-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ESocheIGEX/dn/xvI134P2l9ZqE2PcNs393J1dgHo7EhyZv9yqlZmoUFlXmzok54 5DQIrWQMAC+kMI8BUDGHHg== 0000912057-01-529021.txt : 20010816 0000912057-01-529021.hdr.sgml : 20010816 ACCESSION NUMBER: 0000912057-01-529021 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20010815 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUEPASA COM INC CENTRAL INDEX KEY: 0001078099 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ADVERTISING [7310] IRS NUMBER: 860879433 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-25565 FILM NUMBER: 1715943 BUSINESS ADDRESS: STREET 1: ONE ARIZONA CENTER STREET 2: 400 E VAN BUREN CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6027160100 MAIL ADDRESS: STREET 1: ONE ARIZONA CENTER STREET 2: 400 E VAN BUREN CITY: PHOENIX STATE: AZ ZIP: 85004 10-Q/A 1 a2057274z10-qa.txt 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM 10-Q/A (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER: 0-25565 QUEPASA.COM, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 84-0879433 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) ONE ARIZONA CENTER, 400 E. VAN BUREN 85004 4TH FLOOR, PHOENIX, AZ (ZIP CODE) (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 602-716-0100 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NAME OF EXCHANGE TITLE OF EACH CLASS ON WHICH REGISTERED NONE. NONE. SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $.001 PER SHARE (TITLE OF CLASS) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] The number of outstanding shares of the registrant's Common Stock as of May 12, 2000 was approximately 18,833,305 shares. ================================================================================ QUEPASA.COM, INC. INDEX PART I. FINANCIAL INFORMATION PAGE NO. Item 1. Condensed Consolidated Financial Statements . . . . . . . . . . . . 1 Condensed Consolidated Balance Sheets at March 31, 2000, (unaudited) and December 31, 1999 . . . . . . . . . . . . . . . . . . . 1 Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2000 and 1999 (unaudited) . . . . . . . . . 2 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2000 and 1999 (unaudited) . . . . . . . . . 3 Notes to Condensed Consolidated Financial Statements . . . . . . . . 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors . . . . . . . . . . . . 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk . . . . 24 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 25 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . .25 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ITEM 1. PART I FINANCIAL INFORMATION CONDENSED CONSOLIDATED FINANCIAL STATEMENTS QUEPASA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31, DECEMBER 31, 2000 1999 (UNAUDITED) (restated) -------------- ------------- ASSETS Current assets: Cash and cash equivalents.............................. $ 5,111,885 $ 6,961,592 Trading securities..................................... 17,345,392 22,237,656 Accounts receivable (net of allowance for doubtful accounts of $6,638 and $4,813, respectively)........ 416,920 297,170 Forgivable loans....................................... 276,667 368,042 Prepaid expenses....................................... 4,813,301 2,161,494 Other current assets................................... 5,787,391 -- ------------ ------------ Total current assets........................... 33,751,556 32,025,954 Prepaid marketing services .............................. 8,840,127 10,120,192 Property and equipment, net.............................. 2,219,857 2,051,103 Goodwill, net ........................................... 19,947,364 -- Other assets............................................. 985,680 153,743 ------------ ------------ Total assets............................................. $ 65,744,584 $ 44,350,992 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable....................................... $ 4,071,197 $ 2,775,347 Accrued liabilities.................................... 647,518 1,023,984 Interest payable....................................... 21,970 -- Deferred revenue....................................... 97,182 85,417 ------------ ------------ Total current liabilities...................... 4,837,867 3,884,748 Long-term notes payable.................................. 2,149,054 -- Redeemable common stock.................................. 2,000,000 2,000,000 Deferred advertising expense ............................ (1,200,000) (1,600,000) Stockholders' equity: Preferred stock, authorized 5,000,000 shares, no par value, -- none issued or outstanding................... -- -- Common stock, authorized 50,000,000 shares, $0.001 par value; issued and outstanding 17,742,790 shares and 14,536,058 shares, respectively........................ 17,743 14,536 Additional paid-in capital............................... 104,338,376 75,829,202 Accumulated deficit...................................... (46,398,456) (35,777,494) ------------ ------------ Total stockholders' equity..................... 57,957,663 40,066,244 ------------ ------------ Total liabilities and stockholders' equity .............. $ 65,744,584 $ 44,350,992 ============ ============
See accompanying notes to condensed consolidated financial statements. 2 QUEPASA.COM, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 1999 (restated) ------------ ----------- Gross revenue................................... $ 729,533 $ -- Less commissions................................ (64,661) -- ------------ ----------- Net revenue..................................... 664,872 -- Operating expenses: Product and content development expenses..... 1,720,420 186,691 Advertising and marketing expenses........... 7,075,214 2,062,607 General and administrative expenses.......... 1,693,515 1,429,299 Amortization of goodwill..................... 1,079,391 -- ------------ ----------- Total operating expenses.............. 11,568,540 3,678,597 ------------ ----------- Loss from operations............................ (10,903,668) (3,678,597) Other income (expense): Interest expense.............................. (31,358) (20,000) Interest income and other..................... 430,393 15,378 Short term gain on trading securities......... 2,820 -- Unrealized loss on trading securities......... (119,149) -- ------------ ----------- Other income (expenses), net.................... 282,706 (4,622) ------------ ----------- Net loss........................................ $(10,620,962) $(3,683,219) ============ =========== Net loss per share, basic and diluted........... $ (.67) $ (.41) ============ =========== Weighted average number of shares outstanding, basic and diluted.................. 15,764,051 9,075,833 ============ ===========
See accompanying notes to condensed consolidated financial statements. 3 QUEPASA.COM, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 1999 (restated) ------------ ----------- Cash flows from operating activities: Net loss .......................................... $(10,620,962) $(3,683,219) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization .................. 1,360,666 28,694 Stock based compensation ....................... 20,546 479,000 Forgiveness of forgivable loans ................ 173,374 -- Amortization of prepaid marketing services ..... 1,280,065 -- Unrealized loss on trading securities .......... 119,149 -- Short-term gain on trading securities .......... (2,820) -- Increase (decrease) in cash resulting from changes in assets and liabilities: Sale of trading securities, net .............. 4,775,935 -- Accounts receivable .......................... (119,750) -- Prepaid expenses ............................. (2,593,807) 456,714 Other assets ................................. (6,710,890) (51,192) Accounts payable ............................. 1,192,311 317,214 Accrued liabilities .......................... (357,395) 95,142 Amortization of deferred advertising credit .. 400,000 -- Deferred revenue ............................. 11,765 -- ------------ ----------- Net cash used in operating activities ..... (11,071,813) (2,357,647) ------------ ----------- Cash flows from investing activities: Forgivable loans .................................. (82,000) (35,165) Cash paid for acquisitions ........................ (238,793) -- Cash received in acquisition ...................... 578,730 -- Purchase of fixed assets .......................... (161,804) (510,301) ------------ ----------- Net cash (used in) provided by investing activities .................... 96,133 (545,466) ------------ ----------- Cash flows from financing activities: Stock subscription receivable ..................... -- 125,000 Net proceeds from issuance of stock ............... 9,000,000 -- Proceeds from the exercise of stock options ....... 347,302 -- Proceeds from draws on line of credit ............. 12,286 2,000,000 Payment on note payable ........................... (233,615) -- Accrued commissions ............................... -- (191,144) Stock subscription ................................ -- (337,500) Deferred initial public offering costs ............ -- (342,441) ------------ ----------- Net cash provided by financing activities .............................. 9,125,973 1,253,915 ------------ ----------- Net decrease in cash and cash equivalents ........... (1,849,707) (1,649,198) Cash and cash equivalents, beginning of period ...... 6,961,592 2,199,172
4 ------------ ----------- Cash and cash equivalents, end of period ............ $ 5,111,885 $ 549,974 ============ ===========
Supplemental disclosure of non-cash operating, financing and investing activities: Interest paid ....................................... $ 12,286 -- =========== ======== Barter transactions.................................. $ 112,146 -- =========== ======== Notes payable assumed in acquisitions................ $ 2,370,383 -- =========== ======== Issuance of stock in acquisitions.................... $20,073,032 -- =========== ========
