Filed Pursuant to Rule 424(b)(3)

Registration No. 333-171461

QUEPASA CORPORATION

PROSPECTUS

1,918,329 Shares of Common Stock

This prospectus relates to the sale of up to 1,753,329 shares of our common stock and 165,000 shares of common stock issuable upon exercise of warrants at $4.50 per share which may be offered by the selling shareholders identified in this prospectus.  We will not receive any proceeds from the sales of shares of our common stock by the selling shareholders named on page 60.  We will, however, receive proceeds in connection with the exercise of the warrants referred to above.

Our common stock trades on the Over-the-Counter Bulletin Board under the symbol “QPSA”.  As of the last trading day before the date of this prospectus, the closing price of our common stock was $12.07 per share.

The common stock offered in this prospectus involves a high degree of risk.  See “Risk Factors” beginning on page 4 of this prospectus to read about factors you should consider before buying shares of our common stock.

No underwriter or other person has been engaged to facilitate the sale of shares of our common stock in this offering.  The selling shareholders may be deemed underwriters of the shares of our common stock that they are offering within the meaning of the Securities Act of 1933.  We will bear all costs, expenses and fees in connection with the registration of these shares.

The selling shareholders are offering these shares of common stock. The selling shareholders may sell all or a portion of these shares from time to time in market transactions through any market on which our common stock is then traded, in negotiated transactions or otherwise, and at prices and on terms that will be determined by the then prevailing market price or at negotiated prices directly or through a broker or brokers, who may act as agent or as principal or by a combination of such methods of sale. The selling shareholders will receive all proceeds from the sale of the common stock. For additional information on the methods of sale, you should refer to the section entitled “Plan of Distribution.”

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined whether this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.

The date of this prospectus is January 6, 2011

TABLE OF CONTENTS

	Page
PROSPECTUS SUMMARY		1
THE OFFERING		1
SUMMARY FINANCIAL DATA		3
RISK FACTORS		4
FORWARD-LOOKING STATEMENTS		14
USE OF PROCEEDS		15
CAPITALIZATION		15
PRIVATE PLACEMENT		16
MARKET FOR COMMON STOCK		16
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		17
RECENT ACCOUNTING PRONOUNCEMENTS		32
BUSINESS		33
MANAGEMENT		44
EXECUTIVE COMPENSATION		47
PRINCIPAL SHAREHOLDERS		54
RELATED PERSON TRANSACTIONS		57
SELLING SHAREHOLDERS		58
DESCRIPTION OF SECURITIES		61
PLAN OF DISTRIBUTION		64
LEGAL MATTERS		65
EXPERTS		66
ADDITIONAL INFORMATION		66
INDEX TO FINANCIAL STATEMENTS		F-1

You should rely only on information contained in this prospectus.  We have not authorized anyone to provide you with information that is different from that contained in this prospectus.  The selling shareholders are not offering to sell or seeking offers to buy shares of common stock in jurisdictions where offers and sales are not permitted.  The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock.  We are responsible for updating this prospectus to ensure that all material information is included and will update this prospectus to the extent required by law.

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus.  You should read the entire prospectus carefully including the section entitled “Risk Factors” before making an investment decision.  Quepasa Corporation, is referred to throughout this prospectus as “Quepasa,” “we,” “our” or “us.”  When we refer to “DSM”, we mean distributed social media as described in the “Business” section of this prospectus.

Our Company

Quepasa Corporation, through its website Quepasa.com, is one of the fastest growing online social communities for young Latinos.  Quepasa.com provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing, and other topics of importance to Latino users and is dedicated to empowering young Latinos with the most entertaining online social community.

Corporate Information

We are a Nevada corporation.  Our principal executive offices are located at 324 Datura Street, Suite 114, West Palm Beach, Florida 33401.  Our phone number is (561) 366-1249and our corporate website can be found at www.quepascorp.com.  The information on our website is not incorporated into this prospectus.

THE OFFERING

Common stock outstanding prior to the offering:	15,271,480 shares
Common stock offered by the selling shareholders:	1,918,329 shares (1)
Common stock outstanding immediately following the offering:	15,436,480 shares
Use of proceeds:	We will not receive any proceeds from the sale of the shares of common stock by the selling shareholders but will receive proceeds from the exercise of the warrants if the warrants are exercised, which proceeds will be used for working capital purposes.
Risk Factors:	See “Risk Factors” beginning on page 4 of this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

1

Stock Symbol: QPSA

(1) Except for the shares underlying the warrants, the shares offered under this prospectus have already been issued and are outstanding.

The number of shares of common stock to be outstanding after this offering excludes:

● a total of 7,677,449 shares of common stock issuable upon the exercise of outstanding stock options;

● a total of 915,249 shares of common stock reserved for future issuance under our 2006 Stock Incentive Plan, or the Plan;

● shares of common stock issuable upon conversion of our outstanding Series A Preferred Stock, or Series A;  and

● a total of  4,400,000 shares of common stock issuable upon the exercise of warrants.

2

SUMMARY FINANCIAL DATA

The following summary of our financial data should be read in conjunction with, and is qualified in its entirety by reference to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements, appearing elsewhere in this prospectus. 

Statements of Operations Data

	Nine Months Ended September  30, 2010 (Unaudited)		Nine Months Ended September 30, 2009 (Unaudited)		Year Ended December 31, 2009		Year Ended   December 31,  2008
Revenue	$	4,199,846	$	197,018	$	535,976	$	56,006
Loss from operations	$	(4,416,158)	$	(7,489,756)	$	(9,930,680)	$	(11,911,505)
Net loss allocable to common shareholders	$	(4,948,962)	$	(8,069,096)	$	(10,687,007)	$	(7,195,069)
Net loss per share allocable to common shareholders	$	(0.38)	$	(0.63)	$	(0.84)	$	(0.57)
Weighted average common shares (basic and diluted)		12,951,513		12,722,412		12,725,894		12,621,621

Balance Sheet Data

	September  30, 2010 (Unaudited)			December 31, 2009			December 31, 2008
Cash	$	527,854		$	1,028,267		$	4,932,629
Accounts receivable	$	1,819,803		$	310,781		$	21,775
Current liabilities	$	543,098		$	479,349		$	328,036
Working capital	$	2,024,769		$	1,050,212		$	5,023,950
Notes payable, net of discount	$	6,122,243		$	5,673,702		$	5,074,858
Accumulated deficit	$	(164,283,701	)	$	(159,334,739	)	$	(148,647,732	)

3

RISK FACTORS

Investing in our common stock involves a high degree of risk.  You should carefully consider the following risk factors before deciding whether to invest in Quepasa. If any of the events discussed in the risk factors below occur, our business, consolidated financial condition, results of operations or prospects could be materially and adversely affected.  In such case, the value and marketability of the common stock could decline.

Risk Factors Relating to Our Company

Because we face significant competition from other social networks and companies with greater resources, we may not be able to compete effectively.

We face formidable competition from other companies that seek to connect young Latinos online.  Our primary competitors are other companies providing portal and online community services, especially to the Spanish and Portuguese language Internet users, such as Facebook, Yahoo!Español,  MySpace Latino, America Online Latin America, StarMedia, Hi5, Orkut, Batanga, Terra.com and UOL.com.  All of these companies have a more established reputation, longer operating histories and more established relationships with users.  They can use their experience and resources against us in a variety of competitive ways, including developing ways to attract and maintain users.  Yahoo and America Online also may have a greater ability to attract and retain users than we do because they operate Internet portals with a broad range of content and products and services.

If our members do not interact with each other or our viral marketing strategy fails, our ability to attract new members will suffer and our revenue will decrease.

Part of our success is dependent upon our social networking members interacting with our website and contributing to our viral advertising platform (DSM).  If our DSM platform is unsuccessful and our members do not spread our advertisers’ messages throughout the Internet, our operating results will suffer.

The majority of our members do not visit our website frequently and spend a limited amount of time when they visit.  If we are unable to encourage our members to interact more frequently and to increase the amount of user generated content they provide, our ability to attract new users to our website and our financial results will suffer.

If we are unable to expand the number of users to our website and generate sufficient revenue, your investment may be jeopardized.

In order to operate our website profitably, we must attract sufficient users, including users who regularly visit our website.  In addition, we must generate revenue from these users.  To date, we have identified two primary revenue sources – social games and advertising, which includes DSM.  To date, the only material revenue came from DSM in 2010 as well as website development for a customer.  We must continue to generate material revenue from DSM and expand our other revenue sources.  If we unable to attract sufficient users and increase our revenue, we will not generate sufficient revenue and your investment may be jeopardized.

4

If we are unable to expand and monetize our social gaming portfolio, our future results of operations may be adversely affected.

Quepasa believes that social games will be an extremely important part of its business model and its ability to generate significant revenue.  We are relying upon a combination of acquiring content from third parties and a possible acquisition of a social games developer.  If we fail to expand our offering of social games,   if our members do not play the games on a regular basis or if we do not receive sufficient revenue from gaming on our website, our future results of operations will be materially and adversely affected.

If we fail to enhance our existing services and products or develop and introduce new features in a timely manner to meet changing customer requirements, our ability to grow our business will suffer.

Our social network depends in part on rapidly changing technologies, which will impact our capacity to attract new users. The widespread adoption of new Internet, networking, streaming media, or telecommunications technologies or other technological changes could require us to incur substantial expenditures to modify or adapt our operating practices or infrastructure. Our future success will depend in large part upon our ability to:

● identify and respond to emerging technological trends in the market;

● develop content that attracts and allows us to retain large numbers of users;

● enhance our products by adding innovative features that differentiate our products and services from those of our competitors;

● acquire and license leading technologies; and

● respond effectively to new technological changes or new product and services announcements by others.

We will not be competitive unless we continually introduce new services and content or enhancements to existing services and content that meet evolving industry standards and user needs.

If we cannot address technological change in our industry in a timely fashion and develop new products and services, our future results of operations may be adversely affected.

The Internet and electronic commerce industries are characterized by:

● rapidly changing technology;

● evolving industry standards and practices that could render our website and proprietary technology obsolete;

● changes in Latino consumer tastes and demands; and

● frequent introductions of new services or products that embody new technologies.

5

Our future performance will depend, in part, on our ability to develop, license or acquire leading technologies and program formats, enhance our existing services and respond to technological advances and consumer tastes and emerging industry standards and practices on a timely and cost-effective basis. Developing website and other proprietary technology involves significant technical and business risks. We also cannot assure you that we will be able to successfully use new technologies or adapt our website and proprietary technology to emerging industry standards. We may not be able to remain competitive or sustain growth if we do not adapt to changing market conditions or customer requirements.

Because we have international operations, we are exposed to foreign currency risks.

Quepasa conducts business in countries outside of the United States and expects to generate most of its revenue outside of the United States, which exposes us to fluctuations in foreign currency exchange rates. We may enter into short-term forward exchange or option contracts to hedge this risk; nevertheless, volatile foreign currency exchange rates increase our risk related to products purchased in a currency other than the currencies in which our revenue is generated.  The realization of this risk could have a significant adverse effect on our financial results.  There can be no assurance that these and other factors will not have an adverse effect on our business.

Because we are pursuing a strategy of seeking to commercialize our services internationally, we are subject to risks frequently associated with international operations, and we may sustain large losses if we cannot deal with these risks.

Our business model is aimed at Spanish and Portuguese speaking persons who live primarily outside the United States as well as Latinos living in the United States. We also maintain material operations in Mexico.  Because of the diverse number of countries including Mexico and those located in Central and South America, we will be required to focus our business on unique local cultural differences which vary from country to country. If we are able to successfully develop international markets, we would be subject to a number of risks besides currency fluctuations, including:

● Changes in laws or regulations resulting in more burdensome governmental controls, regulation of the Internet, privacy protection, or restrictions;

● Being able to attract users from countries with different local cultures;

● Political and economic instability;

● Extended payment terms beyond those customarily offered in the United States;

● Difficulties in managing sales representatives and employees outside the United States; and

● Potentially adverse tax consequences.

If we cannot manage these risks, we may sustain large losses.

6

If we are unable to implement payment gateways to our users, our results of operations will be adversely affected.

We conduct our business in countries outside the United States and depend on payment gateways that are not as well developed as those in the United States where most people have Visa, MasterCard or bank debit cards to use in paying for virtual goods and our services.  User of our social network in the countries we operate, outside of the United States, do not always have access to credit cards and other “typical” payment methods  our United States members have such as debit cards.  If we are unable to implement payment gateways that provide end-users of our social network the ability to easily pay for services and related game transactions, our future results will be adversely affected. Additionally, our inability to collect and receive payments from these other sources will have an adverse effect on our business and results of operations.

Because most of our technical operations are in Mexico, we are subject to social instability risks which could materially adversely affect our business and our results of operations.

Because a material portion of our activities are conducted in Hermosillo, Mexico, our business is exposed to the risk of crime that is currently taking place in certain areas in Mexico.  Recent increases in kidnapping and violent drug related criminal activity in Mexico, and in particular Mexican States bordering the United States, may adversely affect our ability to carry on business safely.  Although Hermosillo has not been affected by these criminal activities, if it were to spread to Hermosillo it could affect our ability to do business there and our business could be adversely affected.

If our acquisition strategy is unsuccessful or if we are unable to integrate future acquisitions our business will be materially and adversely affected.

We plan to make acquisitions of social gaming intellectual property.  Our success will depend in part on the ability of Quepasa to manage the integration of future acquisitions.  Integrating businesses poses a variety of challenges, which we must meet.

The process of integrating any future acquired business may be disruptive to our business and may cause an interruption of, or a loss of momentum in, our business as a result of the following factors, among others:

● Our members may cease visiting Quepasa.com if they find our website is no longer interesting or fun;

● Loss of key employees;

● Possible inconsistencies in standards, controls, procedures and policies among the combined companies and the need to implement company-wide financial, accounting, information and other systems;

● Failure to maintain the quality of services that the companies have historically provided; and

● The diversion of management’s attention from our day-to-day business as a result of the need to deal with any disruptions and difficulties and the need to add management resources to do so.

7

These disruptions and difficulties, if they occur, may cause us to fail to realize the cost savings, revenue enhancements and other benefits that we currently expect to result from that integration and may cause material adverse short and long-term effects on our operating results and financial condition. If we are not able to integrate the businesses, our future results of operations may reflect declining revenue growth and reduced profitability.

Even if we are able to integrate the operations of acquired businesses into our operations, we may not realize the full benefits that we anticipate. If we achieve the expected benefits, they may not be achieved within the anticipated time frame. Also, the cost savings and other synergies from these acquisitions may be offset by costs incurred in integrating the companies, increases in other expenses, operating losses or problems in the business unrelated to these acquisitions.

