##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-QSB
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 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
(State or other jurisdiction of 
incorporation or organization)
    
    86-0879433
(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
 PagePART I. FINANCIAL INFORMATIONItem 1 Condensed Consolidated Financial Statements (Unaudited)Balance Sheets as of September 30, 2007 and December 31, 2006
    
    
    1Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2007 and 2006 (as restated)
    
    
    2Statement of Changes in Stockholders Equity for the Nine Months Ended September 30, 2007
    
    
    3Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006 (as restated)
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    5Item 2 Managements Discussion and Analysis or Plan of Operation
    
    
    11Item 3 Controls and Procedures
    
    
    17PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    19Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 3 Defaults Upon Senior Securities
    
    
    19Item 4 Submissions of Matters to a Vote of Security Holders
    
    
    19Item 5 Other Information
    
    
    19Item 6 Exhibits
    
    
    19SIGNATURES
    
    
    20INDEX TO EXHIBITSEX-3.1EX-3.2EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
 December 31,September 30,
    
    
    20062007
    
    
    (As Restated)(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    6,068,814
    
    
    $
    14,093,811Accounts receivable, net of allowance of $6,000 and $0
    
    
    97,311
    
    
    
    74,355Other current assets
    
    
    529,841
    
    
    
    332,478Total current assets
    
    
    6,695,966
    
    
    
    14,500,644Property and equipment  net
    
    
    1,027,655
    
    
    
    546,481Jet rights  net
    
    
    910,900
    
    
    
    986,457Other assets
    
    
    144,071
    
    
    
    55,102Total assets
    
    $
    8,778,592
    
    
    $
    16,088,684LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    1,091,367
    
    
    $
    711,486Accrued expenses
    
    
    487,678
    
    
    
    92,070Unearned grant income
    
    
    72,865
    
    
    
    94,980Total current liabilities
    
    
    1,651,910
    
    
    
    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; 12,279,511 shares issued and outstanding at
September 30, 2007 and 11,705,861 shares issued and
outstanding at December 31, 2006
    
    
    12,280
    
    
    
    11,706Additional paid-in capital
    
    
    145,599,834
    
    
    
    143,271,109Accumulated deficit
    
    
    (138,485,457
    )
    
    
    (128,094,164
    )Accumulated other comprehensive income
    
    
    25
    
    
    
    1,497Total stockholders equity
    
    
    7,126,682
    
    
    
    15,190,148Total liabilities and stockholders equity
    
    $
    8,778,592
    
    
    $
    16,088,684
   1




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations and Comprehensive Loss
 For the Nine Months Ended
    
    
    For the Three Months EndedSeptember 30,
    
    
    
    
    
    
    September 30,September 30,
    
    
    2006
    
    
    September 30,
    
    
    20062007
    
    
    (As Restated)
    
    
    2007
    
    
    (As Restated)(Unaudited)
    
    
    (Unaudited)REVENUES
    
    $
    189,939
    
    
    $
    302,185
    
    
    $
    64,197
    
    
    $
    53,713OPERATING COSTS AND EXPENSES:Search services
    
    
    
    
    
    
    200,142
    
    
    
    
    
    
    
    34,812Sales and marketing
    
    
    1,038,742
    
    
    
    307,471
    
    
    
    193,468
    
    
    
    167,807Product and content development
    
    
    4,008,657
    
    
    
    724,033
    
    
    
    1,799,209
    
    
    
    292,559General and administrative
    
    
    5,618,261
    
    
    
    10,409,698
    
    
    
    1,557,651
    
    
    
    943,976Depreciation and amortization
    
    
    323,820
    
    
    
    65,683
    
    
    
    127,559
    
    
    
    23,914TOTAL OPERATING COSTS AND EXPENSES
    
    
    10,989,480
    
    
    
    11,707,027
    
    
    
    3,677,887
    
    
    
    1,463,068LOSS FROM OPERATIONS
    
    
    (10,799,541
    )
    
    
    (11,404,842
    )
    
    
    (3,613,690
    )
    