See accompanying notes to condensed consolidated financial statements. 5 QUEPASA.COM, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2000 AND 1999 (1) THE COMPANY quepasa.com, inc. (the "Company"), a Nevada Corporation, was incorporated in June 1997. The Company is a bilingual Internet portal and on-line community focused on the United States Hispanic market. quepasa.com offers a number of services such as a search engine, Spanish-language newsfeeds, free Web pages, worldwide weather information, chat, games, maps, messageboards and free e-mail. The Company's portal draws viewers to its Web site by providing a one-stop destination for identifying, selecting and accessing resources, services, content and information on the Web. Because English is the language preference of many United States Hispanics, it also offers its users the ability to access information and services in the English language. The Company has not had any significant revenue and there is no assurance that the Company will generate significant revenue or earn profits in the future. (2) BASIS OF PRESENTATION Our accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and pursuant to rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for a complete financial statement presentation. In our opinion, such unaudited interim information reflects all adjustments, consisting only of normal recurring adjustments, necessary to present our financial position and results of operations for the periods presented. Our results of operations for interim periods are not necessarily indicative of the results to be expected for a full fiscal year. Our Condensed Consolidated Balance Sheet as of December 31, 1999 was derived from our audited financial statements as of that date but does not include all the information and footnotes required by generally accepted accounting principles. We suggest that these condensed consolidated financial statements be read in conjunction with the audited financial statements included in our Annual Report on Form 10-K/A, for the year ended December 31, 1999. (3) SIGNIFICANT TRANSACTIONS On January 28, 2000, the Company acquired credito.com, an on-line credit company targeted to the U.S. Hispanic population for a purchase price of $8.4 million consisting of 681,818 shares of common stock valued at $11 per share and assumption of an $887,000 note payable. The Company included the 681,818 shares of common stock issued unconditionally in determining the cost of credito.com recorded at the date of acquisition. Contingent consideration consisted of warrants to purchase 681,818 shares of common stock exercisable upon credito.com's achievement of certain performance objectives related to gross revenue as of January 2001 and January 2002. The value of the stock was determined using the average stock price between the date of the merger agreement and the date the merger was publicly announced, or $11 per share. The acquisition was accounted for using the purchase method of accounting, and, accordingly, the purchase price was allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was approximately $7.8 million and was recorded as goodwill, 6 which is being amortized on a straight-line basis over a period of 3 years. On January 28, 2000, the Company acquired eTrato.com, an on-line trading community developed especially for the Spanish language or bilingual Internet user for an aggregate purchase price of $10.85 million, consisting of 681,818 shares of common stock valued at $14.09 per share, and assumption of a $1.25 million promissory note. The note payable is due in whole on January 28, 2002 with a stated interest rate at the greater of 6% per annum or the federal rate then in effect with respect to debt instruments having a two-year term. An additional 681,818 shares will be held in escrow pending the outcome of certain revenue and web site contingencies over the six-month period following the acquisition. The value of the stock was determined using the average stock price between the date of the merger agreement and the date the merger was publicly announced, or $14.09 per share. The Company accounted for the acquisition using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was approximately $10.1 million and was recorded as goodwill, which is being amortized on a straight-line basis over a period of 3 years. On March 9, 2000, the Company acquired RealEstateEspanol.com, a real estate services site providing the Hispanic-American community with bilingual home buying services for an aggregate purchase price of $3.3 million. The purchase price for RealEstateEspanol.com consisted of 335,925 shares of the Company's common stock valued at $3.0 million and the assumption of $300,000 in debt paid immediately following the closing of the acquisition. Contingent consideration consisted of 248,834 shares of common stock which were held in escrow pending RealEstateEspanol.com's achievement of gross revenue targets within 12 months of the date of the agreement. The value of the stock was determined using the average stock price between the date of the merger agreement and the date the merger was publicly announced, or $8.83 per share. The Company accounted for the acquisition using the purchase method of accounting. Accordingly, the purchase price was allocated to the assets purchased and the liabilities assumed based upon the estimated fair values at the date of acquisition. The excess of the purchase price over the fair value of the net assets acquired was approximately $3.2 million and was recorded as goodwill, which is being amortized on a straight-line basis over a period of 3 years. The following summary, prepared on a pro forma basis, combines the consolidated results of operations (unaudited) as if the acquisitions had taken place on January 1, 1999. Amortization of goodwill related to the acquisitions of credito.com, eTrato.com and RealEstateEspanol.com has been recorded for the applicable period of inception, August 17, 1999, June 16, 1999 and August 30, 1999, respectively, through December 31, 1999, based on an estimated useful life of 3 years. Such pro form amounts are not necessarily indicative of what the actual results of operations might have been if the acquisition had been effective on January 1, 1999, including $1,752,000 and $0 amortization of goodwill during the three months ended March 31, 2000 and 1999, respectively (in thousands, except per share amounts):
THREE MONTHS ENDED MARCH 31 2000 1999 ---- ---- Gross revenue $ 730 $ - Net revenue 665 - Operating expenses 13,604 3,679 Net loss (12,657) (3,683) Net loss per share, basic and diluted (.80) (.41)
7 While issuance of the contingent shares of common stock held in escrow is believed to be remote, the contingent shares of common stock held in escrow as a result of the acquisitions, if subsequently issued, would increase the purchase price of the entities by $7,500,000, $9,607,000, and $2,197,000, for credito.com, eTrato.com, and RealEstateEspanol.com, respectively, assuming the same fair value for the contingent shares of common stock as that which was used for the shares of common stock that were issued as a result of the transaction on the respective acquisition dates. In addition, pro forma operating expenses for the first quarter of 2000 would increase to $15,212,000, from $13,604,000, and would remain at $3,679,000 for the first quarter of 1999, net loss for the first quarter of 2000 would increase to $14,264,000, from $12,657,000, and would remain at $3,683,000 for the first quarter of 1999, and net loss per share for the first quarter of 2000 would increase to $.90, from $.80, and would remain at $.41 for the first quarter of 1999. On March 30, 2000, Gateway, Inc. invested $9.0 million (restated) in exchange for 1,428,571 shares of common stock which represents 7.6% of quepasa.com's outstanding common stock. The amount attributable to common stock and additional paid-in capital was $7,685,712, the value of the 1,428,571 shares of common stock on the date issued ($5.38 per share). Additionally, quepasa granted a 60-day warrant to acquire 483,495 shares of common stock at $7 per share. The warrants were valued at $386,000 using the Black-Scholes option-pricing model. The assumptions used for the Gateway warrants are as follows: expected dividend yield 0%, risk-free interest rate of 5.67%, expected volatility of 147%, and expected life of two months. In the event there is a change in ownership of quepasa in excess of 30% prior to September 30, 2000 and for a price per share less than $7.00, Gateway has the right to be reimbursed for the differential in the per share amount. quepasa also committed itself to use a substantial portion of the proceeds of Gateway's investment to further its community and educational initiative program, which includes distributing computers purchased from Gateway accompanied with Spanish language technical support, providing Internet access, and training for quepasa's subscribers. The Company purchased $5.8 million (restated) of computers pursuant to this agreement to be used for promotional activities which are included in other current assets as of March 31, 2000. The Company took title to the computers upon the close of the transaction. Since the Company has no warehousing facilities, the computers were segregated from Gateway's inventory in third party warehouse locations and the Company is responsible for the payment of warehouse storage charges. The Company will partner with Gateway in joint marketing and promotional programs targeting the U.S. Hispanic community. These computers will be amortized as they are donated. (4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USES OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Additionally, such estimates and assumptions affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS Certain reclassifications have been made to prior year financial statement amounts to conform to current year presentation. CONCENTRATION OF CREDIT RISK AND SIGNIFICANT CUSTOMERS Financial instruments which potentially subject the Company to concentrations of credit risk are principally accounts receivable, cash and cash equivalents and trading securities. The Company maintains ongoing credit evaluations of its customers and generally does not require collateral. The Company provides reserves for potential credit losses and such losses have not exceeded management expectations. Periodically during the year, the Company maintains cash and investments in financial institutions in excess of the amounts insured by the federal government. During the three months ended March 31, 2000, two customers 8 accounted for 34% and 20% of gross revenue. No other single advertiser utilizing banner ads or sponsorship agreements amounted to or exceeded 10% of the total gross revenue. CASH AND CASH EQUIVALENTS Cash and cash equivalents include cash on hand and highly liquid debt instruments with original maturities of three months or less. TRADING SECURITIES The Company classifies its securities in one of three categories: trading, available-for-sale, or held-to-maturity. Trading securities are bought and held principally for the purpose of selling them in the near term. Held-to-maturity securities are those securities in which the Company has the ability and intent to hold the security until maturity. All other securities not included in trading or held-to-maturity are classified as available-for-sale. Trading securities at March 31, 2000 and December 31, 1999 consist of corporate debt securities. Trading and available-for-sale securities are recorded at market value. Held-to-maturity securities are recorded at amortized cost, adjusted for the amortization or accretion of premiums or discounts. Unrealized holding gains and losses on trading securities are included in operations. Unrealized holding gains and losses, net of the related tax effect, on available-for-sale securities are excluded from operations and are reported as a separate component of other comprehensive income until realized. Realized gains and losses for trading securities are included in operations and are derived using the specific identification method for determining the cost of securities. All securities held at March 31, 2000 and December 31, 1999 are categorized