If government regulation of the Internet increases, it may adversely affect our business and operating results.

We may be subject to additional operating restrictions and regulations in the future. Due to the rapid growth and widespread use of the Internet, national and local governments are enacting and considering various laws and regulations relating to the Internet. Very recently in the United States, the Federal Communication Commission has issued proposed rules to regulate the Internet. Companies engaging in online search, commerce and related businesses face uncertainty related to future government regulation of the Internet. Sometimes, new laws and regulations while designed to protect consumers have unintended consequences. Furthermore, the application of existing laws and regulations to Internet companies remains somewhat unclear. Our business and operating results may be negatively affected by new laws, and such existing or new regulations may expose us to substantial compliance costs and liabilities and may impede the growth in use of the Internet. Internationally, we may also be subject to domestic laws regulating our activities in foreign countries and to foreign laws and regulations that are inconsistent from country to country. Political factors may cause governments to restrict Internet Social Networking usage as has occurred in non-Latino countries. Other countries, including Venezuela, may begin to restrict the usage of Internet Social Networks.  We may incur substantial liabilities for expenses necessary to comply with these laws and regulations or penalties for any failure to comply.

With respect to the subject matter of each of these laws, courts may apply these laws in unintended and unexpected ways.  As a company that provides services over the Internet, we may be subject to an action brought under any of these or future laws governing online services. We may also be subject to costs and liabilities with respect to privacy issues.   Further, it is anticipated that new legislation may be adopted by federal and state governments with respect to user privacy.  Additionally, foreign governments may pass laws which could negatively impact our business or may prosecute us for our products and services based upon existing laws.  The restrictions imposed by and cost of complying with, current and possible future laws and regulations related to our business could harm our business and operating results.

If a regulatory authority were to conclude that skill-based games are subject to compliance with their rules or regulations, the cost of compliance could materially adversely affect our results of operations.

The gaming industry is subject to extensive government regulation.  If a regulator were to conclude that skill-based gaming is subject to their rules or regulations, it could preclude us from providing access to local residents, require us to obtain licenses, or otherwise restrict our business. The cost of compliance with such requirements could be significant and our future results of operations could be adversely affected.

8

If there are changes in regulations or user concerns regarding privacy and protection of user data, or we fail to comply with such laws, it could adversely affect our business.

Federal and state laws and regulations govern the collection, use, retention, sharing and security of data that we receive from and about our users. We have posted on our website our own privacy policies and practices concerning the collection, use, and disclosure of user data. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders, or other federal or state privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in proceedings or actions against us by governmental entities or others, which could potentially have an adverse effect on our business.

Further, failure or perceived failure by us to comply with our policies, applicable requirements, or industry self-regulatory principles related to the collection, use, sharing or security of personal information, or other privacy or data protection-related matters could result in a loss of user confidence in us, damage to the Quepasa brand, and ultimately in a loss of users, and advertising partners, or which could adversely affect our business.

In addition, various federal and state legislative or regulatory bodies may enact new or additional laws and regulations concerning data privacy and retention issues which could adversely impact our business. The interpretation and application of privacy, data protection and data retention laws and regulations are currently unsettled in the U.S. and internationally. These laws may be interpreted and applied inconsistently from country to country and inconsistently with our current data protection policies and practices. Complying with these varying international requirements could cause us to incur substantial costs or require us to change our business practices in a manner adverse to our business.

If technologies are developed that block our email invitations to join Quepasa, we may be unable to obtain additional memberships.

We send mass emails for our members to invite their friends to join our social network. We believe that our business will continue to rely on this method for attracting users in the foreseeable future. Unsuccessful email delivery could impact our ability to monetize our products. As a result, any email or ad-blocking technology could, in the future, adversely affect our business.

Because of the global economic instability, our business could be harmed in a number of ways.

Although there are indications that the global economic downturn may be abating, a number of European countries have continued to have economic issues including problems related to their indebtedness. There can be no assurance that it will continue to stabilize or that it will improve. There could be additional global economic instability or another downturn. Such an environment creates several risks relating to our results of operations and prospects. We may experience decreased demand for our service and pressure to reduce our cost of operations. We may find that advertisers will reduce Internet advertising which would reduce our future revenue.  The benefits from cost reductions may take longer to fully realize and may not fully mitigate the impact of the reduced demand.  Deterioration in the financial and credit markets heightens the risk of customer delay in payment.  These events may result in a number of adverse effects upon us including reducing online access, failure to spend money on our games and a loss of advertising revenue.

9

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.

In addition to Internet companies, we face competition from companies that offer traditional media advertising opportunities. Most large advertisers have set advertising budgets, a portion of which is allocated to Internet advertising. We expect that large advertisers will continue to increase their advertising efforts on the Internet. If we fail to convince these companies to spend a portion of their advertising budgets on social media, our operating results would be harmed.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel and the continued contributions of our executive officers and key employees, each of whom may be difficult to replace. In particular, John Abbott, Chief Executive Officer, Michael Matte, Chief Financial Officer and Louis Bardov, Chief Technology Officer, are important to the management of our business and operations and the development of our strategic direction. The loss of the services of Messrs. Abbott, Matte or Bardov and the process to replace any key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

If we cannot manage our growth effectively and expand our technology, we may not become profitable.

Businesses which grow rapidly often have difficulty managing their growth. Because of our rapid growth, we need to expand our technology and data centers and our management by recruiting and employing experienced executives and key employees capable of providing the necessary support.  We cannot assure you that our management will be able to manage our growth effectively or successfully and expand our technology and capacity as needed. Our failure to meet these challenges could cause us to lose money, traffic and user growth and your investment could be lost.

Interruption, failure of our information technology and communications systems or our inability to scale our systems could hurt our ability to effectively provide our products and services, which could damage our reputation and harm our operating results.

The availability of our services depends on the continuing operation of our information technology and communications systems. Any damage to or failure of our systems or our inability to scale our systems could result in interruptions in our service, which could reduce our revenue, and damage our brand. Our systems are vulnerable to damage or interruption from terrorist attacks, floods, fires, power loss, telecommunications failures, hurricanes, computer viruses, computer denial of service attacks or other attempts to harm our systems. Our data centers are subject to break-ins, sabotage and intentional acts of vandalism, and to potential disruptions if the operators of these facilities have financial difficulties. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a decision to close a facility we are using without adequate notice for financial reasons, or other unanticipated problems at our data centers could result in lengthy interruptions in our service.

Our headquarters and some of our operating locations are located in areas prone to natural disasters such as floods, hurricanes, tornadoes, or earthquakes. Adverse weather conditions, major electrical failures or other natural disasters in these major metropolitan areas may disrupt our business should our ability to host our site be impacted by such an event. Additionally, we operate in multiple geographic markets, several of which may be susceptible to acts of war and terrorism. Our business could be adversely affected should its facilities be impacted by such events.

10

If we are unable to protect our intellectual property rights, we may be unable to compete with competitors developing similar technologies.

Our success and ability to compete are often dependent upon internally developed software technology that we developed for our Quepasa.com website. While we rely on copyright, trade secret and trademark law to protect our technology, we believe that factors such as the technological and creative skills of our personnel, new service developments, frequent enhancements or our services and reliable maintenance are more essential to establishing a technology leadership position. There can be no assurance that others will not develop technologies that are similar or superior to our technology. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy or otherwise obtain and use our technology, making it more difficult for us to compete.

If we are subject to intellectual property infringement claims, it could cause us to incur significant expenses, pay substantial damages and prevent service delivery.

Third parties may claim that our products or services infringe or violate their intellectual property rights. Any such claims could cause us to incur significant expenses and, if successfully asserted against us, could require that we pay substantial damages and prevent us from using licensed technology that may be fundamental to our business service delivery. Even if we were to prevail, any litigation regarding its intellectual property could be costly and time-consuming and divert the attention of our management and key personnel from our business operations. We may also be obligated to indemnify our business partners in any such litigation, which could further exhaust our resources. Furthermore, as a result of an intellectual property challenge, we may be prevented from providing some of our services unless we enter into royalty, license or other agreements. We may not be able to obtain such agreements at all or on terms acceptable to us, and as a result, we may be precluded from offering some of our products and services.

If there are changes in income tax or other regulatory legislation, our business may be adversely affected.

If new legislation is enacted with minimal advance notice, or when new interpretations or applications of existing laws are made, we may need to implement changes in our policies or operations.

Quepasa makes plans for its operations based upon existing laws and anticipated future changes in the law. We are susceptible to unanticipated changes in legislation.  Such changes in legislation, both domestic and international, may have a significant adverse effect on our business.

11

If there are changes in accounting rules, our results of operations could be adversely affected.

Quepasa prepares its consolidated financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, the Public Company Accounting Oversight Board, the Securities and Exchange Commission, the American Institute of Certified Public Accountants and various other bodies formed to interpret and create appropriate accounting policies. A change in these policies or a new interpretation of an existing policy could have a significant effect on our reported results or changes in presentation or disclosure, and may affect our reporting of transactions before a change is adopted, which in turn could have a significant adverse affect on our results of operations.

If there is new tax treatment of companies engaged in Internet commerce may adversely affect the commercial use of our marketing services and our financial results.

Due to the global nature of the Internet, it is possible that governments might attempt to tax our activities.  As the recession placed budgetary pressures on governments, it is possible that they may seek to tax all Internet sales including game usage and sale of virtual currency.  New or revised tax regulations may subject us to additional sales, income and other taxes. We cannot predict the effect of current attempts to impose sales, income or other taxes on commerce over the Internet. New or revised taxes and, in particular, sales taxes, would likely increase the cost of doing business online, reduce Internet sales and decrease the attractiveness of advertising over the Internet. Any of these events could have an adverse effect on our business and results of operations.

Risks Relating to Our Common Stock

Because our stock price may be volatile due to factors beyond our control, you may lose all or part of your investment.

Our operating results have been in the past, and in the future are likely to be, subject to quarterly and annual fluctuations as a result of numerous factors, including:

● changes in the growth rate of our members,

● changes in the usage of Quepasa.com by our members,

● independent reports relating to the metrics of our website, including the number of visitors,

● our failure to generate increases in revenue,

● our failure to achieve or maintain profitability,

● actual or anticipated variations in our quarterly results of operations,

● announcements by us or our competitors of significant contracts, new services, acquisitions, commercial relationships, joint ventures or capital commitments,

● the loss of significant business relationships,

● changes in market valuations of similar companies,

● the loss of major advertisers,

● future acquisitions,

● the departure of key personnel,

● short selling activities, or

● regulatory developments.

12

In the past, following periods of volatility in the market price of a company’s securities, securities class action litigation has often been instituted. A securities class action suit against us could result in substantial costs and divert our management’s time and attention, which would otherwise be used to benefit our business.

We may issue preferred stock without the approval of our shareholders, which could make it more difficult for a third party to acquire us and could depress our stock price.

Our Board may issue, without a vote of our shareholders, one or more additional series of preferred stock that have more than one vote per share.  This could permit our Board to issue preferred stock to investors who support our management and give effective control of our business to our management. Additionally, issuance of preferred stock could block an acquisition resulting in both a drop in our stock price and a decline in interest of our common stock. This could make it more difficult for shareholders to sell their common stock. This could also cause the market price of our common stock shares to drop significantly, even if our business is performing well.

Because almost all of our outstanding shares are freely tradable, sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.

As of December 24, 2010, we had 15,271,480 shares of common stock outstanding of which our directors and executive officers beneficially own approximately 1,700,000 which are subject to the limitations of Rule 144 under the Securities Act. Most of the remaining outstanding shares, including a substantial amount of shares issuable upon the exercise of warrants and options are and will be freely tradable.

In general, Rule 144 provides that any non-affiliate of Quepasa, who has held restricted common stock for at least six-months, is entitled to sell their restricted stock freely, provided that we stay current in our SEC filings.  After two years, a non-affiliate may sell without any restrictions, even if we fail to stay current in our SEC filings.

An affiliate of ours may sell after six months with the following restrictions:

(i)	we are current in our filings,
(ii)	certain manner of sale provisions,
(iii)	filing of Form 144, and
(iv)	volume limitations limiting the sale of shares within any three-month period to a number of shares that does not exceed the 1% of the total number of outstanding shares.

Because almost all of our outstanding shares are freely tradable beginning on the date of this prospectus and a number of shares held by our affiliates may be freely sold (subject to Rule 144 limitation), sales of these shares could cause the market price of our common stock to drop significantly, even if our business is performing well.

13

Because we may not be able to attract the attention of major brokerage firms, it could have a material impact upon the price of our common stock.

It is not likely that securities analysts of major brokerage firms will provide research coverage for our common stock since the firm itself cannot recommend the purchase of our common stock under the penny stock rules referenced in an earlier risk factor. The absence of such coverage limits the likelihood that an active market will develop for our common stock. It may also make it more difficult for us to attract new investors at times when we acquire additional capital.

FORWARD-LOOKING STATEMENTS

This prospectus includes forward-looking statements including statements regarding:

● Having adequate working capital to remain operational,

● Expectations regarding revenues,

● Belief regarding the DSM campaigns being a highly effective ad product,  

● Belief that there will be a direct correlation between website traffic and our ability to increase revenue,

● Expect results from our Open Social Platform,

● Expectations regarding our net cash earn (burn) rate,

 ● Plans regarding continuing to develop and partner with social application developers,

 ● Expectations that our companion applications will be distributed on several major carriers in Latin America,

 ● Developing new partnerships,

 ● Opportunities to monetize applications and our members, and

● The continued growth of our business.

All statements other than statements of historical facts contained in this prospectus, including statements regarding our future financial position, liquidity, business strategy and plans and objectives of management for future operations, are forward-looking statements.  The words “believe,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “could,” “target,” “potential,” “is likely,” “will,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements.  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs.  These forward-looking statements are subject to a number of risks, uncertainties and assumptions described in “Risk Factors” elsewhere in this prospectus.

Other sections of this prospectus may include additional factors which could adversely affect our business and financial performance.  New risk factors emerge from time to time and it is not possible for us to predict all such risk factors, nor can we assess the impact of all such risk factors on our business or the extent to which any risk factor, or combination of risk factors, may cause actual results to differ materially from those contained in any forward-looking statements.

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USE OF PROCEEDS

We are registering 1,753,329 shares of common stock pursuant to the registration rights granted to selling shareholders in connection with a registration rights agreement with the selling shareholders.  These selling shareholders will receive all of the net proceeds from the sale of the shares of our common stock offered for resale by them under this prospectus.  

We are also registering 165,000 shares of common stock underlying warrants issued to a certain selling shareholder.   Any net proceeds received upon the exercise of warrants will be used for working capital purposes.