    
    (1,409,355
    )OTHER INCOME (EXPENSE):Interest income
    
    
    380,603
    
    
    
    43,894
    
    
    
    88,779
    
    
    
    27,625Interest expense
    
    
    
    
    
    
    (1,616
    )
    
    
    
    
    
    
    (792
    )Other income
    
    
    27,645
    
    
    
    
    
    
    
    9,959
    
    
    
    TOTAL OTHER INCOME
    
    
    408,248
    
    
    
    42,278
    
    
    
    98,738
    
    
    
    26,833LOSS BEFORE INCOME TAXES
    
    
    (10,391,293
    )
    
    
    (11,362,564
    )
    
    
    (3,514,952
    )
    
    
    (1,382,522
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    NET LOSS
    
    $
    (10,391,293
    )
    
    $
    (11,362,564
    )
    
    $
    (3,514,952
    )
    
    $
    (1,382,522
    )NET LOSS PER COMMON SHARE, BASIC AND
DILUTED
    
    $
    (0.85
    )
    
    $
    (1.34
    )
    
    $
    (0.29
    )
    
    $
    (0.15
    )WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING, BASIC AND DILUTED
    
    
    12,217,299
    
    
    
    8,451,121
    
    
    
    12,270,761
    
    
    
    9,291,919NET LOSS
    
    $
    (10,391,293
    )
    
    $
    (11,362,564
    )
    
    $
    (3,514,952
    )
    
    $
    (1,382,522
    )Foreign currency translation adjustment
    
    
    (1,472
    )
    
    
    (7,833
    )
    
    
    (1,508
    )
    
    
    (26,094
    )COMPREHENSIVE LOSS
    
    $
    (10,392,765
    )
    
    $
    (11,370,397
    )
    
    $
    (3,516,460
    )
    
    $
    (1,408,616
    )
   2




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QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statement of Changes in Stockholders Equity
For the Nine Months Ended September 30, 2007
 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,189,048
    
    
    
    
    
    
    
    
    
    
    
    1,189,048Issuance of common stock
to directors for
compensation
    
    
    
    
    
    
    
    
    
    
    41,250
    
    
    
    42
    
    
    
    227,059
    
    
    
    
    
    
    
    
    
    
    
    227,101Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    526,000
    
    
    
    526
    
    
    
    883,824
    
    
    
    
    
    
    
    
    
    
    
    884,350Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    6,400
    
    
    
    6
    
    
    
    28,794
    
    
    
    
    
    
    
    
    
    
    
    28,800Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,472
    )
    
    
    (1,472
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (10,391,293
    )
    
    
    
    
    
    
    (10,391,293
    )BalanceSeptember
30, 2007 (Unaudited)
    
    
    
    
    
    $
    
    
    
    
    12,279,511
    
    
    $
    12,280
    
    
    $
    145,599,834
    
    
    $
    (138,485,457
    )
    
    $
    25
    
    
    $
    7,126,682
   3




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QUEPASA CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
 For the Nine Months EndedSeptember 30,September 30,
    
    
    20062007
    
    
    As Restated(Unaudited)Operating activities:Net loss
    
    $
    (10,391,293
    )
    
    $
    (11,362,564
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    323,820
    
    
    
    65,683Issuance of warrants for strategic initiatives
    
    
    
    
    
    
    7,387,979Issuance of stock options and warrants for compensation
    
    
    1,189,048
    
    
    
    1,717,992Issuance of common stock to directors for compensation
    
    
    227,101
    
    
    
    Issuance of stock options for professional services
    
    
    
    
    
    
    5,839Grant income
    
    
    (22,115
    )
    
    
    Provision for bad debts
    
    
    6,175
    
    
    
    6,384Changes in operating assets and liabilities:Accounts receivable
    
    
    (29,131
    )
    
    
    31,620Other current assets and other assets
    
    
    (286,332
    )
    
    
    (62,355
    )Accounts payable and accrued expenses
    
    
    775,489
    
    
    
    135,740Deferred revenue
    
    
    