as trading. REVENUE RECOGNITION The Company's revenue is derived principally from the sales of banner advertisements and sponsorships. The Company sells banner advertising primarily on a cost-per-thousand impressions, or "CPM" basis, under which advertisers and advertising agencies receive a guaranteed number of "impressions," or number of times that an advertisement appears in pages viewed by users of the Company's Web site, for a fixed fee. The Company's contracts with advertisers and advertising agencies for these types of contracts cover periods ranging from one to twelve months. Advertising revenues are recognized ratably based on the number of impressions displayed, provided that the Company has no obligations remaining at the end of a period and collection of the resulting receivable is probable. Company obligations typically include guarantees of a minimum number of impressions. To the extent that minimum guaranteed impressions are not met, the Company defers recognition of the corresponding revenues until the remaining guaranteed impression levels are achieved. Payments received from advertisers prior to displaying their advertisements on the Company's Web site are recorded as deferred revenue. The Company also derives revenue from the sale of sponsorships for certain areas or a sponsorship exclusivity for certain areas within its Web site. These sponsorships are for periods up to one year. The Company recognizes revenue during the initial setup, if required under the unique terms of each sponsorship agreement (e.g. co-branded Web site), to the extent that actual costs are incurred. The balance of the sponsorship is recognized ratably over the period of time of the related agreement. Payments received from sponsors prior to displaying their advertisements on the Company's Web site are recorded as deferred revenue. The Company also derives revenue from slotting fees and commissions. Slotting fees revenue is recognized ratably over the period the services are provided. Setup fees revenue is recognized during the initial setup to the extent that direct costs are incurred. The remaining revenue derived from setup fees is deferred and amortized ratably over the term of the applicable agreement. Commission revenue related to X:Drive is recognized in the month in which a new account is established (i.e. services are provided). Commission revenue and expenses related to Net2Phone are recognized during the month in which the service is provided. 9 The Company in the ordinary course of business enters into reciprocal service arrangements (barter transactions) whereby the Company provides advertising service to third parties in exchange for advertising services in other media. Revenue and expenses from these agreements are recorded at the fair value of services provided or received, whichever is more determinable in the circumstances. The fair value represents market prices negotiated on an arms' length basis. Revenue from reciprocal service arrangements is recognized as income when advertisements are delivered on the Company's Web site. Expense from reciprocal service arrangements is recognized when the Company's advertisements are run in other media, which are typically in the same period when the reciprocal service revenue is recognized. Related expenses are classified as advertising and marketing expenses in the accompanying statements of operations. During the three months ended March 31, 2000 and 1999 revenues attributable to reciprocal services totaled approximately $112,000 (restated) and $0, respectively, and related expenses totaled approximately $161,000 (restated) and $0, respectively. COMPUTER PROMOTIONS INVENTORY Computer promotions inventory is recorded at cost and included in Other Current Assets. Amortization expense is provided on an individual basis as each computer is donated. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation and amortization expense is generally provided on a straight-line basis using estimated useful lives of the assets, which range from two to five years. Leasehold improvements are amortized on a straight-line basis over the shorter of the lease term or the estimated useful lives of the related improvements. Expenditures for repairs and maintenance are charged to operations as incurred and improvements which extend the useful lives of the assets are capitalized. PRODUCT AND CONTENT DEVELOPMENT Costs incurred in the classification and organization of listings within the Company's Web site are charged to expense as incurred. In accordance with SOP 98-1, material software development costs, costs of development of new products and costs of enhancements to existing products, incurred during the application development stage are capitalized. Based upon the Company's product development process, and the constant modification of the Company's Web site, costs incurred by the Company during the application development stage have been insignificant. In March 2000, EITF No. 00-02, ACCOUNTING FOR WEB SITE DEVELOPMENT COSTS, was issued, addressing how an entity should account for costs incurred in web site development. EITF 00-02 distinguishes between those costs incurred during the development, application and infrastructure development stage and those costs incurred during the operating stage. EITF 00-02 is effective on and after June 30, 2000 although early adoption is encouraged. The adoption of EITF No. 00-02 did not have a material impact on the Company's consolidated financial statements. INCOME TAXES The Company utilizes the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. IMPAIRMENT OF LONG-LIVED ASSETS 10 The Company reviews long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value of the assets less costs to sell. FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of the Company's financial instruments, which principally include cash and cash equivalents, trading securities, accounts receivable, forgivable loans, accounts payable, and accrued liabilities approximates fair market value because of the short term nature of the instruments. The terms of the Company's notes payable approximate the terms in the marketplace at which they could be replaced. Therefore, the fair value approximates the carrying value of these financial instruments. STOCK-BASED COMPENSATION The Company accounts for its stock option plan in accordance with the provisions of Accounting Principles Board ("APB") Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. As such, compensation expense is recorded on the date of grant only if the current market price of the underlying stock exceeded the exercise price. The Company has adopted the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation, which permits entities to provide pro forma net earnings (loss) and pro forma earnings (loss) per share disclosures for employee stock option grants as if the fair-value-based method as defined in SFAS No. 123 had been applied. The Company uses one of the most widely used option pricing models, the Black-Scholes model ("Model"), for purposes of valuing its stock option grants. The Model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, it requires the input of highly subjective assumptions, including the expected stock price volatility, expected dividend yields, the risk free interest rate, and the expected life. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in subjective input assumptions can materially affect the fair value estimate, in management's opinion, the value determined by the Model is not necessarily indicative of the ultimate value of the granted options. Stock based compensation totaled $20,546 for the three months ended March 31, 2000 and is primarily classified in production and content development expense. Stock based compensation totaled $479,000 for the three months ended March 31, 1999 and is classified as follows: $69,300 in production and content development expense, $35,000 in advertising and marketing expense, and $374,700 in general and administrative expense. NET LOSS PER SHARE Basic loss per share is computed by dividing loss available to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if securities or contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Stock options and warrants are excluded because they are anti-dilutive. 11 ADVERTISING COSTS Advertising costs are expensed as incurred in accordance with Statement of Position 93-7, "Reporting on Advertising Costs". The Company recognizes the advertising expense in a manner consistent with how the related advertising is displayed or broadcast. Advertising production costs are expensed as incurred. SEGMENT REPORTING The Company utilizes the management approach in designating business segments. The management approach designates the internal organization that is used by management for making operating decisions and assessing performance as the source of the Company's reportable segments. The Company's one segment provides Internet Portal and On-Line Community services in both Spanish and English to the Hispanic market. The Company's initial focus is on the U.S. Hispanic market, with substantially all of the Company's assets in and revenues originating from the United States. (5) NOTES PAYABLE A summary of notes payable at March 31, 2000 and December 31, 1999 follows:
March 31, December 31, 2000 1999 --------- ------------ Unsecured note payable with interest at 6.35% due on February 28, 2002, paid May 8, 2000 $1,250,000 -- Note payable with interest at prime +2% due on December 31, 2001 secured by tangible and intangible assets, paid May 8, 2000 899,054 -- ---------- ------------ Total long-term notes payable $2,149,054 -- ========== ============
