Table
      of Contents




U.S.
        SECURITIES AND EXCHANGE COMMISSION
 Washington,
        D.C. 20549
 
 FORM
        10-QSB/A
 
 AMENDMENT
        NO. 1
 
 [X]
              QUARTERLY
                  REPORT UNDER SECTION 13
                  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the period
                  ended June
                  30, 2007
 
 [ 
                   ]
              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)
   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]
 
 
 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
                    August 14, 2007Common
                    Stock ($.001 par value)
              22,276,991
  Transitional
        Small Business Disclosure Format (Check one): Yes [  ]   No
        [X]
 
 
  UPSNAP,
        INC.
 FORM
        10-QSB
 
 For
        the
        Quarter ended June 30, 2007
 
 TABLE
        OF CONTENTS
 
  PagePART
                    I – FINANCIAL INFORMATIONITEM
                    1.
                Selected
                    Financial StatementsBalance
                    Sheet – June 30, 2007
                    (unaudited)
                2Statements
                    of Operations – Three and Nine Months
                    Ended June 30, 2007 and 2006  (unaudited)
                3Statements
                    of Stockholders’ Equity -
                    (unaudited)
                4Statements
                    of Cash Flows – Nine months Ended
                    June 30, 2007 and 2006 (unaudited)
                5Notes
                    to Financial Statements
                    (unaudited)
                6ITEM
                    2.
                Management’s
                    Discussion and Analysis
                18ITEM
                    3.
                Controls
                    and Procedures
                23PART
                    II – OTHER INFORMATIONITEM
                    2
                Unregistered
                    Sales of Equity Securities and Use of
                    Proceeds
                24ITEM
                    5.
                Other
                    Information
                24ITEM
                    6.
                Exhibits
                24Signatures
 i
 Table
            of Contents
  **PART
        I – FINANCIAL INFORMATION**
 
   Table
            of Contents
  **Explanatory
        Note**
  
 We
        are
        filing this Amendment No. 1 on Form 10-QSB/A to the Company’s Quarterly Report
        on Form 10-QSB for the quarter ended June 30, 2007, which was originally
        filed
        with the Securities and Exchange Commission on August 20, 2007, to amend
        and
        correct certain errors in the financial information included in the Consolidated
        Statement of Operations and Results of Operations caused by erroneous data
        generated by a data mapping error.  As a result of the data mapping
        error our cost of sales and gross profit numbers were transposed for all
        four
        periods reported.  The following correction will not result in a
        change to our net loss as previously reported.  This Form 10-QSB/A
        amends and restates only certain information in the sections described
        above.
 
 This
        Amendment continues to speak as of
        the date of the Company’s Quarterly Report on Form 10-QSB for the fiscal quarter
        ended June 30, 2006.  Except as set forth above, this Amendment to our
        Form 10-QSB/A does not reflect events occurring after June 30, 2006 or modify
        or
        update those disclosures affected by subsequent events.  The filing of
        this Amendment is not a representation that any statements contained in the
        original Quarterly Report or this Amendment No. 1 are true and complete as
        of
        any date subsequent to the date of the original Quarterly Report.  The
        filing of this Amendment shall not be deemed an admission that the original
        filing, when made, contained any untrue statement of a material fact or omitted
        to state a material fact necessary to make the statements therein not
        misleading.
  1
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            of Contents
  **ITEM
        1. FINANCIAL STATEMENTS**
  **UPSNAP,
        Inc.**
 CONSOLIDATED
        BALANCE SHEET
 AS
        OF
        JUNE 30, 2007
 UNAUDITED
 
 ASSETSCurrent
                          AssetsCash
                      
                      $       164,987Accounts
                          receivable
                      179,241Other
                          current assets
                      21,202TOTAL
                          CURRENT ASSETS
                      365,430PROPERTY
                          & EQUIPMENT (Note H)Computer
                          and office equipment
                      173,742Accumulated
                          Depreciation
                      (79,923)NET
                          PROPERTY & EQUIPMENT
                      93,819OTHER
                          ASSETSOther
                          intangibles (Note L)
                      840,650Goodwill
                          (Note L)
                      4,677,862Security
                          deposits
                      1,114TOTAL
                          ASSETS
                      $     5,978,875LIABILITIES
                          & STOCKHOLDERS' EQUITYCURRENT
                          LIABILITIESAccounts
                          payable
                      $         88,221Total
                          Other Current Liabilities
                      39,997TOTAL
                          CURRENT LIABILITIES
                      128,218LONG
                          TERM LIABILITIESNote
                          Payable (Note K)
                      113,500TOTAL
                          LIABILITIES
                      241,718Commitments
                          (Note I)STOCKHOLDERS'
                          EQUITY (Note C and D)Common
                          stock, par value $0.001, 97,500,000 authorized,
                          issued
                            and outstanding 22,255,324 shares at June 30, 2007
                      22,255Additional
                          paid-in capital
                      8,623,975Accumulated
                          deficit
                      (2,909,073)TOTAL
                          STOCKHOLDERS' EQUITY
                      5,737,157TOTAL
                          LIABILITIES & STOCKHOLDERS' EQUITY
                      $     5,978,875
  The
        accompanying notes are an integral part of these unaudited financial
        statements
   2
 Table
            of Contents
  **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENTS OF OPERATIONS
 FOR
        THE
        THREE AND NINE MONTHS ENDED JUNE 30, 2007 AND
        2006
 UNAUDITED
 
 **Three
                    Months Ended June 30,**
                
                
                **Nine
                    Months Ended June 30,****2007**
                
                
                **2006**
                
                
                **2007**
                
                
                **2006**SALES
                    AND COST OF SALESAdvertising
                    Revenue
                
                $
                5,203
                
                
                $
                -
                
                
                $
                13,419
                
                
                $
                -Revenue
                    Share
                
                
                252,930
                
                
                
                247,273
                
                
                
                725,185
                
                
                
                491,315Other
                
                
                2,330
                
                
                
                135
                
                
                
                3,362
                
                
                
                135Total
                    Sales
                
                
                260,463
                
                
                
                247,408
                
                
                
                741,966
                
                
                
                491,450Cost
                    of Sales
                
                
                153,364
                
                
                
                136,463
                
                
                
                413,999
                
                
                
                247,040Gross
                    Profit
                
                
                107,099
                
                
                
                110,944
                
                
                
                327,968
                
                
                
                244,410OPERATING
                    EXPENSESProduct
                    development
                
                
                79,216
                
                
                
                102,081
                
                
                
                262,414
                
                
                
                271,234Sales
                    and marketing expenses
                
                
                8,849
                
                
                
                63,778
                
                
                
                46,653
                
                
                
                168,309General
                    and administrative
                
                
                258,580
                
                
                
                578,390
                
                
                
                953,673
                
                
                
                1,125,205Total
                    Expense
                
                
                346,645
                
                
                
                744,249
                
                
                
                1,262,740
                
                
                
