Table
      of Contents


U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





[X]
            QUARTERLY
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                for the period ended March 31, 2006





[ 
                 ]
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934
                for the transition period from _______ to
                _______





Commission
      File No. 000-50560





UPSNAP,
      INC.


(Exact
      name of small business issuer as specified in its charter)







(Former
      name of registrant)





Nevada
              (State
                or other jurisdiction of
              incorporation
                or organization)
            20-0118697
              (IRS
                Employer identification No.)








134
      Jackson Street, Suite 203, P.O. Box 2399, Davidson, North Carolina
      20836


----------------------------------------------------------------------------------------------------------------


(Address
      of Principal Executive Offices)





(704)
      895.4121


-----------------------------------------------------------------------------


(Issuer’s
      Telephone Number)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or
      15(d) of the Exchange Act during the past 12 months (or for such shorter period
      that the registrant was required to file such reports), and (2) has been subject
      to such filing requirements for the past 90 days.  Yes [X] No [  ]





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of The Exchange Act)  Yes [  ] No [X]


**APPLICABLE
        ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**
 **PROCEEDINGS
        DURING THE PRECEDING FIVE YEARS**
 
 Check
        whether the registrant filed all documents and reports required to be filed
        by
        Section l2, 13 or 15(d) of the Exchange Act after the distribution of securities
        under a plan confirmed by a court.  Yes [  ] No [X]
 
 **APPLICABLE
        ONLY TO CORPORATE ISSUERS**




State
      the
      number of shares outstanding of each of the issuers’ classes of common equity,
      as of the latest practicable date:




Class
                  of Stock
              Outstanding
                  May 10, 2006Common
                  Stock ($.001 par value)
              21,151,324


Transitional
        Small Business Disclosure Format (Check one):  Yes [  ] No [X]




Table
          of Contents




UPSNAP,
      INC.


FORM
      10-QSB





For
      the
      Quarter ended March 31, 2006





TABLE
      OF CONTENTS




Page


Cautionary
                    Statement and Risk Factors that May Affect
                    Future Results
                1PART
                    I - FINANCIAL INFORMATIONITEM
                    1.
                Selected
                    Financial Statements
                7Balance
                    Sheet - March 31, 2006
                    (unaudited)
                7Statements
                    of Operations - Three and Six Months Ended
                    March 31, 2006 and 2005 (unaudited)
                8Statements
                    of Stockholders’ Equity -
                    (unaudited)
                9Statements
                    of Cash Flows - Six Months Ended March 31,
                    2006 and 2005
                10Notes
                    to Financial Statements
                    (unaudited)
                11ITEM
                    2.
                Plan
                    of Operations
                21ITEM
                    3.
                Controls
                    and Procedures
                25PART
                    II - OTHER INFORMATIONITEM
                    6.
                Exhibits
                27Signatures
                
                28




Table
          of Contents





**Cautionary
      Statement and Risk Factors that May Affect Future
      Results**





This
      report and other presentations made by UpSNAP, Inc. (“UPSNAP,” “We” or
“Company”) contain “forward-looking statements,” which include statements that
      are predictive in nature, depend upon or refer to future events or conditions,
      and usually include words such as “expects,” “anticipates,” “intends,” “plans,”
“believes,” “will,” “predicts,” “estimates,” or similar expressions. In
      addition, any statements concerning future financial performance (including
      future revenues, expenses, earnings or losses or growth rates), ongoing business
      strategies or prospects and possible future actions are also forward-looking
      statements. Forward-looking statements are based on current expectations and
      projections about future events and are subject to risks, uncertainties and
      the
      accuracy of assumptions concerning UPSNAP , the performance of the industries
      in
      which it does business and economic and market factors, among other things. **These
      forward-looking statements are not guarantees of future
      performance.**





Risks,
      uncertainties and other important factors that could cause actual results to
      differ materially from those in forward-looking statements and from historical
      results include, but are not limited to, the following:


**RISK
        FACTORS**
 
 Investing
        in our common stock involves a high degree of risk. You should carefully
        consider the risks and uncertainties described below before you purchase
        any of
        our common stock. If any of these risks or uncertainties actually occurs,
        our
        business, financial condition or results of operations could be materially
        adversely affected. In this event, you could lose all or part of your
        investment.
 
 Financial
        Risks
  **Our
        business is difficult to evaluate because we have a limited operating history
        in
        a new industry. The adverse effects of a limited operating history include
        reduced management visibility into forward sales, customer acquisition and
        retention which could lead to missing financial targets.**
 
 From
        the
        inception of our operating subsidiary, UpSNAP USA, until March 31, 2006,
        UpSNAP
        USA has had accumulated net losses of $868,503. In Q1 of 2006 UpSNAP posted
        sales of $244,042 net of carrier charges from the sale of it’s premium
        subscription services for mobile content. However, we expect to continue
        to have
        net operating losses until we can expand our sales channel and implement
        our
        marketing efforts. These continued net operating losses together with our
        limited working capital of $1,064,616 and
        the
        uncertainties of operating in a new industry make investing in our company
        a
        high-risk proposal.
 
 We
        expect
        to incur expenses associated with the expansion of our sales and marketing
        efforts and from promotional arrangements with our strategic partners. We
        expect
        that our future agreements and promotional arrangements with our strategic
        partners may require us to pay consideration in various forms, including
        the
        payment of royalties, license fees and other significant guaranteed amounts
        based upon revenue sharing agreements and the issuance of stock in certain
        cases. In addition, our promotional arrangements and revenue sharing agreements
        may require us to incur significant expenses, and we cannot guarantee that
        we
        will generate sufficient revenues to offset these expenses. We cannot guarantee
        that we will be able to achieve sufficient revenues in relation to our expenses
        to become profitable. Even if we do attain profitability, we may not be able
        to
        sustain ourselves as a profitable company in the future.
 
 To
        date,
        UpSNAP has entered into revenue share relationships with carriers and content
        providers at industry standard margins, and has not issued, nor is in discussion
        with any party to issue stock or warrants, or enter into promotional
        arrangements to include guaranteed minimum payments. Based on management
        experience, future contractual arrangements will be based upon standard revenue
        share relationships at industry-standard margins.
 
 1
 Table
            of Contents
 
 ***The
        Company has limited resources to execute its business
        plan.***
 
 In
        September and October 2005, we raised $2,146,200 in a private placement
        transaction. As of March 29, 2006, we had approximately $1.05 million in
        cash
        and cash equivalents. We believe that these funds are sufficient to meet
        our
        operating needs for the next 12 months. We expect to utilize all of this
        cash
        over the next 12 months to fund our sales and marketing efforts and for general
        working capital purposes. As a result, our financial resources are limited
        and
        the amount of funding that we will need to develop and commercialize our
        products and services is highly uncertain. Adequate funds may not be available
        when needed or on terms satisfactory to us. A lack of funds may cause us
        to
        delay, reduce and/or abandon certain or all aspects of our product development
        programs. If additional funds are raised through the issuance of equity or
        convertible debt securities, your percentage ownership in us will be reduced,
        existing stockholders may suffer dilution. The securities that we issue to
        raise
        money may also have rights, preferences and privileges that are senior to
        those
        of our existing stockholders.
 
 ***We
        anticipate that our results of operations may fluctuate significantly from
        period to period due to factors that are outside of our control, which may
        lead
        to reduced revenues or increased expenditures*** ***.***
 
 Our
        operating results may fluctuate significantly as a result of a variety of
        factors, many of which are outside of our control. Some of the factors that
        may
        affect our quarterly and annual operating results include:
 
 ·
              our
                  ability to establish and strengthen brand awareness;
 ·
              our
                  success, and the success of our potential strategic partners, in
                  promoting
                  our products and services;
 ·
              the
                  overall market demand for mobile services and applications of the
                  type
                  offered by us;
 ·
              the
                  amount and timing of the costs relating to our marketing efforts
                  or other
                  initiatives;
 ·
              the
                  timing of contracts with strategic partners and other parties;
 ·
              fees
                  that we may pay for distribution and promotional arrangements or
                  other
                  costs that we may incur as we expand our operations;
 ·
              our
                  ability to compete in a highly competitive market, and the introduction
                  of
                  new products; and
 ·
              economic
                  conditions specific to the telecommunications and mobile services
                  industries and general economic conditions.
 
 As
        a
        result of our limited operating history and the emerging nature of the markets
        in which we compete, it is difficult for us to forecast our revenues or earnings
        accurately.
  Business
          Risks
 
 ***We
          are dependent on strategic partners for content and sales distribution
          to
          consumers. If these partnerships were to cease, this could lead to loss
          of
          revenues and customers.***
 
 UpSNAP
          relies on the US mobile carriers Verizon, Sprint/Nextel, T-Mobile, and
          Cingular
          to sell its products and collect revenues which are then passed onto UpSNAP.
          Although management has no reason to believe that these arrangements are
          going
          to be adversely affected in the future, it is management experience that
          carrier
          contracts are prone to change and re-negotiation. UpSNAP also relies on
          the
          content developers to enter into commercially reasonable relationship with
          the
          company to allow for the re-selling of the content to consumers. UpSNAP
          has over
          140 content partners and is not dependent on any one content
          supplier.
 
 **We
          are dependent upon our executive officers, managers and other key personnel,
          without whose services our prospects would be severely limited leading
          to loss
          of revenue and customer acquisition** **.**
 
 Our
          success depends to a significant extent upon efforts and abilities of our
          key
          personnel, in particular our Chief Executive Officer Tony Philipp. The
          loss
          of Tony Philipp could have a material adverse effect upon us ,
          resulting in loss of current business relationships, strategy and planning.
          Competition for highly qualified personnel is intense and we may have difficulty
          replacing such key personnel .
          UpSNAP
          has no key man insurance in place to help alleviate the loss.
 2
 Table
            of Contents
  ***The
        mobile search engine market in which we operate is subject to intense
        competition and we may not be able to compete effectively resulting in loss
        of
        revenues or customers.***
 
 We
        compete in the mobile search engine market. This market is becoming increasingly
        more competitive. We face competition from the existing search players, such
        as
        Google and Yahoo!, and newcomers to the mobile search markets, such as 4INFO,
        and Askmenow. There are relatively low barriers to entry into the mobile
        search
        engine market. Many of our competitors or potential competitors have longer
        operating histories, longer customer relationships and significantly greater
        financial, managerial, sales and marketing and other resources than we do.
        We
        are particularly vulnerable to efforts by well funded competitors and will
        lose
        market share unless we can attain a critical mass of consumers, strategic
        partners, and affiliates, as well as strong brand identity.
 