(6) COMMITMENTS ADVERTISING CONTRACTS In April 1999, the Company entered into an agreement with Telemundo Network Group LLC ("Telemundo"). A director of the Company serves as the Chief Operating Officer of Telemundo. Under this agreement, the Company issued Telemundo 600,000 shares of its common stock and warrants to purchase 1,000,000 shares of the Company's common stock exercisable up to and including June 25, 2001 at $14.40 per share. In exchange, the Company received a $5.0 million advertising credit on the Telemundo television network at the rate of $1.0 million for each of the next five years. This agreement also provides that the Company will collaborate regarding online content development, co-branded marketing promotions and other complementary aspects of its businesses. As of March 31, 2000, the Company's unused advertising credit amounted to $4.7 million. In March 1999, the Company entered into a sponsorship agreement with the Arizona Diamondbacks. A director of the Company serves as the Arizona Diamondbacks' Chief Executive Officer and General Manager. Under this agreement, the Company will receive English and Spanish television and radio broadcast time, ballpark signage, and Internet and print promotions for the 2000 season for a sponsorship fee of $1.5 million which is payable during 2000. The $1.5 million sponsorship fee is recognized 12 as expense ratably over the 2000 baseball season. The Company paid $500,000 and recognized $216,000 in expense for the period ended March 31, 2000. The Company is obligated to pay $2.0 million in 2000 under an agreement with Estefan Enterprises, Inc. ("Estefan"). In addition, if the closing price of the Company's common stock on September 1, 2000 is less than $12.75 per share, Estefan will have the option to return 156,863 shares of the Company's common stock (issued to Estefan in September, 1999) to the Company in exchange for $2.0 million cash. As of March 31, 2000, the Company has paid $1.5 million of the year 2000 obligation. INTERNET ACCESS AGREEMENT On December 14, 1999, the Company entered into a one-year agreement with NetZero, Inc. ("NetZero"), where they will provide free internet access along with the Company's content to the U.S. Hispanic market. According to the terms of this agreement, the Company is obligated to pay a fee for their subscribers who access the Company's Web site. This fee ranges from $.10 to $.15 per user session. The Company is also committed to spend at least $1 million for the production and distribution of CD's containing the customized NetZero service. (7) CONTINGENCIES LEGAL PROCEEDINGS The Company from time to time is involved in various legal proceedings incidental to the conduct of its business. The Company believes that the outcome of all such pending legal proceedings will not in the aggregate have a material adverse effect on the Company's business, financial condition, results of operations or liquidity. (8) LOSS PER SHARE A summary of the reconciliation from basic loss per share to diluted loss per share for the three months ended March 31, 2000 and 1999 follows:
THREE MONTHS ENDED MARCH 31, 2000 1999 (restated) ------------- --------- Loss available to common stockholders $(10,620,962) $(3,683,219) Basic EPS-weighted average shares ============ =========== outstanding........................ 15,764,051 9,075,833 ============ =========== Basic and diluted loss per share..... $ (.67) $ (.41) ============ =========== Stock options not included in diluted EPS since antidilutive............... 3,996,046 1,463,000 ============ =========== Warrants not included in diluted EPS since antidilutive............ 2,565,313 -- ============ ===========
Contingent shares not included in basic and diluted EPS total 930,652 and 0 for the three months ended March 31, 2000 and March 31, 1999, respectively. (9) SUBSEQUENT EVENTS On May 9, 2000 the Company announced that it would be reducing its workforce by approximately one third over the next 60 days as part of management's effort to 13 further enhance the Company's competitive position and utilize its assets more efficiently. The Company will record the costs associated with the workforce reduction in its second fiscal quarter. (10) RESTATEMENT The Company has restated its March 31, 2000 financial statements to appropriately reflect the following: (1) the classification of a contra-redeemable common stock account in the amount of $2 million, net of accumulated amortization of $800,000, reclassified from prepaid expenses, and reversal of a $500,000 liability (accounts payable), which also reduces prepaid expenses, as of March 31, 2000 for payments to be made after March 31, 2000 under the Estefan contract since the Company did not have a present obligation to make the future installment payments, and (2) the classification of prepaid marketing services of $4,658,640 as an asset, reclassified from deferred advertising services, and an increase in the value assigned to the issuance of common stock and warrants related to the Telemundo agreement in the amount of $5,120,192, both amounts of which are reflected as prepaid marketing services on the balance sheet. The increase in amortization associated with the prepaid marketing services was $256,010 during the three months ended March 31, 2000. Additionally, the Company recorded $682,695 of amortization expense (included in the advertising and marketing expenses line item on the statement of operations) in the first quarter of 2000 related to the 1999 amortization of prepaid marketing services. The Company did not adjust the amortization of these costs in its 1999 Form 10-K/A due to the immaterial impact on its results of operations. Prepaid marketing services were reduced by the total of $938,705 in amortization for the three months ended March 31, 2000. Furthermore, the Company originally recorded the issuance of 1,428,571 shares of common stock in the Gateway transaction at $7.00 per share and immediately expensed a $1,000,000 marketing payment to Gateway. Management has determined that the issuance of shares of common stock should be valued at $5.38 per share representing the closing price of the Company's common stock on the execution date of the transaction. The difference in the price per share noted above has been reflected as a reduction of additional paid-in capital in the amount of $1,928,499, elimination of $1.0 million advertising expense, and a reduction of $928,499 in other current assets representing a discount assigned to the value of computer promotions inventory purchased as part of the transaction. The Company has restated its barter revenue and barter expenses for the quarter ended March 31, 2000 to comply with limitations identified in EITF 99-17. As a result, gross revenues and advertising and marketing expenses were both reduced by $192,000 for the three months ended March 31, 2000. Barter revenue for the three months ended March 31, 2000, after the restatement, was $112,000, while advertising and marketing expenses related to barter transactions was $161,000. Therefore, the quarterly financial information as of and for the three months ended March 31, 2000, has been restated to properly record these matters in accordance with generally accepted accounting principles. The net loss of the Company for the three-month period ended March 31, 2000, decreased from $10.7 million to $10.6 million, with a decrease in the basic and diluted net loss per share of $.01. 14 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - RISK FACTORS This Quarterly Report on Form 10-Q/A and the information incorporated by reference may include "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. In particular, we direct your attention to Item 1., Financial Statements, Item 2., Management's Discussion and Analysis of Financial Condition and Results of Operations - Risk Factors and Item 3, Quantitative and Qualitative Disclosures about Market Risk. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend" and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Although we believe that our expectations expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct. Our actual results could be materially different from our expectations, including the following: - we may lose members or fail to grow our member base; - we may not successfully integrate new members or assets obtained through acquisitions; - we may fail to compete with existing and new competitors; - we may not be able to sustain our current growth; - we may not adequately respond to technological developments impacting the Internet; - we may fail to identify and correct problems associated with system migration; and - we may not be able to find needed financing. This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in this Quarterly Report on Form 10-Q/A under the caption "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors", "Item 3, Quantitative and Qualitative Disclosures about Market Risk" and our other SEC filings and our press releases. The following discussion of our financial condition and results of operations for the three months ended March 31, 2000 and 1999 should be read in conjunction with our financial statements, the notes related thereto, and the other financial data included elsewhere in this Form 10-Q/A. OVERVIEW We commenced operations on June 25, 1997. The operations for the period June 25, 1997 through May 1998 were limited to organizing quepasa.com, raising operating capital, hiring initial employees and drafting a business plan. From May 1998 to present, we were engaged primarily in content development and acquisition. In May 1999, we launched our first media-based branding and advertising campaign in the United States. Significant revenues did not commence until the fourth quarter of 1999. For these reasons, we believe that period-to-period comparisons of our 15 operating results are not meaningful and the results for any period should not be relied upon as an indication of future performance. We currently expect to continue investing in marketing and advertising and content development. As a result of these factors, we expect to continue to incur significant losses on a quarterly and annual basis for the foreseeable future. THE QUEPASA.COM COMMUNITY quepasa.com is a Bilingual (Spanish/English) Internet portal and online community launched in November of 1998, focused initially on the U.S. Hispanic market. We provide users with information and interactive content centered around the Spanish language. Because the language preference of many acculturated U.S. Hispanics is English, we also offer our users the ability to access information and services in the English language. We draw viewers to our Web site by providing a one-stop destination for identifying, selecting and accessing resources, services, content and information on the Web. Our online community includes a search engine, free e-mail, Spanish and English-language news feeds, chat rooms, message boards, auction and e-commerce sites. We anticipate that our principal source of revenue will be fees paid by third parties for advertising their products and services on our Web site, sponsorship revenue for specific areas within our Web site, auction revenue from our recent acquisition of eTrato.com, e-commerce revenues from our recent acquisitions of credito.com and realestateespanol.com and through other acquisitions and partnerships. The quepasa.com Web site currently offers a number of categories of topical interest, including the following: Noticias (News) Etretenimiento (Entertainment) Salud (Health) Mundo Latino (Latino World) Recetario (Recipe Box) Compras (Shopping) Negocios y Finanzas (Business & Finance) Deportes (Sports) Computadoras y Tecnologia (Science & Technology) Empleo (Employment) Educacion (Education) Temas de Sociedad (People & Society) Subastas (Auctions) SEARCH ENGINE. The quepasa.com search engine helps users find information on the Web by searching through quepasa.com's index of Web documents. Our search technology is provided by Inktomi which enables us to provide customers with a variety of online search services. FREE E-MAIL, CHAT AND MESSAGE BOARD FEATURES. quepasa.com offers free e-mail and free Web community services that consist of chat services and message boards. These features enable users to discuss topics of mutual interest by participating in ongoing discussions or by creating their own topics for discussion. 