbook’s offerings; and
|
|
·
|
the ability to publish our social games to myYearbook’s online and mobile audience.
|
Title of Class
|
Name and Address of Beneficial Owner
|
Amount of
Beneficial
Ownership Prior to Merger (1)
|
Percent Beneficially
Owned Prior
To Merger (1)
|
Amount of
Beneficial
Ownership Post-
Merger (1)
|
Percent Beneficially
Owned Post-Merger (1)
|
|||||||||||||
Common Stock
|
John Abbott (2)
|
2,789,850 | 14.5 | % | 2,789,850 | 7.1 | % | |||||||||||
Common Stock
|
Michael Matte (3)
|
1,962,757 | 10.5 | % | 1,962,757 | 5.1 | % | |||||||||||
Common Stock
|
Louis Bardov (4)
|
636,990 | 3.7 | % | 636,990 | 1.7 | % | |||||||||||
Common Stock
|
Alonso Ancira (5)
|
3,407,458 | 18.1 | % | 4,804,691 | 12.5 | ||||||||||||
Common Stock
|
Lars Batista (6)
|
197,791 | 1.2 | % | 197,791 | * | ||||||||||||
Common Stock
|
Ernesto Cruz (7)
|
73,617 | * | 73,617 | * | |||||||||||||
Common Stock
|
Malcolm Jozoff (8)
|
146,116 | * | 146,116 | * | |||||||||||||
Common Stock
|
Lionel Sosa (9)(10)
|
106,263 | * | 106,263 | * | |||||||||||||
Common Stock
|
Dr. Jill Syverson-Stork (10)(11)
|
75,700 | * | 75,700 | * | |||||||||||||
All directors and executive officers as a group (10 persons)
|
9,633,365 | 39.5 | % | 11,030,598 | 25.0 | % | ||||||||||||
Common Stock
|
Mexicans & Americans Trading Together, Inc. (12)
|
3,333,333 | 17.9 | % | 4,730,566 | 12.3 | % | |||||||||||
Common Stock
|
Fredric Levin (13)
|
1,208,693 | 7.3 | % | 1,208,693 | 3.3 | % | |||||||||||
Common Stock
|
Richard L. Scott Blind Trust (14)
|
1,166,887 | 6.6 | % | 1,166,887 | 3.1 | % | |||||||||||
Common Stock
|
F. Annette Scott Revocable Trust (15)
|
166,667 | 1.0 | % | 166,667 | * | ||||||||||||
Common Stock
|
Richard L. and F. Annette Scott Family Limited Partnership Ltd. (16)
|
166,446 | 1.0 | % | 166,446 | * | ||||||||||||
Common Stock
|
F. Stephen Allen (17)
|
1,000,000 | 5.7 | % | 1,000,000 | 2.7 | % | |||||||||||
Common Stock
|
Geoffrey Cook (18)(19)
|
0 | 0 |
4,278,331
|
11.7 | % | ||||||||||||
Common Stock
|
Richard Lewis (19)(20)
|
0 | 0 |
3,887,469
|
10.7 | % | ||||||||||||
Common Stock
|
Terry Herndon (19)(21)
|
0 | 0 |
2,406,567
|
6.6 | % | ||||||||||||
Common Stock
|
U.S. Venture Partners IX, L.P. (19)(22)
|
0 | 0 |
3,887,469
|
10.7 | % | ||||||||||||
Common Stock
|
Norwest Venture Partners X, LP (19)(23)
|
0 | 0 |
3,359,362
|
9.2 | % |
Name of Holder
|
Amount of Beneficial Ownership of myYearbook Shares (1)
|
Percentage Beneficially Owned of myYearbook Shares (1)
|
Amount of Beneficial Ownership of Quepasa Shares Post-Merger (1)
|
Percentage Beneficially Owned of Quepasa Shares Post-Merger (1)
|
||||||||||||
Geoffrey Cook(2)
|
6,500,000 | 52.5 | % |
4,278,331
|
11.7 | % | ||||||||||
Richard Lewis(3)
|
4,793,279 | 27.9 | % |
3,887,469
|
10.7 | % | ||||||||||
Terry Herndon(4)
|
4,218,760 | 34.1 | % |
2,406,567
|
6.6 | % | ||||||||||
U.S. Venture Partners IX, L.P.(5)
|
4,793,279 | 27.9 | % |
3,887,469
|
10.7 | % | ||||||||||
Norwest Venture Partners X, LP
|
3,125,000 | 20.2 | % |
3,359,362
|
9.2 | % | ||||||||||
Name and Principal Position
|
Year
|
Salary ($)
|
All Other
Compensation
($)
|
Total ($)
|
||||||||||
Geoffrey Cook
|
2010
|
75,000
|
—
|
75,000
|
||||||||||
Chief Executive Officer, President, Treasurer and Secretary
|
2009
|
75,000
|
—
|
75,000
|
·
|
Catherine Cook, Co-Founder of myYearbook and Geoffrey Cook’s sister, has received an aggregate of $54,053 in cash compensation since January 1, 2010 and received an aggregate of $25,976 and $23,273 in cash compensation in 2009 and 2008, respectively, for product and business development services provided to myYearbook. In addition, on March 27, 2008, Ms. Cook was granted 95,308 stock purchase options with an exercise price of $0.34 per share, which vested in full on April 19, 2008.
|
·
|
David Cook, Co-Founder of myYearbook and Geoffrey Cook’s brother, has received an aggregate of $30,960 in cash compensation since January 1, 2010 and received an aggregate of $15,600 and $28,530 in cash compensation in 2009 and 2008, respectively, for product and business development services provided to myYearbook. In addition, on March 27, 2008, Mr. Cook was granted 95,308 stock purchase options with an exercise price of $0.34 per share, which vested in full on April 19, 2008.
|
·
|
Kerri Cook, Geoffrey Cook’s spouse, has received an aggregate of $83,727 in cash compensation since January 1, 2010 and received an aggregate of $48,744 and $49,403 in cash compensation in 2009 and 2008, respectively, as Payroll Project Manager for myYearbook.
|
·
|
Matt Eustice, Geoffrey Cook’s brother-in-law, has received an aggregate of $128,874 in cash compensation since January 1, 2010 and received an aggregate of $62,809 and $99,709 in cash compensation in 2009 and 2008, respectively, as Vice President-Quality for myYearbook. In addition, Mr. Eustice received options to purchase 5,000 shares of common stock at an exercise price of $1.83 per share in June 2011, options to purchase 5,000 shares of common stock at an exercise price of $0.91 per share in June 2010, options to purchase an aggregate of 16,500 shares of common stock at an exercise price of $0.42 per share in June and October 2009 and options to purchase an aggregate of 40,000 shares of common stock at an exercise price of $0.34 in March and May 2008. The grants
vest 25% on the first anniversary of the grant date and then monthly for the next 36 months, with the exception of the options to purchase 20,000 shares granted in March 2008, which vested 25% on the first anniversary of the date of hire (May 8, 2006) and then monthly for the next 36 months.
|
·
|
On June 16, 2008, myYearbook issued debt in the principal amount of $1,000,000 to USVP IX, which debt, including accrued interest thereon in the amount of $2,384, was converted into 412,164 shares of Series B Preferred Stock on July 16, 2008. The conversion rate was at a discount to the price per share of the other Series B Preferred Stock that was issued on such date.
|
·
|
On July 16, 2008, myYearbook issued an additional 639,870 shares of Series B Preferred Stock to USVP IX at an aggregate issuance price of $1,945,205.
|
•
|
that such representations and warranties may not be intended to establish matters as facts, but rather for the purpose of allocating the risk between the parties in the event the statements therein prove to be inaccurate;
|
•
|
that such representations and warranties may be qualified by certain disclosures that were made between the parties in connection with the negotiation of the Merger Agreement, which disclosures are not reflected in the Merger Agreement itself;
|
•
|
that information concerning the subject matter of such representations and warranties may have changed after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in public disclosures by Quepasa; and
|
•
|
that such representations and warranties may apply standards of materiality in a way that is different from what may be viewed as material by you or other investors.
|
Issue Dates
|
Exercise Price
(to be deducted)
|
Estimated Taxes
(to be deducted)
|
||
January 2007 through December 2007
|
$0.24
|
$0.116
|
||
January 2008 through July 2008
|
$0.34
|
$0.157
|
||
August 2008 through February 2009
|
$0.74
|
$0.280
|
||
March 2009 through February 2010
|
$0.42
|
$0.186
|
||
February 2010 through March 2011
|
$0.91
|
$0.315
|
||
March 2011 through present
|
$1.83
|
$0.358
|
|
·
|
Organization, standing and corporate power and authority;
|
|
·
|
Required regulatory filings and consents and approvals of governmental entities;
|
|
·
|
Board approval and recommendation of the Merger Agreement and execution of the Voting Agreements;
|
|
·
|
Capital structure;
|
|
·
|
Compliance with applicable laws and permits;
|
|
·
|
Financial statements and internal controls and disclosure controls and procedures;
|
|
·
|
Absence of undisclosed liabilities;
|
|
·
|
Absence of certain changes and events since June 30, 2011;
|
|
·
|
Absence of discussions or negotiations;
|
|
·
|
Pending litigation;
|
|
·
|
Insurance;
|
|
·
|
Outstanding contracts and commitments;
|
|
·
|
Labor matters and employee benefit plans;
|
|
·
|
Intellectual property rights;
|
|
·
|
Taxes; and
|
|
·
|
Environmental matters.
|
|
·
|
SEC filings;
|
|
·
|
Receipt of a fairness opinion;
|
|
·
|
Ownership of subsidiaries; and
|
|
·
|
Third-party financing of cash consideration for the Merger.
|
|
·
|
grant any severance or termination pay to any officer or employee except payments in amounts consistent with policies and past practices or pursuant to written agreements outstanding, or existing policies, or adopt any new severance plan;
|
|
·
|
declare or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any capital stock or split, combine or reclassify any capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for any capital stock;
|
|
·
|
repurchase or otherwise acquire, directly or indirectly, any shares of capital stock except pursuant to rights of repurchase of any such shares under any employee, consultant or director stock plan existing on the date hereof;
|
|
·
|
cause, permit or propose any amendments to their Certificates of Incorporation or Bylaws, except as disclosed in this proxy statement/prospectus;
|
|
·
|
sell, lease, license, encumber or otherwise dispose of any properties or assets which are material to their business, except in the ordinary course of business consistent with past practice;
|
|
·
|
except in the ordinary course of business pursuant to its existing line of credit, if any, incur any indebtedness for borrowed money (other than ordinary course trade payables or pursuant to existing credit facilities in the ordinary course of business) or guarantee any such indebtedness or issue or sell any debt securities or warrants or rights to acquire debt securities of myYearbook, as the case may be, or guarantee any debt securities of others;
|
|
·
|
adopt or amend any employee benefit or employee equity purchase or employee option plan, or enter into any employment contract, pay any special bonus or special remuneration to any director or employee, or increase the salaries or wage rates of its officers or employees other than in the ordinary course of business, consistent with past practice, or change in any material respect any management policies or procedures;
|
|
·
|
pay, discharge or satisfy any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of claims, liabilities or obligations in the ordinary course of business;
|
|
·
|
split, combine or reclassify any shares of its capital stock;
|
|
·
|
except as permitted by the Merger Agreement, authorize, solicit, propose or announce an intention to authorize, recommend or propose, or enter into any agreement in principle or an agreement with any other person with respect to, any plan of liquidation or dissolution, any acquisition of a material amount of assets or securities (having an aggregate value of over $1 million), any disposition of a material amount of assets (having an aggregate value of over $1 million), any material change in capitalization, or any partnership, association or joint venture;
|
|
·
|
fail to renew any insurance policy naming it as a beneficiary or a loss payee, or take any steps or fail to take any steps that would permit any insurance policy naming it as a beneficiary or a loss payee to be canceled, terminated or materially altered, except in the ordinary course of business and consistent with past practice and following written notice to the other party;
|
|
·
|
fail to maintain its books and records in a manner other than in the ordinary course of business and consistent with past practice;
|
|
·
|
enter into any hedging, option, derivative or other similar transaction or any foreign exchange position or contract for the exchange of currency other than in the ordinary course of business and consistent with past practice;
|
|
·
|
institute any change in its accounting methods, principles or practices other than as required by GAAP, or the rules and regulations promulgated by the SEC, or revalue any assets, including without limitation, writing down the value of inventory or writing off notes or accounts receivables;
|
|
·
|
in respect of any taxes, (i) except as required by applicable law make or change any material election, change any accounting method, enter into any closing agreement, settle any material claim or assessment, or consent to any extension or waiver of the limitation period applicable to any material claim or assessment, or (ii) enter into any tax sharing agreement (including any indemnity arrangement) or similar arrangement;
|
|
·
|
issue any capital stock or other equity securities or other options, warrants or other rights to purchase or acquire capital stock or other equity securities except for (i) the customary grant of stock options in accordance with past practice and the issuance of common stock upon exercise of stock options granted prior to the date hereof under the its stock plan and (ii) issuances of capital stock or other equity securities to existing shareholders on the date hereof for capital-raising purposes only; or
|
|
·
|
take or agree to take any action which could reasonably be expected to result in any condition contained in the Merger Agreement not being satisfied immediately prior to the closing of the Merger.
