QUEPASA CORPORATION
|
(Exact name of registrant as specified in its charter)
|
NEVADA
|
7310
|
86-0879433
|
||
(State or other jurisdiction of
|
(Primary Standard Industrial
|
(I.R.S. Employer
|
||
incorporation or organization)
|
Classification Code Number)
|
Identification No.)
|
Large accelerated filer
|
o
|
Accelerated filer
|
o
|
Non-accelerated filer
|
o
|
Smaller reporting company
|
þ
|
Title of Each
Class of Securities
to be Registered
|
Amount to be
Registered
(1)
|
Proposed
Maximum
Offering Price
Per Share
(2)
|
Proposed
Maximum
Aggregate
Offering Price
(2)
|
Amount of
Registration Fee
|
||||||||||||
Common stock, $0.001 par value per share
|
1,918,329
|
9.25
|
17,744,543
|
2,060.14
|
Page
|
||||
PROSPECTUS SUMMARY
|
1
|
|||
THE OFFERING | 1 | |||
SUMMARY FINANCIAL DATA | 3 | |||
RISK FACTORS
|
4
|
|||
FORWARD-LOOKING STATEMENTS
|
14
|
|||
USE OF PROCEEDS
|
15
|
|||
CAPITALIZATION | 15 | |||
PRIVATE PLACEMENT | 16 | |||
MARKET FOR COMMON STOCK
|
16
|
|||
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|
17
|
|||
RECENT ACCOUNTING PRONOUNCEMENTS | 32 | |||
BUSINESS | 33 | |||
MANAGEMENT | 44 | |||
EXECUTIVE COMPENSATION
|
47
|
|||
PRINCIPAL SHAREHOLDERS | 54 | |||
RELATED PERSON TRANSACTIONS | 57 | |||
SELLING SHAREHOLDERS
|
58
|
|||
DESCRIPTION OF SECURITIES
|
61
|
|||
PLAN OF DISTRIBUTION | 64 | |||
LEGAL MATTERS
|
65 | |||
EXPERTS
|
66
|
|||
ADDITIONAL INFORMATION
|
66
|
|||
INDEX TO FINANCIAL STATEMENTS
|
F-1
|
Common stock outstanding prior to the offering:
|
15,271,480 shares
|
Common stock offered by the selling shareholders:
|
1,918,329 shares (1)
|
Common stock outstanding immediately following the offering:
|
15,436,480 shares
|
Use of proceeds:
|
We will not receive any proceeds from the sale of the shares of common stock by the selling shareholders but will receive proceeds from the exercise of the warrants if the warrants are exercised, which proceeds will be used for working capital purposes.
|
Risk Factors:
|
See “Risk Factors” beginning on page 4 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.
|
Stock Symbol:
|
QPSA
|
●
|
a total of 7,677,449 shares of common stock issuable upon the exercise of outstanding stock options;
|
●
|
a total of 915,249 shares of common stock reserved for future issuance under our 2006 Stock Incentive Plan, or the Plan;
|
●
|
shares of common stock issuable upon conversion of our outstanding Series A Preferred Stock, or Series A; and
|
●
|
a total of 4,400,000 shares of common stock issuable upon the exercise of warrants.
|
Nine
Months Ended
September 30,
2010
(Unaudited)
|
Nine
Months Ended
September 30,
2009
(Unaudited)
|
Year
Ended
December 31,
2009
|
Year
Ended
December 31,
2008
|
|||||||||||||
Revenue
|
$
|
4,199,846
|
$
|
197,018
|
$
|
535,976
|
$
|
56,006
|
||||||||
Loss from operations
|
$
|
(4,416,158)
|
$
|
(7,489,756)
|
$
|
(9,930,680)
|
$
|
(11,911,505)
|
||||||||
Net loss allocable to common shareholders
|
$
|
(4,948,962)
|
$
|
(8,069,096)
|
$
|
(10,687,007)
|
$
|
(7,195,069)
|
||||||||
Net loss per share allocable to common shareholders
|
$
|
(0.38)
|
$
|
(0.63)
|
$
|
(0.84)
|
$
|
(0.57)
|
||||||||
Weighted average common shares (basic and diluted)
|
12,951,513
|
12,722,412
|
12,725,894
|
12,621,621
|
September 30,
2010
(Unaudited)
|
December 31,
2009
|
December 31,
2008
|
||||||||||
Cash
|
$ | 527,854 | $ | 1,028,267 | $ | 4,932,629 | ||||||
Accounts receivable
|
$ | 1,819,803 | $ | 310,781 | $ | 21,775 | ||||||
Current liabilities
|
$ | 543,098 | $ | 479,349 | $ | 328,036 | ||||||
Working capital
|
$ | 2,024,769 | $ | 1,050,212 | $ | 5,023,950 | ||||||
Notes payable, net of discount
|
$ | 6,122,243 | $ | 5,673,702 | $ | 5,074,858 | ||||||
Accumulated deficit
|
$ | (164,283,701 | ) | $ | (159,334,739 | ) | $ | (148,647,732 | ) |
●
|
identify and respond to emerging technological trends in the market; |
●
|
develop content that attracts and allows us to retain large numbers of users; |
●
|
enhance our products by adding innovative features that differentiate our products and services from those of our competitors; |
●
|
acquire and license leading technologies; and |
● | respond effectively to new technological changes or new product and services announcements by others. |
●
|
rapidly changing technology; |
●
|
evolving industry standards and practices that could render our website and proprietary technology obsolete; |
●
|
changes in Latino consumer tastes and demands; and |
●
|
frequent introductions of new services or products that embody new technologies. |
●
|
Changes in laws or regulations resulting in more burdensome governmental controls, regulation of the Internet, privacy protection, or restrictions; |
●
|
Being able to attract users from countries with different local cultures; |
●
|
Political and economic instability; |
●
|
Extended payment terms beyond those customarily offered in the United States; |
● | Difficulties in managing sales representatives and employees outside the United States; and |
● | Potentially adverse tax consequences. |
●
|
Our members may cease visiting Quepasa.com if they find our website is no longer interesting or fun;
|
●
|
Loss of key employees;
|
●
|
Possible inconsistencies in standards, controls, procedures and policies among the combined companies and the need to implement company-wide financial, accounting, information and other systems;
|
●
|
Failure to maintain the quality of services that the companies have historically provided; and
|
● |
The diversion of management’s attention from our day-to-day business as a result of the need to deal with any disruptions and difficulties and the need to add management resources to do so.
|
●
|
changes in the growth rate of our members, |
●
|
changes in the usage of Quepasa.com by our members, |
●
|
independent reports relating to the metrics of our website, including the number of visitors, |
●
|
our failure to generate increases in revenue, |
● | our failure to achieve or maintain profitability, |
● | actual or anticipated variations in our quarterly results of operations, |
● | announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, jointventures or capital commitments, |
● | the loss of significant business relationships, |
● | changes in market valuations of similar companies, |
● | the loss of major advertisers, |
● | future acquisitions, |
● | the departure of key personnel, |
● | short selling activities, or |
● | regulatory developments. |
(i)
|
we are current in our filings, | |
(ii)
|
certain manner of sale provisions, | |
(iii)
|
filing of Form 144, and | |
(iv)
|
volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed the 1% of the total number of outstanding shares. |
● | Having adequate working capital to remain operational, |
● |
Expectations regarding revenues,
|
● |
Belief regarding the DSM campaigns being a highly effective ad product,
|
● |
Belief that there will be a direct correlation between website traffic and our ability to increase revenue,
|
● |
Expect results from our Open Social Platform,
|
● |
Expectations regarding our net cash earn (burn) rate,
|
● | Plans regarding continuing to develop and partner with social application developers, |
● | Expectations that our companion applications will be distributed on several major carriers in Latin America, |
● | Developing new partnerships, |
● | Opportunities to monetize applications and our members, and |
● |
The continued growth of our business.
|
As of
September 30,
2010
|
||||
Cash and cash equivalents
|
$ | 527,854 | ||
Notes payable, net of discounts
|
$ | 6,122,243 | ||
Shareholders’ equity:
|
||||
Preferred stock, $0.001 par value
|
$ | 25 | ||
$ | 13,239 | |||
Additional paid-in capital
|
$ | 161,000,693 | ||
Accumulated deficit
|
$ | (164,283,701 | ) | |
Accumulated other comprehensive income (loss)
|
$ | (6,568 | ) | |
Total shareholders’ equity (deficit)
|
$ | (3,276,312 | ) |
Quarter Ended
|
High
($)
|
Low
($)
|
||||||
December 31, 2010
|
10.50
|
5.10
|
||||||
September 30, 2010
|
5.38
|
3.25
|
||||||
June 30, 2010
|
5.50
|
3.37
|
||||||
March 31, 2010
|
4.20
|
1.95
|
||||||
December 31, 2009
|
2.50
|
1.11
|
||||||
September 30, 2009
|
1.90
|
0.70
|
||||||
June 30, 2009
|
1.06
|
0.41
|
||||||
March 31, 2009
|
2.27
|
0.74
|
●
|
Quepasa DSM – Launched in December 2009, this is a new tool that allows advertisers and brands to deliver their brand message through a viral contest engine that is shared and spread by the users across the most popular social media sites. We believe this is a highly effective ad product that allows brands to market their products to the broader Latino demographic, without requiring the advertiser to have to decide how to allocate its budget among numerous websites. With Quepasa DSM, brands can target Latinos across all social media properties, leveraging the user’s use of viral widgets and sharing tools to spread the brand message. In the first nine months of 2010, we signed contracts totaling $5.2 million and generated approximately $3.0 million in DSM revenue.
|
●
|
We partnered with Moblyng, Viximo and Hollywood Creations to offer a portfolio of social games to our website.
|
●
|
A new community was launched devoted to the Ultimate Fighting Championship, or UFC. The community features a UFC themed contest.
|
●
|
We received from Altos Hornos de Mexico, S.A.B. de C.V., or AHMSA, which owns Mexicans and Americans Trading Together, Inc., or MATT Inc., a $3.5 million contract to develop a website and a series of environmental campaigns using our DSM Technology and a $3.0 million contract to develop a website and a legislative campaign using our DSM technology. These contracts are the ones described in the first bullet point above and the next bullet point below.
|
● |
Website Development - In the first nine months of 2010, we signed contracts totaling $1.3 million in website development revenue and generated approximately $1.0 million in website development revenue. We do not expect website development revenue to continue.
|
●
|
We partnered with and launched the Zoosk online dating service for Latin America.
|
●
|
As a result of our ongoing partnership with Dr. Robert Rey (Dr. 90210), we recognized $36,000 in royalty revenue for the first nine months of 2010 from product sales in Brazil.
|
●
|
Product Development and Content Expenses:
Product development and content expenses consist of personnel costs associated with the development, testing and upgrading of our website and systems, content fees, and purchases of specific technology, particularly software and hardware related to our infrastructure upgrade.
|
●
|
Sales and Marketing Expenses:
Sales and marketing expenses consist primarily of salaries and expenses of marketing and sales personnel, and other marketing-related expenses including our mass media-based branding and advertising.
|
●
|
General and Administrative Expenses:
General and administrative expenses consist primarily of costs related to corporate personnel, occupancy costs, general operating costs and corporate professional fees, such as legal and accounting fees.