24 HOUR REAL-TIME NEWS, WEATHER, MAPS AND GAMES. quepasa.com offers worldwide news coverage from Associated Press, Reuters and Hispanic Business Magazine including worldwide editorialized, topical news covering areas of special interest to Hispanic users (in Spanish and English), as well as a Spanish and English-language news feed that we format and edit internally to provide broad coverage of news that is of special interest to Hispanic users. Our users are also able to search a database of archived news stories over the prior 30-day period. Through an agreement with WeatherLabs, we offer worldwide weather information, including real time weather reports and forecasts, for 5,000 U.S. and 2,400 international cities. We were the first to offer maps and door-to-door driving directions in both Spanish and English in connection with a partnership with MapQuest Global Corporation and a bilingual "yellow-pages" directory through a partnership with MapQuest.com Inc. We also offer several internally developed games on our Web site for free. 16 OTHER SERVICES. We will offer our members unified messaging, PC-to-phone and calling card services as part of an agreement with Net2Phone. Through an agreement with GlobalEnglish Corporation we offer English language online learning to our members and through an agreement with X:Drive, we offer free Internet hard drive space. ON-LINE AUCTIONS Our goal is to become the most popular auction community for Hispanic Internet users. On January 28, 2000 we acquired eTrato.com, an online trading community developed especially for the Spanish language or bilingual Internet user, for an aggregate purchase price of $10.85 million consisting of 681,818 shares of common stock valued at $9.6 million and assumption of a $1.25 million promissory note. An additional 681,818 shares are being held in escrow pending the outcome of certain revenue and web-site contingencies over the 6-month period following the acquisition. Our acquisition of eTrato.com will enable us to move toward this goal. eTrato.com is an online, auction community that: - facilitates transactions from consumer-to-consumer, business-to-consumer and business-to-business; - links Hispanic buyers and sellers of goods and services; - aids transactions with online tools for payment and fulfillment; and - provides a secure and easy to understand environment for conducting e-business. Members of the eTrato.com community can list products or services in the site's online auction or classifieds section in Spanish, English or both. If users request, eTrato.com will translate to either language, for a small fee. Some of the features of the site include escrow payment services, customs and shipping estimates and options, currency conversion tools, chat and discussion forums, a trading resource center and directory, advanced auction functions such as image hosting, user ratings and bulk item uploading and specialized business-to-business areas with sealed bid and reverse auction formats. eTrato.com will also have live online customer service in order to help users have a positive first experience. We expect online auction revenue from the following sources: - revenue splits on the sale of value-added trading services (e.g. escrow and freight forwarding); - premium service fees and premium listing upgrades providing the seller with more prominent ad space; - the auctioning of our own products through the site; - fees paid by third parties for advertising their products and services on the site; and - translation services. It is estimated that the volume of auction-based or market-priced Internet commerce transactions is close to $4.0 billion, or 10% of total Internet trading today. Projections are for this number to grow to nearly $129.0 billion and 29% of the market by the year 2002. We are unaware of any companies which have successfully targeted the Spanish-language segment of this market. While the online trading market and in particular the auction market is very competitive, we believe that eTrato.com's Spanish/English language advantage represents an attractive alternative for Hispanic users. ON-LINE FINANCING AND REAL ESTATE SERVICES On January 28, 2000 we acquired credito.com, an online credit company targeted to the U.S. Hispanic population for a purchase price of $8.4 million consisting of 17 681,818 shares of common stock valued at $11 per share and assumption of an $887,000 note payable. Contingent consideration consisted of warrants to purchase 681,818 shares of common stock exercisable upon credito.com's achievement of certain performance objectives related to gross revenue as of January 2001 and January 2002. credito.com, will provide our members with information, interactive tools and resources to help them build and manage their credit needs and will provide a secure and easy process to apply for a wide variety of credit products and services. The site will also provide lenders with the opportunity to communicate with credit educated customers using its consumer profiling and marketing technologies. We will offer our members the ability to apply for mortgage loans, credit cards, auto finance loans, home equity loans and student loans. On March 9, 2000, we acquired RealEstateEspanol.com, a real estate services site providing the Hispanic-American community with bilingual home buying services for 335,925 shares of the Company's common stock valued at $3.0 million and assumption of $300,000 in debt paid immediately following the closing of the acquisition. Contingent consideration consisted of 248,834 shares of common stock which were held in escrow pending RealEstateEspanol.com's achievement of gross revenue targets within 12 months of the date of the agreement. RealEstateEspanol.com has been designated the official internet site of the National Association of Hispanic Real Estate Professionals (NAHREP). quepasa.com members will be able to search for a real estate agent, access school information, take virtual tours, apply for a mortgage, and view homes for sale among the more than 800,000 online listings provided through a partnership with homeseekers.com. RESULTS OF OPERATIONS INTRODUCTION The Company derives its net revenues from three principal sources: advertising on our Website; sales of sponsorships for different areas within our Website; and e-commerce related revenue. The Company's principle expenses are: Product and Content Development; Marketing and Advertising; General and Administrative expense; and Amortization of Goodwill. THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999 Our results of operations for the three months ended March 31, 2000 were characterized by increased expenses that more than offset revenue growth during the period. We reported a net loss of $10.6 million (restated) for the three months ended March 31, 2000, compared to a net loss of $3.7 million for the three months ended March 31, 1999. During the three months ended March 31, 2000, we have continued to enter into strategic partnerships, develop our content and capitalize on our branding efforts and newly created sales force. As a result of our marketing initiatives, including the NetZero partnership, our number of registered users increased 67% to approximately 350,000 as of March 31, 2000 from 210,000 as of December 31, 1999. Our monthly impressions increased 144% during the three months ended March 31, 2000 to 58.7 million from 24.1 million as of December 31, 1999. The Company realized nominal revenue ($35) but incurred approximately $490,000 in expenses as a result of the acquisitions of credito.com, eTrato.com and RealEstateEspanol.com during the first quarter 2000. NET REVENUES Net Revenue increased 100% to $664,872 (restated) for the three months ended March 31, 2000 from zero for the three months ended March 31, 1999. We launched our Web site in the fourth quarter 1998 and first generated revenue during the second quarter 1999. During the three months ended March 31, 2000, revenue was principally derived from two sources: 1) banner advertising arrangements under which we receive revenue based on cost per thousand ad impressions (CPM) and on cost per clicks and 2) sponsor agreements which allow advertisers to sponsor an area or receive exclusivity on an area within our Web site. Approximately, 49% of the gross revenue was generated from banner advertising and 51% was generated from sponsorship agreements. With the exception of Star Travel and Net2Phone, 18 representing 34% and 20% of gross revenue, respectively, no other single advertiser utilizing banner ads or sponsorship agreements amounted to or exceeded 10% of total gross revenue. Sponsor revenues are recognized ratably over the term of the agreement. During the three months ended March 31, 2000, we recognized $112,146 (restated) of barter revenue which is included in the amounts noted above. OPERATING EXPENSES PRODUCT AND CONTENT DEVELOPMENT EXPENSES. Our product and content development expenses increased 809% to $1.7 million for the three months ended March 31, 2000 from $187,000 for the three months ended March 31, 1999. The period-to-period increase was principally attributable to: - an increase in personnel costs relating to the development of content and technological support to $839,000 for the three months ended March 31, 2000 from $68,000 for the three months ended March 31, 1999; - an increase in expenses for telecommunications links to $143,000 for the three months ended March 31, 2000 from $119,000 for the three months ended March 31, 1999; and - an increase in third-party content and development expenses to $579,000 for the three months ended March 31, 2000 from zero for the three months ended March 31, 1999. ADVERTISING AND MARKETING EXPENSES. Our marketing and sales expenses increased 238% to $7.1 million (restated) for the three months ended March 31, 2000 from $2.1 million for the three months ended March 31, 1999. This increase was principally attributable to: - an increase in marketing and sales personnel costs to $598,000 for the three months ended March 31, 2000 from $30,000 for the three months ended March 31, 1999; - an increase in the amortization of advertising agreements amounting to $2.4 million (restated) for the three months ended March 31, 2000 from $423,000 for the three months ended March 31, 1999; - an increase in advertising expenditures amounting to $2.8 million expended on the maintenance of brand awareness for the three months ended March 31, 2000 from $1.2 million for the three months ended March 31, 1999; and - the initial expenditures related to the NetZero campaign amounting to $2.0 million, comprised of $1.2 million in production expenses and $750,000 for CD distribution and other related expenses. GENERAL AND ADMINISTRATIVE EXPENSES. Our general and administrative expenses increased 21% to $1.7 million for the three months year ended March 31, 2000 from $1.4 million for the three months ended March 31, 1999. This increase was principally attributable to an increase in professional fees to $407,000, in depreciation and rent to $312,000 and an increase in other office and related expenses to $490,000 for the three months ended March 31, 2000 from $150,000, $77,000 and $123,000 for the three months ended March 31, 1999. These increases were partially offset by a 96% decrease in stock based compensation to $21,000 for the three months ended March 31, 2000 compared to $479,000 for the three months ended March 31, 1999. Stock Based compensation for the three months ended March 31, 2000 is comprised of expense recognized in accordance with APB Opinion No. 25, for various employee stock options vesting over time. The expense recognized for the three months ended March 31, 1999 consisted primarily of employee stock options vesting immediately. 