 ***UpSNAP
        is largely dependent on one strategic relationship. We need to significantly
        expand our distribution channels. Failure to expand our distribution channels
        will result in reduced customer acquisition, and reduced
        revenues.***
 
 In
        Q1 of
        2006 95.7% of our revenues were generated from the Sprint/Nextel Distribution
        relationship. Due to the Sprint/Nextel merger, we do not have in place a
        current
        contract with Sprint. We continue to operate under the terms of the expired
        contract and as such, the relationship could be terminated at any time. We
        are
        working towards formalizing an ongoing contract with Sprint. In order to
        decrease our dependence on one major US carriers, we need to enhance our
        ability
        to find new strategic partners in order to create additional distribution
        channels for our products and to generate increased revenues. We expect that
        we
        will need to invest on an ongoing basis to expand our partner sales force.
        The
        creation of strategic partnerships requires a sophisticated sales effort
        targeted at the senior management of prospective partners. Given our limited
        budget of $150,000 dedicated to this effort, we expect that we will have
        a hard
        time trying to expand the number of strategic partners and other distributors
        for our products.
 
 ***We
        plan to build our business through merger with or acquisition of existing
        technology companies but may not be successful in finding merger or acquisition
        partners.*** ***In addition we may need to seek additional finance to support the acquisitions.
        The financing and acquisitions will most likely involve the issuance of common
        stock, which may result in dilution of the current
        shareholders.***
 
 We
        plan
        to build our business through the merger with or acquisition of existing
        technology companies that will benefit our application service business.
        It is
        reasonable to expect that such activity will be an ongoing part of our business
        development efforts. At any given time, we could be in process of analyzing
        or
        making an offer for such a transaction. However, any discussion or speculation
        on specific transactions is only conjecture until such time that a definite
        agreement is signed and announced in an SEC filing. It is possible that no
        transactions will take place at all.
  *Our
        intellectual property and other
        proprietary rights are valuable, and any inability to protect them could
        adversely affect our business and results of operations; in addition, we
        may be
        subject to infringement claims by third parties which we may be unable to
        settle.*  Our
          ability to compete effectively is dependent upon our ability to protect
          and
          preserve the intellectual property and other proprietary rights and materials
          owned, licensed or otherwise used by us. We currently have a patent- pending
          technology. We cannot assure you that the patent application will result
          in an
          issued patent, and failure to secure rights under the patent application
          may
          limit our ability to protect the intellectual property rights that the
          application was intended to cover. Although we have attempted to protect
          our
          intellectual property and other proprietary rights both in the United States
          and
          in foreign countries through a combination of patent,
          trademark, copyright and trade secret protection, these steps may be insufficient
          to prevent unauthorized use of our intellectual property and other proprietary
          rights, particularly in foreign countries where the protection available
          for
          such intellectual property and other proprietary rights may be limited.
          To date,
          we are not currently engaged in and have not had any material infringement
          or
          other claims pertaining to our intellectual property brought by us or against
          us
          in recent years. We cannot assure you that any of our intellectual property
          rights will not be infringed upon or that our trade secrets will not be
          misappropriated or otherwise become known to or independently developed
          by
          competitors. We may not have adequate remedies available for any such
          infringement or other unauthorized use. We cannot assure you that any
          infringement claims asserted by us will not result in our intellectual
          property
          being challenged or invalidated,
  3
 Table
            of Contents
 that
        our
        intellectual property will be held to be of adequate scope to protect our
        business or that we will be able to deter current and former employees,
        contractors or other parties from breaching confidentiality obligations and
        misappropriating trade secrets. In addition, we may become subject to claims
        against us which could require us to pay damages or limit our ability to
        use
        certain intellectual property and other proprietary rights found to be in
        violation of a third party's rights, and, in the event such litigation is
        successful, we may be unable to use such intellectual property and other
        proprietary rights at all or on reasonable terms. Regardless of its outcome,
        any
        litigation, whether commenced by us or third parties, could be protracted
        and
        costly and could result in increased litigation related expenses, the loss
        of
        intellectual property rights or payment of money or other damages, which
        may
        result in lost sales and reduced cash flow and decrease our net income.
 
 ***In
        order to be successful and profitable we must grow rapidly. We expect that
        rapid
        growth will put a large strain on our management team and our other resources.
        We may not have sufficient resources to manage this growth effectively, which
        could lead to loss of customers through poor service and
        support*** ***.***
 
 We
        anticipate that a period of significant expansion will be required to address
        potential growth in our customer base, market opportunities and personnel.
        This
        expansion will place a significant strain on our management, operational
        and
        financial resources. To manage the expected growth of our operations and
        personnel, we will be required to implement new operational and financial
        systems, procedures and controls, and to expand, train and manage our growing
        employee base. We also will be required to expand our finance, administrative
        and operations staff. Further, we anticipate that we will be entering into
        relationships with various strategic partners and third parties necessary
        to our
        business. Our current and planned personnel, systems, procedures and controls
        may not be adequate to support our future operations. Management may not
        able to
        hire, train, retain, motivate and manage required personnel for our planned
        operations.
 
 ***Our
        business is subject to frequent technology changes, multiple standards, rapid
        roll-out of new mobile handsets, and changes in the method of Internet
        broadcasting delivery, that could lead to us being unable to provide our
        services to some our existing and new users, leading to loss of revenues,
        poor
        performance or both.***
 
 We
        are
        presently able to sell and deliver information to our product carriers
        throughout the world, but any changes in the method of delivery of Internet
        broadcasting or mobile communications standards, could result in our not
        being
        able to deliver our services to some or all of our customers. We will continue
        to develop our technology to address emerging mobile platforms and standards
        to
        avoid this problem, but no assurance can be given that this will be accomplished
        in a timely manner.
  **Some
          of our existing stockholders can exert control over us and may not make
          decisions that are in the best interests of all stockholders which could
          lead to
          a reduced stock price.**
 
 As
          of
          March 29, 2006, officers, directors, and stockholders holding more than
          5% of
          our outstanding shares collectively controlled approximately 68.9% of our
          outstanding common stock. As a result, these stockholders, if they act
          together,
          would be able to exert a significant degree of influence over our management
          and
          affairs and over matters requiring stockholder approval, including the
          election
          of directors and approval of significant corporate transactions. Accordingly,
          this concentration of ownership may harm the market price of our common
          stock by
          delaying or preventing a change in control of us, even if a change is in
          the
          best interests of our other stockholders.
 
 In
          addition, the interests of this concentration of ownership may not always
          coincide with the interests of other stockholders, and accordingly, they
          could
          cause us to enter into transactions or agreements that we would not
 otherwise
          consider. No officers or directors of UpSNAP are currently or have ever
          been
          affiliated with any of the greater than 5% beneficial owners.
 
 Market
          Risks
  **A
          limited public market exists for the trading of our securities, which may
          result
          in shareholders being unable to sell their shares, or forced to sell them
          at a
          loss.**
 
 Our
          common stock is quoted on the NASD Over-the-Counter Bulletin Board. Our
          common
          stock is thinly traded and has little to no liquidity. The stock has a
          low-trading volume, a limited number of market makers, and a limited
 
 4
 Table
            of Contents
 
 number
        of
        round lot holders. As a result, investors may find it difficult to dispose
        of
        our securities. This lack of liquidity of our common stock will likely will
        have
        an adverse effect on the market price of our common stock and on our ability
        to
        raise additional capital.
 
 If
        an
        active trading market does develop, the market price of our common stock
        is
        likely to be highly volatile due to, among other things, the low revenue
        nature
        of our business and because we are a new public company with a relatively
        limited operating history. Further, even if a public market develops, the
        volume
        of trading in our common stock will presumably be limited and likely be
        dominated by a few individual stockholders. The limited volume, if any, will
        make the price of our common stock subject to manipulation by one or more
        stockholders and will significantly limit the number of shares that one can
        purchase or sell in a short period of time.
 
 The
        equity markets have, on occasion, experienced significant price and volume
        fluctuations that have affected the market prices for many companies’ securities
        that have often been unrelated to the operating performance of these companies.
        Any such fluctuations may adversely affect the market price of our common
        stock,
        regardless of our actual operating performance. As a result, stockholders
        may be
        unable to sell their shares, or may be forced to sell them at a
        loss.
 
 ***We
        do not intend to pay dividends to our stockholders, so you will not receive
        any
        return on your investment in our company prior to selling your interest in
        us.***
 
 We
        have
        never paid any dividends to our stockholders. We currently intend to retain
        any
        future earnings for funding growth and, therefore, do not expect to pay any
        dividends in the foreseeable future. If we determine that we will pay dividends
        to the holders of our common stock, we cannot assure that such dividends
        will be
        paid on a timely basis. As a result, you will not receive any return on your
        investment prior to selling your shares in our company and, for the other
        reasons discussed in this “Risk Factors” section, you may not receive any return
        on your investment even when you sell your shares in our company and your
        shares
        may become worthless.
  ***A
          significant number of our shares will be eligible for sale and their sale
          or
          potential sale may depress the market price of our common
          stock.***
  Sales
          of
          a significant number of shares of our common stock in the public market
          could
          harm the market price of our common stock. We have authorized 97,500,000
          shares
          of common stock. As of March 31, 2006, we have outstanding 21,151,324 shares
          of
          common stock. Accordingly, we have 76,348,676 shares of common stock available
          for future sale.
 
 As
          additional shares of our common stock become available for resale in the
          public
          market, the supply of our common stock will increase, which could decrease
          its
          price. Some or all of the shares of common stock may be offered from time
          to
          time in the open market under Rule 144, and these sales may have a depressive
          effect on the market for our shares of common stock. In general, a person
          who
          has held restricted shares for a period of one year may, on filing with
          the SEC
          a notification on Form 144, sell into the market common stock in an amount
          equal
          to 1% of the outstanding shares for Bulletin Board Companies. Such sales
          may be
          repeated once each three months, and any of the restricted shares may be
          sold by
          a non-affiliate after they have been held for two years.
 