|
●
|
Depreciation and Amortization Expenses:
Our depreciation and amortization are non-cash expenses which have consisted primarily of depreciation related to our property and equipment.
|
●
|
Other Income (Expense):
Other income (expense) consists primarily of interest earned, interest expense and earned grant income. We have invested our cash in AAA rated, fully liquid instruments. Interest expense relates to our Note Purchase Agreements. Earned grant income represents the amortized portion of a cash grant received in 2006 from the Mexican government for approved capital expenditures. The grant is being recognized on a straight-line basis over the useful lives of the purchased assets.
|
For the Three Months Ended September 30,
|
||||||||||||||||
2010
|
2009
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$
|
2,721,760
|
$
|
51,827
|
$
|
2,669,933
|
5152
|
%
|
||||||||
OPERATING EXPENSES
|
||||||||||||||||
Sales and marketing
|
221,311
|
111,774
|
109,537
|
98
|
%
|
|||||||||||
Product development and content
|
844,466
|
718,533
|
125,933
|
18
|
%
|
|||||||||||
General and administrative
|
1,761,810
|
1,796,930
|
(35,120
|
)
|
-2
|
%
|
||||||||||
Depreciation and amortization
|
62,310
|
130,527
|
(68,217
|
)
|
-52
|
%
|
||||||||||
Operating Expenses
|
2,889,897
|
2,757,764
|
132,133
|
5
|
%
|
|||||||||||
LOSS FROM OPERATIONS
|
(168,137
|
)
|
(2,705,937
|
)
|
2,537,800
|
-94
|
%
|
|||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest income
|
940
|
10,128
|
(9,188
|
)
|
-91
|
%
|
||||||||||
Interest expense
|
(151,500
|
)
|
(151,500
|
)
|
-
|
-100
|
%
|
|||||||||
Loss on settlement of receivable
|
-
|
(100,000
|
)
|
100,000
|
100
|
%
|
||||||||||
Other income
|
524
|
9,041
|
(8,517
|
)
|
-94
|
%
|
||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(150,036
|
)
|
(232,331
|
)
|
82,295
|
-35
|
%
|
|||||||||
NET LOSS
|
$
|
(318,173
|
)
|
$
|
(2,938,268
|
)
|
$
|
2,620,095
|
-89
|
%
|
●
|
a decrease in stock based compensation of $54,000; and
|
● |
a decrease in reporting dues of $21,000;
|
● |
partially offset by an increase of $53,000 in hosting, server storage and bandwidth costs.
|
For the Three Months Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Sales and marketing
|
$ |
96,102
|
$ |
38,011
|
||||
Product and content development
|
246,639
|
251,489
|
||||||
General and administrative
|
1,237,849
|
1,291,419
|
||||||
Total Stock Based Compensation
|
$ |
1,580,590
|
$ |
1,580,919
|
For the Three Months Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Vesting of stock options
|
$
|
1,553,755
|
$
|
1,560,005
|
||||
Issuance of warrants
|
26,835
|
-
|
||||||
Issuance of common stock to directors for compensation
|
-
|
5,748
|
||||||
Amortization of prepaid expenses
|
-
|
15,166
|
||||||
Total Stock Based Compensation
|
$
|
1,580,590
|
$
|
1,580,919
|
For the Nine Months Ended September 30,
|
||||||||||||||||
2010
|
2009
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$
|
4,199,846
|
$
|
197,018
|
$
|
4,002,828
|
2032
|
%
|
||||||||
OPERATING EXPENSES
|
||||||||||||||||
Sales and marketing
|
602,205
|
355,111
|
247,094
|
70
|
%
|
|||||||||||
Product development and content
|
2,458,318
|
2,174,999
|
283,319
|
13
|
%
|
|||||||||||
General and administrative
|
5,300,328
|
4,762,634
|
537,694
|
11
|
%
|
|||||||||||
Depreciation and amortization
|
255,153
|
394,030
|
(138,877
|
)
|
-35
|
%
|
||||||||||
Operating Expenses
|
8,616,004
|
7,686,774
|
929,230
|
12
|
%
|
|||||||||||
LOSS FROM OPERATIONS
|
(4,416,158
|
)
|
(7,489,756
|
)
|
3,073,598
|
-41
|
%
|
|||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest income
|
1,342
|
36,051
|
(34,709
|
)
|
-96
|
%
|
||||||||||
Interest expense
|
(452,104
|
)
|
(452,106
|
)
|
2
|
-100
|
%
|
|||||||||
Loss on settlement of receivable
|
-
|
(100,000
|
)
|
100,000
|
100
|
%
|
||||||||||
Other income
|
1,583
|
20,340
|
(18,757
|
)
|
-92
|
%
|
||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(449,179
|
)
|
(495,715
|
)
|
46,536
|
-9
|
%
|
|||||||||
NET LOSS
|
$
|
(4,865,337
|
)
|
$
|
(7,985,471
|
)
|
$
|
3,120,134
|
-39
|
%
|
For the Nine M
onths Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Sales and marketing
|
$
|
248,459
|
$
|
102,351
|
||||
Product and content development
|
626,217
|
670,177
|
||||||
General and administrative
|
3,830,017
|
3,347,245
|
||||||
Total Stock Based Compensation
|
$
|
4,704,693
|
$
|
4,119,773
|
For the Nine Months Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Vesting of stock options
|
$
|
4,503,711
|
$
|
3,948,254
|
||||
Re-pricing of warrants
|
147,813
|
-
|
||||||
Issuance of warrants
|
26,835
|
-
|
||||||
Issuance (cancellation) of common stock for professional services
|
26,334
|
(20,471
|
)
|
|||||
Issuance of common stock to directors for compensation
|
-
|
17,244
|
||||||
Amortization of prepaid expenses
|
-
|
174,746
|
||||||
Total Stock Based Compensation
|
$
|
4,704,693
|
$
|
4,119,773
|
For the years ended December 31,
|
||||||||||||||||
2009
|
2008
|
Change ($)
|
Change (%)
|
|||||||||||||
REVENUE
|
$ | 535,976 | $ | 56,006 | $ | 479,970 | 857 | % | ||||||||
OPERATING EXPENSES
|
||||||||||||||||
Sales and marketing
|
455,427 | 382,193 | 73,234 | 19 | % | |||||||||||
Product development and content
|
2,870,411 | 3,831,849 | (961,438 | ) | -25 | % | ||||||||||
General and administrative
|
6,627,841 | 7,289,881 | (662,040 | ) | -9 | % | ||||||||||
Depreciation and amortization
|
512,977 | 463,588 | 49,389 | 11 | % | |||||||||||
Operating Expenses
|
10,466,656 | 11,967,511 | (1,500,855 | ) | -13 | % | ||||||||||
LOSS FROM OPERATIONS
|
(9,930,680 | ) | (11,911,505 | ) | 1,980,825 | -17 | % | |||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest income
|
38,351 | 149,248 | (110,897 | ) | -74 | % | ||||||||||
Interest expense
|
(603,607 | ) | (930,816 | ) | 327,209 | -100 | % | |||||||||
Gain/ (Loss) on disposal
|
(650 | ) | (39,134 | ) | 38,484 | -98 | % | |||||||||
Gain on extinguishment of debt
|
–– | 5,056,052 | (5,056,052 | ) | 100 | % | ||||||||||
Loss on settlement of receivable
|
(100,000 | ) | –– | (100,000 | ) | 100 | % | |||||||||
Other income
|
21,079 | 536,836 | (515,757 | ) | -96 | % | ||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(644,827 | ) | 4,772,186 | (5,417,013 | ) | -114 | % | |||||||||
NET LOSS
|
$ | (10,575,507 | ) | $ | (7,139,319 | ) | $ | (3,436,188 | ) | 48 | % |
● | a decrease in professional fees of $85,000, primarily made up of decreases in accounting fees of $138,000 partially offset byan increase in legal fees of $68,000; |
● | a decrease in travel related expenses of $60,000; |
● | a decrease in stock based compensation of $359,000; |
● | a decrease in rent expenses of $195,000, due to the closing of our Scottsdale, AZ headquarters; |
● | a decrease in salaries and related payroll costs of $93,000, due to a reduction in headcount and a reduction of some salaries inexchange for stock based compensation; |
● | partially offset by an increase in managed hosting cost of $83,000 for the new data center in Dallas; |
● | impairment of an intangible asset of $67,000; and |
● | an increase in Internet reporting fees of $50,000. |
For the Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
Sales and marketing
|
$ | 137,427 | $ | 147,601 | ||||
Product and content development
|
873,313 | 1,314,013 | ||||||
General and administrative
|
4,615,696 | 4,974,456 | ||||||
Total Stock Based Compensation
|
$ | 5,626,436 | $ | 6,436,070 |
For the Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
Vesting of stock options
|
$ | 5,449,170 | $ | 6,101,143 | ||||
Extension of warrants
|
–– | 51,657 | ||||||
Issuance (cancellation) of common stock for professional services
|
(20,471 | ) | 319,971 | |||||
Issuance of common stock to directors for compensation
|
22,992 | 98,543 | ||||||
Amortization of prepaid expenses
|
174,745 | (135,244 | ) | |||||
Total Stock Based Compensation
|
$ | 5,626,436 | $ | 6,436,070 |
For the Nine Months Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Net cash used in operating activities
|
$
|
(1,008,862
|
)
|
$
|
(2,835,728
|
)
|
||
Net cash used in investing activities
|
$
|
(362,168
|
)
|
$
|
(15,494
|
)
|
||
Net cash provided by financing activities
|
$
|
871,130
|
$
|
-
|
September 30,
|
||||||||
2010
|
2009
|
|||||||
Cash and cash equivalents
|
$
|
527,854
|
$
|
1,028,267
|
||||
Total assets
|
$
|
3,389,029
|
$
|
2,250,391
|
||||
Percentage of total assets
|
16
|
%
|
46
|
%
|
For the Three Months Ended
September 30,
|
For the Nine Months Ended
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
LOSS FROM OPERATIONS
|
(168,137
|
)
|
(2,705,937
|
)
|
(4,416,158
|
)
|
(7,489,756
|
)
|
||||||||
NON CASH OPERATING EXPENSES
|
||||||||||||||||
Stock based compensation expense
|
1,580,590
|
1,580,919
|
4,704,693
|
4,119,773
|
||||||||||||
Depreciation and amortization
|
62,310
|
130,527
|
255,153
|
394,030
|
||||||||||||
TOTAL NON CASH OPERATING EXPENSES
|
1,642,900
|
1,711,446
|
4,959,846
|
4,513,803
|
||||||||||||
NET CASH EARN (BURN)
|
1,474,763
|
(994,491
|
)
|
543,688
|
(2,975,953
|
)
|
||||||||||
NET MONTHLY CASH EARN (BURN) RATE
|
491,588
|
(331,497
|
)
|
60,410
|
(330,661
|
)
|
For the Year Ended
December 31,
|
||||||||
2009
|
2008
|
|||||||
|
|
|||||||
Net cash used in operating activities
|
$ | (3,878,474 | ) | $ | (5,332,553 | ) | ||
Net cash used in investing activities
|
$ | (19,733 | ) | $ | (739,353 | ) | ||
Net cash provided by financing activities
|
$ | –– | $ | 7,337,019 |
December 31,
2009
|
December 31,
2008
|
|||||||
|
|
|||||||
Cash and cash equivalents
|
$ | 1,028,267 | $ | 4,932,629 | ||||
Total assets
|
$ | 2,250,391 | $ | 6,741,705 | ||||
Percentage of total assets
|
46 | % | 73 | % |
1.
