##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-KSB
 
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT UNDER 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
 (Name of small business issuer in its charter)
 
 NEVADA
    
    86-0879433(State or other jurisdiction of 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 7550 E. Redfield Rd.
Scottsdale, AZ 85260
(Address of principal executive offices)
 (480) 348-2665
(Issuers telephone number)
 
  Title of Each Class
    
    Name of Each Exchange on Which RegisteredCommon Stock, $.001 par value per share
    
    The NASDAQ Stock Market LLC
  
 o
 þ o
 o
 o þ
    DOCUMENTS INCORPORATED BY REFERENCE
  o þ




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##### 



Quepasa Corporation
 FORM 10-KSB
 For the fiscal year ended December 31, 2007
 INDEX
 PagePART IItem 1.
    
    Description of Business
    
    
    3Item 2.
    
    Description of Properties
    
    
    10Item 3.
    
    Legal Proceedings
    
    
    10Item 4.
    
    Submission of Matters to a Vote of Securities Holders
    
    
    10PART IIItem 5.
    
    Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of
Equity Securities
    
    
    11Item 6.
    
    Managements Discussion and Analysis or Plan of Operation
    
    
    11Item 7.
    
    Financial Statements
    
    
    17Item 8.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    18Item 8A
    
    Controls and Procedures
    
    
    18Item 8B
    
    Other Information
    
    
    19PART IIIItem 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance
with Section 16(a) of the Exchange Act
    
    
    21Item 10.
    
    Executive Compensation
    
    
    21Item 11.
    
    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    21Item 12.
    
    Certain Relationships and Related Transactions and Director Independence
    
    
    21Item 13.
    
    Exhibits
    
    
    21Item 14.
    
    Principal Accountant Fees and Services
    
    
    21Signatures
    
    
    21Exhibit 10.18Exhibit 10.21Exhibit 10.34Exhibit 10.35Exhibit 10.36Exhibit 10.37Exhibit 10.38Exhibit 10.39Exhibit 10.40Exhibit 21.1Exhibit 23.1Exhibit 23.2Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



PART I
 
 Item 1. Description of Business
 The Company
    Industry Overview
  Hispanic growth and concentration
 
    
    totaled 44.3 million, or 14.8% of the total U.S. population, in 2006, an increase of
approximately 25.9% from 35.2 million or 12.5% of the total U.S. population in 2000;
 
    
    is expected to grow to 102.6 million, or 24.4% of the total U.S. population, by
2050, an increase of 66.9 million, or 187.4%, between 2000 and 2050;
 
    
    is the fastest growing minority group at 3.4% in the U.S. by adding one in every two
people to the US population between 2005 and 2006; and
 
    
    is relatively young according to the 2005 U.S. Census; the number of US Hispanics
age 0-24 will rise 25% between 2000 and 2010 as compared to 5.3% for the general
population of the same age group. As of 2006, it has a median age of 27.4, compared to
36.4 for the rest of the population.
  Hispanic use of the Internet
  3




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Increasing Hispanic purchasing power:
  Market Opportunity
  
    
    According to eMarketer, U.S. online spending in 2008 will reach $27.5 billion and by
2011 it will increase by 53% to $42.0 billion. The estimated online share of total
U.S. media ad spending will grow from 9.3% in 2008 to 13.3% in 2011;
 
    
    eMarketer estimates that by the end of 2007, 38% of all U.S. Internet users or 72
million people, will have used social networking at least once a month. By 2011, half
of all internet users, nearly 105 million people, will use social networking regularly.
In 2008, U.S. Social Network Advertising Spending will continue to grow to an
estimated $1.6 billion and by 2011 is estimated to increase 69% to $2.7 billion;
 
    
    ZenithOptimedias December 2007 report, predicts internet advertising to overtake
global radio advertising spending in 2008, to attain double digit share of global
advertising in 2009, and to overtake magazine advertising in 2011, with 11.5% of total
advertising spending representing $60.9 billion dollars;
 
    
    According to PriceWaterhouseCoopers, Internet advertising and access spending in
Latin America will increase from $6.0 billion in 2006 to $12.2 billion in 2011;
 
    
    GroupM predicts Latin American advertising spending to grow from $14.4 billion in
2006 to $19.3 billion in 2008; and
 
    
    ComScore reports that there are 53.6 million users in Latin America as of June 2007.
    
    
    Approximately two-thirds were born outside the U.S.;
 
    
    Hispanic immigration is continuing;
 
    
    Hispanics generally seek to preserve their cultural identity; and
 
    
    Hispanic population concentration encourages communication in Spanish.
  4




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Products and Services
 Products and services for businesses:
    
    
    Banner advertising, in which we earn revenue when an advertiser purchases
advertising space within our website and impressions are delivered. An impression
is delivered when an advertisement appears on our website pages viewed by users. We
recognize such revenue ratably over the contract period.
 
    
    Other types of display advertising earn revenue for Quepasa using various business
models, such as, but not limited to, cost per click, flat fee, and cost per
acquisition.
 
    
    We partner with offline properties and provide the online media component to their
sponsorship packages. When the online sponsorship package is sold, Quepasa splits the
revenue with the content provider.
 
    
    We will continue to sell the opportunity for marketers to email our registered user
base with a branded message.
 
    
    We will also continue to sell the bulletin functionality to advertisers. Bulletins
allow ads to be posted directly to a users profile.
 Products and services for community members
     Sales and Marketing
     5




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Product Development
     Intellectual Property
    Competition
     6




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Employees
  Executive Officers of the Company
 Officer orName
    
    Age
    
    Position
    
    Director SinceJohn C. Abbot
    
    
    37
    
    
    Chief Executive Officer
    
    
    2007Michael Matte
    
    
    48
    
    
    Chief Financial Officer
    
    
    2007Louis Bardov
    
    
    44
    
    
    Chief Technology Officer
    
    
    2008
 John C. Abbott
 Michael D. Matte
 Louis Bardov
  Risk Factors
 This Annual Report on Form 10-KSB includes forward-looking statements, as that term is
defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. All statements, other than statements of historical facts, included or incorporated in
this Form 10-KSB could be deemed forward-looking statements, particularly statements about our
plans, strategies and prospects under the headings Managements Discussion and Analysis or Plan of
Operation and Description of Business. Forward-looking statements are often characterized by the
use of words such as believes, estimates, expects, projects, may, will, intends,
plans, or anticipates, or by discussions of strategy, plans or intentions. All forward-looking
statements in this Form 10-KSB are made based on our current expectations and estimates, and
involve risks, uncertainties and other factors that could cause results or events to differ
materially from those expressed in forward-looking statements.
  7




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Risks and Uncertainties
 Our current level of indebtedness and the restrictions in our subordinated promissory notes may
make it more difficult to obtain additional financing.
  We have incurred ongoing operating losses and cannot assure we will be profitable in the future.
  We may face liability for information displayed on or accessible via our website, and for other
content and commerce-related activities, which could reduce our net worth and working capital and
increase our operating losses.
     8




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Competition in the operation of our website and in the provision of our information retrieval
services could cause us to reduce our prices or increase our marketing costs.
  If we are unable to protect our intellectual property rights, we may be unable to compete with
competitors developing similar technologies.
  The loss of the services of our executive officers and senior management would disrupt our
operations and interfere with our ability to compete.
  If we need and are unable to raise additional capital, we may be unable to maintain our operations.
  Changing laws, rules and regulations and legal uncertainties could increase the regulation of our
business and therefore increase our operating costs.
     9




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We could face liability for breaches of security on the Internet.
  We are dependent on third party databases and computer systems.
  We face competition from traditional media companies, and we may not be included in the advertising
budgets of large advertisers, which could harm our operating results.
  New technologies could block our ads, which would harm our business.
  
