Table
      of Contents




U.S.
      SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB





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





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





Commission
      File No. 000-50560





UPSNAP,
      INC.


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








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
      February 15, 2007


Common
      Stock ($.001 par value)        22,170,324





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




Table
          Of Contents


UPSNAP,
      INC.


FORM
      10-QSB





For
      the
      Quarter ended December 31, 2006





TABLE
      OF
      CONTENTS





**Page**PART
                I - FINANCIAL INFORMATIONITEM
                1.
            Selected
                Financial Statements
            1Balance
                Sheet - December 31, 2006
                (unaudited)
            2Statements
                of Operations - Three Months
                Ended December 31, 2006 and 2005 (unaudited)
            3Statements
                of Stockholders’ Equity
                - (unaudited)
            4Statements
                of Cash Flows - Three months
                Ended December 31, 2006 and 2005 (unaudited)
            5Notes
                to Financial Statements
                (unaudited)
            6ITEM
                2.
            Management’s
                Discussion and
                Analysis
            16ITEM
                3.
            Controls
                and
                Procedures
            21PART
                II - OTHER INFORMATIONITEM
                2
            Unregistered
                Sales of Equity Securities and Use
                of Proceeds
            23ITEM
                6.
            Exhibits
            23Signatures
            
            24




Table
          Of Contents




**PART
      I**





**ITEM
      1. SELECTED FINANCIAL STATEMENTS**




1
 Table
          Of Contents




UPSNAP,
        Inc.
 CONSOLIDATED
          BALANCE SHEET
 AS
          OF DECEMBER 31, 2006
 UNAUDITED
 ASSETSCurrent
                  AssetsCash
              
              $
              183,612Accounts
                  receivable
              
              
              103,463Other
                  current
                  assets
              
              
              20,301TOTAL
                  CURRENT
                  ASSETS
              
              
              307,376PROPERTY
                  & EQUIPMENT (Note H)Computer
                  and
                  office equipment
              
              
              171,565Accumulated
                  Depreciation
              
              
              (54,921
              )NET
                  PROPERTY
                  & EQUIPMENT
              
              
              116,644OTHER
                  ASSETSOther
                  intangibles (Note L)
              
              
              1,008,780Goodwill
                  (Note L)
              
              
              4,677,862Security
                  deposits
              
              
              1,114TOTAL
                  ASSETS
              
              $
              6,111,776LIABILITIES
                  & STOCKHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              70,043Total
                  Other
                  Current Liabilities
              
              
              40,378TOTAL
                  CURRENT
                  LIABILITIES
              
              
              110,421LONG
                  TERM
                  LIABILITIESNote
                  Payable
                  (Note K)
              
              
              113,500TOTAL
                  LIABILITIES
              
              
              223,921Commitments
                  (Note I)STOCKHOLDERS'
                  EQUITY (Note C and D)Common
                  stock,
                  par value $0.001, 97,500,000 authorized,
              
              
              21,151issued
                  and
                  outstanding 21,151,324 shares at December 31, 2006Additional
                  paid-in capital
              
              
              8,272,706Accumulated
                  deficit
              
              
              (2,406,002
              )TOTAL
                  STOCKHOLDERS' EQUITY
              
              
              5,887,855TOTAL
                  LIABILITIES & STOCKHOLDERS' EQUITY
              
              $
              6,111,776




The
        accompanying
        notes are an integral part of these unaudited financial
        statements




2
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          Of Contents




**UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENTS OF
        OPERATIONS
 FOR
        THE THREE
        MONTHS ENDED DECEMBER 31, 2006 AND 2005
 UNAUDITED


**Three
                Months Ended December 31,****2006**
            ****
            ****
            **2005**SALES
                AND
                COST OF SALESSales
            
            $
            253,977
            
            $
            -Cost
                of
                Sales
            
            
            123,414
            
            
            3,530Gross
                Profit
            
            
            130,563
            
            
            (3,530
            )OPERATING
                EXPENSESProduct
                development
            