|
Social Discovery – Quepasa’s user experience is designed to facilitate the discovery of new people and content, in lieu of focusing exclusively on users’ “real world” friend networks.
|
2.
|
Social Gaming – Quepasa’s Open Social API brings culturally relevant social gaming titles to the Quepasa audience by way of third party game developers.
|
3.
|
Contests – Quepasa’s proprietary Distributed Social Media, or DSM technology, is a social media advertising product that gives the Quepasa audience an opportunity to compete for prizes in engaging, viral contests sponsored by brands.
|
●
|
Campaign: “Why I Watch”
|
●
|
Client: Ultimate Fighting Championship
Summary: Participants were invited to create and share UFC video highlight reels and describe their love of the sport for the chance to win UFC memorabilia. The campaign gave the UFC an opportunity to let its most passionate supporters distribute content across the web and build brand awareness on its behalf.
|
●
|
Campaign: “Primer Empleo”
Client: Manlio Fabio Beltrones
Summary: The goal of this DSM campaign was to educate Mexican youth regarding a proposed law designed to create employment opportunities for them. Participants were given the opportunity to learn about and cast a virtual vote for the law. In turn, they could tell friends about the proposed law and their support of it by sharing information to their various social profiles. The law’s focus on young people made social media and DSM a good fit for disseminating information about it, and the campaign reached over 6,000,000 Mexicans and led to the law being passed in the Mexican Senate.
|
●
|
Campaign: “Acapulco Revealed”
Client: Mexico Tourism
Summary: Participants were invited to create a slideshow depicting their ideal vacation to Acapulco using images of Acapulco’s nightlife, beaches, adventure and culture. Vacation packages were awarded to those contestants who most effectively shared their entry across the social web. Follow-on DSM campaigns have recently concluded on behalf of Cozumel and Ixtapa-Zihuatanejo.
|
●
|
In a presentation given on January 13, 2010, Jim McNiven, CEO of viral games company Kerb, noted that the huge growth of games website Zynga, which is estimated to have generated $200 million in revenue last year, is evidence of the power of viral platforms.
|
●
|
According to a report published by iGaming Business, the skills-based games market alone is worth just over $382 million globally and is set to rise to more than $472 million by the end of 2010. By the end of 2014, iGaming estimated that the industry will enjoy a massive growth spurt and be worth $957 million.
|
●
|
As part of a global study on the gaming sector, Ernst & Young reported that in the first 6 months of 2009, 59% of web users had played a skill-based game online.
|
●
|
DSM campaigns.
|
●
|
Banner advertising: Quepasa earns revenue when an advertiser purchases advertising space on its website and “impressions” are delivered. An “impression” is delivered when an advertisement appears on our website and the page is viewed by a user. The fees associated with display advertising can be negotiated on a cost per click, flat fee, or cost per acquisition basis. Quepasa works with many of the leading online ad networks who specialize in delivering ads to the Latino audience online.
|
●
|
Social games: free-to-play games in which a percentage of users will pay for premium goods and upgrades.
|
●
|
Skill-based games: Quepasa will earn a percentage of the amount paid by users to participate in tournaments.
|
Month Ending
|
Number of Members
|
|
November 30, 2010
|
25,052,283
|
|
October 31, 2010
|
22,780,813
|
|
September 30, 2010
|
20,720,906
|
|
August 31, 2010
|
18,673,689
|
|
July 31, 2010
|
16,833,699
|
|
June 30, 2010
|
15,416,042
|
|
May 31, 2010
|
14,230,841
|
|
April 30, 2010
|
13,159,387
|
|
March 31, 2010
|
13,159,387
|
|
February 28, 2010
|
10,326,057
|
|
January 31, 2010
|
9,047,365
|
|
December 31, 2009
|
7,675,988
|
|
November 30, 2009
|
6,432,687
|
|
October 31, 2009
|
5,360,178
|
|
September 30, 2009
|
4,893,240
|
|
August 31, 2009
|
4,573,719
|
|
July 31, 2009
|
4,339,609
|
|
June 30, 2009
|
3,772,374
|
|
May 31, 2009
|
3,465,465
|
|
April 30, 2009
|
2,816,872
|
|
March 31, 2009
|
2,508,023
|
|
February 28, 2009
|
2,331,378
|
|
January 31, 2009
|
2,172,619
|
● | totaled 48.4 million, or 16% of the total U.S. population, as of July 1, 2009, an increase of 1.4 million over the pastyear. |
● | is expected to grow to 132.8 million, or 30% of the total U.S. population, by 2050, an increase of 84.4 million, or272%, between 2000 and 2050; |
● |
is the fastest growing minority group at 3.1% in the U.S. by adding more than one of every two people to the U.S.population between July 1, 2008 and July 1, 2009; and
|
● |
as of 2009, is the 3
rd
largest Latino population in the world. Only Brazil (194 million) and Mexico (107 million) had larger Latino populations than the U.S.
|
● |
According to eMarketer, U.S. online spending is expected to top $40 billion by 2014, growing at double digit rates for more than three years. The estimated online share of total U.S. online ad spending will grow from $25.8 billion in 2010 to $40.5 billion in 2014;
|
● |
According to eMarketer, marketers will spend around $2 billion to advertise on social networks in 2010, a 20% increase from 2009. Furthermore, eMarketer estimated that advertisers will spend $220 million on advertising insocial games, a rise from $183 million in 2009; and
|
● |
A study conducted by inSites Consulting found that 95% of Internet users in Latin America had at least one account on a social networking site in 2010.
|
o
|
Approximately one-third were born outside the U.S.;
|
o
|
Latino immigration is continuing;
|
o
|
Latinos generally seek to preserve their cultural identity; and
|
o
|
Latino population concentration encourages communication in Spanish.
|
Name
|
Age
|
Position
|
|||
John Abbott
|
40 |
Chairman of the Board and Chief Executive Officer
|
|||
Michael Matte
|
51 |
Chief Financial Officer, Executive Vice President and Secretary
|
|||
Louis Bardov
|
47 |
Chief Technology Officer
|
|||
Alonso Ancira
|
56 |
Director
|
|||
Ernesto Cruz
|
53 |
Director
|
|||
James Ferris
|
36 |
Director
|
|||
Malcolm Jozoff
|
71 |
Director
|
|||
Lionel Sosa
|
70 |
Director
|
|||
Dr. Jill Syverson-Stork
|
57 |
Director
|
Name
|
|
Independent
|
Audit
|
|
Compensation and Nominating
|
|
John Abbott
|
||||||
Alonso Ancira
|
||||||
Ernesto Cruz
|
P
|
Chairman
|
||||
James Ferris
|
P
|
|||||
Malcolm Jozoff
|
P
|
P
|
Chairman
|
|||
Lionel Sosa
|
P
|
|||||
Dr. Jill Syverson-Stork
|
P
|
P
|
P
|
|||
Meetings held in 2010
|
4
|
2
|
(i)
|
the appropriate size of our Board and its committees;
|
(ii)
|
the perceived needs of our Board for particular skills, background and business experience;
|
(iii)
|
diversity, including Latino background and the skills, public company experience, background, reputation, and business experience of nominees compared to those already possessed by other members of our Board;
|
(iv)
|
nominees’ independence from management; and
|
(v)
|
the applicable regulatory and listing requirements, including independence requirements and legal considerations.
|
Name and
Principal Position
(a)
|
Year
(b)
|
Salary
($)(c)
|
Bonus
($)(d)
|
Stock
Awards
($)(e)(1)
|
Option
Awards
($)(f)(1)
|
Total
($)(j)
|
||||||||||||||||
John Abbott
|
2009
|
129,863 | (2) | — | — | 814,475 | 944,338 | |||||||||||||||
Chief Executive Officer
|
2008
|
65,744 | (3)(4) | — | — | 535,526 | 601,270 | |||||||||||||||
Michael Matte
|
2009
|
250,000 | (5) | — | — | 534,663 | 784,663 | |||||||||||||||
Chief Financial Officer
|
2008
|
124,384 | (6) | 125,000 | (7) | 3,015 | (8) | 520,649 | 773,048 | |||||||||||||
Louis Bardov
|
2009
|
160,000 | — | — | 92,856 | 252,856 | ||||||||||||||||
Chief Technology Officer
|
2008
|
146,667 | — | — | 1,457,306 | 1,603,973 |
(1)
|
The amounts in these columns represent the fair value of the award as of the grant date as computed in accordance with FASB ASC Topic 718 and the revised SEC disclosure rules. These rules also require prior years amounts to be recalculated in accordance with the rule and therefore any number previously disclosed regarding our Named Executive Officers compensation on this table or any other table may not reconcile. These amounts represent awards that are paid in shares of common stock or options to purchase shares of our common stock and do not reflect the actual amounts that may be realized by the Named Executive Officers.
|
(2)
|
In lieu of his $250,000 salary for the period from October 2009 to October 2010, Mr. Abbott elected to receive 316,456 10-year stock options. These options vest monthly through October 2010 and are exercisable at $1.34 per share.
|
(3)
|
In lieu of his $80,000 salary for the period from October 2007 to October 2008, Mr. Abbott elected to receive 54,237 10-year stock options. All of these options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.
|
(4)
|
Includes 54,237 10-year stock options issued to Mr. Abbott in lieu of salary for the period from October 2008 to October 2009. All of these options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.
|
(5)
|
Includes 126,582 10-year stock options issued to Mr. Matte in lieu of $100,000 of his salary for the period from November 2009 through October 2010. These options vest monthly through October 2010 and are exercisable at $1.34 per share.
|
(6)
|
Includes 67,797 10-year stock options issued to Mr. Matte in lieu of $100,000 of his salary for the period from November 30, 2008 through October 2009. These options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.
|
(7)
|
In lieu of a $75,000 bonus, Mr. Matte elected to receive 50,847 10-year stock options. These options have fully vested and are exercisable at $1.00 per share.
|
(8)
|
Represents payments for services as an independent director prior to joining the management team on October 30, 2007.