 Item 2. Description of Properties
  
 Item 3. Legal Proceedings
  
 Item 4. Submission of Matters to a Vote of Security Holders
   10




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PART II
 
 Item 5.
    
    Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases
of Equity Securities
  Stock PriceHigh
    
    
    Low2007First Quarter
    
    $
    9.40
    
    
    $
    5.65Second Quarter
    
    $
    6.85
    
    
    $
    3.83Third Quarter
    
    $
    6.09
    
    
    $
    3.87Fourth Quarter
    
    $
    6.00
    
    
    $
    1.51
 Stock PriceHigh
    
    
    Low2006First Quarter
    
    $
    4.33
    
    
    $
    2.55Second Quarter
    
    $
    8.55
    
    
    $
    4.08Third Quarter
    
    $
    9.25
    
    
    $
    5.40Fourth Quarter
    
    $
    12.45
    
    
    $
    7.30
  Dividend Policy
  
 Item 6. Managements Discussion and Analysis or Plan of Operation
 You should read the following discussion in conjunction with our audited historical consolidated
financial statements, which are included elsewhere in this Form 10-KSB . 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
titled Risk Factors, located in Part I, Item 1, of this Form 10-KSB .
 Company Overview
   11




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Revenue sources
  Performance-based Revenue
 Banner Advertising Revenue.
 Google AdSense Revenue.
 Summary
  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:
  12




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Sales and Marketing Expenses:
 General and Administrative Expenses:
 Depreciation and Amortization Expenses:
 Other Income (Expense):
 Results of Operations
 2007 Compared to 2006
  Revenues
  Operating Costs and Expenses
  Search Services:
 Sales and Marketing:
  13




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Product and Content Development:
 General and Administrative:
   
    
    An increase of $1,294,210 for outside professional fees, primarily for accounting
and legal services. As a result of the restatements disclosed in 2007, we incurred an
additional $721,027 for accounting services, $108,186 for filing and reporting
requirements, and $386,082 in legal services. Lastly, we spent $78,915 for consulting
services related to due diligence for potential acquisition targets and human
resources.
 
    
    An increase of $1,264,584 for salaries and employee related overhead expenses. As
a result of the increased number of employees and the website re-design efforts in
2007, we incurred $443,903 in additional costs for travel expenses, $430,576 in
additional outside recruiting fees, $390,105 in additional general and administration
salaries and related payroll expenses.
 
    
    An increase of $605,104 for Corporate overhead expenses related to an expansion of
the Arizona corporate headquarters in 2007.
 Depreciation and Amortization:
  Other Income (Expense)
 Liquidity and Capital Resources
  2007
    
    
    2006Cash and cash equivalents
    
    $
    3,673,281
    
    
    $
    14,093,811Percentage of total assets
    
    
    62
    %
    
    
    88
    %
  14




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2007
    
    
    2006Net cash used in operating activities
    
    $
    (10,153,236
    )
    
    $
    (3,983,769
    )Net cash used in investing activities
    
    $
    (817,812
    )
    
    $
    (489,065
    )Net cash provided by financing activities
    
    $
    546,150
    
    
    $
    17,117,548
       Cash flow changes
    Financing
   15




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Capital expenditures
  Critical Accounting Policies, Judgments and Estimates
    Stock-Based Compensation Expense
  Recent Accounting Pronouncements
   16




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Item 7. Financial Statements
 Table of Contents
 PageReport of Independent Registered Public Accounting Firm
    
    
    F-1Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Financial StatementsConsolidated Balance Sheet
    
    
    F-3Consolidated Statements of Operations and Comprehensive Loss
    
    
    F-4Consolidated Statements of Changes in Stockholders Equity (Deficit)
    
    
    F-5Consolidated Statements of Cash Flows
    
    
    F-6Notes to Consolidated Financial Statements
    
    
    F-8
  17




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
    
  F-1




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 The Stockholders 
Quepasa Corporation and Subsidiaries We have audited the accompanying
consolidated statements of operations and comprehensive loss, changes in
stockholders’ equity and cash flows of Quepasa Corporation and
Subsidiaries (the “Company”) for the year ended December 31,
2006. These consolidated financial statements are the responsibility of the
Company’s management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit. We conducted our audit in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit also includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements, assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion. In our opinion, the consolidated
financial statements referred to above present fairly, in all material
respects, the consolidated results of operations and cash flows of Quepasa
Corporation and Subsidiaries for the year ended December 31, 2006, (as
restated), in conformity with accounting principles generally accepted in the
United States of America. As discussed in Note 1, the Company
adopted the provisions of Statement of Financial Accounting Standards
No. 123(R), “Share-Based Payment,” on January 1, 2006. As discussed in Note 8b to the
consolidated financial statements, certain errors resulting in understatement
of previously recognized stock-based compensation expense during 2006, were
discovered by management of the Company during October 2007. Accordingly,
the 2006 consolidated financial statements have been restated to correct the errors. As discussed in Note 9b to the
consolidated financial statements, there is substantial doubt about the
Company’s ability to continue as a going concern as of October 29, 2007. /s/ Perelson Weiner LLP 
New York, New York
April 17, 2007, except for Notes 8b and 9b to which the date is October 29, 2007  F-2




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QUEPASA CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheet
 December 31, 2007ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    3,673,281Accounts receivable  trade, net of allowance $15,000
    
    
    38,306Other current assets
    
    
    146,876Total current assets
    
    
    3,858,463Property and equipment  net
    
    
    1,023,041Jet rights  net
    
    
    885,712Other assets
    
    
    133,692Total assets
    
    $
    5,900,908LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)CURRENT LIABILITIES:Accounts payable
    