            
            86,076
            
            
            55,942Sales
                and
                marketing expenses
            
            
            28,876
            
            
            46,675General
                and
                administrative
            
            
            447,312
            
            
            258,490Total
                Expense
            
            
            562,264
            
            
            361,107Net
                operating
                income
            
            
            (431,700
            )
            
            (364,637
            )Other
                income
                and expenseInterest
                income
            
            
            126
            
            
            -Interest
                expense
            
            
            -
            
            
            300Net
                Other
                Income
            
            
            126
            
            
            (300
            )NET
                LOSS
            
            $
            (431,574
            )
            $
            (364,937
            )Net
                loss per
                share
            
            $
            (0.02
            )
            $
            (0.02
            )Weighted
                average common shares outstanding:Basic
                and
                diluted
            
            
            21,151,324
            
            
            14,658,252The
                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:
            
            
            5,144,668
            
            
            5,144,668


The
        accompanying
        notes are an integral part of these unaudited financial
        statements


3
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            Of Contents
  **UPSNAP,
        INC.**
 CONSOLIDATED
        STATEMENT OF STOCKHOLDER'S
        EQUITY
 FOR
        THE PERIOD
        SEPTEMBER 30, 2004 to DECEMBER 31, 2006
 UNAUDITED




Common
                StockTotalAdditional
            
            
            
            Stockholders'Paid-in
            
            Accumulated
            
            EquityShares
            
            Par
                Value
            
            capital
            
            Deficit
            
            (Deficit)**Balances,
                September 30, 2004**
            
            
            -
            
            $
            -
            
            $
            27,474
            
            $
            (27,474
            )
            $
            --Donated
                capital
            
            
            -
            
            
            -
            
            
            119,525
            
            
            -
            
            
            119,525Shares
                issued
                for cash ($.0003 per share)
            
            
            12,999,999
            
            
            1,300
            
            
            1,700
            
            
            -
            
            
            3,000Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (158,586
            )
            
            (158,586
            )**Balances,
                September 30, 2005**
            
            
            12,999,999
            
            
            1,300
            
            
            148,699
            
            
            (186,060
            )
            
            (36,061
            )Shares
                issued
                in connection with reverse merger
            
            
            5,788,495
            
            
            17,488
            
            
            2,079,623
            
            
            -
            
            
            2,097,112Shares
                issued
                in connection with XSVoice acquisition
            
            
            2,362,830
            
            
            2,363
            
            
            5,997,712
            
            
            -
            
            
            6,000,074Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            (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
            
            
            -
            
            
            -
            
            
            46,672
            
            
            -
            
            
            46,672Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            (431,574
            )
            
            (431,574
            )**Balances,
                December 31, 2006**
            
            
            21,151,324
            
            
            21,151
            
            $
            8,272,706
            
            $
            (2,406,002
            )
            $
            5,887,855




The accompanying notes are an integral part of these unaudited financial statement4Table Of Contents**UPSNAP, INC.**CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE THREE MONTH PERIODS ENDED DECEMBER 31, 2006 AND 2005UNAUDITED


December
                  31,
                  2006
              
              December
                  31,
                  2005CASH
                  FLOWS
                  FROM OPERATING ACTIVITIES:Net
                  loss
              
              $
              (431,574
              )
              $
              (364,937
              )Adjustments
                  to reconcile net lossto
                  net
                  cash used by operating activities:Depreciation
              
              
              12,708
              
              
              208Amortization
                  of intangibles
              
              
              150,690
              
              
              -Changes
                  to
                  goodwill
              
              
              -
              
              
              -Stock
                  based
                  compensation
              
              
              46,672
              
              
              -CHANGES
                  IN
                  CURRENT ASSETS AND CURRENTLIABILITIES:
                  (Net of effect of acquisition)Accounts
                  receivable
              
              
              65,364
              
              
              -Other
                  current
                  assets
              
              
              (9,358
              )
              
              (50,978
              )Deposits
              
              
              -
              
              
              (965
              )Accounts
                  payable and accrued expenses
              
              
              (60,363
              )
              
              55,469Other
                  current
                  liabilities
              
              
              33,936
              
              
              (16,090
              )NET
                  CASH USED
                  FOR OPERATING ACTIVITIES
              
              
              (191,925
              )
              