|
Name
(a)
|
No. of
Securities
Underlying
Unexercised
Options (#)
Exercisable
(b)
|
No. of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
(c)
|
Equity
Incentive
Plan Awards:
No. of
Securities
Underlying
Unexercised
Unearned
Options
(#)
(d)
|
Option
Exercise Price
($)
(e)
|
Option
Expiration Date
(f)
|
|||||||||||||
|
|
|
|
|
|
|||||||||||||
John Abbott
|
1,897,492 | (1) | — | — | 1.00 |
10/25/2017
|
||||||||||||
175,000 | — | 87,500 | (2) | 1.00 |
7/22/2018
|
|||||||||||||
54,237 | (1) | — | — | 1.00 |
10/15/2018
|
|||||||||||||
54,237 | (1) | — | — | 1.00 |
10/15/2018
|
|||||||||||||
316,456 | (1) | — | — | 1.34 |
10/31/2019
|
|||||||||||||
7,494 | 82,434 | (3) | — | 4.95 |
9/26/2020
|
|||||||||||||
— | 90,000 | (4) | — | 4.95 |
9/26/2020
|
|||||||||||||
Michael Matte
|
1,475,827 | (1) | — | — | 1.00 |
10/29/2017
|
||||||||||||
155,000 | — | 77,500 | (2) | 1.00 |
7/22/2018
|
|||||||||||||
50,847 | (1) | — | — | 1.00 |
10/15/2018
|
|||||||||||||
67,797 | (1) | — | — | 1.00 |
10/15/2018
|
|||||||||||||
126,582 | (1) | — | — | 1.34 |
10/31/2019
|
|||||||||||||
2,998 | 32,973 | (3) | — | 4.95 |
9/26/2020
|
|||||||||||||
— | 90,000 | (4) | — | 4.95 |
9/26/2020
|
|||||||||||||
Louis Bardov
|
500,000 | (1) | — | — | 1.00 |
1/18/2018
|
||||||||||||
155,000 | — | 77,500 | (2) | 1.00 |
7/22/2018
|
|||||||||||||
— | 14,388 | (5) | — | 4.95 |
9/26/2020
|
|||||||||||||
— | 90,000 | (4) | — | 4.95 |
9/26/2020
|
(1)
|
Fully vested.
|
(2)
|
The options are subject to meeting performance milestones as determined by the Chief Executive Officer at the end of 2011.
|
(3)
|
The options vest monthly over a 12 month period with the first vesting date being December 1, 2010.
|
(4)
|
The options vest in three equal increments on January 1, 2011, 2012 and 2013.
|
(5)
|
The options vest monthly over a 12 month period with the first vesting date being February 1, 2011.
|
Name
(a)
|
Stock
Awards
($)(c) (1)
|
Option
Awards
($)(d) (1)
|
Total
($)(j)
|
|||||||||
Alonso Ancira (2)
|
2,905 | 7,999 | 10,904 | |||||||||
Malcolm Jozoff (2)
|
4,233 | 7,999 | 12,232 | |||||||||
Lionel Sosa (2)
|
2,905 | 7,999 | 10,904 | |||||||||
Dr. Jill Syverson-Stork (2)
|
2,905 | 7,999 | 10,904 | |||||||||
Ernesto Cruz (2)
|
4,233 | 7,999 | 12,232 | |||||||||
Jeffrey Valdez (3)
|
2,905 | 7,999 | 10,904 | |||||||||
James Ferris (2)
|
2,905 | 7,999 | 10,904 |
(1)
|
The amounts in these columns represent the fair value of the award as of the grant date as computed in accordance with FASB ASC Topic 718 and the recently revised SEC disclosure rules. These amounts represent awards that are paid in shares of common stock and options to purchase shares of our common stock and do not reflect the actual amounts that may be realized by the directors.
|
(2)
|
Each non-employee director received 3,500 shares of common stock and 12,500 stock options exercisable at $0.83 per share for their service as directors; all of these options vested on December 31, 2009. Additionally, committee chairpersons were granted 1,600 shares of common stock.
|
(3)
|
Mr. Valdez resigned on June 4, 2010.
|
Options
|
Director Shares
|
Committee
Chairperson Shares
|
||||||||||
2009
|
12,500 | 3,500 | 1,600 | |||||||||
2008
|
12,500 | 3,500 | 1,600 |
Title of Class
|
Name and
Address of Beneficial Owner
|
Amount of
Beneficial
Ownership
(1)
|
Percent
Beneficially
Owned
(1)
|
|||||||
Common Stock
|
John Abbott
324 Datura Street, Suite 114
West Palm Beach, FL 33401
(2)
|
2,722,404 | 15.3 | % | ||||||
Common Stock
|
Michael Matte
324 Datura Street, Suite 114
West Palm Beach, FL 33401
(3)
|
1,935,279 | 11.3 | |||||||
Common Stock
|
Louis Bardov
5820 Bassinghall Lane
Plano, TX 75093
(4)
|
689,899 | 4.3 | % | ||||||
Common Stock
|
Alonso Ancira
C/O Grupo Acerero del Norte, S.A. de C.V,
Campos Eliseos No. 29,
Colonia Rincon Del Bosque, Mexico
(5)
|
3,393,583 | 19.6 | % | ||||||
Common Stock
|
Ernesto Cruz
Lazaro Cardenas N 4000-27A. Col. Las Brisas,
Monterrey N.L., Mexico 64780
(6)
|
57,867 | * | |||||||
Common Stock
|
James Ferris
533 Ashland Ave, Apt. 202
Santa Monica, CA 90405
(7)
|
42,500 | * | |||||||
Common Stock
|
Malcolm Jozoff
5200 E. Solano Drive
Paradise Valley, AZ 85253
(8)
|
130,366 | * | |||||||
Common Stock
|
Lionel Sosa
215 Rhode Lane
Floresville, TX 78114
(9)
|
91,138 | * |
Common Stock
|
Dr. Jill Syverson-Stork
48 Park Drive
Sherborn, MA 01770
(10)
|
61,825 | * | |||||||
Common Stock
|
All directors and executive officers
as a group (9 persons)
|
10,838,823 | 44.4 | % | ||||||
5% Stockholders
|
||||||||||
Common Stock
|
Mexicans & Americans Trading Together, Inc.
5150 N. Loop 1604 West
San Antonio, TX 78249
(11)
|
3,333,333 | 19.3 | % | ||||||
Common Stock
|
Richard L. Scott
700 11th Street, Suite 101
Naples, FL 34102
(12)
|
1,500,000 | 9.2 | % | ||||||
Common Stock
|
Frederic W. Levin
16 S. Main Street #303
Norwalk, CT 06854
(13)
|
1,229,944 | 8.1 | % | ||||||
Common Stock
|
F. Stephen Allen
2100 S. Utica, Suite 305
Tulsa, OK 74114
(14)
|
1,147,500 | 7.1 | % | ||||||
Preferred Stock
|
Mexicans & Americans Thinking Together Foundation, Inc.
329 Old Guilbeau Street
San Antonio, TX 78204
(15)
|
25,000 | 100 | % |
*
|
Less than 1%
|
(1)
|
Applicable percentages are based on 15,271,480 shares of common stock and 25,000 shares of preferred stock outstanding adjusted as required by rules of the SEC. Beneficial ownership is determined under the rules of the SEC and generally includes voting or investment power with respect to securities. A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days whether upon the exercise of options or otherwise. Shares subject to options, warrants and convertible notes currently exercisable or convertible, or exercisable or convertible within 60 days are deemed outstanding for computing the percentage of the person holding such securities but are not deemed outstanding for computing the percentage of any other person. Unless otherwise indicated in the footnotes to this table, Quepasa believes that each of the stockholders named in the table has sole voting and investment power with respect to the shares indicated as beneficially owned by them. This table includes options that are vesting and exercisable within 60 days of the date of this prospectus.
|
(2)
|
Mr. Abbott is a director and executive officer. Includes 2,549,904 shares issuable upon the exercise of stock options.
|
(3)
|
Mr. Matte is an executive officer. Includes 1,915,046 shares issuable upon the exercise of stock options.
|
(4)
|
Mr. Bardov is an executive officer. Includes 686,199 shares issuable upon the exercise of stock options.
|
(5)
|
Mr. Ancira is a director. Mr. Ancira is also the Chairman of the Board of Directors of MATT, Inc. and AHMSA. MATT, Inc. is a wholly-owned subsidiary of AHMSA. Grupo Acerero del Norte, S.A. de C.V., or GAN, is the majority stockholder of AHMSA. Mr. Ancira is a stockholder of GAN. By virtue of his role as Chairman of the Boards of Directors of MATT, Inc. and AHMSA and his equity interest in GAN, Mr. Ancira may be deemed to beneficially own 1,333,333 shares owned by MATT, Inc. and 2,000,000 shares issuable upon the exercise of warrants held by MATT, Inc. Includes 16,750 shares of common stock and 43,500 shares of common stock issuable upon the exercise of stock options granted to and owned directly by Mr. Ancira. Does not include preferred stock held by a not-for-profit-corporation. Mr. Ancira is Chairman of the Board of this non-for-profit corporation but has no power to vote these shares.
|
(6)
|
Mr. Cruz is a director. Includes 46,000 shares issuable upon the exercise of stock options.
|
(7)
|
Mr. Ferris is a director. Includes 37,250 shares issuable upon the exercise of stock options.
|
(8)
|
Mr. Jozoff is a director and a selling shareholder. Includes 84,366 shares held in the Malcolm Jozoff Trust with Mr. Jozoff as Trustee. Includes 46,000 shares issuable upon the exercise of stock options.
|
(9)
|
Mr. Sosa is a director. Includes 43,500 shares issuable upon the exercise of stock options.
|
(10)
|
Dr. Syverson-Stork is a director. Includes 43,500 shares issuable upon the exercise of stock options.
|
(11)
|
MATT, Inc. is a selling shareholder. Represents 1,333,333 shares of common stock and 2,000,000
shares of common stock issuable upon the exercise of
warrants, exercisable at $2.75 per share. See Note 5 above.
|
(12)
|
Includes: (i) 166,446 shares of common stock held by the Richard L. Annette Scott Family Partnership, (ii) 166,667 shares of common stock held by the F. Annette Scott Revocable Trust, (iii) 166,887 shares of common stock held by the Richard L. Scott Revocable Trust, and (iv) 1,000,000 shares of common stock issuable upon the exercise of warrants, exercisable at $2.75 per share held by the Richard L. Scott Revocable Trust. Richard L. Scott has sole voting power and dispositive power over all of the shares and warrants.
|
(13)
|
Includes 254,224 shares over which Mr. Levin has sole voting and dispositive power and 975,720 shares in which such powers are shared. Based on Schedule 13G/A filed on February 8, 2010.
|
(14)
|
Includes 1,000,000 shares of common stock issuable upon the exercise of warrants, exercisable at $3.55 per share.
|
(15)
|
Represents Series A Preferred Stock. Each share of Series A represents one vote.
|
Name (1)
|
Number of
securities
beneficially
owned before
offering
|
Number of
securities
to be
offered
|
Number of
securities
owned after
offering
|
Percentage of
securities
beneficially
owned after
offering
|
||||||||||||
ALB Private Investments LLC
(2)
|
30,000
|
30,000
|
0
|
*
|
||||||||||||
Anthony B. Low-Beer
|
50,000
|
50,000
|
0
|
*
|
||||||||||||
Athena Sofios Marks
|
40,000
|
40,000
|
0
|
*
|
||||||||||||
BBS Capital Fund, LP
(3)
|
33,333
|
33,333
|
0
|
*
|
||||||||||||
Carpe Diem Partners LLC
(4)
|
25,000
|
25,000
|
0
|
*
|
||||||||||||
Christopher G. Thunen
|
4,000
|
4,000
|
0
|
*
|
||||||||||||
Columbus Capital Offshore Fund, Ltd.
(5)
|
23,000
|
23,000
|
0
|
*
|
||||||||||||
Columbus Capital Partners, L.P.
(5)
|
177,000
|
177,000
|
0
|
*
|
||||||||||||
Connective Capital I Master Fund, Ltd.
(6)
|
26,666
|
26,666
|
0
|
*
|
||||||||||||
Connective Capital II Cayman Master, Ltd.
