UpSnap, Inc. - FORM 8-K/A - EX-99.2 - DURATECH?S UNAUDITED BALANCE SHEET

Attached files

file	filename
8-K/A - UPSN 8-K/A 11/20/2009 - UpSnap, Inc.	form8-ka.htm
EX-2.1 - SHARE EXCHANGE AGREEMENT, DATED AUGUST 29, 2008 - UpSnap, Inc.	ex2_1.htm
EX-2.2 - ASSET PURCHASE AGREEMENT, DATED AUGUST 29, 2008 - UpSnap, Inc.	ex2_2.htm
EX-99.1 - UPSNAP?S AUDITED CONSOLIDATED BALANCE - UpSnap, Inc.	ex99_1.htm
EX-21.1 - LIST OF SUBSIDIARIES - UpSnap, Inc.	ex21_1.htm

Exhibit 99.2

UpSnap, Inc. F/K/A Duratech Group Inc.
Consolidated Balance Sheet

	As of			As of
	July 31, 2009			January 31, 2009
	(Unaudited)			(Audited)
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents	$	-		$	-
Accounts Receivable		970,326			812,355
Deposits/Holdback		114,905			117,973
Inventory		2,236,958			1,947,581
TOTAL CURRENT ASSETS		3,322,189			3,542,131


OTHER ASSETS		388,221			365,934
PROPERTY, PLANT, AND EQUIPMENT, NET		2,315,286			638,305
TOTAL ASSETS	$	6,025,696		$	3,882,148


LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
LIABILITIES
CURRENT LIABILITIES:
Bank Overdraft	$	263,426		$	319,263
Notes Payable, current		2,086,317			2,136,664
Due to related party, current		129,364			70,308
Accounts Payable and Accrued Liabilities		1,042,636			961,195
Customer Deposits		1,663,574			273,289
TOTAL LIABILITIES		5,185,317			3,760,719

STOCKHOLDERS' EQUITY/(DEFICIT)
Common Stock ($.001 par value, 97,500,000 authorized; 78,379,167 and 75,224,676 issued and outstanding)		78,379			75,225
Paid in Capital		3,317,842			1,403,688
Accumulated Other Comprehensive Income		69,391			109,209
Retained Earnings/(Accumulated Deficit)		(2,486,451	)		(1,466,693	)
TOTAL STOCKHOLDERS' EQUITY/(DEFICIT)		840,379			(121,429)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)	$	6,025,696		$	3,882,148

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

Table of Contents

UpSnap, Inc. F/K/A Duratech Group Inc.
Consolidated Statement of Operations (Unaudited)

	For the three months ended July 31,
	2009			2008
SALES AND COST OF SALES
Sales	$	1,030,429		$	661,050
Cost of Sales (excluding depreciation)		739,176			508,437



EXPENSES
Selling, general and administrative		276,029			222,439
Payroll Expense		252,534			509,386
Bad Debt Expense		-			-
Depreciation		43,907			-
TOTAL EXPENSES		572,470			731,825

Net Income/(Loss) from Operations		(281,217	)		(579,212	)

OTHER INCOME/(EXPENSE)
Other Income		491			998
Interest Expense		(104,395	)		(49,082	)
Interest Income		-			-
NET OTHER INCOME/(EXPENSE)		(103,904	)		(48,084	)

NET INCOME/(LOSS) FROM CONTINUED OPERATIONS		(385,121	)		(627,296	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation Gain/(Loss)		(19,307	)		5,852

COMPREHENSIVE INCOME (LOSS)		(404,428	)		(621,444	)
Net (Loss) per share—basic and fully-diluted		(0.01	)		(3.18	)
Weighted average shares outstanding		77,102,840			195,514

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

Table of Contents

UpSnap, Inc. F/K/A Duratech Group Inc.
Consolidated Statement of Operations (Unaudited)

	For the six months ended July 31,
	2009			2008
SALES AND COST OF SALES
Sales	$	1,859,144		$	2,176,567
Cost of Sales (excluding depreciation)		1,567,068			1,592,225



EXPENSES
Selling, general and administrative		490,836			387,155
Payroll Expense		501,645			720,614
Bad Debt Expense		-			-
Depreciation		73,058			-
TOTAL EXPENSES		1,065,539			1,107,769

Net Income/(Loss) from Operations		(773,463	)		(523,427	)

OTHER INCOME/(EXPENSE)
Other Income		484			999
Interest Expense		(192,655	)		(88,951	)
Interest Income		-			-
NET OTHER INCOME/(EXPENSE)		(192,171	)		(87,952	)

NET INCOME/(LOSS) FROM CONTINUED OPERATIONS		(965,634	)		(611,379	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign Currency Translation Gain/(Loss)		(39,818	)		5,887

COMPREHENSIVE INCOME (LOSS)		(1,005,452	)		(605,492	)
Net (Loss) per share—basic and fully-diluted		(0.01	)		(3.10	)
Weighted average shares outstanding		76,163,758			195,514

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

UpSnap Inc. F/K/A Duratech Group, Inc.
Consolidated Statements of Cash Flows
	For six-months ended July 31 2009			For year ended Jan. 31 2009
	(Unaudited)			(Audited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income/(loss) from continued operations	$	(965,634	)	$	(1,050,993	)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Depreciation		73,058			124,397
Bad Debt Expense		-			62