|
·
|
approval by Quepasa shareholders of the share issuance proposal;
|
·
|
approval of the Merger and Merger Agreement by the holders of at least the majority of the outstanding shares of myYearbook common stock and 70% of the outstanding shares of myYearbook preferred stock;
|
·
|
the registration statement on Form S-4, of which this proxy statement/prospectus is a part, shall have been declared effective by the Securities and Exchange Commission;
|
·
|
authorization of listing on the NYSE Amex of the shares of Quepasa common stock to be issued in connection with the Merger, subject to official notice of issuance;
|
·
|
completion of an equity financing transaction by Quepasa of at least $10 million in order to partially fund the cash portion of the Merger consideration;
|
·
|
no material adverse effect (or any change, event or development that could reasonably be expected to have a material adverse effect) shall have occurred with respect to Quepasa or myYearbook. In the Amendment, Quepasa and myYearbook agreed that the other party’s financial performance and/or web traffic metrics shall not be considered in determining whether a material adverse effect has occurred with respect to Quepasa. They also agreed that no information or events known by the other party on the date of the Amendment or reflected for or reserved on their respective August 31, 2011 financial results shall be considered in determining whether a material adverse effect has
occurred with respect to Quepasa;
|
·
|
the representations and warranties of the other party in the Merger Agreement shall be true and correct in all material respects (subject to certain limitations and exclusions);
|
·
|
all agreements and obligations of the other party shall have been complied with in all material respects;
|
|
·
|
no statute, rule, regulation, writ, order, temporary restraining order or preliminary or permanent injunction shall have been enacted, entered, promulgated or enforced by any court or other tribunal or governmental body or authority, which remains in effect, and prohibits the consummation of the Merger or otherwise makes it illegal; and
|
·
|
no person or governmental agency has instituted any action, suit or proceeding which remains pending and which seeks, and which is reasonably likely, to enjoin, restrain or prohibit the consummation of the Merger.
|
|
·
|
the Merger is not completed by January 19, 2012, which date may be extended by mutual consent, for any reason, provided that the right to terminate the Merger Agreement shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a material breach of the Merger Agreement;
|
|
·
|
a statute, rule, regulation or executive order is enacted or entered prohibiting the consummation of the Merger substantially on the terms contemplated by the Merger Agreement;
|
|
·
|
a court or other government entity shall have issued an order, decree or ruling or taken any other action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger, provided that the party seeking to terminate shall have complied with its obligations under the Merger Agreement and used its reasonable best efforts to have any such order, decree, ruling or other action vacated or lifted;
|
|
·
|
the other party has breached any of its representations or warranties or failed to perform any of the obligations to be performed by and under the Merger Agreement and such breach or failure to perform (i) will result in the failure by such party to satisfy the closing conditions with respect to the accuracy of such parties representations and warranties or the performance by such party of its obligations and (ii) is incapable of being cured or has not been cured by the later of 20 business days of written notice of the breach, provided that no party may terminate the Merger Agreement if it shall have materially breached the Merger Agreement and remains in breach of as of the date of such termination;
|
|
·
|
if, prior to the applicable Special Meeting, either company’s board of directors has determined in good faith after receiving the advice of outside legal counsel, to withhold, withdraw, amend or modify its recommendation or approval in order to approve and permit them to accept a Superior Offer;
|
|
·
|
a “Triggering Event” (described below) has occurred with respect to the other party; or
|
|
·
|
after complying with the terms of the Merger Agreement relating to considering alternative business combination transactions, it determines to pursue an alternative business combination transaction instead of the Merger.
|
|
·
|
After one month following the closing of the Merger, each shareholder may sell up to an additional 35% of the shares of Quepasa common stock held by such shareholder; and
|
|
·
|
After two months following the closing of the Merger, the resale restrictions lapse entirely and each shareholder may sell all of the shares of Quepasa common stock held by such shareholder.
|
|
·
|
reviewed an execution copy of the Merger Agreement provided to Raymond James on July 19, 2011;
|
|
·
|
reviewed a draft of the Amendment provided to Raymond James on September 15, 2011;
|
|
·
|
reviewed the financial terms and conditions as stated in such execution copy of the Merger Agreement and a draft of the Amendment;
|
|
·
|
reviewed the audited financial statements of myYearbook as of and for the years ended December 31, 2008, 2009 and 2010, and the unaudited financial statements for the quarters ended March 31, 2011 and June 30, 2011, as well as summary financial information for the period ended August 31, 2011;
|
|
·
|
reviewed the audited consolidated financial statements of Quepasa as of and for the year ended December 31, 2010, and the unaudited consolidated financial statements for the quarter ended March 31, 2011 and June 30, 2011;
|
|
·
|
reviewed Quepasa’s Annual Report on Form 10-K for the year ended December 31, 2010, and Quepasa’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 and June 30, 2011;
|
|
·
|
reviewed Quepasa's Registration Statement on Form S-4, as initially filed with the Securities and Exchange Commission on August 11, 2011, as amended by Amendment No. 1 thereto dated August 26, 2011;
|
|
·
|
reviewed other financial and operating information provided to Raymond James by myYearbook or Quepasa;
|
|
·
|
met with and discussed with members of the senior management of Quepasa and myYearbook certain information relating to the aforementioned matters and any other matters which Raymond James deemed relevant to its inquiry;
|
|
·
|
reviewed and discussed with senior management of Quepasa and myYearbook the historical and anticipated future financial performance of myYearbook, including the review of myYearbook financial forecasts prepared by senior management of Quepasa and myYearbook;
|
|
·
|
compared financial information for myYearbook with similar information for companies which Raymond James deemed to be comparable, except that such other companies had publicly traded equity securities;
|
|
·
|
reviewed the financial terms of recent business combinations involving companies in comparable businesses and industries; and
|
|
·
|
performed such other analyses and studies, and considered such other factors, as Raymond James considered appropriate.
|
•
|
Ancestry.com Inc.
|
||
•
|
Demand Media, Inc.
|
||
•
|
DeNA Co., Ltd.
|
||
•
|
Google Inc.
|
||
•
|
Gree, Inc.
|
||
•
|
IAC/InterActiveCorp
|
||
•
|
Jiayuan.com International Ltd.
|
||
•
|
LinkedIn Corporation
|
||
•
|
Pandora Media, Inc.
|
||
•
|
Renren Inc.
|
||
•
|
SINA Corporation
|
||
•
|
Sohu.com Inc.
|
||
•
|
Tencent Holdings Ltd.
|
||
•
|
XO Group Inc.
|
||
•
|
Yahoo! Inc.
|
Enterprise Value / Revenue
|
Enterprise Value / Adjusted EBITDA
|
||||||||||||||||
TTM
|
CY2011
|
CY2012
|
TTM
|
CY2011
|
CY2012
|
||||||||||||
Low
|
1.6x
|
1.5x
|
1.3x
|
6.9x
|
7.1x
|
5.1x
|
|||||||||||
Median
|
5.4x
|
4.2x
|
3.2x
|
12.6x
|
10.6x
|
9.0x
|
|||||||||||
Mean
|
5.0x
|
4.1x
|
3.2x
|
27.5x
|
10.8x
|
8.5x
|
|||||||||||
High
|
11.0x
|
9.3x
|
7.1x
|
129.2x
|
18.9x
|
14.4x
|
|||||||||||
myYearbook
|
3.5x
|
2.8x
|
2.1x
|
17.5x
|
14.6x
|
9.7x
|
Enterprise Value / Revenue
|
Enterprise Value / Adjusted EBITDA
|
|||||||||||||||||||
TTM
|
CY2011
|
CY2012
|
TTM
|
CY2011
|
CY2012
|
|||||||||||||||
Low
|
$42.4
|
$48.5
|
$59.9
|
$37.4
|
$46.0
|
$49.1
|
||||||||||||||
Median
|
$148.2
|
$139.9
|
$144.2
|
$67.7
|
$68.4
|
$86.7
|
||||||||||||||
Mean
|
$137.3
|
$134.9
|
$141.5
|
$148.3
|
$69.6
|
$82.8
|
||||||||||||||
High
|
$300.4
|
$306.6
|
$316.7
|
$696.4
|
$121.4
|
$139.2
|
||||||||||||||
Selected Software Transactions (Target / Acquiror)
|
|||
•
|
PopCap Games, Inc. / Electronic Arts, Inc.
|
||
•
|
YuuZoo Corporation / Alanco Technologies Inc.
|
||
•
|
Cryptic Studios, Inc. / Perfect World Co., Ltd.
|
||
•
|
Meetic SA / Match.com
|
||
•
|
5to1.com LLC / Yahoo! Inc.
|
||
•
|
OpenFeint, Inc. / GREE Inc.
|
||
•
|
Radian6 / salesforce.com
|
||
•
|
GSI Commerce, Inc. / eBay, Inc.
|
||
•
|
PlaySpan Inc. / Visa Inc.
|
||
•
|
TheHuffingtonPost.com, Inc. / AOL, Inc.
|
||
•
|
KickApps / KIT digital, Inc.
|
||
•
|
Aprimo, Inc. / Teradata Corporation
|
||
•
|
Sonic Solutions / Rovi Corporation
|
||
•
|
Art Technology Group, Inc. / Oracle Corporation
|
||
•
|
Internet Brands, Inc. / Hellman & Friedman LLC
|
||
•
|
Unica Corporation / International Business Machines Corporation
|
||
•
|
BV Media / Rogers Communications Inc.
|
||
•
|
Health Grades, Inc. / Vestar Capital Partners, Inc.
|
Total Enterprise Value/
Trailing Twelve Months Revenue
|
Implied Total Enterprise Value
|
|||||
Low
|
1.4x
|
$38.1
|
||||
Median
|
4.8x
|
$131.9
|
||||
Mean
|
4.6x
|
$124.7
|
||||
High
|
9.3x
|
$254.1
|
||||
Implied Total Enterprise Value
|
||||||
Low
|
$100.0
|
|||||
High
|
$143.7
|
|||||
myYearbook
|
Quepasa
|
|||||
Users as of 6/30/11
|
49
|
%
|
51
|
%
|
||
Projected users as of 12/31/11
|
45
|
%
|
55
|
%
|
||
Projected users as of 12/31/12
|
42
|
%
|
58
|
%
|
||
TTM revenue*
|
76
|
%
|
24
|
%
|
||
2011 revenue
|
77
|
%
|
23
|
%
|
||
2012 revenue
|
54
|
%
|
46
|
%
|
||
TTM adjusted EBITDA*
|
105
|
%
|
(5)
|
%
|
||
2011 adjusted EBITDA
|
132
|
%
|
(32)
|
%
|
||
2012 adjusted EBITDA
|
58
|
%
|
42
|
%
|
•
|
entities treated as partnerships for U.S. federal income tax purposes or myYearbook security holders that hold their shares through entities treated as partnerships for U.S. federal income tax purposes;
|
•
|
persons who hold myYearbook capital stock as part of a straddle, hedging transaction, synthetic security, conversion transaction or other integrated investment or risk reduction transaction;
|
•
|
U.S. holders whose functional currency is not the U.S. dollar;
|
•
|
persons who acquired myYearbook capital stock through the exercise of employee stock options or otherwise as compensation;
|
•
|
persons subject to the U.S. alternative minimum tax;
|
•
|
banks, insurance companies and other financial institutions;
|
•
|
regulated investment companies;
|
•
|
real estate investment trusts;
|
•
|
tax-exempt organizations;
|
•
|
brokers or dealers in securities or foreign currencies; and
|
•
|
traders in securities that mark-to-market.
|
•
|
a citizen or resident of the United States;
|
•
|
a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized under the laws of the United States or any of its political subdivisions;
|
•
|
a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person; or
|
•
|
an estate that is subject to U.S. federal income tax on its income regardless of its source.
|
·
|
the affairs of Quepasa will cease to be governed by Nevada corporation laws, Quepasa’s existing Articles of Incorporation, or the Articles, and Quepasa’s existing Bylaws, and the affairs of Quepasa will become subject to Delaware corporation laws, a new Certificate of Incorporation and new Bylaws, as more fully described below;
|
·
|
the resulting Delaware corporation, or Quepasa Delaware will (i) be deemed to be the same entity as Quepasa Nevada for all purposes under the laws of Delaware, (ii) continue to have all of the rights, privileges and powers of Quepasa Nevada, (iii) continue to possess all of the properties of Quepasa Nevada, and (iv) continue to have all of the debts, liabilities and obligations of Quepasa Nevada;
|
·
|
each outstanding share of Quepasa Nevada common stock will continue to be an outstanding share of Quepasa Delaware common stock, and each outstanding option, warrant or other right to acquire shares of Quepasa Nevada common stock will continue to be an outstanding option, warrant or other right to acquire shares of Quepasa Delaware common stock;
|
·
|
each employee benefit plan, incentive compensation plan or other similar plan of Quepasa Nevada will continue to be an employee benefit plan, incentive compensation plan or other similar plan of Quepasa Delaware; and
|
·
|
each director and officer of Quepasa Nevada will continue to hold their respective offices with Quepasa Delaware.
|
Nevada law
|
Delaware law
|
myYearbook Certificate of Incorporation and Bylaws
|
|||
Elections; Voting; Procedural Matters
Number of Directors
|
|||||
Nevada law provides that a corporation must have at least one director and may provide in its articles of incorporation or in its bylaws for a fixed number of directors or a variable number, and for the manner in which the number of directors may be increased or decreased.
|
Delaware law provides that a corporation must have at least one director and that the number of directors shall be fixed by, or in the manner provided in, the bylaws unless the certificate of incorporation fixes the number of directors, in which case a change in the number of directors shall be made only by amendment of the certificate of incorporation.
|
myYearbook is a Delaware corporation.
|
|||
Quepasa’s existing Bylaws provide that the board of directors shall consist of not less than three nor more than nine directors. Subject to this limitation, the number of directors shall be set by a resolution of the shareholders or the board of directors upon the affirmative vote of at least two-thirds of the directors then in office.
