##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-QSB/A
 Amendment No. 1
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 For the transition period from  to
 Commission File Number: 001-33105
 
 QUEPASA CORPORATION
 (Exact name of registrant as specified in its charter)
 
 NEVADA
    
    86-0879433(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 7550 E. Redfield Rd., Suite A
Scottsdale, AZ 85260
(Address of principal executive offices)
 (480) 348-2665
(Issuers telephone number)
 
 þ o
 o þ
  o þ




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##### 



QUEPASA CORPORATION AND SUBSIDIARIES
 INDEX
 PageExplanatory Note
    
    
    1PART I. FINANCIAL INFORMATIONItem 1
    
    Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2007 and December 31, 2006 (as restated)
    
    
    3Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2007 and 2006 (as restated)
    
    
    4Condensed Consolidated Statement of Changes in Stockholders' Equity for the Six Months Ended June 30, 2007 (as restated)
    
    
    5Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2007 and 2006 (as restated)
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2
    
    Management's Discussion and Analysis or Plan of Operation
    
    
    13Item 3
    
    Controls and Procedures
    
    
    20PART II. OTHER INFORMATIONItem 6
    
    Exhibits
    
    
    22SIGNATURES
    
    
    23INDEX TO EXHIBITSEX-31.3EX-31.4EX-32.3EX-32.4




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Explanatory Note  Restatement of Financial Information; Going Concern Qualification
    For the Six Months Ended
    
    
    For the Three Months Ended(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)June 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Net loss, as previously reported
    
    $
    ( 6,799
    )
    
    $
    (7,891
    )
    
    $
    ( 3,643
    )
    
    $
    (1,058
    )Total adjustments
    
    
    ( 77
    )
    
    
    (2,089
    )
    
    
    ( 28
    )
    
    
    (119
    )Net loss, as restated
    
    $
    ( 6,876
    )
    
    $
    (9,980
    )
    
    $
    ( 3,671
    )
    
    $
    (1,177
    )
  For the Six Months Ended
    
    
    For the Three Months Ended(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)June 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006Net loss per share, as
previously reported
    
    $
    ( 0.56
    )
    
    $
    ( 0.98
    )
    
    $
    ( 0.30
    )
    
    $
    ( 0.13
    )Total adjustments
    
    
    ( 0.00
    )
    
    
    (0.26
    )
    
    
    ( 0.00
    )
    
    
    ( 0.01
    )Net loss per share, as restated
    
    $
    ( 0.56
    )
    
    $
    (1.24
    )
    
    $
    ( 0.30
    )
    
    $
    ( 0.14
    )
  
    
    Part I  Item 1. Financial Statements (Unaudited)
 
    
    Part I  Item 2. Managements Discussion and Analysis or Plan of Operation
 
    
    Part I  Item 3. Controls and Procedures
 
    
    Part II  Item 6. Exhibits
  1




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2




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PART I FINANCIAL INFORMATION
 
 Item 1. Financial Statements (Unaudited)
 
 QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 June 30,
    
    
    December 31,2007
    
    
    2006As restated (1)
    
    
    As restated (1)(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,348,490
    
    
    $
    14,093,811Accounts receivable  trade
    
    
    64,570
    
    
    
    74,355Other current assets
    
    
    241,102
    
    
    
    332,478Total current assets
    
    
    9,654,162
    
    
    
    14,500,644Property and equipment  net
    
    
    1,015,795
    
    
    
    546,481Jet rights  net
    
    
    936,086
    
    
    
    986,457Other assets
    
    
    140,796
    
    
    
    55,102Total assets
    
    $
    11,746,839
    
    
    $
    16,088,684LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    1,234,847
    
    
    $
    711,486Accrued expenses
    
    
    100,372
    
    
    
    92,070Unearned grant income
    
    
    81,042
    
    
    
    94,980Total current liabilities
    
    
    1,416,261
    
    
    
    898,536COMMITMENTS AND CONTINGENCIES (see Note 2)STOCKHOLDERS EQUITY:Preferred stock, $.001 par value; authorized -
5,000,000 shares; none issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value; authorized - 50,000,000
shares; 12,270,761 shares issued and outstanding at
June 30, 2007 and 11,705,861 shares issued and
outstanding at December 31, 2006
    