( 6)
|
26,667
|
26,667
|
0
|
*
|
||||||||||||
Cranshire Capital LP
(7)
|
33,333
|
33,333
|
0
|
*
|
||||||||||||
Cynthia A. Kohn
|
20,000
|
20,000
|
0
|
*
|
||||||||||||
David N. Low Jr. and Dominique G. Lahaussois
|
6,000
|
6,000
|
0
|
*
|
||||||||||||
Douglas Thunen
|
6,000
|
6,000
|
0
|
*
|
||||||||||||
Eric Chez and Bryan Pitstick, TR - UA-07-22-08
|
10,000
|
10,000
|
0
|
*
|
||||||||||||
Hudson Bay Master Fund LTD
(8)
|
50,000
|
50,000
|
0
|
*
|
||||||||||||
Iroquois Master Fund Ltd.
(9)
|
33,333
|
33,333
|
0
|
*
|
||||||||||||
Jacaranda Partners
(10)
|
25,000
|
25,000
|
0
|
*
|
||||||||||||
John F. Kohn
|
15,000
|
15,000
|
0
|
*
|
||||||||||||
John R. Low-Beer
|
1,000
|
1,000
|
0
|
*
|
||||||||||||
Kazazian Capital Master Fund, L.P.
(11)
|
55,000
|
55,000
|
0
|
*
|
||||||||||||
Kenneth Steven Pope
|
28,333
|
13,333
|
15,000
|
*
|
||||||||||||
Kevin James Flick
|
113,333
|
33,333
|
80,000
|
*
|
||||||||||||
Kevin McCormack
|
3,000
|
3,000
|
0
|
*
|
Maida Chicon
|
4,500
|
4,500
|
0
|
*
|
||||||||||||
Maiden Capital Opportunity Fund, LP
(12)
|
25,000
|
25,000
|
0
|
*
|
||||||||||||
Malcolm Jozoff Trust, dated Jan. 15, 1999, as amended
(13)
|
130,366
|
6,666
|
123,750
|
*
|
||||||||||||
Mark Green
|
666
|
666
|
0
|
*
|
||||||||||||
Mechele Plotkin
|
2,000
|
2,000
|
0
|
*
|
||||||||||||
Mexicans & Americans Trading Together, Inc.
(14)
|
3,333,333
|
333,333
|
3,000,000
|
17.4%
|
||||||||||||
Mireille Gousseland
|
8,000
|
8,000
|
0
|
*
|
||||||||||||
Phylis M. Esposito
|
40,000
|
40,000
|
0
|
*
|
||||||||||||
Rockmore Investment Master Fund Ltd.
(15)
|
46,666
|
46,666
|
0
|
*
|
||||||||||||
Ronald L. Chez IRA
|
90,000
|
90,000
|
0
|
*
|
||||||||||||
Rovida Strategic Investments Company Ltd.
(16)
|
400,000
|
400,000
|
0
|
*
|
||||||||||||
Ryan McCormack
|
3,000
|
3,000
|
0
|
*
|
||||||||||||
Sander A. Flaum
|
8,000
|
8,000
|
0
|
*
|
||||||||||||
Sheila Low-Beer
|
1,500
|
1,500
|
0
|
*
|
||||||||||||
Susan Nakada
|
4,000
|
4,000
|
0
|
*
|
||||||||||||
The Thunen Family Trust, dtd 10/04/05
(17)
|
20,000
|
20,000
|
0
|
*
|
||||||||||||
Warberg Opportunistic Trading Fund L.P.
(18)
|
20,000
|
20,000
|
0
|
*
|
||||||||||||
Liolios Group, Inc.
(19)
|
365 ,000 |
165,000
|
200,000 |
1.3%
|
*
|
Less than 1%.
|
(1) |
For all of the selling shareholders who are not natural persons, the investment managers, general partners, trustees or principals named in the footnotes below have the sole voting and dispositive power over the shares held by the selling shareholders.
|
(2) |
Mr. Francis A. Mlynarczyk, Jr. is the investment
manager of the selling shareholder.
|
(3) |
Mr. Berke Bakay is the investment manager of the selling shareholder.
|
(4) |
Carpe Diem Capital Management LLC, or Carpe Diem, is the investment manager of the selling shareholder. Mr. John D. Ziegelman is the president of Carpe Diem.
|
(5) |
Mr. Matthew Ockner is the managing member of the investment manager of Columbus Capital Offshore Fund, Ltd. Mr. Ockner is the managing member of the investment manager of Columbus Capital Partners, L.P.
|
(6) |
Connective Capital Management, LLC is the investment manager of the selling shareholder. Messrs. Robert Romero, Ronald Lee and Keith Hwang have voting and dispositive power over the shares held by the investment manager.
|
(7) |
Downsview Capital, Inc. is the general partner of the selling shareholder. Messrs. Keith Goodman and Mitchell Kopin have voting and dispositive power over the shares held by the general partner.
|
(8) |
Mr. Yoav Roth is th
e investment manager of the selling shareholder.
|
(9) |
Iroquois Capital Management L.L.C., or Iroquois Capital, is the investment manager of the selling shareholder. As managing members of Iroquois Capital, Messrs. Joshua Silverman and Richard Abbe have voting and dispositive power over shares held by Iroquois Capital. Messrs. Silverman and Abbe disclaim any beneficial ownership of these shares.
|
(10) |
Mr. Michael Dooling is the general partner of the selling shareholder.
|
(11) |
Kirk Kazazian is the portfolio manager of the selling shareholder.
|
(12) |
Mr. Steven L. Maiden is the general partner of the selling shareholder.
|
(13) |
Mr. Malcolm Jozoff, a director of Quepasa, is the trustee of the selling shareholder.
|
(14) |
The selling shareholder, which directly owns the securities, is a wholly-owned subsidiary of AHMSA. Mr. Alonso Ancira, a director of Quepasa, is the Chairman of the Boards of Directors of the selling shareholder and AHMSA. See Note 5 on page 57 for further description.
|
(15) |
Rockmore Capital, LLC is the investment manager of the selling shareholder.
|
(16) |
The London & Amsterdam Trust Company Limited is the trustee of the selling shareholder.
|
(17) |
Mr. Garret G. Thunen and Mrs. Carol Thunen are the trustees of the selling shareholder.
|
(18) |
Mr. Daniel I. Warsh is the investment manager of the selling shareholder.
|
(19) |
Liolios Group, Inc. is our financial public relations firm. Mr. J. Scott Liolios has voting and investment power over these shares. Represents warrants exercisable at $4.50 per share.
|
●
|
Ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
●
|
Block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
|
●
|
Purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
|
●
|
Privately negotiated transactions;
|
●
|
Short sales;
|
●
|
Broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated
price per share;
|
●
|
Writing of options on the shares;
|
●
|
A combination of any such methods of sale; and
|
●
|
Any other method permitted pursuant to applicable law.
|
Page
|
||
Condensed Consolidated Balance Sheets (unaudited)
|
F-2 | |
Condensed Consolidated Statements of Operations (unaudited)
|
F-3 | |
Condensed Consolidated Statements of Changes in Stockholders’ Equity
(unaudited)
|
F-4 | |
Condensed Consolidated Statements of Cash Flows (unaudited)
|
F-5 | |
Notes to Condensed Consolidated Financial Statements (unaudited)
|
F-6 |
Page
|
||
Report of Salberg & Company, P.A., Independent Registered Public Accounting Firm
|
F-18 | |
Consolidated Balance Sheets
|
F-19 | |
Consolidated Statements of Operations
|
F-20 | |
Consolidated Statements of Changes in Stockholders’ Equity
|
F-21 | |
Consolidated Statements of Cash Flows
|
F-22 | |
Notes to Consolidated Financial Statements
|
F-23 |
For the Three Months Ended
|
For the Nine Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
REVENUES
|
$ | 2,721,760 | $ | 51,827 | $ | 4,199,846 | $ | 197,018 | ||||||||
OPERATING COSTS AND EXPENSES:
|
||||||||||||||||
Sales and marketing
|
221,311 | 111,774 | 602,205 | 355,111 | ||||||||||||
Product development and content
|
844,466 | 718,533 | 2,458,318 | 2,174,999 | ||||||||||||
General and administrative
|
1,761,810 | 1,796,930 | 5,300,328 | 4,762,634 | ||||||||||||
Depreciation and amortization
|
62,310 | 130,527 | 255,153 | 394,030 | ||||||||||||
TOTAL OPERATING COSTS AND EXPENSES
|
2,889,897 | 2,757,764 | 8,616,004 | 7,686,774 | ||||||||||||
LOSS FROM OPERATIONS
|
(168,137 | ) | (2,705,937 | ) | (4,416,158 | ) | (7,489,756 | ) | ||||||||
OTHER INCOME (EXPENSE):
|
||||||||||||||||
Interest income
|
940 | 10,128 | 1,342 | 36,051 | ||||||||||||
Interest expense
|
(151,500 | ) | (151,500 | ) | (452,104 | ) | (452,106 | ) | ||||||||
Loss on settlement of receivable
|
- | (100,000 | ) | - | (100,000 | ) | ||||||||||
Other income
|
524 | 9,041 | 1,583 | 20,340 | ||||||||||||
TOTAL OTHER INCOME (EXPENSE)
|
(150,036 | ) | (232,331 | ) | (449,179 | ) | (495,715 | ) | ||||||||
LOSS BEFORE INCOME TAXES
|
(318,173 | ) | (2,938,268 | ) | (4,865,337 | ) | (7,985,471 | ) | ||||||||
Income taxes
|
- | - | - | - | ||||||||||||
NET LOSS
|
$ | (318,173 | ) | $ | (2,938,268 | ) | $ | (4,865,337 | ) | $ | (7,985,471 | ) | ||||
Preferred stock dividends
|
(27,875 | ) | (27,875 | ) | (83,625 | ) | (83,625 | ) | ||||||||
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS
|
$ | (346,048 | ) | $ | (2,966,143 | ) | $ | (4,948,962 | ) | $ | (8,069,096 | ) | ||||
NET LOSS PER COMMON SHARE ALLOCABLE TO
|
||||||||||||||||
COMMON SHAREHOLDERS
|
||||||||||||||||
BASIC AND DILUTED
|
$ | (0.03 | ) | $ | (0.23 | ) | $ | (0.38 | ) | $ | (0.63 | ) | ||||
WEIGHTED AVERAGE NUMBER OF SHARES
|
||||||||||||||||
OUTSTANDING:
|
||||||||||||||||
BASIC AND DILUTED
|
12,982,326 | 12,729,261 | 12,951,513 | 12,722,412 | ||||||||||||
NET LOSS
|
$ | (318,173 | ) | $ | (2,938,268 | ) | $ | (4,865,337 | ) | $ | (7,985,471 | ) | ||||
Foreign currency translation adjustment
|
(924 | ) | (509 | ) | (513 | ) | (7,099 | ) | ||||||||
COMPREHENSIVE LOSS
|
$ | (319,097 | ) | $ | (2,938,777 | ) | $ | (4,865,850 | ) | $ | (7,992,570 | ) |
Accumulated
|
Total | |||||||||||||||||||||||||||||||
Additional
|
Other
|
Stockholders' | ||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
Comprehensive
|
Equity
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income (Loss)
|
(Deficit)
|
|||||||||||||||||||||||||
Balance—December 31, 2009
|
25,000 | $ | 25 | 12,743,111 | $ | 12,743 | $ | 155,425,366 | $ | (159,334,739 | ) | $ | (6,055 | ) | $ | (3,902,660 | ) | |||||||||||||||
Vesting of stock options