                1,564,748Net
                    operating income
                
                
                (239,546
                )
                
                
                (633,305
                )
                
                
                (934,773
                )
                
                
                (1,320,338
                )Other
                    income and expenseInterest
                    income
                
                
                -
                
                
                
                8,762
                
                
                
                127
                
                
                
                13,653Interest
                    expense
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                300Net
                    Other Income
                
                
                -
                
                
                
                8,762
                
                
                
                127
                
                
                
                13,353NET
                    LOSS
                
                $
                (239,546
                )
                
                $
                (624,543
                )
                
                $
                (934,646
                )
                
                $
                (1,306,986
                )Net
                    loss per share
                
                $
                (0.01
                )
                
                $
                (0.03
                )
                
                $
                (0.04
                )
                
                $
                (0.07
                )Weighted
                    average common shares outstanding:Basic
                    and diluted
                
                
                22,211,991
                
                
                
                21,151,324
                
                
                
                21,687,404
                
                
                
                17,981,123The
                    average shares listed below were notincluded in the computation of diluted lossesper share because to do so would have beenantidilutive for the periods presented:Warrants:
                
                
                3,554,667
                
                
                
                5,144,668
                
                
                
                4,881,493
                
                
                
                4,287,223
  The
        accompanying notes are an integral part of these unaudited financial
        statements
  3
 Table
            of Contents
  **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENT OF STOCKHOLDER'S
        EQUITY
 FOR
        THE
        PERIOD SEPTEMBER 30, 2004 to JUNE 30, 2007
 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
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (1,788,368
                )
                
                
                (1,788,368
                )**Balances,
                    September 30, 2006**
                
                
                21,151,324
                
                
                
                21,151
                
                
                
                8,226,034
                
                
                
                (1,974,428
                )
                
                
                6,272,757Stock
                    based compensation
                
                
                85,000
                
                
                
                85
                
                
                
                144,210
                
                
                
                -
                
                
                
                144,295Exercise
                    of Series A Warrants
                
                
                1,019,000
                
                
                
                1,019
                
                
                
                253,731
                
                
                
                
                
                
                
                254,750Net
                    loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (934,646
                )
                
                
                (934,646
                )**Balances,
                    June 30, 2007**
                
                
                22,255,324
                
                
                
                22,255
                
                
                $
                8,623,975
                
                
                $
                (2,909,073
                )
                
                $
                5,737,157
  The
        accompanying notes are an integral part of these unaudited financial
        statements
  4
 Table
            of Contents
  **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENTS OF CASH FLOWS
 FOR
        THE
        NINE MONTH PERIODS ENDED JUNE 30, 2007 AND 2006
 UNAUDITED
 
 June
                    30, 2007
                
                
                June
                    30, 2006CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (934,646
                )
                
                $
                (1,306,986
                )Adjustments
                    to reconcile net lossto
                    net cash used by operating activities:Depreciation
                
                
                37,710
                
                
                
                25,250Amortization
                    of intangibles
                
                
                318,820
                
                
                
                301,380Changes
                    to goodwill
                
                
                -
                
                
                
                (36,408
                )Stock
                    based compensation
                
                
                144,295
                
                
                
                -CHANGES
                    IN CURRENT ASSETS AND CURRENTLIABILITIES:
                    (Net of effect of acquisition)Accounts
                    receivable
                
                
                (10,414
                )
                
                
                (101,371
                )Other
                    current assets
                
                
                (10,258
                )
                
                
                (20,786
                )Deposits
                
                
                -
                
                
                
                (1,115
                )Accounts
                    payable and accrued expenses
                
                
                (36,131
                )
                
                
                162,298Other
                    current liabilities
                
                
                27,500
                
                
                
                (16,200
                )NET
                    CASH USED FOR OPERATING ACTIVITIES
                
                
                (463,123
                )
                
                
                (993,937
                )CASH
                    FLOWS FROM INVESTING ACTIVITIES:Cash
                    to acquire XSVoice, Inc.
                
                
                -
                
                
                
                (243,241
                )Cash
                    received from the company merger
                
                
                -
                
                
                
                1,919,662Purchase
                    of equipment
                
                
                (7,435
                )
                
                
                (134,107
                )NET
                    CASH PROVIDED BY INVESTING ACTIVITIES
                
                
                (7,435
                )
                
                
                1,542,314CASH
                    FLOWS FROM FINANCING ACTIVITIES:Exercise
                    of warrants
                
                
                254,750
                
                
                
                -NET
                    CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                254,750
                
                
                
                -NET
                    INCREASE IN CASH
                
                
                (215,808
                )
                
                
                548,377CASH,
                    beginning of period
                
                
                380,796
                
                
                
                175,611CASH,
                    end of period
                
                $
                164,987
                
                
                $
                723,988Taxes
                    paid
                
                $
                -
                
                
                $
                -Interest
                    paid
                
                $
                -
                
                
                $
                -Other
                    non-cash investing and financing activities:Shares issued in connection with reverse merger
                
                $
                -
                
                
                $
                2,097,112Shares issued in connection with XSVoice acquisition
                
                $
                -
                
                
                $
                6,000,074
 The
        accompanying notes are an integral part of these unaudited financial
        statements
  5
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            of Contents
 
 **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 Item
        310
        of Regulation S-B. 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, 2006.
 
 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
        June 30, 2007 and the results of their operations for the nine month periods
        ended June 30, 2007 and 2006 and their cash flows for the nine months ended
        June
        30, 2007 and 2006. 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
        L).
 
 The
        consolidated financial statements include the operations of UpSNAP, Inc.
        from
        November 15, 2005 through June 30, 2007.
 
 UpSNAP,
        Inc. changed its year-end to September 30 to coincide with the year-end of
        UPSNAP USA, Inc.
  6
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  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 June
        30,
        2007, 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
 
 The
        Company incurs product development expenses related to the ongoing development
        of their search engine technology and connecting new clients to the existing
        streaming audio platform. Research and development expenses consist primarily
        of
        wages paid to employees and to independent contractors.  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.
  7
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  Revenue
        Recognition
 
 The
        Company recognizes revenue 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
        Company receives revenue from the wireless carriers by providing streaming
        audio
        content that the carriers make available to their mobile handset customers.
        UpSNAP generates
        revenues from this line of business in two distinct ways:
 
 1.
              Provider
                  of Technology Platform:
                  UpSNAP provides technology to brands that have their own mobile
                  distribution and revenue arrangements with the carriers. In this
                  case,
                  UpSNAP does not act as the principal in the transaction. The brands
–
                  typically large brands such as NASCAR or ESPN, have their own
                  relationships with the carriers and look to UpSNAP to provide the
                  technology platform and service, while they retain the relationship
                  with
                  the consumer and set the pricing. In these cases, UpSNAP typically
                  reports
                  net revenues received from the carrier which are revenues after
                  both
                  carrier charges and content provider
                  charges.
 