    $
    887,598Accrued expenses
    
    
    306,130Unearned grant income
    
    
    65,917Current portion of long-term debt
    
    
    1,668,808Total current liabilities
    
    
    2,928,453Long-term debt
    
    
    5,526,506Total liabilities
    
    
    8,454,959COMMITMENTS AND CONTINGENCIES (Note 5)STOCKHOLDERS EQUITY (DEFICIT):Preferred stock, $0.001 par value; authorized  5,000,000 shares;
issued and outstanding  none
    
    
    Common stock, $0.001 par value; authorized  50,000,000 shares;
issued and outstanding  12,284,511 shares
    
    
    12,285Additional paid-in capital
    
    
    138,880,462Accumulated deficit
    
    
    (141,452,663
    )Accumulated other comprehensive income
    
    
    5,865Total stockholders equity (deficit)
    
    
    (2,554,051
    )Total
liabilities and stockholders equity (deficit)
    
    $
    5,900,908
   F-3




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QUEPASA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
 For the Years Ended December 31,20062007
    
    
    As RestatedREVENUES
    
    $
    219,466
    
    
    $
    395,432OPERATING COSTS AND EXPENSES:Search services
    
    
    
    
    
    
    210,832Sales and marketing
    
    
    1,160,514
    
    
    
    561,486Product and content development
    
    
    4,773,965
    
    
    
    1,246,156General and administrative
    
    
    7,829,217
    
    
    
    12,049,010Depreciation and amortization
    
    
    446,635
    
    
    
    129,04314,210,331
    
    
    
    14,196,527LOSS FROM OPERATIONS
    
    
    (13,990,865
    )
    
    
    (13,801,095
    )OTHER INCOME (EXPENSE):Interest income
    
    
    430,205
    
    
    
    195,125Interest expense
    
    
    (741
    )
    
    
    (1,871
    )Gain / (loss) on disposal of property and equipment
    
    
    4,638
    
    
    
    (6,926
    )Other income
    
    
    198,264
    
    
    
    8,736TOTAL OTHER INCOME
    
    
    632,366
    
    
    
    195,064LOSS BEFORE INCOME TAXES
    
    
    (13,358,499
    )
    
    
    (13,606,031
    )Income taxes
    
    
    
    
    
    
    NET LOSS
    
    
    (13,358,499
    )
    
    
    (13,606,031
    )Foreign currency translation adjustment
    
    
    4,368
    
    
    
    7,208TOTAL COMPREHENSIVE LOSS
    
    $
    (13,354,131
    )
    
    $
    (13,598,823
    )NET LOSS PER COMMON SHARE, BASIC AND DILUTED
    
    $
    (1.09
    )
    
    $
    (1.50
    )WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING, BASIC AND
DILUTED
    
    
    12,233,573
    
    
    
    9,063,947
   F-4




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QUEPASA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders Equity (Deficit)
For the Years Ended December 31, 2007 and 2006 as restated
 AccumulatedAdditional
    
    
    
    
    
    
    Other
    
    
    TotalPreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Deficit
    
    
    Income (loss)
    
    
    EquityBalanceDecember 31, 2005
    
    
    
    
    
    $
    
    
    
    
    7,832,021
    
    
    $
    7,832
    
    
    $
    115,773,796
    
    
    $
    (114,488,133
    )
    
    $
    (5,711
    )
    
    $
    1,287,784Issuance of stock options for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,381,625
    
    
    
    
    
    
    
    
    
    
    
    1,381,625Issuance of warrants for compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    667,581
    
    
    
    
    
    
    
    
    
    
    
    667,581Issuance of warrants for strategic initiatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,387,979
    
    
    
    
    
    
    
    
    
    
    
    7,387,979Issuance of stock options for professional
services
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,402
    
    
    
    
    
    
    
    
    
    
    
    13,402Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    908,500
    
    
    
    909
    
    
    
    1,332,441
    
    
    
    
    
    
    
    
    
    
    
    1,333,350Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    1,965,340
    
    
    
    1,965
    
    
    
    6,142,069
    
    
    
    
    
    
    
    
    
    
    
    6,144,034Issuance of common stock
    
    
    
    
    
    
    
    
    
    
    1,000,000
    
    
    
    1,000
    
    
    
    10,572,216
    
    
    
    
    
    
    
    
    
    
    
    10,573,216Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,208
    
    
    
    7,208Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,606,031
    )
    
    
    
    
    
    
    (13,606,031
    )Balance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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,087,243
    
    
    
    
    
    
    
    
    
    
    
    2,087,243Issuance of common stock to directors for
compensation
    
    
    
    
    
    
    
    
    
    
    41,250
    
    
    
    42
    
    
    
    227,059
    
    
    
    
    
    
    
    
    
    
    
    227,101Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    531,000
    
    
    
    531
    
    
    
    891,819
    
    
    
    
    
    
    
    
    
    
    
    892,350Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    6,400
    
    
    
    6
    
    
    
    28,794
    
    
    
    
    
    
    
    
    
    
    
    28,800Commitment
for Corporate Sponsership and Management Services Agreement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,625,562
    )
    
    
    
    
    
    
    
    
    
    
    (7,625,562
    )Foreign currency translation adjustment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,368
    
    
    
    4,368Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,358,499
    )
    
    
    
    
    
    
    (13,358,499
    )BalanceDecember 31, 2007
    
    
    
    
    
    $
    
    
    
    
    12,284,511
    
    
    $
    12,285
    
    
    $
    138,880,462
    
    
    $
    (141,452,663
    )
    
    $
    5,865
    
    
    $
    (2,554,051
    )
   F-5




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QUEPASA CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
 For the Years EndedDecember 31,20062007
    
    
    As RestatedOperating activities:Net loss
    
    $
    (13,358,499
    )
    
    $
    (13,606,031
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization
    
    
    446,635
    
    
    
    129,043Issuance of warrants for strategic initiatives
    
    
    
    
    
    
    7,387,979Issuance of stock options and warrants for compensation
    
    
    2,087,243
    
    
    
    2,049,206Issuance of common stock to directors for compensation
    
    
    227,101
    
    
    
    Issuance of common stock and stock options for professional services
    
    
    
    
    
    
    13,402Loss / (Gain) on disposal of property and equipment
    
    
    (4,638
    )
    
    
    6,926Grant income
    
    
    (29,063
    )
    
    
    (8,201
    )Bad debt expense
    
    
    15,172
    
    
    
    Change in assets and liabilities:Accounts receivable  trade
    
    
    20,877
    
    
    
    (22,170
    )Other current assets and other assets
    
    
    51,764
    
    
    
    (341,694
    )Accounts payable and accrued expenses
    
    
    390,172
    
    
    
    615,634Deferred revenue
    
    
    
    
    
    
    (207,863
    )Net cash used in operating activities
    
    
    (10,153,236
    )
    
    
    (3,983,769
    )Investing activities:Disposal of property and equipment
    
    
    24,975
    
    
    