    
    12,271
    
    
    
    11,706Additional paid-in capital
    
    
    145,287,279
    
    
    
    143,271,109Accumulated deficit
    
    
    (134,970,505
    )
    
    
    (128,094,164
    )Accumulated other comprehensive income
    
    
    1,533
    
    
    
    1,497Total stockholders equity
    
    
    10,330,578
    
    
    
    15,190,148Total liabilities and stockholders equity
    
    $
    11,746,839
    
    
    $
    16,088,684
    3




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QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
 For the Six Months Ended
    
    
    For the Three Months EndedJune 30, 2007
    
    
    June 30, 2006
    
    
    June 30, 2007
    
    
    June 30, 2006As Restated (1)
    
    
    As Restated (1)
    
    
    As Restated (1)
    
    
    As Restated (1)(Unaudited)
    
    
    (Unaudited)REVENUES
    
    $
    125,742
    
    
    $
    248,472
    
    
    $
    73,260
    
    
    $
    83,907OPERATING COSTS AND EXPENSES:Search services
    
    
    
    
    
    
    165,330
    
    
    
    
    
    
    
    47,178Sales and marketing
    
    
    845,274
    
    
    
    139,664
    
    
    
    351,132
    
    
    
    88,994Product and content development
    
    
    2,209,448
    
    
    
    431,474
    
    
    
    1,212,638
    
    
    
    240,609General and administrative
    
    
    4,060,610
    
    
    
    9,465,722
    
    
    
    2,209,578
    
    
    
    871,450Depreciation and amortization
    
    
    196,261
    
    
    
    41,769
    
    
    
    103,658
    
    
    
    20,220TOTAL OPERATING COSTS AND EXPENSES
    
    
    7,311,593
    
    
    
    10,243,959
    
    
    
    3,877,006
    
    
    
    1,268,451LOSS FROM OPERATIONS
    
    
    (7,185,851
    )
    
    
    (9,995,487
    )
    
    
    (3,803,746
    )
    
    
    (1,184,544
    )OTHER INCOME (EXPENSE):Interest income
    
    
    291,824
    
    
    
    16,269
    
    
    
    127,438
    
    
    
    8,024Interest expense
    
    
    
    
    
    
    (824
    )
    
    
    
    
    
    
    (359
    )Gain on sale of property and equipment
    
    
    3,449
    
    
    
    
    
    
    
    3,449
    
    
    
    Other income
    
    
    14,237
    
    
    
    
    
    
    
    1,529
    
    
    
    TOTAL OTHER INCOME (EXPENSE)
    
    
    309,510
    
    
    
    15,445
    
    
    
    132,416
    
    
    
    7,665LOSS BEFORE INCOME TAXES
    
    
    (6,876,341
    )
    
    
    (9,980,042
    )
    
    
    (3,671,330
    )
    
    
    (1,176,879
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (6,876,341
    )
    
    $
    (9,980,042
    )
    
    $
    (3,671,330
    )
    
    $
    (1,176,879
    )NET LOSS PER COMMON SHARE, BASIC AND
DILUTED
    
    $
    (0.56
    )
    
    $
    (1.24
    )
    
    $
    (0.30
    )
    
    $
    (0.14
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED
    
    
    12,189,975
    
    
    
    8,021,436
    
    
    
    12,238,879
    
    
    
    8,155,451NET LOSS
    
    $
    (6,876,341
    )
    
    $
    (9,980,042
    )
    
    $
    (3,671,330
    )
    
    $
    (1,176,879
    )Foreign currency translation adjustment
    
    
    36
    
    
    
    (18,261
    )
    
    
    (8,527
    )
    
    
    (12,559
    )COMPREHENSIVE LOSS
    
    $
    (6,876,305
    )
    
    $
    (9,998,303
    )
    
    $
    (3,679,857
    )
    
    $
    (1,189,438
    )
    4




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QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders Equity
For the Six Months Ended June 30, 2007 (as restated)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    EquityBalanceDecember
31, 2006 (as
restated)
    
    
    
    
    
    $
    
    
    