|
||||||||||||||||||||||||||||||||
for compensation
|
4,503,711 | 4,503,711 | ||||||||||||||||||||||||||||||
Re-pricing of warrants
|
147,813 | 147,813 | ||||||||||||||||||||||||||||||
Issuance of warrants
|
26,835 | 26,835 | ||||||||||||||||||||||||||||||
Exercise of stock options
|
488,958 | 489 | 870,641 | 871,130 | ||||||||||||||||||||||||||||
Issuance of common stock
|
||||||||||||||||||||||||||||||||
for professional services
|
6,600 | 7 | 26,327 | 26,334 | ||||||||||||||||||||||||||||
Preferred stock dividends
|
(83,625 | ) | (83,625 | ) | ||||||||||||||||||||||||||||
Foreign currency
|
||||||||||||||||||||||||||||||||
translation adjustment
|
(513 | ) | (513 | ) | ||||||||||||||||||||||||||||
Net loss
|
(4,865,337 | ) | (4,865,337 | ) | ||||||||||||||||||||||||||||
Balance—September 30, 2010
|
25,000 | $ | 25 | 13,238,669 | $ | 13,239 | $ | 161,000,693 | $ | (164,283,701 | ) | $ | (6,568 | ) | $ | (3,276,312 | ) |
For the Nine Months Ended
September 30,
|
||||||||
2010
|
2009
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (4,865,337 | ) | $ | (7,985,471 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
255,153 | 394,030 | ||||||
Loss on settlement of receivable
|
- | 100,000 | ||||||
Repricing of warrants
|
147,813 | - | ||||||
Issuance of warrants
|
26,835 | - | ||||||
Vesting of stock options for compensation
|
4,503,711 | 3,948,254 | ||||||
Issuance of common stock to directors for compensation
|
- | 17,244 | ||||||
Issuance/ (cancellation) of common stock and stock options for professional services
|
26,334 | (20,471 | ) | |||||
Grant income
|
(1,005 | ) | (15,768 | ) | ||||
Bad debt expense
|
(29,636 | ) | 5,996 | |||||
Non-cash interest related to notes receivable
|
(356 | ) | (22,803 | ) | ||||
Non-cash interest related to notes payable
|
234,150 | 234,150 | ||||||
Amortization of discounts on notes payable and debt issuance costs
|
217,954 | 217,956 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(1,479,386 | ) | (18,468 | ) | ||||
Other current assets and other assets
|
(26,221 | ) | 279,547 | |||||
Accounts payable and accrued expenses
|
(18,871 | ) | 30,076 | |||||
Net cash used in operating activities
|
(1,008,862 | ) | (2,835,728 | ) | ||||
Cash flows from investing activities:
|
||||||||
Purchase of property and equipment
|
(145,501 | ) | (15,494 | ) | ||||
Advance to Hollywood Creations
|
(216,667 | ) | - | |||||
Net cash used in investing activities
|
(362,168 | ) | (15,494 | ) | ||||
Cash flows from financing activities:
|
||||||||
Proceeds from exercise of stock options and warrants
|
871,130 | - | ||||||
Net cash provided by financing activities
|
871,130 | - | ||||||
Effect of foreign currency exchange rate on cash
|
(513 | ) | (7,099 | ) | ||||
Net decrease in cash and cash equivalents
|
(500,413 | ) | (2,858,321 | ) | ||||
Cash and cash equivalents at beginning of period
|
1,028,267 | 4,932,629 | ||||||
Cash and cash equivalents at end of period
|
$ | 527,854 | $ | 2,074,308 | ||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash paid for interest
|
$ | - | $ | - | ||||
Cash paid for income taxes
|
$ | - | $ | - | ||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
||||||||
Preferred stock dividends accrued and charged to accumulated deficit
|
$ | 83,625 | $ | 83,625 |
September 30,
|
||||||||
|
2010
|
2009
|
||||||
Stock options
|
7,957,400 | 6,415,187 | ||||||
Warrants
|
4,465,000 | 4,432,500 | ||||||
Totals
|
12,422,400 | 10,847,687 |
September 30, 2010
|
December 31, 2009
|
|||||||
Computer equipment
|
$ | 1,940,299 | $ | 1,796,197 | ||||
Vehicles
|
18,104 | 17,340 | ||||||
Office furniture and equipment
|
132,701 | 123,256 | ||||||
Other equipment
|
9,465 | 9,065 | ||||||
2,100,569 | 1,945,858 | |||||||
Less accumulated depreciation
|
(1,787,673 | ) | (1,523,310 | ) | ||||
Property and equipment—net
|
$ | 312,896 | $ | 422,548 |
BRC
|
Hollywood
Creations
|
Total
|
||||||||||
Notes Receivable, face amount
|
$ | 250,000 | $ | 216,667 | $ | 466,667 | ||||||
Accrued Interest
|
- | 356 | 356 | |||||||||
Notes Receivable, including accrued interest
|
$ | 250,000 | $ | 217,023 | $ | 467,023 |
MATT
|
RSI
|
Total
|
||||||||||
Notes Payable, face amount
|
$ | 5,000,000 | $ | 2,000,000 | $ | 7,000,000 | ||||||
Discounts on Notes:
|
||||||||||||
Revaluation of Warrants
|
(1,341,692 | ) | (263,690 | ) | (1,605,382 | ) | ||||||
Termination of Jet Rights
|
(878,942 | ) | - | (878,942 | ) | |||||||
Accumulated Amortization
|
682,144 | 86,686 | 768,830 | |||||||||
Total Discounts
|
(1,538,490 | ) | (177,004 | ) | (1,715,494 | ) | ||||||
Accrued Interest
|
598,383 | 239,354 | 837,737 | |||||||||
Notes Payable, net
|
$ | 4,059,893 | $ | 2,062,350 | $ | 6,122,243 |
Weighted | |||||||||||||||
Average
|
|||||||||||||||
Number of
|
Weighted-
|
Remaining |
Aggregate
|
||||||||||||
Stock
|
Average
|
Contractual
|
Intrinsic
|
||||||||||||
Options
|
Options
|
Exercise Price
|
Life
|
Value
|
|||||||||||
Outstanding at December 31, 2009 (1)
|
105,000 | $ | 1.48 | ||||||||||||
Granted
|
- | $ | - | ||||||||||||
Exercised
|
(100,000 | ) | $ | 1.50 | |||||||||||
Forfeited or expired
|
- | $ | - | ||||||||||||
Outstanding at September 30, 2010
|
5,000 | $ | 1.00 | 5.7 | $ | 21,250 | |||||||||
Exercisable at September 30, 2010
|
5,000 | $ | 1.00 | 5.7 | $ | 21,250 |
(1)
|
Includes 100,000 outstanding and exercisable options to purchase common stock at a weighted average exercise price of $1.50 per share being held by consultants.
|
Weighted | |||||||||||||||
Average | |||||||||||||||
Number of
|
Weighted-
|
Remaining
|
Aggregate
|
||||||||||||
Stock
|
Average
|
Contractual
|
Intrinsic
|
||||||||||||
Options
|
Options
|
Exercise Price
|
Life
|
Value
|
|||||||||||
Outstanding at December 31, 2009 (1) (2)
|
6,765,187 | $ | 1.18 | ||||||||||||
Granted (3)
|
1,206,175 | $ | 4.24 | ||||||||||||
Exercised (4)
|
(378,958 | ) | $ | 1.85 | |||||||||||
Forfeited or expired (5)
|
(83,042 | ) | $ | 3.01 | |||||||||||
Outstanding at September 30, 2010 (6)
|
7,509,362 | $ | 1.61 | 7.8 | $ | 27,413,735 | |||||||||
Exercisable at September 30, 2010 (7)
|
5,331,510 | $ | 1.14 | 7.4 | $ | 21,974,021 |
|
For the Nine Months Ended
|
|||||||
|
September 30,
|
|||||||
|
2010
|
2009
|
||||||
Risk-free interest rate:
|
1.87 | % | 2.51 | % | ||||
Expected term: |
5.8 Years
|
4.2 Years
|
||||||
Expected dividend yield:
|
- | - | ||||||
Expected volatility:
|
89 | % | 106 | % |
Weighted
|
Weighted | ||||||||||||||
|
Number of
|
Average
|
Average
|
Aggregate
|
|||||||||||
Stock
|
Exercise |
Remaining
|
Intrinsic
|
||||||||||||
Options
|
Options
|
Price
|
Contractual
Life
|
Value
|
|||||||||||
Outstanding at December 31, 2009 (1)
|
463,038 | $ | 1.39 | ||||||||||||
Granted
|
- | $ | - | ||||||||||||
Exercised (2)
|
(10,000 | ) | $ | 2.00 | |||||||||||
Forfeited or expired (3)
|
(10,000 | ) | $ | 3.00 | |||||||||||
Outstanding at September 30, 2010
|
443,038 | $ | 1.34 | 0.5 | $ | 1,732,279 | |||||||||
Exercisable at September 30, 2010
|
406,118 | $ | 1.34 | 0.7 | $ | 1,587,922 |
|
|
Weighted-Average
|
||||||
|
Shares
|
Share Price
|
||||||
Unvested at January 1, 2010
|
- | $ | - | |||||
Granted
|
6,600 | $ | 3.99 | |||||
Vested during period
|
(6,600 | ) | $ | 3.99 | ||||
Cancelled during period
|
- | $ | - | |||||
Unvested at September 30, 2010
|
- | $ | - |
Risk-free interest rate:
|
4.68 | % | ||
Expected term: |
5 years
|
|||
Expected dividend yield:
|
0.00 | % | ||
Expected volatility:
|
163.73 | % |
Risk-free interest rate:
|
2.81 | % | ||
Expected term:
|
4.08 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
105.68 | % |
Risk-free interest rate:
|
3.24 | % | ||
Expected term:
|
6.08 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
105.68 | % |
Risk-free interest rate:
|
2.81 | % | ||
Expected term:
|
4.36 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
103.55 | % |
Risk-free interest rate:
|
0.87 | % | ||
Expected term:
|
3.0 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
79.02 | % |
Outstanding at December 31, 2009
|
4,200,000 | |||
Issued
|
265,000 | |||
Exercised
|
— | |||
Expired
|
— | |||
Outstanding at September 30, 2010
|
4,465,000 |
|
Consolidated Statements of Operations and Comprehensive Income (Loss)
|
For the Years Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
|
|
|||||||
REVENUES
|
$ | 535,976 | $ | 56,006 | ||||
OPERATING COSTS AND EXPENSES:
|
||||||||
Sales and marketing
|
455,427 | 382,193 | ||||||
Product development and content
|
2,870,411 | 3,831,849 | ||||||
General and administrative
|
6,627,841 | 7,289,881 | ||||||
Depreciation and amortization
|
512,977 | 463,588 | ||||||
TOTAL OPERATING COSTS AND EXPENSES
|
10,466,656 | 11,967,511 | ||||||
LOSS FROM OPERATIONS
|
(9,930,680 | ) | (11,911,505 | ) | ||||
OTHER INCOME (EXPENSE):
|
||||||||
Interest income
|
38,351 | 149,248 | ||||||
Interest expense
|
(603,607 | ) | (930,816 | ) | ||||
Gain (Loss) on disposal, net
|
(650 | ) | (39,134 | ) | ||||
Gain on extinguishment of debt
|
–– | 5,056,052 | ||||||
Loss on settlement of receivable
|
(100,000 | ) | –– | |||||
Other income (expense), net
|