CAPITALIZATION

The following table sets forth our capitalization as of September 30, 2010.  The table should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this prospectus:

	As of September  30, 2010
Cash and cash equivalents	$	527,854
Notes payable, net of discounts	$	6,122,243
Shareholders’ equity:
Preferred stock, $0.001 par value	$	25
Common stock, $0.001 par value	$	13,239
Additional paid-in capital	$	161,000,693
Accumulated deficit	$	(164,283,701	)
Accumulated other comprehensive income (loss)	$	(6,568	)
Total shareholders’ equity (deficit)	$	(3,276,312	)

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PRIVATE PLACEMENT

On December 21, 2010, we sold 1,753,329 shares of common stock to the selling shareholders (except Lilios Group, Inc.) at $7.50 per share for $13,149,968 in gross proceeds.  We are registering all of the shares in this prospectus.  In connection with this private placement, we paid Merriman Capital, Inc. a fee of $434,999 for acting as placement agent.  Also, we paid $10,000 to Merriman for reimbursement of legal fees and other expenses.  We are using the proceeds from the private placement to support our growth and for general corporate purposes, including working capital, capital expenditures and acquisition consideration.

MARKET FOR COMMON STOCK

Our common stock is quoted on the Bulletin Board under the symbol “QPSA”.  Our common stock last traded at $9.50 on December 23, 2010. The following table provides the high and low bid price information for our common stock for each quarterly period within the two most recent fiscal years as reported by the Bulletin Board.  The quotation reflects inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Quarter Ended	High ($)		Low ($)
December 31, 2010		12.23		5.10
September 30, 2010		5.38		3.25
June 30, 2010		5.50		3.37
March 31, 2010		4.20		1.95
December 31, 2009		2.50		1.11
September 30, 2009		1.90		0.70
June 30, 2009		1.06		0.41
March 31, 2009		2.27		0.74

As of December 27, 2010, here were approximately 640 holders of record of our common stock.  We believe that additional beneficial owners of our common stock hold shares in street name.

Dividend Policy

We have not paid cash dividends on our common stock and do not plan to pay such dividends in the foreseeable future.  Our Board of Directors, or the Board, will determine our future dividend policy on the basis of many factors, including results of operations, capital requirements, and general business conditions.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under “Risk Factors” in this prospectus.

Overview

With the evolution of our website into a social network, we expect future revenue will come predominately from advertising including our DSM contest platform, and from social games. With social games, users can purchase virtual goods and currency from us to enhance their chances of success.

Highlights for the first nine months of 2010 included:

● Quepasa DSM – Launched in December 2009, this is a new tool that allows advertisers and brands to deliver their brand message through a viral contest engine that is shared and spread by the users across the most popular social media sites.  We believe this is a highly effective ad product that allows brands to market their products to the broader Latino demographic, without requiring the advertiser to have to decide how to allocate its budget among numerous websites.  With Quepasa DSM, brands can target Latinos across all social media properties, leveraging the user’s use of viral widgets and sharing tools to spread the brand message.  In the first nine months of 2010, we signed contracts totaling $5.2 million and generated approximately $3.0 million in DSM revenue.

● We partnered with Moblyng, Viximo and Hollywood Creations to offer a portfolio of social games to our website.

● A new community was launched devoted to the Ultimate Fighting Championship, or UFC.  The community features a UFC themed contest.

● We received from Altos Hornos de Mexico, S.A.B. de C.V., or AHMSA, which owns Mexicans and Americans Trading Together, Inc., or MATT Inc., a $3.5 million contract to develop a website and a series of environmental campaigns using our DSM Technology and a $3.0 million contract to develop a website and a legislative campaign using our DSM technology.  These contracts are the ones described in the first bullet point above and the next bullet point below.

● Website Development - In the first nine months of 2010, we signed contracts totaling $1.3 million in website development revenue and generated approximately $1.0 million in website development revenue.  We do not expect website development revenue to continue.

● We partnered with and launched the Zoosk online dating service for Latin America.

● As a result of our ongoing partnership with Dr. Robert Rey (Dr. 90210), we recognized $36,000 in royalty revenue for the first nine months of 2010 from product sales in Brazil.

Substantially all of our revenue has been generated from or arranged by AHMSA and MATT Inc., which are companies affiliated with Mr. Alonso Ancira, a director of Quepasa.  Quepasa did not pay Mr. Ancira for his efforts.  To date, Mr. Ancira has played an important role in generating revenue and played a prominent role in Quepasa obtaining financings.  All contracts with AHMSA (and its subsidiary, MATT Inc.) were negotiated by Mr. Ancira and Quepasa management and benefited both Quepasa and AHMSA.

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RESULTS OF OPERATIONS

Revenue Sources

During the nine months ended September 30, 2010, our revenue was generated from four principal sources: revenue earned from the sale of DSM campaigns, website development services, banner advertising on our website and royalty revenue.

DSM Revenue: We recognize DSM revenue over the period of the contest or as the service is provided.  Approximately 71% of our revenue came from DSM campaigns.

Website Development Revenue: We recognize website development revenue as the service is provided.  Approximately 24% of our revenue came from website development.

Banner Advertising Revenue: Banner advertising revenue is generated when an advertiser purchases a banner placement within our quepasa.com website.  We recognize revenue related to banner advertisements upon delivery.  Approximately 3% of our revenue came from banner advertising.

Royalty Revenue: We recognize royalty revenue as reported to us by third parties.  Approximately 1% of our revenue came from royalties. This revenue source is not material.

Operating Expenses

Our principal operating expenses are divided into the following categories:

● Product Development and Content Expenses: Product development and content 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.

● 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.

● Depreciation and Amortization Expenses: Our depreciation and amortization are non-cash expenses which have consisted primarily of depreciation related to our property and equipment.

● 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 Note Purchase Agreements.  Earned grant income represents the amortized portion of a cash grant received in 2006 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.

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Comparison of the Three Months Ended September 30, 2010 with the Three Months Ended September 30, 2009

The following table sets forth a modified version of our unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss that is used in the following discussions of our results of operations:

	For the Three Months Ended September 30,
	2010			2009			Change ($)			Change (%)
REVENUE	$	2,721,760		$	51,827		$	2,669,933			5152	%
OPERATING EXPENSES
Sales and marketing		221,311			111,774			109,537			98	%
Product development and content		844,466			718,533			125,933			18	%
General and administrative		1,761,810			1,796,930			(35,120	)		-2	%
Depreciation and amortization		62,310			130,527			(68,217	)		-52	%
Operating Expenses		2,889,897			2,757,764			132,133			5	%
LOSS FROM OPERATIONS		(168,137	)		(2,705,937	)		2,537,800			-94	%
OTHER INCOME (EXPENSE):
Interest income		940			10,128			(9,188	)		-91	%
Interest expense		(151,500	)		(151,500	)		-			-100	%
Loss on settlement of receivable		-			(100,000	)		100,000			100	%
Other income		524			9,041			(8,517	)		-94	%
TOTAL OTHER INCOME (EXPENSE)		(150,036	)		(232,331	)		82,295			-35	%
NET LOSS	$	(318,173	)	$	(2,938,268	)	$	2,620,095			-89	%

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Revenue

Our revenue were $2,721,760 for the three months ended September 30, 2010, an increase of $2,669,933 or 5152% compared to $51,827 for the same period in 2009.  This increase is primarily attributable to $1,993,512 in DSM revenue and $677,500 in website development revenue earned in the quarter ended September 30, 2010.  Launched in December 2009, our DSM contest platform is a new tool that allows advertisers and brands to deliver their brand message through a viral contest engine that is shared and spread by the users across the most popular social media sites.  We believe this is a highly effective ad product that allows brands to market their products to the broader Latino demographic, without requiring the advertiser to have to decide how to allocate its budget amongst numerous websites.  With Quepasa DSM, brands can target Latinos across all social media properties, leveraging the user’s use of viral widgets and sharing tools to spread the brand message.  $227,679 of DSM revenue for the third quarter of 2010 was received from MATT Inc., the Company’s largest shareholder, on behalf of the Municipality of Ixtapa in Mexico. MATT Inc. received no compensation from the Company for arranging these campaigns.  $1,765,833 of DSM revenue and $677,500 of Website Development revenue for the third quarter of 2010 was received from AHMSA, which owns MATT, Inc. See Note 9 to the Unaudited Condensed Consolidated Financial Statements.

We expect our revenue will continue to increase in 2010 as a result of the $6.5 million in contracts currently signed to develop websites and a series of environmental and legislative campaigns using our DSM Technology.

In February 2008, we re-launched our website.  Website traffic has increased significantly since the re-launch.  The website had 5,288,445 unique visitors in the third quarter of 2009 and 41,308,183in the third quarter of 2010, a 681% increase.  We believe there will be a direct correlation between website traffic and our ability to increase revenue.

As part of our website development strategy, we have focused on establishing a platform for sustained, viral growth—based on (i) simple user registration and invitation process; (ii) effective email deliverability; and (iii) a simplified way to navigate the site through an enhanced user interface.  In June 2008, we redesigned the sign-up and invitation pages of our site, resulting in approximately a 50% increase in the number of new users who invited friends and contacts to join Quepasa.com.  In addition, we have substantially reduced the number of Quepasa.com invitation emails that fail to reach recipients’ email inboxes. Improved deliverability, together with the redesign of our sign-up and invitation steps and a more robust user experience, has resulted in meaningful gains in the number new registered users and site traffic.

Operating Costs and Expenses

Sales and Marketing: Sales and marketing expenses increased $109,537, or 98%, to $221,311 for the three months ended September 30, 2010 from $111,774 in 2009.  The increase is primarily attributed to an increase in stock based compensation of $58,000 and an increase in salaries of $47,000 due to the addition of a salesperson in Mexico City and a marketing person in the U.S.

Product Development and Content: Product development and content expenses increased $125,933, or 18%, to $844,466 for the three months ended September 30, 2010 from $718,533 in 2009.  During the three months ended September 30, 2010, we had increases in U.S. salaries of $49,000 and an increase in salaries and associated payroll costs of $52,000 due to salary increases for our product development and technology personnel within Quepasa.com de Mexico, which, under the direction of our U.S.-based Chief Technology Officer, provides substantially all of our design, translation services, and website management and development services.

20

General and Administrative: General and administrative expenses decreased $35,120, or 2%, to $1,761,810 for the three months ended September 30, 2010 from $1,796,930 for the same period in 2009.  The significant changes consisted of:

● a decrease in stock based compensation of $54,000; and

● a decrease in reporting dues of $21,000;

● partially offset by an increase of $53,000 in hosting, server storage and bandwidth costs.   

Stock Based Compensation: Stock based compensation expense, which is included in the other operating expense categories as discussed above, decreased $329 to $1,580,590 for the three months ended September 30, 2010 from $1,580,919 in 2009.  Stock based compensation expense represented 55% and 57% of operating expenses for the three months ended September 30, 2010 and 2009, respectively.  At September 30, 2010, we had $4,131,787 of unrecognized stock based compensation expense, most of which we expect to recognize over the next five quarters.

	For the Three Months Ended September 30,
	2010		2009
Sales and marketing	$	96,102	$	38,011
Product and content development		246,639		251,489
General and administrative		1,237,849		1,291,419
Total Stock Based Compensation	$	1,580,590	$	1,580,919

Stock Based Compensationexpense is composed of the following:

	For the Three Months Ended September 30,
	2010		2009
Vesting of stock options	$	1,553,755	$	1,560,005
Issuance of warrants		26,835		-
Issuance of common stock to directors for compensation		-		5,748
Amortization of prepaid expenses		-		15,166
Total Stock Based Compensation	$	1,580,590	$	1,580,919

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The amortization of prepaid expenses includes compensation for professional services in which the professionals vested in stock options prior to the performance of services.  The amount of compensation is being amortized over the lengths of the contracts.

Depreciation and Amortization: Depreciation and amortization expense decreased $68,217, or 52%, to $62,310 for the three months ended September 30, 2010 from $130,527 in 2009.  This decrease is attributable to completed depreciation on older assets.

Other Income (Expense): Other expense decreased $82,295 to $150,036 for the three months ended September 30, 2010 from $232,331 in 2009.  The decrease is primarily attributable to a 2009 loss of $100,000 on settlement of the note receivable discussed in Note 3 of the unaudited condensed consolidated financial statements contained elsewhere in this prospectus.

Comparison of the Nine Months Ended September 30, 2010 with the Nine Months Ended September 30, 2009

The following table sets forth a modified version of our unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss that is used in the following discussions of our results of operations:

	For the Nine Months Ended September 30,
	2010			2009			Change ($)			Change (%)
REVENUE	$	4,199,846		$	197,018		$	4,002,828			2032	%
OPERATING EXPENSES
Sales and marketing		602,205			355,111			247,094			70	%
Product development and content		2,458,318			2,174,999			283,319			13	%
General and administrative		5,300,328			4,762,634			537,694			11	%
Depreciation and amortization		255,153			394,030			(138,877	)		-35	%
Operating Expenses		8,616,004			7,686,774			929,230			12	%
LOSS FROM OPERATIONS		(4,416,158	)		(7,489,756	)		3,073,598			-41	%
OTHER INCOME (EXPENSE):
Interest income		1,342			36,051			(34,709	)		-96	%
Interest expense		(452,104	)		(452,106	)		2			-100	%
Loss on settlement of receivable		-			(100,000	)		100,000			100	%
Other income		1,583			20,340			(18,757	)		-92	%
TOTAL OTHER INCOME (EXPENSE)		(449,179	)		(495,715	)		46,536			-9	%
NET LOSS	$	(4,865,337	)	$	(7,985,471	)	$	3,120,134			-39	%

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Revenue

Our revenue was $4,199,846 for the nine months ended September 30, 2010, an increase of $4,002,828 or 2032% compared to $197,018 for the same period in 2009.  This increase is primarily attributable to $3.0 million in DSM revenue and $1.0 million in website development revenue earned in the nine months ended September 30, 2010.  Launched in December 2009, our DSM contest platform is a new tool that allows advertisers and brands to deliver their brand message through a viral contest engine that is shared and spread by the users across the most popular social media sites.  We believe this is a highly effective ad product that allows brands to market their products to the broader Latino demographic, without requiring the advertiser to have to decide how to allocate its budget amongst numerous websites.  With Quepasa DSM, brands can target Latinos across all social media properties, leveraging the user’s use of viral widgets and sharing tools to spread the brand message.  $800,000 of DSM revenue for the nine months ended September 30, 2010 was received from MATT Inc., the Company’s largest shareholder, on behalf of the Municipalities of Acapulco, Cozumel and Ixtapa in Mexico. MATT Inc. received no compensation from the Company for arranging these campaigns.  $2.2 million of DSM revenue and $1.0 million of Website Development revenue for the nine months ended September 30, 2010 was received from AHMSA, which owns MATT, Inc. See Note 9 to the Unaudited Condensed Consolidated Financial Statements.

