##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 For the quarterly period ended March 31, 2008
 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
  
 NEVADA
    
    86-0879433(State of Incorporation)
    
    (I.R.S. Employer Identification No.)
 224 Datura Street, Suite 1100
West Palm Beach, Florida 33401
 (561) 491-4181
 7550 East Redfield Road, Suite A
Scottsdale, Arizona 85260
 
 þ o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
 Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.
 Class
    
    Shares Outstanding as of May 8, 2008Common Stock, $.001 par value per share
    
    12,648,836




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##### 



QUEPASA CORPORATION AND SUBSIDIARIES
 INDEX
 PagePART I. FINANCIAL INFORMATIONItem 1 Condensed Consolidated Financial StatementsBalance Sheets as of March 31, 2008 (Unaudited) and December 31, 2007
    
    
    1Statements of Operations and Comprehensive Loss for the Three Months
Ended March 31, 2008 and 2007 (Unaudited)
    
    
    2Statement of Changes in Stockholders Equity (Deficit) for the Three
Months Ended March 31, 2008 (Unaudited)
    
    
    3Statements of Cash Flows for the Three Months Ended March 31, 2008
and 2007 (Unaudited)
    
    
    4Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    5Item 2 Managements Discussion and Analysis of Financial Condition and
Results of Operation
    
    
    13Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4T Controls and Procedures
    
    
    18PART II. OTHER INFORMATIONItem 1 Legal Proceedings
    
    
    20Item 1A Risk Factors
    
    
    20Item 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    20Item 3 Defaults Upon Senior Securities
    
    
    20Item 4 Submissions of Matters to a Vote of Security Holders
    
    
    20Item 5 Other Information
    
    
    20Item 6 Exhibits
    
    
    20SIGNATURES
    
    
    21INDEX TO EXHIBITS
    
    
    22Exhibit 10.11Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 QUEPASA CORPORATION AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    9,074,037
    
    
    $
    3,673,281Accounts receivable, net of allowance of $18,000 and $15,000, respectively
    
    
    11,066
    
    
    
    38,306Other current assets
    
    
    127,446
    
    
    
    146,876Total current assets
    
    
    9,212,549
    
    
    
    3,858,463Property and equipment, net
    
    
    944,979
    
    
    
    1,023,041Jet rights, net
    
    
    
    
    
    
    885,712Note Receivable
    
    
    300,000
    
    
    
    Other assets
    
    
    132,907
    
    
    
    133,692Total assets
    
    $
    10,590,435
    
    
    $
    5,900,908LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Accounts payable
    
    $
    794,096
    
    
    $
    887,598Accrued expenses
    
    
    232,850
    
    
    
    306,130Unearned grant income
    
    
    59,902
    
    
    
    65,917Current portion of long-term debt
    
    
    1,950,303
    
    
    
    1,668,808Total current liabilities
    
    
    3,037,151
    
    
    
    2,928,453Long-term debt
    
    
    5,417,759
    
    
    
    5,526,506Notes payable, net of unamortized discount of $2,432,493
    
    
    4,624,744
    
    
    
    Total liabilities
    
    
    13,079,654
    
    
    
    8,454,959COMMITMENTS AND CONTINGENCIES (see Note 7)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; 12,643,261
shares issued and outstanding at March 31, 2008 and 12,284,511 shares
issued and outstanding at December 31, 2007
    
    
    12,643
    
    
    
    12,285Additional paid-in capital
    
    
    142,243,746
    
    
    
    138,880,462Accumulated deficit
    
    
    (144,753,146
    )
    
    
    (141,452,663
    )Accumulated other comprehensive income
    
    
    7,538
    
    
    
    5,865Total stockholders equity
    
    
    (2,489,219
    )
    
    
    (2,554,051
    )Total liabilities and stockholders equity
    
    $
    10,590,435
    
    
    $
    5,900,908
   1




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QUEPASA CORPORATION AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations and Comprehensive Loss
 (Unaudited)
 For the Three Months Ended March 31,2008
    
    
    2007REVENUES
    
    $
    6,863
    
    
    $
    52,482OPERATING COSTS AND EXPENSES:Sales and marketing
    
    
    80,623
    
    
    
    469,316Product and content development
    
    
    548,714
    
    
    
    972,740General and administrative
    
    
    941,665
    
    
    
    1,585,138Stock based compensation expense
    
    
    1,396,821
    
    
    
    314,790Depreciation and amortization
    
    
    108,415
    
    
    