              (377,293
              )CASH
                  FLOWS
                  FROM INVESTING ACTIVITIES:Cash
                  received
                  from the company merger
              
              
              -
              
              
              1,919,662Purchase
                  of
                  equipment
              
              
              (5,258
              )
              
              (2,761
              )NET
                  CASH
                  PROVIDED BY INVESTING ACTIVITIES
              
              
              (5,258
              )
              
              1,916,901NET
                  INCREASE
                  IN CASH
              
              
              (197,184
              )
              
              1,539,608CASH,
                  beginning of period
              
              
              380,796
              
              
              175,611CASH,
                  end of
                  period
              
              $
              183,612
              
              $
              1,715,219Taxes
                  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
      December 31, 2006 and the results of their operations for the three month
      periods ended December 31, 2006 and 2005 and their cash flows for the three
      months ended December 31, 2006 and 2005. All such adjustments are of a normal
      recurring nature, unless otherwise disclosed in this Form 10-QSB or other
      referenced material. Results of operations for interim periods are not
      necessarily indicative of results for the full year.





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





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





Organization





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





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


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





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





The
      consolidated financial statements include the operations of UpSNAP, Inc. from
      November 15, 2005 through December 31, 2006.





UpSNAP,
      Inc. changed its year-end to September 30 to coincide with the year-end of
      UPSNAP USA, Inc.




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





Research
      and Development Expenditures





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.




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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 reports
                net
                revenues received from the carrier which are revenues after both
                carrier
                charges and 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.




Dividends





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





Long-lived
      assets





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





Accounting
      Policy for Impairment of Intangible Assets





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




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Segment
      reporting





T he
      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 three month periods ended
      December 31, 2006 and 2005 the Company incurred advertising expense of $2,758
      and $0 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 three months ended December 31, 2006 and 2005
      included stock-based compensation expense of $46,672 and $0, respectively.




Unrecognized
      stock-based compensation expense expected to be recognized over an estimated
      weighted-average amortization period of 43.4 months was approximately $382,356
      at December 31, 2006.




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.




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
      three months ended December 31, 2006 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%




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 three months ended
        December 31, 2006 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,




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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 December 31, 2006, and changes during
      the
      three months ended December 31, 2006, is as follows:




**Shares**
              
              **Weighted-Average
                  Exercise Price**
              
              **Average
                  Remaining Contractual Term (years)**
              
              **Aggregate
                  Intrinsic Value**Outstanding
                  at October 1, 2006
              
              
              -
              
              
              -Granted
              
              
              700,000
              
              $
              0.92
              
              
              
              
              $
              -Forfeited
                  or expired
              
              
              -
              
              
              -Outstanding
                  at December 31, 2006
              
              
              700,000
              
              
              
              
              
              3.61
              
              $
              -Exercisable
                  at December 31, 2006
              
              
              75,000
              
              $
              0.64
              
              
              2.92
              
              $
              -




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 December 31, 2006 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.





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.




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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.




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 Company is currently evaluating the Statement to
      determine what impact, if any, it will have on the Company.





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).




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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 have a twelve
      month life.




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




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




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.





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





**Shares
                Exercisable**
            **Exercise
                Price**
            **Date
                of Expiration**Series
                A Warrant: Issued in conjunction with Private Placement
            2,384,668
            $1.50
            March
                2007Series
                B Warrant: Issued for investor relations services
            2,200,000
            $1.10
            October
                2010Viant
                Capital LLC Warrant
            560,000
            $0.90
            November
                2010Total
            5,144,668





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





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.




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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.




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 December 31, 2006 totaling $2,406,002
      and
      as of December 31, 2006, has had limited revenues from operations. These factors
      raise substantial uncertainty about the Company’s ability to continue as a going
      concern.





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





NOTE
      G
      - CONCENTRATION OF CREDIT RISK





For
      the
      three month period ended December 31, 2006, our largest customer accounted
      for
      more than 85% of sales.





The
      Company has deposits of $87,871 in a bank in excess of federally insured limits
      at December 31, 2006. The amount has not been reduced by items recorded in
      the
      account not yet clearing the bank.