|
The Delaware Bylaws provide that the number of directors comprising the Board shall be between three and nine directors. The number may be established from time to time fixed by resolution of the Board, but no decrease shall have the effect of shortening the terms of any incumbent director. Subject to the foregoing provisions, the number of directors of Quepasa Delaware will be as of the date of the Special Meeting fixed at seven in order to consummate the Merger.
|
The myYearbook Certificate of Incorporation provides that the Series A and B Preferred Stock holders shall each be entitled to elect one director, the holders of common stock shall be entitled to elect two directors and the holders of common stock and the holders of Preferred Stock, voting together as a single class, shall be entitled to elect the balance of the number of directors. The myYearbook Bylaws require one director and empower the Board to increase the number of directors.
|
|||
Quorum at Directors Meetings
|
|||||
The Nevada Bylaws require a quorum of a majority of the Board.
|
The Delaware Bylaws require a quorum of a majority of the Board.
|
The myYearbook Bylaws generally permit a quorum of the Board to be one-third of the total number of directors.
|
Removal of Directors
|
|||||
Under Nevada law, any one or all of the directors of a corporation may be removed by the holders of not less than two-thirds of the voting power of a corporation’s issued and outstanding stock. Nevada law does not distinguish between removal of directors with or without cause.
|
With limited exceptions applicable to classified boards and cumulative voting provisions, under Delaware law, directors of a corporation without a classified board may be removed with or without cause, by the holders of a majority of shares then entitled to vote in an election of directors.
|
The myYearbook Certificate of Incorporation does not provide for a classified Board or cumulative voting. The myYearbook Bylaws are consistent with Delaware law
|
|||
Quepasa’s Articles and Bylaws provide that any director may be removed from office at any time, but only by the affirmative vote, at a meeting called for that purpose, by the holders of two-thirds of the outstanding shares of each class of shares entitled to vote as a separate class on such matter, but only if such proposal was contained in the notice of such meeting. At least 30 days prior to such meeting of shareholders, written notice shall be sent to the director whose removal will be considered at such meeting.
|
The Delaware Bylaws provide that any director or the entire Board may be removed, with or without cause, by a vote of the holders of a majority of the shares of each class or series of voting power then entitled to vote at an election of directors.
|
The myYearbook Certificate of Incorporation provides that a director elected in a certain manner such as a designee of the Series A Preferred Stock, for example, may only be removed by the affirmative vote of a majority of the class or series entitled to elect the director.
|
|||
Board Action by Written Consent
|
|||||
Nevada law provides that, unless the articles of incorporation or bylaws provide otherwise, any action required or permitted to be taken at a meeting of the board of directors or of a committee thereof may be taken without a meeting if, before or after the action, a written consent thereto is signed by all the members of the board or committee, except for a director that has a personal interest in the matter.
|
Delaware law provides that, unless the certificate of incorporation or bylaws provide otherwise, any action required or permitted to be taken at a meeting of the board of directors or of any committee thereof may be taken without a meeting if all members of the board or committee consent thereto in writing or by electronic transmission and the writing or writings or electronic transmission or transmissions are filed with the minutes of proceedings of the board or committee.
|
Quepasa’s existing Articles and Bylaws do not change this statutory rule.
|
The Delaware Certificate of Incorporation and Bylaws does not change this statutory rule.
|
The myYearbook Certificate of Incorporation and Bylaws are consistent with the Delaware Bylaws and Delaware law in all material respects.
|
Shareholder Action by Written Consent
|
||||
Nevada law provides that, unless the articles of incorporation or bylaws provides otherwise, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if the holders of outstanding stock having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting consent to the action in writing.
|
Unless the Delaware Certificate of Incorporation provides otherwise, any action required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if the holders of outstanding stock having at least the minimum number of votes that would be necessary to authorize or take such action at a meeting consent to the action in writing. In addition, Delaware law requires the corporation to give prompt notice of the taking of corporate action without a meeting by less than unanimous written consent to those shareholders who did not consent in writing.
|
|||
Quepasa’s Bylaws do not permit shareholder action by written consent if Quepasa has a class of common stock registered under Section 12 of the Securities Exchange Act of 1934. As of the record date, Quepasa common stock was registered under the Exchange Act.
|
The Delaware Certificate of Incorporation does not permit shareholder action by written consent.
|
The myYearbook Certificate of Incorporation is consistent with the Delaware Certificate of Incorporation, except to the extent removal of a director by written consent is reserved to the class or series with the power to elect.
|
Interested Party Transactions
|
||||
Under Nevada law, a contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, form or association in which one or more of its directors or officers are directors or officers, or have a financial interest, is not void or voidable solely for that reason, or solely because of such relationship or interest, or solely because the interested director or officer was present, participates or votes at the meeting of the board or committee that authorizes the contract or transaction, if (i) the director’s or officer’s interest in the contract or transaction is known to the board of directors and the board or
committee approves or ratifies the contract or transaction in good faith by a vote sufficient for the purpose without counting the vote or votes of the interested director or officer, (ii) the fact that of the financial interest is known to shareholders and they approve or ratify the contract or transaction in good faith by a majority vote of shareholders holding a majority of the voting power, (iii) the fact of the common directorship, office or financial interest is not known to the director or officer at the time the transaction is brought before the board of directors, and (iv) the contract or transaction is fair to the corporation at the time it is authorized or approved.
|
Under Delaware law, a contract or transaction between a corporation and one or more of its directors or officers, or between a corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, is not void or voidable solely because of such relationship or interest, or solely because the director or officer is present at or participates or votes at the meeting of the board or committee that authorizes the contract or transaction, if one or more of the following is true: (i) the material facts of the contract or transaction and the director’s or officer’s
relationship or interest are disclosed to or known by the board or committee, and the board or the committee in good faith authorizes the contract or transaction by an affirmative vote of the majority of the disinterested directors (even though these directors are less than a quorum); (ii) the material facts of the contract or transaction and the director’s or officer’s relationship or interest are disclosed to or known by the shareholders entitled to vote on the matter and they specifically approve in good faith the contract or transaction; or (iii) the contract or transaction is fair to the corporation as of the time it was authorized, approved or ratified.
|
Quepasa’s existing Articles and Bylaws are consistent with Nevada law and do not provide any protection for Preferred Stock holders for corporate opportunities.
|
The Delaware Certificate of Incorporation and the Delaware Bylaws does not change this statutory rule and do not provide any protection for Preferred Stock holders for corporate opportunities.
|
The myYearbook Certificate of Incorporation and Bylaws do not change the statutory rule, except that the myYearbook Certificate of Incorporation specifically provides that a corporate opportunity that is presented to, or acquired, created or developed, or which otherwise comes into the possession of, any non employee director of myYearbook or any holder of Preferred Stock or affiliates, employees or agents of such holder, does not give myYearbook any right to, interest in or expectancy to the corporate opportunity. This protection will be lost if the Merger is approved.
|
||
Special Meetings of Shareholders
|
||||
Nevada law provides that unless otherwise provided in a corporation’s articles of incorporation or bylaws, the entire board of directors, any two directors, or the president of the corporation may call a special meeting of the shareholders.
|
Delaware law permits special meetings of shareholders to be called by the board of directors or by any other persons authorized in the certificate of incorporation or bylaws to call a special shareholder meeting.
|
|||
Quepasa’s existing Bylaws provide that special meetings of the shareholders may be called by the Chairman of the Board of Directors, the President or the Chief Executive Officer and shall be called by the President, Chief Executive Officer or the Secretary upon the written request signed by a majority of members of the Board of Directors. Any business to be transacted at such meeting must be confined to the purposes stated in the notice of the shareholders’ meeting and to such additional matters as the chairmen of the meeting may rule to be relevant.
|
The Delaware Bylaws provide for special meetings of the shareholders to be held (a) when directed by the board of directors, or (b) when requested in writing by the holders of not less than 20 percent of all the shares entitled to vote at the meeting. The Delaware Bylaws require that notice of special meetings of the shareholders must state the purpose of the meeting.
|
The myYearbook Bylaws provide that special meetings of the shareholders may be called by the Board, the Chief Executive Officer, by any two directors or by holders of the majority of the issued and outstanding capital stock entitled to vote. The notice of meeting shall state the purpose, and no other business shall be transacted.
|
Failure to Hold an Annual Meeting of Shareholders
|
||||
Nevada law provides that if a corporation fails to elect directors within 18 months after the last election, a Nevada district court may order an election upon the petition of one or more shareholders holding 15 percent of the corporation’s voting power.
|
Delaware law provides that if a corporation fails to hold an annual meeting for the election of directors or there is no written consent to elect directors in lieu of an annual meeting taken, in both cases for a period of 30 days after the date designated for the annual meeting, or if no date has been designated, for a period of 13 months after the latest to occur of the latest to occur of the organization of the corporation, its last annual meeting or last action by written consent to elect directors in lieu of an annual meeting, a director or shareholder of the corporation may apply to the Court of Chancery of the State of Delaware to order that an annual meeting be held.
|
|||
Quepasa’s existing Articles and Bylaws do not change this statutory rule.
|
The Delaware Certificate of Incorporation and the Delaware Bylaws do not change this statutory rule.
|
The myYearbook Certificate of Incorporation and Bylaws do not change the statutory rule.
|
||
Cumulative Voting
|
||||
Nevada law permits cumulative voting in the election of directors as long as the articles of incorporation provide for cumulative voting and certain procedures for the exercise of cumulative voting are followed.
|
A Delaware corporation may provide for cumulative voting in the corporation’s certificate of incorporation.
|
|||
Quepasa’s existing Articles does not permit cumulative voting.
|
The Delaware Certificate of Incorporation does not have a provision granting cumulative voting rights in the election of its directors.
|
The myYearbook Certificate of Incorporation do not grant cumulative voting rights in the election of directors.
|
Vacancies
|
||||
All vacancies on the board of directors of a Nevada corporation may be filled by a majority of the remaining directors, though less than a quorum, unless the articles of incorporation provide otherwise. Unless otherwise provided in the articles of incorporation, the board may fill the vacancies for the remainder of the term of office of the resigning director or directors.
|
All vacancies and newly created directorships on the board of directors of a Delaware corporation may be filled by a majority of the directors then in office, though less than a quorum, unless the certificate of incorporation or bylaws provide otherwise. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any shareholder or shareholders holding at least 10 percent of the voting stock at the time outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
|
|||
Quepasa’s existing Articles and Bylaws are consistent with Nevada law.
|
The Delaware Bylaws will provide that vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by an affirmative vote of a majority of the directors remaining in office, although less than a quorum, and each director so elected shall hold office until the next election of directors by the shareholders.
|
The myYearbook Certificate of Incorporation and Bylaws are consistent with Delaware law.
|
||
Shareholder Voting Provisions
|
||||
Under Nevada law, a majority of the voting power, which includes the voting power that is present in person or by proxy, regardless of whether the proxy has authority to vote on all matters, generally constitutes a quorum for the transaction of business at a meeting of shareholders. Quepasa’s existing Bylaws are consistent with Nevada law.
|
Under Delaware law, a majority of the shares entitled to vote, present in person or represented by proxy, generally constitutes a quorum at a meeting of shareholders. Quepasa Delaware’s Bylaws are consistent with Delaware law.
|
The myYearbook Certificate of Incorporation and Bylaws are consistent with Delaware law, but the Bylaws provide that where a separate vote by class or classes is required, one-third of the outstanding shares of such class shall constitute a quorum with respect to the vote on that matter.
|
Approval
|
||||
Generally, action by the shareholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, unless otherwise provided in Nevada law or the articles of incorporation or bylaws of the corporation. Unless otherwise provided in the articles of incorporation or bylaws, directors are generally elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on election of directors.
|
Unless otherwise provided for in the certificate of incorporation or bylaws, generally, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter constitutes the act of shareholders. Unless other provided in the certificate of incorporation or bylaws, directors are generally elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors.
|
Our Nevada Bylaws provide that action by the shareholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, which is consistent with Nevada.
|
The Delaware Bylaws provide that action by the shareholders on a matter other than the election of directors is approved if the number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, which is identical to Quepasa Nevada’s Bylaws.
|
The myYearbook Certificate of Incorporation generally provides for shareholder approval by a majority of outstanding votes entitled to vote and holders of common stock and Preferred Stock shall vote together as a single class, except to the extent otherwise provided. It further provides that the Preferred Stock shall vote on an as converted basis and requires approval of 70% of outstanding Preferred Stock voting together as a single series to (i) require mandatory conversion or (ii) to take certain actions including, issuing any new class or series of Preferred Stock which are senior to or equal to any series of Preferred Stock, to liquidate which includes the Merger, making
acquisitions using equity securities oof myYearbook which would constitute 10% of myYearbook prior to the acquisition, pay any common stock dividend other than stock dividends, amend the myYearbook Certificate of Incorporation (including increasing or decreasing the authorized number of shares of Preferred Stock)or the Bylaws, change the number of directors, amend the rights and preferences of any series of Preferred Stock.
|
Majority Voting Policy
|
||||
Quepasa’s Bylaws contain a form of majority voting policy. It provides that a nominee for director shall be elected if the votes cast for such nominee’s election exceeded the votes cast against such nominee; provided, however, that a nominee shall be elected by a plurality of the votes cast at any meeting of shareholders for which the Secretary of Quepasa determines that the number of nominees exceeds the number of directors to be elected as of the record date for such meeting.
|
The Delaware Bylaws contain identical provisions as our Quepasa Nevada’s current form of majority voting policy.
|
The myYearbook Bylaws provide directors shall be elected by a plurality of the votes of the shares present or in person, which differs from the Quepasa Articles and Delaware Certificate of Incorporation.