    92,603TOTAL OPERATING COSTS AND EXPENSES
    
    
    3,076,238
    
    
    
    3,434,587LOSS FROM OPERATIONS
    
    
    (3,069,375
    )
    
    
    (3,382,105
    )OTHER INCOME (EXPENSE):Interest income
    
    
    50,579
    
    
    
    164,386Interest expense
    
    
    (289,082
    )
    
    
    Other income
    
    
    7,395
    
    
    
    12,708TOTAL OTHER INCOME (EXPENSE)
    
    
    (231,108
    )
    
    
    177,094LOSS BEFORE INCOME TAXES
    
    
    (3,300,483
    )
    
    
    (3,205,011
    )Income taxes
    
    
    
    
    
    
    NET LOSS
    
    $
    (3,300,483
    )
    
    $
    (3,205,011
    )Foreign currency translation adjustment
    
    
    1,673
    
    
    
    8,563COMPREHENSIVE LOSS
    
    $
    (3,298,810
    )
    
    $
    (3,196,448
    )NET LOSS PER COMMON SHARE, BASIC AND DILUTED
    
    $
    (0.26
    )
    
    $
    (0.26
    )WEIGHTED AVERAGE NUMBER OF SHARESOUTSTANDING, BASIC AND DILUTED
    
    
    12,477,636
    
    
    
    12,139,971
   2




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QUEPASA CORPORATION AND SUBSIDIARIES
 
 Condensed Consolidated Statement of Changes in Stockholders Equity (Deficit)
 For the Three Months Ended March 31, 2008
 (Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income
    
    
    Equity (Deficit)BalanceDecember 31,
2007
    
    
    
    
    
    $
    
    
    
    
    12,284,511
    
    
    $
    12,285
    
    
    $
    138,880,462
    
    
    $
    (141,452,663
    )
    
    $
    5,865
    
    
    $
    (2,554,051
    )Issuance of stock options
for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,130,285
    
    
    
    
    
    
    
    
    
    
    
    1,130,285Re-pricing of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,605,382
    
    
    
    
    
    
    
    
    
    
    
    1,605,382Issuance of common
stock for professional services
    
    
    
    
    
    
    
    
    
    
    50,000
    
    
    
    50
    
    
    
    218,750
    
    
    
    
    
    
    
    
    
    
    
    218,800Issuance of common
stock to directors for compensation
    
    
    
    
    
    
    
    
    
    
    8,750
    
    
    
    8
    
    
    
    31,667
    
    
    
    
    
    
    
    
    
    
    
    31,675Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    300,000
    
    
    
    300
    
    
    
    377,200
    
    
    
    
    
    
    
    
    
    
    
    377,500Foreign currency
translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,673
    
    
    
    1,673Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,300,483
    )
    
    
    
    
    
    
    (3,300,483
    )BalanceMarch 31,
2008
    
    
    
    
    
    $
    
    
    
    
    12,643,261
    
    
    $
    12,643
    
    
    $
    142,243,746
    
    
    $
    (144,753,146
    )
    
    $
    7,538
    
    
    $
    (2,489,219
    )
   3




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QUEPASA CORPORATION AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 (Unaudited)
 For the Three Months EndedMarch 31,2008
    
    
    2007Operating activities:Net loss
    
    $
    (3,300,483
    )
    
    $
    (3,205,011
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    108,415
    
    
    
    92,603Issuance of stock options and warrants for compensation
    
    
    1,130,285
    
    
    
    314,790Issuance of common stock to directors for compensation
    
    
    31,675
    
    
    
    Issuance of common stock and stock options for professional services
    
    
    218,800
    
    
    
    Grant income
    
    
    (6,015
    )
    
    
    (12,708
    )Bad debt expense
    
    
    5,968
    
    
    
    Non-cash interest related to corporate sponsorship agreement
    
    
    191,253
    
    
    
    Non-cash interest related to note payable agreements
    
    
    57,237
    
    
    
    Amortization of debt issuance costs
    
    
    52,692
    
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    21,272
    
    
    
    32,489Other current assets and other assets
    
    
    41,330
    
    
    
    102,769Accounts payable and accrued expenses
    
    
    (166,782
    )
    
    
    439,568Net cash used in operating activities
    
    
    (1,614,353
    )
    
    
    (2,235,500
    )Investing activities:Purchase of property and equipment
    
    
    (23,583
    )
    
    
    (253,039
    )Advance to BRC / La Alianza
    
    
    (300,000
    )
    