19 AMORTIZATION OF GOODWILL. During the three months ended March 31, 2000, the Company completed the acquisition of eTrato.com, credito.com and RealEstateEspanol.com. These three acquisitions were accounted for using the purchase method of accounting. The Company recorded approximately $21.0 million of goodwill in relation to these acquisitions, amortized over a period of three years. Amortization of goodwill amounted to $1.1 million for the three months ended March 31, 2000. OTHER INCOME (EXPENSE). Other income (expense), which primarily consists of interest income, unrealized gains or losses and short-term gains or losses on trading securities, offset by interest expense increased 6252% to $283,000 for the three months ended March 31, 2000 from $(4,600) for the three months ended March 31, 1999. This change resulted primarily from interest income and short-term gains on trading securities purchased with the remaining proceeds of the June 1999 initial public offering. LIQUIDITY AND CAPITAL RESOURCES We have substantial liquidity and capital resource requirements, but limited sources of liquidity and capital resources. We have generated net losses and negative cash flows from our inception and anticipate that we will experience substantial and increasing net losses and negative cash flows for at least the next several years. As we implement our strategy and seek to take advantage of our market opportunity, we anticipate that our liquidity and capital resource requirements will increase significantly. From our inception to date, we have relied principally upon equity investments to support the development of our business. We expect to continue to rely mainly on further equity offerings to provide financing. As of March 31, 2000, we had $5.1 million in cash and cash equivalents and $17.3 million in short-term investments. These resources are principally the remaining funds generated from our June 24, 1999 Initial Public Offering, which raised approximately $42.4 million, net of offering costs and an additional $6.3 million, net of offering costs, from the exercise in July 1999 of an option granted to our underwriters to cover overallotments from the IPO. In March 2000, Gateway purchased a 7.6% equity stake in the Company for $9.0 million (restated). Net cash used in operating activities was $11.1 million (restated) for the three months ended March 31, 2000 and $2.4 million for the three months ended March 31, 1999. Net cash used by operations for the three months ended March 31, 2000 consisted of a net loss of $10.6 million (restated), $4.8 million net proceeds from the sale of trading securities, an increase in prepaid expenses of $2.6 million (restated), an increase in other assets of $6.7 million and a decrease in accrued liabilities of $357,000 (restated) offset by non-cash expenses for the depreciation of fixed assets and amortization of $1.4 million (restated), and an increase in accounts payable of $1.2 million (restated). Net cash provided by (used in) investing activities amounted to $96,000 for the three months ended March 31, 2000 and ($545,000) for the three months ended March 31, 1999. The increase is attributed to $579,000 in net cash obtained from newly acquired subsidiaries, partially offset by $162,000 of fixed asset purchases and $239,000 expended for deferred acquisition costs. Net cash provided by financing activities was $9.1 million (restated) for the three months ended March 31, 2000 and $1.3 million for the three months ended March 31, 1999. The increase is primarily attributed to the proceeds received from Gateway's $9.0 million (restated) purchase of a 7.6% equity stake in the Company and 20 $347,000 from the exercise of stock options, partially offset by the $234,000 payment of a note payable assumed in the acquisition of RealEstateEspanol.com. On March 30, 2000, Gateway, ranked number one in 1999 in U.S. consumer PC revenue, invested $9.0 million (restated) in exchange for 1,428,571 shares of common stock which represents 7.6% of quepasa.com's outstanding stock. quepasa also committed itself to use a substantial portion of the proceeds of Gateway's investment to further its community and educational initiative program, which will include distributing computers purchased from Gateway accompanied with Spanish language technical support, providing Internet access, and training for quepasa's subscribers. The Company will partner with Gateway in joint marketing and promotional programs targeting the U.S. Hispanic community. Currently, we have commitments under non-cancelable operating leases for office facilities and equipment requiring payments of $258,000 for the remainder of 2000. We paid $1.5 million in the three months ended March 31, 2000 and are obligated to pay an additional $500,000 in 2000 under an agreement with Estefan Enterprises, Inc. In addition, if the closing price of our common stock on September 1, 2000 is less than $12.75 per share Estefan Enterprises will have the option to return 156,863 shares of our common stock (issued to Estefan Enterprises in September, 1999) to us in exchange for $2.0 million cash. We are required to pay $188,000 for the remainder of 2000, pursuant to the terms of our search technology licensing agreement with Inktomi which extends through September 2001. The Inktomi agreement may require additional payments based upon the level of use; however, we believe the additional payments, if any, will not be material. Including the Inktomi agreement, we are obligated to pay approximately $1.2 million for the remainder of 2000 for technology and content used on our Web site portal furnished by service providers such as Reuters, Zacks, Associated Press, STATS, Inc., EFE News Services. We are required to pay $1.5 million under our sponsorship agreement with the Arizona Diamondbacks for the 2000 baseball season. In addition, under a one-year agreement with NetZero, Inc. ("NetZero"), they will provide free internet access along with our content to the U.S. Hispanic market and we are obligated to pay a fee for their subscribers who accessed our Web site. This fee ranges from $.10 to $.15 per user session (user session fees), however, we have made an advance payment to NetZero of $1.0 million and are required to maintain this advance payment deposit amount at least equal to 125% of the prior month amount due for the user session fees. We are also committed to spend at least $1.0 million for the production and distribution of CD's containing the customized NetZero service. In the event we have paid an aggregated of $6.0 million for user session fees we are obligated to spend an additional $1.0 million for CD's. We are also obligated under an agreement with a company owned by a former Director to provide advertising and marketing advisory services through July 2000. The total remaining commitment under this agreement is $160,000 in 2000. We recognize the expense related to advertising, content and technology agreements in a manner consistent with the timing of the services provided for under the terms of the respective agreements. Generally, the services are received evenly over the terms of the agreements. We expect to continue to incur costs, particularly sales, marketing and advertising costs, product content and development costs, general and administrative costs and technology and equipment purchase costs during the second, third and fourth quarters of 2000 in order to execute our strategic objectives. We expect to expend the largest portion of our existing capital on sales, marketing and advertising expenses and product content and development costs and do not expect sufficient revenue to be realized to offset these costs. We believe that our cash on hand, along with our planned cost cutting measures, will be sufficient to meet our working capital and capital expenditure needs through the second quarter of 2001, however, we believe it will be necessary for us to raise additional capital to ensure our continued operations beyond the second quarter of 2001. In the event we are not able to raise capital our ability to continue operations will be severely impacted and could include a significant reduction in our advertising spending, a reduction in our personnel and other spending cuts which could have an adverse effect on the Company. On May 9, 2000 we announced that we would be reducing our workforce by approximately one third over the next 60 days as part of management's effort to utilize its assets more efficiently. The Company will record the costs associated with the workforce reduction in the second fiscal quarter. There can be no assurance that we will be successful in raising the necessary funds or that these funds will be on terms which are beneficial to us. 21 SYSTEM ISSUES We have successfully completed our migration from a Windows NT-based platform to a Sun Solaris-based platform in March of 2000. We depend on the delivery of information over the Internet, a medium that depends on information contained primarily in electronic format, in databases and computer systems maintained by third parties and us. A disruption of third-party systems or our systems interacting with these third party systems could prevent us from delivering search results or other services in a timely manner, which could materially adversely affect our business and results of operations. RISK FACTORS You should carefully consider the risks described below. OUR OPERATING HISTORY IS EXTREMELY LIMITED We were incorporated in June 1997 and have generated no significant revenue to date. Accordingly, we have no operating history upon which an investor can evaluate us, and our prospects are subject to the risks and uncertainties encountered by companies that are in the early stages of operation and particularly companies which operate in the new and rapidly evolving Internet market. These risks include, among others, our ability to: - expand the contents and services on our Web site; - maintain and increase levels of traffic on our Web site; - increase awareness of our quepasa.com brand; - attract advertisers and sponsors to our Web site; - generate significant revenues from e-commerce; - respond effectively to competitive pressure; - maintain our current, and develop new, strategic relationships; - recruit and retain personnel, including sales, content and technology personnel; - anticipate and adapt to developing markets; - upgrade and develop our systems and infrastructure; - respond to any failure of our network and to handle efficiently our Web traffic; and - manage our rapidly expanding operations. If we are unsuccessful in addressing these and