 ***Because
          our stock is considered a penny stock, any investment in our stock is considered
          to be a high-risk investment and is subject to restrictions on
          marketability.***
 
 Our
          common stock is a “penny stock” within the meaning of Rule 15g-9 to the
          Securities Exchange Act of 1934, which is generally an equity security
          with a
          price of less than $5.00. Our common stock is subject to rules that impose
          sales
          practice and disclosure requirements on certain broker-dealers who engage
          in
          certain transactions involving a penny stock. Under the penny stock regulations,
          a broker-dealer selling penny stock to anyone other than an established
          customer
          or “accredited investor” must make a special suitability determination for the
          purchaser and must receive the purchaser’s written consent to the transaction
          prior to the sale, unless the broker-dealer is otherwise exempt. Generally,
          an
          individual with a net worth in excess of $1,000,000 or annual income exceeding
          $200,000 individually or $300,000 together with his or her spouse is considered
          an accredited investor.
  In
          addition, the penny stock regulations require the broker-dealer
          to:
  5
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            of Contents
 
 ·
                deliver,
                    prior to any transaction involving a penny stock, a disclosure
                    schedule
                    prepared by the Securities and Exchange Commission relating to
                    the penny
                    stock market, unless the broker-dealer or the transaction is
                    otherwise
                    exempt;
 ·
                disclose
                    commissions payable to the broker-dealer and the Registered Representative
                    and current bid and offer quotations for the securities;
                    and
 ·
                send
                    monthly statements disclosing recent price information with respect
                    to the
                    penny stock held in a customer’s account, the account’s value and
                    information regarding the limited market in penny
                    stocks.
 Because
          of these regulations, broker-dealers may encounter difficulties in their
          attempt
          to sell shares of our common stock, which may affect the ability of selling
          stockholders or other holders to sell their shares in the secondary market
          and
          have the effect of reducing the level of trading activity in the secondary
          market. These additional sales practice and disclosure requirements could
          impede
          the sale of our securities. In addition, the liquidity of our securities
          may be
          decreased, with a corresponding decrease in the price of our securities.
          Our
          common stock in all probability will be subject to such penny stock rules
          and
          our stockholders will, in all likelihood, find it difficult to sell their
          securities.




6
 Table
          of Contents


**PART
      I**


**ITEM
        1. SELECTED FINANCIAL STATEMENTS**
  **UPSNAP,
        INC.**
 CONSOLIDATED
        BALANCE SHEET
 AS
        OF
        MARCH 31, 2006
 UNAUDITED
 ASSETSCurrent
                    AssetsCash
                
                $
                1,064,637Accounts
                    receivable
                
                
                110,423Other
                    current assets
                
                
                32,833TOTAL
                    CURRENT ASSETS
                
                
                1,207,893PROPERTY
                    & EQUIPMENT (Note H)Computer
                    and office equipment
                
                
                163,287Accumulated
                    Depreciation
                
                
                (8,470
                )NET
                    PROPERTY & EQUIPMENT
                
                
                154,817OTHER
                    ASSETSOther
                    intangibles (Note K)
                
                
                1,593,773Goodwill
                    (Note K)
                
                
                4,677,862Security
                    deposits
                
                
                1,115TOTAL
                    ASSETS
                
                $
                7,635,459LIABILITIES
                    & STOCKHOLDERS' EQUITYCURRENT
                    LIABILITIESAccounts
                    payable
                
                $
                142,815Total
                    Other Current Liabilities
                
                
                463TOTAL
                    CURRENT LIABILITIES
                
                
                143,277LONG
                    TERM LIABILITIESNotes
                    Payable
                
                
                113,500TOTAL
                    LIABILITIES
                
                
                256,777Commitments
                    (Note I)STOCKHOLDERS'
                    EQUITY (Note C and D)Common
                    stock, par value $0.001, 97,500,000 authorized,
                
                
                21,151issued
                    and outstanding 21,151,324 shares at March 31, 2006Additional
                    paid-in capital
                
                
                8,226,034Accumulated
                    deficit
                
                
                (868,503
                )TOTAL
                    STOCKHOLDERS' EQUITY
                
                
                7,378,682TOTAL
                    LIABILITIES & STOCKHOLDERS' EQUITY
                
                $
                7,635,459
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.
  7
 Table
            of Contents
  **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 FOR
        THE
        THREE AND SIX MONTHS ENDED MARCH 31, 2006 AND 2005
 UNAUDITED
 **Three
                    Months Ended March 31,**
                
                **Six
                    Months Ended March 31,****2006**
                
                **2005**
                
                **2006**
                
                **2005**SALES AND COST OF SALESSales
                
                
                
                
                $
                244,042
                
                $
                -
                
                $
                244,042
                
                $
                -Cost
                    of Sales
                
                
                
                
                
                107,046
                
                
                -
                
                
                110,576
                
                
                -Gross
                    Profit
                
                
                
                
                
                136,996
                
                
                -
                
                
                133,466
                
                
                -OPERATING
                    EXPENSESProduct
                    development
                
                
                
                
                
                113,211
                
                
                27,504
                
                
                199,153
                
                
                53,205Sales
                    and marketing expenses
                
                
                
                
                
                57,856
                
                
                58
                
                
                104,531
                
                
                9,103General
                    and administrative
                
                
                
                
                
                288,325
                
                
                8,807
                
                
                516,815
                
                
                16,497Total
                    Expense
                
                
                
                
                
                459,393
                
                
                36,369
                
                
                820,499
                
                
                78,804Net
                    operating income
                
                
                
                
                
                (322,396
                )
                
                (36,369
                )
                
                (687,033
                )
                
                (78,804
                )Other
                    income and expenseInterest
                    income
                
                
                
                
                
                4,890
                
                
                -
                
                
                4,890
                
                
                -NET
                    LOSS
                
                
                
                
                $
                (317,506
                )
                $
                (36,369
                )
                $
                (682,443
                )
                $
                (78,804
                )Net
                    loss per share
                
                
                
                
                $
                (0.02
                )
                $
                (0.01
                )
                $
                (0.04
                )
                $
                (0.02
                )Weighted
                    average common shares outstanding:Basic and diluted
                
                
                
                
                
                20,993,802
                
                
                4,013,100
                
                
                16,396,022
                
                
                4,013,100
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.
  8
 Table
            of Contents
 
 **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENT OF STOCKHOLDER’S EQUITY
 FOR
        THE
        PERIOD SEPTEMBER 30, 2004 TO MARCH 31, 2006
 UNAUDITED
 Common
                    StockTotalAdditional
                
                
                
                Stockholders'Paid-in
                
                Accumulated
                
                EquityShares
                
                Par
                    Value
                
                capital
                
                Deficit
                
                (Deficit)**Balances,
                    September 30, 2004**
                
                
                
                
                
                
                
                
                -
                
                $
                27,474
                
                $
                (27,474
                )
                $
                --Donated
                    capital
                
                
                
                
                
                
                
                
                
                
                
                119,525
                
                
                
                
                
                119,525Shares
                    issued for cash ($.0003 per share)
                
                
                
                
                
                12,999,999
                
                
                1,300
                
                
                1,700
                
                
                
                
                
                3,000Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (158,586
                )
                
                (158,586
                )**Balances,
                    September 30, 2005**
                
                
                
                
                
                12,999,999
                
                
                1,300
                
                
                148,699
                
                
                (186,060
                )
                
                (36,061
                )Shares
                    issued in connection with reverse merger
                
                
                
                
                
                5,788,495
                
                
                17,488
                
                
                2,079,623
                
                
                
                
                
                2,097,112Shares
                    issued in connection with XSVoice acquisition
                
                
                
                
                
                2,362,830
                
                
                2,363
                
                
                5,997,712
                
                
                
                
                
                6,000,074Net
                    loss
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (682,443
                )
                
                (682,443
                )**Balances,
                    March 31, 2006**
                
                
                
                
                
                21,151,324
                
                $
                21,151
                
                $
                8,226,034
                
                
                ($868,503
                )
                $
                7,378,682
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.
  9
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            of Contents
 
 **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        SIX MONTH PERIODS ENDED MARCH 31, 2006 AND 2005
 UNAUDITED
 For
                    the six month period ended March 31, 2006
                
                For
                    the six month period ended March 31, 2005CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (682,443
                )
                $
                (78,804
                )Adjustments
                    to reconcile net lossto net cash used by operating activities:Depreciation
                
                
                8,470
                
                
                -Changes
                    to goodwill
                
                
                (36,408
                )
                
                -CHANGES
                    IN CURRENT ASSETS AND CURRENTLIABILITIES: (Net of effect of acquisition)Accounts
                    receivable
                
                
                (38,801
                )
                
                -Other
                    current assets
                
                
                (29,833
                )
                
                -Deposits
                
                
                (1,115
                )
                
                -Accounts
                    payable and accrued expenses
                
                
                122,255
                
                
                -Other
                    current laibilities
                
                
                (16,200
                )
                
                -NET
                    CASH USED FOR OPERATING ACTIVITIES
                
                
                (656,308
                )
                
                (78,804
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:Cash
                    to acquire XSVoice, Inc.
                
                
                (243,241
                )
                
                -Cash
                    received from the company merger
                
                
                1,919,662
                
                
                -Purchase
                    of equipment
                
                
                (131,087
                )
                
                -NET
                    CASH PROVIDED BY INVESTING ACTIVITIES
                
                
                1,545,334
                
                
                -CASH
                    FLOWS FROM FINANCING ACTIVITIES:Sale
                    of common stock
                
                
                -
                
                
                3,000Donated
                    capital
                
                
                -
                
                
                82,432NET
                    CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                -
                
                
                85,432NET
                    INCREASE IN CASH
                
                
                889,026
                
                
                6,628CASH,
                    beginning of period
                
                
                175,611
                
                
                -CASH,
                    end of period
                
                $
                1,064,637
                
                $
                6,628Taxes
                    paid
                
                $
                -
                
                $
                -Interest
                    paid
                
                $
                -
                
                $
                -Other
                    non-cash investing and financing activities:Shares
                    issued in connection with reverse merger
                
                $
                2,097,112
                
                $
                -Shares
                    issued in connection with XSVoice acquisition
                
                $
                6,000,074
                
                $
                -
 
 The
        accompanying notes are an integral part of these unaudited financial
        statements.


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**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





NOTE
      A
      - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Basis
      of
      Presentation





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      conformity with Generally Accepted Accounting Principles (“GAAP”) for interim
      financial information and with the instructions to SEC Form 10-QSB and Article
      10 of Regulation S-X. Accordingly, they do not include all of the information
      and footnotes required by GAAP for complete financial statements. In preparing
      the financial statements, management is required to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the balance
      sheet
      and the reported amounts of revenues and expenses for the period. Actual results
      could differ significantly from those estimates. The accompanying unaudited
      consolidated financial statements should be read in conjunction with the audited
      consolidated financial statements and the notes thereto incorporated by
      reference in the Company’s Annual Report on SEC Form 10-KSB for the year ended
      September 30, 2005.





In
      the
      opinion of the Company’s management, the accompanying unaudited consolidated
      financial statements contain all material adjustments required by GAAP to
      present fairly the financial position of UPSNAP, INC. and its subsidiaries
      as of
      March 31, 2006 and the results of their operations for the three and six month
      periods ended March 31, 2006 and 2005 and their cash flows for the six months
      ended March 31, 2006 and 2005. All such adjustments are of a normal recurring
      nature, unless otherwise disclosed in this Form 10-QSB or other referenced
      material. Results of operations for interim periods are not necessarily
      indicative of results for the full year.





When
      required, certain reclassifications are made to the prior period’s consolidated
      financial statements to conform to the current presentation.