    
    Net cash used in investing activities
    
    
    (323,583
    )
    
    
    (253,039
    )Financing activities:Proceeds from exercise of stock options and warrants
    
    
    377,500
    
    
    
    890,650Net proceeds from issuance of notes payable
    
    
    6,959,519
    
    
    
    Net cash provided by financing activities
    
    
    7,337,019
    
    
    
    890,650Effect of foreign currency exchange rate on cash
    
    
    1,673
    
    
    
    9,788Net increase (decrease) in cash and cash equivalents
    
    
    5,400,756
    
    
    
    (1,588,101
    )Cash and cash equivalents at beginning of period
    
    
    3,673,281
    
    
    
    14,093,811Cash and cash equivalents at end of period
    
    
    9,074,037
    
    
    
    12,505,710Supplemental Disclosure of Cash Flow Information:Cash paid for interest
    
    $
    
    
    
    $
    Cash paid for income taxes
    
    $
    
    
    
    $
    
   4




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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
  Principles of Consolidation
  Reclassifications
  Cash and Cash Equivalents
  Loss Per Share
   5




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March 31,2008
    
    
    2007Stock options
    
    
    4,834,819
    
    
    
    1,187,700Warrants
    
    
    4,432,500
    
    
    
    4,432,500Total
    
    
    9,267,319
    
    
    
    5,620,200
 Recent Accounting Pronouncements
   Business Combinations
 Non-controlling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51
   6




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Note 2Property and Equipment
  Software
    
    $
    489,449Computer equipment
    
    
    1,414,336Vehicles
    
    
    21,101Office furniture and equipment
    
    
    212,247Other equipment
    
    
    11,0322,148,165Less accumulated depreciation
    
    
    (1,203,186
    )Property and equipmentnet
    
    $
    944,979
  Note 3Jet Rights
   Note 4Note Receivable
       7




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Note 5Long-term Debt
 Corporate Sponsorship and Management Services Agreement
   Present Value ofYear Ending December 31:
    

Expected PaymentsUnpaid 2007 Obligations
    
    $
    520,2252008
    
    
    1,155,5352009
    
    
    1,051,1172010
    
    
    933,9032011
    
    
    829,7612012
    
    
    737,2322013
    
    
    655,0212014
    
    
    581,9782015
    
    
    517,0802016
    
    
    386,210Total Corporate Sponsorship Liability
    
    
    7,368,062Less: Current Portion of Debt
    
    
    (1,950,303
    )Long-term Corporate Sponsorship Liability
    
    $
    5,417,759
 Note 6Notes Payable
    8




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MATT
    
    
    RSI
    
    
    TotalNotes Payable, face amount
    
    $
    5,000,000
    
    
    $
    2,000,000
    
    
    $
    7,000,000Discounts on Notes:Revaluation of Warrants
    
    
    (1,341,692
    )
    
    
    (263,690
    )
    
    
    (1,605,382
    )Termination of Jet Rights
    
    
    (878,942
    )
    
    
    
    
    
    
    (878,942
    )Accumulated Amortization
    
    
    45,987
    
    
    
    5,844
    
    
    
    51,831Total Discounts
    
    
    (2,174,647
    )
    
    
    (257,846
    )
    
    
    (2,432,493
    )Accrued Interest
    
    
    40,883
    
    
    
    16,354
    
    
    
    57,237Notes Payable, net
    
    $
    2,866,236
    
    
    $
    1,758,508
    
    
    $
    4,624,744
 Note 7Commitments and Contingencies
 Operating Leases
   Remainder of 2008
    
    $
    93,0252009
    
    
    54,8322010
    
    
    13,856$
    161,713
 Litigation
  Note 8Stock-Based Compensation
 Share-Based Payment
  Share-Based Payment
  9




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Stock Option Plans
 1998 Stock Option Plan
  Number of
    
    
    Weighted-Stock
    
    
    AverageOptions
    
    Options
    
    
    Exercise PriceOutstanding at December 31, 2007
(1)
    
    
    814,506
    
    
    $
    2.76Granted
    
    
    
    
    
    
    Exercised
    
    
    (300,000
    )
    
    $
    1.26Forfeited or expired
    
    
    (413,506
    )
    
    $
    3.72Outstanding at March 31, 2008 (2)
    
    
    101,000
    
    
    $
    3.27Exercisable at March 31, 2008 (2)
    
    
    97,000
    
    
    $
    3.10
 
 (1)
    