    32,162Purchase of property and equipment
    
    
    (842,787
    )
    
    
    (521,227
    )Net cash used in investing activities
    
    
    (817,812
    )
    
    
    (489,065
    )Financing activities:Proceeds from exercise of stock options and warrants
    
    
    921,150
    
    
    
    7,477,384Net proceeds from the issuance of common stock
    
    
    
    
    
    
    9,565,771Grant proceeds
    
    
    
    
    
    
    103,181Payments on long-term debt
    
    
    (375,000
    )
    
    
    (28,788
    )Net cash provided by financing activities
    
    
    546,150
    
    
    
    17,117,548Cash and cash equivalents prior to effect of foreign currency exchange rate on cash
    
    
    (10,424,898
    )
    
    
    12,644,714Effect of foreign currency exchange rate on cash
    
    
    4,368
    
    
    
    7,208Net increase (decrease) in cash and cash equivalents
    
    
    (10,420,530
    )
    
    
    12,651,922Cash and cash equivalents at beginning of year
    
    
    14,093,811
    
    
    
    1,441,889Cash and cash equivalents at end of year
    
    $
    3,673,281
    
    
    $
    14,093,811Supplemental disclosures of cash flow information:Cash paid for interest
    
    $
    741
    
    
    $
    1,871Cash paid for income taxes
    
    $
    
    
    
    $
    
   F-6




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##### Table of Contents




    
    The Company recorded a long-term liability in the amount of $7,195,314 payable to
an Organization, in connection with the financing transaction to raise
capital. See Note 4.
  
    
    The Company received jet rights with a fair value of $1,007,445 in connection
with a financing transaction. See Common Stock section of Note 6.
   F-7




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##### Table of Contents



QUEPASA CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For The Years Ended December 31, 2007 and 2006
 Note 1Description of Business and Summary of Significant Accounting Policies
  Principles of Consolidation
  Reclassification
  Cash and Cash Equivalents
  Accounts Receivable  Trade
  Property and Equipment
  Software
    
    2 yearsComputer equipment
    
    
    3 to 4 yearsVehicles
    
    
    4 to 5 yearsOffice furniture and equipment
    
    
    5 to 10 yearsOther equipment
    
    
    3 to 13 years
  F-8




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##### Table of Contents



Jet Rights
  Unearned Grant Income
  Use of Estimates
  Foreign Currency
  Revenue Recognition
 Revenue Recognition Revenue Arrangements with Multiple Deliverables.
 Income Taxes
  Accounting for Uncertainty in Income Taxesan Interpretation of FASB Statement No. 109
 Advertising Costs
  Comprehensive Income (Loss)
  Loss per Share
   F-9




---



##### Table of Contents



December 31,2007
    
    
    2006Stock options
    
    
    4,520,825
    
    
    
    2,358,075Warrants
    
    
    4,432,500
    
    
    
    4,438,900Total
    
    
    8,953,325
    
    
    
    6,796,975
 Long-Lived Assets
  Fair Value of Financial Instruments
  Product and Content Development Costs
  Software Development Costs
  Stock-Based Compensation
 Accounting
for Stock-Based Compensation Accounting for Stock Issued to Employees Share-Based Payment
 Share-Based Payment
  Significant Customers
   F-10




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##### Table of Contents



Leases
  Recent Accounting Pronouncements
 Fair Value Measurements
  Business Combinations
 Non-controlling Interests in
Consolidated Financial Statements  an amendment of ARB No. 51
  F-11




---



##### Table of Contents



Note 2Property and Equipment
  Software
    
    $
    489,449Computer equipment
    
    
    1,390,059Vehicles
    
    
    20,697Office furniture and equipment
    
    
    214,526Other equipment
    
    
    10,8212,125,552Less accumulated depreciation
    
    
    (1,102,511
    )Property and equipmentnet
    
    $
    1,023,041
  Note 3Jet Rights
   Jet rights
at original fair value
    
    $
    1,007,445Less: accumulated amortization
    
    
    (121,733
    )Jet rights, net
    
    $
    885,712
   Note 4Long-term Debt
 Corporate Sponsorship and Management Services Agreement
   F-12




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##### Table of Contents



Present Value ofYear Ending December 31:
    
    Expected PaymentsUnpaid 2007 Obligations
    
    $
    520,2252008
    
    
    1,148,5832009
    
    
    1,020,5022010
    
    
    906,7022011
    
    
    805,5932012
    
    
    715,7592013
    
    
    635,9432014
    
    
    565,0272015
    
    
    502,0192016
    
    
    374,961Total Debt
    
    
    7,195,314Less: Current Portion of Debt
    
    
    (1,668,808
    )Total Long-term Debt
    
    $
    5,526,506
 Note 5Commitments and Contingencies
 Operating Leases
   Year Ending December 31:2008
    
    $
    382,2142009
    
    
    132,498Total
    
    $
    514,712
 Litigation
  Employment Contracts
  Note 6Stockholders Equity
 Preferred Stock
  Common Stock
   F-13




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##### Table of Contents



1998 Stock Option Plan
     F-14




---



##### Table of Contents



Employees:
 For the years ended December 31,2007
    
    
    2006Weighted
    
    
    
    
    
    
    
    
    
    
    WeightedAvg.
    
    
    Remaining
    
    
    
    
    
    
    Avg.
    
    
    Remaining1998 Plan - Employee
    
    
    
    
    
    Exercise
    
    
    Life
    
    
    
    
    
    
    Exercise
    
    
    LifeStock Options:
    
    Shares
    
    
    Price
    
    
    (years)
    
    
    Shares
    
    
    Price
    
    
    (years)Options
outstanding,
beginning of year
    
    
    2,248,075
    
    
    $
    2.42
    
    
    
    
    
    
    
    2,211,375
    
    
    $
    1.65Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    820,200
    
    
    
    3.59Exercised
    
    
    (531,000
    )
    
    
    1.68
    
    
    
    
    
    
    
    (758,500
    )
    
    
    1.48Expired or forfeited
    
    
    (902,569
    )
    
    
    2.55
    
    
    
    
    
    
    
    (25,000
    )
    
    
    1.50Options outstanding,
end of year
    
    
    814,506
    
    
    $
    2.76
    
    
    
    0.8
    
    
    
    2,248,075
    
    
    $
    2.42
    
    
    
    6.2Options exercisable,
end of year
    
    
    809,506
    
    
    $
    2.73
    
    
    
    0.7
    
    
    
    1,822,078
    
    
    $
    2.04
    
    
    
    5.4
 Share-Based Payment
  For the year endedDecember 31, 2006(As Restated)Risk-free interest rate:
    
    
    4.6
    %Expected term:
    
    5 yearsExpected dividend yield:
    
    
    0
    %Expected volatility:
    
    
    170
    %
 Consultants:
  Risk-free interest rate:
    
    
    4.5
    %Expected term:
    
    7 yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    123
    %
  Risk-free interest rate:
    
    
    4.99
    %Expected term:
    
    6 yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    167
    %
  F-15




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##### Table of Contents



Totals for 1998 Plan:
  2006 Stock Incentive Plan
   Employees:
  For the year ended December 31, 2007WeightedAvg.
    