We expect our revenue will continue to increase in 2010 as a result of the $6.5 million in signed contracts to develop websites and a series of environmental and legislative campaigns using our DSM Technology.

In February 2008, we re-launched our website.  Website traffic has increased significantly since the re-launch.  The website had 12,923,628 unique visitors in the first nine months of 2009 and 82,074,670in 2010, a 535% increase.  We believe there will be a direct correlation between website traffic and our ability to increase revenue.

As part of our website development strategy, we have focused on establishing a platform for sustained, viral growth—based on (i) simple user registration and invitation process; (ii) effective email deliverability; and (iii) a simplified way to navigate the site through an enhanced user interface.  In June 2008, we redesigned the sign-up and invitation pages of our site, resulting in approximately a 50% increase in the number of new users who invited friends and contacts to join Quepasa.com.  In addition, we have substantially reduced the number of Quepasa.com invitation emails that fail to reach recipients’ email inboxes. Improved deliverability, together with the redesign of our sign-up and invitation steps and a more robust user experience, has resulted in meaningful gains in the number new registered users and site traffic.

Operating Costs and Expenses

Sales and Marketing: Sales and marketing expenses increased $247,094, or 70%, to $602,205 for the nine months ended September 30, 2010 from $355,111 in 2009.  The increase is primarily attributed to an increase in stock based compensation of $146,000 and an increase in salaries of $116,000 due to the addition of a salesperson in Mexico City and a marketing person in the US, partially offset by a decrease of $29,000 in advertising.

Product Development and Content: Product development and content expenses increased $283,319, or 13%, to $2,458,318 for the nine months ended September 30, 2010 from $2,174,999 in 2009.  During the nine months ended September 30, 2010, we had increases in U.S. salaries of $153,000, an increase in salaries and associated payroll costs of $145,000 due to salary increases for our product development and technology personnel within Quepasa.com de Mexico, which, under the direction of our U.S.-based Chief Technology Officer, provides substantially all of our design, translation services, and website management and development services and an increase in of $74,000 technical and product development consulting.  These increases were partially offset by decreases of $44,000 in stock based compensation and $58,000 in public relations and design consulting expenses.

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General and Administrative: General and administrative expenses increased $537,694, or 11%, to $5,300,328 for the nine months ended September 30, 2010 from $4,762,634 for the same period in 2009.  The increase consisted primarily of an increase in stock based compensation of $483,000 and hosting, server storage and bandwidth costs of $102,000.  These increases were partially offset by a decrease of $34,000 in U.S. salaries.

Stock Based Compensation: Stock based compensation expense, which is included in the other operating expense categories as discussed above, increased $584,919 to $4,704,692 for the nine months ended September 30, 2010 from $4,119,773 in 2009.  This increase is attributable to the July 2009 stock option exchange (see Note 7 to the Unaudited Condensed Consolidated Financial Statements) and an increase in headcount.  Stock based compensation expense represented 55% and 54% of operating expenses for the nine months ended September 30, 2010 and 2009, respectively.  At September 30, 2010, we had $4,131,787 of unrecognized stock based compensation expense, most of which we expect to recognize over the next five quarters.

	For the Nine Months Ended September 30,
	2010		2009
Sales and marketing	$	248,459	$	102,351
Product and content development		626,217		670,177
General and administrative		3,830,017		3,347,245
Total Stock Based Compensation	$	4,704,693	$	4,119,773

Stock Based Compensationexpense is composed of the following:

	For the Nine Months Ended September 30,
		2010		2009
Vesting of stock options	$	4,503,711	$	3,948,254
Re-pricing of warrants		147,813		-
Issuance of warrants		26,835		-
Issuance (cancellation) of common stock for professional services		26,334		(20,471	)
Issuance of common stock to directors for compensation		-		17,244
Amortization of prepaid expenses		-		174,746
Total Stock Based Compensation	$	4,704,693	$	4,119,773

The amortization of prepaid expenses includes compensation for professional services in which the professionals vested in stock options prior to the performance of services.  The amount of compensation is being amortized over the lengths of the contracts.

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Depreciation and Amortization: Depreciation and amortization expense decreased $138,877, or 35%, to $255,153 for the nine months ended September 30, 2010 from $394,030 in 2009.  This decrease is attributable to completed depreciation on older assets.

Other Income (Expense): Other expense decreased $46,536 to $449,179 for the nine months ended September 30, 2010 from $495,715 in 2009.  The decrease is primarily attributable to a loss in 2009 of $100,000 on the settlement of the note receivable discussed in Note 3 of the Unaudited Condensed Consolidated Financial Statements contained elsewhere in this prospectus, partially offset by $35,000 reduction in interest income due to settlement of that note.

Comparison of the Year Ended December 31, 2009 with the Year Ended December 31, 2008

The following table sets forth a modified version of our Consolidated Statements of Operations and Comprehensive Loss that is used in the following discussions of our results of operations:

	For the years ended December 31,
	2009			2008			Change ($)			Change (%)
REVENUE	$	535,976		$	56,006		$	479,970			857	%
OPERATING EXPENSES
Sales and marketing		455,427			382,193			73,234			19	%
Product development and content		2,870,411			3,831,849			(961,438	)		-25	%
General and administrative		6,627,841			7,289,881			(662,040	)		-9	%
Depreciation and amortization		512,977			463,588			49,389			11	%
Operating Expenses		10,466,656			11,967,511			(1,500,855	)		-13	%
LOSS FROM OPERATIONS		(9,930,680	)		(11,911,505	)		1,980,825			-17	%
OTHER INCOME (EXPENSE):
Interest income		38,351			149,248			(110,897	)		-74	%
Interest expense		(603,607	)		(930,816	)		327,209			-100	%
Gain/ (Loss) on disposal		(650	)		(39,134	)		38,484			-98	%
Gain on extinguishment of debt		––			5,056,052			(5,056,052	)		100	%
Loss on settlement of receivable		(100,000	)		––			(100,000	)		100	%
Other income		21,079			536,836			(515,757	)		-96	%
TOTAL OTHER INCOME (EXPENSE)		(644,827	)		4,772,186			(5,417,013	)		-114	%
NET LOSS	$	(10,575,507	)	$	(7,139,319	)	$	(3,436,188	)		48	%

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Revenue

Our revenue was $535,976 for the year ended December 31, 2009, an increase of $479,970 compared to $56,006 in 2008 as a result of the significant increase in new members and website traffic during the 4th quarter of 2009. In February 2008, we re-launched our website as a Latino social network with content provided by the user community. Website traffic has experienced significant increases since the re-launch in February 2008. The site had 24,982,695 unique visitors in 2009, a 315% increase from 6,014,865 unique visitors in 2008.  We believe there will be a direct correlation between website traffic and our ability to increase revenue.

As part of our website development strategy, we have focused on establishing a platform for sustained, viral growth—based on (i) simple user registration and invitation process; (ii) effective email deliverability; and (iii) a simplified way to navigate the home page for our members. In June 2008, we redesigned the sign-up and invitation pages of our site, resulting in approximately a 50% increase in the number of new users who invited friends and contacts to join Quepasa.com. In order to avoid Quepasa’s invitations going straight to spam,  we obtained a third party service provider to assist Quepasa to be whitelisted; which has dramatically improved email delivery to major ISPs and substantially increased the number of Quepasa.com invitation emails that reach recipients’ email inboxes. Improved deliverability, together with the redesign of our sign-up and invitation steps, has resulted in meaningful gains in the number new registered users and site traffic.  Registered users at December 31, 2009 and 2008 were 7,675,988 and 1,914,623, respectively. An increase of over 301% in 2009.

Operating Costs and Expenses

Sales and Marketing: Sales and marketing expenses increased $73,234, or 19%, to $455,427 for the year ended December 31, 2009 from $382,193 in 2008. During the year ended December 31, 2009, we had increases in commissions of $52,000 resulting from the increase in revenue and increases in salaries of $66,000. The increases were partially offset by a decrease of $40,000 due the shutdown of the Mexico City sales office in the first quarter of 2008.

Product Development and Content: Product development and content expenses decreased $961,438, or 25%, to $2,870,411 for the year ended December 31, 2009 from 3,831,849 in 2008. This decrease is attributable to a focused effort to reduce costs and focused development effort. During the year ended December 31, 2009, we had decreases in various consulting fees of $187,000, a decrease in stock based compensation of $441,000, a decrease in U.S. salaries of $40,000, and a decrease in salaries and associated payroll costs of $202,000 in Mexico due to the favorable exchange rates for our product development and technology personnel within Quepasa.com de Mexico.

General and Administrative: General and administrative expenses decreased $662,040, or 9%, to $6,627,841, for the year ended December 31, 2009 from 7,289,881 in 2008. The significant changes consisted of:

● a decrease in professional fees of $85,000, primarily made up of decreases in accounting fees of $138,000 partially offset byan increase in legal fees of $68,000;

● a decrease in travel related expenses of $60,000;

● a decrease in stock based compensation of $359,000;

● a decrease in rent expenses of $195,000, due to the closing of our Scottsdale, AZ headquarters;

● a decrease in salaries and related payroll costs of $93,000, due to a reduction in headcount and a reduction of some salaries inexchange for stock based compensation;

● partially offset byan increase in managed hosting cost of $83,000 for the new data center in Dallas;

● impairment of an intangible asset of $67,000; and

● an increase in Internet reporting fees of $50,000.

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Stock Based Compensation: Stock based compensation expense, which is included in the other operating expense categories as discussed above, decreased $809,634 to $5,626,436 for the year ended December 31, 2009 from $6,436,070 in 2008. This decrease is attributable to a reduction in overall headcount. Stock based compensation expense represented 54% of operating expenses for the years ended December 31, 2009 and 2008.  At December 31, 2009, we had $4,314,589 of unrecognized stock based compensation expense, almost all of which we expect to recognize over the next three quarters.

	For the Year Ended December 31,
	2009		2008
Sales and marketing	$	137,427	$	147,601
Product and content development		873,313		1,314,013
General and administrative		4,615,696		4,974,456
Total Stock Based Compensation	$	5,626,436	$	6,436,070

Stock Based Compensationexpense is composed of the following:

	For the Year Ended December 31,
	2009			2008
Vesting of stock options	$	5,449,170		$	6,101,143
Extension of warrants		––			51,657
Issuance (cancellation) of common stock for professional services		(20,471	)		319,971
Issuance of common stock to directors for compensation		22,992			98,543
Amortization of prepaid expenses		174,745			(135,244	)
Total Stock Based Compensation	$	5,626,436		$	6,436,070

The amortization of prepaid expenses includes compensation for professional services in which the professionals vested in stock options prior to the performance of services.  The amount of compensation is being amortized over the lengths of the contracts.

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Depreciation and Amortization: Depreciation and amortization expense increased $49,389, or 11%, to $512,977 for the year ended December 31, 2009 from $463,588 in 2008. This increase is attributable to fixed asset additions to create a primary data center in the Dallas, Texas metropolitan area leaving the redundant data center in the Phoenix, Arizona metropolitan area as a backup.

Other Income (Expense): Other income decreased $5,417,013 to an expense of $644,827 for the year ended December 31, 2009 from other income of $4,772,186 in 2008. The decrease is primarily attributable to a gain on the extinguishment of debt of $5,056,052 recorded in the second quarter of 2008 as a result of the termination of an agreement discussed in Note 4 of the consolidated financial statements.  This decrease is also attributable to a writeoff of $100,000 of a note receivable as discussed in Note 3 of the consolidated financial statements.  In addition, there was a reduction of $111,000 in interest income due to lower interest rates and lower cash balances.  The decrease is partially offset by a reduction in interest expense of $327,000 due to the termination of an agreement and a loss of $39,000 on the disposal of office furniture and equipment associated with the closure of our Scottsdale, Arizona office.

Liquidity and Capital Resources

	For the Nine Months Ended September 30,
	2010			2009
Net cash used in operating activities	$	(1,008,862	)	$	(2,835,728	)
Net cash used in investing activities	$	(362,168	)	$	(15,494	)
Net cash provided by financing activities	$	871,130		$	-

Cash used in operating activities for the nine months ended September 30, 2010 was driven by our net loss, adjusted for non-cash items.  Non-cash adjustments include depreciation and amortization, stock based compensation for the vesting of stock options and issuance of common stock for compensation, and interest accrual and amortization of discounts associated with long-term debt.  Net cash used in operations was $1,008,862 for the nine months ended September 30, 2010 compared to $2,835,728 for 2009.  For the nine months ended September 30, 2010, net cash used by operations consisted primarily of a net loss of $4,865,337, offset by non-cash expenses of $255,153 in depreciation and amortization, $234,150 in non-cash interest, $217,956 in amortization of discounts on notes payable and debt issuance costs, and $4,503,711 related to stock based compensation for the vesting of stock options.  Additionally, changes in working capital impacted the net cash used in operating activities.  These changes included increases in accounts receivable of $1,479,386.  For the nine months ended September 30, 2009, net cash used by operations consisted primarily of a net loss of $7,985,471, offset by non-cash expenses of $394,030 in depreciation and amortization, $211,347 in non-cash interest, $217,956 in amortization of discounts on notes payable and debt issuance costs, and $3,948,254 related to the vesting of stock options. Additionally, changes in working capital impacted the net cash used in operating activities. These changes included a decrease in other current assets and other assets of $279,547, and an increase in accounts payable and accrued expenses of $30,076.

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Net cash used in investing activities in the nine months ended September 30, 2010 was primarily attributable to Investment in Hollywood Creations of $216,667, see Note 3 of the Unaudited Consolidated Financial Statements. Our capital expenditures were $145,501 for the nine months ended September 30, 2010, compared to $15,494 for the same period in 2009.

There was $871,130 provided by financing activities for the nine months ended September 30, 2010, attributable to proceeds from the exercise of stock options.  There was no net cash used in financing activities for the nine months ended September 30, 2009.

	September 30,
	2010			2009
Cash and cash equivalents	$	527,854		$	1,028,267
Total assets	$	3,389,029		$	2,250,391
Percentage of total assets		16	%		46	%

We invest excess cash predominately in liquid marketable securities to support our growing infrastructure needs for operational expansion.  The majority of our cash is concentrated in one large financial institution, JP Morgan Chase.

We have substantial capital resource requirements and have generated significant losses since inception.  At September 30, 2010, we had $527,854 in cash and cash equivalents compared to $1,028,267 at December 31, 2009, resulting in a net decrease in cash and cash equivalents of $500,413 for 2010.