    
    11,705,861
    
    
    $
    11,706
    
    
    $
    143,271,109
    
    
    $
    (128,094,164
    )
    
    $
    1,497
    
    
    $
    15,190,148Issuance of stock
options for
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    912,097
    
    
    
    
    
    
    
    
    
    
    
    912,097Issuance of common
stock to directors
for compensation
    
    
    
    
    
    
    
    
    
    
    32,500
    
    
    
    33
    
    
    
    191,455
    
    
    
    
    
    
    
    
    
    
    
    191,488Exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    526,000
    
    
    
    526
    
    
    
    883,824
    
    
    
    
    
    
    
    
    
    
    
    884,350Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    6,400
    
    
    
    6
    
    
    
    28,794
    
    
    
    
    
    
    
    
    
    
    
    28,800Foreign currency
translation
adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36
    
    
    
    36Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,876,341
    )
    
    
    
    
    
    
    (6,876,341
    )BalanceJune
30, 2007
(Unaudited)
    
    
    
    
    
    $
    
    
    
    
    12,270,761
    
    
    $
    12,271
    
    
    $
    145,287,279
    
    
    $
    (134,970,505
    )
    
    $
    1,533
    
    
    $
    10,330,578
    5




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QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
 For the Six Months EndedJune 30, 2007
    
    
    June 30, 2006As Restated
    
    
    As Restated(Unaudited)Operating activities:Net loss
    
    $
    (6,876,341
    )
    
    $
    (9,980,042
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    196,261
    
    
    
    41,769Issuance of warrants for strategic initiatives
    
    
    
    
    
    
    7,387,979Issuance of stock options and warrants for compensation
    
    
    912,097
    
    
    
    1,388,656Issuance of common stock to directors for compensation
    
    
    191,488
    
    
    
    Grant income
    
    
    (14,146
    )
    
    
    Gain on sale of property and equipment
    
    
    (3,449
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable  trade
    
    
    9,785
    
    
    
    35,807Other current assets
    
    
    96,139
    
    
    
    (9,493
    )Other assets
    
    
    (90,376
    )
    
    
    (20,850
    )Accounts payable
    
    
    686,682
    
    
    
    106,362Accrued expenses
    
    
    (154,953
    )
    
    
    (61,068
    )Deferred revenue
    
    
    
    
    
    
    (29,412
    )Net cash used in operating activities
    
    
    (5,046,813
    )
    
    
    (1,140,292
    )Investing activities:Proceeds from sale of property and equipment
    
    
    3,449
    
    
    
    Purchase of property and equipment
    
    
    (613,789
    )
    
    
    (72,357
    )Net cash used in investing activities
    
    
    (610,340
    )
    
    
    (72,357
    )Financing activities:Payments on long-term debt
    
    
    
    
    
    
    (3,263
    )Proceeds from exercise of stock options and warrants
    
    
    913,150
    
    
    
    1,066,000Net cash provided by financing activities
    
    
    913,150
    
    
    
    1,062,737Effect of foreign currency exchange rate on cash
    
    
    (1,318
    )
    
    
    (18,261
    )Net decrease in cash and cash equivalents
    
    
    (4,745,321
    )
    
    
    (168,173
    )Cash and cash equivalents at beginning of period
    
    
    14,093,811
    
    
    
    1,441,889Cash and cash equivalents at end of period
    
    $
    9,348,490
    
    
    $
    1,273,716Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    
    
    
    $
    824Cash paid for income taxes
    
    $
    
    
    
    $
    
    6




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QUEPASA CORPORATION AND SUBSIDIARIES
 Notes to Unaudited Condensed Consolidated Financial Statements
 Note 1Description of Business and Summary of Significant Accounting Policies
  Interim Financial Information
  Reclassifications
  Loss Per Share
   June 30,2007
    
    
    2006Stock options
    
    
    1,498,200
    
    
    
    2,718,875Warrants
    
    
    4,432,500
    
    
    
    4,194,240Total
    
    
    5,930,700
    
    
    
    6,913,115
 Recent Accounting Pronouncements
 Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
 Fair Value Measurements
  7




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Note 2Commitments and Contingencies
 Operating Leases
  2007
    