    
    RemainingExercise
    
    
    Life2006 Plan Employee Stock Options:
    
    Shares
    
    
    Price
    
    
    (years)Options outstanding, beginning of year
    
    
    
    
    
    $
    Granted
    
    
    3,815,319
    
    
    
    3.91Exercised
    
    
    
    
    
    
    Expired or forfeited
    
    
    (215,000
    )
    
    
    9.59Options outstanding, end of year
    
    
    3,600,319
    
    
    $
    3.57
    
    
    
    9.4Options exercisable, end of year
    
    
    152,000
    
    
    $
    10.00
    
    
    
    1.0
 Share-Based Payment
  F-16




---



##### Table of Contents



Non-Executive Employees:
  For the year endedDecember 31, 2007Risk-free interest rate:
    
    
    5.0
    %Expected term:
    
    5.5 yearsExpected dividend yield:
    
    
    0
    %Expected volatility:
    
    
    157
    %
 Executive Employees:
  For the year endedDecember 31, 2007Risk-free interest rate:
    
    
    4.0
    %Expected term:
    
    5.8 yearsExpected dividend yield:
    
    
    0
    %Expected volatility:
    
    
    153
    %
 Consultants:
  For the year endedDecember 31, 2007Risk-free interest rate:
    
    
    5.0
    %Expected term:
    
    5.5 yearsExpected dividend yield:
    
    
    0
    %Expected volatility:
    
    
    156
    %
 Totals for 2006 Plan:
  Warrants
    F-17




---



##### Table of Contents



Risk-free interest rate:
    
    
    4.68
    %Expected term:
    
    5 yearsExpected dividend yield:
    
    
    0.00
    %Expected volatility:
    
    
    163.73
    %
  Warrant #1
    
    
    Warrants #2 and #3Risk-free interest rate:
    
    
    4.69
    %
    
    
    4.68
    %Expected term:
    
    0.25 years
    
    
    5 yearsExpected dividend yield:
    
    
    0.00
    %
    
    
    0.00
    %Expected volatility:
    
    
    53.98
    %
    
    
    163.73
    %
   F-18




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##### Table of Contents



Note 7Income Taxes
    2007
    
    
    2006U.S. federal income tax at statutory rate
    
    $
    (4,542,000
    )
    
    $
    (4,626,000
    )Nondeductible expenses
    
    
    45,000
    
    
    
    2,530,000Exercise of non-qualified stock options
    
    
    (1,059,000
    )
    
    
    (1,624,000
    )Change in valuation allowance
    
    
    6,304,000
    
    
    
    4,562,000State tax benefit, net of federal provision (benefit)
    
    
    (753,000
    )
    
    
    (502,000
    )Other
    
    
    5,000
    
    
    
    (340,000
    )Income tax expense
    
    $
    
    
    
    $
    
  December 31,2007Net operating loss
    
    $
    36,193,000Deferred revenue
    
    
    Property and equipment
    
    
    5,000Stock options and warrants
    
    
    1,690,000Accrued Professional Fees
    
    
    196,000Other
    
    
    20,000Total deferred tax assets
    
    
    38,104,000Valuation allowance
    
    
    (38,104,000
    )Net deferred tax assets
    
    $
    
 Note 8Related Party Transactions
      F-19




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##### Table of Contents



Note 9Restatements of Previously Issued Financial Statements
 April 2007 Restatement:
  October 2007 Restatement:
 annualized Share-Based Payment
  Originally
    
    
    April07
    
    
    October07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Unaudited)For the three months ended
March 31, 2006:Loss from operations
    
    $
    (2,172,554
    )
    
    $
    (4,668,568
    )
    
    $
    (1,969,821
    )
    
    $
    (8,810,943
    )Net Loss
    
    
    (2,164,774
    )
    
    
    (4,668,568
    )
    
    
    (1,969,821
    )
    
    
    (8,803,163
    )Loss per share
    
    
    (0.27
    )
    
    
    (0.60
    )
    
    
    (0.25
    )
    
    
    (1.12
    )
  Originally
    
    
    April07
    
    
    October07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Unaudited)For the three months
ended June 30, 2006:Loss from operations
    
    $
    (890,891
    )
    
    $
    (174,899
    )
    
    $
    (118,754
    )
    
    $
    (1,184,544
    )Net Loss
    
    
    (883,226
    )
    
    
    (174,899
    )
    
    
    (118,754
    )
    
    $
    (1,176,879
    )Loss per share
    
    
    (0.11
    )
    
    
    (0.02
    )
    
    
    (0.01
    )
    
    
    (0.14
    )
  F-20




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##### Table of Contents



Originally
    
    
    April'07
    
    
    October'07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Unaudited)For the six months
ended June 30,
2006:Loss from operations
    
    $
    (3,063,445
    )
    
    $
    (4,843,467
    )
    
    $
    (2,088,575
    )
    
    $
    (9,995,487
    )Net Loss
    
    
    (3,048,000
    )
    
    
    (4,843,467
    )
    
    
    (2,088,575
    )
    
    $
    (9,980,042
    )Loss per share
    
    
    (0.38
    )
    
    
    (0.60
    )
    
    
    (0.26
    )
    
    
    (1.24
    )
  Originally
    
    
    April'07
    
    
    October'07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Unaudited)For the three
months ended
September 30, 2006:Loss from operations
    
    $
    (1,324,134
    )
    
    $
    (28,175
    )
    
    $
    (57,046
    )
    
    $
    (1,409,355
    )Net Loss
    
    
    (1,297,301
    )
    
    
    (28,175
    )
    
    
    (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
    
    $
    (4,387,579
    )
    
    $
    (4,871,642
    )
    
    $
    (2,145,621
    )
    
    $
    (11,404,842
    )Net Loss
    
    
    (4,345,301
    )
    
    
    (4,871,642
    )
    
    
    (2,145,621
    )
    
    $
    (11,362,564
    )Loss per share
    
    
    (0.51
    )
    
    
    (0.58
    )
    
    
    (0.25
    )
    
    
    (1.34
    )
  Originally
    
    
    April'07
    
    
    October'07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Audited)For the year ended
December 31, 2006:Loss from operations
    
    $
    (11,644,548
    )
    
    $
    
    
    
    $
    (2,156,547
    )
    
    $
    (13,801,095
    )Net Loss
    
    
    (11,449,484
    )
    