    
    
    
    (37,507
    )Net cash used in operating activities
    
    
    (8,207,238
    )
    
    
    (2,111,189
    )Investing activities:Purchase of property and equipment
    
    
    (729,437
    )
    
    
    (156,094
    )Net cash used in investing activities
    
    
    (729,437
    )
    
    
    (156,094
    )Financing activities:Payments on long-term debt
    
    
    
    
    
    
    (5,263
    )Proceeds from exercise of stock options and warrants
    
    
    913,150
    
    
    
    4,759,866Net cash provided by financing activities
    
    
    913,150
    
    
    
    4,754,603Cash and cash equivalents prior to effect of foreign currency exchange rate on cash
    
    
    (8,023,525
    )
    
    
    2,487,320Effect of foreign currency exchange rate on cash
    
    
    (1,472
    )
    
    
    (7,833
    )Net (decrease) increase in cash and cash equivalents
    
    
    (8,024,997
    )
    
    
    2,479,487Cash and cash equivalents at beginning of period
    
    
    14,093,811
    
    
    
    1,441,889Cash and cash equivalents at end of period
    
    $
    6,068,814
    
    
    $
    3,921,376Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    684
    
    
    $
    1,616Cash paid for income taxes
    
    $
    
    
    
    $
    
   4




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 Notes to Unaudited Condensed Consolidated Financial Statements
 Note 1Description of Business
  Interim Financial Information
  Summary of Significant Accounting Policies
 Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
 Reclassifications
  Loss Per Share
   September 30,2007
    
    
    2006Stock options
    
    
    1,357,200
    
    
    
    2,772,200Warrants
    
    
    4,432,500
    
    
    
    2,974,400Total
    
    
    5,789,700
    
    
    
    5,746,600
  5




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##### Table of Contents



Recent Accounting Pronouncements
 Fair Value Measurements
  Note 2Commitments and Contingencies
 Operating Leases
  2007
    
    $
    90,0002008
    
    
    334,0002009
    
    
    135,000Total
    
    $
    559,000
 Litigation
    6




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##### Table of Contents



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
    )
    
    
    1.68Forfeited or expired
    
    
    (671,875
    )
    
    
    2.12Outstanding at September 30, 2007 (1)
    
    
    1,050,200
    
    
    $
    2.98Exercisable at September 30, 2007 (2)
    
    
    757,200
    
    
    $
    2.34
 
 (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.   Number of
    
    
    Weighted-AverageOptions
    
    Stock Options
    
    
    Exercise PriceOutstanding at December 31, 2006
    
    
    
    
    
    $
    Granted
    
    
    338,000
    
    
    
    10.00Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (141,000
    )
    
    
    Outstanding at September 30, 2007
    
    
    197,000
    
    
    $
    10.00Exercisable at September 30, 2007
    
    
    75,000
    
    
    $
    10.00
 Share-Based Payment
  7




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##### Table of Contents



For the Nine Months EndedSeptember 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 Interim Financial Information
 a. April 2007 Restatement
   Previously
    
    
    TotalReported
    
    
    Adjustments
    
    
    Restated(Unaudited)For the three months ended September 30, 2006:Loss from operations
    
    $
    (1,324,134
    )
    
    $
    (28,175
    )
    
    $
    (1,352,309
    )Net loss
    
    
    (1,297,301
    )
    
    
    (28,175
    )
    
    
    (1,325,476
    )Loss per share
    
    
    (0.14
    )
    
    
    (0.00
    )
    
    
    (0.14
    )For the nine months ended September 30, 2006:Loss from operations
    
    
    (4,387,579
    )
    
    
    (4,871,642
    )
    
    
    (9,259,221
    )Net loss
    
    
    (4,345,301
    )
    
    
    (4,871,642
    )
    
    
    (9,216,943
    )Loss per share
    
    
    (0.51
    )
    
    
    (0.58
    )
    
    
    (1.09
    )
  8




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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 September
30, 2006:Previously reported
    