As
      of
      January 1, 2006 the Company exited the development stage company as defined
      in
      Financial Accounting Statements Board (“FASB”) Statement No. 7, *Accounting
      and Reporting for Development Stage Companies.*





Organization





In
      November, 2005, UpSNAP, Inc. (formerly Manu Forti Group) completed an
      acquisition of UpSNAP USA, Inc. The acquisition was accounted for as a
      recapitalization effected by a reverse merger, wherein UpSNAP USA, Inc. is
      considered the acquirer for accounting and financial reporting purposes
      (collectively, UpSNAP, Inc. and UpSNAP USA, Inc are referred to hereinafter
      as
      the “Company”). The pre-merger assets and liabilities of the acquired entity
      have been brought forward at their book value and no goodwill has been
      recognized. The accumulated deficit of UpSNAP USA, Inc. has been brought
      forward, and common stock and additional paid-in-capital of the combined company
      have been retroactively restated.





Pursuant
      to a definitive share exchange agreement dated November 15, 2005 (as previously
      filed on SEC Form 8-k on November 16, 2005), UpSNAP, Inc. acquired 100% of
      the
      issued and outstanding shares of UpSNAP USA, Inc.





Under
      the
      terms of the agreement UpSNAP, Inc. issued 11,730,000 shares of its common
      stock
      for all of the issued and outstanding stock of UpSNAP USA, Inc. As a result
      of
      the acquisition, the former shareholders of UpSNAP USA, Inc. held immediately
      after the acquisition 62.4% of the issued and outstanding shares of UpSNAP,
      Inc.'s common stock. The remaining 37.8% were held by UpSNAP, Inc.’s (formerly
      Manu Forti Group, Inc.) shareholders.


On
        January 6, 2006, the Company completed the purchase of XSVoice, Inc., a
        privately held wireless platform and application developer, by acquiring
        substantially all of the assets of XSVoice, Inc. for a total purchase price
        of
        $6.3 million. XSVoice, Inc.’s results of operations have been included in the
        consolidated financial statements since the date of acquisition. See Note
        K.


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The
        consolidated financial statements include the operations of UpSNAP, Inc.
        from
        November 15, 2005 through March 31, 2006.
 
 UpSNAP,
        Inc. changed its year-end to September 30 to coincide with the year-end of
        UPSNAP USA, Inc.


NOTE
      B
      - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





These
      financial statements have been prepared by management in accordance with GAAP.
      The significant accounting principles are as follows:





Principles
      of consolidation





The
      consolidated financial statements include the accounts of UpSNAP, Inc. since
      November 15, 2005 and its wholly-owned subsidiary, UpSNAP USA, Inc., which
      is
      100% consolidated in the financial statements,
      and the
      accounts and results from operations acquired as a result of the XSVoice, Inc.
      acquisition as of January 6, 2006. All material inter-company accounts
      and transactions have been eliminated.





Use
      of
      Estimates





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the amounts reported in the
      financial statements and the accompanying notes. These estimates and assumptions
      are based on management's judgment and available information and, consequently,
      actual results could be different from these estimates.





Cash
      and cash equivalents





For
      purposes of the statement of cash flows, the Company considers all highly liquid
      debt instruments purchased with an original maturity of three months or less
      to
      be cash equivalents.





Property
      and equipment





Property
      and equipment are stated at cost. Major renewals and improvements are charged
      to
      the asset accounts while replacements, maintenance and repairs, which do not
      improve or extend the lives of the respective assets, are expensed. At the
      time
      property and equipment are retired or otherwise disposed of, the asset and
      related accumulated depreciation accounts are relieved of the applicable
      amounts. Gains or losses from retirements or sales are credited or charged
      to
      income.





The
      Company depreciates its property and equipment on the double declining balance
      method with a five year life and half year convention.





Disclosure
      about Fair Value of Financial Instruments





The
      Company estimates that the fair value of all financial instruments at March
      31,
      2006, as defined in FASB 107, does not differ materially from the aggregate
      carrying values of its financial instruments recorded in the accompanying
      balance sheet. The estimated fair value amounts have been determined by the
      Company using available market information and appropriate valuation
      methodologies. Considerable judgment is required in interpreting market data
      to
      develop the estimates of fair value, and accordingly, the estimates are not
      necessarily indicative of the amounts that the Company could realize in a
      current market exchange.





Research
      and Development Expenditures





Research
      and development expenses consist primarily of web hosting and communication
      expenses. The Company follows the guidelines in Statement of Financial
      Accounting Standards No. 2, *Accounting
      for Research and Development Costs* .
      Expenditures, including equipment used in research and development activities,
      are expensed as incurred.


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Revenue
      Recognition





The
      Company receives revenue from the wireless carriers by providing streaming
      audio
      content that the carriers make available to their mobile handset customers.
      The
      Company recognizes revenue on the net funds received from the wireless carriers.
      Under the guidance provided by the SEC Staff Accounting Bulletin (“SAB”)
      No. 104, “Revenue Recognition” and the Emerging Issues Task Force (“EITF”)
      Abstract No. 99-19 “Reporting Revenue Gross
      as
      a Principal versus Net as an Agent” (“EITF 99-19”), the carriers provide the
      service to their mobile handset user and remit a percentage of revenues
      generated to the Company, therefore the Company recognizes as revenue only
      the
      net fees realized on the transactions.





The
      Company also
      contracts with third party content providers who are paid by the Company a
      fixed
      percentage of the net revenues received by the Company from the carriers. The
      payments to these third party content providers are treated as cost of
      sales.




Dividends





The
      Company has not yet adopted any policy regarding payment of dividends. No
      dividends have been paid or declared since inception.





Long-lived
      assets





The
      Company reviews the carrying value of property, plant, and equipment for
      impairment whenever events and circumstances indicate that the carrying value
      of
      an asset may not be recoverable from the estimated future cash flows expected
      to
      result from its use and eventual disposition. In cases where undiscounted
      expected future cash flows are less than the carrying value, an impairment
      loss
      is recognized equal to an amount by which the carrying value exceeds the fair
      value of assets. The factors considered by management in performing this
      assessment include current operating results, trends and prospects, the manner
      in which the property is used, and the effects of obsolescence, demand,
      competition, and other economic factors.


Accounting
        Policy for Impairment of Intangible Assets
 
 The
        Company evaluates the recoverability of identifiable intangible assets whenever
        events or changes in circumstances indicate that an intangible asset’s carrying
        amount may not be recoverable. Such circumstances could include, but are
        not
        limited to: (1) a significant decrease in the market value of an asset, (2)
        a
        significant adverse change in the extent or manner in which an asset is used,
        or
        (3) an accumulation of costs significantly in excess of the amount originally
        expected for the acquisition of an asset. The Company measures the carrying
        amount of the asset against the estimated undiscounted future cash flows
        associated with it. Should the sum of the expected future net cash flows
        be less
        than the carrying value of the asset being evaluated, an impairment loss
        would
        be recognized. The impairment loss would be calculated as the amount by which
        the carrying value of the asset exceeds its fair value. The fair value is
        measured based on quoted market prices, if available. If quoted market prices
        are not available, the estimate of fair value is based on various valuation
        techniques, including the discounted value of estimated future cash flows.
        The
        evaluation of asset impairment requires the Company to make assumptions about
        future cash flows over the life of the asset being evaluated. These assumptions
        require significant judgment and actual results may differ from assumed and
        estimated amounts.




Segment
      reporting





The
      Company follows Statement of Financial Accounting Standards No. 130, Disclosures
      About Segments of an Enterprise and Related Information. The Company operates
      as
      a single segment and will evaluate additional segment disclosure requirements
      as
      it expands its operations.




13
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Advertising
      costs





The
      Company expenses all advertising as incurred. For the six month periods ended
      March 31, 2006 and 2005 the Company incurred advertising expense of $10,053
      and
      $0 respectively. During the three months ended March 31, 2006 and 2005, the
      Company incurred approximately $3,952 and $0, respectively for advertising
      expense.




Income
      Taxes





In
      accordance with Statement of Financial Accounting Standards No. 109, *Accounting
      For Income Taxes* ,
      the
      Company uses an asset and liability approach for financial accounting and
      reporting for income taxes. The basic principles of accounting for income taxes
      are: (a) a current tax liability or asset is recognized for the estimated taxes
      payable or refundable on tax returns for the current year; (b) a deferred tax
      liability or asset is recognized for the estimated future tax effects
      attributable to temporary differences and carryforwards; (c) the measurement
      of
      current and deferred tax liabilities and assets is based on provisions of the
      enacted tax law and the effects of future changes in tax laws or rates are
      not
      anticipated; and (d) the measurement of deferred tax assets is reduced, if
      necessary, by the amount of any tax benefits that, based on available evidence,
      are not expected to be realized.





Loss
      per common share





The
      Company adopted Statement of Financial Accounting Standards No. 128 that
      requires the reporting of both basic and diluted earnings (loss) per share.
      Basic loss per share is calculated using the weighted average number of common
      shares outstanding in the period. Diluted loss per share includes potentially
      dilutive securities such as outstanding options and warrants, using the
      "treasury stock" method and convertible securities using the "if-converted"
      method. The assumed exercise of options and warrants and assumed conversion
      of
      convertible securities have not been included in the calculation of diluted
      loss
      per share as the affect would be anti-dilutive.





Recent
      Accounting Pronouncements





In
      November 2004, the Financial Accounting Standards Board (FASB) issued SFAS
      No.
      151, Inventory Costs, which clarifies the accounting for abnormal amounts of
      idle facility expense, freight, handling costs, and wasted material. SFAS No.
      151 will be effective for inventory costs incurred during fiscal years beginning
      after June 15, 2005. We do not believe the adoption of SFAS No. 151 will have
      a
      material impact on our financial statements.




In
      December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets,
      which eliminates the exception for nonmonetary exchanges of similar productive
      assets and replaces it with a general exception for exchanges of nonmonetary
      assets that do not have commercial substance. SFAS No. 153 will be effective
      for
      nonmonetary asset exchanges occurring in fiscal periods beginning after June
      15,
      2005. We do not believe the adoption of SFAS No. 153 will have a material impact
      on our financial statements.




In
      December 2004, the FASB issued SFAS No. 123(R), Share-Based Payment, which
      establishes standards for transactions in which an entity exchanges its equity
      instruments for goods or services. This standard requires an issuer to measure
      the cost of employee services received in exchange for an award of equity
      instruments based on the grant-date fair value of the award. This eliminates
      the
      exception to account for such awards using the intrinsic method previously
      allowable under Accounting Principles Board (APB) Opinion No. 25. We do not
      believe the adoption of SFAS No. 123 (R) will have a material impact on our
      financial statements.