 The
        Company negotiated a new contract with its largest carrier customer effective
        February 12, 2007 in which the carrier is no longer deducting content provider
        charges before submitting revenue to the Company. Under this arrangement,
        the
        content provider charges are the responsibility of the Company. The net effect
        of this new contract is that revenues and cost of revenues are increased
        by an
        identical amount to reflect the content provider charges.
 
 2.
              UpSNAP
                  is Principal Party: UpSNAP
                  acts as the principal party in the content relationships. Specifically,
                  UpSNAP has the relationship with the carriers, sets the re-sale
                  price at
                  which consumers buy the product, pays the content provider for
                  the
                  content, and builds the mobile application or service.  In these
                  relationships, the Company recognizes revenue based on the gross
                  fees
                  remitted by the carrier to the company. The Company’s payments to the
                  third party content providers are treated as cost of
                  sales.
  The
        Company also receives advertising revenues from third parties. These revenues
        are resultant from audio ads played on the Company’s SWInG platform, banner ads
        on the WAP deck, and pay per call revenues when the consumer proactively
        responds to a text message. These advertising revenues are recognized in
        the
        period the transactions are recorded by the third party provider.
  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 whichthe
        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.
  8
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  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.
 
 Advertising
        costs
 
 The
        Company expenses all advertising as incurred.   For the nine
        month periods ended June 30, 2007 and 2006 the Company incurred advertising
        expense of $3,906 and $19,899 respectively.
 
 Stock-Based
        Compensation
  Under
        the
        fair value recognition provisions of SFAS No. 123(R), stock-based
        compensation cost is estimated at the grant date based on the fair value
        of the
        award and is recognized as expense over the requisite service period of the
        award. We use the Black-Scholes option valuation model to value option awards
        under SFAS No. 123(R). The Company currently has awards outstanding with
        only service conditions and graded-vesting features. We recognize compensation
        cost on a straight-line basis over the requisite service period.
  Our
        statement of operations for the nine months ended June 30, 2007 and 2006
        included stock-based compensation expense of $144,295 and $0, respectively.
  Unrecognized
        stock-based compensation expense expected to be recognized over an estimated
        weighted-average amortization period of 38.9 months was approximately $457,073
        at June 30, 2007.
  Stock
        Plan
  On
        November 2, 2006 the Board of Directors of UpSNAP, Inc. approved a 2006 Omnibus
        Stock and Incentive Plan. The Plan will make four million (4,000,000) shares,
        either unissued or reacquired by the Company, available for awards of either
        options, stock appreciation rights, restricted stocks, other stock grants,
        or
        any combination thereof. Eligible recipients include employees, officers,
        consultants, advisors and directors. Options granted generally have a ten-year
        term and vest over four years from the date of grant. Certain of the stock
        options granted under the Plan have been granted pursuant to various stock
        option agreements. Each stock option agreement contains specific terms. The
        Board of Directors increased the size of the Plan to seven and one half million
        (7,500,000) total shares on August 8, 2007, subject to stockholder
        ratification.
  Time-Based
        Stock Awards
  The
        fair
        value of each time-based award is estimated on the date of grant using the
        Black-Scholes option valuation model, which uses the assumptions described
        below. Our weighted-average assumptions used in the Black-Scholes valuation
        model for equity awards with time-based vesting provisions granted during
        the
        nine months ended June 30, 2007 are shown in the following table:
  Expected
                    volatility
              70.0%Expected
                  dividends
              0%Expected
                    terms
              6.0
                    - 6.25 yearsRisk-free
                    interest rate
              4.45%
                    - 4.76%
  9
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  The
        expected volatility rate was estimated based on historical volatility of
        the
        Company’s common stock over approximately the fourteen month period since the
        reverse merger and comparison to the volatility of similar size companies
        in the
        similar industry. The expected term was estimated based on a simplified method,
        as allowed under SEC Staff Accounting Bulletin No. 107, averaging the
        vesting term and original contractual term. The risk-free interest rate for
        periods within the contractual life of the option is based on U.S. Treasury
        securities. The pre-vesting forfeiture rate used for the nine months ended
        June
        30, 2007 was assumed to be zero. As required under SFAS No. 123(R), we will
        adjust the estimated forfeiture rate to our actual experience. Management
        will
        continue to assess the assumptions and methodologies used to calculate estimated
        fair value of share-based compensation. Circumstances may change and additional
        data may become available over time, which could result in changes to these
        assumptions and methodologies, and thereby materially impact our fair value
        determination.
  A
        summary
        of the time-based stock awards as of June 30, 2007, and changes during the
        nine
        months ended June 30, 2007, is as follows:
  **Shares**
              
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**
              
              
              **Average**
                **Remaining**
                **Contractual**
                **Terms
                    (years)**
              
              **Aggregate**
                **Intrinsic**
                **Value**Outstanding
                    at October 1, 2006
              
              
              -Granted
              
              
              1,240,000
              
              
              $
              0.69
              
              
              
              9.5Forfeited
                    or expired
              
              
              -Outstanding
                  March 31, 2007
              
              
              1,240,000
              
              
              $
              0.69
              
              
              
              9.5Exercisable
                    at March 31, 2007
              
              
              75,000
              
              
              $
              0.64
  The
        aggregate intrinsic value represents the pretax value (the period’s closing
        market price, less the exercise price, times the number of in-the-money options)
        that would have been received by all option holders had they exercised their
        options at the end of the period. The exercise price of stock options granted
        during the three months ended June 30, 2007 was equal to the market price
        of the
        underlying common stock on the grant date.
  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.
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  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
        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.
  In
        February 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        155, Accounting for Certain Hybrid Instruments-an amendment of FASB Statements
        No. 133 and 140 ("SFAS 155"). SFAS 155 allows financial instruments that
        have
        embedded derivatives to be accounted for as a whole if the holder elects
        to
        account for the whole instrument on a fair value basis. SFAS 155 eliminates
        the
        need to bifurcate the derivative from its host, as previously required under
        Statement of Financial Accounting Standards No. 133, Accounting for Derivative
        Instruments and Hedge Accounting ("SFAS 133"). SFAS 155 also amends SFAS
        133 by
        establishing a requirement to evaluate interests in securitized financial
        assets
        to determine whether they are free standing derivatives or whether they contain
        embedded derivatives that require bifurcation. SFAS 155 is effective for
        all
        hybrid financial instruments acquired or issued by the Company on or after
        January 1, 2007. The Company does not anticipate any material impact to its
        financial condition or results of operations as a result of the adoption
        of SFAS
        155.
  In
        March
        2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
        Assets” (“SFAS 156”). SFAS 156 addresses the accounting for recognized servicing
        assets and servicing liabilities related to certain transfers of the servicer’s
        financial assets and for acquisitions or assumptions of obligations to service
        financial assets that do not relate to the financial assets of the servicer
        and
        its related parties. SFAS 156 requires that all recognized servicing assets
        and
        servicing liabilities are initially measured at fair value, and subsequently
        measured at either fair value or by applying an amortization method for each
        class of recognized servicing assets and servicing liabilities. SFAS 156
        is
        effective in fiscal years beginning after September 15, 2006. The adoption
        of
        SFAS 156 is not expected to have a material impact on our consolidated financial
        statements.
  In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        157, “Fair Value Measurements.” The standard provides guidance for using fair
        value to measure assets and liabilities. Under the standard, fair value refers
        to the price that would be received to sell an asset or paid to transfer
        a
        liability in an orderly transaction between market participants in the market
        in
        which the reporting entity transacts. The standard clarifies the principle
        that
        fair value should be based on the assumptions market participants would use
        when
        pricing the asset or liability. In support of this principle, the standard
        establishes a fair value hierarchy that prioritizes the information used
        to
        develop those assumptions. The Statement is effective for financial statements
        issued for fiscal years beginning after November15, 2007, and interim periods
        within those fiscal years. The Company is currently evaluating the Statement
        to
        determine what impact, if any, it will have on the Company.
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  In
        September 2006, the FASB issued Statement of Financial Accounting Standards
        No.
        158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
        Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R)” (“SFAS 158”).
        This statement requires balance sheet recognition of the funded status, which
        is
        the difference between the fair value of plan assets and the benefit obligation,
        of pension and postretirement benefit plans as a net asset or liability,
        with an
        offsetting adjustment to accumulate other comprehensive income in shareholders’
equity. In addition, the measurement date, the date at which plan assets
        and the
        benefit obligation are measured, is required to be the company’s fiscal year
        end. The Company currently is evaluating the Statement to determine what
        impact,
        if any, it will have on the Company.
 