other risks, our business, financial condition and results of operations will be materially and adversely affected. WE EXPECT FUTURE LOSSES AND WILL NEED MORE CAPITAL We have never been profitable. As of March 31, 2000, we had an accumulated deficit of approximately $46.4 million (restated). Our limited operating history and the uncertainty of the Internet market in which we operate our business make any prediction of our future results of operations difficult or impossible. We expect to make significant expenditures in marketing and advertising and content development. We also expect our expenses to increase from the acquisitions of eTrato.com, credito.com and realestateespanol.com. We do not expect that our revenue will cover our expenses in the foreseeable future. As a result, we will continue to incur significant losses and will need to raise additional capital. We cannot assure 22 that we will be able to raise additional capital and we do not know what the terms of such capital raising would be. Any future sale of our equity securities would dilute the ownership and control of our stockholders. WE ARE SUBJECT TO RISKS ASSOCIATED WITH ACQUISITIONS In the first quarter of 2000, we acquired the stock of three companies. As part of our long-term business strategy, we continually evaluate strategic acquisitions of businesses. Acquisitions often involve a number of special risks, including the following: - we may experience difficulty integrating acquired operations and personnel; - we may be unable to retain acquired subscribers; - the acquisition may disrupt our ongoing business; - we may not be able to successfully incorporate acquired technology and rights into our offerings and maintain uniform standards, controls, procedures, and policies; - the businesses we acquire may fail to achieve the revenues and earnings we anticipated; - we may ultimately be liable for contingent and other liabilities, not previously disclosed to us, of the companies that we acquire; and - our resources may be diverted in asserting and defending our legal rights. We may not successfully overcome problems encountered in connection with our recent and potential future acquisitions. In addition, an acquisition could materially adversely affect our operating results by: - causing us to incur additional debt; - forcing us to accelerate amortization of expenses related to goodwill and other intangible assets; - diluting our stockholders' ownership interest. WE WILL BE UNABLE TO GENERATE SUFFICIENT REVENUE IF OUR TARGET AUDIENCE DOES NOT ACCEPT OUR PRODUCTS AND SERVICES We have been promoting our site for less than one year and we cannot give assurances that the Spanish-speaking population will accept our products and services or that we will attract repeat users to our Web site. Because the market for our products and services is new and evolving, it is difficult to predict the future growth rate, if any, and the size of the market we have targeted. If the market develops more slowly than we expect or becomes saturated with competitors, or if our products and services are not accepted by the market, we will be unable to generate enough revenue to offset our expenses and to earn profits. OUR INABILITY TO MAINTAIN THE QUEPASA.COM BRAND WILL SIGNIFICANTLY REDUCE OUR REVENUE We believe that maintaining the quepasa.com brand is of critical importance to our efforts to attract and expand our user base and our advertising, sponsorships and e-commerce revenues. We also believe that brand recognition will become more important due to the increasing number of Internet sites. Promotion and enhancement of the quepasa.com brand will depend largely on our success in providing high quality products and services and Web site content that is of interest to the worldwide Spanish-speaking population. We cannot assure that success. Failure to 23 develop brand loyalty among our users could result in our being unable to generate enough revenue to offset our expenses and to earn profits. WE WILL BE ADVERSELY AFFECTED IF THE INTERNET DOES NOT BECOME A MORE WIDELY ACCEPTED AS A MEDIUM FOR ADVERTISING AND E-COMMERCE We will need revenue from the sale of advertisements and sponsorships on our Web pages and from e-commerce transactions to offset expenses. At the present time, Web advertisers generally enter into only short-term advertising contracts. Because Web site advertising is a new phenomenon, few advertisers have significant experience with the Web as an advertising medium. Consequently, many advertisers have not devoted a substantial portion of their advertising expenditures to Web-based advertising, and may not find Web-based advertising to be effective for promoting their products and services as compared to traditional print and broadcast media. No standards have yet been widely accepted for the measurement of the effectiveness of Web-based advertising, and we can give no assurance that such standards will be developed or adopted sufficiently to sustain Web-based advertising as a significant advertising medium. We cannot give assurances that banner advertising, the predominant revenue producing mode of advertising currently used on the Web, will be accepted as an effective advertising medium or that we can effectively transition to any other forms of Web-based advertising, should they develop. Software programs are available that limit or remove advertisements from an Internet user's desktop. This software, if generally adopted by users, may materially and adversely affect Web-based advertising. OUR WEB SITE OPERATIONS COULD BE IMPAIRED IF WE LOSE THE SERVICES OF THIRD PARTY TECHNOLOGY AND CONTENT PROVIDERS Our business depends upon third parties, including providers of technology, infrastructure, content and features. We supplement our Web site directory listings with Web search results provided by Inktomi under a non-exclusive agreement. We depend upon Inktomi for ongoing maintenance and technical support to ensure accurate and rapid presentation of search results to users of our Web site. Termination of our relationship with Inktomi or Inktomi's failure to renew our agreement upon expiration could result in substantial additional costs to us in developing or replacing technology. We also rely on GTE for our Internet and Critical Path for our e-mail connections. Any interruption in the Internet access provided by GTE or any other provider of access could disrupt our Web site operations and impair relations with our users. We license content, including technology and related databases, from third parties for portions of our quepasa.com Web site, including news from Associated Press, Reuters, Hispanic Business and EFE News Services, weather from WeatherLabs, stock quotes and other stock information from Zacks Investment Research and sports scores and statistics from STATS, Inc. Any errors, delays or failures experienced in connection with these third party technologies and services could have a negative effect on our relationship with users of our Web site, could materially and adversely affect our brand and our business and could subject us to liability to third parties for business negligence such as defamation or libel. SYSTEM FAILURE COULD DISRUPT OUR WEB SITE OPERATIONS The continued and uninterrupted performance of our hardware and software is critical to our reputation and our success in attracting traffic to our Web site. Users of our site and our services, such as our e-mail services, may become dissatisfied by system failures that may limit our Web site services. Sustained or repeated system failures could significantly reduce the traffic on our Web site and may impair our reputation and brand name. Our operations depend on our ability to protect our computer systems from damage from fire, power loss, water damage, telecommunications failures, vandalism and other malicious acts, and similar unexpected adverse events. The number of pages of information transmitted over our network, commonly referred to as "page views," has continued to increase over time. We are actively trying to increase our level of page views. As a result, our network must 24 accommodate a high volume of traffic, often at unexpected times. We have experienced periodic capacity constraints in terms of our ability to serve our increasing user volumes. In addition, we have had reliability problems with two of our internally developed applications, chat and e-mail, and as a result we are currently outsourcing these two applications. We are in the process of improving our network infrastructure to ensure that we will be able to handle future increases in traffic. We have migrated our platform and our applications to a Unix platform using Sun Microsystems servers. Any break in the continuous operations of our network could have a material adverse effect on our operating expenses, our brand and our business. We may, from time to time, experience interruptions due to several factors including hardware failures, unsolicited bulk e-mail and operating system failures. Because our revenues depend on the number of users of our network, we will be adversely affected if we experience frequent or long system delays or interruptions. If delays or interruptions continue to occur our users could perceive our network as being unreliable, traffic on our Web site could deteriorate and our brand could be adversely affected. Any failure on our part to minimize or prevent capacity constraints or system interruptions could have an adverse effect on our brand and our business. We may not carry enough business interruption insurance to compensate for losses that may occur as a result of any of these adverse events. We also depend upon Internet browsers and Internet service providers that provide users with access to the Internet and our Web site. Users may experience difficulties due to system failures unrelated to our systems. Any disruption in Internet access by Internet service providers and other third party access providers, or any failure of such providers to handle higher volumes of user traffic, could disrupt our Web site operations and impair relations with our users. OUR MANAGEMENT IS INEXPERIENCED AND MAY NOT BE ABLE TO MANAGE OUR GROWTH Several executive officers and members of our board of directors joined us in 1999, our management team has worked together for less than a year and none of our executive officers has extensive experience managing a rapidly growing business enterprise. Any growth we experience will place a significant strain on our management and financial resources. Any inability of our management to manage growth effectively could increase our operating expenses, impair our marketing efforts and limit the development of our Web site. GROWTH OF OUR WEB SITE MAY BE LIMITED BY GOVERNMENTAL REGULATIONS Government regulation has not materially restricted use of the Internet in our markets to date. However, the legal and regulatory environment pertaining to the Internet remains relatively undeveloped and may change. New laws and regulations could be adopted, and existing laws and regulations could be applied to the Internet and, in particular, to