In
      May
      2005, the FASB issued SFAS No. 154 “Accounting Changes and Error Corrections - a
      replacement of APB Opinion No. 20 and FASB Statement No. 3.” This Statement
      replaces APB Opinion No. 20, “Accounting Changes”, and FASB Statement No. 3,
“Reporting Accounting Changes in Interim Financial Statements” and changes the
      requirements for the accounting for and reporting of a change in accounting
      principle. This Statement applies to all voluntary changes in accounting
      principle.  It also applies to changes required by an accounting
      pronouncement in the unusual instance that the pronouncement does not include
      specific transition provision. When a pronouncement includes specific transition
      provisions, those provisions should be followed. The Company has no transactions
      that would be subject to SFAS 154.




14
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NOTE
      C
      - STOCKHOLDERS’ EQUITY





The
      Company issued 9,999,999 shares of common stock to its directors on December
      20,
      2004 for $3,000 of which, $2,000 was paid in cash and $1,000 was paid by
      director’s reimbursable company expense. The shares issued have been restated to
      reflect the 1.3 to 1 forward split on August 28, 2005.





Donated
      capital represents Company expenses paid by certain directors of the Company
      totaling $146,999 during the period from inception to September 30,
      2005.





On
      August
      28, 2005, the Board of Directors of UpSNAP, Inc. approved a 1.3 for 1 forward
      stock split which was approved by a majority of the existing shareholders.
      The
      forward stock split has been retroactively applied and is reflected in the
      statement of stockholders’ equity.





On
      November 15, 2005, the closing under the Definitive Share Exchange Agreement
      occurred. 11,730,000 shares of common stock were issued to the stockholders
      of
      UpSNAP USA, Inc. Additionally, 370,000 shares of common stock and 560,000
      warrants were issued to an investment banking firm in consideration for services
      provided. (See
      Note
      D). 
 On
        January 6, 2006, the Company acquired substantially all of the assets of
        XSVoice, Inc. 2,362,830 shares of common stock were issued to the stockholders
        of XSVoice, Inc. (See Note K).




NOTE
      D
      - WARRANTS





The
      Company has recorded the warrant instruments described below as equity in
      accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging
      Activity, paragraph 11(a), and EITF 00-19, Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company's Own
      Stock.





During
      September - October 2005, the Company issued Series A warrants to purchase
      2,384,668 shares of common stock at $1.50 per share, in conjunction with the
      Company’s Private Placement. The fair value of the warrants in the amount
      of
      $1,935,260 was recorded as a debit and credit to additional paid in capital
      so
      there was no net impact on equity. The Private Placement warrants have a
      five-year life.





In
      October 2005, the Company issued Series B warrants to purchase 2,200,000 shares
      of common stock at $1.10 per share to investor relations firms in conjunction
      with services related to the Private Placement offering. The warrants have
      a
      term of five years. These warrants have been recorded at fair value using the
      Black-Scholes option-pricing model. The value of these warrants, $2,057,125,
      was
      recorded as additional paid-in capital and a non-cash compensation expense
      in
      October 2005.





In
      November 2005, the Company issued warrants to purchase 560,000 shares of common
      stock at $0.90 per share to an investment bank in conjunction with investment
      services related to the Private Placement offering. The warrants have a term
      of
      five years. These warrants have been recorded at fair value using the
      Black-Scholes option-pricing model. The value of these warrants, $900,063,
      was
      recorded as additional paid-in capital and a non-cash compensation expense
      in
      November 2005.





The
      following table summarizes information about warrants outstanding at March
      31,
      2006:




**Shares
                Exercisable**
            **ExercisePrice**
            **Date
                of Expiration**Series
                A Warrant: Issued in conjunction with Private Placement
            2,384,668
            $1.50
            September
                - October 2010Series
                B Warrant: Issued for investor relations services
            2,200,000
            $1.10
            October
                2010Viant
                Capital LLC Warrant
            560,000
            $0.90
            November
                2010Total
            5,144,668




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 Table
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At
      March
      31, 2006, a total of 5,144,668 warrants remain outstanding. All warrants are
      fully vested and exercisable upon issuance.





NOTE
      E
      - INCOME TAXES





For
      the
      twelve month period ended September 30, 2005, the Company incurred net operating
      losses and, accordingly, no provision for income taxes has been recorded. In
      addition, no benefit for income taxes has been recorded due to the uncertainty
      of the realization of any tax assets. At March 31, 2006, the Company had
      approximately $462,979 of accumulated net operating losses. The net operating
      loss carryforwards, if not utilized, will begin to expire in 2024.




The
      components of the Company’s deferred tax asset are as follows:




As
                  ofSeptember 30**2005**Deferred
                  tax assets:Net
                  operating loss carryforwards
              
              $
              682,442Total
                  deferred tax assets
              
              
              682,442Net
                  deferred tax assets before valuation allowance
              
              
              682,442Less:
                  Valuation allowance
              
              
              (682,442
              )Net
                  deferred tax assets
              
              $
              -0-





For
      financial reporting purposes, the Company has incurred a loss since its
      inception. The Company provided for a full valuation allowance against its
      net
      deferred tax assets at March 31, 2006.




A
      reconciliation between the amount of income tax benefit determined by applying
      the applicable U.S. and State statutory income tax rate to pre-tax loss is
      as
      follows:




Twelve
                  Month Period Ended September 30**2005**Federal
                  and state statutory rate
              
              $
              238,854Change
                  in valuation allowance on deferred tax assets
              
              
              (238,854
              )$
              0




NOTE
      F
      - GOING CONCERN





As
      shown
      in the accompanying financial statements, the Company has accumulated net losses
      from operations from
      inception through March 31, 2006totaling $868,503, and as of March 31,
      2006, has had limited revenues from operations. These factors raise substantial
      uncertainty about the Company’s ability to continue as a going
      concern.





The
      Company’s financial statements are prepared using the generally accepted
      accounting principles applicable to a going concern, which contemplates the
      realization of assets and liquidation of liabilities in the normal course of
      business. The
      accompanying financial statements do not include any adjustments that might
      be
      necessary if the Company is unable to continue as a going concern.




16
 Table
          of Contents


NOTE
      G
      - CONCENTRATION OF CREDIT RISK





The
      Company has deposits of $964,637 in a bank in excess of federally insured limits
      at March 31, 2006. The amount has not been reduced by items recorded in the
      account not yet clearing the bank.





Management
      periodically reviews the adequacy and strength of the financial institutions
      and
      deems this to be an acceptable risk.





NOTE
      H
      - PROPERTY AND EQUIPMENT





Property
      and equipment consisted of the following at March 31, 2006:





Fixed
                AssetsComputer
                and office equipment
            
            $
            163,286.70Computer
                Equipment
            
            
            159,286.70Office
                Equipment
            
            
            1,000.00Office
                Furniture
            
            
            3,000.00Accumulated
                Depreciation
            
            
            (8,470.12
            )Total
                Fixed Assets
            
            $
            154,816.58




Depreciation
        expense for the six months ended March 31, 2006 and 2005 was $8,470 and $
        0 ,
        respectively.
 
 The
        estimated service lives of property and equipment are 3 - 7 years.




NOTE
      I
      - COMMITMENTS





In
      March
      2006, the Company began a lease for approximately 1800 square feet of office
      space. The lease extends through February 28, 2007 at a rate of $2,250 per
      month. .Future maturities associated with this commitment are as follows:





Year
                Ended
              September
                30
            Amount2006
            $13,5002006
            $11,250





NOTE
      J
      - RELATED PARTY TRANSACTION





The
      Chairman of the Board of the Company provides services to the Company as its
      CEO, for monthly compensation of $10,000 and related expenses. The Company
      pays
      $10,000 per month in fees to a board member who is providing services related
      to
      product content.





NOTE
      K
      - ACQUISTION OF XSVOICE, INC.




On
        January 6, 2006, the Company completed the purchase of XSVoice, Inc., a
        privately held wireless platform and application developer, by acquiring
        substantially all of the assets of XSVoice, Inc. for a total purchase price
        of
        $6.3 million. XSVoice, Inc.’s results of operations have been included in the
        consolidated financial statements since the date of acquisition.
 
 As
        a
        result of the acquisition, the Company acquired XSVoice's proprietary SWInG
        (Streaming Wireless Internet Gateway) technology, which enables mobile access
        to
        virtually any type of audio content, including Internet-based streaming audio,
        radio, television, satellite or other audio source. The acquisition also
        allowed
        the Company to gain access to carrier distribution channels and premium content
        provider relationships.
  17
 Table
            of Contents
 
 The
        aggregate purchase price of $6,393,223 consisted of $198,829 in cash
        consideration, the assumption of $130,000 in debt, and common stock valued
        at
        $5,735,000. In
        addition, the Company paid $80,820 for accounting and legal fees related
        to the
        acquisition and issued common stock valued at $265,074 for investment banking
        services.The value of the 2,258,470 common shares issued was
        determined based on the average market price of the Company’s common shares over
        the preceding 15-day period before the closing date of the
        acquisition.
 
 The
        following table presents the allocation of the acquisition cost, including
        professional fees and other related acquisition costs, to the assets acquired
        and liabilities assumed, based on their fair values:





Allocation
                of acquisition cost:Accounts
                receivable
            
            $
            71,621.43Property,
                plant, and equipmentComputer
                equipment
            
            
            28,200.00Office
                equipment
            
            
            1,000.00Office
                furniture
            
            
            3,000.00SWinG
                copyright
            
            
            1,345,040.00Customer
                relationships
            
            
            104,000.00Employment
                contracts
            
            
            78,000.00Supplier
                contracts
            
            
            84,500.00Goodwill
            
            
            4,791,361.53Total
                assets acquired
            
            
            6,506,722.96Note
                payable
            
            
            (113,500.00
            )Total
                liabilities assumed
            
            
            (113,500.00
            )Net
                assets acquired
            
            $
            6,393,222.96





Of
      the
      $6,402,902 of acquired intangible assets, $1,345,040 was assigned to the SWinG
      technology platform, $104,000 for customer relationships, $78,000 for employment
      contracts, and $84,500 for supplier contracts.
      These intangible assets were assigned a life of 45 months. The remaining
      unallocated intangible balance of $4,791,362 was assigned to
      goodwill.


The
        allocation of the purchase price is based on preliminary data and could change
        when final valuation of certain intangible assets is obtained.
 
 In
        connection with the XSVoice, Inc. acquisition, the Company agreed to pay
        an
        additional $550,000 in cash consideration by January 6, 2007, if the company
        raises an additional $3.2 million in additional equity capital or the Series
        A
        warrants are exercised. In accordance with Statement of Financial Accounting
        Standards No. 141, *Business
        Combinations* ,
        the
        Company does not accrue contingent consideration obligations prior to the
        attainment of the objectives. Any such payments would result in increases
        in
        goodwill.