 In
        February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
        Financial Assets and Financial Liabilities-Including an amendment of FASB
        Statement No. 115" ("SFAS 159"). SFAS 159 expands the use of fair value
        accounting but does not affect existing standards which require assets or
        liabilities to be carried at fair value. Under SFAS 159, a company may elect
        to
        use fair value to measure accounts and loans receivable, available-for-sale
        and
        held-to-maturity securities, equity method investments, accounts payable,
        guarantees and issued debt. Other eligible items include firm commitments
        for
        financial instruments that otherwise would not be recognized at inception
        and
        non-cash warranty obligations where a warrantor is permitted to pay a third
        party to provide the warranty goods or services. If the use of fair value
        is
        elected, any upfront costs and fees related to the item must be recognized
        in
        earnings and cannot be deferred, e.g., debt issue costs. The fair value election
        is irrevocable and generally made on an instrument-by-instrument basis, even
        if
        a company has similar instruments that it elects not to measure based on
        fair
        value. At the adoption date, unrealized gains and losses on existing items
        for
        which fair value has been elected are reported as a cumulative adjustment
        to
        beginning retained earnings. Subsequent to the adoption of SFAS 159, changes
        in
        fair value are recognized in earnings. SFAS 159 is effective for fiscal years
        beginning after November 15, 2007 and is required to be adopted by the Company
        in the first quarter of fiscal 2009. The Company is currently is determining
        whether fair value accounting is appropriate for any of its eligible items
        and
        cannot estimate the impact, if any, which SFAS 159 will have on its consolidated
        results of operations and financial condition.
 
 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 Share Exchange
        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 L).
 
 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 to the
        extent
        not exercised have expired.
  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.
  12
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  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 ofthese
        warrants, $900,063, was recorded
        as additional paid-in capital and a non-cash compensation expense in November
        2005.
  In
        September 2006, the Company extended the expiration date for the Series A
        Warrants from October 2006 to March 30, 2007. The fair value of the warrants
        in
        the amount of $71,540 was recorded as a debit and credit to additional paid
        in
        capital so there was no net impact on equity.
 
 In
        February 2007, 619,000 Series A Warrants and 400,000 Series B Warrants were
        exercised at an Exercise Price of $0.25.
 
 The
        following table summarizes information about warrants outstanding at June
        30,
        2007:
  **Shares
                    Exercisable**
                **Exercise
                    Price**
                **Date
                    of Expiration**Series
                      B Warrant: Issued for investor relations services
                1,800,000
                $1.10
                October
                      2010Viant
                    Capital LLC Warrant
                560,000
                $0.90
                November
                    2010Total
                2,360,000
  The
        Company may from time to time reduce the exercise price for any of the warrants
        either permanently or for a limited period or extend their expiration
        date.
 
 NOTE
        E
        - INCOME TAXES
 
 For
        the
        twelve month periods ended September 30, 2006 and 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 September 30, 2006,
        the
        Company had approximately $2,470,810 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:
 
 Twelve
                  Month
                Period
                  Ended September 30
              
              
              Twelve
                  Month
                Period
                  Ended September 30**2006**
              
              
              **2005**Federal
                    and state income tax benefit
              
              $
              864,783
              
              
              $
              238,854Change
                  in valuation allowance on deferred tax assets
              
              $
              (864,783
              )
              
              
              (238,854
              )$
              -
              
              
              $
              -
 
 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 September 30, 2006.
  13
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  A
        reconciliation between the amounts 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
              
              
              Twelve
                  Month Period Ended September 30**2006**
              
              
              **2005**Federal
                    and state statutory rate
              
              $
              864,783
              
              
              $
              238,854Change
                  in valuation allowance on deferred tax assets
              
              $
              (864,783
              )
              
              
              (238,854
              )$
              -
              
              
              $
              -
  NOTE
        F
        - GOING CONCERN
 
 As
        shown
        in the accompanying financial statements, the Company has accumulated net
        losses
        from operations from inception through June 30, 2007 totaling $2,909,073
        and as
        of June 30, 2007, 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.
 
 NOTE
        G
        - CONCENTRATION OF CREDIT RISK
 
 For
        the
        nine month period ended June 30, 2007, our largest customer accounted for
        approximately 90%of sales.
 
 The
        Company has deposits of $123,534 in a bank in excess of federally insured
        limits
        at June 30, 2007. 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 June 30, 2007:
  As
                    of June 30
              
              
              As
                    of June 30Fixed
                    Assets
              
              2007
              
              
              2006Computer
                    and office equipment
              
              $
              169,742
              
              
              $
              162,307Office
                  Equipment
              
              
              1,000
              
              
              
              1,000Office
                    Furniture
              
              
              3,000
              
              
              
              3,000Accumulated
                  Depreciation
              
              
              (79,923
              )
              
              
              (25,250
              )Total
                    Fixed Assets
              
              $
              93,819
              
              
              $
              141,057
  Depreciation
        expense for the nine months ended June 30, 2007 and 2006 was $37,710 and
        $25,250, 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 1,800 square feet of office
        space. The lease extends through February 28, 2008 at a rate of $2,250 per
        month. Future maturities associated with this commitment are as
        follows:
 
 Year
                  Ended
                September
                  30
              Amount2007
              $6,7502008
              $11,250
  14
 Table
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  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. A board member
        and Vice President of the Company provides services to the Company for monthly
        compensation of $10,000 and related expenses.
  NOTE
        K
– NOTE PAYABLE
 
 As
        part
        of the consideration for the purchase of XSVoice, the Company assumed the
        principal balance of a November 5, 2004 note that was in default between
        XSVoice, Inc. and one of its carrier partners. The principal balance of the
        note at the time of the acquisition of XSVoice, Inc. was $113,500 and it
        carries
        an interest rate is 5% above the prime rate and is subject to an additional
        2%
        after any event of default.  The Company has been unable to identify
        any parties within the carrier that are aware of the note and are thus able
        to
        negotiate terms. The carrier has also made no attempts to collect the note.
        The
        Company carries the note as long-term and is not accruing interest.
 