    $
    196,0002008
    
    
    334,0002009
    
    
    135,000Total
    
    $
    665,000
 Litigation
   Note 3Stock Option Plans
  Number of
    
    
    Weighted-AverageOptions
    
    Stock Options
    
    
    Exercise PriceOutstanding at December 31, 2006 (1)
    
    
    2,248,075
    
    
    $
    2.42Granted
    
    
    
    
    
    
    Exercised
    
    
    (526,000
    )
    
    
    1.66Forfeited or expired
    
    
    (656,875
    )
    
    
    1.91Outstanding at June 30, 2007 (1)
    
    
    1,065,200
    
    
    $
    3.06Exercisable at June 30, 2007 (2)
    
    
    757,200
    
    
    $
    2.57
 
 (1)
    
    Excludes stock options to purchase 110,000 shares of common stock at a weighted average
exercise price of $1.93 per share being held by consultants.(2)
    
    Excludes stock options to purchase 100,000 shares of common stock at a weighted average price
of $1.50 per share being held by a consultant.   8




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Number of
    
    
    Weighted-AverageOptions
    
    Stock Options
    
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    
    
    
    $
    Granted
    
    
    323,000
    
    
    
    10.00Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    
    
    
    
    Outstanding at June 30, 2007
    
    
    323,000
    
    
    $
    10.00Exercisable at June 30, 2007
    
    
    75,000
    
    
    $
    10.00
 Share-Based Payment
  For the Three Months EndedJune 30,2007
    
    
    2006Risk-free interest rate:
    
    
    5.0
    %
    
    
    4.6
    %Expected term:
    
    5 Years
    
    
    5 yearsExpected dividend yield:
    
    
    0
    %
    
    
    0
    %Expected volatility:
    
    
    156
    %
    
    
    170
    %
   Note 4Related Party Transactions
  Note 5Restatement of Previously Issued Interim Financial Information
 5a. April 2007 Restatement (as originally filed)
   9




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Previously
    
    
    TotalReported
    
    
    Adjustments
    
    
    Restated(Unaudited)For the three months ended June 30, 2006:Loss from operations
    
    $
    (890,891
    )
    
    $
    (174,899
    )
    
    $
    (1,065,790
    )Net loss
    
    
    (883,226
    )
    
    
    (174,899
    )
    
    
    (1,058,125
    )Loss per share
    
    
    (0.11
    )
    
    
    (0.02
    )
    
    
    (0.13
    )For the six months ended June 30, 2006:Loss from operations
    
    
    (3,063,445
    )
    
    
    (4,843,467
    )
    
    
    (7,906,912
    )Net loss
    
    
    (3,048,000
    )
    
    
    (4,843,467
    )
    
    
    (7,891,467
    )Loss per share
    
    
    (0.38
    )
    
    
    (0.60
    )
    
    
    (0.98
    )
  Product and
    
    
    
    
    
    
    DepreciationSearch
    
    
    Sales and
    
    
    Content
    
    
    General and
    
    
    andServices
    
    
    Marketing
    
    
    Development
    
    
    Administrative
    
    
    Amortization
    
    
    Total(Unaudited)For the three months ended June 30, 2006:Previously reported
    
    $
    47,178
    
    
    $
    33,686
    
    
    $
    76,562
    
    
    $
    797,152
    
    
    $
    20,220
    
    
    $
    974,798Total adjustments
    
    
    
    
    
    
    
    
    
    
    38,036
    
    
    
    136,863
    
    
    
    
    
    
    
    174,899Total reclassifications
    
    
    
    
    
    
    55,308
    
    
    
    116,433
    
    
    
    (171,741
    )
    
    
    
    
    
    
    Restated
    
    $
    47,178
    
    
    $
    88,994
    
    
    $
    231,031
    
    
    $
    762,274
    
    
    $
    20,220
    
    
    $
    1,149,697For the six months ended June 30, 2006:Previously reported
    
    $
    165,330
    
    
    $
    57,918
    
    
    $
    118,371
    
    
    $
    2,928,529
    
    
    $
    41,769
    
    
    $
    3,311,917Total adjustments
    
    
    
    
    
    
    
    
    
    
    72,443
    
    
    
    4,771,024
    
    
    
    
    
    
    
