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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 10-Q
 
(MARK ONE)
 
x
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
 
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)
 
 
NEVADA
(State or Other Jurisdiction of
Incorporation or Organization)
  
84-0879433
(I.R.S. Employer Identification No.)
     
410 N. 44th Street, Suite 350,
Three Gateway Ctr.
Phoenix, AZ
(Address of Principal Executive Offices)
  
85008
(Zip Code)
 
 
Registrant’s Telephone Number, Including Area Code: 602-231-9002
 
Securities Registered Pursuant to Section 12(b) of the Act:
 
 
Title of Each Class
     
Name of Exchange 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 June 30, 2002 was approximately 17,163,291 shares.
 

Table of Contents
QUEPASA.COM INC. AND SUBSIDIARIES
 
INDEX
 
PART I.    FINANCIAL INFORMATION
 
Item 1.
   
Condensed Consolidated Financial Statements
     
       
1
       
2
       
3
       
4
Item 2.
      
6
Part II.
   
OTHER INFORMATION
     
Item 1.
      
10
Item 2.
      
10
Item 3.
      
10
Item 4.
      
10
Item 5.
      
11
Item 6.
      
11
  
12
Exhibit 99
   
Certification
     

Table of Contents
 
QUEPASA.COM, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
 
Item 1.    Condensed Consolidated Financial Statements
 
    
June 30,
2002
     
December 31, 2001
  
    
(Unaudited)
         
Assets
Current assets
                  
Cash and cash equivalents
   
$
1,348,257
 
   
$
3,052,147
 
Other receivable
   
 
229,032
 
   
 
113,019
 
Note receivable
   
 
—  
 
   
 
500,000
 
Prepaid expenses
   
 
171,062
 
   
 
251,509
 
Other current assets
   
 
3,045
 
   
 
—  
 
    
  
    
$
1,751,396
 
   
$
3,916,675
 
    
  
Liabilities and Stockholders’ Equity
Current liabilities
                  
Accounts payable
   
$
12,650
 
   
$
75,107
 
Accrued liabilities
   
 
1,461
 
   
 
120,807
 
Arbitration settlement accrual
   
 
—  
 
   
 
200,000
 
Deferred revenue
   
 
—  
 
   
 
20,089
 
    
  
Total current liabilities
   
 
14,111
 
   
 
416,003
 
    
  
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; 17,163,291 shares issued and outstanding at March 31, 2002 and December 31, 2001, respectively
   
 
17,763
 
   
 
17,763
 
Additional paid-in capital
   
 
104,454,267
 
   
 
104,454,267
 
Accumulated deficit
   
 
(102,734,745
)
   
 
(100,971,358
)
    
  
Total stockholders’ equity
   
 
1,737,285
 
   
 
3,500,672
 
    
  
    
$
1,751,396
 
   
$
3,916,675
 
    
  
 
 
See accompanying notes to condensed consolidated financial statements.
 

1

Table of Contents
 
QUEPASA.COM, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
    
For the Six Months Ended
June 30,
     
For the Three Months
Ended June 30,
  
    
2002
     
2001
     
2002
     
2001
  
Gross revenue
   
$
20,089
 
   
$
147,200
 
   
$
—  
 
   
$
30,967
 
Less commissions
   
 
—  
 
   
 
(26,361
)
   
 
—  
 
   
 
—  
 
    
  
  
  
Net revenue
   
 
20,089
 
   
 
144,564
 
   
 
—  
 
   
 
30,967
 
    
  
  
  
Operating expenses
                                    
Product and content development expenses
   
 
—  
 
   
 
375,943
 
   
 
—  
 
   
 
41,375
 
Advertising and marketing expenses
   
 
—  
 
   
 
421,845
 
   
 
—  
 
   
 
53,565
 
General and administrative expenses
   
 
1,809,645
 
   
 
1,654,974
 
   
 
444,012
 
   
 
791,270
 
    
  
  
  
Total operating expenses
   
 
1,809,645
 
   
 
2,452,762
 
   
 
444,012
 
   
 
886,210
 
    
  
  
  
Loss from operations
   
 
(1,893,556
)
   
 
(2,308,198
)
   
 
(444,012
)
   
 
(855,243
)
Other income (expense)
                                    
Interest expense
   
 
—  
 
   
 
(1,939
)
   
 
—  
 
   
 
(884
)
Interest income and other
   
 
26,169
 
   
 
173,945
 
   
 
6,000
 
   
 
73,092
 
Realized and unrealized loss on trading securities
   
 
—  
 
   
 
(14,204
)
   
 
—  
 
   
 
—  
 
    
  
  
  
Net other income
   
 
26,169
 
   
 
157,802
 
   
 
6,000
 
   
 
72,208
 
    
  
  
  
Net loss
   
$
(1,763,387
)
   
$
(2,150,396
)
   
$
(438,012
)
   
$
(783,035
)
    
  
  
  
Net loss per share, basic and diluted
                                    
Loss before cumulative effect of a chance in accounting principle and net loss per share, basic and diluted
   
$
(.10
)
   
$
(.12
)
   
$
(.03
)
   
$
(.04
)
    
  
  
  
Weighted average number of shares outstanding, basic and diluted
   
 
17,163,291
 
   
 
17,763,291
 
   
 
17,163,291
 
   
 
17,763,291
 
    
  
  
  
 
 
See accompanying notes to condensed consolidated financial statements.