    
    
    
    
    
    (2,156,547
    )
    
    $
    (13,606,031
    )Loss per share
    
    
    (1.26
    )
    
    
    
    
    
    
    (0.24
    )
    
    
    (1.50
    )
  Originally
    
    
    April'07
    
    
    October'07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    Restated(Unaudited)For the three
months ended March
31, 2007:Loss from operations
    
    $
    (3,332,838
    )
    
    $
    
    
    
    $
    (49,267
    )
    
    $
    (3,382,105
    )Net Loss
    
    
    (3,155,744
    )
    
    
    
    
    
    
    (49,267
    )
    
    $
    (3,205,011
    )Loss per share
    
    
    (0.26
    )
    
    
    
    
    
    
    (0.00
    )
    
    
    (0.26
    )
  F-21




---



##### Table of Contents



Originally
    
    
    April'07
    
    
    October'07Reported
    
    
    Restatement
    
    
    Restatement
    
    
    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 March 31,
2006:Originally reported
    
    $
    118,152
    
    
    $
    24,232
    
    
    $
    41,809
    
    
    $
    2,131,377
    
    
    $
    21,549
    
    
    $
    2,337,119April07 restatement
    
    
    
    
    
    
    
    
    
    
    34,407
    
    
    
    4,634,161
    
    
    
    
    
    
    
    4,668,568April07 reclassifications
    
    
    
    
    
    
    26,438
    
    
    
    105,761
    
    
    
    (132,199
    )
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    
    
    
    
    8,888
    
    
    
    1,960,933
    
    
    
    
    
    
    
    1,969,821Restated
    
    $
    118,152
    
    
    $
    50,670
    
    
    $
    190,865
    
    
    $
    8,594,272
    
    
    $
    21,549
    
    
    $
    8,975,508For the three months ended June 30,
2006:Originally reported
    
    $
    47,178
    
    
    $
    33,686
    
    
    $
    76,562
    
    
    $
    797,152
    
    
    $
    20,220
    
    
    $
    974,798April07 restatement
    
    
    
    
    
    
    
    
    
    
    38,036
    
    
    
    136,863
    
    
    
    
    
    
    
    174,899April07 reclassifications
    
    
    
    
    
    
    55,308
    
    
    
    116,433
    
    
    
    (171,741
    )
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    
    
    
    
    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:Originally reported
    
    $
    165,330
    
    
    $
    57,918
    
    
    $
    118,371
    
    
    $
    2,928,529
    
    
    $
    41,769
    
    
    $
    3,311,917April07 restatement
    
    
    
    
    
    
    
    
    
    
    72,443
    
    
    
    4,771,024
    
    
    
    
    
    
    
    4,843,467April07 reclassifications
    
    
    
    
    
    
    81,746
    
    
    
    222,194
    
    
    
    (303,940
    )
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    
    
    
    
    18,466
    
    
    
    2,070,109
    
    
    
    
    
    
    
    2,088,575Restated
    
    $
    165,330
    
    
    $
    139,664
    
    
    $
    431,474
    
    
    $
    9,465,722
    
    
    $
    41,769
    
    
    $
    10,243,959For the three months ended September
30, 2006:Originally reported
    
    $
    34,812
    
    
    $
    46,252
    
    
    $
    101,474
    
    
    $
    1,171,395
    
    
    $
    23,914
    
    
    $
    1,377,847April07 restatement
    
    
    
    
    
    
    15,743
    
    
    
    13,946
    
    
    
    (1,514
    )
    
    
    
    
    
    
    28,175April07 reclassifications
    
    
    
    
    
    
    103,312
    
    
    
    174,661
    
    
    
    (277,973
    )
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    2,500
    
    
    
    2,478
    
    
    
    52,068
    
    
    
    
    
    
    
    57,046Restated
    
    $
    34,812
    
    
    $
    167,807
    
    
    $
    292,559
    
    
    $
    943,976
    
    
    $
    23,914
    
    
    $
    1,463,068
  F-22




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##### Table of Contents



Product and
    
    
    
    
    
    
    DepreciationSearch
    
    
    Sales and
    
    
    Content
    
    
    General and
    
    
    andServices
    
    
    Marketing
    
    
    Development
    
    
    Administrative
    
    
    Amortization
    
    
    Total(Unaudited)For the nine months ended September
30, 2006:Originally reported
    
    $
    200,142
    
    
    $
    104,170
    
    
    $
    219,845
    
    
    $
    4,099,924
    
    
    $
    65,683
    
    
    $
    4,689,764April07 restatement
    
    
    
    
    
    
    15,743
    
    
    
    86,389
    
    
    
    4,769,510
    
    
    
    
    
    
    
    4,871,642April07 reclassifications
    
    
    
    
    
    
    185,058
    
    
    
    396,855
    
    
    
    (581,913
    )
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    2,500
    
    
    
    20,944
    
    
    
    2,122,177
    
    
    
    
    
    
    
    2,145,621Restated
    
    $
    200,142
    
    
    $
    307,471
    
    
    $
    724,033
    
    
    $
    10,409,698
    
    
    $
    65,683
    
    
    $
    11,707,027(Audited)For the year ended December 31, 2006:Originally reported
    
    $
    210,832
    
    
    $
    555,073
    
    
    $
    1,221,505
    
    
    $
    9,923,527
    
    
    $
    129,043
    
    
    $
    12,039,980April07 restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April07 reclassifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    6,413
    
    
    
    24,651
    
    
    
    2,125,483
    
    
    
    
    
    
    
    2,156,547Restated
    
    $
    210,832
    
    
    $
    561,486
    
    
    $
    1,246,156
    
    
    $
    12,049,010
    
    
    $
    129,043
    
    
    $
    14,196,527For the three months ended March 31,
2007:Originally reported
    
    $
    
    
    
    $
    490,781
    
    
    $
    993,637
    
    
    $
    1,808,299
    
    
    $
    92,603
    
    
    $
    3,385,320April07 restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April07 reclassifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    3,361
    
    
    
    3,173
    
    
    
    42,733
    
    
    
    
    
    
    
    49,267Restated
    
    $
    
    
    
    $
    494,142
    
    
    $
    996,810
    
    
    $
    1,851,032
    
    
    $
    92,603
    
    
    $
    3,434,587For the three months ended June 30,
2007:Originally reported
    
    $
    
    
    
    $
    314,772
    
    
    $
    1,339,238
    
    
    $
    2,091,165
    
    
    $
    103,658
    
    
    $
    3,848,833April07 restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April07 reclassifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    3,761
    
    
    
    3,900
    
    
    
    20,512
    
    
    
    
    
    
    
    28,173October07 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:Originally reported
    
    $
    
    
    