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




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NOTE
      H
      - PROPERTY AND EQUIPMENT





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




As
                  of December 31
              
              As
                  of December 31Fixed
                  Assets
              
              **2006**
              
              **2005**Computer and office equipment
              
              $
              167,565
              
              $
              2,761Office Equipment
              
              
              1,000
              
              
              -Office Furniture
              
              
              3,000
              
              
              -Accumulated Depreciation
              
              
              (54,921
              )
              
              (208
              )Total
                  Fixed Assets
              
              $
              116,644
              
              $
              2,553




Depreciation
      expense for the three months ended December 31, 2006 and 2005 was $12,708 and
      $
      208, 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, 2007 at a rate of $2,250 per
      month. Future maturities associated with this commitment are as
      follows:





Year
                Ended
              September
                30
            Amount2007
            $4,500





NOTE
      J
      - RELATED PARTY TRANSACTION





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





NOTE
      K
      - 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.




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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 thresh holds 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 147,677 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
            $
                71,621.43Property,
                plant, and equipmentComputer
                equipment
            28,200.00Office
                equipment
            1,000.00Office
                furniture
            3,000.00SWinG
                copyright
            1,345,040.00Customer
                relationships
            104,000.00Employment
                contracts
            78,000.00Supplier
                contracts
            84,500.00Goodwill
            4,791,361.53Total
                assets acquired
            6,506,722.96Note
                payable
            (113,500.00)Total
                liabilities assumed
            (113,500.00)Net
                assets acquired
            $6,393,222.96





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





The
      allocation of the purchase price is based on preliminary data and could change
      when final valuation of certain intangible assets is obtained.





In
      connection with the XSVoice, Inc. acquisition, the Company agreed to pay an
      additional $550,000 in cash consideration by January 6, 2007, if the company
      raises an additional $3.2 million in additional equity capital or a majority
      of
      the Series A warrants are exercised. In accordance with Statement of Financial
      Accounting Standards No. 141, *Business
      Combinations* ,
      the
      Company does not accrue contingent consideration obligations prior to the
      attainment of the objectives. Any such payments would result in increases in
      goodwill.


NOTE
      M
      - SUBSEQUENT EVENT





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) . Total proceeds of $274,750 were received to be added to working
      capital. The Company relied on  Rule 4(2) in this private placement.




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**ITEM
      2. MANAGEMENT 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 & 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.





***MD&A
      Overview:***





*UpSNAP
      spent 2005 developing its core hardware and software infrastructure and 2006
      building out its core platform of services. UpSNAP now has a rich platform
      of
      content ranging from radio stations, to sports commentary and podcasts from
      over
      1,500 content providers.*





*The
      typical revenue model for mobile content has been subscription only. UpSNAP
      has
      now built an advertising driven model, rather than relying on subscriptions
      alone. Many successful media models have involved making money from advertising
      services, while growing the advertising base of consumes as rapidly as possible.*





*UpSNAP
      management believes that a mobile advertising driven model will in the long-run
      achieve greater revenues than a subscription model.*





*For
      the quarter ended December 31, 2006, UpSNAP recorded record sales of $253,977
      and implemented operating measures that will reduce the forecasted operating
      cash burn during calendar 2007 to approximately $36,000 a month.*





*During
      January- February 2007 UpSNAP raised an additional $254,750 through the sale
      of
      warrants.* *The
      company’s current financial models, benefiting from t* *his
      additional cash raised and progress to reduce cash burn,* *indicate that within twelve months the Company’s cash balances may fall to
      levels that will not sustain operations.*





*As
      of
      February 12, 2007 the Company had approximately $303,000 in cash and
      approximately $395,000 in working capital.*





General





Consumer
      interest and spend on mobile phones and services are continuing to showing
      very
      high growth rates. In the US, according to the Cellular Telecommunications
&
Internet Association (CTIA) as reported in its Wireless Quick Facts September
      2006, wireless subscribers reached 219.4 million by June 2006, reaching more
      than 72% of the total US population. Wireless Data Revenues grew particularly
      sharply, showing growth of 70% from $3.8 billion in the first half of 2005,
      to
      $6.5 billion for the first six months of 2006.