 NOTE
        L
– ACQUISITION 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.
 
 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 2,362,830 common shares issued as a result of this acquisition 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. 590,710
        of the common shares given as consideration were placed into an escrow account
        and were subject to an Escrow Agreement which allowed for the release of
        shares
        as certain revenue thresholds were met over the first year after the
        acquisition. Total revenues recognized during the year indicate that the
        shareholders of XSVoice are entitled to 60% of the escrowed shares. The Company
        has made a demand for the balance of the escrowed shares, or 236,284 shares
        to
        be returned to the Company for cancellation.
 
 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$Property,
                    plant, and equipment
                
                $
                71,621.43Computer
                    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
                
                
                (113,500.00Total
                    liabilities assumed
                
                
                (113,500.00Net
                    assets acquired
                
                $
                6,393,222.96
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 Table
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  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.
 
 NOTE
        M
– SUBSEQUENT EVENTS
 
 On
        August
        9, 2007, the Company entered into an Agreement and Plan of Merger (the “Merger
        Agreement”) with Mobile Greetings, Inc., a California corporation (“MGI”), and
        UpSNAP Acquisition Corp., a California corporation and a newly-formed
        wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, upon
        the terms and subject to the conditions of the Merger Agreement, Merger Sub
        will
        be merged with and into MGI, with MGI continuing as the surviving corporation
        and a wholly-owned subsidiary of the Company (the “Merger”).  MGI is a
        private corporation engaged in providing content to the mobile phone
        industry.
 
 Under
        the
        terms of the Merger Agreement, at the effective date of the Merger (the
“Effective Date”), each issued and outstanding share of MGI common stock (other
        than any shares held in treasury and any shares as to which the holder has
        properly demanded appraisal of his shares under California law) will be
        converted into and exchanged for 9.68 shares (the “Exchange Ratio”) of the
        Company’s common stock. Options, warrants and other rights to purchase MGI
        common stock as of the Effective Date will be assumed by the Company with
        an
        adjustment in the number of underlying shares and the exercise price thereof
        based upon the Exchange Ratio.  The exchange concept is that the
        shares of Company common stock to be exchanged for MGI common stock on a
        fully
        diluted basis would equal 50% of the number of outstanding shares of Company
        common stock on a fully-diluted basis immediately after the Merger, and without
        giving effect to the Private Financing mentioned below.
 
 In
        addition to the share consideration, the Company is to issue an Non-Negotiable
        Convertible Note (the “Note”) in the principal amount of up to $2,200,000 to a
        representative for the holders of the outstanding MGI common stock, options,
        warrants and other rights to purchase MGI common stock as of the Effective
        Date,
        repayable in 12 months subject to a six month extension should the Company
        then
        be working on a public offering, together with interest at the rate of federal
        funds payable at maturity or waived upon conversion.  Commencing after
        six months, the Note would be convertible at a base conversion price of $.50
        per
        share into shares of Company common stock, or an aggregate of 4,400,000 shares,
        subject to customary anti-dilution provisions.  The principal amount
        of the Note may be reduced by reason of indemnification claims by the Company
        against MGI and payment of claims of MGI holders under their dissenter’s
        appraisal rights.  The principal amount of the Note also may be
        reduced in the event the value of the Note could jeopardize the tax-free
        reorganization of the Merger.  In such event, the reduction in
        principal amount of the Note would increase the number of shares of Company
        common stock issued on the Effective Date based upon the average price of
        the
        Company Common Stock for the five consecutive trading days ending on the
        trading
        day immediately preceding the Effective Date.
 
 The
        Company has made customary representations and warranties in the Merger
        Agreement and agreed to customary covenants, including covenants regarding
        the
        operation of its business prior to the closing, and reciprocal
        indemnifications.  Completion of the Merger is subject to the
        satisfaction of customary closing conditions as set forth in the Merger
        Agreement, including among other things, the adoption of the Merger Agreement
        and approval of the Merger by the MGI shareholders, the consummation by the
        Company of a private placement to obtain working capital for the combined
        operations and the entry into employment agreements with certain executive
        officers of MGI.  The Merger is expected to close prior to September
        30, 2007.
 
 The
        Company is entering into a placement agency agreement with a placement agent
        for
        a placement of $3,000,000 gross proceeds of the Company’s securities (the
“Private Financing”).  The terms of the Private Financing are subject
        to negotiation among the Company, the placement agent and the prospective
        investors.  The securities to be offered in the Private Financing will
        not be registered under the Securities Act of 1933, and may not be offered
        or
        sold in the United States absent registration or an applicable exemption
        from
        registration.
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  At
        the
        closing of the Merger, the Company will enter into a Registration Rights
        Agreement with the MGI shareholders providing them with “piggyback” registration
        rights for the Company Common Stock issued to them on the Merger.  It
        is anticipated that the Company will enter into a registration rights agreement
        with the investors for the Company Common Stock in the Private
        Financing.
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  **ITEM
        2. MANAGEMENT’S DISCUSSION AND
        ANALYSIS**
 
 *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 and entertainment 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, ESPN Radio,
        ESPN
        Deportes, Radio Disney and Batanga. Over the past 12 months, UpSNAP has built
        one of the largest Radio networks of content from over 1,500 content providers.
        It has built a mobile advertising platform that allows for the automated
        insertion of audio and pay-per-call contextual mobile advertising. UpSNAP
        currently operates in the United States only.
 
 ***Management
        Discussion and Analysis Overview:***
 
 UpSNAP
        sells a rich platform of mobile content to consumers in the United States,
        and
        makes money from subscriptions and mobile advertising.  UpSNAP has
        searchable mobile content from over 1,500 content providers, ranging from
        live
        NASCAR in-car broadcasts, to ESPN sports and Hip-Hop radio. In April 2007,
        UpSNAP launched a multi-media search engine for all other mobile content,
        such
        as ringtones, and mobile videos stored on the Internet.
 
 Mobile
        consumers are now buying more and more powerful phones with Internet features
        cable of sending emails, running applications, and browsing the Internet.
        According to the Pew Wireless Internet Access study in February 2007, as
        many as
        25% of Internet users now have a cell-phone capable on accessing the
        Internet.  In the key youth demographic of 18-34, consumers are using
        their cell-phones as their primary method of communication and entertainment–
effectively replacing their Personal Computer.
 