The decrease in cash for the nine months ended September 30, 2010 was primarily attributed to cash used in operating activities of $1,008,862 for the period.

During the nine months ended September 30, 2010, we obtained proceeds from the exercise of common stock options and warrants of $871,130.  There were no proceeds from the exercise of stock options and warrants during the nine months ended September 30, 2009.

Net Cash Earn (Burn) – Non-GAAP

Net cash earn (burn) is a non-GAAP financial measure that may be considered in addition to results prepared in accordance with GAAP.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position or cash flows that either excludes or includes amounts that are not normally included or excluded in the most directly comparable measure calculated and presented in accordance with GAAP.  We define “net cash earn (burn)” as loss from operations plus non-cash operating expenses including stock based compensation expenses, depreciation, amortization and other non-cash charges.  This non-GAAP measure should not be considered a substitute for, or superior to, GAAP results. Our management uses this non-GAAP financial measure in evaluating its financial and operational decision making and as a means to evaluate period-to-period comparison.  We believe that both management and shareholders benefit from referring to non-GAAP financial measures such as net cash earn (burn) in planning, forecasting and analyzing future periods.  Additionally, net cash earn (burn) rate provides meaningful information about our ability to meet our working capital needs.  Net cash earn (burn), as presented below, may not be comparable to similarly titled measures reported by other companies since not all companies necessarily calculate net cash earn (burn) in an identical manner and, therefore, it is not necessarily an accurate measure of comparison between companies.  The following table is a reconciliation of our non-GAAP financial measure to loss from operations.

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	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2010			2009			2010			2009
LOSS FROM OPERATIONS		(168,137	)		(2,705,937	)		(4,416,158	)		(7,489,756	)
NON CASH OPERATING EXPENSES
Stock based compensation expense		1,580,590			1,580,919			4,704,693			4,119,773
Depreciation and amortization		62,310			130,527			255,153			394,030
TOTAL NON CASH OPERATING EXPENSES		1,642,900			1,711,446			4,959,846			4,513,803
NET CASH EARN (BURN)		1,474,763			(994,491	)		543,688			(2,975,953	)
NET MONTHLY CASH EARN (BURN) RATE		491,588			(331,497	)		60,410			(330,661	)

We expect a net cash earn (burn) rate of approximately zero per month for 2011, excluding any promotional activities and growth of advertising revenue.

We have budgeted capital expenditures of $500,000 for 2011, which will allow us to continue to grow the business given our member growth, by increasing capacity, improving performance and providing redundant backup for content.

	For the Year Ended December 31,
	2009			2008
Net cash used in operating activities	$	(3,878,474	)	$	(5,332,553	)
Net cash used in investing activities	$	(19,733	)	$	(739,353	)
Net cash provided by financing activities	$	––		$	7,337,019

Cash used in operating activities for the year ended December 31, 2009 is driven by our net loss, adjusted for non-cash items. Non-cash adjustments include depreciation and amortization, the vesting of stock options and issuance of common stock for compensation, and interest accrual and amortization of discounts associated with long-term debt. Net cash used in operations was $3,878,474 for the year ended December 31, 2009 compared to $5,332,553 for 2008. For the year ended December 31, 2009, net cash used by operations consisted primarily of a net loss of $10,575,507 less non-cash expenses of $512,977 in depreciation and amortization, $289,397 in non-cash interest, $291,407 in amortization of discounts on notes payable and debt issuance costs, loss of $100,000 on settlement of a receivable, $67,000 for the write-off of an intangible asset and $5,451,691 related to the vesting of stock options, and issuance (cancellation) of common stock for compensation and professional services. Additionally, changes in working capital impacted the net cash used in operating activities. These changes included an increase in accounts receivable of $327,320, offset by decreases in other current assets and other assets of $233,104 and increases in accounts payable and accrued expenses of $55,548. Cash used in operating activities for the year ended December 31, 2008 is driven by our net loss, adjusted for non-cash items. Non-cash adjustments include a gain on the extinguishment of debt, depreciation and amortization, the vesting of stock options and issuance of common stock for compensation, and interest accrual and amortization of discounts associated with long-term debt. For the year ended December 31, 2008, net cash used by operations consisted primarily of a net loss of $7,139,319 plus a gain on extinguishment of debt of $5,056,052 and a write-off of invoices totaling $508,610, offset by non-cash expenses of $463,588 in depreciation and amortization, $641,282 in non-cash interest, $272,246 in amortization of discounts on notes payable and debt issuance costs, $39,134 loss on the disposal of fixed assets, and $6,610,814 related to the vesting of stock options, extension of warrants, and issuance common stock for compensation and professional services. Additionally, changes in working capital impacted the net cash used in operating activities. These changes included a decrease in accounts payable and accrued expenses of $442,378, offset by decreases in other current assets and other assets of $193,417.

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Our capital expenditures were $20,483 for the year ended December 31, 2009, compared to capital expenditures of $399,954 for 2008. Net cash used in investing activities for the year ended December 31, 2008 is primarily attributable to Investment in BRC/La Alianza of $350,000, see Note 3 of the Unaudited Condensed Consolidated Financial Statements.

There was no cash flow from financing activities during the year ended December 31, 2009. Net cash provided by financing activities for the year ended December 31, 2008 came from net proceeds of $6,959,519 from our borrowing in January 2008. See Note 6 of the unaudited condensed consolidated financial statements. Cash proceeds from the exercise of stock options and warrants was $377,500 for the year ended December 31, 2008.

	December 31, 2009			December 31, 2008
Cash and cash equivalents	$	1,028,267		$	4,932,629
Total assets	$	2,250,391		$	6,741,705
Percentage of total assets		46	%		73	%

Quepasa had a positive working capital of $1,050,212 at December 31, 2009 which consisted primarily of cash.

In December 2010, we raised net proceeds of approximately $12.6 million from the sale of our common stock to accredited investors in a private offering.  We expect that these funds and the $6.5 million in contracts we signed this in 2010 will supply us working capital to remain operational through at least 2011. 

Related Person Transactions

For information on related party transactions and their financial impact, see Note 9 to the Unaudited Condensed Consolidated Financial Statements contained in this prospectus.

 Critical Accounting Policies, Judgments and Estimates

Our discussion and analysis of our consolidated financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with Generally Accepted Accounting Principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates.

An accounting policy is considered to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimate that are reasonably likely to occur, could materially impact the consolidated financial statements. We believe that the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of the consolidated financial statements.

Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board. In addition, there are other items within our financial statements that require estimation, but are not deemed critical as defined above. Changes in estimates used in these and other items could have a material impact on our financial statements.

Stock-Based Compensation Expense

Effective January 1, 2006, we adopted the fair value recognition provisions of GAAP, using the modified-prospective transition method. Since all share-based payments made prior to January 1, 2006 were fully vested, compensation cost recognized during the years ended December 31, 2009 and 2008 represents the compensation cost for all share-based payments granted subsequent to January 1, 2006 based upon the grant-date fair value using the Black-Scholes option pricing model.

The fair values of share-based payments are estimated on the date of grant using the Black-Scholes option pricing model, based on weighted average assumptions. Expected volatility is based on historical volatility of the Company’s common stock. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. Compensation expense is recognized on a straight-line basis over the requisite service period of the award.

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In December 2007, the SEC issued guidance that allows companies, in certain circumstances, to utilize a simplified method in determining the expected term of stock option grants when calculating the compensation expense to be recorded under GAAP, for employee stock options. The simplified method can be used after December 31, 2007 only if a company’s stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term. Through 2007, we used the simplified method to determine the expected option term, based upon the vesting and original contractual terms of the option. We have continued to use the simplified method to determine the expected option term since our stock option exercise experience does not provide a reasonable basis upon which to estimate the expected option term.

The assumptions used in calculating the fair value of stock-based awards represent our best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Contingencies

Quepasa accrues for contingent obligations, including legal costs, when the obligation is probable and the amount can be reasonably estimated. As facts concerning contingencies become known we reassess our position and make appropriate adjustments to the financial statements. Estimates that are particularly sensitive to future changes include those related to tax, legal, and other regulatory matters that are subject to change as events evolve and additional information becomes available.

Income Taxes

Quepasa uses the asset and liability method to account for income taxes. Under this method, deferred income taxes are determined based on the differences between the tax basis of assets and liabilities and their reported amounts in the consolidated financial statements which will result in taxable or deductible amounts in future years and are measured using the currently enacted tax rates and laws. A valuation allowance is provided to reduce net deferred tax assets to the amount that, based on available evidence, is more likely than not to be realized.

RECENT ACCOUNTING PRONOUNCEMENTS

For information on recent accounting pronouncements, see Note 1 to the Unaudited Condensed Consolidated Financial Statements contained in this prospectus.

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BUSINESS

Our Company

Quepasa owns and operates Quepasa.com, a Latino-focused social network with over 25,000,000 registered users as of December 1, 2010.  Quepasa is focused on continuing its rapid user growth, while deepening its users’ engagement with the site by offering users compelling features and content centered on the following themes:

1.   Social Discovery – Quepasa’s user experience is designed to facilitate the discovery of new people and content, in lieu of focusing exclusively on users’ “real world” friend networks.

2.   Social Gaming – Quepasa’s Open Social API brings culturally relevant social gaming titles to the Quepasa audience by way of third party game developers.

3.   Contests – Quepasa’s proprietary Distributed Social Media, or DSM technology, is a social media advertising product that gives the Quepasa audience an opportunity to compete for prizes in engaging, viral contests sponsored by brands.

By building an experience around these core themes, Quepasa seeks to create a clear and differentiated value proposition for existing and potential users, and continue to attract advertisers trying to reach those users. Quepasa believes this strategy will enhance revenue opportunities from its customers, users who engage in micro transactions within social games, and brand advertisers who pay to utilize Quepasa’s advertising products.

Product Development

Quepasa is continually developing new products, as well as optimizing its existing platform and feature set in order to meet the evolving needs of its audience, game developers and advertising partners.

Quepasa’s ongoing emphasis on social discovery drives the development of products that continue to make it easier for users to meet new people and discover new and interesting content.

Quepasa also proactively maintains and evolves its Open Social platform to reflect the latest technological advances as well as ensure that relevant game developers are able to achieve maximum participation in their games.

Quepasa’s DSM platform is designed to give advertisers a vehicle for reaching Latino audiences on Quepasa and across the social web through branded, viral contests. In addition to and in parallel with the launch of new DSM campaigns, Quepasa is also regularly adding features to the DSM platform in response to customer needs for innovative campaigns as well as advanced reporting and analytics.

Quepasa develops most of its software internally. Quepasa will, however, purchase technology and license intellectual property rights in the event that it is strategically important, operationally compatible, and economically advantageous to do so. For instance, Quepasa partners with third party game developers to bring additional social gaming titles to Quepasa.com.  Quepasa believes that it is not materially dependent upon licenses and other agreements with third parties relating to product development.

DSM

One of Quepasa’s strategies is to build innovative social media advertising products that allow advertisers to reach Latino audiences both on Quepasa and across the social web. Quepasa’s offerings attract advertising partners that want to go beyond traditional online channels and leverage social media to drive the viral consumption of their brand messaging and the content associated with it.

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To this end, Quepasa developed DSM which launched at the end of 2009.  DSM is a social contest platform that gives users the opportunity to compete for prizes by way of sharing a brand message on Quepasa and across their other social profiles. The viral nature of DSM campaigns helps advertisers achieve highly engaging, word-of-mouth advertising across popular social media sites. By virtue of reaching multiple, relevant sites, DSM campaigns allow advertisers to market their products to the Latino demographic in a single campaign, rather than requiring the advertiser to decide how to allocate their budgets across numerous websites.   

Quepasa refers to the core success metric for all DSM campaigns as an “engagement.” The engagements generated by a campaign are defined as the total of all the online activity driven by it, including for instance, entries, votes, and shares. Individuals competing in a given DSM contest increase their chances of winning by driving more engagements around their entries. As a measure of viral activity, engagements are also used to evaluate the success of the campaigns themselves. To date, Quepasa’s DSM campaigns have exceeded all of their engagement targets.

Quepasa believes that DSM represents a significant differentiator as compared to other online advertising offerings in the U.S. Latino and Latin American markets. The ongoing success of the DSM campaigns continues to validate the product and opportunity for existing and potential customers.

Some of Quepasa’s initial DSM Campaigns have included:

●   Campaign: “Why I Watch”

●   Client: Ultimate Fighting Championship Summary: Participants were invited to create and share UFC video highlight reels and describe their love of the sport for the chance to win UFC memorabilia.  The campaign gave the UFC an opportunity to let its most passionate supporters distribute content across the web and build brand awareness on its behalf.

●   Campaign: “Primer Empleo” Client: Manlio Fabio Beltrones Summary:  The goal of this DSM campaign was to educate Mexican youth regarding a proposed law designed to create employment opportunities for them. Participants were given the opportunity to learn about and cast a virtual vote for the law. In turn, they could tell friends about the proposed law and their support of it by sharing information to their various social profiles. The law’s focus on young people made social media and DSM a good fit for disseminating information about it, and the campaign reached over 6,000,000 Mexicans and led to the law being passed in the Mexican Senate.

●   Campaign: “Acapulco Revealed” Client: Mexico Tourism Summary: Participants were invited to create a slideshow depicting their ideal vacation to Acapulco using images of Acapulco’s nightlife, beaches, adventure and culture.  Vacation packages were awarded to those contestants who most effectively shared their entry across the social web.  Follow-on DSM campaigns have recently concluded on behalf of Cozumel and Ixtapa-Zihuatanejo.

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DSM Reseller Agreements

Quepasa has recently entered into reseller agreements with Sony Pictures Television Ad Sales in Latin America, or Sony, and Grupo Expansion, or Grupo.  Under these reseller agreements, Sony and Grupo have agreed to offer DSM to their advertisers.  Sony handles the advertising sales for nine cable television networks in Latin America.  Grupo is one of Mexico’s premier media companies, with 16 print magazine titles and seven Internet sites that have a combined reach of 11,000,000 monthly readers and users. 

Quepasa’s reseller strategy allows major media partners to sell its DSM solution to advertisers as an innovative, “social” solution, in addition to standard broadcast, cable and digital advertising products. Quepasa is able to leverage its resellers’ deep relationships with advertisers to facilitate DSM sales while building credibility in the marketplace.

Social Gaming and Social Applications

As social gaming and other viral applications continue to maintain their hold on social networking audiences, Quepasa plans to continue developing its own intellectual property and partnering with third party developers to bring the best, most relevant content to its users. Quepasa has developed several social applications to facilitate interaction between members in the context of its broader emphasis on “social discovery.”  The first of these, a flirting application called “Papacito,” allows users to browse other users’ photos and pick people with whom they would like to be matched. Users who are picked are invited back to the site to try to guess who picked them. Additionally, Quepasa has created an application called “QTweet” that gives users the opportunity to integrate existing Twitter accounts into their Quepasa experience, thereby driving activity around real-time updates from the popular social networking service.