UpSNAP’s
      search technology is in part based on text messaging or Short Message Service
      (SMS) that is proving to be extremely popular amongst the youth demographic
      in
      the United States.





According
      to the CTIA’s April 2006 Wireless Quick Facts Report, 9.8 billion messages were
      sent in December 2005, up 109% from 4.8 billion messages in December 2004.
      48.7
      billion SMS messages were sent in the last six months of 2005, up 50% from
      32.5
      billion in the first six months of 2005, and up 97% from 24.7 billion in the
      last six months of 2004.





Reports
      are available from http://www.ctia.org/ and are
      free to the public.




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Mobile
      Search Business Model





Putting
      as few obstacles between joining merchants and buyers together has proved to
      be
      a highly successful business strategy that has created several billion dollar
      industries. In the 1980s 1-800 services became enormously popular, and enabled
      consumers to reach merchants at no cost. In the 1990s, merchants paid for
‘clicks’ on Internet advertisements on search engines such as Yahoo! and Google.
      Again, these services were virtually free to the consumer, and the merchant
      paid
      for new incoming business. In 2000, cellular customers had to pay up to $1.50
      for a merchant number using cellular 411 directory assistance services, or
      have
      to use expensive handsets and data packages to view a web site, crammed onto
      a
      tiny mobile browser.




UpSNAP
      provides a SMS, WAP and mobile application based search engine that allows
      mobile subscribers to quickly and easily search for mobile content and
      information services. The consumer pays for the cost of sending a text message,
      which can vary from free, to a few cents per message depending on their mobile
      contract with their carrier.





UpSNAP
      business model is to generate consumer traffic from the provision of these
      search services, and then up-sell premium content, or direct response
      advertising as a “pay per
      call”
service targeted according to the nature of the consumer search.





The
      business model is a media model - reliant on the sale of subscriptions and
      advertising from content-based services. UpSNAP relies on third-party operators
      for our advertising.





One
      of
      the key problems to establishing a media model for cell-phones is the difficulty
      of rolling out media based services to all the many carrier platforms and
      different handsets. The cellular industry has many competing technologies,
      standards and platforms.





UpSNAP
      solves this problem by allowing its premium services to be broadcast to any
      cell-phone using its proprietary technology outlined below.





Principal
      Products and Services





UpSNAP
      has four principal products and services:





1
            Mobile
                Search Engine Platform





2
            Pay-Per-Call
                Advertising services using our Voice over Internet Protocol (VoIP)
                platform





3
            SWinG
                streaming audio platform





4
            Premium
                audio content supplied from content
                partners





**MOBILE
      SEARCH ENGINE PLATFORM**





The
      UpSNAP mobile search engine platform allows consumers to search via text
      message, 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 do not generate any revenue for UpSNAP. They are free content to the
      consumer and are used by UpSNAP as a promotional vehicle to convert consumers
      from free to paid services.





**PAY-PER-CALL
      ADVERTISING PLATFORM**





Once
      a
      consumer makes a search for a specific search category or uses a “key-word’
identified and purchased by an UpSNAP partner as indicative of buying behavior,
      the UpSNAP advertising platform inserts a “paid’ advertising listing into the
      search reply.





UpSNAP
      has a Voice Over Internet Protocol (VoIP) switch which seamlessly bridges the
      merchant telephone number with the consumer via a call connect. Our Pay Per
      Call
      advertising platform can then record the number of calls received by a merchant
      and produce an audit trail for a billing engine. UpSNAP partners with
      specialized “Pay-Per-Call” companies, that sign-up advertisers nationwide
      throughout the US for this type of advertising **.** Our
      pay-per-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.





UpSNAP
      has now begun to generate small amounts of revenue from our pay-per-call
      Platform.








**SWING
      STREAMING AUDIO PLATFORM**





UpSNAP’s
      SWinG (Streaming Wireless Internet Gateway) platform enables mobile access
      to
      virtually any type of live and on-demand streaming audio content, 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 is thus able to be used on any cell phone
      in the United States, regardless of handset, data package or software. The
      SWinG
      platform was built over the course of 2002-2004 and is fully
      operational.