    Excludes stock options to purchase 105,000 shares of common
stock at a weighted average exercise price of $1.73 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.  2006 Stock Incentive Plan
   Number of
    
    
    Weighted-Stock
    
    
    AverageOptions
    
    Options
    
    
    Exercise PriceOutstanding at December 31, 2007
(1)
    
    
    3,600,319
    
    
    $
    3.57Granted
    
    
    1,175,000
    
    
    $
    2.49Exercised
    
    
    
    
    
    
    Forfeited or expired
    
    
    (142,500
    )
    
    $
    10.00Outstanding at March 31, 2008 (1)
    
    
    4,632,819
    
    
    $
    3.10Exercisable at March 31, 2008 (2)
    
    
    71,750
    
    
    $
    8.04
 
 (1)
    
    Excludes stock options to purchase 1,000 shares of common stock
at a weighted average exercise price of $10.00 per share being
held by a consultant.(2)
    
    Excludes stock options to purchase 500 shares of common stock
at a weighted average price of $10.00 per share being held by a
consultant.  10




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For the Three Months EndedMarch 31,2008
    
    
    2007Risk-free interest rate:
    
    
    2.8
    %
    
    
    n/aExpected term:
        
    6 Years
        
    
    n/aExpected dividend yield:
    
    
    0
    %
    
    
    n/aExpected volatility:
    
    
    151
    %
    
    
    n/a
   Unrestricted Shares
  Restricted Shares
  Weighted-AverageShares
    
    
    Share PriceUnvested at January 1, 2008
    
    
    0
    
    
    
    n/aGranted
    
    
    25,800
    
    
    $
    2.49Vested during period
    
    
    (6,450
    )
    
    $
    2.49Cancelled during period
    
    
    0
    
    
    
    n/aUnvested at March 31, 2008
    
    
    19,350
    
    
    $
    2.49
  Note 9Related Party Transactions
   11




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Note 10Subsequent Events
 th rd th
    12




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operation
 You should read the following discussion in conjunction with our condensed consolidated
financial statements, which are included in Item 1 of this Form 10-Q .
 Company Overview
   
    
    We launched our new website in beta mode on February 6, 2008, which marked
our transformation to an Hispanic social network;
    
    We elected Jeffrey Valdez as Chairman of our Board of Directors in January
2008 and at the same time entered into a Consulting Agreement with him. Mr.
Valdez is a leading Hispanic-American television and motion picture figure who
founded SlTV, the first English language cable network aimed at the Hispanic
market. Mr. Valdez is devoting substantial time working with our management in
developing content for our website.
    Critical Accounting Policies, Judgments and Estimates
     13




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Stock-Based Compensation Expense
  Contingencies
  Income Taxes
  Accounting for Uncertainty in Income Taxesan Interpretation of FASB
Statement No. 109
 Recent Accounting Pronouncements
  Results of Operations
 Revenue Sources
  Banner Advertising Revenue:
 Google AdSense Revenue:
 Subscription Sales:
 Operating Expenses
  
    
    Product and Content Development Expenses:Product and content development
expenses consist of personnel costs associated with the development, testing and
upgrading of our website and systems, content fees, and purchases of specific
technology, particularly software and hardware related to our infrastructure
upgrade.
    
    Sales and Marketing Expenses:Sales and marketing expenses consist primarily of
salaries and expenses of marketing and sales personnel, and other marketing-related
expenses including our mass media-based branding and advertising.
  14




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
    
    General and Administrative Expenses:General and administrative expenses
consist primarily of costs related to corporate personnel, occupancy costs, general
operating costs and corporate professional fees, such as legal and accounting fees.
    
    Stock Based Compensation Expenses:Stock based compensation is a non-cash
expense that consists primarily of compensation paid for employees, directors, and
consultants by the issuance of stock options or common stock. Expense is
calculated based upon the grant-date fair value using the Black-Scholes option
pricing model recognized on a straight-line basis over the vesting term of the
award.
    
    Depreciation and Amortization Expenses:Our depreciation and amortization are
non-cash expenses which have consisted primarily of depreciation related to our
property and equipment and the amortization pertaining to jet rights acquired in
2006 and disposed in 2008.
    