Quepasa’s feature-rich Open Social Platform allows third party publishers to submit and publish their applications and games to Quepasa.com.  Quepasa is proactively seeking out and building relationships with world-class developers whose titles are well suited to the Quepasa userbase and Latin American market.  In July 2010, for instance, Quepasa worked with Viximo, a leading provider of virtual goods solutions and applications, to launch “Snapmeup,” an application in which users buy and sell photos of other users. Quepasa believes its Open Social Platform will provide a strong foundation for user retention, by giving users access to engaging content from the best social game publishers. To date, the games on Quepasa.com have been supplied primarily by third parties and Quepasa only receives a percentage of the revenue generated from those titles.

Quepasa will also enter the mobile application marketplace by developing companion mobile applications for Quepasa-owned applications. Quepasa expects that the companion applications will be distributed on several major carriers in Latin America and will present monetization opportunities by way of mobile advertising, micro-transactions, and/or monthly subscription fees.

Quepasa has been negotiating an agreement to acquire TechFront Desenvolvimento de Software S/S Ltda, a Brazilian company, or TechFront, which has developed social games for third parties on a contract basis.  Under the terms Quepasa is negotiating, Quepasa will pay TechFront owners $4,000,000 consisting of $300,000 in cash and $3,700,000 in common stock.  In addition, Quepasa may issue up to $250,000 in common stock based upon TechFront meeting certain future performance milestones.  Assuming we complete the acquisition, for which there is no assurance, Quepasa will supply $1,000,000 in working capital.  This acquisition will enable Quepasa to develop and publish games for our own use as well as publish those games to other third party social networks to create additional monetization opportunities for those games we develop.

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Skill-Based Gaming

Skill based games are games in which outcomes are primarily determined by a user’s skill, while the role of chance in gameplay is diminished. Some skill-based games can be played for cash.  In these games players pay a cash entry fee to play against one another in the hopes of winning cash or merchandise.  This makes skill-based games attractive to casual gamers interested in capitalizing on their gaming skills. Skill-based games also give users the ability to meet and connect with other people in gameplay.

The growth of online skill-based gaming has presented a lucrative opportunity for game developers and social networks like Quepasa.com:

●   In a presentation given on January 13, 2010, Jim McNiven, CEO of viral games company Kerb, noted that the huge growth of games website Zynga, which is estimated to have generated $200 million in revenue last year, is evidence of the power of viral platforms.  

●   According to a report published by iGaming Business, the skills-based games market alone is worth just over $382 million globally and is set to rise to more than $472 million by the end of 2010.  By the end of 2014, iGaming estimated that the industry will enjoy a massive growth spurt and be worth $957 million.  

●   As part of a global study on the gaming sector, Ernst & Young reported that in the first 6 months of 2009, 59% of web users had played a skill-based game online.

Quepasa has recently undertaken two new partnerships to bring skill-based gaming opportunities to its userbase. In September 2010, Quepasa and Hollywood Creations, Inc., or Hollywood, signed a binding term sheet whereby Hollywood committed to creating and publishing certain social games and skill-based wagering titles to Quepasa.com. Hollywood granted Quepasa an exclusive worldwide license to market and distribute the games. Quepasa and Hollywood will share the net revenue derived from the games. In June 2010, Quepasa entered into an agreement with Titan Gaming, or Titan, to integrate Titan’s skill based-gaming technologies into its Open Social Developer platform. Titan’s technology enables game developers to add tournaments, leaderboards, skill-based matchmaking, as well as points and cash competitions to their games.  Quepasa anticipates that these partnerships will drive the continued engagement and monetization among its users.

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Premium Content Partnerships

Quepasa believes a unique aspect of its strategy is its openness to premium content partnerships with traditional Latino media partners.  Many leading Latin American media companies are proactively looking for ways to reach their audiences on the social web. By being “partner-friendly” and building best-of-breed social tools, Quepasa has been able to attract partnerships with the likes of UFC, the NBA and Sony Pictures, and bring valuable content from these brands to the Quepasa.com userbase.  Quepasa believes it can effectively serve as a social extension for brands that want to access the Latin American market. Quepasa is focused on working with content partners to ensure the consumption of their content on Quepasa.com, while building out new and scalable technologies for distributing that content.  Quepasa will continue developing new partnerships to boost engagement and retention.

Revenue Sources

Quepasa expects future revenue to be derived from two primary revenue sources: Quepasa.com users who engage in micropayments within social games and applications on the site, and advertisers who pay for advertising and marketing services in order to reach Quepasa.com users. In 2010, substantially all of our revenue came from companies of which a director of Quepasa is the Chairman of the Board of Directors. See the section entitled "Related Person Transactions" for further detail.

Quepasa expects to generate revenue from the following products and services:

Advertising

●   DSM campaigns.

●   Banner advertising: Quepasa earns revenue when an advertiser purchases advertising space on its website and “impressions” are delivered. An “impression” is delivered when an advertisement appears on our website and the page is viewed by a user. The fees associated with display advertising can be negotiated on a cost per click, flat fee, or cost per acquisition basis. Quepasa works with many of the leading online ad networks who specialize in delivering ads to the Latino audience online.

Social Games

●   Social games: free-to-play games in which a percentage of users will pay for premium goods and upgrades.

●   Skill-based games: Quepasa will earn a percentage of the amount paid by users to participate in tournaments.

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Membership Base

Our website has experienced rapid growth as reflected in the following table:

Month Ending	Number of Members
November 30, 2010	25,052,283
October 31, 2010	22,780,813
September 30, 2010	20,720,906
August 31, 2010	18,673,689
July 31, 2010	16,833,699
June 30, 2010	15,416,042
May 31, 2010	14,230,841
April 30, 2010	13,159,387
March 31, 2010	13,159,387
February 28, 2010	10,326,057
January 31, 2010	9,047,365
December 31, 2009	7,675,988
November 30, 2009	6,432,687
October 31, 2009	5,360,178
September 30, 2009	4,893,240
August 31, 2009	4,573,719
July 31, 2009	4,339,609
June 30, 2009	3,772,374
May 31, 2009	3,465,465
April 30, 2009	2,816,872
March 31, 2009	2,508,023
February 28, 2009	2,331,378
January 31, 2009	2,172,619

Our membership base consists of Latinos in the U.S., Mexico, Brazil and other Latin American countries.  In March 2009, we launched Quepasa in Brazil.  Brazil is distinct from other Latin American countries because it is the only Portuguese speaking country in the Americas.  We are working with Playboy Mexico and Dr. Rey on marketing Quepasa in Brazil.  Dr. Rey was born and is a well known, idolized figure in Brazil.  Additionally, Brazilian Internet users are estimated to grow to 150 million by the end of 2010 and spend more time on the Internet than users in other countries, including the United Kingdom and Japan.

Latino Growth and Concentration

According to the United States Census Bureau and published sources, the Latino population:

● totaled 48.4 million, or 16% of the total U.S. population, as of July 1, 2009, an increase of 1.4 million over the pastyear.

● is expected to grow to 132.8 million, or 30% of the total U.S. population, by 2050, an increase of 84.4 million, or272%, between 2000 and 2050;

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● is the fastest growing minority group at 3.1% in the U.S. by adding more than one of every two people to the U.S.population between July 1, 2008 and July 1, 2009; and

● as of 2009, is the 3rd largest Latino population in the world.  Only Brazil (194 million) and Mexico (107 million) had larger Latino populations than the U.S.

In addition, 16 states have at least 500,000 Latino residents and in 21 states Latinos are the largest minority, which makes Latinos in the United States an attractive demographic group for advertisers, enabling marketers to deliver messages cost effectively to a highly targeted audience through geographic targeted ad serving.

Latino Use of the Internet

The number of Internet users in Latin America is growing rapidly because of affordable computers, increased broadband availability and interest in social media.  According to Internet World Stats, as of June 30, 2010, the number of Internet users in Latin America was estimated at 200 million.  Latin America has shown a 1,025% growth in Internet penetration from 2000-2010 and now makes up 10% of the world Internet population.

According to Scarborough Research Firm, over half (54%) of U.S. Latinos use the Internet today.  These users download more digital content than the general population, have a higher household income than the average U.S. Latino, and make online purchases.  In 2008, 43% of Latino users downloaded some form of digital content, such as music, podcasts, video games, etc. compared to 35% of the general population.  The average household income for all U.S. Latinos is $54,000 compared to $67,000 for the U.S. Latino Internet user.  62% of Latino Internet users are online purchasers, spending an average of $762 per person annually.

Latino Purchasing Power

The purchasing power of Latino households is rapidly increasing.  According to the Selig Center, U.S. Latino purchasing power surged to $978 billion in 2009 and is projected to reach as much as $1.3 trillion by 2014.  During the past decade, the rate of growth was more than two times the overall national rate.

Quepasa is committed to providing a comprehensive set of Internet marketing solutions for advertisers. We believe there is an ongoing growth in the online advertising market and an increasing shift in advertisers’ use of online media as audiences shift toward the Internet from traditional media:

● According to eMarketer, U.S. online spending is expected to top $40 billion by 2014, growing at double digit rates for more than three years. The estimated online share of total U.S. online ad spending will grow from $25.8 billion in 2010 to $40.5 billion in 2014;

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● According to eMarketer, marketers will spend around $2 billion to advertise on social networks in 2010, a 20% increase from 2009.  Furthermore, eMarketer estimated that advertisers will spend $220 million on advertising insocial games, a rise from $183 million in 2009; and

● A study conducted by inSites Consulting found that 95% of Internet users in Latin America had at least one account on a social networking site in 2010.

Quepasa is committed to capitalizing on this shift to Internet advertising and helping its advertisers create and execute Internet marketing strategies that both encourage its users to interact with our advertisers’ brands as well as provide valuable insights into their customer base.

We offer all of our services in English, Spanish and Portuguese, which we believe provides great value to advertisers seeking to reach the Latino audience. According to published sources, approximately 76% of Latinos five years and older in the U.S. speak Spanish at home.  Moreover, Latinos in the U.S. are expected to continue to speak Spanish because:

o Approximately one-third were born outside the U.S.;

o Latino immigration is continuing;

o Latinos generally seek to preserve their cultural identity; and

o  Latino population concentration encourages communication in Spanish.

Acquiring Members

We primarily rely on viral growth to acquire members.  We encourage our members to invite their friends to join to share the Quepasa experience.

With respect to our users, our sales and marketing activities are focused on developing the Quepasa brand within the Latino community in order to gain a competitive advantage that will enable us to attract, retain, and more deeply engage users and advertisers. We believe that our ability to obtain and retain users is also related to our ability to provide a fully trilingual site.  To date, we do not allocate any budget for the direct marketing efforts to acquire more users.   Our marketing efforts are simply focused on providing great entertainment content to our users and trusting that they will want to share this content with their friends. Our success with user acquisition has been solely dependent on “word of mouth” marketing by the Quepasa user base and our ability to deliver large volumes of email invitations to the contacts of our users.

In 2008, Quepasa focused on creating a new email system because major Internet service providers, or ISPs, and websites which provide email were blocking Quepasa’s emails inviting users to join Quepasa.  In order to avoid Quepasa’s invitations going straight to spam, Quepasa obtained a third party service provider to cause Quepasa to be whitelisted; this has dramatically improved email delivery to major ISPs, especially to popular free email services such as Hotmail, Gmail and Yahoo Mail.  As a result, Quepasa immediately saw increased traffic and increases in the number of new members, every subsequent month thereafter.  In November 2009, we formed a cross functional team dedicated to email management and deliverability.

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Sales and Marketing

We sell our marketing services to businesses through both direct and indirect channels. Our main focus is on selling our marketing services and solutions to leading advertising agencies and marketers in the U.S., Mexico and Latin America.  For the portion of banner advertising inventory that we do not sell direct, we work with the leading ad networks to fill the unused ad inventory with banner advertisement aggregated by those ad network partners.

Quepasa employs sales professionals in Miami, Florida, Mexico City, Mexico and Sao Paulo, Brazil.Our sales representatives consult regularly with agencies and advertisers on design and placement of online advertising, and provide customers with measurements and analysis of advertising effectiveness as well as effective consumer insights that can be turned into marketing campaigns.

Intellectual Property

Our intellectual property includes trademarks related to our brands, products and services; copyrights in software and creative content; trade secrets; and other intellectual property rights and licenses of various kinds. We seek to protect our intellectual property assets through, copyright, trade secret, trademark and other laws of the U.S. and other countries of the world, and through contractual provisions.

We consider the Quepasa trademark and our related trademarks to be valuable to Quepasa and we have registered these trademarks in the U.S. and other countries throughout the world and aggressively seek to protect them.

Competition

We operate in the Internet products, services, and content markets, which are highly competitive and characterized by rapid change, converging technologies, and increasing competition. Our most significant competition for users, advertisers, publishers, and developers is from other social networking sites, such as Yahoo!Español, Facebook, MySpace Latino, MySpace, America Online Latin America StarMedia, Hi5, Orkut and Batanga and Terra.com and UOL.com. We also compete with these companies to obtain agreements with software publishers, ISPs, mobile carriers, device manufacturers and others to promote or distribute our services to their users.

The principal competitive factors relating to attracting and retaining users include functionality, performance, ease of use, usefulness, accessibility, integration, and personalization of the online services that we offer, the overall user experience and quality of support on Quepasa properties. The principal competitive factors relating to attracting advertisers and publishers are the reach, effectiveness, and efficiency of our marketing services as well as the creativity of the marketing solutions that we offer. “Reach” is the audience and/or demographic that can be accessed through the Quepasa network. “Effectiveness” for advertisers is delivering against advertisers’ targets, measuring those achievements against those targets and optimizing for these across the Quepasa network. “Effectiveness” for publishers is our advertising technology platforms and the monetization we are able to offer through our marketing services.

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Many large media companies have developed, or are developing, social networking or social media tools for their web users. As these companies develop such portal or community sites, we could lose a substantial portion of our user traffic.

Most of our existing competitors, as well as new competitors such as Spanish-language media companies, other portals, communities and Internet industry consolidators, have significantly greater financial, technical, and marketing resources. Many of our competitors offer Internet products and services that are superior and achieve greater market acceptance. There can be no assurance that we will be able to compete successfully against current or future competitors or that competition will not have a material adverse affect on our business.