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.





***Margins***





The
      selling of mobile content typically involves:





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.




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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 typically
                will take
                20-85% of the net proceeds of the sale after all carrier and distribution
                charges depending on the nature, exclusivity and licensing rights
                of the
                content. If the content owner has a large brand, and distribution
                rights
                and relationships with the wireless operators, the content owner
                will be
                able to demand a higher margin, but will also bring much higher volume
                to
                the transaction. If the content is not exclusive, or is not a name
                brand,
                the content owner will be reliant on other companies such as UpSNAP
                to
                promote and distribute the application, and will thus take a much
                smaller
                margin.





The
      mobile supplier, in this case UpSNAP, takes between 15-80% of the remaining
      net
      revenue, A large media brand that has distribution with the wireless carriers
      and exclusive content will typically act as the principal in the wireless
      application deal, and will retain their brand and direct consumer relationship
      (via the mobile operator) with the consumer. In this case UpSNAP acts as a
      service provider, and will typically be paid a smaller margin and will not
      show
      the revenues from the content. In all other cases, UpSNAP acts a the principal
      in the wireless application deal. UpSNAP builds the application, makes it
      available on its servers, and on the wireless handsets, introduces the content
      into the wireless distribution channels, sets the price, and handles all the
      customer related issues and support.








**DISTRIBUTING
      AGREEMENTS**





Distribution
      of the UpSNAP suites of services is multi-tiered but can be summarized
      as:





1
            Carrier
                or “on deck” promotion - where the carrier actually promotes the service
                from the menu’s on the carrier handset, bills the consumer on their mobile
                phone bill, and takes its cuts, and then remits the balance to UpSNAP.
                UpSNAP has ‘on deck’ agreements with
                Sprint/Nextel.


2
              Off
                  Deck Promotion - where the consumer signs up for services through
                  traditional media promotions, internet advertising, affiliate marketing
                  relationships, or other media channels directly, and payment is
                  made via a
                  short-code or Premium SMS (PSMS) to the consumers mobile phone
                  bill.
                  UpSNAP has billing relationships in place with most major US carriers
                  including, Cingular, T-Mobile, Sprint/Nextel and
                  Alltel.


3
            White-label
                or third-party branded services, where UpSNAP sells its suite of
                search
                applications, content and services to third-parties, who when resell
                its
                services. UpSNAP has not yet entered into any such deals, but industry
                standard arrangements for these type of deals are largely done on
                a
                revenue-share basis, while some are performed on a license basis.
                These
                third-parties include media companies, who have relationships with
                local
                media and merchants, but lack the technology to offer mobile search
                and
                entertainment services.





In
      order
      to increase its revenues UpSNAP plans to aggressively market its search and
      entertainment technology to all three of these distribution channels outlined
      above over the course of 2007.





In
      addition, we expect to perform continued research and development around mobile
      search and integration of multi-media content during the course of the next
      12
      months. We may also enter into significant acquisitions, joint ventures, or
      offshore outsourcing programs to rapidly increase the amount of programming
      resource available to the company to allow us to continue to innovate in the
      marketplace.





Our
      growth strategy contemplates acquisitions.  During the first Quarter of
      2006 we successfully integrated the assets and personnel of XSVoice into the
      company. We continue to look for acquisition targets for although this will
      depend upon the timing and availability of appropriate acquisition
      opportunities. Our business plan calls for acquisitions in the advertising
      sector, that will allow us increase our average revenue per subscriber as well
      as our distribution channels.





As
      of
      December 31 we have a total of eight full-time employees and two part time
      individual contractors. We do not expect significant increases in employees,
      but
      do expect incremental additions in line with revenues in all areas of the
      business.




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**RESULTS
      OF OPERATIONS**





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





Our
      net
      losses during the three-month period ended December 31, 2006 were $431,574
      compared to a net loss of $364,937 during the three-month period ended December
      31, 2006.





The
      Company was a development stage company during the three month period ended
      December 31, 2005. Activities were primarily limited to outside contractors
      performing product development work, marketing costs, and officer’s travel
      expenses. The Company commenced generating revenue immediately after the
      XSVoice, Inc. acquisition on January 6, 2006.