|
Shareholder Vote for Mergers and Other Corporate Reorganizations
|
||||
In general, Nevada requires authorization by an absolute majority of outstanding shares entitled to vote, as well as approval by the board of directors, with respect to the terms of a merger or a sale of substantially all of the assets of the corporation. So long as the surviving corporation is organized in Nevada, Nevada law does not generally require a shareholder vote of the surviving corporation in a merger if: (a) the plan of merger does not amend the existing articles of incorporation; (b) each share of stock of the surviving corporation outstanding immediately before the effective date of the merger is an identical outstanding share after the merger; (c) the number of voting
shares outstanding immediately after the merger, plus the number of voting shares issued as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20 percent the total number of voting shares of the surviving domestic corporation outstanding immediately before the merger; and (d) the number of participating shares outstanding immediately after the merger, plus the number of participating shares issuable as a result of the merger, either by the conversion of securities issued pursuant to the merger or the exercise of rights and warrants issued pursuant to the merger, will not exceed by more than 20 percent the total number of participating shares outstanding immediately before the merger.
|
In general, Delaware requires authorization by an absolute majority of outstanding shares entitled to vote, as well as approval by the board of directors, with respect to the terms of a merger or a sale of substantially all of the assets of the corporation. Delaware law does not generally require a shareholder vote of the surviving corporation in a merger (unless the corporation provides otherwise in its certificate of incorporation) if: (a) the plan of merger does not amend the existing certificate of incorporation; (b) each share of stock of the surviving corporation outstanding immediately before the effective date of the merger is an identical outstanding share after the merger;
and (c) either no shares of common stock of the surviving corporation and no shares, securities or obligations convertible into such stock are to be issued or delivered under the plan of merger, or the authorized unissued shares or shares of common stock of the surviving corporation to be issued or delivered under the plan of merger plus those initially issuable upon conversion of any other shares, securities or obligations to be issued or delivered under such plan do not exceed 20% of the shares of common stock of such constituent corporation outstanding immediately prior to the effective date of the merger.
|
|||
Quepasa’s existing Articles of Incorporation and Quepasa’s existing Bylaws do not change these statutory rules.
|
The Delaware Certificate of Incorporation and the Delaware Bylaws do not change these statutory rules.
|
myYearbook has the 70% vote of outstanding Preferred Stock as described above for these kinds of transactions.
|
Indemnification of Officers and Directors and Advancement of Expenses; Limitation on Personal Liability
|
||||
Indemnification
|
||||
A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in
connection with the action, suit or proceeding, if (i) he is not liable under NRS 78.138, and (ii) acted in "good faith" and in a manner he reasonably believed to be in and not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. However, with respect to actions by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall
deem proper. A director or officer who is successful, on the merits or otherwise, in defense of any proceeding subject to the Nevada corporate statutes’ indemnification provisions must be indemnified by the corporation for reasonable expenses incurred in connection therewith, including attorneys’ fees.
|
Through, among other means, a majority vote of disinterested directors, a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person's conduct was unlawful. With respect to actions by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit is brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such court shall deem proper. A director or officer who is successful, on the merits or otherwise, in defense of any proceeding subject to the Delaware corporate statutes’ indemnification provisions shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection therewith.
|
Quepasa’s existing Articles provide that directors and officers of the corporation shall be indemnified by Quepasa against any liability to the fullest extent provided by Nevada law.
|
The Quepasa Certificate of Incorporation provide that directors and officers of the corporation shall be indemnified by Quepasa against any liability to the fullest extent provided by Delaware law, except that there is a limitation which precludes indemnification where the current or former officer or director sues or is sued by Quepasa.
|
myYearbook’s Bylaws provide indemnification rights substantially similar to that provided by the Quepasa Certificate of Incorporation, except there is no exclusion for suits between myYearbook and officers or directors.
|
Advancement of Expenses
|
||||
Under Nevada law, the articles of incorporation, bylaws or an agreement made by the corporation may provide that the corporation must pay advancements of expenses in advance of the final disposition of the action, suit or proceedings upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined that he or she is not entitled to be indemnified by the corporation.
|
Delaware law provides that expenses incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of the action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay the amount if it is ultimately determined that he or she is not entitled to be indemnified by the corporation. A Delaware corporation has the discretion to decide whether or not to advance expenses, unless provided otherwise in its certificate of incorporation or bylaws.
|
|||
Quepasa’s existing Articles and Bylaws do not provide for the advancement of expenses. Quepasa entered into indemnification agreements with its executive officers and directors which provide for advancement of expenses.
|
Quepasa will continue to provide advancement of expenses to our executive officers and directors with indemnification agreements which are consistent with the DGCL. Quepasa has also agreed to indemnify the myYearbook director designees against any liability which may arise to Quepasa shareholders prior to the closing or termination of the Merger.
|
myYearbook’s Bylaws provide for advancement of expenses in the same manner as it provides for indemnification as described above.
|
Limitation on Personal Liability of Directors
|
||||
Neither a director nor an officer of a Nevada corporation can be held personally liable to the corporation, its shareholders or its creditors unless the director or officer committed both a breach of fiduciary duty and such breach was accompanied by intentional misconduct, fraud, or knowing violation of law. Unlike Delaware law, Nevada law does not exclude breaches of the duty of loyalty, or instances where the director has received an improper personal benefit.
|
A Delaware corporation is permitted to adopt provisions in its certificate of incorporation limiting or eliminating the liability of a director to a company and its shareholders for monetary damages for breach of fiduciary duty as a director, provided that such liability does not arise from certain proscribed conduct, including breach of the duty of loyalty, acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law or liability to the corporation based on unlawful dividends or distributions or improper personal benefit.
|
|||
Quepasa’s existing Articles eliminates the liability of the director and officers to for monetary damages for breach of fiduciary duty to the fullest extent provide by Nevada Law.
|
The Delaware Certificate of Incorporation provides that, to the fullest extent permitted by Delaware law, no director of Quepasa Delaware will be personally liable to Quepasa Delaware or its shareholders for monetary damages for breach of fiduciary duty as a director.
|
The myYearbook Certificate of Incorporation eliminates the liability of directors to the same extent as the Quepasa Delaware Certificate of Incorporation.
|
Dividends
|
||||
Declaration and Payment of Dividends
|
||||
Under Nevada law, a corporation may make distributions to its shareholders, including by the payment of dividends, provided that, after giving effect to the distribution, the corporation would be able to pay its debts as they become due in the usual course of business and the corporation’s total assets would not be less than the sum of its total liabilities plus any amount needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights of shareholders whose rights are superior to those receiving the distribution.
|
Under Delaware law, unless further restricted in the certificate of incorporation, a corporation may declare and pay dividends, out of surplus (as defined in the DGCL), or if no surplus exists, out of net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year, only if the amount of capital of the corporation is greater than or equal to the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets. In addition, Delaware law sets forth certain restrictions on the purchase or redemption of its shares of capital stock, including that any such purchase or
redemption may be made only if the capital of the corporation is not impaired and such redemption or repurchase would not impair the capital of the corporation.
|
|||
Quepasa’s existing Bylaws provide that subject to such restrictions or requirements as may be imposed by applicable law or the Articles or as may otherwise be binding upon Quepasa, the Board may from time to time declare, and may pay or make, dividends or other distributions to its shareholders.
|
The Delaware Certificate of Incorporation and the Delaware Bylaws do not change these statutory rules.
|
myYearbook’s Certificate of Incorporation provides a dividend preference to the holders of the Series A and Series B Preferred Stock of $0.0601 and $0.1824, respectively, per share, which dividends are not cumulative. It further provides that no dividends (other than stock dividends) shall paid to holders of the common stock unless (i) dividends are paid on all outstanding shares of Preferred Stock and (ii) holders of the Preferred Stock receive a further dividend as if they converted their Preferred Stock to common stock.
|
Anti-Takeover Statutes
|
||||
Business Combination Statute
|
||||
Sections 78.411 through 78.444 of the NRS prohibits an interested shareholder from engaging in a business combination with a corporation like Quepasa, for three years after the person first became an interested shareholder unless the combination or the transaction by which the person first became an interested shareholder is approved by the board of directors before the person first became an interested shareholder. If this approval is not obtained, then after the expiration of the three-year period, the business combination may be consummated if the combination is then approved by the affirmative vote of the holders of a majority of the outstanding voting power not beneficially owned
by the interested shareholder or any affiliate or associate thereof. Alternatively, even without these approvals, a combination occurring more than three years after the person first became an interested shareholder may be permissible if specified requirements relating to the consideration to be received by disinterested shareholders are met, and the interested shareholder has not, subject to limited exceptions, become the beneficial owner of additional voting shares of the corporation. An interested shareholder is (i) a person that beneficially owns, directly or indirectly, ten percent or more of the voting power of the outstanding voting shares of a corporation, or (ii) an "affiliate" or "associate" (as those terms are defined in the statute) of the corporation who, at any time within the past three years, was an interested shareholder of the
corporation.
|
Under Delaware law, a corporation that is listed on a national securities exchange like Quepasa is not permitted to engage in a business combination with any interested shareholder for a three-year period following the time such shareholder became an interested shareholder, unless (i) the transaction resulting in a person becoming an interested shareholder, or the business combination, is approved by the board of directors of the corporation before the person becomes an interested shareholder; (ii) the interested shareholder acquires 85% or more of the outstanding voting stock of the corporation in the same transaction that makes it an interested shareholder (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by certain employee stock ownership plans); or (iii) on or after the date the person becomes an interested shareholder, the business combination is approved by the corporation’s board of directors and by the holders of at least 66 2/3% of the corporation’s outstanding voting stock at an annual or special meeting (and not by written consent), excluding shares owned by the interested shareholder. Delaware law defines "interested shareholder" generally as a person who owns 15% or more of the outstanding shares of a corporation’s voting stock.
|
|||
A Nevada corporation may adopt an amendment to its articles of incorporation expressly electing not to be governed by these provisions of the NRS, if such amendment is approved by the affirmative vote of a majority of the disinterested shares entitled to vote; provided, however, such vote by disinterested shareholders is not required to the extent the Nevada corporation is not subject to such provisions. Such an amendment to the articles of incorporation does not become effective until 18 months after the vote of the disinterested shareholders and does not apply to any combination with an interested shareholder who first became an interested shareholder on or before the effective date
of the amendment.
|
These provisions do not apply, among other exceptions, if (i) the corporation’s original certificate of incorporation contains a provision expressly electing not to be governed by these provisions, or (ii) the corporation, by action of its shareholders, adopts an amendment to its certificate of incorporation or bylaws expressly electing not to be governed by these provisions.
|
|||
Quepasa did not opt out of this Business Combination Statute under its Articles.
|
The Delaware Certificate of Incorporation does not opt out of these provisions.
|
The myYearbook Certificate of Incorporation does not opt out of these provisions.
|
Control Share Acquisition Statute
|
||||
The NRS also limits the rights of persons acquiring a controlling interest in a Nevada corporation with 200 or more shareholders of record, at least 100 of whom have Nevada addresses appearing on the stock ledger of the corporation, and that does business in Nevada directly or through an affiliated corporation. According to the NRS, an acquiring person who acquires a controlling interest in an issuing corporation may not exercise voting rights on any control shares unless such voting rights are conferred by a majority vote of the disinterested shareholders of the issuing corporation at a special or annual meeting of shareholders. In the event that the control shares are
accorded full voting rights and the acquiring person acquires control shares with a majority or more of all the voting power, any shareholder, other than the acquiring person, who does not vote in favor of authorizing voting rights for the control shares is entitled to demand payment for the fair value of such person’s shares.
|
Delaware does not have a control share acquisition statute. Thus, hostile bidders could acquire blocks of Quepasa Delaware stock without the risk of voting disenfranchisement.
|
|||
Under the NRS, a controlling interest means the ownership of outstanding voting shares of an issuing corporation sufficient to enable the acquiring person, individually or in association with others, directly or indirectly, to exercise (i) one-fifth or more but less than one-third, (ii) one-third or more but less than a majority, or (iii) a majority or more of the voting power of the issuing corporation in the election of directors. Outstanding voting shares of an issuing corporation that an acquiring person acquires or offers to acquire in an acquisition and acquires within 90 days immediately preceding the date when the acquiring person became an acquiring person are referred to as
control shares.
|
||||
The effect of the control share acquisition statute is, generally, to require a hostile bidder to put its offer to a shareholder vote or risk voting disenfranchisement.