21,079 | 536,836 | ||||||
TOTAL OTHER INCOME (EXPENSE)
|
(644,827 | ) | 4,772,186 | |||||
LOSS BEFORE INCOME TAXES
|
(10,575,507 | ) | (7,139,319 | ) | ||||
Income taxes
|
–– | –– | ||||||
NET LOSS
|
$ | (10,575,507 | ) | $ | (7,139,319 | ) | ||
Preferred stock dividends
|
(111,500 | ) | (55,750 | ) | ||||
NET LOSS ALLOCABLE TO COMMON SHAREHOLDERS
|
$ | (10,687,007 | ) | $ | (7,195,069 | ) | ||
NET LOSS PER COMMON SHARE ALLOCABLE TO
|
||||||||
COMMON SHAREHOLDERS, BASIC AND DILUTED
|
$ | (0.84 | ) | $ | (0.57 | ) | ||
WEIGHTED AVERAGE NUMBER OF SHARES
|
||||||||
OUTSTANDING, BASIC AND DILUTED:
|
12,725,894 | 12,621,621 | ||||||
NET LOSS
|
$ | (10,575,507 | ) | $ | (7,139,319 | ) | ||
Foreign currency translation adjustment
|
(6,155 | ) | (5,765 | ) | ||||
COMPREHENSIVE LOSS
|
$ | (10,581,662 | ) | $ | (7,145,084 | ) |
Accumulated
|
Total
|
|||||||||||||||||||||||||||||||
Additional
|
Other
|
Stockholders’
|
||||||||||||||||||||||||||||||
Preferred Stock
|
Common Stock
|
Paid-in
|
Accumulated
|
Comprehensive
|
Equity
|
|||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Income
|
(Deficit)
|
|||||||||||||||||||||||||
Balance—December 31, 2007
|
–– | $ | –– | 12,284,511 | $ | 12,285 | $ | 138,880,462 | $ | (141,452,663 | ) | $ | 5,865 | $ | (2,554,051 | ) | ||||||||||||||||
Vesting of stock options for compensation
|
6,101,143 | 6,101,143 | ||||||||||||||||||||||||||||||
Re-pricing of warrants
|
1,605,382 | 1,605,382 | ||||||||||||||||||||||||||||||
Extension of warrants
|
51,657 | 51,657 | ||||||||||||||||||||||||||||||
Issuance of common stock for professional services
|
95,000 | 95 | 359,376 | 359,471 | ||||||||||||||||||||||||||||
Issuance of common stock to directors for compensation
|
35,900 | 35 | 98,508 | 98,543 | ||||||||||||||||||||||||||||
Issuance of preferred stock
|
25,000 | 25 | 2,499,975 | 2,500,000 | ||||||||||||||||||||||||||||
Exercise of stock options
|
300,000 | 300 | 377,200 | 377,500 | ||||||||||||||||||||||||||||
Preferred stock dividends
|
(55,750 | ) | (55,750 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
(5,765 | ) | (5,765 | ) | ||||||||||||||||||||||||||||
Net loss
|
(7,139,319 | ) | (7,139,319 | ) | ||||||||||||||||||||||||||||
Balance—December 31, 2008
|
25,000 | $ | 25 | 12,715,411 | $ | 12,715 | $ | 149,973,703 | $ | 148,647,732 | ) | $ | 100 | $ | 1,338,811 | |||||||||||||||||
Vesting of stock options for compensation
|
5,449,170 | 5,449,170 | ||||||||||||||||||||||||||||||
Issuance (cancellation) of common stock for professional services
|
(20,471 | ) | (20,471 | ) | ||||||||||||||||||||||||||||
Issuance of common stock to directors for compensation
|
27,700 | 28 | 22,964 | 22,992 | ||||||||||||||||||||||||||||
Preferred stock dividends
|
(111,500 | ) | (111,500 | ) | ||||||||||||||||||||||||||||
Foreign currency translation adjustment
|
(6,155 | ) | (6,155 | ) | ||||||||||||||||||||||||||||
Net loss
|
(10,575,507 | ) | (10,575,507 | ) | ||||||||||||||||||||||||||||
Balance—December 31,
2009
|
25,000 | $ | 25 | 12,743,111 | $ | 12,743 | $ | 155,425,366 | $ | (159,334,739 | ) | $ | (6,055 | ) | $ | (3,902,660 | ) |
For the Years Ended
|
||||||||
December 31,
|
||||||||
2009
|
2008
|
|||||||
Cash flows from operating activities:
|
||||||||
Net loss
|
$ | (10,575,507 | ) | $ | (7,139,319 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
512,977 | 463,588 | ||||||
Gain on extinguishment of debt
|
–– | (5,056,052 | ) | |||||
Write-off of accounts payable
|
–– | (508,610 | ) | |||||
Loss on settlement of receivable
|
100,000 | –– | ||||||
Impairment of intangible asset
|
67,000 | –– | ||||||
Extension of warrants
|
–– | 51,657 | ||||||
Vesting of stock options for compensation
|
5,449,170 | 6,101,143 | ||||||
Issuance of common stock to directors for compensation
|
22,992 | 98,543 | ||||||
Issuance (cancellation) of common stock for professional services
|
(20,471 | ) | 359,471 | |||||
Loss / (Gain) on disposal of property and equipment
|
650 | 39,134 | ||||||
Grant income
|
(15,735 | ) | (36,372 | ) | ||||
Bad debt expense
|
38,314 | 10,820 | ||||||
Non-cash interest related to notes receivable
|
(22,803 | ) | (29,348 | ) | ||||
Non-cash interest related to MATT.org agreement
|
–– | 379,243 | ||||||
Non-cash interest related to notes payable
|
312,200 | 291,387 | ||||||
Amortization of discounts on notes payable and debt issuance costs
|
291,407 | 272,246 | ||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(327,320 | ) | 5,711 | |||||
Other current assets and other assets
|
233,104 | (193,417 | ) | |||||
Accounts payable and accrued expenses
|
55,548 | (442,378 | ) | |||||
Net cash used in operating activities
|
(3,878,474 | ) | (5,332,553 | ) | ||||
Cash flows from investing activities:
|
||||||||
Proceeds from disposal of property and equipment
|
750 | 10,601 | ||||||
Purchase of property and equipment
|
(20,483 | ) | (399,954 | ) | ||||
Advance to BRC / La Alianza
|
–– | (350,000 | ) | |||||
Net cash used in investing activities
|
(19,733 | ) | (739,353 | ) | ||||
Cash flows from financing activities:
|
||||||||
Proceeds from exercise of stock options and warrants
|
–– | 377,500 | ||||||
Debt issuance costs associated with issuance of notes payable
|
–– | (40,481 | ) | |||||
Proceeds from the issuance of notes payable
|
–– | 7,000,000 | ||||||
Net cash provided by financing activities
|
–– | 7,337,019 | ||||||
Cash and cash equivalents prior to effect of foreign currency exchange rate on cash
|
(3,898,207 | ) | 1,265,113 | |||||
Effect of foreign currency exchange rate on cash
|
(6,155 | ) | (5,765 | ) | ||||
Net decrease in cash and cash equivalents
|
(3,904,362 | ) | 1,259,348 | |||||
Cash and cash equivalents at beginning of period
|
4,932,629 | 3,673,281 | ||||||
Cash and cash equivalents at end of period
|
$ | 1,028,267 | $ | 4,932,629 | ||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash paid for interest
|
$ | –– | $ | –– | ||||
Cash paid for income taxes
|
$ | –– | $ | –– | ||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
|
||||||||
Reduction in exercise prices of outstanding warrants recorded as additional paid-in capital
|
$ | –– | $ | 1,605,382 | ||||
Preferred shares exchanged for long-term debt, recorded as preferred stock and additional paid-in capital
|
$ | –– | $ | 2,500,000 | ||||
Preferred stock dividends accrued and charged to accumulated deficit
|
$ | 111,500 | $ | 55,750 | ||||
Warrants recorded as investment assets
|
$ | –– | $ | 104,753 | ||||
Revaluation of warrants recorded as debt discount and additional paid-in capital
|
$ | –– | $ | 1,605,382 | ||||
Write-off of Jet Rights recorded as debt discount
|
$ | –– | $ | 878,942 |
Software
|
2 years
|
Computer equipment
|
3 to 4 years
|
Vehicles
|
4 to 5 years
|
Office furniture and equipment
|
5 to 10 years
|
Other equipment
|
3 to 13 years
|
December 31,
|
||||||||
2009
|
2008
|
|||||||
Stock options
|
7,333,225 | 6,684,687 | ||||||
Warrants
|
4,200,000 | 4,432,500 | ||||||
Totals
|
11,533,225 | 11,117,187 |
Balance at
December 31,
2009
|
Quoted prices
in active
markets for
identical assets
|
Significant
other observable
inputs
|
Significant
Unobservable
inputs
|
||||||||||||||
Assets:
|
|||||||||||||||||
Intangible Asset
|
$ | –– | $ | –– | $ | –– | $ | 0 | |||||||||
Total financial assets
|
$ | –– | $ | –– | $ | –– | $ | –– |
Fair Value of
Intangible
Asset
|
||||
|
||||
Balance at December 31, 2008
|
|
$
|
67,000
|
|
Change in fair value included in net loss
|
|
(67,000
|
)
|
|
Ending balance at December 31, 2009
|
|
$
|
0
|
December 31,
2009
|
December 31,
2008
|
|||||||
Computer equipment
|
$ | 1,796,197 | $ | 1,770,774 | ||||
Vehicles
|
17,340 | 16,406 | ||||||
Office furniture and equipment
|
123,256 | 122,635 | ||||||
Other equipment
|
9,065 | 8,577 | ||||||
1,945,858 | 1,918,392 | |||||||
Less accumulated depreciation
|
(1,523,310 | ) | (1,001,950 | ) | ||||
Property and equipment—net
|
$ | 422,548 | $ | 916,442 |
MATT
|
RSI
|
Total
|
||||||||||
Notes Payable, face amount
|
$ | 5,000,000 | $ | 2,000,000 | $ | 7,000,000 | ||||||
Discounts on Notes:
|
||||||||||||
Revaluation of Warrants
|
(1,341,692 | ) | (263,690 | ) | (1,605,382 | ) | ||||||
Termination of Jet Rights
|
(878,942 | ) | –– | (878,942 | ) | |||||||
Accumulated Amortization
|
491,926 | 62,513 | 554,439 | |||||||||
Total Discounts
|
(1,728,708 | ) | (201,177 | ) | (1,929,885 | ) | ||||||
Accrued Interest
|
431,133 | 172,454 | 603,587 | |||||||||
Notes Payable, net
|
$ | 3,702,425 | $ | 1,971,277 | $ | 5,673,702 |
2010
|
$ | 102,760 | ||
2011
|
88,904 | |||
2012
|
66,678 | |||
$ | 258,342 |
Options
|
Number of
Stock
Options
|
Weighted-
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding at December 31, 2008 (1)
|
200,000 | $ | 2.36 | ||||||||||||||
Granted
|
–– | $ | –– | ||||||||||||||
Exercised
|
–– | $ | –– | ||||||||||||||
Forfeited or expired
|
(95,000 | ) | $ | 3.00 | |||||||||||||
Outstanding at December 31, 2009 (1)
|
105,000 | $ | 1.48 | 2.6 | $ | 65,500 | |||||||||||
Exercisable at December 31, 2009 (1)
|
105,000 | $ | 1.48 | 2.6 | $ | 65,500 |
(1)
|
Includes 100,000 options held by consultants.