 The
        market in general for mobile services is continuing to show very high growth
        rates.  In the U.S., according to the Cellular Telecommunications &
Internet Association (CTIA), as reported in its Wireless Quick Facts December
        2006, wireless subscribers reached 233 million by December 2006, reaching
        more
        than 76% of the total U.S. population.
 
 Now
        that
        the number of subscribers has almost reached saturation point – particularly in
        the 18-35 demographic - the mobile operators are seeking to increase their
        revenues from wireless data usage. According to the CTIA, Wireless Data Revenues
        in the US grew particularly sharply, showing growth of 82% from $4.8 billion
        in
        the first half of 2005, to $8.7 billion for the latter nine months of
        2006.
 
 In
        the
        past, the typical revenue model for mobile content has been a paid subscription
        model. Consumers have proved willing to spend several dollars on a 20 second
        ring-tone from a mobile carriers store, even when they can purchase the whole
        song on Apple’s iTunes for a mere .99 cents on their computer, an example of the
        current large discrepancies between the mobile and Internet content pricing
        models. As the features of the Internet and PCs converge into powerful handsets
        with wireless Internet access, the Company predicts that these discrepancies
        cannot last for long.
 
 The
        global market for mobile-phone premium content is expected to expand to more
        than $43 billion by 2010, rising at a compound annual growth rate of 42.5
        percent from $5.2 billion in 2004, according to iSuppli Corp.
 
 UpSNAP
        management believes that this paid content subscription model will start
        to
        migrate to a search and advertising driven model over time. Most mass media
        business models have started as subscription only, and then migrated with
        the
        increasing reach of consumers into advertising driven services. As John
        Templeton said: “History never repeats itself, but it often
        rhymes.”
 
 In
        the
        United States, most mobile content is sold from ‘virtual’ shops on the mobile
        handsets. However, this trend is set to change. In Europe, the mobile operators
        are leaving content choice and selection to media and distribution companies
        who
        sell mobile content. Consumers in the US are now being increasingly exposed
        to
        direct marketing for mobile products.
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  UpSNAP
        has built a search and advertising driven business model, which enables UpSNAP
        and its media and carrier partners to make money from advertising, rather
        than
        from the content subscription. UpSNAP is very well positioned to take advantage
        of the enormous consumer demand for mobile content and entertainment. A 2006
        study from Shosteck Group showed that revenues from Mobile advertising could
        reach $9.6 billion by 2010. Consumers will also increasing need quick and
        convenient ways to search for all the latest content they can consume on
        their
        mobile phone.
 
 In
        order
        to increase sales, UpSNAP needs to increase its media partnerships that can
        actively promote offers direct to consumers, as well as continue to partner
        with
        as many of the mobile operators as possible.
 
 UpSNAP
        is
        actively in partnership with media companies who can reach customers directly
        with direct response offerings. UpSNAP has signed a term-sheet and launched
        ESPN
        radio on demand on most of the carriers. UpSNAP also signed a distribution
        deal
        with Cablevision to provide news, weather and traffic for News 12 in the
        New
        York City, New Jersey and Connecticut areas. UpSNAP has a strong sales pipe-line
        of advertising supported media distribution deals that will be announced
        over
        the coming year.
 
 Media
        companies and Advertising Agencies are hopeful that mobile advertising can
        reach
        the massive reach numbers of a TV campaign, combined with the direct response
        and tracking potential of the Internet.  However, mobile marketing is
        still in its infancy as they struggle with the right forms of direct marketing,
        privacy issues, and how to structure mobile advertising deals. The pace of
        our
        deal making activities with the media companies has been much slower than
        we
        would have liked. UpSNAP is looking at acquisitions to push this process
        quicker, and has hired a media specialist to increase our business development
        capacity and increase the amount of deals in our pipeline.
 
 In
        January 2006 UpSNAP derived 99% of its revenues from subscription revenue
        from
        one major US mobile operator. In our third fiscal quarter April - June 2007,
        our
        dependency on this carrier has been reduced to approximately 90% of our
        revenues, as we move towards the more lucrative and higher margin search
        and
        advertising related revenues.
 
 Principal
        Products and Services
 
 UpSNAP
        has two principal products and services:
 
 1
              Mobile
                  Search Engine and
                  Advertising Platform
 
 2
              Mobile
                  Content
                  Services
 
 **MOBILE
        SEARCH ENGINE AND ADVERTISING PLATFORM**
 
 UpSNAP
        has expanded its search engine suite to enable consumers to search for a
        wide
        variety of mobile content, services and data. In April 2007 UpSNAP launched
        a
        mobile search tool that finds mobile data stored on the Internet. Mobile
        consumers can search for ringtones, mobile video content, mobile games, and
        other images, wallpapers and multi-media content.
 
 The
        suite
        of mobile search product now allows consumers to find and access mobile content
        and service from any mobile phone in the US. The UpSNAP mobile search engine
        platform allows consumers to search via text message, WAP and through a digital
        download on the mobile handset 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
        horoscope 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 consumer’s 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.
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  These
        searches are free to use by the consumer – save for any communications cost
        incurred by their cellular phone usage according to their carrier
        contract.
 
 UpSNAP
        makes money from advertisers who love the direct response pay-per-click model
        of
        the Internet, and now want the same model to work on mobile.
 
 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-call advertising platform technology was built in 2005, and our first
        pay-per-call-partnership was announced with Ingenio, who provides pay-per-call
        advertisers nationwide on May 4, 2006.  We rely on third party
        operators for our advertising.  For example if a national pizza chain
        were to only want to target select US cities, our third party partners would
        only pass us the advertising for a specific geographical locale.
 
 Pay-per-call
        advertising is receiving a much higher margin than pay-per-click on the
        Internet. The average price of a pay-per-click on Google according to the
        Wall
        Street Journal was .50 cents. Pay Per Call, which directly bridges a consumer
        who is looking to buy on their cell-phone with a merchant starts at $2 dollars
        a
        call, and goes up considerably depending on the nature of the sale.
  **MOBILE
        CONTENT SERVICES**
 
 UpSNAP’s
        SWinG (Streaming Wireless Internet Gateway) platform enables mobile access
        to
        virtually any type of live and on-demand streaming audio content, such as
        radio,
        podcasts and live sports events. 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 runs on any mobile phone in the US,
        regardless of handset, data package or software. The SWinG platform was built
        over the course of 2002-2004 and is fully operational.
 
 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, ESPN Radio, ESPN Deportes, Radio
        Disney & Botanga. The catalogue of content includes over 1,500 content
        providers, with a wide selection of content ranging from Radio Stations,
        to
        sports coverage and Podcasts.
 
 The
        company generates subscription revenues from the SWinG platform by providing
        the
        technology platform to major companies that already have a relationship with
        the
        carriers, such as ESPN and NASCAR. In addition, the Company generates revenues
        acting as the principal in the relationship with the carriers, providing
        content
        from over 1,500 content providers.
 