The control share acquisition statute of the NRS does not apply if the corporation opts-out of such provision in the articles of incorporation or bylaws of the corporation in effect on the tenth day following the acquisition of a controlling interest by an acquiring person. Quepasa did not opt-out of the statute in its Articles or Bylaws.
|
Delaware as Sole and Exclusive Forum
|
||||
The Nevada Articles of Incorporation and Bylaws are silent concerning where lawsuits may be filed against us including derivative suits alleging a breach of fiduciary duty owed by any of our directors or officers. Therefore, our shareholders may file derivative actions and similar suits against us in multiple states including Florida where we are headquartered and California where we have officers.
|
The Delaware Certificate of Incorporation, and Bylaws provide that the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of fiduciary duty owed by any of our directors or officers (or any of their affiliates) to us or our shareholders, (iii) any action asserting a claim against us arising pursuant to any provision of the DGCL or our Certificate of Incorporation or Bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine. As a result, any action brought by any of our shareholders with regard to any of
these matters will need to be filed in the Court of Chancery of the State of Delaware and cannot be filed in any other jurisdiction.
|
myYearbook has no exclusive jurisdiction provision in its Certificate of Incorporation and Bylaws.
|
||
Preferred Stock Rights | ||||
Quepasa has no outstanding Preferred Stock.
|
Quepasa has no outstanding Preferred Stock.
|
myYearbook has outstanding Series A and B Preferred Stock. In addition to the rights and preferences described above, the myYearbook Certificate of Incorporation have other rights and preferences including anti-dilution protection in the event that it issues or sells any common stock including common stock equivalents at a price per share less than the applicable conversion price for the Series A or Series B Preferred Stock (or issued or sold without consideration), the conversion price shall be reduced pursuant to a formula which protects the Preferred Stock. There are certain exceptions for issuances of common stock and options under a stock option plan or agreed approved by the Board,
including the Preferred stock designees, the issuance of common stock and common stock equivalents to lenders, financial institutions and equipment lessors in connection with equipment leases or debt financings approved by the Board including the Preferred Stock designees, the issuance of common stock and common stock equivalents pursuant to technology licensing agreements approved by the Board including the Preferred Stock designees, the issuance of common stock and common stock equivalents pursuant to acquisitions of other companies or intellectual property approved by the Board including the Preferred Stock designees, and the issuance of common stock in connection with the exercise of outstanding warrants.
|
Name Of Plan
|
No. of Securities
Underlying
Outstanding
Options
|
Weighted
Average
Exercise
Price of Outstanding Options
|
No. of Securities Available For Future
Issuance Under
Equity Compensation
Plans
|
|||
Equity compensation plans approved by security holders
|
|
7,679,149
|
$1.61
|
910,249
|
||
Total
|
7,679,149
|
$1.61
|
910,249
|
Filing
|
|
Period
|
Annual Report on Form 10-K
|
|
Fiscal year ended December 31, 2010, filed on February 7, 2011
|
The description of our common stock contained in the Form S-3 filed on September 27, 2011 (Commission File Number: 333-177021), including any amendment or report filed with the SEC for the purpose of updating such description.
|
|
|
Quarterly Report on Form 10-Q
|
|
Fiscal quarter ended March 31, 2011, filed on May 11, 2011, and the fiscal quarter ended June 30, 2011, filed on August 15, 2011
|
Current Reports on Form 8-K
|
|
Filed on February 2, 2011, February 7, 2011, February 11, 2011, March 4, 2011, May 11, 2011, May 13, 2011, June 10, 2011, July 20, 2011, July 27, 2011, August 11, 2011, September 21, 2011 and September 26, 2011
|
Definitive Proxy Statement on Schedule 14A
|
|
Filed on April 14, 2011
|
By Mail:
|
By Fax:
|
324 Datura Street, Suite 114
|
(561) 651-9984
|
West Palm Beach, FL 33401
|
|
Attention: Corporate Secretary
|
Page
|
|
Unaudited Financial Statements:
|
|
Balance Sheet as of June 30, 2011 and December 31, 2010
|
F-2
|
Statement Of Operations for the three and six month periods ended June 30, 2011 and 2010
|
F-3
|
Statement Of Changes In Stockholders’ Equity for the six month period ended June 30, 2011
|
F-4
|
Statement Of Cash Flows for the six month periods ended June 30, 2011 and 2010
|
F-5
|
Notes To Unaudited Financial Statements
|
F-6
|
INSIDER GUIDES, INC.
UNAUDITED BALANCE SHEET
AS OF JUNE 30, 2011 AND DECEMBER 31, 2010
|
||||||||
June 30, | December 31, | |||||||
2011
|
2010
|
|||||||
ASSETS | ||||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 8,849,988 | $ | 8,329,278 | ||||
Trade accounts receivable, net
|
6,383,968 | 7,001,124 | ||||||
Prepaid expenses
|
593,404 | 497,477 | ||||||
Total current assets
|
15,827,360 | 15,827,879 | ||||||
PROPERTY AND EQUIPMENT, Net
|
3,699,084 | 3,993,001 | ||||||
INTANGIBLE ASSETS
|
1,299,350 | 825,660 | ||||||
DEPOSITS AND OTHER ASSETS
|
44,992 | 98,731 | ||||||
TOTAL
|
$ | 20,870,786 | $ | 20,745,271 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$ | 1,790,091 | $ | 1,778,557 | ||||
Accrued expenses and other current liabilities
|
630,499 | 606,758 | ||||||
Deferred revenue
|
59,553 | 44,986 | ||||||
Current portion of long-term debt
|
2,352,246 | 2,151,763 | ||||||
Total current liabilities
|
4,832,389 | 4,582,064 | ||||||
LONG-TERM DEBT, Net of current portion
|
2,348,626 | 2,211,872 | ||||||
Total liabilities
|
7,181,015 | 6,793,936 | ||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Convertible preferred stock Series A, $.001 par value; 4,490,794 shares authorized at June 30, 2011 and December 31, 2010; 4,096,700 shares issued and outstanding at June 30, 2011 and December 31, 2010; liquidation preference $4,106,122 at June 30, 2011 and December 31, 2010
|
4,097 | 4,097 | ||||||
Convertible preferred stock Series B, $.001 par value; 4,516,968 shares authorized at June 30, 2011 and December 31, 2010; 4,318,983 shares issued and outstanding at June 30, 2011 and December 31, 2010; liquidation preference $13,129,708 at June 30, 2011 and December 31, 2010
|
4,319 | 4,319 | ||||||
Common stock, $.001 par value; 27,197,985 shares authorized at June 30, 2011 and December 31, 2010; 12,267,475 and 12,256,757 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively
|
12,267 | 12,257 | ||||||
Additional paid-in capital
|
19,942,375 | 19,798,025 | ||||||
Accumulated deficit
|
(6,273,287 | ) | (5,867,363 | ) | ||||
Total stockholders’ equity
|
13,689,771 | 13,951,335 | ||||||
TOTAL
|
$ | 20,870,786 | $ | 20,745,271 |
INSIDER GUIDES, INC.
|
||||||||||||||||
UNAUDITED STATEMENT OF OPERATIONS
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2011 AND 2010
|
||||||||||||||||
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
REVENUE
|
$ | 7,290,546 | $ | 5,656,078 | $ | 13,383,865 | $ | 9,772,542 | ||||||||
OPERATING EXPENSES:
|
||||||||||||||||
Sales and marketing
|
1,346,589 | 703,676 | 2,344,284 | 1,177,049 | ||||||||||||
Information technology
|
1,147,757 | 959,946 | 2,285,548 | 1,908,094 | ||||||||||||
General and administrative
|
3,778,321 | 2,942,122 | 7,258,450 | 5,629,858 | ||||||||||||
Depreciation and amortization
|
785,632 | 746,850 | 1,600,161 | 1,446,187 | ||||||||||||
Total operating expenses
|
7,058,299 | 5,352,594 | 13,488,443 | 10,161,188 | ||||||||||||
INCOME (LOSS) FROM OPERATIONS
|
232,247 | 303,484 | (104,578 | ) | (388,646 | ) | ||||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest expense
|
(152,357 | ) | (126,354 | ) | (291,299 | ) | (251,365 | ) | ||||||||
Interest income
|
6,003 | 6,805 | 11,543 | 13,600 | ||||||||||||
Total other income (expense)
|
(146,354 | ) | (119,549 | ) | (279,756 | ) | (237,765 | ) | ||||||||
INCOME (LOSS) BEFORE INCOME TAXES
|
85,893 | 183,935 | (384,334 | ) | (626,411 | ) | ||||||||||
INCOME TAX PROVISION
|
- | - | (21,590 | ) | - | |||||||||||
NET INCOME (LOSS)
|
$ | 85,893 | $ | 183,935 | $ | (405,924 | ) | $ | (626,411 | ) |
INSIDER GUIDES, INC.
|
||||||||||||||||||||||||||||||||||||
UNAUDITED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
|
||||||||||||||||||||||||||||||||||||
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2011
|
||||||||||||||||||||||||||||||||||||
CAPITAL STOCK
|
ADDITIONAL PAID-IN CAPITAL
|
ACCUMULATED DEFICIT
|
||||||||||||||||||||||||||||||||||
PREFERRED SERIES A
|
PREFERRED SERIES B
|
COMMON
|
||||||||||||||||||||||||||||||||||
SHARES
|
AMOUNT
|
SHARES
|
AMOUNT
|
SHARES
|
AMOUNT
|
TOTAL
|
||||||||||||||||||||||||||||||
BALANCE, DECEMBER 31, 2010
|
4,096,700 | $ | 4,097 | 4,318,983 | $ | 4,319 | 12,256,757 | $ | 12,257 | $ | 19,798,025 | $ | (5,867,363 | ) | $ | 13,951,335 | ||||||||||||||||||||
ISSUANCE OF WARRANTS
|
36,691 | 36,691 | ||||||||||||||||||||||||||||||||||
SHARE-BASED COMPENSATION
|
104,779 | 104,779 | ||||||||||||||||||||||||||||||||||
EXERCISE OF STOCK OPTIONS
|
10,718 | 10 | 2,880 | 2,890 | ||||||||||||||||||||||||||||||||
NET LOSS
|
(405,924 | ) | (405,924 | ) | ||||||||||||||||||||||||||||||||
BALANCE, JUNE 30, 2011
|
4,096,700 | $ | 4,097 | 4,318,983 | $ | 4,319 | 12,267,475 | $ | 12,267 | $ | 19,942,375 | $ | (6,273,287 | ) | $ | 13,689,771 |
INSIDER GUIDES, INC.
|
|||||||||
UNAUDITED STATEMENT OF CASH FLOWS
FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2011 AND 2010
|
|||||||||
Six Months Ended June 30
|
|||||||||
2011
|
2010
|
||||||||
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|||||||||
Net Loss
|
$ | (405,924 | ) | $ | (626,411 | ) | |||
Adjustments to reconcile net loss to cash provided by operating activities:
|
|||||||||
Depreciation
|
1,548,852 | 1,446,187 | |||||||
Amortization of intangibles
|
51,310 | - | |||||||
Amortization of debt discount
|
21,278 | 26,311 | |||||||
Share-based compensation expense
|
104,779 | 102,644 | |||||||
Changes in operating assets and liabilities:
|
|||||||||
Trade accounts receivable