    Other Income (Expense):Other income (expense) consists primarily of interest
earned, interest expense and earned grant income. We have invested our cash in AAA
rated, fully liquid instruments. Interest expense relates to our Corporate
Sponsorship Agreement and Note Purchase Agreements discussed in notes 5 and 6.
Earned grant income represents the amortized portion of a cash grant received from
the Mexican government for approved capital expenditures. The grant is being
recognized on a straight-line basis over the useful lives of the purchased assets.
 Comparison of the three months ended March 31, 2008 with the three months ended March 31,
2007
  For the three months ended March 31,2008
    
    
    2007
    
    
    Change ($)
    
    
    Change (%)REVENUES
    
    $
    6,863
    
    
    $
    52,482
    
    
    $
    (45,619
    )
    
    
    -87
    %CASH-BASED OPERATING EXPENSESSales and marketing
    
    
    80,623
    
    
    
    469,316
    
    
    
    (388,693
    )
    
    
    -83
    %Product and content development
    
    
    548,714
    
    
    
    972,740
    
    
    
    (424,026
    )
    
    
    -44
    %General and administrative
    
    
    941,665
    
    
    
    1,585,138
    
    
    
    (643,473
    )
    
    
    -41
    %Total cash-based operating expenses
    
    
    1,571,002
    
    
    
    3,027,194
    
    
    
    (1,456,192
    )
    
    
    -48
    %NET CASH BURN
    
    
    (1,564,139
    )
    
    
    (2,974,712
    )
    
    
    1,410,573
    
    
    
    -47
    %Net Cash Monthly Burn Rate
    
    
    (521,380
    )
    
    
    (991,571
    )
    
    
    470,191
    
    
    
    -47
    %NON-CASH OPERATING EXPENSESStock based compensation expense
    
    
    1,396,821
    
    
    
    314,790
    
    
    
    1,082,031
    
    
    
    344
    %Depreciation and amortization
    
    
    108,415
    
    
    
    92,603
    
    
    
    15,812
    
    
    
    17
    %Total Non-Cash Operating Expenses
    
    
    1,505,236
    
    
    
    407,393
    
    
    
    1,097,843
    
    
    
    269
    %LOSS FROM OPERATIONS
    
    
    (3,069,375
    )
    
    
    (3,382,105
    )
    
    
    312,730
    
    
    
    -9
    %OTHER INCOME (EXPENSE):Interest income
    
    
    50,579
    
    
    
    164,386
    
    
    
    (113,807
    )
    
    
    -69
    %Interest expense
    
    
    (289,082
    )
    
    
    
    
    
    
    (289,082
    )
    
    
    -100
    %Other income
    
    
    7,395
    
    
    
    12,708
    
    
    
    (5,313
    )
    
    
    -42
    %TOTAL OTHER INCOME (EXPENSE)
    
    
    (231,108
    )
    
    
    177,094
    
    
    
    (408,202
    )
    
    
    -231
    %NET LOSS
    
    $
    (3,300,483
    )
    
    $
    (3,205,011
    )
    
    $
    (95,472
    )
    
    
    3
    %
   15




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##### Table of Contents



Revenues
  Operating Costs and Expenses
 Sales and Marketing:
 Product and Content Development:
 General and Administrative:
 
    
    a decrease in professional fees expense of $349,000, made up of decreases in
legal fees of $186,000 and accounting fees of $163,000, due to unusually high
activity in 2007;
    
    a decrease in recruiting fees of $147,000, due to reduced hiring during 2008;
    
    a decrease in salaries and related payroll costs of $93,000, due to a reduction
in personnel in our Scottsdale headquarters during the fourth quarter of 2007; and
    
    a decrease in travel and entertainment of $71,000, a decrease in licenses and
fees of $45,000, a decrease in dues and subscriptions of $33,000, and a decrease in
printing and reproduction of $32,000, attributable to a focused effort to reduce
costs;
    
    these decreases were partially offset by a one-time charge of $129,000 for the
termination of the operating lease for our Scottsdale, AZ headquarters.
 Stock
Based Compensation:
 Depreciation and Amortization:
 Other Income (Expense)
  16




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##### Table of Contents



Liquidity and Capital Resources
 For the Three Months EndedMarch 31,2008
    
    
    2007Net cash used in operating activities
    
    $
    (1,614,353
    )
    
    $
    (2,235,500
    )Net cash used in investing activities
    
    $
    (323,583
    )
    
    $
    (253,039
    )Net cash provided by financing activities
    
    $
    7,337,019
    
    
    $
    890,650
    March 31,
    
    
    December 31,2008
    
    
    2007Cash and cash equivalents
    
    $
    9,074,037
    
    
    $
    3,673,281Total assets
    
    $
    10,590,435
    
    
    $
    5,900,908Percentage of total assets
    
    
    86
    %
    
    
    62
    %
      17




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##### Table of Contents



Forward-Looking Statements
   
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
 Not applicable for smaller reporting companies.
 
 Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
   Remediation of Certain Weaknesses and Changes in Internal Controls
   18




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##### Table of Contents



Limitations on the Effectiveness of Controls
   19




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Not applicable for smaller reporting companies.
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  No. ofName of Class
    
    Date Issued
    
    Securities
    
    
    Reason for IssuanceHolders of
Subordinated
Promissory Notes
    
    January 25, 2008
    
    $
    7,000,000
    
    
    Notes issued
pursuant to the terms
of two Note
Purchase AgreementsHolders of Warrants
    
    January 25, 2008
    
    
    3,000,000
    
    
    Warrants issued to
purchase common
stock at an
exercise price of
$2.75 per share. These warrants replaced previously issued warrants
with higher exercise prices.
 
 Item 3. Defaults upon Senior Securities
  
 Item 4. Submissions of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
   20




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
 
 SIGNATURES
  Quepasa CorporationMay 12, 2008
    By:
    /s/ John C. AbbottName:
    John C. AbbottTitle:
    Chairman and Chief Executive Officer
(Principal Executive Officer)May 12, 2008
    By:
    /s/ Michael D. MatteName:
    Michael D. MatteTitle:
    Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)  21




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description of Exhibit3.1
    
    Certificates of Restated Articles of Incorporation (1)3.2
    
    Amended and Restated Bylaws (2)10.1
    
    Amendment to the Employment Agreement with John C. Abbott dated March 27, 2008 (3)10.2
    
    Amendment to the Employment Agreement with Michael D. Matte dated March 27, 2008 (3)10.3
    
    Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and
Mexicans & Americans Trading Together, Inc. (4)10.4
    
    Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and Richard
L. Scott Investments, LLC (4)10.5
    
    Amendment No. 1 to Series 1 Common Stock Purchase Warrant dated January 25, 2008 by and
between Quepasa Corporation and Mexicans & Americans Trading Together, Inc. (4)10.6
    
    Amendment No. 1 to Series 2 Common Stock Purchase Warrant dated January 25, 2008 by and
between Quepasa Corporation and Mexicans & Americans Trading Together, Inc. (4)10.7
    
    Amendment No. 1 to Series 2 Common Stock Purchase Warrant dated January 25, 2008 by and
between Quepasa Corporation and Richard L. Scott Investments, LLC (4)10.8
    
    Amendment No. 1 to Series 3 Common Stock Purchase Warrant dated January 25, 2008 by and
between Quepasa Corporation and Richard L. Scott Investments, LLC (4)10.9
    
    Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and
Mexicans & Americans Trading Together, Inc. (4)10.10
    
    Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and
Richard L. Scott Investments, LLC (4)10.11*
    
    Consulting Agreement with Jeffrey Valdez dated October 24, 2007 (5)10.12
    
    Loan Agreement dated March 27, 2008 by and between Quepasa Corporation and BRC Group, LLC. (3)10.13
    
    Right of First Refusal dated March 27, 2008 by and between Quepasa Corporation and BRC Group,
LLC. (3)10.14
    
    Webpage Development and Hosting Agreement dated March 27, 2008 by and between Quepasa
Corporation and BRC Group, LLC. (3)10.15
    
    Promissory Note dated March 27, 2008 by BRC Group, LLC. (3)10.16
    
    Equity Interests Purchase Warrant dated March 27, 2008 by and between Quepasa Corporation and
BRC Group, LLC. (3)10.17
    
    Lease Termination Agreement dated March 10, 2008 by and between Quepasa Corporation and
Airpark Billorado, LLC (3)31.1*
    
    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 1350, 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 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 *
    
    Filed herewith**
    
    Furnished herewith(1)
    
    Incorporated by reference from the Registrants Quarterly Report on Form 10-QSB as filed with the SEC on August 15, 2007.(2)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K as filed with the SEC on July 3, 2007.(3)
    
    Incorporated by reference from the Registrants Annual Report on Form 10-KSB as filed with the SEC on March 31, 2008.(4)
    
    Incorporated by reference from the Registrants Current Report on Form 8-K as filed with the SEC on January 30, 2008.(5)
    
    This replaces the form Agreement filed with the Registrants Annual Report on Form 10-KSB as filed with the SEC on March 31, 2008, which contained an incorrect
version of the Agreement. The Agreement was approved by the Board of Directors of the Company on January 18, 2008.   22