 The
        subscription revenues can take two forms. 1.) One off Subscription: A consumer
        subscribes for a particular event or for a limited amount of time. For example,
        in the case of the NASCAR Fan-Scan in car audio content, consumers purchase
        a
“$4.99 race pass” that is only good for one NASCAR race, and will simply expire
        after the race is finished. 2.) Recurring Subscribers: Consumers can also
        subscribe per month. For example, in the case of the NASCAR Fan-Scan in car
        audio content, consumers purchase a “$9.99 race pass” that is valid for use each
        month, until the consumer chooses to opt out.
 
 In
        each
        case, the cost of the paid service is added to the consumer’s phone-bill, and
        the carriers pay UpSNAP after deducting their margin and associated
        costs.
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  **DISTRIBUTION
        AGREEMENTS**
 
 UpSNAP’s
        revenues are directly affected by its distribution agreements. The distribution
        of our content occurs in one of two ways:
 
 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 media partner 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 consumer’s mobile phone bill. UpSNAP has billing relationships in
                  place with most major US carriers including, Cingular, T-Mobile,
                  Sprint/Nextel and Alltel,
  The
        Business
 
 Our
        business plan calls for acquisitions in the mobile advertising and content
        sector, that will allow us increase our average revenue per subscriber as
        well
        as our distribution channels.  We continue to look for acquisition targets
        although this will depend upon the timing and availability of appropriate
        acquisition opportunities and our ability to find capital to acquire the
        same
        and provide working capital.
 
 As
        of
        August 14, 2007 we have a total of six full-time employees, one part-time
        employee and one part-time individual contractor.  We do not expect
        significant increases in employees, but do expect incremental additions in
        line
        with revenues in all areas of the business.
 
 ***Margins***
 
 The
        revenue stream from the consumer is shared across several parties:
 
 1
              The
                  wireless carrier, who
                  operates the cellular infrastructure and billing interface to add
                  micro-payments from wireless services onto the customer phone bill.
                  The
                  carrier will typically demand 30-50% of the gross revenues. UpSNAP
                  reports
                  revenues net of the carrier gross margin. For example, if UpSNAP
                  sells an
                  application for $10.00 to the consumer, UpSNAP would only report
                  $5-$7 of
                  net revenue.
 
 2
              An
                  aggregator or mobile delivery
                  and clearing house for the receipt and delivery of mobile messages
                  will
                  take 5-10% of the gross sale
                  value
 
 3
              The
                  content owner who has the
                  rights to the mobile
                  content.
 
 The
        mobile supplier, in this case UpSNAP reports net revenue after the carrier
        and
        aggregator have taken their cut of 30 -60%. In turn, UpSNAP’s average pay-out to
        content providers in 30% of the net revenue.
 
 UpSNAP’s
        margin improves considerably on advertising related services such as banner
        ads,
        audio ads, and Pay-per-call advertising. For these services, UpSNAP receives
        net
        revenue from an advertising partner. When UpSNAP deals directly with the
        media
        companies, the wireless carriers do not share in this revenue.
 
 ***LIQUIDITY
        AND CAPITAL RESOURCES***
 
 Overall,
        we have funded our cash needs from inception through June 30, 2007 with the
        $2,146,200 in funds acquired as part of the September – October 2005 Private
        Placement.  In addition, the Company raised $254,750 in February 2007
        from the sale of 619,000 Series A warrants and 400,000 Series B warrants
        at
        $0.25 each.
 
 As
        of
        June 30, 2007, our current assets were $365,430 and our current liabilities
        were
        $128,218, which resulted in net working capital of $237,212.  As of
        August 14, 2007 cash on hand was $101,285 and accounts receivable due from
        customers were approximately $158,000.
 
 Our
        cash
        burn rate continues to decline. For the nine months ended June 30, 2007,
        net
        cash flow used by operating activities was $463,123 compared to net cash
        used in
        operating activities of $993,937 for the nine months ended June 30, 2006.
        The
        decrease in cash flows used in operating activities is mainly due to the
        decrease in the loss for the period adjusted for non-cash items.
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  For
        the
        three months ended June 30, 2007, net cash flow used by operating activities
        was
        $82,032 compared to net cash used in operating activities of $337,630 for
        the
        three months ended June 30, 2006. The decrease in cash flows used in operating
        activities is mainly due to the decrease in the loss for the period adjusted
        for
        non-cash items.
 
 Net
        cash
        flows used by investing activities amounted to $7,435 for the nine months
        ended
        June 30, 2007 compared to $1,542,314 provided for the nine months ended June
        30,
        2006. The Company received $1,919,662 in cash as part of the reverse merger
        in
        November 2005.
 
 The
        Company received $254,750 in net cash flow provided by financing activities
        for
        the nine months ended June 30, 2007. These cash proceeds were resultant from
        the
        sale of 619,000 Series A warrants and 400,000 Series B warrants at $0.25
        each.
        The Company relied on Regulation D in this private
        placement.  There were no net cash flows provided by financing
        activities for the nine months ended June 30, 2006.
 
 In
        summary, based upon the cash flow activities as previously discussed, for
        the
        nine months ended June 30, 2007, our overall cash position decreased by
        $215,808.
 
 At
        the
        date of this report we are continuing to incur losses. We used capital of
        approximately $463,000 during the nine month period ended June 30, 2007 to
        fund
        operations. The Company’s current financial models indicate that the Company
        will have an average cash burn rate of $27,000 per month from operations
        and
        that by the end of calendar 2007 the Company’s cash balances, without the
        successful launch of revenue generating products or the infusion of new capital,
        will fall to levels that will not sustain operations.
 
 The
        Company does not have any material commitments for capital expenditures as
        of
        August 14, 2007.
 
 The
        Company may obtain up to $2,484,000 in additional capital if all of the
        Company’s remaining outstanding Series B and Viant warrants are exercised at
        their stated exercise prices of $1.10 and $0.90, respectively; however there
        is
        no assurance that any of these warrants will be exercised.
  On
        August
        9, 2007, the Company entered into an Agreement and Plan of Merger (the “Merger
        Agreement”) with Mobile Greetings, Inc., a California corporation (“MGI”), and
        UpSNAP Acquisition Corp., a newly-formed wholly-owned subsidiary of the Company,
        see Note M to the Notes to the Consolidated Financial Statements in this
        report.
        As part of the Merger Agreement, the Company is entering into a placement
        agency
        agreement with a placement agent for a placement of $3,000,000 gross proceeds
        of
        the Company’s securities (the “Private Financing”).  The terms of the
        Private Financing are subject to negotiation among the Company, the placement
        agent and the prospective investors. The Private Financing is forecasted
        to
        close by September 30, 2007. It is forecasted that this Private Financing
        will
        result in approximately $2,400,000 in net proceeds that will be used as working
        capital for the combined entities.
 