    4,843,467Total reclassifications
    
    
    
    
    
    
    81,746
    
    
    
    222,194
    
    
    
    (303,940
    )
    
    
    
    
    
    
    Restated
    
    $
    165,330
    
    
    $
    139,664
    
    
    $
    413,008
    
    
    $
    7,395,613
    
    
    $
    41,769
    
    
    $
    8,155,384
  Accumulated Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of June 30, 2006:Previously reported
    
    $
    
    
    
    $
    8,520
    
    
    $
    118,683,701
    
    
    $
    (117,536,133
    )
    
    $
    (23,972
    )
    
    $
    1,132,116Adjustments
    
    
    
    
    
    
    
    
    
    
    4,843,467
    
    
    
    (4,843,467
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    8,520
    
    
    $
    123,527,168
    
    
    $
    (122,379,600
    )
    
    $
    (23,972
    )
    
    $
    1,132,116
 5b. October 2007 Restatement
   10




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Previously
    
    
    TotalReported
    
    
    Adjustments
    
    
    Restated(Unaudited)For the three months ended June 30, 2006:Loss from operations
    
    $
    (1,065,790
    )
    
    $
    (118,754
    )
    
    $
    (1,184,544
    )Net loss
    
    
    (1,058,125
    )
    
    
    (118,754
    )
    
    
    (1,176,879
    )Loss per share
    
    
    (0.13
    )
    
    
    (0.01
    )
    
    
    (0.14
    )For the six months ended June 30, 2006:Loss from operations
    
    
    (7,906,912
    )
    
    
    (2,088,575
    )
    
    
    (9,995,487
    )Net loss
    
    
    (7,891,467
    )
    
    
    (2,088,575
    )
    
    
    (9,980,042
    )Loss per share
    
    
    (0.98
    )
    
    
    (0.26
    )
    
    
    (1.24
    )
  Previously
    
    
    TotalReported
    
    
    Adjustments
    
    
    Restated(Unaudited)For the three months ended June 30, 2007:Loss from operations
    
    $
    (3,775,573
    )
    
    $
    (28,173
    )
    
    $
    (3,803,746
    )Net loss
    
    
    (3,643,157
    )
    
    
    (28,173
    )
    
    
    (3,671,330
    )Loss per share
    
    
    (0.30
    )
    
    
    (0.00
    )
    
    
    (0.30
    )For the six months ended June 30, 2007:Loss from operations
    
    
    (7,108,411
    )
    
    
    (77,440
    )
    
    
    (7,185,851
    )Net loss
    
    
    (6,798,901
    )
    
    
    (77,440
    )
    
    
    (6,876,341
    )Loss per share
    
    
    (0.56
    )
    
    
    (0.00
    )
    
    
    (0.56
    )
  Product and
    
    
    
    
    
    
    DepreciationSearch
    
    
    Sales and
    
    
    Content
    
    
    General and
    
    
    andServices
    
    
    Marketing
    
    
    Development
    
    
    Administrative
    
    
    Amortization
    
    
    Total(Unaudited)For the three months ended June 30, 2006:Previously reported
    
    $
    47,178
    
    
    $
    88,994
    
    
    $
    231,031
    
    
    $
    762,274
    
    
    $
    20,220
    
    
    $
    1,149,697Total adjustments
    
    
    
    
    
    
    
    
    
    
    9,578
    
    
    
    109,176
    
    
    
    
    
    
    
    118,754Restated
    
    $
    47,178
    
    
    $
    88,994
    
    
    $
    240,609
    
    
    $
    871,450
    
    
    $
    20,220
    
    
    $
    1,268,451For the six months ended June 30, 2006:Previously reported
    
    $
    165,330
    
    
    $
    139,664
    
    
    $
    413,008
    
    
    $
    7,395,613
    
    
    $
    41,769
    
    
    $
    8,155,384Total adjustments
    
    
    
    
    
    
    
    
    
    
    18,466
    
    
    
    2,070,109
    
    
    
    
    
    
    
    2,088,575Restated
    
    $
    165,330
    
    
    $
    139,664
    
    
    $
    431,474
    
    
    $
    9,465,722
    
    
    $
    41,769
    
    
    $
    10,243,959
  11




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##### Table of Contents



Product and
    
    
    