    $
    805,553
    
    
    $
    2,332,875
    
    
    $
    3,899,464
    
    
    $
    196,261
    
    
    $
    7,234,153April07 restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    April07 reclassifications
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 restatement
    
    
    
    
    
    
    7,122
    
    
    
    7,073
    
    
    
    63,245
    
    
    
    
    
    
    
    77,440October07 reclassifications
    
    
    
    
    
    
    32,599
    
    
    
    (130,500
    )
    
    
    97,901
    
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    845,274
    
    
    $
    2,209,448
    
    
    $
    4,060,610
    
    
    $
    196,261
    
    
    $
    7,311,593
  F-23




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##### Table of Contents



AccumulatedOther
    
    
    TotalPreferred
    
    
    Common
    
    
    Additional
    
    
    Accumulated
    
    
    Comprehensive
    
    
    Stockholders'Stock
    
    
    Stock
    
    
    Paid-in Capital
    
    
    Deficit
    
    
    Income (Loss)
    
    
    Equity(Unaudited)As of March 31, 2006:Originally Reported
    
    $
    
    
    
    $
    8,082
    
    
    $
    117,899,635
    
    
    $
    (116,652,907
    )
    
    $
    (11,413
    )
    
    $
    1,243,397April07 Restatement
    
    
    
    
    
    
    
    
    
    
    4,668,568
    
    
    
    (4,668,568
    )
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    1,969,821
    
    
    
    (1,969,821
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    8,082
    
    
    $
    124,538,024
    
    
    $
    (123,291,296
    )
    
    $
    (11,413
    )
    
    $
    1,243,397As of June 30, 2006:Originally Reported
    
    $
    
    
    
    $
    8,520
    
    
    $
    118,683,701
    
    
    $
    (117,536,133
    )
    
    $
    (23,972
    )
    
    $
    1,132,116April07 Restatement
    
    
    
    
    
    
    
    
    
    
    4,843,467
    
    
    
    (4,843,467
    )
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    2,088,575
    
    
    
    (2,088,575
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    8,520
    
    
    $
    125,615,743
    
    
    $
    (124,468,175
    )
    
    $
    (23,972
    )
    
    $
    1,132,116As of September 30, 2006:Originally Reported
    
    $
    
    
    
    $
    9,754
    
    
    $
    122,626,287
    
    
    $
    (118,833,434
    )
    
    $
    (13,544
    )
    
    $
    3,789,063April07 Restatement
    
    
    
    
    
    
    (10
    )
    
    
    4,871,652
    
    
    
    (4,871,642
    )
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    2,145,621
    
    
    
    (2,145,621
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    9,744
    
    
    $
    129,643,560
    
    
    $
    (125,850,697
    )
    
    $
    (13,544
    )
    
    $
    3,789,063(Audited)As of December 31, 2006:Originally Reported
    
    $
    
    
    
    $
    11,706
    
    
    $
    141,114,562
    
    
    $
    (125,937,617
    )
    
    $
    1,497
    
    
    $
    15,190,148April07 Restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    2,156,547
    
    
    
    (2,156,547
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    11,706
    
    
    $
    143,271,109
    
    
    $
    (128,094,164
    )
    
    $
    1,497
    
    
    $
    15,190,148(Unaudited)As of March 31, 2007:Originally Reported
    
    $
    
    
    
    $
    12,231
    
    
    $
    142,270,210
    
    
    $
    (129,093,361
    )
    
    $
    10,060
    
    
    $
    13,199,140Roll-forward of fiscal year
2006 restatement
    
    
    
    
    
    
    
    
    
    
    2,156,547
    
    
    
    (2,156,547
    )
    
    
    
    
    
    
    April07 Restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    49,267
    
    
    
    (49,267
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    12,231
    
    
    $
    144,476,024
    
    
    $
    (131,299,175
    )
    
    $
    10,060
    
    
    $
    13,199,140As of June 30, 2007:Originally Reported
    
    $
    
    
    
    $
    12,271
    
    
    $
    143,053,292
    
    
    $
    (132,736,518
    )
    
    $
    1,533
    
    
    $
    10,330,578Roll-forward of fiscal year
2006 restatement
    
    
    
    
    
    
    
    
    
    
    2,156,547
    
    
    
    (2,156,547
    )
    
    
    
    
    
    
    April07 Restatement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    October07 Restatement
    
    
    
    
    
    
    
    
    
    
    77,440
    
    
    
    (77,540
    )
    
    
    
    
    
    
    Restated
    
    $
    
    
    
    $
    12,271
    
    
    $
    145,287,279
    
    
    $
    (134,970,505
    )
    
    $
    1,533
    
    
    $
    10,330,578
  F-24




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##### Table of Contents



Note 10Subsequent Events
           F-25




---



##### Table of Contents



Item 8. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
  
 Item 8A. Controls and Procedures
 Disclosure Controls and Procedures
  Limitations on the Effectiveness of Controls
  Managements Annual Report on Internal Control over Financial Reporting
     18




---



##### Table of Contents



Remediation of Weaknesses
    Changes in Internal Control over Financial Reporting
  
 Item 8B. Other Information.
       19




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##### Table of Contents



20




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##### Table of Contents



PART III
 
 Item 9.
    
    Directors, Executive Officers, Promoters, Control Persons and Corporate Governance;
Compliance with Section 16(a) of the Exchange Act.
  
 Item 10. Executive Compensation.
  
 Item 11. Security Ownership of Certain Beneficial Owners and Management And Related Stockholder Matters.
  Disclosure with Respect to the Companys Equity Compensation Plans as of December 31, 2007
  Number of securities remainingNumber of securities to
    
    
    Weighted-average
    
    
    available for future issuancebe issued upon exercise
    
    
    exercise price of
    
    
    under equity compensationof outstanding options,
    
    
    outstanding options,
    
    
    plans (excluding securitieswarrants and rights
    
    
    warrants and rights
    
    
    reflected in column (a))Plan Category
    
    (a)
    
    
    (b)
    
    
    (c)Equity compensation
plans approved by
security holders
(1)
    
    
    4,520,825
    
    
    $
    3.38
    
    
    
    855,000
 (1)
    
    2006 Stock Incentive Plan 
 Item 12. Certain Relationships and Related Transactions, and Director Independence.
  
 Item 13. Exhibits.
  
 Item 14. Principal Accountant Fees and Services.
  