2

Table of Contents
QUEPASA.COM, INC. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 
    
For the Six Months Ended
June 30,
  
    
2002
     
2001
  
Cash flows from operating activities
                  
Net loss
   
$
(1,763,387
)
   
$
(2,150,396
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities
                  
Depreciation and amortization
   
 
—  
 
   
 
103,244
 
Stock based compensation
   
 
—  
 
   
 
28,767
 
Allowance for note receivable
   
 
500,000
 
   
 
—  
 
Realized and unrealized loss on trading securities
   
 
—  
 
   
 
14,204
 
Increase (decrease) in cash resulting from changes in assets and liabilities
                  
Sale of trading securities, net
   
 
—  
 
   
 
2,379,760
 
Accounts receivable
   
 
(116,013
)
   
 
226,993
 
Prepaid expenses
   
 
80,447
 
   
 
140,760
 
Other receivable and other assets
   
 
(3,045
)
   
 
1,140,291
 
Accounts payable
   
 
(62,457
)
   
 
(168,578
)
Accrued liabilities
   
 
(319,346
)
   
 
(64,727
)
Deferred revenue
   
 
(20,089
)
   
 
(121,935
)
    
  
Net cash provided by (used in) operating activities
   
 
(1,703,890
)
   
 
1,528,383
 
    
  
Cash flows from investing activities
                  
Proceeds from assets held for sale
   
 
—  
 
   
 
277,000
 
    
  
Net cash provided by investing activities
   
 
—  
 
   
 
277,000
 
    
  
Net increase (decrease) in cash and cash equivalents
   
 
(1,703,890
)
   
 
1,805,383
 
Cash and cash equivalents, beginning of period
   
 
3,052,147
 
   
 
3,940,232
 
    
  
Cash and cash equivalents, end of period
   
$
1,348,257
 
   
$
5,745,615
 
    
  
Supplemental disclosure of non-cash operating, financing activities:
                  
Interest paid
   
$
—  
 
   
$
1,939
 
    
  
 
 
See accompanying notes to condensed consolidated financial statements.

3

Table of Contents

QUEPASA.COM, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – The Company
 
quepasa.com, inc. (the “Company” or “quepasa”) is a Bilingual (Spanish/English) Internet portal and online community focused on the United States Hispanic market. We provide users with information and content centered around the Spanish language. Because the language preference of many U.S. Hispanics is English, we also offer our users the ability to access information in the English language.
 
Note 2 – Liquidity
 
To date, the Company’s expenses have significantly exceeded revenue and there is no assurance that the Company will earn profits in the future. The Company’s independent accountants issued their auditors’ report dated February 27, 2002 stating that the Company has suffered recurring losses from operations, has an accumulated deficit, has been unable to successfully execute its business plan, and is considering alternatives for the Company, all of which raise substantial doubt about its ability to continue as a going concern.
 
By March 31, 2002, the Company downsized its workforce to two individuals and disposed of certain assets. Management believes that as a result of its significant cost-cutting measures, there is sufficient cash to operate for the next twelve months assuming current spending levels. Management of the Company and the Board of Directors continue to evaluate alternatives for the Company including disposing of assets and investigating merger opportunities.
 
Note 3 – Basis of Presentation
 
The Company’s 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 the Company’s 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. The Company’s results of operations for interim periods are not necessarily indicative of the results to be expected for a full fiscal year. The Company’s condensed consolidated balance sheet as of December 31, 2001 was derived from its audited consolidated financial statements as of that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States of America. The Company suggests that these condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements included in its Annual Report on Form 10-K as of and for the year ended December 31, 2001.

4

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QUEPASA.COM, INC. AND SUBSIDIARIES
 
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

 
Note 4 – Summary of Significant Accounting Policies
 
Uses of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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.
 
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 six months ended June 30, 2002 and 2001, one and two customers accounted for 100% and 69% of gross revenue, respectively.
 
Note 5 – Commitments
 
Employment Agreements
 
In connection with the termination of an employment agreement, the Company was required to pay a severance payment of $100,000 in the first quarter of 2002. In addition all of the employees options (totaling 193,334) became immediately vested.
 
Contingencies