|
617,156 | 425,569 | |||||||
Prepaid expenses
|
(95,927 | ) | (161,493 | ) | |||||
Deposits and other assets
|
53,739 | 64,820 | |||||||
Accounts payable
|
334,113 | (205,405 | ) | ||||||
Accrued expenses and other current liabilities
|
(298,838 | ) | (268,425 | ) | |||||
Deferred revenue
|
14,567 | (28,678 | ) | ||||||
Net cash provided by operating activities
|
1,945,105 | 775,119 | |||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|||||||||
Purchase of property and equipment
|
(1,254,936 | ) | (896,177 | ) | |||||
Purchase of intangible assets
|
(525,000 | ) | (275,000 | ) | |||||
Net cash used in investing activities
|
(1,779,936 | ) | (1,171,177 | ) | |||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|||||||||
Proceeds from notes payable
|
1,627,086 | 1,596,916 | |||||||
Exercise of stock options
|
2,891 | 30,757 | |||||||
Repayments of notes payable
|
(1,274,436 | ) | (1,240,676 | ) | |||||
Net cash provided by financing activities
|
355,541 | 386,997 | |||||||
NET INCREASE (DECREASE) IN CASH
|
520,710 | (9,061 | ) | ||||||
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
8,329,278 | 7,028,320 | |||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD
|
$ | 8,849,988 | $ | 7,019,259 | |||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION,
|
|||||||||
Interest paid
|
$ | 270,021 | $ | 225,054 | |||||
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
|
|||||||||
Discount of note payable and adjustment to additional paid-in-capital for warrants issued
|
$ | 36,691 | $ | 17,835 |
June 30,
2011
|
December 31,
2010
|
|||||||
Servers
|
$ | 11,592,718 | $ | 10,455,551 | ||||
Computer equipment
|
503,400 | 385,630 | ||||||
Leasehold improvements
|
114,224 | 114,224 | ||||||
Furniture and fixtures
|
47,136 | 47,135 | ||||||
Property and equipment, at cost
|
12,257,478 | 11,002,540 | ||||||
Less accumulated depreciation
|
8,558,394 | 7,009,539 | ||||||
Property and equipment, net
|
$ | 3,699,084 | $ | 3,993,001 |
June 30,
2011
|
December 31,
2010
|
|||||||
Amortized intangibles:
|
||||||||
Mobile applications
|
$ | 647,500 | $ | 432,500 | ||||
Accumulated amortization
|
(51,310 | ) | - | |||||
596,190 | 432,500 | |||||||
Unamortized intangibles,
|
||||||||
Domain names
|
703,160 | 393,160 | ||||||
Total intangible assets
|
$ | 1.299,350 | $ | 825,660 |
June 30,
2011
|
December 31,
2010
|
|||||||
Compensation and related benefits
|
$ | 490,499 | $ | 452,258 | ||||
Commissions
|
140,000 | 154,500 | ||||||
Total
|
$ | 630,499 | $ | 606,758 |
Original
Borrowings
|
Interest
Rates
|
June 30,
2011
|
December 31,
2010
|
|||||||||||||
Growth term loans:
|
||||||||||||||||
LSA
|
$ | 900,000 | 12.50 | % | $ | - | $ | - | ||||||||
ELSA
|
1,000,000 | 12.50 | % | - | 113,170 | |||||||||||
LSA2
|
432,500 | 12.50 | % | 366,205 | 93,788 | |||||||||||
Equipment term loans:
|
||||||||||||||||
LSA
|
1,100,000 | 12.00 | % | - | - | |||||||||||
ELSA
|
1,000,000 | 12.00 | % | - | 133,012 | |||||||||||
SLSA
|
2,500,000 | 12.60 | % | 747,984 | 1,168,287 | |||||||||||
S2LSA
|
2,500,000 | 12.50 | % | 1,723,571 | 2,087,457 | |||||||||||
LSA2
|
1,875,502 | 12.50 | % | 1,942,209 | 831,605 | |||||||||||
Total
|
4,779,969 | 4,427,319 | ||||||||||||||
Less current portion
|
2,352,246 | 2,151,763 | ||||||||||||||
Less unamortized discount
|
79,097 | 63,684 | ||||||||||||||
Total long-term debt
|
$ | 2,348,626 | $ | 2,211,872 |
Years ending December 31:
|
||||
2011
|
$ | 1,253,015 | ||
2012
|
1,968,734 | |||
2013
|
1,409,121 | |||
2014
|
149,099 | |||
Total principal outstanding
|
4,779,969 | |||
Less unamortized discount
|
79,097 | |||
Total
|
$ | 4,700,872 |
Six months ended June 30, | ||||||||||||||||
ISO’s
|
NSO’s
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Expected volatility range
|
44.6-45.2 | % | 46.0-46.4 | % | 45.6-50.7 | % | 56.0-64.6 | % | ||||||||
Dividend yield
|
- | - | - | - | ||||||||||||
Expected life, years
|
6.1 | 6.1 | 8.4-8.7 | 8.0-9.9 | ||||||||||||
Risk free interest rate
|
1.8-2.5 | % | 2.7-2.8 | % | 2.8-3.3 | % | 3.2-3.9 | % |
Six Months Ended June 30, 2011
|
||||||||||||
Number Of Common Stock
Options
|
Weighted Average
Exercise
Price
|
Weighted Average Remaining Contractual Life
(In Years)
|
||||||||||
Outstanding at the beginning of the period
|
3,777,419 | $ | 0.43 | 7.63 | ||||||||
Granted
|
407,500 | 1.35 | 9.95 | |||||||||
Cancelled or forfeited
|
(10,718 | ) | 0.27 | 6.13 | ||||||||
Exercised
|
(279,437 | ) | 0.49 | 8.61 | ||||||||
Outstanding at the end of the period
|
3,894,764 | $ | 0.54 | 7.87 | ||||||||
Exercisable at the end of the period
|
2,701,981 | $ | 0.21 | 6.73 |
Six Months Ended June 30, 2010
|
||||||||||||
Number Of Common Stock
Options
|
Weighted Average
Exercise
Price
|
Weighted Average Remaining Contractual Life
(In Years)
|
||||||||||
Outstanding at the beginning of the period
|
3,255,722 | $ | 0.39 | 7.91 | ||||||||
Granted
|
626,245 | 0.56 | 9.72 | |||||||||
Cancelled or forfeited
|
(92,785 | ) | 0.33 | 7.43 | ||||||||
Exercised
|
(62,339 | ) | 0.51 | 8.73 | ||||||||
Outstanding at the end of the period
|
3,726,843 | $ | 0.42 | 7.02 | ||||||||
Exercisable at the end of the period
|
2,671,261 | $ | 0.29 | 6.43 |
Years ending December 31:
|
|
2011
|
$ 648,587
|
2012
|
974,389
|
2013
|
410,326
|
Page
|
|
Independent Auditors' Report
|
FF-2
|
Financial Statements:
|
|
Balance Sheet
|
FF-3
|
Statement Of Operations
|
FF-4
|
Statement Of Changes In Stockholders' Equity
|
FF-5
|
Statement Of Cash Flows
|
FF-6
|
Notes To Financial Statements
|
FF-7
|
2010 | 2009 | |||||||
Assets
|
||||||||
Current Assets:
|
||||||||
Cash and cash equivalents | $ | 8,329,278 | $ | 7,028,320 | ||||
Trade accounts receivable, net | 7,001,124 | 4,249,382 | ||||||
Prepaid expenses
|
497,477 | 347,678 | ||||||
Total current assets
|
15,827,879 | 11,625,380 | ||||||
Property And Equipment, Net
|
3,993,001 | 4,144,239 | ||||||
Intangible Assets
|
825,660 | 190,000 | ||||||
Deposits And Other Assets
|
98,731 | 91,812 | ||||||
Total
|
$ | 20,745,271 | $ | 16,051,431 | ||||
Liabilities And Stockholders' Equity
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable
|
$ | 1,778,557 | $ | 1,459,885 | ||||
Accrued expenses and other current liabilities
|
606,758 | 394,430 | ||||||
Deferred revenue
|
44,986 | 73,041 | ||||||
Current portion of long-term debt
|
2,151,763 | 2,177,090 | ||||||
Total current liabilities
|
4,582,064 | 4,104,446 | ||||||
Long-Term Debt, Net Of Current Portion
|
2,211,872 | 1,354,142 | ||||||
Total liabilities
|
6,793,936 | 5,458,588 | ||||||
Stockholders' Equity:
|
||||||||
Convertible preferred stock Series A, $.001 par value; 4,490,794 shares authorized at December 31, 2010 and 2009; 4,096,700 shares issued and outstanding at December 31, 2010 and 2009; liquidation preference $4,106,122 at December 31, 2010 and 2009
|
4,097 | 4,097 | ||||||
Convertible preferred stock Series B, $.001 par value; 4,516,968 and 4,318,983 shares authorized at December 31, 2010 and 2009, respectively; 4,318,983 shares issued and outstanding at December 31, 2010 and 2009; liquidation preference $13,129,708 at December 31, 2010 and 2009
|
4,319 | 4,319 | ||||||
Common stock, $.001 par value; 27,197,985 and 27,000,000 shares authorized at December 31, 2010 and 2009, respectively; 12,256,757 and 12,156,972 shares issued and outstanding at December 31, 2010 and 2009, respectively
|
12,257 | 12,157 | ||||||
Additional paid-in capital
|
19,798,025 | 19,510,931 | ||||||
Accumulated deficit
|
(5,867,363 | ) | (8,938,661 | ) | ||||
Total stockholders' equity
|
13,951,335 | 10,592,843 | ||||||
Total
|
$ | 20,745,271 | $ | 16,051,431 |
2010
|
2009
|
|||||||
Revenue
|
$ | 23,664,405 | $ | 15,427,514 | ||||
Operating Expenses:
|
||||||||
Sales and marketing
|
2,690,309 | 1,318,756 | ||||||
Information technology
|
3,948,385 | 3,292,890 | ||||||
General and administrative
|
12,306,939 | 9,394,887 | ||||||
Depreciation
|
2,953,307 | 2,500,545 | ||||||
Total operating expenses
|
21,898,940 | 16,507,078 | ||||||
Income (Loss) From Operations
|
1,765,465 | (1,079,564 | ) | |||||
Other Income (Expense):
|
||||||||
Gain on sale of asset
|
1,895,000 | - | ||||||
Interest expense
|
(512,010 | ) | (539,388 | ) | ||||
Interest income
|
25,797 | 61,013 | ||||||
Total other income (expense)
|
1,408,787 | (478,375 | ) | |||||
Income (Loss) Before Income Taxes
|
3,174,252 | (1,557,939 | ) | |||||
Income Tax Provision
|
102,954 | - | ||||||
Net Income (Loss)
|
$ | 3,071,298 | $ | (1,557,939 | ) |
Capital Stock | Additional | |||||||||||||||||||||||||||||||||||
Preferred Series A |
Preferred Series B
|
Common
|
Paid-In
|
Accumulated | ||||||||||||||||||||||||||||||||
Shares | Amount |
Shares
|
Amount
|
Shares
|
Amount | Capital | Deficit | Total | ||||||||||||||||||||||||||||
Balance, December 31, 2008
|
4,096,700 | $ | 4,097 | 4,318,983 | $ | 4,319 | 12,146,144 | $ | 12,147 | $ | 19,341,540 | $ | (7,380,722 | ) | $ | 11,981,381 | ||||||||||||||||||||
Issuance of warrants
|
26,714 | 26,714 | ||||||||||||||||||||||||||||||||||
Share-based compensation
|
139,505 | 139,505 | ||||||||||||||||||||||||||||||||||
Exercise of stock options
|
10,828 | 10 | 3,172 | 3,182 | ||||||||||||||||||||||||||||||||
Net loss
|
(1,557,939 | ) | (1,557,939 | ) | ||||||||||||||||||||||||||||||||
Balance, December 31, 2009
|
4,096,700 | $ | 4,097 | 4,318,983 | $ | 4,319 | 12,156,972 | $ | 12,157 | $ | 19,510,931 | $ | (8,938,661 | ) | $ | 10,592,843 | ||||||||||||||||||||
Issuance of warrants
|
59,756 | 59,756 | ||||||||||||||||||||||||||||||||||
Share-based compensation
|
194,101 | 194,101 | ||||||||||||||||||||||||||||||||||
Exercise of stock options
|
99,785 | 100 | 33,237 | 33,337 | ||||||||||||||||||||||||||||||||
Net income
|
3,071,298 | 3,071,298 | ||||||||||||||||||||||||||||||||||
Balance, December 31, 2010
|
4,096,700 | $ | 4,097 | 4,318,983 | $ | 4,319 | 12,256,757 | $ | 12,257 | $ | 19,798,025 | $ | (5,867,363 | ) | $ | 13,951,335 |
2010
|
2009
|
|||||||
Cash Flows From Operating Activities:
|
||||||||
Net income (loss)
|
$ | 3,071,298 | $ | (1,557,939 | ) | |||
Adjustments to reconcile net income (loss) to cash provided by (used in) operating activities:
|
||||||||
Depreciation
|
2,953,307 | 2,500,545 | ||||||
Gain on sale of asset
|
(1,895,000 | ) | - | |||||
Amortization of debt discount
|
56,399 | 47,356 | ||||||