 If
        this
        Private Financing is not successful, the Company would likely have to
        curtail our activities (including our marketing and research and development
        expenses) during the next twelve months but may be able to continue operations
        depending on the development of new revenue sources. No assurance can be
        given
        that the Private Financing will be consummated or the merger with MGI will
        close.
 
 Our
        auditors have raised substantial doubt about our ability to continue as a
        going concern due to recurring losses from operations. We expect to continue
        to
        have net operating losses until we can expand our sales channel and implement
        our marketing efforts. Our financial statements do not include any adjustments
        relating to the recoverability and classification of recorded asset amounts
        nor
        to amounts and classification of liabilities that may be necessary should
        we be
        unable to continue as a going concern.
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  ***RESULTS
        OF OPERATIONS***
 
 NINE-MONTH
        PERIOD ENDED JUNE 30, 2007 COMPARED TO NINE-MONTH PERIOD ENDED JUNE 30,
        2006
 
 Revenue
        for the nine month period ended June 30, 2007 grew to $741,966 compared to
        $491,450 during the nine month period ended June 30, 2006. The nine month
        period
        ending June 30, 2006 contained six months of revenue generated by the XSVoice
        acquisition.
 
 Our
        net
        losses during the nine-month period ended June 30, 2007 were ($934,646) or
        ($0.04) per common share compared to a net loss of ($1,306,986) or ($0.07)
        per
        common share during the nine-month period ended June 30, 2006.
 
 Cost
        of
        revenues for the nine month period ended June 30, 2007 were $413,999, resulting
        in a gross profit of $327,968 (44.2%) compared to cost of revenues for the
        nine
        month period ended June 30, 2006 of $247,040 and a gross profit of $244,410
        (49.7%). Costs of revenues were primarily fees paid to the Company’s content
        providers; royalty payments for the music content, server farm, and call
        connect
        charges.  The Company has increased gross margins by negotiating
        better terms with content providers and modifications to the technology
        supporting the company’s offerings.
 
 During
        the nine-month period ended June 30, 2007, we incurred operating expenses
        of
        $1,262,740 compared to operating expenses of $1,564,748 incurred during the
        nine-month period ended June 30, 2006, The Company has implemented cash burn
        austerity measures during fiscal year 2007 which have reduced operating
        expenses.
 
 THREE-MONTH
        PERIOD ENDED JUNE 30, 2007 COMPARED TO THREE-MONTH PERIOD ENDED JUNE 30,
        2006
 
 The
        Company had revenues of $260,463 for the three month period ended June 30,
        2007
        compared to $247,408 during the three month period ended June 30,
        2006.
 
 Our
        net
        losses during the three-month period ended June 30, 2007 were ($239,546)
        or
        ($0.01) per common share compared to a net loss of ($624,543) or ($0.03)
        per
        common share during the three-month period ended June 30, 2006. On a cash
        basis
        our net cash used in operations fell to $82,031 for the quarter ended June
        30,
        2007, compared to $337,630 for the quarter ended June 30, 2006.
 
 For
        the
        quarter ended June 30, 2007 revenues from the Company’s primary customers are
        down approximately 18% from the comparable quarter ended June 30,
        2006.  The revenue decline was principally due to lower new
        subscriptions for the Company’s music services.  The Company is
        aggressively attempting to diversify its revenue stream by focusing on
        advertising revenues and selling subscription services directly to consumers.
        If
        the company is not successful in its continuing efforts to diversifying its
        revenue base or halting the slide in revenues, then the Company’s operating
        results and liquidity will continue to be adversely affected.
 
 Cost
        of
        revenues for the three month period ended June 30, 2007 were $153,364, resulting
        in a gross profit of $107,099 (41.1%) compared to cost of revenues for the
        three
        month period ended June 30, 2006 of $136,463 and a gross profit of $110,944
        (44.8%). Costs of revenues were primarily fees paid to the Company’s content
        providers; royalty payments for the music content, server farm, and call
        connect
        charges.  The Company has increased gross margins by negotiating
        better terms with content providers and modifications to the technology
        supporting the company’s offerings.
 
 During
        the three-month period ended June 30, 2007, we incurred operating expenses
        of
        $346,645 compared to operating expenses of $744,249 incurred during the
        three-month period ended June 30, 2006. The Company has implemented cash
        burn
        austerity measures during fiscal year 2007 which have reduced operating
        expenses.
 
 ***OFF-
        BALANCE SHEET ARRANGEMENTS***
 
 The
        Company did not have any off –balance sheet arrangements as of the fiscal period
        ended June 30, 2007.
  **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 andboard.  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.
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  *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.
 
 *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. Additionally,
        there has been no change in our internal controls over financial reporting
        that
        occurred during our most recent fiscal quarter that has materially affected,
        or
        is reasonably likely to affect, our Internal Controls over financial
        reporting.
 
 **PART
        II – OTHER INFORMATION**
  **ITEM
        2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
        PROCEEDS**
 
 During
        the period from January 20, 2007 to February 12, 2007, the Company issued
        1,019,000 shares of common stock each at a price of $0.25 upon exercise of
        previously placed warrants (619,000 Series A warrants and 400,000 Series
        B
        warrants) to eleven warrant holders. The exercise price of the warrants was
        reduced on a limited basis to permit this exercise. Total proceeds of $254,750
        were received and added to working capital. The Company relied on Regulation
        D
        in this private placement.
 
 **ITEM
        5. OTHER INFORMATION**
 
 On
        May
        11, 2007, the Company’s Compensation Committee approved a change in the
        compensation plan for the Company’s CFO. Under this new arrangement, in lieu of
        cash compensation, the Company’s CFO will be compensated for the company’s third
        and fourth fiscal quarter with a restricted stock grant of 130,000 shares
        to be
        vested 21,666.67 shares per month, effective April 1, 2007.
 
 **ITEM
        6. EXHIBITS**
 
 **The
        exhibits to this form are listed in the attached 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:
                    October 3, 2007
              /s/
                    Tony PhillipTony
                    Philipp, Chairman of the Board and Chief Executive Officer (Principal
                    Executive Officer)Date:  October
                    3, 2007
              /s/
                    Paul C. SchmidtPaul
                    C. Schmidt, Chief Financial Officer (Principal Financial
                    Officer)
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  **INDEX
        TO EXHIBITS**
  Exhibit
                  No.
              **Description**31.1
              Rule
                  13a-14(a)/15d-14(a) Certification of Tony Phillips, Chairman and
                  Chief
                  Executive Officer.31.2
              Rule
                  13a-14(a)/15d-14(a) Certification of Paul C. Schmidt, Chief Financial
                  Officer.32.1
              Certification
                    of Principal Executive Officer
                    furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                    to
                    Section 906 of the Sarbanes-Oxley Act of
                    2002.32.2
              Certification
                of Principal Financial Officer
                furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant
                to
                Section 906 of the Sarbanes-Oxley Act of
                2002.
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