The
      Company had revenues of $253,977 for the three month period ended December
      31,
      2006 and gross profit of $130,563. These revenues were primarily generated
      by
      the company’s relationship with Nextel and consisted primarily of streaming
      audio revenues generated by the company’s music content providers as well as the
      streaming audio content from NASCAR races. Cost of revenues for the three month
      period ended December 31, 2006 were $123,414. 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 did not have any
      revenues for the comparable quarter ended December 31, 2005 because the XSVoice
      acquisition had not yet been completed.





During
      the three-month period ended December 31, 2006, we incurred operating expenses
      of $562,264 compared to operating expenses of $361,107 incurred during the
      three-month period ended December 31, 2005, The increase in operating expenses
      during the three-month period ended December 31, 2006 from the same period
      in
      2005 resulted from: (i) an increase of $30,134 in product development costs
      as
      the Company added personnel to support both the acquired streaming audio
      technology from XSVoice, Inc. as well as the Company’s mobile search platform,
      (ii) a decrease of $17,799 in sales and marketing costs reflecting the
      deliberate reduction in marketing staff positions to reduce cash burn, and
      (iii)
      an increase of $188,822, in general and administrative expenses resulting from
      increased operating costs associated with increased operations and professional
      fees related to our SEC filings and $150,690 in amortization expense related
      to
      intangible assets generated as a result of the XSVoice acquisition.





For
      the
      three months ended December 31, 2006, our net loss was ($431,574) or ($0.02)
      per
      common share compared to a net loss of ($364,937) or ($0.02) per common share
      for the three month period ended December 31, 2006.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      December 31, 2006, our current assets were $307,376 and our current liabilities
      were $110,421, which resulted in net working capital of $196,955.





For
      the
      three months ended December 31, 2006, net cash flow used by operating activities
      was $191,925 compared to net cash used in operating activities of $377,293
      for
      the three months ended December 31, 2005. The decrease in cash flows used in
      operating activities is mainly due to the decrease in net loss for the
      period.





Net
      cash
      flows used by investing activities amounted to $5,258 for the three months
      ended
      December 31, 2006 compared to $1,916,901 provided for the three months ended
      December 31, 2005. The Company received $1,919,662 in cash as part of the
      reverse merger in November 2005.





There
      was
      no net cash flow provided by financing activities for the three months ended
      December 31, 2006 and December 31, 2005.





In
      summary, based upon the cash flow activities as previously discussed, for the
      three months ended December 31, 2006, our overall cash position decreased by
      $197,184.





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




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At
      the
      date of this report we are continuing to incur losses. We used capital of
      approximately $197,184 during the quarter ended December 31, 2006 to fund
      operations. The company’s current financial models indicate that within twelve
      months the Company’s cash balances may fall to levels that will not sustain
      operations. This financial model is highly sensitive to revenue forecasts based
      on existing revenue sources.





As
      of
      February 12, 2007 the Company had approximately $303,000 in cash and $395,000
      in
      working capital. The Company has
      taken
      steps to reduce its cash burn to a forecasted average cash burn of approximately
      $36,000 per month for calendar 2007.





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) . Total proceeds of $254,750 were received to be added to working
      capital. The Company relied on  Rule 4(2) in this private placement.





The
      company is likely
      to be dependent on raising a minimum of $500,000 in additional capital in order
      to fund its existing operating plan over the next twelve months, increase
      marketing and research and development and maintain a cash balance of
      approximately $ 250,000 at the end of such period.





The
      Company has no other commitments for such capital. The Company may obtain up
      to
      $5,132,502 in additional capital if all of the Company’s remaining outstanding
      warrants are exercised; however there is no assurance that any of these warrants
      will be exercised. The Company will also seek long-term financing through
      additional debt or equity financing. Without such additional capital we 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.





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.





**ITEM
      3. CONTROLS AND
      PROCEDURES**





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





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





*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




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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.




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**PART
      II**




**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) . 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 Rule 4(2) in this private placement.