Share-based compensation expense
|
194,101 | 139,505 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Trade accounts receivable
|
(2,751,742 | ) | (2,087,558 | ) | ||||
Prepaid expenses
|
(149,799 | ) | (190,121 | ) | ||||
Deposits and other assets
|
(6,919 | ) | (1,191 | ) | ||||
Accounts payable
|
318,672 | 885,295 | ||||||
Accrued expenses and other current liabilities
|
212,328 | 118,550 | ||||||
Deferred revenue
|
(28,055 | ) | 20,935 | |||||
Net cash provided by (used in) operating activities
|
1,974,590 | (124,623 | ) | |||||
Cash Flows From Investing Activities:
|
||||||||
Purchase of property and equipment
|
(2,802,069 | ) | (1,783,093 | ) | ||||
Purchase of intangible assets
|
(740,660 | ) | (140,000 | ) | ||||
Proceeds from sale of asset
|
2,000,000 | - | ||||||
Net cash used in investing activities
|
(1,542,729 | ) | (1,923,093 | ) | ||||
Cash Flows From Financing Activities:
|
||||||||
Proceeds from notes payable
|
3,458,373 | 1,721,449 | ||||||
Exercise of stock options
|
33,337 | 3,182 | ||||||
Repayments of notes payable
|
(2,622,613 | ) | (1,919,751 | ) | ||||
Net cash provided by (used in) financing activities
|
869,097 | (195,120 | ) | |||||
Net Increase (Decrease) In Cash And Cash Equivalents
|
1,300,958 | (2,242,836 | ) | |||||
Cash And Cash Equivalents, Beginning Of Year
|
7,028,320 | 9,271,156 | ||||||
Cash And Cash Equivalents, End Of Year
|
$ | 8,329,278 | $ | 7,028,320 | ||||
Supplemental Disclosures Of Cash Flow Information:
|
||||||||
Interest paid
|
$ | 455,611 | $ | 492,030 | ||||
Taxes paid
|
$ | 55,354 | $ | - | ||||
Supplemental Disclosure Of Noncash Financing Activity,
|
||||||||
Discount of note payable and adjustment to additional paid-in-capital for warrents issued
|
$ | 59,756 | $ | 26,714 |
2010
|
2009
|
|||||||
Servers
|
$ | 10,455,551 | $ | 7,846,909 | ||||
Computer equipment
|
385,630 | 266,044 | ||||||
Leasehold improvements
|
114,224 | 50,217 | ||||||
Furniture and fixtures
|
47,135 | 37,301 | ||||||
Property and equipment, at cost
|
11,002,540 | 8,200,471 | ||||||
Less accumulated depreciation
|
7,009,539 | 4,056,232 | ||||||
Property and equipment, net
|
$ | 3,993,001 | $ | 4,144,239 |
2010 | 2009 | |||||||
Amortized intangibles: | ||||||||
Mobile applications
|
$ | 432,500 | $ | - | ||||
Accumulated amortization
|
- | - | ||||||
Balance, net
|
432,500 | - | ||||||
Unamortized intangibles, | ||||||||
Domain names
|
393,160 | 190,000 | ||||||
Total intangible assets
|
$ | 825,660 | $ | 190,000 |
2010 | 2009 | |||||||
Compensation and related benefits
|
$ | 452,258 | $ | 310,085 | ||||
Commissions
|
154,500 | 84,345 | ||||||
Total
|
$ | 606,758 | $ | 394,430 |
Original | Interest | |||||||||||||||
Borrowings | Rates | 2010 | 2009 | |||||||||||||
Growth term loans:
|
||||||||||||||||
LSA
|
$ | 900,000 | 12.50 | % | $ | - | $ | 296,779 | ||||||||
ELSA
|
1,000,000 | 12.50 | % | 113,170 | 532,902 | |||||||||||
LSA2
|
97,500 | 12.50 | % | 93,788 | - | |||||||||||
Equipment term loans:
|
||||||||||||||||
LSA
|
1,100,000 | 12.00 | % | - | 354,807 | |||||||||||
ELSA
|
1,000,000 | 12.00 | % | 133,012 | 473,243 | |||||||||||
SLSA
|
2,500,000 | 12.60 | % | 1,168,287 | 1,933,829 | |||||||||||
S2LSA
|
2,500,000 | 12.50 | % | 2,087,457 | - | |||||||||||
LSA2
|
860,872 | 12.50 | % | 831,605 | - | |||||||||||
Total
|
4,427,319 | 3,591,560 | ||||||||||||||
Less current portion
|
2,151,763 | 2,177,090 | ||||||||||||||
Less unamortized discount
|
63,684 | 60,328 | ||||||||||||||
Total long-term debt
|
$ | 2,211,872 | $ | 1,354,142 |
Years ending December 31:
|
||||
2011
|
$ | 2,151,763 | ||
2012
|
1,430,855 | |||
2013
|
844,701 | |||
Total principal outstanding
|
4,427,319 | |||
Less unamortized discount
|
63,684 | |||
Total
|
$ | 4,363,635 |
2010 | 2009 | |||||||
Current: | ||||||||
Federal
|
$ | 69,323 | $ | - | ||||
State
|
33,631 | - | ||||||
Total
|
102,954 | - | ||||||
Deferred:
|
||||||||
Federal
|
949,968 | (501,691 | ) | |||||
State
|
332,732 | (97,289 | ) | |||||
Total
|
1,282,700 | (598,980 | ) | |||||
Valuation allowance
|
(1,282,700 | ) | 598,980 | |||||
Total income tax provision | $ | 102,954 | $ | - |
2010
|
2009
|
|||||||
U.S. Federal statutory rate
|
34.00 | % | 34.00 | % | ||||
State and local tax
|
0.70 | % | 6.59 | % | ||||
Permanent differences
|
1.40 | % | - | % | ||||
Change in valuation allowance
|
(32.86 | )% | (40.59 | )% | ||||
Effective income tax rate
|
3.24 | % | - | % |
2010
|
2009
|
|||||||
Deferred tax assets: | ||||||||
Intangible assets
|
$ | 30,762 | $ | 39,692 | ||||
NOL carryforwards
|
1,802,110 | 3,412,479 | ||||||
AMT carryforward
|
69,323 | - | ||||||
Allowance for bad debt
|
71,038 | 23,890 | ||||||
Deferred revenue
|
18,261 | 29,650 | ||||||
Property and equipment
|
- | 56,339 | ||||||
Charitable contributions
|
100,626 | 135,769 | ||||||
Accrued expenses
|
304,079 | 149,867 | ||||||
Other
|
1,258 | 1,258 | ||||||
2,397,457 | 3,848,944 | |||||||
Valuation allowance
|
(1,794,804 | ) | (3,077,504 | ) | ||||
Net deferred tax assets
|
602,653 | 771,440 | ||||||
Deferred tax liabilities:
|
||||||||
Section 481(a) adjustment
|
(287,886 | ) | (746,951 | ) | ||||
Property and equipment
|
(288,915 | ) | - | |||||
Warrants
|
(25,852 | ) | (24,489 | ) | ||||
Total deferred tax liabilities
|
(602,653 | ) | (771,440 | ) | ||||
Net deferred assets (liabilities) | $ | - | $ | - |
ISO's | NSO's | |||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Expected volatility range
|
45.3 | 47.9 | 50.6 | 56.0 | ||||||||||||
46.5 | % | 48.5 | % | 50.7 | % | 64.6 | % | |||||||||
Dividend yield
|
- | - | - | - | ||||||||||||
Expected life, years
|
6.08 | 6.08 | 8.9 | 8.0-9.9 | ||||||||||||
Risk free interest rate
|
1.5-3.0 | % | 1.5-2.9 | % | 3.1 | % | 3.5-3.9 | % |
2010
|
||||||||||||
Number Of Common Stock Options | Weighted Average Exercies Price | Weighted Average Remaining Contractual Life (In Years) | ||||||||||
Outstanding at the beginning of the period
|
3,255,722 | $ | 0.39 | 7.91 | ||||||||
Granted
|
723,435 | 0.60 | 9.25 | |||||||||
Cancelled or forfeited
|
(101,953 | ) | 0.50 | 8.63 | ||||||||
Exercised
|
(99,785 | ) | 0.33 | 7.47 | ||||||||
Outstanding at the end of the period
|
3,777,419 | $ | 0.43 | 7.64 | ||||||||
Exercisable at the end of the period
|
2,310,017 | $ | 0.35 | 7.00 | ||||||||
2009 | ||||||||||||
Number Of Common Stock Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Life (In Years) | ||||||||||
Outstanding at the beginning of the period
|
2,650,354 | $ | 0.37 | 8.91 | ||||||||
Granted
|
798,450 | 0.48 | 9.43 | |||||||||
Cancelled or forfeited
|
(182,254 | ) | 0.37 | 8.56 | ||||||||
Exercised
|
(10,828 | ) | 0.29 | 8.28 | ||||||||
Outstanding at the end of the period
|
3,255,722 | $ | 0.39 | 7.91 | ||||||||
Exercisable at the end of the period
|
1,693,151 | $ | 0.32 | 6.92 |
Years ending December 31:
|
||||
2011
|
$ | 734,698 | ||
2012
|
199,626 | |||
2013
|
136,586 |
ARTICLE I THE MERGER
|
1
|
|
1.1
|
The Merger
|
1
|
1.2
|
Closing; Effective Time
|
1
|
1.3
|
Effects of the Merger
|
2
|
1.4
|
Certificate of Incorporation; Bylaws
|
2
|
1.5
|
Directors and Officers of the Surviving Corporation
|
2
|
ARTICLE II CONVERSION OF SHARES
|
2
|
|
2.1
|
Certain Definitions
|
2
|
2.2
|
Effects on Capital Stock
|
6
|
2.3
|
Exchange of Stock Certificates
|
8
|
2.4
|
Company Options and Warrants
|
9
|
2.5
|
Lost, Stolen or Destroyed Certificates
|
9
|
2.6
|
Tax Consequences
|
9
|
2.7
|
Dissenting Shares
|
10
|
2.8
|
Required Withholdings
|
10
|
ARTICLE III REPRESENTATIONS AND WARRANTIES OF COMPANY
|
10
|
|
3.1
|
Organization, Etc.
|
11
|
3.2
|
Authority Relative to This Agreement
|
12
|
3.3
|
No Violations, Etc.
|
12
|
3.4
|
Board Recommendation
|
13
|
3.5
|
Capitalization
|
13
|
3.6
|
Compliance with Laws
|
14
|
3.7
|
Financial Statements; Controls
|
14
|
3.8
|
Absence of Undisclosed Liabilities
|
15
|
3.9
|
Absence of Changes or Events
|
15
|
3.10
|
Capital Stock of Subsidiaries
|
17
|
3.11
|
Litigation
|
17
|
3.12
|
Insurance
|
17
|
3.13
|
Contracts and Commitments
|
17
|
3.14
|
Labor Matters; Employment and Labor Contracts
|
19
|
3.15
|
Intellectual Property Rights
|
20
|
3.16
|
Taxes
|
21
|
3.17
|
Employee Benefit Plans; ERISA
|
23
|
3.18
|
Environmental Matters
|
26
|
3.19
|
Affiliates
|
27
|
3.20
|
Finders or Brokers
|
27
|
3.21
|
Title to Property
|
27
|
3.22
|
No Existing Discussions
|
28
|
3.23
|
Negative Assurances
|
28
|
3.24
|
No Aggregate Company Material Adverse Effect
|
28
|
ARTICLE IV REPRESENTATIONS & WARRANTIES OF PARENT AND MERGER SUB
|
28
|
|
4.1
|
Organization, Etc.
|
28
|
4.2
|
Authority Relative to This Agreement
|
29
|
4.3
|
No Violations, Etc.
|
30
|
4.4
|
Board Approval
|
31
|
4.5
|
Fairness Opinion
|
31
|
4.6
|
Capitalization
|
31
|
4.7
|
SEC Filings
|
32
|
4.8
|
Compliance with Laws
|
32
|
4.9
|
Financial Statement; Controls
|
33
|
4.10
|
Absence of Undisclosed Liabilities
|
33
|
4.11
|
Absence of Changes or Events
|
33
|
4.12
|
Capital Stock of Subsidiaries
|
35
|
4.13
|
Litigation
|
35
|
4.14
|
Insurance
|
36
|
4.15
|
Contracts and Commitments
|
36
|
4.16
|
Labor Matters; Employment and Labor Contracts
|
37
|
4.17
|
Intellectual Property Rights
|
38
|
4.18
|
Taxes
|
39
|
4.19
|
Employee Benefit Plans; ERISA
|
41
|
4.20
|
Environmental Matters
|
44
|
4.21
|
Finders or Brokers
|
45
|
4.22
|
Title to Property
|
45
|
4.23
|
Third Party Financing of Cash Consideration
|
45
|
4.24
|
No Existing Discussions
|
45
|
4.25
|
Negative Assurances
|
45
|
4.26
|
No Aggregate Parent Material Adverse Effect
|
45
|
ARTICLE V COVENANTS
|
46
|
|
5.1
|
Conduct of Company Business During Interim Period
|
46
|
5.2
|
Conduct of Parent Business During Interim Period
|
48
|
5.3
|
No Solicitation
|
50
|
5.4
|
Access to Information
|
53
|
5.5
|
Company Special Meeting; Board Recommendations
|
53
|
5.6
|
Parent Special Meeting; Board Recommendations
|
54
|
5.7
|
Registration Statement; Proxy Statement/Prospectus
|
56
|
5.8
|
Other SEC Filings
|
57
|
5.9
|
Commercially Reasonable Efforts
|
57
|
5.10
|
Public Announcements
|
58
|
5.11
|
Notification of Certain Matters
|
58
|
5.12
|
Indemnification
|
58
|
5.13
|
Stock Exchange Listing
|
59
|
5.14
|
Resignation of Directors and Officers
|
60
|
5.15
|
Consents of Parent’s and Company’s Accountants
|
60
|
5.16
|
Voting Agreements
|
60
|
5.17
|
Tax Treatment
|
60
|
5.18
|
Employee Benefit Matters.