e-commerce. New laws and regulations may be adopted with respect to the Internet covering, among other things, sales and other taxes, user privacy, pricing controls, characteristics and quality of products and services, consumer protection, cross-border commerce, libel and defamation, intellectual property matters and other claims based on the nature and content of Internet materials. Any laws or regulations adopted in the future affecting the Internet could subject us to substantial liability. Such laws or regulations could also adversely affect the growth of the Internet generally, and decrease the acceptance of the Internet as a communications and commercial medium. In addition, the growing use of the Internet has burdened the existing telecommunications infrastructure. Areas with high Internet use relative to the existing telecommunications structure have experienced interruptions in phone service leading local telephone carriers to petition regulators to govern Internet service providers and impose access fees on them. Such regulations, if adopted in the United States or other places, could increase significantly the costs of communicating over the Internet, which could in turn decrease the demand for our products and services. The adoption of various proposals to impose additional taxes on the sale of goods and services through the Internet could also reduce the demand for Web-based commerce. WE MAY FACE LIABILITY FOR INFORMATION CONTENT AND COMMERCE-RELATED ACTIVITIES 25 Because materials may be downloaded by the services that we operate or facilitate and the materials may subsequently be distributed to others, we could face claims for errors, defamation, negligence, or copyright or trademark infringement based on the nature and content of such materials. We could also be exposed to liability because of the listings that we select and make available through our Web site, or through content and materials posted by users in chat room and message board services that we provide. We could face personal injury or other product liability claims arising from the use of products sold through our Web site. We offer e-mail services, which expose us to potential liabilities or claims resulting from unsolicited e-mail, lost or misdirected messages, illegal or fraudulent use of e-mail or interruptions or delays in e-mail service. Even to the extent that claims made against us do not result in liability, we may incur substantial costs in investigating and defending such claims. Although we carry general liability insurance, our insurance may not cover all potential claims to which we are exposed or may not be adequate to indemnify us for all liabilities that may be imposed. Any imposition of liability that is not covered by insurance or is in excess of insurance coverage could have a material adverse effect on our financial condition. In addition, the increased attention focused on liability issues as a result of these lawsuits and legislative proposals could impact the overall growth of Internet use. CONCERNS ABOUT SECURITY OF E-COMMERCE TRANSACTIONS AND CONFIDENTIALITY OF INFORMATION ON THE INTERNET MAY REDUCE THE USE OF OUR WEB SITE AND IMPEDE OUR GROWTH A significant barrier to e-commerce and confidential communications over the Internet has been the need for security. Internet usage could decline if any well-publicized compromise of security occurred. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by these breaches. Unauthorized persons could attempt to penetrate our network security. If successful, they could misappropriate proprietary information or cause interruptions in our services. As a result, we may be required to expend capital and resources to protect against or to alleviate these problems. Security breaches could have a material adverse effect on our business, financial condition and results of operations. COMPETITION FOR INTERNET USERS MAY LIMIT TRAFFIC ON, AND THE VALUE OF OUR WEB SITE The market for Internet products and services and the market for Internet advertising and electronic commerce arrangements are extremely competitive, and we expect that competition will continue to intensify. There are many companies that provide Web sites and online destinations targeted to Spanish-language Internet users. Competition for visitors, advertisers and e-commerce partners is intense and is expected to increase significantly in the future because there are no substantial barriers to entry in our market. We believe that the principal competitive factors in these markets are name recognition, distribution arrangements, functionality, performance, ease of use, the number of services and features provided and the quality of support. Our primary competitors are other companies providing portal or other online services, especially to Spanish-language Internet users such as StarMedia, Terra Network, El Sitio, Yahoo! Espanol, America Online Latin America, Yupi, Prodigy and Microsoft networks in Latin America, Mexico and Spain. Most of our competitors, as well as a number of potential new competitors, have significantly greater financial, technical and marketing resources than we do. Our competitors may offer Internet products and services that are superior to ours or that achieve greater market acceptance. There can be no assurance that competition will not limit traffic on, and the value of, our Web site. TECHNOLOGICAL CHANGES COULD IMPAIR OUR ABILITY TO COMPETE AND SUBJECT US TO SIGNIFICANT EXPENDITURES The market for Internet products and services is characterized by rapid technological developments, frequent new product and service introductions and evolving industry standards. The emerging character of these products and services and their rapid evolution will require that we continually improve the performance, features and reliability of our Internet content, particularly in response to competitive offerings. There can be no assurance that we will be successful in 26 responding quickly, cost effectively and sufficiently to these developments. In addition, the widespread adoption of new Internet technologies or standards could require substantial expenditures by us to modify or adapt our Web site and services and could fundamentally affect the character, viability and frequency of Web-based advertising, either of which could have a material adverse effect on our business. In addition, new Internet services or enhancements offered by us may contain design flaws or other defects that could require costly modifications or result in a loss of consumer confidence. OUR STOCK PRICE IS HIGHLY VOLATILE In the past, our common stock has traded at volatile prices. We believe that the market prices will continue to be subject to significant fluctuations due to various factors and events that may or may not be related to our performance. If the market value of our common stock decreased substantially, we could be delisted from the Nasdaq National Market. Consequently, you could find it difficult or impossible to sell your stock or to determine the value of your stock. In addition, the stock market has from time to time experienced significant price and volume fluctuations, which have particularly affected the market prices of the stocks of Internet-sector companies and which may be unrelated to the operating performance of such companies. Furthermore, our operating results and prospects from time to time may be below the expectations of public market analysts and investors. Any such event could result in a material decline in the price of your stock. WE HAVE NO INTENTION TO PAY DIVIDENDS We have never paid any cash dividends on our common stock. We currently intend to retain all future earnings, if any, for use in our business and do not expect to pay any dividends in the foreseeable future. FUTURE SALES OF OUR COMMON STOCK OR SHARES ISSUABLE UPON EXERCISE OF STOCK OPTIONS COULD ADVERSELY AFFECT OUR STOCK PRICE AND OUR ABILITY TO RAISE FUNDS IN NEW STOCK OFFERINGS As of the date of the original filing, we had 18,833,305 shares of common stock outstanding. Sale of substantial amounts of common stock, or the perception that sales could occur, could reduce the market price of the common stock. At that time, there were outstanding stock options or common stock purchase warrants to acquire 6,561,359 of common stock at exercise prices ranging from $1 to $19.80 per share, including 2,565,313 common stock purchase warrants subject to demand and piggy-back registration rights. EMPLOYEES As of March 31, 2000, we had 104 employees, including our five executive officers. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK We do not have any derivative financial instruments as of March 31, 2000. Our interest income is sensitive to changes in the general level of interest rates. In this regard, changes in interest rates can affect the interest earned on our cash equivalents. To mitigate the impact of fluctuations in interest rates, we generally enter into fixed rate investing arrangements. As a result, we believe that the market risk arising from holdings of our financial instruments is not material. We do not believe that we are exposed to any significant market risk for market rate changes to our notes payable. 27 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On May 9, 2000 the Company announced that it would be reducing its workforce by approximately one third over the next 60 days as part of management's effort to further enhance the Company's competitive position and utilize its assets more efficiently. The Company will record the costs associated with the workforce reduction in its second fiscal quarter. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. The exhibits listed in the accompanying Index to Exhibits are filed as part of this Report on Form 10-Q/A. b. Reports on Form 8-K: (1) On January 21, 2000, the Company filed a report on Form 8-K announcing that it had replaced Deloitte & Touche LLP with KPMG LLP as its independent accountants. (2) On January 28, 2000, the Company filed a report on Form 8-K announcing the closing of its acquisition of credito.com, Inc. (3) On February 11, 2000, the Company filed a report on Form 8-K announcing the closing of its acquisition of eTrato.com, Inc. (4) On March 17, 2000, the Company filed a report on Form 8-K announcing the closing of its acquisition of RealEstateEspanol.com, Inc. 28 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the city of Phoenix, state of Arizona, on August 15, 2001. quepasa.com, inc. By: /s/ Gary L. Trujillo -------------------------------------- Name: Gary L. Trujillo Title: President, Chief Executive Officer and Chairman of the Board of Directors (Principal Executive Officer) By: /s/ Robert J. Taylor -------------------------------------- Name: Robert J. Taylor Title: Chief Financial Officer 29 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBITS - ------- --------------------------------- 20.1 News Release dated May 9, 2000 (1) 27.1 Financial Data Schedule (1)
30 (1) Previously filed with the Registrant's Quarterly Report on Form 10-Q dated May 15, 2000. 31 -----END PRIVACY-ENHANCED MESSAGE-----