 SIGNATURES
  Quepasa Corporation/s/ John C. AbbottJohn C. AbbottChief Executive Officer  21




---



##### Table of Contents



Power of Attorney
   Signature
    
    Title
    
    Date/s/ John C. Abbott

John C. Abbott
    
    Chief Executive Officer and Director
    
    March 31, 2008/s/ Michael D. Matte

Michael D. Matte
    
    Chief Financial Officer (Principal Accounting Officer)
and Executive Vice President
    
    March 31, 2008/s/ Jeffrey Valdez

Jeffrey Valdez
    
    Chairman of the Board of Directors
    
    March 31, 2008/s/ Alonso Ancira

Alonso Ancira
    
    Director
    
    March 31, 2008/s/ Ernesto Cruz

Ernesto Cruz
    
    Director
    
    March 31, 2008/s/ Malcolm Jozoff

Malcolm Jozoff
    
    Director
    
    March 31, 2008/s/ Lionel Sosa

Lionel Sosa
    
    Director
    
    March 31, 2008/s/ Dr. Jill Syverson-Stork

Dr. Jill Syverson-Stork
    
    Director
    
    March 31, 2008
  22




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##### Table of Contents



Exhibit Index
 Exhibit No.
    
    Description of Exhibit3.1
    
    Certificates of Restated Articles of Incorporation (1)3.2
    
    Amended and Restated Bylaws (2)4.1
    
    Specimen Common Stock Certificate (3)10.1
    
    Securities Purchase Agreement dated October 17, 2006 by and between Quepasa Corporation and
Mexicans and Americans Trading Together, Inc. (4)10.2
    
    Series 1 Common Stock Purchase Warrant dated October 17, 2006 by and between Quepasa
Corporation and Mexicans and Americans Trading Together, Inc. (4)10.3
    
    Series 2 Common Stock Purchase Warrant dated October 17, 2006 by and between Quepasa
Corporation and Mexicans and Americans Trading Together, Inc. (4)10.4
    
    Registration Rights Agreement dated October 17, 2006 by and between Quepasa Corporation and
Mexicans and Americans Trading Together, Inc. (4)10.5
    
    Amended and Restated Support Agreement dated November 20, 2006 and effective October 17, 2006
by and between Quepasa Corporation and Mexicans and Americans Trading Together, Inc. (5)10.6
    
    Corporate Sponsorship and Management Services Agreement dated November 20, 2006 and effective
October 17, 2006 by and between Quepasa Corporation and Mexicans and Americans Trading
Together, Inc. (5)10.8
    
    Warrant Purchase Agreement dated March 21, 2006 by and between Quepasa Corporation, Richard
L. Scott Investments, LLC and F. Stephen Allen (6)10.9
    
    Series 1 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and Richard L. Scott Investments, LLC. (7)10.10
    
    Series 1 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and F. Stephen Allen (7)10.11
    
    Series 2 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and Richard L. Scott Investments, LLC (7)10.12
    
    Series 2 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and F. Stephen Allen (7)10.13
    
    Series 3 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and Richard L. Scott Investments, LLC (7)10.14
    
    Series 3 Common Stock Purchase Warrant dated March 21, 2006 by and between Quepasa
Corporation and F. Stephen Allen (7)10.15
    
    Registration Rights Agreement dated March 21, 2006 by and between Quepasa Corporation,
Richard L. Scott Investments, LLC, and F. Stephen Allen (7)***10.16
    
    Amended and Restated 1998 Stock Option Plan (8)***10.17
    
    Employment Agreement with John C. Abbott dated October 25, 2007 (9)*10.18
    
    Amendment to the Employment Agreement with John C. Abbott dated March 27, 200810.19
    
    Separation Agreement and General Release with Robert B. Stearns dated October 25, 2007 (9)***10.20
    
    Employment Agreement with Michael D. Matte dated October 25, 2007 (9)*10.21
    
    Amendment to the Employment Agreement with Michael D. Matte dated March 27, 2008***10.22
    
    Quepasa Corporation 2006 Stock Incentive Plan (2)***10.23
    
    Quepasa Corporation Form of 2006 Stock Incentive Plan Non-Qualified Stock Option Agreement (2)***10.24
    
    Quepasa Corporation Form of 2006 Stock Incentive Plan Incentive Stock Option Agreement (2)***10.25
    
    Quepasa Corporation Executive Incentive Plan (10)10.26
    
    Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and
Mexicans & Americans Trading Together, Inc. (11)10.27
    
    Note Purchase Agreement dated January 25, 2008 by and between Quepasa Corporation and Richard
L. Scott Investments, LLC (11)10.28
    
    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. (11)
  23




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##### Table of Contents



Exhibit No.
    
    Description of Exhibit10.29
    
    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. (11)10.30
    
    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 (11)10.31
    
    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 (11)10.32
    
    Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and
Mexicans & Americans Trading Together, Inc. (11)10.33
    
    Subordinated Promissory Note dated January 25, 2008 by and between Quepasa Corporation and
Richard L. Scott Investments, LLC (11)*10.34
    
    Consulting Agreement with Jeffrey Valdez dated March 27, 2008*10.35
    
    Loan Agreement dated March 27, 2008 by and between Quepasa Corporation and BRC Group, LLC.*10.36
    
    Right of First Refusal dated March 27, 2008 by and between Quepasa Corporation and BRC Group,
LLC.*10.37
    
    Webpage Development and Hosting Agreement dated March 27, 2008 by and between Quepasa
Corporation and BRC Group, LLC.*10.38
    
    Promissory Note dated March 27, 2008 by BRC Group, LLC.*10.39
    
    Equity Interests Purchase Warrant dated March 27, 2008 by and between Quepasa Corporation and
BRC Group, LLC.*10.40
    
    Lease termination Agreement dated March 10, 2008 by and between Quepasa Corporation and
Airpark Billorado, LLC*21.1
    
    Subsidiaries of the small business issuer*23.1
    
    Consent of Berenfeld, Spritzer,
Shechter & Sheer, LLP*23.2
    
    Consent of Perelson Weiner LLP*24.1
    
    Power of Attorney (See Signatures page)*31.1
    
    Certification of Principal Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended*31.2
    
    Certification of Principal Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of
the Securities Exchange Act, as amended**32.1
    
    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 2002**32.2
    
    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***
    
    Indicates management compensatory contract, plan or arrangement(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.(3)
    
    Incorporated by reference to the Registrants Registration Statement on Form 8-A12G as
filed with the Commission on March 16, 1999.(4)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K as filed with
the Commission on October 19, 2006.(5)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K as filed with
the Commission on November 27, 2006.(6)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K as filed with
the Commission on March 22, 2006.(7)
    
    Incorporated by reference to the Registrants Registration Statement on Form SB-2 as
filed with the Commission on January 30, 2007.(8)
    
    Incorporated by reference to the Registrants Registration Statement on Form S-1 as filed
with the Commission on April 29, 1999.(9)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K as filed with
the Commission on October 30, 2007.(10)
    
    Incorporated by reference to the Registrants Registrants Current Report on Form 8-K as
filed with the Commission on January 25, 2008.(11)
    
    Incorporated by reference to the Registrants Registrants Current Report on Form 8-K as
filed with the Commission on January 30, 2008.   24