    
    
    
    DepreciationSearch
    
    
    Sales and
    
    
    Content
    
    
    General and
    
    
    andServices
    
    
    Marketing
    
    
    Development
    
    
    Administrative
    
    
    Amortization
    
    
    Total(Unaudited)For the three months ended June 30, 2007:Previously reported
    
    $
    
    
    
    $
    314,772
    
    
    $
    1,339,238
    
    
    $
    2,091,165
    
    
    $
    103,658
    
    
    $
    3,848,833Total adjustments
    
    
    
    
    
    
    3,761
    
    
    
    3,900
    
    
    
    20,512
    
    
    
    
    
    
    
    28,173Total reclassifications
    
    
    
    
    
    
    32,599
    
    
    
    (130,500
    )
    
    
    97,901
    
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    351,132
    
    
    $
    1,212,638
    
    
    $
    2,209,578
    
    
    $
    103,658
    
    
    $
    3,877,006For the six months ended June 30, 2007:Previously reported
    
    $
    
    
    
    $
    805,553
    
    
    $
    2,332,875
    
    
    $
    3,899,464
    
    
    $
    196,261
    
    
    $
    7,234,153Total adjustments
    
    
    
    
    
    
    7,122
    
    
    
    7,073
    
    
    
    63,245
    
    
    
    
    
    
    
    77,440Total reclassifications
    
    
    
    
    
    
    32,599
    
    
    
    (130,500
    )
    
    
    97,901
    
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    845,274
    
    
    $
    2,209,448
    
    
    $
    4,060,610
    
    
    $
    196,261
    
    
    $
    7,311,593
  Accumulated Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of June 30, 2006:Previously reported
    
    $
    
    
    
    $
    8,520
    
    
    $
    123,527,168
    
    
    $
    (122,379,600
    )
    
    $
    (23,972
    )
    
    $
    1,132,116Adjustments
    
    
    
    
    
    
    
    
    
    
    2,088,575
    
    
    
    (2,088,575
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    8,520
    
    
    $
    125,615,743
    
    
    $
    (124,468,175
    )
    
    $
    (23,972
    )
    
    $
    1,132,116
  Accumulated Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of June 30, 2007:Previously reported
    
    $
    
    
    
    $
    12,271
    
    
    $
    143,053,292
    
    
    $
    (132,736,518
    )
    
    $
    1,533
    
    
    $
    10,330,578Roll-forward of fiscal
2006 restatement
    
    
    
    
    
    
    
    
    
    
    2,156,547
    
    
    
    (2,156,547
    )
    
    
    
    
    
    
    Adjustments
    
    
    
    
    
    
    
    
    
    
    77,440
    
    
    
    (77,440
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    12,271
    
    
    $
    145,287,279
    
    
    $
    (134,970,505
    )
    
    $
    1,533
    
    
    $
    10,330,578
 Note 6  Subsequent Events
 Going Concern Consideration:
    12




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##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operation
 Forward-Looking Information
 You should read the following discussion in conjunction with our condensed consolidated
financial statements, which are included in Item 1 of this Form 10-QSB . Managements Discussion and
Analysis or Plan of Operation contains statements that are forward-looking. These statements are
based on current expectations and assumptions, which are subject to risk, uncertainties and other
factors. Actual results may differ materially because of the factors discussed in the subsection
below titled Risk Factors.
 Company Overview
    Revenue sources
  Banner Advertising Revenue.
 Google AdSense Revenue.
 Subscription Sales
 Performance-based Revenue
  13




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##### Table of Contents



Operating Expenses
  
    
    search services expenses;
    
    product and content development expenses;
    
    sales and marketing expenses;
    
    general and administrative expenses; and
    
    depreciation and amortization.
 Search Services Expenses.
 Product and Content Development Expenses.
 Sales and Marketing Expenses.
 General and Administrative Expenses.
 Depreciation and Amortization Expenses
 Other Income (Expense).
 Results of Operations
 Comparison of the three and six months ended June 30, 2007 with the three and six months ended June
30, 2006
   14




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##### Table of Contents



Revenues
  Banner Advertising Revenue.
 Google AdSense.
 Performance-based Revenue
 Subscription Sales
 Operating Costs and Expenses
 Search Services.
  Sales and Marketing.
   15




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##### Table of Contents



Product and Content Development.
  General and Administrative.
   