NOTE
        L - PROFORMA INFORMATION
 
 The
        unaudited pro forma consolidating statement of operations give effect to
        the
        reverse merger and XSVoice acquisition as if it had occurred at the beginning
        of
        the six month period ended March 31, 2006 and the fiscal year ended September
        30, 2005. The unaudited pro forma consolidating financial statements are
        based
        on available information and the assumptions and adjustments described in
        the
        accompanying notes. The unaudited pro forma consolidating financial statements
        do not purport to represent what the results of operations actually would
        have
        been if the events described had occurred as of the dates indicated or what
        such
        results will be for any future periods.
 
 The
        combining companies have different year ends. For purposes of these statements,
        the year end of December 31 for XSVoice, Inc. has been changed to September
        30,
        which is the year end of UpSNAP, Inc. which is the surviving
        entity.




18
 Table
          of Contents


**UPSNAP,
        INC.**
 PRO-FORMA
        CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
 YEAR
        ENDED SEPTEMBER 30, 2005
 UNAUDITED


**UpSNAP,
                  Inc. 10/1/2004 - 9/30/2005**
              
              **UpSNAP
                  USA, Inc. 10/1/2004 - 9/30/2005**
              
              **September
                  30, 2005 Consolidated Pro Forma Results before Acquisition of
                  XSVoice**
              
              **XSVoice,
                  Inc. 10/1/2004 - 9/30/2005**
              
              
              
              **Pro-Forma
                  Entries**
              
              **September
                  30, 2005**
                **Pro-Forma
                  Consolidated**REVENUESSales
              $
              -
              
              $
              -
              
              $
              -
              
              $
              801,645
              
              
              
              
              
              
              
              $
              801,645Cost
                  of sales
              
              
              
              
              
              
              
              -
              
              
              (454,289
              )
              
              
              
              
              
              
              
              (454,289
              )Gross
                  profit
              
              -
              
              
              -
              
              
              -
              
              
              347,356
              
              
              
              
              
              
              
              
              347,356EXPENSESSelling,
                  general and administrative
              
              119,912
              
              
              158,586
              
              
              278,498
              
              
              1,052,417
              
              
              
              
              
              
              
              
              1,330,915Depreciation
              
              
              
              
              
              
              
              -
              
              
              55,335
              
              
              
              
              
              
              
              
              55,335Total
                  expense
              
              119,912
              
              
              158,586
              
              
              278,498
              
              
              1,107,752
              
              
              
              
              
              
              
              
              1,386,250Loss
                  from
                  operations
              
              (119,912
              )
              
              (158,586
              )
              
              (278,498
              )
              
              (760,396
              )
              
              
              
              
              
              
              
              (1,038,894
              )OTHER
                  INCOME AND EXPENSES
              
              
              
              
              
              
              
              -Gain
                  on forgiveness of debt
              
              
              
              
              
              
              
              -
              
              
              51,963
              
              
              (1
              )
              
              (51,963
              )
              
              -Gain
                  on sale of assets
              
              
              
              
              
              
              
              -
              
              
              33,250
              
              
              (1
              )
              
              
              
              
              33,250Gain
                  on settlement with vendors
              
              
              
              
              
              
              
              -
              
              
              69,279
              
              
              (1
              )
              
              (69,279
              )
              
              -Interest
                  income
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Vendor
                  reimbursement for equipment
              
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              -Other
                  income
              
              
              
              
              
              
              
              -
              
              
              80
              
              
              
              
              
              
              
              
              80Loan
                  cost expense
              
              
              
              
              
              
              
              -
              
              
              (66,503
              )
              
              (1
              )
              
              66,503
              
              
              -Interest
                  expense
              
              -
              
              
              -
              
              
              -
              
              
              (30,834
              )
              
              (1
              )
              
              30,834
              
              
              -Total
                  other income
                  and expenses
              
              -
              
              
              -
              
              
              -
              
              
              57,235
              
              
              
              
              
              (23,905
              )
              
              33,330-
              
              
              
              
              
              
              
              
              
              
              
              --
              
              
              
              
              
              
              
              
              
              
              
              -NET
                  LOSS
              $
              (119,912
              )
              $
              (158,586
              )
              $
              (278,498
              )
              $
              (703,161
              )
              
              
              
              $
              (23,905
              )
              $
              (1,005,564
              )




(1) To
      eliminate expenses related to assets and liabilites of XSVoice not acquired
      as
      part of the January 6, 2006 Asset Purchase Agreement.




See
      Notes
      to Financial Statements




19
 Table
          of Contents




**UPSNAP,
      INC.**


PRO-FORMA
      CONSOLIDATED STATEMENTS OF OPERATIONS


FOR
      THE
      SIX MONTHS ENDED MARCH 31, 2006


UNAUDITED


**Consolidated
                    UpSNAP, Inc. 10/1/2005 - 3/31/2006**
                
                **UpSNAP,
                    Inc. fka Manu Forti Group 10/1/2005 - 11/15/2005**
                
                **XSVoice,
                    Inc. 10/1/2005 -1/6/2006**
                
                **Pro-Forma
                    Entries**
                
                **3/31/06**
                  **Pro-Forma
                    Consolidated**SALES
                  AND COST OF SALESSales
                
                
                $
                244,042.17
                
                
                
                
                $
                218,137.76
                
                
                
                
                
                
                $
                462,179.93Cost
                    of Sales
                
                
                
                110,576.29
                
                
                
                
                
                134,864.64
                
                
                
                
                
                
                
                245,440.93Gross
                    Profit
                
                
                
                133,465.88
                
                
                
                
                
                83,273.12
                
                
                
                
                
                
                
                216,739.00OPERATING
                    EXPENSES
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Product
                    development
                
                
                
                199,152.79
                
                
                
                
                
                21,666.64
                
                
                
                
                -
                
                
                220,819.43Sales
                    and marketing expenses
                
                
                
                104,530.91
                
                
                
                
                
                -
                
                
                
                
                
                
                
                104,530.91General
                    and administrative
                
                
                
                516,815.41
                
                
                3,808,334.71
                
                
                558,454.03
                
                
                
                
                
                
                
                4,883,604.15-Total
                    Expense
                
                
                
                820,499.11
                
                
                3,808,334.71
                
                
                580,120.67
                
                
                
                
                
                
                
                5,208,954.49-Net
                    operating income (loss)
                
                
                
                (687,033.23
                )
                
                (3,808,334.71
                )
                
                (496,847.55
                )
                
                
                
                
                
                
                (4,992,215.49
                )Other
                    income and expenseOther
                    Income
                
                
                
                -
                
                
                
                
                
                68,926.44
                
                (1
                )
                
                (68,926.44
                )
                
                -Interest
                    income
                
                
                
                4,890.39
                
                
                162.74
                
                
                
                
                
                
                
                
                
                
                5,053.13Interest
                    expense
                
                
                
                300.00
                
                
                
                
                
                40,896.91
                
                (1
                )
                
                (40,896.91
                )
                
                300.00-NET
                    LOSS
                
                
                $
                (682,442.84
                )
                $
                (3,808,171.97
                )
                $
                (468,818.02
                )
                
                
                $
                (28,029.53
                )
                $
                (4,987,462.36
                )
  (1) To
          eliminate expenses related to assets and liabilites of XSVoice not acquired
          as
          part of the January 6, 2006 Asset Purchase Agreement.
  See
          Notes
          to Financial Statements




20
 Table
          of Contents




**ITEM
      2. PLAN OF OPERATIONS.**





*The
      following discussion should be read in conjunction with the Financial Statements
      and related notes thereto included elsewhere in this report.*


**BUSINESS
        OVERVIEW**
 
 UpSNAP
        is
        a mobile search engine that helps mobile US consumers quickly find mobile
        content and entertainment services. UpSNAP provides a seamless platform for
        search & content delivery to almost all mobile devices in the United States.
        Our catalog of free and premium streaming audio content delivers compelling
        content from some of the world’s premier brands including Fan Scan, the Nascar
        in car-audio application on Sprint/Nextel,  ABC,
        FOX
        News, ESPN Radio, ESPN Deportes, Radio Disney & Batanga.
 
 General
 
 Consumer
        interest and spend on mobile phones and services are showing the highest
        growth
        rates ever. In the US, according to the Cellular Telecommunications &
Internet Assocation (CTIA) wireless subscribers grew by 25 million from June
        2004 to June 2005. There are now some 195 million currently subscribed cell
        phone users in the US according to the CTIA.
 
 UpSNAP’s
        search technology is based on text messaging or Short Message Service (SMS)
        which is proving to be extremely popular amongst the youth demographic in
        the
        United States.
 
 According
        to CTIA figures, approximately 10 billion text messages will be sent each
        month
        in 2006, and approximately 7 billion were sent each month in 2005. For the
        same
        period in 2004, there were 2 billion text messages sent each month -
        representing a growth of 350% year to year according to the CTIA.
 
 UpSNAP
        operates in the United States only.
  Mobile
        Search Business Model
 
 Putting
        as few obstacles between joining merchants and buyers together has proved
        to be
        a highly successful business strategy that has created several billion dollar
        industries. In the 1980s 1-800 services became enormously popular, and enabled
        consumers to reach merchants at no cost. In the 1990s, merchants paid for
        ‘clicks’ on Internet advertisements on search engines such as Yahoo! and Google.
        Again, these services were virtually free to the consumer, and the merchant
        paid
        for new incoming business. In 2000, cellular customers have to pay up to
        $1.50
        for a merchant number using cellular 411 directory assistance services, or
        have
        to use expensive handsets and data packages to view a web site, crammed onto
        a
        tiny mobile browser.
  UpSNAP
        provides a SMS based search engine that allows mobile subscribers to quickly
        and
        easily search for mobile content and information services. The consumer pays
        for
        the cost of sending a text message, which can vary from free, to a few cents
        per
        message depending on their mobile contract with their carrier.
 
 UpSNAP
        business model is to generate consumer traffic from the provision of these
        search services, and then up-sell premium content, or direct response
        advertising as a ‘pay per call” service targeted according to the nature of the
        consumer search.
 
 The
        business model is a media model - reliant on the sale of subscriptions and
        advertising from content-based services.
 
 One
        of
        the key problems to establishing a media model for cell-phones is the difficulty
        of rolling out media based services to all the many carrier platforms and
        different handsets. The cellular industry has many competing technologies,
        standards and platforms.
  21
 Table
            of Contents
  UpSNAP
          solves this problem by allowing its premium services to be broadcast to
          any
          cell-phone using its proprietary technology outlined below.
 