Corporate History

Quepasa was incorporated in the State of Nevada in June 1997 under the name Internet Century, Inc. and later changed its name to quepasa.com, Inc. to reflect our decision to operate a Spanish language portal and search engine.  On August 5, 2003, we changed our name to Quepasa Corporation.  In 2007, Quepasa moved away from being a bilingual search engine into a multilingual portal and Latino social network. With the evolution of the website into a Latino portal and social network, the products and services provided to businesses transitioned to predominately display advertising. In December 2007, the portal service of Quepasa was discontinued. Quepasa re-launched the site on February 6, 2008, to be solely a Latino social network with content provided by the user community. In August 2008, Quepasa again re-launched Quepasa.com with an improved user interface and enhanced technical capabilities.

Government Regulation

In the United States, advertising and promotional information presented to visitors on our website and our other marketing activities are subject to federal and state consumer protection laws that regulate unfair and deceptive practices. There are a variety of state and federal restrictions on the marketing activities conducted by email, or over the Internet, including U.S. federal and state privacy laws and the CAN-SPAM Act of 2003. We are also subject to laws in the various Latin American countries in which we operate.  The rules and regulations are complex and may be subject to different interpretations by courts or other governmental authorities. We might unintentionally violate such laws, such laws may be modified and new laws may be enacted in the future. Any such developments (or developments stemming from enactment or modification of other laws) or the failure to anticipate accurately the application or interpretation of these laws could create liability to us, result in adverse publicity and negatively affect our businesses.  See our risk factors found elsewhere in this prospectus for further discussion of government regulations.

Our skill-based gaming could be subject to extensive regulation.  If a local regulator were to conclude that skill-based gaming is subject to their rules, it could require us to obtain licenses or otherwise restrict our business or require us to block users in a particular jurisdiction.  See the Risk Factor on page 8 of this prospectus.

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Employees

As of December 27, 2010, we employed approximately 75 employees, all of which are full-time.  Of these employees: 61 individuals were employed in Hermosillo, Mexico and 14 were employed in the United States none of whom are represented by a labor union. Our future success is substantially dependent on the performance of our senior management and key technical personnel, and our continuing ability to attract and retain highly qualified technical and managerial personnel.

Research and Development

During 2009 and 2008, we incurred $1,040,022 and $1,241,681 in research and development costs, respectively.

Property

Our headquarters are located in West Palm Beach, Florida. We also lease office space in Los Angeles, California.  Our data centers are operated in Dallas, Texas and Tempe, Arizona. Our technical operations are provided in leased offices located in Hermosillo, Mexico. We believe that our existing facilities are adequate to meet current requirements, and that suitable additional or substitute space will be available as needed to accommodate any further physical expansion of operations.

Legal Proceedings

From time to time, we are party to certain legal proceedings that arise in the ordinary course and are incidental to our business.  There are currently no such pending proceedings to which we are a party that our management believes will have a material adverse effect on Quepasa’s consolidated financial position or results of operations.  However, future events or circumstances, currently unknown to management, will determine whether the resolution of pending or threatened litigation or claims will ultimately have a material effect on our consolidated financial position, liquidity or results of operations in any future reporting periods.

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MANAGEMENT

The following is a list of our directors and executive officers.

Name	Age		Position
John Abbott		40	Chairman of the Board and Chief Executive Officer
Michael Matte		51	Chief Financial Officer, Executive Vice President and Secretary
Louis Bardov		47	Chief Technology Officer
Alonso Ancira		56	Director
Ernesto Cruz		53	Director
James Ferris		36	Director
Malcolm Jozoff		71	Director
Lionel Sosa		70	Director
Dr. Jill Syverson-Stork		57	Director

John Abbott has been a director and Chief Executive Officer since October 2007. Since February 25, 2009, Mr. Abbott has served as Chairman of the Board and previously served as Chairman from October 25, 2007 until January 18, 2008. Since 2005, Mr. Abbott has been a financial advisor to or AHMSA. In addition, Mr. Abbott has led investor groups and has served on the executive committees of two start-up efforts in Brazil, namely Click Filmes (www.clickfilmes.com), Brazil’s first hotel video on demand business and Industria de Entretenimento, an entertainment business that owns the rights to the Pacha brand in Brazil, among others. From 1992 to 2005, Mr. Abbott held several senior positions within JP Morgan Securities, Inc. Mr. Abbottwas selected to serve on our Board because of his extensive experience in strategic advisory and entrepreneurship. In addition, Mr. Abbott, as our Chief Executive Officer possesses a detailed understanding of the characteristics of our business model.

Michael Matte has served as our Chief Financial Officer, Executive Vice-President and Secretary since October 29, 2007. From July 2006 through October 2007, Mr. Matte served as a director of Quepasa. Mr. Matte served as Chief Financial Officer of Cyberguard Corporation from February 2001 to April 2006. Prior to joining Cyberguard Corporation, Mr. Matte began his professional career at Price Waterhouse, where he worked from 1981 to 1992. His last position was as a senior Audit Manager. Currently, Mr. Matte serves as a director of Iris International, Inc. and until October 15, 2009 served as a director of GelTech Solutions, Inc. Mr. Matte is a Certified Public Accountant.

Louis Bardov has served as our Chief Technology Officer since January 2008. Mr. Bardov has over 21 years’ experience in software development and technology management. Most recently, he worked for Match.com, a leading Internet dating service from 2000 through early January 2008. Mr. Bardov last served as Match.com’s Senior Vice President of Software Development, Customer Care and Customer Retention and previously as the Vice President of Development.

Alonso Ancira has been a director since November 2006. He has served as Chairman of the Board of AHMSA, one of Mexico’s most prestigious industrial consortiums since April 2004. He is also Chairman of the Board of MATT, Inc., a wholly-owned subsidiary of AHMSA. From 1991 until April 2004, Mr. Ancira was Vice-Chairman and Chief Executive Officer of AHMSA. He is currently President of Mexico’s Chamber of Iron and Steel, a position he held from 1993 to 1995, and again from 2003 to 2004. Mr. Ancira was selected to serve on the Board due to his leadership in the Mexican business community, innovative thinking and strong support of our business model.

Ernesto Cruz has been a director since November 13, 2007. Since October 2007, Mr. Cruz has served as the managing partner of Advanzer de Mexico S.A. de C.V. a consulting and audit firm. From March 2002 until October 2007, he was the Managing Partner for the Monterrey and Northeast Mexican offices of Deloitte & Touche, a big four international accounting firm. Mr. Cruz served as the Managing Partner for the Monterrey and Northeast Mexican offices of Arthur Anderson from April 1997 through March 2002. Mr. Cruz is a Certified Public Accountant in Mexico. Mr. Cruz was selected to serve on our Board for because of his extensive knowledge in accounting and auditing and his service on the board of directors of large companies in Mexico.

James Ferris has been a director since July 18, 2008. Since January 2008, Mr. Ferris has been a Sr. Global Brand Manager at EA Games a division of Electronic Arts, Inc. From December 2006 until December 2007, Mr. Ferris was a Global Brand Manager at Electronic Arts. From 2003 to 2006, Mr. Ferris was a Product Manager at EA Sports also a division of Electronic Arts. Prior to his employment at Electronic Arts, Mr. Ferris was a Product Manager at Hasbro, Inc. Mr. Ferris was selected to serve on the Board because of his experience managing premier products in the interactive entertainment industry and his knowledge of the online media landscape.

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Malcolm Jozoff has been a director since January 2007. Since 2004, Mr. Jozoff has been serving as a corporate advisor to Otsuka Pharmaceutical Co., Ltd., a pharmaceutical and consumer health products company, based in Tokyo, Japan. From July 1996 to August 2000, Mr. Jozoff was Chairman of the Board of Directors and President and Chief Executive Officer of The Dial Corporation, which markets Dial soaps, Purex laundry detergents, Renuzit air fresheners, and Armour Star canned meats. Mr. Jozoff was selected to serve on the Board because of his past experience as Chief Executive Officer of a major New York Stock Exchange listed company.

Lionel Sosa has been a director since January 2007. Since 2008, Mr. Sosa has been a marketing consultant with Sosa Consultation and Design a position he previously held from 2000 until 2005. From 2005 until 2007, Mr. Sosa also served as executive director of Mexicans & Americans Thinking Together Foundation, Inc., or MATTF, a non-profit organization focused on encouraging bicultural relations between Mexicans and Americans. Mr. Sosa is the founder of Sosa, Bromley, Aguilar, & Associates (now Bromley Communications), the largest  advertising agency in the U.S.  Mr. Sosa has served as a Hispanic media advisor in seven Republican presidential races beginning with President Reagan in 1980.  Mr. Sosa was named one of the “25 Most Influential Hispanics in America” by Time Magazine in 2005. Mr. Sosa was selected to serve on the Board because he is a leader in the Mexican-American community and because of his influence in the Hispanic community. He was also selected for his experience and knowledge of Hispanic consumer behavior.

Dr. Jill Syverson-Stork has been a director since September 2006. She has been a Professor at Wellesley College from September 1989 to the present, and is the Coordinator of Intermediate Spanish and the Director of the Spanish Language House and Cultural Center. Dr. Syverson-Stork was selected to serve on the Board because of her over 30 years experience in bilingual, multi-cultural education with a specialization in serving the Hispanic community and promoting Hispanic culture.

There are no family relationships between any of our directors and/or executive officers.

Board Committees

The Board and its committees meet throughout the year on a set schedule, hold special meetings, and act by written consent from time to time as appropriate. The Board delegates various responsibilities and authority to its Board committees. Committees regularly report on their activities and actions to the Board. The Board currently has, and appoints the members of the Audit Committee and the Compensation and Nominating Committee. Each committee has a written charter approved by the Board. We post each charter on our website at www.quepasacorp.com. The following table identifies the independent and non-independent current Board and committee members:

Name	Independent	Audit	Compensation and Nominating
John Abbott
Alonso Ancira
Ernesto Cruz	P	Chairman
James Ferris	P
Malcolm Jozoff	P	P	Chairman
Lionel Sosa	P
Dr. Jill Syverson-Stork	P	P	P
Meetings held in 2010		4	2

The Board held six meetings in 2010 and all of the directors attended over 75% of the combined number of Board and committee meetings, except for Messrs. Alonso Ancira and Lionel Sosa who attended four and James Ferris who attended three of the Board meetings. In addition, Mr. Jeffrey Valdez, a former director, missed both meetings before his resignation. Quepasa does not have a policy with regard to directors’ attendance at annual meetings.  In 2010, Quepasa held an annual meeting which was attended by John Abbott, our Chairman.

Independence

The Board has determined Messrs. Cruz, Ferris, Jozoff and Sosa and Dr. Syverson-Stork are independent directors in accordance with the listing rules of the NYSE Amex Stock Market. The Board has determined that each of the members of the Audit Committee, Messrs. Cruz and Jozoff and Dr. Syverson-Stork are independent in accordance with the independence standards for audit committees under the NYSE Amex Stock listing rules.

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Audit Committee

The Audit Committee assists the Board in its general oversight of our financial reporting, internal control, and audit functions, and is responsible for the appointment, retention, compensation, and oversight of the work of our independent registered public accounting firm. The Audit Committee also has responsibility for our corporate governance including keeping abreast of developments and best practices in corporate governance matters and shall review our compliance and, where appropriate, recommending any changes for approval by the Board. Our Board has determined that each Audit Committee member has sufficient knowledge in reading and understanding our financial statements to serve on the Audit Committee.

The Board has determined that Mr. Cruz is qualified as an “audit committee financial expert,” as that term is defined by the rules of the Securities and Exchange Commission, or the SEC, and in compliance with the Sarbanes-Oxley Act of 2002. This designation does not impose any duties, obligations or liabilities that are greater than the duties, obligations and liabilities imposed by being a member of the Audit Committee or of the Board.

Compensation and Nominating Committee

The Compensation and Nominating Committee, or the Committee, is responsible for assisting the Board in discharging its duties with respect to the compensation of Quepasa’s directors and executive officers. The Committee reviews the performance of our directors and executive officers in achieving corporate goals and objectives and seeks to ensure that the directors and officers are compensated appropriately in a manner consistent with our business strategies, competitive practices and the requirements of applicable regulatory authorities. The Committee determines salaries, bonuses and other matters relating to compensation of the executive officers of Quepasa. The Committee also approves the compensation of our non-employee directors and reports it to the full Board. The Committee is authorized to delegate to the Chief Executive Officer, Chief Financial Officer or other authorized executive officer with the authority to make annual grants of stock options. The Chief Executive Officer, with the exception of a meeting determining their compensation, may be present at meetings during with compensation is under review and consideration but may not vote.

The responsibilities of the Committee include the identification of individuals qualified to become Board members, the selection or recommendation to the Board of nominees to stand for election as directors, the oversight of the selection and composition of committees of the Board, establish procedures for the nomination process including procedures and a policy with regard to the consideration of any candidates recommended by stockholders and the oversight of the evaluations of the Board and management.

In fulfilling its responsibilities, the Committee considers the following factors in reviewing possible candidates for nomination as a director of Quepasa:

(i)  the appropriate size of our Board and its committees;

(ii)  the perceived needs of our Board for particular skills, background and business experience;

(iii)  diversity, including Latino background and the skills, public company experience, background, reputation, and business experience of nominees compared to those already possessed by other members of our Board;

(iv)  nominees’ independence from management; and

(v)  the applicable regulatory and listing requirements, including independence requirements and legal considerations.

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The Committee may, by majority vote of its full membership, create one or more subcommittees comprised of members of the Committee, and may vest any such subcommittee with full authority with respect to the specific matters delegated to such subcommittee.

The Committee will consider persons recommended by stockholders for inclusion as nominees for election to our Board if the names, biographical data, and qualifications of such persons are submitted in writing in a timely manner addressed and delivered to our Corporate Secretary at our Florida offices, 324 Datura Street, Suite 114, West Palm Beach, Florida 33401.

Code of Conduct and Ethics

We have adopted a Code of Conduct and Ethics that applies to all of our directors and employees. To see a copy of the Code of Conduct and Ethics, please go to our corporate website at www.quepasacorp.com.

Board Diversity

While we do not have a formal policy on diversity, the Committee considers as one of the factors the diversity of the composition of our Board and the skill set, background, reputation, type and length of business experience of our Board members as well as a particular nominee’s contributions to that mix. Although there are many other factors, the Committee seeks to attract individuals with strong ties to the Latino Community or with knowledge of the Spanish culture. Additionally, we seek individuals with experience on public company boards, marketing expertise and international background.

Board Structure

Quepasa has chosen to combine the Chief Executive Officer and Board Chairman positions. We believe that this Board leadership structure is the most appropriate for Quepasa. Because we are a small company and do not have significant revenue, it is more efficient to have the leadership of the Board in the same hands as the Chief Executive Officer of Quepasa. The challenges faced by us at this stage – obtaining financing and developing our business – are most efficiently dealt with by one person who is familiar with both the operational aspects as well as the strategic aspects of our business.