    $
    34,812
    
    
    $
    46,252
    
    
    $
    101,474
    
    
    $
    1,171,395
    
    
    $
    23,914
    
    
    $
    1,377,847Total adjustments
    
    
    
    
    
    
    15,743
    
    
    
    13,946
    
    
    
    (1,514
    )
    
    
    
    
    
    
    28,175Total reclassifications
    
    
    
    
    
    
    103,312
    
    
    
    174,661
    
    
    
    (277,973
    )
    
    
    
    
    
    
    Restated
    
    $
    34,812
    
    
    $
    165,307
    
    
    $
    290,081
    
    
    $
    891,908
    
    
    $
    23,914
    
    
    $
    1,406,022For the nine
months ended September
30, 2006:Previously reported
    
    $
    200,142
    
    
    $
    104,170
    
    
    $
    219,845
    
    
    $
    4,099,924
    
    
    $
    65,683
    
    
    $
    4,689,764Total adjustments
    
    
    
    
    
    
    15,743
    
    
    
    86,389
    
    
    
    4,769,510
    
    
    
    
    
    
    
    4,871,642Total reclassifications
    
    
    
    
    
    
    185,058
    
    
    
    396,855
    
    
    
    (581,913
    )
    
    
    
    
    
    
    Restated
    
    $
    200,142
    
    
    $
    304,971
    
    
    $
    703,089
    
    
    $
    8,287,521
    
    
    $
    65,683
    
    
    $
    9,561,406
  Accumulated Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of September 30, 2006:Previously reported
    
    $
    
    
    
    $
    9,754
    
    
    $
    122,626,287
    
    
    $
    (118,833,434
    )
    
    $
    (13,544
    )
    
    $
    3,789,063Adjustments
    
    
    
    
    
    
    (10
    )
    
    
    4,871,652
    
    
    
    (4,871,642
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    9,744
    
    
    $
    127,497,939
    
    
    $
    (123,705,076
    )
    
    $
    (13,544
    )
    
    $
    3,789,063
 5b. October 2007 Restatement
   Previously
    
    
    TotalReported
    
    
    Adjustments
    
    
    Restated(Unaudited)For the three months ended September 30, 2006:Loss from operations
    
    $
    (1,352,309
    )
    
    $
    (57,046
    )
    
    $
    (1,409,355
    )Net loss
    
    
    (1,325,476
    )
    
    
    (57,046
    )
    
    
    (1,382,522
    )Loss per share
    
    
    (0.14
    )
    
    
    (0.01
    )
    
    
    (0.15
    )For the nine months ended September 30, 2006:Loss from operations
    
    $
    (9,259,221
    )
    
    
    (2,145,621
    )
    
    
    (11,404,842
    )Net loss
    
    
    (9,216,943
    )
    
    
    (2,145,621
    )
    
    
    (11,362,564
    )Loss per share
    
    
    (1.09
    )
    
    
    (0.25
    )
    
    
    (1.34
    )
  9




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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 September
30, 2006:Previously reported
    
    $
    34,812
    
    
    $
    165,307
    
    
    $
    290,081
    
    
    $
    891,908
    
    
    $
    23,914
    
    
    $
    1,406,022Total adjustments
    
    
    
    
    
    
    2,500
    
    
    
    2,478
    
    
    
    52,068
    
    
    
    
    
    
    
    57,046Restated
    
    $
    34,812
    
    
    $
    167,807
    
    
    $
    292,559
    
    
    $
    943,976
    
    
    $
    23,914
    
    
    $
    1,463,068For the nine
months ended September
30, 2006:Previously reported
    
    $
    200,142
    
    
    $
    304,971
    
    
    $
    703,089
    
    
    $
    8,287,521
    
    
    $
    65,683
    
    
    $
    9,561,406Total adjustments
    
    
    
    
    
    
    2,500
    
    
    
    20,944
    
    
    
    2,122,177
    
    
    
    
    
    
    