 Principal
          Products and Services
 
 UpSNAP
          has four principal products and services:
  1
              Mobile
                  Search Engine Platform
 
 2
              Pay-Per-Call
                  Advertising services using our Voice over Internet Protocol (VoIP)
                  platform
 
 3
              SWinG
                  streaming audio platform
 
 4
              Premium
                  audio content supplied from content
                  partners
 
 **MOBILE
        SEARCH ENGINE PLATFORM**
 
 The
        UpSNAP mobile search engine platform allows consumers to search via text
        message
        to a mobile “short-code” or 5 digit telephone number, which in our case is 2SNAP
        (27627). Current services include yellow pages directory assistance, sport
        scores, horoscopes, price comparison shopping services, weather, calorie
        counter, spelling, and airline travel information. Consumers type in search
        requests e.g. Leo for a star sign reading. The consumer will be offered a
        free
        horoscope, but also receive an advertisement via a text message to speak
        with an
        astrologer direct or hear an extended audio horoscope.
 
 Similarly,
        consumers looking for sports scores, for example, will receive a text message
        advertising UpSNAP premium sports services. The short-code can also be used
        for
        Premium Text Messaging Services (PSMS) which are directly billed by the
        carriers, and included on the consumers phone bill. UpSNAP has PSMS services
        provisioned for billing with most of the major US carriers including, Cingular,
        Sprint/Nextel, T-Mobile and Alltel. These short-codes at present will only
        work
        on US handsets, limiting the geographic coverage of the service to those
        areas
        in the United States with cell-phone coverage. Our mobile search engine was
        launched live to consumers in November 2005.
 
 **PAY-PER-CALL
        ADVERTISING PLATFORM**
 
 Once
        a
        consumer makes a search for a specific search category or uses a “key-word’
identified and purchased by an UpSNAP partner as indicative of buying behavior,
        the UpSNAP advertising platform inserts a “paid’ advertising listing into the
        search reply.
  UpSNAP
        has a Voice Over Internet Protocol (VoIP) switch which seamlessly bridges
        the
        merchant telephone number with the consumer via a call connect. Our Pay Per
        Call
        advertising platform can then record the number of calls received by a merchant
        and produce an audit trail for a billing engine. UpSNAP partners with
        specialized “Pay-Per-Call” companies, that sign-up advertisers nationwide
        throughout the US for this type of advertising. Our pay-per-pall Advertising
        platform technology was built in 2005, and our first advertising partner
        is
        being integrated ready for launch in Q2 of 2006.
 
 **SWING
        STREAMING AUDIO PLATFORM**
 
 UpSNAP’s
        SWinG (Streaming Wireless Internet Gateway) platform, enables mobile access
        to
        virtually any type of live and on-demand streaming audio content. The software
        translates data from almost any type of common audio format, for example
        MP3
        files, to allow it to be streamed to cell-phones capable of supporting audio
        streaming. If the cell-phone does not have any data services, the platform
        broadcasts the audio via the voice channel on the cell-phone. The SWinG platform
        is thus able to be used on any cell phone in the United States, regardless
        of
        handset, data package or software. The SWinG platform was built over the
        course
        of 2002-2004 and is fully operational.
 
 22
 Table
            of Contents
  **FREE
          AND PREMIUM MOBILE CONTENT**
 
 Our
          catalog of free and premium streaming audio content delivers compelling
          content
          from some of the world’s premier brands including Fan Scan, the Nascar in
          car-audio application on Sprint/Nextel,  ABC,
          FOX
          News, ESPN Radio, ESPN Deportes, Radio Disney & Botanga. The catalogue of
          content includes over 130 radio stations, with a wide selection of content
          ranging from Christian Radio to Hip-Hop.
 **DISTRIBUTING
        AGREEMENTS**
 
 Distribution
        of the UpSNAP suites of services is multi-tiered but can be summarized
        as:
 
 1
              Carrier
                  or “on deck” promotion - where the carrier actually promotes the service
                  from the menu’s on the carrier handset, bills the consumer on their mobile
                  phone bill, and takes its cuts, and then remits the balance to
                  UpSNAP.
                  UpSNAP has ‘on deck’ agreements with
                  Sprint/Nextel.
 
 2
              Off
                  Deck Promotion - where the consumer signs up for services through
                  traditional media promotions, internet advertising, affiliate marketing
                  relationships, or other media channels directly, and payment is
                  made via a
                  short-code or Premium SMS (PSMS) to the consumers mobile phone
                  bill.
                  UpSNAP has billing relationships in place with most major US carriers
                  including, Cingular, T-Mobile, Sprint/Nextel and Alltel, and will
                  market
                  its existing suite of services direct to consumers in Q2 of
                  2006.
 
 3
              White-label
                  or third-party branded services, where UpSNAP sells its suite of
                  search
                  applications, content and services to third-parties, who when resell
                  its
                  services. UpSNAP has not yet entered into any such deals, but industry
                  standard arrangements for these type of deals are largely done
                  on a
                  revenue-share basis, while some are performed on a license basis.
                  These
                  third-parties include media companies, who have relationships with
                  local
                  media and merchants, but lack the technology to offer mobile search
                  and
                  entertainment services.
 
 Plan
        of Operations
 
 In
        Q1 of
        2006 UpSNAP posted sales of $244,042 net of carrier charges from the sale
        of its
        premium subscription services for mobile content. These revenues were largely
        generated from sales of its Fan Scan Nascar in-car Audio content, sold via
        Sprint/Nextel and premium music radio sales.
 
 In
        order
        to increase its revenues UpSNAP plans to aggressively market its search and
        entertainment technology to all three of these distribution channels outlined
        above over the course of 2006.
  In
        addition, we expect to perform continued research and development around
        mobile
        search and integration of multi-media content during the course of the next
        12
        months. We may also enter into significant acquisitions, joint ventures,
        or
        offshore outsourcing programs to rapidly increase the amount of programming
        resource available to the company to allow us to continue to innovate in
        the
        marketplace.
  Our
          growth strategy contemplates acquisitions. During the first Quarter of
          2006 we
          successfully integrated the assets and personnel of XSVoice into the company.
          We
          continue to look for acquisition targets for 2006 although this will depend
          upon
          the timing and availability of appropriate acquisition opportunities. Our
          business plan calls for acquisitions in the advertising sector, that will
          allow
          us increase our average revenue per subscriber as well as our distribution
          channels.
 
 As
          of
          March 31st we have a total of six full time employees and three full-time
          contractors working for UpSNAP. We do not expect significant increases
          in
          employees, but do expect incremental additions in line with revenues in
          all
          areas of the business.


23
 Table
          of Contents




***RESULTS
        OF OPERATIONS***
 
 SIX-MONTH
        PERIOD ENDED MARCH 31, 2006 COMPARED TO SIX-MONTH PERIOD ENDED MARCH 31,
        2005
 
 Our
        net
        losses during the six-month period ended March 31, 2006 were $682,443 compared
        to a net loss of $78,804 during the six-month period ended March 31, 2005.
 
 The
        Company was a development stage company during the six month period ended
        March
        31, 2005. Activities were primarily limited to outside contractors performing
        product development work, marketing costs, and officer’s travel expenses.
 
 The
        Company began to build an infrastructure after the reverse merger was completed
        on November 15, 2005. The Company opened an office in Davidson, North Carolina
        and added six employees, four of whom were former employees of XSVoice, Inc.
 
 The
        Company commenced generating revenue immediately after the XSVoice, Inc.
        acquisition on January 6, 2006, resulting in revenues of $244,042 for the
        six
        month period and gross profit of $133,466. All of the revenues were generated
        from former XSVoice customers.
  During
      the six-month period ended March 31, 2006, we incurred operating expenses of
      $820,499 compared to operating expenses of $78,804 incurred during the six-month
      period ended March 31, 2005, The increase in operating expenses during the
      six-month period ended March 31, 2006 from the same period in 2005 resulted
      from: (i) an increase of $145,949 in product development costs as the Company
      added personnel to support both the acquired streaming audio technology from
      XSVoice, Inc. as well as the Company’s mobile search platform, (ii) an increase
      of $95,428 reflecting the addition of a director of marketing position and
      public relations efforts, and (iii) an increase of $500,318, in general and
      administrative expenses resulting from increased operating costs associated
      with
      increased operations and professional fees related to our SEC filings and filing
      of a registration statement of form SB-2.





For
      the
      six months ended March 31, 2006, our net loss was ($682,443) or ($0.04) per
      common share compared to a net loss of ($78,804) or ($0.02) per common share
      for
      the six month period ended March 31, 2005.




THREE-MONTH
      PERIOD ENDED MARCH 31, 2006 COMPARED TO THREE-MONTH PERIOD ENDED MARCH 31,
      2005





Our
      net
      losses during the three-month period ended March 31, 2006 were $317,506 compared
      to a net loss of $36,369 during the three-month period ended March 31, 2005.
      During the three-month period ended March 31, 2006, we generated $244,042 in
      net
      revenues compared to no net revenues for the three-months ended March 31, 2005.
      The increase in revenues is due to the XSVoice acquisition which closed on
      January 6, 2006.





During
      the three-month period ended March 31, 2006, we incurred operating expenses
      of
      $459,393 compared to operating expenses of $36,369 incurred during the
      three-month period ended March 31, 2005. The increase in operating expenses
      during the three-month period ended March 31, 2006 from the same period in
      2005
      resulted from: (i) an increase of $85,707 in product development costs as the
      Company added personnel to support both the acquired streaming audio technology
      from XSVoice, Inc. as well as the Company’s mobile search platform, (ii) an
      increase of $68,798 reflecting the addition of a director of marketing position
      and public relations efforts, and (iii) an increase of $279,518, in general
      and
      administrative expenses resulting from increased operating costs associated
      with
      increased operations and professional fees related to our SEC filings and filing
      of a registration statement of form SB-2.





For
      the
      three months ended March 31, 2006, our net loss was ($317,506) or ($0.02) per
      common share compared to a net loss of ($36,369) or ($0.01) per common share
      for
      the six month period ended March 31, 2005.





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LIQUIDITY
        AND CAPITAL RESOURCES
 
 As
        of
        March 31, 2006, our current assets were $1,207,893 and our current liabilities
        were $143,277, which resulted in net working capital of $1,064,616. As of
        March
        31, 2006, our total assets were $7,635,459 consisting of: (i) $1,064,637
        in
        cash; (ii) $32,833 in prepaid expenses and other current assets; (iii) $110,423
        in accounts receivable; (iv)
        $720,758 in net valuation of property and equipment (v) $1,593,733 in other
        intangibles and $4,677,862 in goodwill which were both resultant from the
        XSVoice acquisition.
 
 As
        of
        March 31, 2006, our total liabilities were $256,777 consisting of: (i) $143,277
        in accounts payable and accrued expenses; and (ii) $113,500 in a note assumed
        as
        part of the XSVoice, Inc. acquisition.
  For
        the
        six months ended March 31, 2006, net cash flow used by operating activities
        was
        $656,308 compared to net cash used in operating activities of $78,804 for
        the
        six months ended March 31, 2005. The increase in cash flows used in operating
        activities is mainly due to the increase in operating loss for the
        period.
 