Board Assessment of Risk

Our risk management function is overseen by our Board. Through our management reports, our policies, such as our Related Party Transaction Policy, our Code of Conduct and Ethics and our Board committees’ review of financial and other risks, our management keeps our Board apprised of material risks and provides our directors access to all information necessary for them to understand and evaluate how these risks interrelate, how they affect Quepasa, and how management addresses those risks. Mr. John Abbott, as our Chairman and Chief Executive Officer, and Mr. Michael Matte, our Chief Financial Officer, work closely together with the Board once material risks are identified on how to best address such risks. If the identified risk poses an actual or potential conflict with management, our independent directors may conduct the assessment. Presently, the primary risks affecting Quepasa are the lack of working capital and the inability to generate sufficient revenue so that we have positive cash flow from operations. The Board focuses on these key risks at each meeting and actively interfaces with management on seeking solutions.

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Shareholder Communications

Although we do not have a formal policy regarding communications with the Board, shareholders may communicate with the Board by writing to us at Quepasa Corporation, Attention: Michael Matte, 324 Datura Street, Suite 114, West Palm Beach, Florida 33401, or by visiting Quepasa’s website at www.quepasacorp.com. Shareholders who would like their submission directed to a member of the Board may so specify, and the communication will be forwarded, as appropriate.

EXECUTIVE COMPENSATION

The following table reflects the compensation paid to our Chief Executive Officer and the two other executive officers serving at the end of the last fiscal year whose compensation exceeded $100,000, who we refer to as our Named Executive Officers for 2009 and 2008.

2009 Summary Compensation Table

Name and Principal Position (a)	Year (b)	Salary ($)(c)			Bonus ($)(d)			Stock Awards ($)(e)(1)			Option Awards ($)(f)(1)		Total ($)(j)
John Abbott	2009		129,863	(2)		—			—			814,475		944,338
Chief Executive Officer	2008		65,744	(3)(4)		—			—			535,526		601,270
Michael Matte	2009		250,000	(5)		—			—			534,663		784,663
Chief Financial Officer	2008		124,384	(6)		125,000	(7)		3,015	(8)		520,649		773,048
Louis Bardov	2009		160,000			—			—			92,856		252,856
Chief Technology Officer	2008		146,667			—			—			1,457,306		1,603,973

———————

(1)  The amounts in these columns represent the fair value of the award as of the grant date as computed in accordance with FASB ASC Topic 718 and the revised SEC disclosure rules. These rules also require prior years amounts to be recalculated in accordance with the rule and therefore any number previously disclosed regarding our Named Executive Officers compensation on this table or any other table may not reconcile. These amounts represent awards that are paid in shares of common stock or options to purchase shares of our common stock and do not reflect the actual amounts that may be realized by the Named Executive Officers.

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(2)  In lieu of his $250,000 salary for the period from October 2009 to October 2010, Mr. Abbott elected to receive 316,456 10-year stock options. These options vest monthly through October 2010 and are exercisable at $1.34 per share.

(3)  In lieu of his $80,000 salary for the period from October 2007 to October 2008, Mr. Abbott elected to receive 54,237 10-year stock options. All of these options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.

(4)  Includes 54,237 10-year stock options issued to Mr. Abbott in lieu of salary for the period from October 2008 to October 2009. All of these options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.

(5)  Includes 126,582 10-year stock options issued to Mr. Matte in lieu of $100,000 of his salary for the period from November 2009 through October 2010. These options vest monthly through October 2010 and are exercisable at $1.34 per share.

(6)  Includes 67,797 10-year stock options issued to Mr. Matte in lieu of $100,000 of his salary for the period from November 30, 2008 through October 2009. These options have fully vested. The options were exercisable at $2.43 per share, however on July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share.

(7)  In lieu of a $75,000 bonus, Mr. Matte elected to receive 50,847 10-year stock options. These options have fully vested and are exercisable at $1.00 per share.

(8)  Represents payments for services as an independent director prior to joining the management team on October 30, 2007.

See the discussion below of the Named Executive Officers’ employment agreements and payments provided to them upon a change of control of Quepasa.

Executive Employment Agreements

John Abbott Employment Agreement

Effective as of October 25, 2007, we entered into an employment agreement with our Chief Executive Officer, John Abbott. Under the agreement, Mr. Abbott received an annual base salary of $80,000 per year, which was increased to $250,000 (discussed below) and was granted 1,897,492 10-year stock options, exercisable at $3.05 per share. On July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share. One-third of the options vested on October 25, 2008 and the remaining options vested in 24 equal monthly installments thereafter, subject to remaining employed on each applicable vesting date. On September 14, 2009, the Committee approved an increase of Mr. Abbott’s salary to $250,000 per year.

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Michael Matte Employment Agreement

Effective as of October 29, 2007, we entered into an employment agreement with our Chief Financial Officer, Michael Matte. Under the agreement, Mr. Matte received an annual base salary of $100,000 per year, which was increased to $250,000 (discussed below), and was granted 1,475,827 10-year stock options exercisable at $3.25 per share. On July 8, 2009, these options were exchanged for options with an exercise price of $1.00 per share. One-third of the options vested on October 29, 2008 and the remaining options vested in 24 equal monthly installments thereafter, subject to remaining employed on each applicable vesting date. Effective November 1, 2008, Mr. Matte’s salary was increased to $250,000 per year.

Amendment to Abbott and Matte Agreements

Effective as of March 27, 2008, the Committee approved amendments to the employment agreements with John Abbott and Michael Matte, the Company’s Chief Executive Officer and Chief Financial Officer, respectively. The amendments provide for immediate vesting of their stock options following a change of control of Quepasa. Additionally, they will have the right to exercise these stock options for a period of two years after they are terminated.

Louis Bardov Employment Agreement

Effective as of January 18, 2008, we entered into an employment agreement with our Chief Technology Officer, Louis Bardov. Mr. Bardov receives an annual base salary of $160,000 per year and was granted 500,000 10-year stock options, exercisable at $2.49 per share. On July 8, 2009, these options were re-priced to an exercise price of $1.00 per share. The options vest in equal annual increments on January 18, 2009, 2010 and 2011, subject to Mr. Bardov remaining as an employee on each applicable vesting date.

Performance Options

On July 31, 2008, the Committee approved the grant of 262,500 10-year stock options to Mr. Abbott and 232,500 10-year stock options each to Mr. Matte and Mr. Bardov exercisable at $2.07 per share (which were later re-priced to $1.00 per share). The options are subject to Quepasa meeting specific performance milestones. As of the record date, 175,000of Mr. Abbott’s options have vested and 155,000 of each of Mr. Matte’s and Mr. Bardov’s performance options have vested.

Options in Lieu of Cash Compensation

Mr. Abbott and Mr. Matte agreed to accept stock options in lieu of cash compensation for the period from December 1, 2010 until November 30, 2011.  Mr. Abbott was granted 89,928 10-year stock options and Mr. Matte was granted 35,971 10-year stock options.  The options vest monthly in equal increments with the first vesting date being December 1, 2010.  Mr. Bardov agreed to accept stock options in lieu of cash compensation for the period from February 11, 2011 until February 10, 2012.   Mr. Bardov was granted 14,388 10-year stock options.  The options vest monthly in equal increments with the first vesting date being February 11, 2011.  All of the options described in this paragraph are exercisable at $4.95 per share.

Management Bonus Program

Messrs. Abbott and Matte are eligible to participate in our discretionary management bonus program with one-half based upon cost reductions and one-half based upon increases in cash flow. The three target bonus levels are 50%, 150% and 300% of base salary. Also, Mr. Bardov is eligible to participate in our discretionary management bonus program with an initial target bonus of $100,000.

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Severance Provisions

Messrs. Abbott and Matte are entitled to severance in the event that they are dismissed without cause, they resign for good reason or are terminated within one year following a change of control. In any of such events, they will receive two years base salary, two times the highest target or bonus for that year, all of their stock options will immediately vest and they will have two years to exercise their options post termination. If Mr. Bardov is terminated without cause, he is entitled to six months base salary, his stock options will vest and he will have three months to exercise his options post-termination. If his employment is terminated following a change of control, he will receive six months’ base salary.

Option Exchange

As a result of the decline of the stock market in 2008 and the first quarter of 2009, a substantial percentage of our outstanding options had exercise prices in excess of the then fair market value of our common stock. In order to retain the compensatory value of the equity awards without further diluting shareholders by issuing incremental shares, the Committee offered to certain option holders, including certain executive officers and directors, the right to exchange on a one-for-one basis outstanding options for newly issued options with an exercise price equal to the fair market value on the new date grant. The newly-issued options had the same terms, other than exercise price, and were vested to the same extent as the exchanged options. Our Named Executive Officers were issued a total of 4,827,937 new options and cancelled the same amount of options.

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Outstanding Equity Awards at 2010 Fiscal Year End

Listed below is information with respect to unexercised options, stock that has not vested and equity incentive awards for each Named Executive Officer as of December 31, 2010:

Name (a)	No. of Securities Underlying Unexercised Options (#) Exercisable (b)			No. of Securities Underlying Unexercised Options (#) Unexercisable (c)			Equity Incentive Plan Awards: No. of Securities Underlying Unexercised Unearned Options (#) (d)			Option Exercise Price ($) (e)		Option Expiration Date (f)
John Abbott		1,897,492	(1)		—			—			1.00	10/25/2017
		175,000			—			87,500	(2)		1.00	7/22/2018
		54,237	(1)		—			—			1.00	10/15/2018
		54,237	(1)		—			—			1.00	10/15/2018
		316,456	(1)		—			—			1.34	10/31/2019
		7,494			82,434	(3)		—			4.95	9/26/2020
		—			90,000	(4)		—			4.95	9/26/2020
Michael Matte		1,475,827	(1)		—			—			1.00	10/29/2017
		155,000			—			77,500	(2)		1.00	7/22/2018
		50,847	(1)		—			—			1.00	10/15/2018
		67,797	(1)		—			—			1.00	10/15/2018
		126,582	(1)		—			—			1.34	10/31/2019
		2,998			32,973	(3)		—			4.95	9/26/2020
		—			90,000	(4)		—			4.95	9/26/2020
Louis Bardov		500,000	(1)		—			—			1.00	1/18/2018
		155,000			—			77,500	(2)		1.00	7/22/2018
		—			14,388	(5)		—			4.95	9/26/2020
		—			90,000	(4)		—			4.95	9/26/2020

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———————

(1) Fully vested.

(2) The options are subject to meeting performance milestones as determined by the Chief Executive Officer at the end of 2011.

(3) The options vest monthly over a 12 month period with the first vesting date being December 1, 2010.

(4) The options vest in three equal increments on January 1, 2011, 2012 and 2013.

(5) The options vest monthly over a 12 month period with the first vesting date being February 1, 2011.

Director Compensation

We do not pay cash compensation to our directors for service on our Board. Non-employee members of our Board were compensated with restricted common stock and stock options in 2009 for service as a director or committee chairperson.

2009 Director Compensation

Name (a)	Stock Awards ($)(c) (1)		Option Awards ($)(d) (1)		Total ($)(j)
Alonso Ancira (2)		2,905		7,999		10,904
Malcolm Jozoff (2)		4,233		7,999		12,232
Lionel Sosa (2)		2,905		7,999		10,904
Dr. Jill Syverson-Stork (2)		2,905		7,999		10,904
Ernesto Cruz (2)		4,233		7,999		12,232
Jeffrey Valdez (3)		2,905		7,999		10,904
James Ferris (2)		2,905		7,999		10,904

———————

(1) The amounts in these columns represent the fair value of the award as of the grant date as computed in accordance with FASB ASC Topic 718 and the recently revised SEC disclosure rules. These amounts represent awards that are paid in shares of common stock and options to purchase shares of our common stock and do not reflect the actual amounts that may be realized by the directors.

(2) Each non-employee director received 3,500 shares of common stock and 12,500 stock options exercisable at $0.83 per share for their service as directors; all of these options vested on December 31, 2009. Additionally, committee chairpersons were granted 1,600 shares of common stock.

(3) Mr. Valdez resigned on June 4, 2010.

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The following table reflects the number of securities received by our non-employee directors for 2009 and 2008:

	Options		Director Shares		Committee Chairperson Shares
2009		12,500		3,500		1,600
2008		12,500		3,500		1,600

For 2010, our non-employee directors received 18,500 stock options and our committee chairpersons received an additional 2,500 stock options exercisable at $3.05 per share.

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PRINCIPAL SHAREHOLDERS 

The following table sets forth the number of shares of Quepasa’s voting stock beneficially owned as of December 27, 2010 (i) those persons known by Quepasa to be owners of more than 5% of Quepasa’s voting stock, (ii) each director (iii) each of the Named Executive Officers, and (iv) all executive officers and directors as a group:

Title of Class	Name and Address of Beneficial Owner	Amount of Beneficial Ownership (1)		Percent  Beneficially Owned (1)
Common Stock	John Abbott 324 Datura Street, Suite 114 West Palm Beach, FL 33401 (2)		2,722,404		15.3	%
Common Stock	Michael Matte 324 Datura Street, Suite 114 West Palm Beach, FL 33401 (3)		1,935,279		11.3
Common Stock	Louis Bardov 5820 Bassinghall Lane Plano, TX 75093 (4)		689,899		4.3	%
Common Stock	Alonso Ancira C/O Grupo Acerero del Norte, S.A. de C.V, Campos Eliseos No. 29, Colonia Rincon Del Bosque, Mexico (5)		3,393,583		19.6	%
Common Stock	Ernesto Cruz Lazaro Cardenas N 4000-27A. Col. Las Brisas, Monterrey N.L., Mexico 64780 (6)		57,867		*
Common Stock	James Ferris 533 Ashland Ave, Apt. 202 Santa Monica, CA 90405 (7)		42,500		*
Common Stock	Malcolm Jozoff 5200 E. Solano Drive Paradise Valley, AZ 85253 (8)		130,366		*
Common Stock	Lionel Sosa 215 Rhode Lane Floresville, TX 78114 (9)		91,138		*

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Common Stock	Dr. Jill Syverson-Stork 48 Park Drive Sherborn, MA 01770 (10)	61,825	*
Common Stock	All directors and executive officers as a group (9 persons)	10,838,823	44.4	%
5% Stockholders
Common Stock	Mexicans & Americans Trading Together, Inc. 5150 N. Loop 1604 West San Antonio, TX 78249 (11)	3,333,333	19.3	%
Common Stock	Richard L. Scott 700 11th Street, Suite 101 Naples, FL 34102 (12)	1,500,000