|
Options
|
Number of
Stock
Options
|
Weighted-
Average
Exercise Price
|
Weighted
Average
Remaining
Contractual
Life
|
Aggregate
Intrinsic
Value
|
|||||||||||||
Outstanding at December 31, 2008 (1)(2)
|
6,484,687 | $ | 2.85 | ||||||||||||||
Granted (3)
|
1,095,538 | $ | 1.41 | ||||||||||||||
Exercised
|
–– | $ | –– | ||||||||||||||
Forfeited or expired (4)
|
(372,000 | ) | $ | 2.84 | |||||||||||||
Outstanding at December 31, 2009 (5)
|
7,208,225 | $ | 1.19 | 8.2 | $ | 6,929,087 | |||||||||||
Exercisable at December 31, 2009 (5)
|
4,279,048 | $ | 1.19 | 7.9 | $ | 4,226,502 |
(1)
|
Includes 486,000 options to purchase common stock at a weighted average exercise price of $2.83 per share being held by consultants.
|
(2)
|
Includes 1,649,000 performance based options, of which 1,007,040 have been expensed.
|
(3)
|
Includes 45,000 options to purchase common stock at a weighted average exercise price of $2.22 per share being held by consultants.
|
(4)
|
Includes 15,000 options to purchase common stock at a weighted average exercise price of $1.00 per share being held by consultants.
|
(5)
|
Includes 511,000 outstanding and 287,667 exercisable options to purchase common stock at a weighted average exercise price of $1.99 and $2.36 per share, respectively, being held by consultants.
|
December 31,
|
||||||||
2009
|
2008
|
|||||||
Risk-free interest rate:
|
2.49 | % | 3.10 | % | ||||
Expected term:
|
4.4 Years
|
5.6 Years
|
||||||
Expected dividend yield:
|
–– | –– | ||||||
Expected volatility:
|
105 | % | 140 | % |
Shares
|
Weighted-Average
Share Price
|
|||||||
Unvested at January 1, 2009
|
–– | $ | –– | |||||
Granted
|
27,700 | $ | 0.83 | |||||
Vested during period
|
(27,700 | ) | $ | 0.83 | ||||
Cancelled during period
|
–– | $ | –– | |||||
Unvested at December 31, 2009
|
–– | $ | –– |
Risk-free interest rate:
|
4.68
|
%
|
||
Expected term:
|
5 years
|
|||
Expected dividend yield:
|
0.00
|
%
|
||
Expected volatility:
|
163.73
|
%
|
Risk-free interest rate:
|
2.81 | % | ||
Expected term:
|
4.08 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
105.68 | % |
Warrant #1
|
Warrants #2 and #3
|
|||||||
Risk-free interest rate:
|
4.69
|
%
|
4.68
|
%
|
||||
Expected term:
|
0.25 years
|
5 years
|
||||||
Expected dividend yield:
|
0.00
|
%
|
0.00
|
%
|
||||
Expected volatility:
|
53.98
|
%
|
163.73
|
%
|
Risk-free interest rate:
|
2.81 | % | ||
Expected term:
|
4.36 years
|
|||
Expected dividend yield:
|
— | |||
Expected volatility:
|
103.55 | % |
Outstanding at January 1, 2009
|
4,432,500 | |||
Issued
|
— | |||
Exercised
|
— | |||
Expired
|
(232,500 | ) | ||
Outstanding at December 31, 2009
|
4,200,000 |
2009
|
2008
|
|||||||
U.S. federal income tax at statutory rate
|
$
|
(3,596,000
|
)
|
$
|
(2,427,000
|
)
|
||
Extinguishment of debt
|
––
|
(1,719,000
|
)
|
|||||
Nondeductible expenses
|
3,000
|
3,000
|
||||||
Exercise and forfeitures of stock based compensation
|
(13,000
|
)
|
660,000
|
|||||
Change in valuation allowance
|
4,083,000
|
4,061,000
|
||||||
State tax benefit, net of federal provision (benefit)
|
(486,000
|
)
|
(604,000
|
)
|
||||
Foreign subsidiary loss
|
8,000
|
25,000
|
||||||
Other
|
1,000
|
1,000
|
||||||
Income Tax Expense
|
$
|
––
|
$
|
––
|
December 31,
2009
|
December 31,
2008
|
|||||||
U.S. federal income tax at statutory rate
|
$
|
41,016,000
|
$
|
39,179,000
|
||||
Extinguishment of debt
|
23,000
|
(50,000
|
)
|
|||||
Change in valuation allowance
|
5,158,000
|
3,000,000
|
||||||
State tax benefit, net of federal provision (benefit)
|
51,000
|
36,000
|
||||||
Foreign subsidiary loss
|
46,248,000
|
42,165,000
|
||||||
Other
|
(46,248,000
|
)
|
(42,165,000
|
)
|
||||
Income Tax Expense
|
$
|
––
|
$
|
––
|
SEC registration fees
|
$ | 2,060 | ||
Printing expenses
|
$ | 1,300 | ||
Accounting fees and expenses
|
$ | 5,000 | ||
Legal fees and expenses
|
$ | 27,500 | ||
Blue sky fees
|
$ | 1,075 | ||
Miscellaneous
|
$ | 1,065 | ||
Total
|
$ | 38,000 |
Incorporated by Reference
|
Filed or
Furnished
|
|||||||||
Exhibit No.
|
Exhibit Description
|
Form
|
Date
|
Number
|
Herewith
|
|||||
3.1
|
Certificate of Restated Articles of Incorporation
|
10-QSB
|
8/15/07
|
3.1
|
||||||
3.2
|
Certificate of Amendment – Officer Liability Protection
|
10-Q
|
8/9/10
|
3.2
|
||||||
3.3
|
Certificate of Designation
|
10-Q
|
7/25/08
|
3.2
|
||||||
3.4
|
Amended and Restated Bylaws
|
8-K
|
7/3/07
|
3.2
|
||||||
3.5
|
Amendment to Amended and Restated Bylaws
|
8-K
|
5/14/10
|
3.1
|
||||||
4.1
|
Form of Hollywood Note
|
8-K
|
9/24/10
|
4.1
|
||||||
Legal Opinion of Harris Cramer LLP
|
Filed
|
|||||||||
10.1
|
Amended and Restated 2006 Stock Incentive Plan
|
10-Q
|
8/9/10
|
10.1
|
||||||
10.2
|
AHMSA Marketing Services Agreement
|
10-Q
|
11/12/10
|
10.5
|
||||||
10.3
|
AHMSA Promotional Campaign Agreement
|
10-Q
|
11/12/10
|
10.6
|
||||||
10.4
|
John Abbott Employment Agreement*
|
8-K
|
10/30/07
|
10.2
|
||||||
10.5
|
Abbott Employment Agreement Amendment No. 1*
|
10-KSB
|
3/31/08
|
10.18
|
||||||
Abbott Employment Agreement Amendment No. 2*
|
Filed
|
|||||||||
10.7
|
Michael Matte Employment Agreement*
|
8-K
|
10/30/07
|
10.3
|
||||||
10.8
|
Matte Employment Agreement Amendment No. 1*
|
10-KSB
|
3/31/08
|
10.21
|
||||||
Matte Employment Agreement Amendment No. 2*
|
Filed
|
|||||||||
10.10
|
Louis Bardov Employment Agreement*
|
10-Q
|
7/25/08
|
10.18
|
||||||
10.11
|
Hollywood Note Purchase Agreement
|
8-K
|
9/24/10
|
4.1
|
||||||
10.12
|
Securities Purchase Agreement dated December 14, 2010
|
8-K
|
12/16/10
|
10.1
|
||||||
10.13
|
Amendment to Securities Purchase Agreement dated December 14, 2010
|
8-K
|
12/22/10
|
10.2
|
||||||
10.14
|
Registration Rights Agreement dated December 14, 2010
|
8-K
|
12/16/10
|
10.3
|
||||||
10.15
|
MATT, Inc. Note Purchase Agreement
|
8-K
|
1/30/08
|
10.1
|
||||||
10.16
|
MATT, Inc. Subordinated Promissory Note
|
8-K
|
1/30/08
|
10.11
|
||||||
10.17
|
RSI LLC Note Purchase Agreement
|
8-K
|
1/30/08
|
10.6
|
||||||
10.18
|
RSI LLC Promissory Note
|
8-K
|
1/30/08
|
10.12
|
||||||
List of Subsidiaries
|
Filed
|
|||||||||
Consent of Salberg & Company, P.A.
|
Filed
|
|||||||||
23.2
|
Consent of Harris Cramer LLP
|
Filed**
|
*
|
Management compensatory agreement.
|
**
|
Contained in Exhibit 5.1.
|
(a)
|
The undersigned registrant hereby undertakes:
|
(1)
|
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
|
(i)
|
To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;
|
(ii)
|
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement.
|
(iii)
|
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;
|
(2)
|
That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
(3)
|
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
|
(4)
|
That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
|
(b)
|
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
|
QUEPASA CORPORATION.
|
|||
By:
|
/s/ John Abbott
|
||
John Abbott
|
|||
Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
/s/ John Abbott
|
Principal Executive Officer and Director
|
December 29, 2010
|
||
John Abbott
|
||||
/s/ Michael Matte
|
Chief Financial Officer (Principal Financial Officer) and
|
December 29, 2010
|
||
Michael Matte
|
Chief Accounting Officer (Principal Accounting Officer) | |||
|
Director
|
|||
Alonso Ancira
|
||||
/s/ Ernesto Cruz | Director | December 27, 2010 | ||
Ernesto Cruz | ||||
Director | ||||
James Ferris | ||||
/s/ Malcolm Jozoff | Director | December 27, 2010 | ||
Malcolm Jozoff | ||||
/s/ Lionel Sosa | Director | December 27, 2010 | ||
Lionel Sosa | ||||
/s/ Dr. Jill Syverson-Stork | Director | December 27, 2010 | ||
Dr. Jill Syverson-Stork |
3507 Kyoto Gardens Dr., Suite 320
Palm Beach Gardens, FL 33410
Tel: (561) 689-4441
Fax: (561) 659-0701
www.harriscramer.com
|
·
|
1,753,329 shares of common stock, $0.001 par value, which are currently outstanding, and
|
·
|
165,000 shares of common stock, $0.001 par value, underlying outstanding warrants.
|
·
|
50,000,000 shares of common stock, $0.001 par value per share, of which 15,271,480 shares are issued and outstanding, and
|
·
|
5,000,000 shares of preferred stock, $0.001 par value, of which 25,000 shares are issued and outstanding.
|
Very truly yours,
/s/ Harris Cramer LLP
Harris Cramer LLP
|
|