 Net
        cash
        flows provided by investing activities amounted to $1,545,334 for the six
        months
        ended March 31, 2006 compared to none for the six months ended March 31,
        2005.
        The Company received $1,919,662 in cash as part of the reverse merger. In
        addition, the Company spent $243,241 in cash as consideration and professional
        fees for the XSVoice acquisition and $131,087 to purchase computer equipment
        to
        support the expanding product development efforts.
 There
        was
        no net cash flow provided by financing activities for the six months ended
        March
        31, 2006 compared to $85,432 for the six months ended March 31, 2005 resulting
        primarily from donated capital from the Company’s founders.





In
      summary, based upon the cash flow activities as previously discussed, for the
      six months ended March 31, 2006, our overall cash position increased by
      $889,026





Overall,
      we have funded our cash needs from inception through March 31, 2006 with the
      $2,146,200 in funds acquired as part of the September - October 2005 Private
      Placement.





We
      had
      cash on hand of $1,064,637 and a working capital surplus of $1,064,616 as of
      March 31, 2006. Our cash on hand is sufficient to fund our current operating
      plan through the next twelve months without additional sources of capital.
      While
      we are hopeful that we will raise additional funds through the exercise of
      our
      warrants, which if exercised will yield an additional $6,501,002.





If
      we
      choose to launch a more aggressive operating plan and cash flow from existing
      operations is not sufficient, management
      may seek long-term financing through additional debt or equity financing to
      fund
      the rollout of an expanded product line.





**ITEM
      3. CONTROLS AND PROCEDURES**





*Quarterly
      Evaluation of Controls* .
      As of
      the end of the period covered by this quarterly report on Form 10-QSB, we
      evaluated the effectiveness of the design and operation of our disclosure
      controls and procedures ("Disclosure Controls"). This evaluation (“Evaluation”)
      was performed by our Chairman and Chief Executive Officer, Tony Philipp, and
      our
      Chief Financial Officer, Paul C. Schmidt (“CFO”). In addition, we have discussed
      these matters with our securities counsel and board. In this section, we present
      the conclusions of our CEO and CFO as of the date of the Evaluation with respect
      to the effectiveness of our Disclosure Controls.





*CEO
      and CFO Certifications* .
      Attached to this quarterly report, as Exhibits 31.1 through 31.4, are certain
      certifications of the CEO and CFO, which are required in accordance with the
      Exchange Act and the Commission's rules implementing such section (the "Rule
      13a-14(a)/15d-14(a) Certifications"). This section of the quarterly report
      contains the information concerning the Evaluation referred to in the Rule
      13a-14(a)/15d-14(a) Certifications. This information should be read in
      conjunction with the Rule 13a-14(a)/15d-14(a) Certifications for a more complete
      understanding of the topic presented.




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*Disclosure
        Controls* .
        Disclosure Controls are procedures designed with the objective of ensuring
        that
        information required to be disclosed in our reports filed with the Commission
        under the Exchange Act, such as this quarterly report, is recorded, processed,
        summarized and reported within the time period specified in the Commission's
        rules and forms. Disclosure Controls are also designed with the objective
        of
        ensuring that material information relating to us
        is
        made known to the CEO and the CFO by others, particularly during the period
        in
        which the applicable report is being prepared.
 
 *Scope
        of the Evaluation* .
        The CEO
        and CFO's evaluation of our Disclosure Controls included a review of the
        controls' (i) objectives, (ii) design, (iii) implementation, and (iv) the
        effect
        of the controls on the information generated for use in this quarterly report.
        This type of evaluation is done on a quarterly basis so that the conclusions concerning
        the effectiveness of our controls can be reported in our quarterly reports
        on
        Form 10-QSB and annual reports on Form 10-KSB. The overall goals of these
        various evaluation activities are to monitor our Disclosure Controls, and
        to
        make modifications if and as necessary. Our intent in this regard is that
        the
        Disclosure Controls will be maintained as dynamic systems that change (including
        improvements and corrections) as conditions warrant.
 
 *Conclusions.* Based
        upon the Evaluation, our disclosure controls and procedures are designed
        to
        provide reasonable assurance of achieving our objectives. Our CEO and CFO
        have
        concluded that our disclosure controls and procedures are effective at that
        reasonable assurance level to ensure that material information relating to
        the
        Company is made known to management, including the CEO and CFO, particularly
        during the period when our periodic reports are being prepared, and that
        our
        Internal Controls are effective at that assurance level to provide




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**PART
      II**





**ITEM
      6. EXHIBITS**


****


Exhibit
                No.
            **Description**2.1
            Share
                Exchange Agreement, dated November 15, 2005, by and among Upsnap,
                Inc. and
                the former stockholder of UpSNAP USA*3.1.1
            Articles
                of Incorporation as filed with the Secretary of State of the State
                of
                Nevada on July 25, 2003*


3.1.2
            Certificate
                of Amendment filed on November 7, 2005*3.2
            Bylaws
                adopted on July 25, 2003*10.1
            Form
                of Subscription Agreement for September 2005 Private
                Placement*10.2
            Form
                of Registration Rights Agreement for September 2005 Private
                Placement*10.3
            Debt
                Conversion Agreement, dated October 31, 2005, among UpSnap, Inc.,
                518464
                B.C. Ltd., Art Mapp Communications, Inc., Jason Sundar, and Yvonne
                New*10.4
            Form
                of Series A Warrant*10.5
            Form
                of Series B Warrant*10.6
            Directors
                and Officers Insurance Policy, dated October 18, 2005*10.7
            Confirmatory
                Assignment, dated June 1, 2005, by and between UpSNAP USA, Inc. and
                Alto
                Ventures, Inc.*10.8
            Assignment
                of Patent Application, dated June 1, 2005, by and between UpSNAP
                USA, Inc.
                and Alto Ventures, Inc.*10.9
            Asset
                Purchase Agreement, dated January 6, 2006, by and between UpSNAP,
                Inc. and
                XSVoice, Inc.*




10.10
            Nextel
                Online Handset Placement Agreement31.1
            Rule
                13a-14(a)/15d-14(a) Certification of Tony Phillips, Chairman and
                Chief
                Executive Officer31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Paul C. Schmidt, Chief Financial
                Officer32
            Certification
                of Principal Executive Officer and Principal Financial Officer furnished
                pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
                906 of
                the Sarbanes-Oxley Act of 2002.




_________________________________


*Incorporated
      by reference.  See Exhibit Index.




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SIGNATURES





Pursuant
      to the requirements of Section 13 or 15 (d) of the Securities Exchange Act
      of
      1934, the registrant has duly caused this report to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.




UPSNAP,
              INC.(Registrant)Date:
                May 15, 2006
            /s/
                Tony PhilippTony
                PhilippChairman
              of the Board and Chief Executive Officer(Principal
              Executive Officer)Date:
                May 15, 2006
            /s/
                Paul C. SchmidtPaul
                C. SchmidtChief
                Financial Officer(Principal Financial
                Officer)




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**INDEX
      TO EXHIBITS**





Exhibit
                  No.
              **Description**2.1
              Share
                  Exchange Agreement, dated November 15, 2005, by and among Upsnap,
                  Inc. and
                  the former stockholder of UpSNAP USA (incorporated by reference
                  to Exhibit
                  2.1 in our current report on Form 8-k filed on November 16,
                  2005)3.1.1
              Articles
                  of Incorporation as filed with the Secretary of State of the State
                  of
                  Nevada on July 25, 2003 (incorporated by reference to Exhibit 3.1
                  in our
                  Registration Statement SB-2 filed on September 18,
                  2003)3.1.2
              Certificate
                  of Amendment filed on November 7, 2005 (incorporated by reference
                  to
                  Exhibit 3.1 in our current report on Form 8-K filed on November
                  16,
                  2005)3.2
              Bylaws
                  adopted on July 25, 2003 (incorporated by reference to Exhibit
                  3.2 in our
                  Registration Statement SB-2 filed on September 18,
                  2003)10.1
              Form
                  of Subscription Agreement for September 2005 Private Placement
                  (incorporated by reference to Exhibit 10.1 in our quarterly report
                  for the
                  fiscal period ended on September 2005)10.2
              Form
                  of Registration Rights Agreement for September 2005 Private Placement
                  (incorporated by reference to Exhibit 10.2 in our quarterly report
                  for the
                  fiscal period ended on September 2005)10.3
              Debt
                  Conversion Agreement, dated October 31, 2005, among UpSnap, Inc.,
                  518464
                  B.C. Ltd., Art Mapp Communications, Inc., Jason Sundar, and Yvonne
                  New.
                  (incorporated by reference to Exhibit 10.3 in our quarterly report
                  for the
                  fiscal period ended on September 2005)10.4
              Form
                  of Series A Warrant (incorporated by reference to Exhibit 10.4
                  in our
                  quarterly report for the fiscal period ended on September 2005)10.5
              Form
                  of Series B Warrant (incorporated by reference to Exhibit 10.5
                  in our
                  quarterly report for the fiscal period ended on September
                  2005)10.6
              Directors
                  and Officers Insurance Policy, dated October 18, 2005 (incorporated
                  by
                  reference to Exhibit 10.6 in our transitional annual report for
                  the fiscal
                  period from March 31, 2005 to September 30, 2005)10.7
              Confirmatory
                  Assignment, dated June 1, 2005, by and between UpSNAP USA, Inc.
                  and Alto
                  Ventures, Inc. (incorporated by reference to Exhibit 10.7 in our
                  quarterly
                  report for the fiscal period ended on December 31,
                  2005)10.8
              Assignment
                  of Patent Application, dated June 1, 2005, by and between UpSNAP
                  USA, Inc.
                  and Alto Ventures, Inc. (incorporated by reference to Exhibit 10.7
                  in our
                  transitional annual report for the fiscal period from March 31,
                  2005 to
                  September 30, 2005)10.9
              Asset
                  Purchase Agreement, dated January 6, 2006, by and between UpSNAP,
                  Inc. and
                  XSVoice, Inc. (incorporated by reference to Exhibit 10.1 in our
                  current
                  report on Form 8-K filed on January 12, 2006)10.10
              Nextel
                  Online Handset Placement
                  Agreement31.1
              Rule
                  13a-14(a)/15d-14(a) Certification of Tony
                  Phillips, Chairman and Chief Executive Officer31.2
              Rule
                  13a-14(a)/15d-14(a) Certification of Paul C.
                  Schmidt, Chief Financial Officer32
              Certification
                  of Principal Executive Officer and
                  Principal Financial Officer furnished pursuant to 18 U.S.C. Section
                  1350,
                  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                  2002.


29