**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: February
              14, 2007
            By:
            /s/ Tony
              PhilippTony
                Philipp
              Chairman
                of the Board and Chief Executive Officer
              (Principal
                Executive Officer)




Date: February
              14, 2007
            By:
            /s/ Paul
              C. SchmidtPaul C. Schmidt
              Chief
                  Financial Officer
                (Principal
                  Financial Officer)




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**INDEX
      TO EXHIBITS**





**Exhibit**
            **Description**2.1
            Share
                Exchange Agreement, dated November 15, 2005, by and among Upsnap,
                Inc. and
                the former stockholder of UpSNAP USA (incorporated by reference to
                Exhibit
                2.1 in our current report on Form 8-k filed on November 16,
                2005)3.1.1
            Articles
                of Incorporation as filed with the Secretary of State of the State
                of
                Nevada on July 25, 2003 (incorporated by reference to Exhibit 3.1
                in our
                Registration Statement SB-2 filed on September 18,
                2003)3.1.2
            Certificate
                of Amendment filed on November 7, 2005 (incorporated by reference
                to
                Exhibit 3.1 in our current report on Form 8-K filed on November 16,
                2005)3.2
            Bylaws
                adopted on July 25, 2003 (incorporated by reference to Exhibit 3.2
                in our
                Registration Statement SB-2 filed on September 18,
                2003)10.1
            Form
                of Subscription Agreement for September 2005 Private Placement
                (incorporated by reference to Exhibit 10.1 in our quarterly report
                for the
                fiscal period ended on September 2005)10.2
            Form
                of Registration Rights Agreement for September 2005 Private Placement
                (incorporated by reference to Exhibit 10.2 in our quarterly report
                for the
                fiscal period ended on September 2005)10.3
            Debt
                Conversion Agreement, dated October 31, 2005, among UpSnap, Inc.,
                518464
                B.C. Ltd., Art Mapp Communications, Inc., Jason Sundar, and Yvonne
                New.
                (incorporated by reference to Exhibit 10.3 in our quarterly report
                for the
                fiscal period ended on September 2005)10.4
            Form
                of Series A Warrant (incorporated by reference to Exhibit 10.4 in
                our
                quarterly report for the fiscal period ended on September 2005)10.5
            Form
                of Series B Warrant (incorporated by reference to Exhibit 10.5 in
                our
                quarterly report for the fiscal period ended on September
                2005)10.6
            Directors
                and Officers Insurance Policy, dated October 18, 2005*10.7
            Confirmatory
                Assignment, dated June 1, 2005, by and between UpSNAP USA, Inc. and
                Alto
                Ventures, Inc. (incorporated by reference to Exhibit 10.7 in our
                quarterly
                report for the fiscal period ended on December 31,
                2005)10.8
            Asset
                Purchase Agreement, dated January 6, 2006, by and between UpSNAP,
                Inc. and
                XSVoice, Inc. (incorporated by reference to Exhibit 10.1 in our current
                report on Form 8-K filed on January 12, 2006)10.9
            Nextel
                Online Handset Placement Agreement with Nextel Finance Company110.10
            Commercial
                Service Agreement between UpSNAP, Inc. and Simplewire, Inc. dated
                February
                7, 2006110.11
            Letter
                Agreement between UpSNAP, Inc. and Tony Philipp dated July 10, 2006110.12
            Letter
                Agreement between UpSNAP, Inc. and Richard Jones dated July 10, 2006110.13
            Letter
                Agreement between UpSNAP, Inc. and Paul Schmidt dated July 10, 2006131.1
            Rule
                13a-14(a)/15d-14(a) Certification of Tony
                Phillips, Chairman and Chief Executive
                Officer*




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31.2
            Rule
                13a-14(a)/15d-14(a) Certification of Paul C.
                Schmidt, Chief Financial Officer*32
            Certification
                of Principal Executive Officer and
                Principal Financial Officer furnished pursuant to 18 U.S.C. Section
                1350,
                as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
                2002.*





*
      Filed
      herein.


1 Incorporated by reference to Amendment No. 2 our Form SB-2 Registration
      Statement, Reg. No. 333-132893, filed July 13, 2006.