|
60
|
5.19
|
Representation on Parent Board and Executive Committee
|
60
|
5.20
|
Parent Stock Options
|
61
|
5.21
|
Sale Rights Agreement
|
61
|
5.22
|
Parent Reincorporation in Delaware
|
61
|
5.23
|
Tax Free Reorganization
|
61
|
ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF EACH PARTY
|
62
|
|
6.1
|
Registration Statement/Listing of Parent Common Stock
|
62
|
6.2
|
Parent Stockholder Approval
|
62
|
6.3
|
Company Shareholder Approval
|
62
|
6.4
|
Governmental Clearances
|
62
|
6.5
|
Statute or Decree
|
62
|
6.6
|
Financing Transaction
|
63
|
6.7
|
Share Price
|
63
|
6.8
|
Exchange Ratio
|
63
|
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF COMPANY AND PARENT
|
63
|
|
7.1
|
Additional Conditions To The Obligations Of Company
|
63
|
7.2
|
Additional Conditions To The Obligations Of Parent And Merger Sub
|
64
|
ARTICLE VIII TERMINATION
|
64
|
|
8.1
|
Termination
|
64
|
8.2
|
Notice of Termination; Effect of Termination
|
67
|
8.3
|
Fees and Expenses
|
67
|
ARTICLE IX MISCELLANEOUS
|
69
|
|
9.1
|
Amendment and Modification
|
69
|
9.2
|
Waiver of Compliance; Consents
|
69
|
9.3
|
Survival; Investigations
|
69
|
9.4
|
Notices
|
70
|
9.5
|
Assignment; Third Party Beneficiaries
|
70
|
9.6
|
Governing Law
|
71
|
9.7
|
Specific Enforcement; Consent to Jurisdiction; Waiver of Jury Trial
|
71
|
9.8
|
Counterparts
|
71
|
9.9
|
Severability
|
71
|
9.10
|
Interpretation
|
72
|
9.11
|
Entire Agreement
|
72
|
9.12
|
Definition of “law”
|
72
|
9.13
|
Rules of Construction
|
72
|
Term
|
Section
|
Acquisition Proposal
|
5.3(c)
|
Acquisition Transaction
|
5.3(c)
|
Action
|
3.11(a)
|
Affiliates
|
3.19
|
Aggrieved Party
|
8.3(b)(iv)
|
Agreement
|
Recitals
|
Breaching Party
|
8.3(b)(iv)
|
Cash Consideration
|
2.1
|
Cash Percentage
|
2.1
|
Certificate of Merger
|
1.1
|
Closing Date
|
1.2
|
Closing
|
1.2
|
COBRA
|
3.14(b)
|
Code
|
2.6
|
Company Acquisition
|
8.3(b)(iv)
|
Company Balance Sheet
|
3.7(a)
|
Company Capital Stock
|
2.1
|
Company Certificate
|
2.1
|
Company Common Stock
|
2.1
|
Company Contract
|
3.13(a)
|
Company Disclosure Statement
|
Article III
|
Company Employee Benefit Plans
|
3.17(a)
|
Company Environmental Permits
|
3.18(c)
|
Company ERISA Affiliate
|
3.17(a)
|
Company Expenses
|
8.3(b)(ii)
|
Company Financial Statements
|
3.7(a)
|
Company Indemnified Persons
|
5.12(a)
|
Company IP Rights
|
3.15(a)
|
Company Material Adverse Effect
|
3.1(a)
|
Company Options
|
2.1
|
Company Preferred Stock
|
2.1
|
Company Preliminary Financial Statements
|
3.7(a)
|
Company Representative
|
5.3(a)
|
Company Series A Preferred Stock
|
2.1
|
Company Series B Preferred Stock
|
2.1
|
Company Special Meeting
|
5.5
|
Company Stock Plan
|
2.1
|
Company Stock
|
Recital D
|
Company Subsidiaries
|
3.1(a)
|
Company Superior Offer
|
5.5
|
Company Triggering Event
|
8.1(j)
|
Company Voting Agreement
|
5.16
|
Company Warrants
|
2.1
|
Company
|
Recitals
|
Confidentiality Agreement
|
5.4
|
Deferred Compensation Plan
|
3.17(n)
|
Delaware Secretary
|
1.2
|
DGCL
|
1.1
|
Dissenting Shares
|
2.7(a)
|
Effective Time
|
1.2
|
Employment Agreements
|
5.18(a)
|
ERISA
|
3.17(a)
|
Exchange Act
|
4.3
|
Exchange Agent
|
2.3(a)
|
Existing D&O Policy
|
5.12(c)
|
FCPA
|
3.6(b)
|
Financing Letter
|
4.23
|
Financing Transaction
|
4.23
|
Fully-Diluted Company Capital Stock
|
2.1
|
Fully-Diluted Company Series A Preferred Stock
|
2.1
|
Fully-Diluted Company Series B Preferred Stock
|
2.1
|
GAAP
|
3.7(a)
|
Government Entity
|
3.3
|
Hazardous Materials Activity
|
3.18(b)
|
Hazardous Materials
|
3.18(a)
|
Holder
|
2.1
|
HSR Act
|
3.3
|
IRS
|
3.17(j)
|
law
|
9.12
|
Letter of Transmittal
|
2.3(c)
|
Merger Consideration
|
2.1
|
Merger Sub
|
Recitals
|
Merger
|
Recital A
|
Net Exercise Shares
|
2.1
|
NYSE Amex
|
4.7
|
Option Exchange Ratio
|
2.4(a)
|
Option Shares Withheld
|
2.4(a)
|
Outside Date
|
8.1(b)
|
Parent Acquisition
|
8.3(b)(iv)
|
Parent Balance Sheet
|
4.9(a)
|
Parent Certificate
|
2.1
|
Parent Common Stock
|
Recital D
|
Parent Contract
|
4.15(a)
|
Parent Disclosure Statement
|
Article IV
|
Parent Employee Benefit Plans
|
4.19(a)
|
Parent Environmental Permits
|
4.20(c)
|
Parent ERISA Affiliate
|
4.19(a)
|
Parent Expenses
|
8.3(b)(i)
|
Parent Financial Statements
|
4.9(a)
|
Parent Interim Financial Statements
|
4.9(a)
|
Parent IP Rights
|
4.17(a)
|
Parent Material Adverse Effect
|
4.1(a)
|
Parent Options
|
4.6(b)
|
Parent Proxy Statement
|
5.7(b)
|
Parent Representative
|
5.3(b)
|
Parent SEC Reports
|
4.7
|
Parent Special Meeting
|
5.6
|
Parent Stock Plans
|
4.6(b)
|
Parent Subsidiaries
|
4.1(a)
|
Parent Superior Offer
|
5.6
|
Parent Triggering Event
|
8.1(k)
|
Parent Voting Agreement
|
5.16
|
Parent
|
Recitals
|
Participating Amount Per Share
|
2.1
|
Pension Plans
|
3.17(a)
|
Person
|
2.1
|
Potential Acquiror
|
5.3(a)
|
Reference Date
|
3.9
|
Registration Statement
|
5.7(a)
|
Retention Option Pool
|
5.20
|
SEC
|
4.3
|
Securities Act
|
4.7
|
Series A Amount Per Share
|
2.1
|
Series A Liquidation Preference Per Share
|
2.1
|
Series B Amount Per Share
|
2.1
|
Series B Liquidation Preference Per Share
|
2.1
|
Share Percentage
|
2.1
|
Subsidiary
|
2.1
|
Surviving Corporation
|
1.1
|
Tax or Taxes
|
3.16(a)
|
Tax Return or Tax Returns
|
3.16(a)
|
Termination Fee
|
8.3(b)(iv)
|
Total Participating Consideration
|
2.1
|
Total Preferred Liquidation Preference
|
2.1
|
Total Series A Consideration
|
2.1
|
Total Series A Liquidation Preference
|
2.1
|
Total Series A Participation
|
2.1
|
Total Series B Consideration
|
2.1
|
Total Series B Liquidation Preference
|
2.1
|
Total Series B Participation
|
2.1
|
Transaction Share Price
|
2.1
|
WARN Act
|
3.17(o)
|
Welfare Plans
|
3.17(a)
|
If to Company:
|
Insider Guides, Inc.
|
With a copy to:
|
SNR Denton US LLP
|
If to Parent, or Merger Sub, to:
|
Quepasa Corp.
|
With a copy to:
|
Bradley Arant Boult Cummings LLP
|
QUEPASA CORPORATION
|
||
By:
|
/s/ John Abbott
|
|
Name:
|
John Abbott
|
|
Title:
|
Chief Executive Officer
|
IG ACQUISITION COMPANY
|
||
By:
|
/s/ John Abbott
|
|
Name:
|
John Abbott
|
|
Title:
|
Chief Executive Officer
|
INSIDER GUIDES, INC.
|
||
By:
|
/s/ Geoff Cook
|
|
Name:
|
Geoff Cook
|
|
Title:
|
Chief Executive Officer
|
QUEPASA CORPORATION
|
||
By:
|
||
Name:
|
||
Title:
|
IG ACQUISITION COMPANY
|
||
By:
|
||
Name:
|
||
Title:
|
INSIDER GUIDES, INC.
|
||
By:
|
||
Name:
|
||
Title:
|
If to Company:
|
Insider Guides, Inc.
|
|
280 Union Square Drive
|
||
New Hope, PA 18938
|
||
Telephone:
|
||
Facsimile:
|
||
Attention: Mr. Geoff Cook
|
||
With a copy to:
|
SNR Denton US LLP
|
|
Two World Financial Center
|
||
225 Liberty Street
|
||
New York, NY 10281-2699
|
||
Telephone: 212-768-6700
|
||
Facsimile: 212-768-6800
|
||
Attention: Lisa A. Weiss
|
||
If to Parent:
|
Quepasa Corp.
|
|
324 Datura Street, Suite 114
|
||
West Palm Beach, FL 33401
|
||
Telephone: 561-366-1249
|
||
Facsimile:
|
||
Attention:
|
||
With a copy to:
|
Bradley Arant Boult Cummings LLP
|
|
1600 Division Street, Suite 700
|
||
Nashville, TN 37203
|
||
Telephone: 615-252-2388
|
||
Facsimile: 615-252-6388
|
||
Attention: Jeffrey S. Buschmann
|
||
If to Shareholder:
|
To the address for notice set forth on the signature page hereof
|
QUEPASA CORPORATION
|
SHAREHOLDER:
|
|||
|
|
|||
By:
|
|
|||
Name: | Signature | |||
Title: | ||||
Print Name | ||||
Address | ||||
INSIDER GUIDES, INC. | ||||
Shares: | ||||
By: | ||||
Name: | Parent Common Stock: | |||
Title: | Parent Preferred Stock: | |||
Parent Options: | ||||
Parent Warrants: |
|
Signature
Print Name
Address
Shares:
Parent Common Stock:
Parent Preferred Stock:
Parent Options:
Parent Preferred Stock:
|
SHAREHOLDER:
__________________________________________ Signature
__________________________________________ Print Name
Address:
__________________________________________
__________________________________________
|
If to Company: |
Insider Guides, Inc.
|
|
280 Union Square Drive
|
||
New Hope, PA 18938
|
||
Telephone: (215) 862-1162
|
||
Facsimile: (215) 862-1655
|
||
Attention: Mr. Geoff Cook
|
||
With a copy to: |
SNR Denton US LLP
|
|
Two World Financial Center
|
||
225 Liberty Street
|
||
New York, NY 10281-2699
|
||
Telephone: 212-768-6700
|
||
Facsimile: 212-768-6800
|
||
Attention: Lisa A. Weiss
|
||
If to Parent: |
Quepasa Corp.
|
|
324 Datura Street, Suite 114
|
||
West Palm Beach, FL 33401
|
||
Telephone: 561-366-1249
|
||
Facsimile: 561-651-9984
|
||
Attention: John Abbott
|
||
With a copy to: |
Bradley Arant Boult Cummings LLP
|
|
1600 Division Street, Suite 700
|
||
Nashville, TN 37203
|
||
Telephone: 615-252-2388
|
||
Facsimile: 615-252-6388
|
||
Attention: Jeffrey S. Buschmann
|
||
If to Shareholder: |
To the address for notice set forth on the signature page hereof
|
QUEPASA CORPORATION
|
SHAREHOLDER:
|
|||
|
|
|||
By:
|
|
|||
Name: |
|
|||
Title: | ||||
Address | ||||
INSIDER GUIDES, INC. | ||||
Shares: | ||||
By: | ||||
Name: | Company Common Stock: | |||
Title: | Company Preferred Stock: | |||
Company Options: | ||||
Company Warrants: |
|
Address
Shares:
Company Common Stock:
Company Preferred Stock:
Company Options:
Company Preferred Stock:
|
1.
|
Notwithstanding anything to the contrary contained in the Voting Agreement, the Amendment shall not constitute a “Material Adverse Amendment” and the execution and delivery by the Company of the Amendment shall not trigger the “Expiration Time” or the termination of the Voting Agreement.
|
2.
|
Section 9 of the Voting Agreement shall be deleted and replaced in its entirety with the following:
|
SHAREHOLDER:
__________________________________________ Signature
__________________________________________ Print Name
Address:
__________________________________________
__________________________________________
|
If to Company: |
Insider Guides, Inc.
280 Union Square Drive
New Hope, PA 18938
Telephone:
Facsimile:
Attention: Mr. Geoff Cook
|
With a copy to: |
SNR Denton US LLP
Two World Financial Center
225 Liberty Street
New York, NY 10281-2699
Telephone: 212-768-6700
Facsimile: 212-768-6800
Attention: Lisa A. Weiss
|
If to Parent: | Quepasa Corp.
324 Datura Street, Suite 114
West Palm Beach, FL 33401
Telephone: 561-366-1249
Facsimile:
Attention:
|
With a copy to: | Bradley Arant Boult Cummings LLP
1600 Division Street, Suite 700
Nashville, TN 37203
Telephone: 615-252-2388
Facsimile: 615-252-6388
Attention: Jeffrey S. Buschmann
|
If to Shareholder: |
To the address for notice set forth on the
signature page hereof
|
QUEPASA CORPORATION | SHAREHOLDER: | |||
By: ____________________________________
|
____________________________________ | |||
Name: ____________________________________
|
Signature | |||
Title: ____________________________________
|
____________________________________ | |||
Print Name | ||||
____________________________________ | ||||
____________________________________ | ||||
Address | ||||
INSIDER GUIDES, INC.
|
||||
By: ____________________________________
|
Shares: | |||
Name: ____________________________________
|
||||
Title: ____________________________________
|
Parent Common Stock:
Parent Preferred Stock:
Parent Options:
Parent Warrants:
|
____________________________________ | |
Signature | |
____________________________________ | |
Print Name | |
____________________________________ | |
____________________________________ | |
Address | |
Shares: | |
Parent Common Stock:
Parent Preferred Stock:
Parent Options:
Parent Preferred Stock:
|
|
1.
|
reviewed an execution copy of the Agreement dated and provided to us on July 19, 2011;
|
|
2.
|
reviewed a draft of the Amendment provided to us on September 15, 2011;
|
|
3.
|
reviewed the financial terms and conditions as stated in both the Agreement and the Amendment;
|
|
4.
|
reviewed the audited financial statements of the Company as of and for the years ended December 31, 2008, 2009 and 2010, and the unaudited financial statements for the periods ended March 31, 2011 and June 30, 2011, as well as summary financial information for the period ended August 31, 2011;
|
|
5.
|
reviewed the audited consolidated financial statements of the Parent as of and for the year ended December 31, 2010, and the unaudited consolidated financial statements for the periods ended March 31, 2011 and June 30, 2011;
|
|
6.
|
reviewed the Parent’s Annual Report filed on Form 10-K for the year ended December 31, 2010, and the Parent’s Quarterly Report filed on Form 10-Q for the quarters ended March 31, 2011, and June 30, 2011;
|
|
7.
|
reviewed the Parent's Registration Statement on Form S-4, as initially filed with the Securities and Exchange Commission on August 11, 2011, as amended by Amendment No. 1 thereto dated August 26, 2011;
|
|
8.
|
reviewed other financial and operating information requested from and/or provided by the Company or the Parent;
|
|
9.
|
met with and discussed with members of the senior management of the Parent and the Company certain information relating to the aforementioned matters and any other matters which we have deemed relevant to our inquiry;
|
|
10.
|
reviewed and discussed with senior management of the Parent and the Company the historical and anticipated future financial performance of the Company, including the review of forecasts prepared by senior management of the Parent and the Company;
|
|
11.
|
compared financial information for the Company with similar information for companies we deemed to be comparable, except that such other companies had publicly traded equity securities;
|
|
12.
|
reviewed the financial terms of recent business combinations involving companies in comparable businesses and industries; and
|
|
13.
|
performed such other analyses and studies, and considered such other factors, as we considered appropriate.
|
PARENT:
Quepasa Corporation, a Nevada corporation
By: /s/ Michael Matte
Michael Matte, Chief Financial Officer
SUBSIDIARY:
Quepasa Corporation, a Delaware corporation
By: /s/ John Abbott
John Abbott, Chief Executive Officer
|
(i)
|
any suit brought by the Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an Advancement of Expenses) it shall be a defense that, and
|
(ii)
|
any suit by the Company to recover an Advancement of Expenses pursuant to the terms of an Undertaking the Company shall be entitled to recover such expenses upon a final adjudication that,
|
QUEPASA CORPORATION
|
|||
By:
|
/s/ John Abbott | ||
John Abbott, Chief Executive Officer
|
|||