    
    An increase in general and administrative salaries of $94 thousand, or 78%, to
$214 thousand, from $120 thousand for the prior year. This increase is driven by our
increased staffing during 2006 and the second quarter 2007 as we build and enhance our
internal services and administrative and accounting functions.
    
    An increase in recruiting fees of $268 thousand, to $282 thousand from $14
thousand for the prior year and an increase in stock compensation expense of $178
thousand, or 61%, to $470 thousand from $292 thousand or the prior year. These increases
are driven by the increased hiring during the second quarter 2007.
    
    An increase in professional fees expense of approximately $325 thousand, or 239%,
to $464 thousand, from $136 thousand for the prior year. This increase is primarily
attributable an increase in technology consulting of $369 thousand, an increase in
accounting fees of $209 thousand and an increase in legal fees of $139 thousand compared
the prior year. These increases were required in order to enhance and our technology
infrastructure and improve our accounting and legal compliance and corporate governance.
    
    An increase in travel and entertainment of $117 thousand, or 325%, to $153
thousand from $36 thousand for the prior year, an increase in dues and subscriptions of
$53 thousand, or 126%, to $95 thousand from $42 thousand for the prior year and an
increase in printing, postage and reproduction of $101 thousand, to $102 thousand from
$1 thousand for the prior year. These increases are mainly attributable to our overall
growth as we build and enhance our business.
  Depreciation and Amortization.
  16




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##### Table of Contents



Other Income (Expense)
 Liquidity and Capital Resources
  2007
    
    
    2006Cash and cash equivalents
    
    $
    9,348,490
    
    
    $
    14,093,811Percentage of total assets
    
    
    80
    %
    
    
    88
    %
  2007
    
    
    2006Net cash used in operating activities
    
    $
    (5,046,813
    )
    
    $
    (1,140,292
    )Net cash used in investing activities
    
    $
    (610,340
    )
    
    $
    (72,357
    )Net cash provided by financing activities
    
    $
    913,150
    
    
    $
    1,062,737
      Cash flow changes
   17




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##### Table of Contents



Capital expenditures
  Contractual Obligations and Commitments
  Recent Acquisition
  Critical Accounting Policies, Judgments and Estimates
   Stock-Based Compensation Expense.
  Share-Based Payment
  18




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##### Table of Contents



Recent Accounting Pronouncements
   Forward-looking Statements
   
    
    our ongoing operating losses;
    
    the possibility of liability for information displayed or accessed via our
website and for other commerce related activities;
· competition in the operation of our website and in the provision of our
information retrieval services;
    
    the ability to protect our intellectual property rights;
    
    the ability to retain our executive officers and senior management;
    
    the ability to raise additional capital;
    
    changing laws, rules, and regulations;
    
    potential liability for breaches of security on the Internet;
    
    dependence on third party databases and computer systems;
    
    competition from traditional media companies; and
    
    new technologies that could block our ability to advertise.
   19




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##### Table of Contents



Item 3. Controls and Procedures
 Disclosure Controls and Procedures
   Remediation of Certain Weaknesses and Changes in Internal Controls
       20




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##### Table of Contents



Limitations on the Effectiveness of Controls
   21




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 Item 6. Exhibits
   22




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 SIGNATURES
  Quepasa CorporationNovember 16, 2007
    By:
    /s/ John C. AbbottName:
    John C. AbbottTitle:
    Chairman and Chief Executive Officer
(Principal Executive Officer)November 16, 2007
    By:
    /s/ Michael D. MatteName:
    Michael D. MatteTitle:
    Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)  23




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.3*
    
    Certification of Principal Executive Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended31.4*
    
    Certification of Principal Financial Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended32.3**
    
    Certification of Principal Executive Officer Pursuant to 18
U.S.C. Section 1850, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 200232.4**
    
    Certification of Principal Financial Officer Pursuant to 18
U.S.C. Section 1850, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
 
 *
    
    filed herewith**
    
    furnished herewith  24