    2,145,621Restated
    
    $
    200,142
    
    
    $
    307,471
    
    
    $
    724,033
    
    
    $
    10,409,698
    
    
    $
    65,683
    
    
    $
    11,707,027
  Accumulated Other
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of September 30, 2006:Previously reported
    
    $
    
    
    
    $
    9,744
    
    
    $
    127,497,939
    
    
    $
    (123,705,076
    )
    
    $
    (13,544
    )
    
    $
    3,789,063Adjustments
    
    
    
    
    
    
    
    
    
    
    2,145,621
    
    
    
    (2,145,621
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    9,744
    
    
    $
    129,643,560
    
    
    $
    (125,850,697
    )
    
    $
    (13,544
    )
    
    $
    3,789,063
 Note 6  Going Concern Qualification
     10




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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
  11




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##### Table of Contents



Performance-based Revenue
 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 nine months ended September 30, 2007 with the three and nine months
ended September 30, 2006
   12




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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.
 Product and Content Development.
 General and Administrative.
  13




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##### Table of Contents




    
    An increase in general and administrative salaries of $296 thousand, or 98%, to
$598 thousand from $302 thousand for the prior year. This increase is driven by our
increased staffing levels during the first nine months of 2007.
    
    An increase in recruiting fees of $448 thousand, to $462 thousand from $14
thousand for the prior year due to the increased hiring incurred during the first nine
months of 2007.
    
    An increase in professional fees expense of $1.1 million, or 236%, to $1.6
million from $0.5 million for the prior year. This increase is primarily attributable to an
increase in accounting related fees of $500 thousand and an increase in legal fees of
$500 thousand compared to the prior year.
    
    An increase in travel and entertainment of $440 thousand, or 519%, to $525
thousand from $85 thousand for the prior year, an increase in dues and subscriptions of
$157 thousand, or 112%, to $297 thousand from $140 thousand for the prior year, and an
increase in printing, postage and reproduction of $101 thousand, to $116 thousand from
$15 thousand for the prior year.
 Depreciation and Amortization.
 Other Income (Expense)
 Liquidity and Capital Resources
  2007
    
    
    2006Cash and cash equivalents
    
    $
    6,068,814
    
    
    $
    14,093,811Percentage of total assets
    
    
    69
    %
    
    
    88
    %
  2007
    
    
    2006Net cash used in operating activities
    
    $
    (8,207,238
    )
    
    $
    (2,111,189
    )Net cash used in investing activities
    
    $
    (729,437
    )
    
    $
    (156,094
    )Net cash provided by financing activities
    
    $
    913,150
    
    
    $
    4,754,603
    14




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##### Table of Contents



Cash flow changes
    Capital expenditures
  Contractual Obligations and Commitments
   15




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##### Table of Contents



Recent Acquisition
  Critical Accounting Policies, Judgments and Estimates
   Stock-Based Compensation Expense.
  Share-Based Payment
  Recent Accounting Pronouncements
   Forward-looking Statements
   16




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##### Table of Contents




    
    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.
   
 Item 3. Controls and Procedures
 Disclosure Controls and Procedures
   Remediation of Certain Weaknesses and Changes in Internal Controls
   17




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##### Table of Contents



Limitations on the Effectiveness of Controls
   18




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
   19




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 SIGNATURES
  Quepasa CorporationNovember 19, 2007
    By:
    /s/ John C. AbbottName:
    John C. AbbottTitle:
    Chairman and Chief Executive Officer
(Principal Executive Officer)November 19, 2007
    By:
    /s/ Michael D. MatteName:
    Michael D. MatteTitle:
    Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)  20




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description3.1(1)
    
    Certificate of Restated Articles of Incorporation3.2(2)
    
    Amended and Restated Bylaws31.1*
    
    Certification of Principal Executive Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended31.2*
    
    Certification of Principal Financial Officer Pursuant to
Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange
Act, as amended32.1**
    
    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 200232.2**
    
    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(1)
    
    Incorporated by reference to the Registrants Quarterly Report on Form 10-QSB
as filed with the Commission on August 15, 2007.(2)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K
as filed with the Commission on July 3, 2007.  21