Changes in Assets and Liabilities:
(Increase)/Decrease in Accounts Receivable		(152,971	)		(345,833	)
(Increase)/Decrease in Accounts Receivable--Related Party		-			89,289
(Increase)/Decrease in Deposits/Holdbacks		3,068			(117,973	)
(Increase)/Decrease in Inventories		(289,377	)		23,236
Increase/(Decrease) in Accounts Payable and Accrued Expenses		38,401			670,714
Increase/(Decrease) In Customer Deposits		1,390,285			219,607
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		96,830			(387,494	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of Other Assets		(22,287	)		-
Purchase of Property, Plant, and Equipment		(300,039	)		(46,867	)
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES		(322,326	)		(46,867	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds/(Payment) of Notes Payable		262,095			539,340
Proceeds/(Payment) of Shareholder Loans		-			-
Proceeds from Long-term Debt		-			-
Increase/(decrease) in Due to related party		59,056			-
Proceeds/(Payment) of Bank Overdraft		(55,837	)		(220,056	)
Proceeds/(Payment) from Share Redemption		-			-
Payment for Structures Acquisition		-			-
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		265,314			319,284

EFFECT OF EXCHANGE RATE CHANGES ON CASH		(39,818	)		115,077

NET INCREASE IN CASH AND
CASH EQUIVALENTS		-			-
CASH AND CASH EQUIVALENTS:
Beginning of Period		-			-

End of Period	$	-		$	-

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
CASH PAID DURING THE PERIOD FOR:
Interest	$	192,655		$	277,653
Taxes	$	-		$	-
NON-CASH FINANCING ACTIVITIES

Issuance of shares for Land/Equipment	1,450,000	431,653
Conversion of Notes Payable/Accounts Payable to Equity	393,765	-
Conversion of Due to related party to Equity	-	592,435
Conversion of Duratech Stock for UpSnap Stock	-	459,209

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

Table of Contents

UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Nature of Business—UpSnap, Inc. (“UpSnap” or “the Company”) was incorporated on July 24, 2003 under the laws of the State of Nevada. The Company was a Development Stage Company, as defined by the Statement of Financial Accounting Standard (“SFAS”) No. 7 “Accounting and Reporting by Development Stage Enterprises”.

On August 29, 2008, UpSnap Inc. (the “Company”) entered into a Share Exchange Agreement (the “Share Exchange Agreement”) by and among the Company; Tony Philipp, an officer, director and shareholder of the Company (“Philipp”); Duratech Group Inc., an Alberta, Canada corporation (“Duratech”) and the shareholders of Duratech (“Duratech Shareholders”), including Peter van Hierden, a citizen of Alberta, Canada and owner directly or indirectly of approximately 96% of the share capital of Duratech (“van Hierden”).

Upon closing of the share exchange transaction (the “Share Exchange”) on September 17, 2008, the Duratech Shareholders transferred all of their shares of common stock in Duratech to the Company in exchange for an agreement to issue to them an aggregate of 50,349,342 shares of Common Stock of the Company, resulting in Duratech becoming a majority owned subsidiary of the Company.

After the consummation of the transactions contemplated by the Share Exchange Agreement, the Company, on the day after the Closing Date, consummated the sale of its assets related to its mobile information search services, subject to assumption and payment of all of the Company’s liabilities related to periods prior to the closing, to UpSnap Services, LLC, a North Carolina limited liability corporation (“UpSnap Services”), which is owned by Philipp, pursuant to an Asset Purchase Agreement dated as of August 29, 2008 (the “Asset Purchase Agreement”). As part of the reverse merger, the Company will cease engaging in the mobile information search services business.

UpSnap, Inc.’s principal operations following the reverse-merger are conducted through Duratech Group Inc. (previously named Duratech Contracting Inc.). Prior to the date of the reverse-merger, the historical financial statements only include the historical results and operations of Duratech Group, Inc. (the accounting acquirer). Duratech commenced operations on December 18, 2002 as a small homebuilding company constructing about 5 homes a year until Peter van Hierden (“van Hierden”) bought out the majority partners and took control of the operations in July, 2007. Shortly thereafter, Mr. van Hierden identified a synergistic opportunity to acquire a modular oil camp factory which was also in distress and acquired the company in July, 2007. Since that time management has been able to turn both these operations around and now seeks to grow the company organically and through additional acquisitions.

Duratech’s principle operations are building manufactured and stick-built homes and modular oil camps in Alberta and Saskatchewan, Canada.

Duratech manufactures and builds homes and modular sites for its marketplace, principally Alberta and Saskatchewan. The Company has three principal products that it offers: first, the company builds on-site conventional homes; second, the company builds ready-to-move (RTM) homes in factories and brings them on foundations to sell to end users; and third, the company builds modular camp sites for the oil mining industry.

On July 1, 2007, Duratech Contracting Inc. acquired Duratech Structures Inc. (Previously known as Jobsite Structures). On July 28, 2008, Duratech Contracting Inc. changed its name to become Duratech Group Inc.

Cash and Cash Equivalents—For purposes of the Consolidated Statement of Cash Flows, the Company considers liquid investments with an original maturity of three months or less to be cash equivalents.

Management’s Use of Estimates—The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Presentation and Foreign Currency Translation—These consolidated financial statement have been prepared in accordance with US generally accepted accounting principles (GAAP) and translated into U.S dollars. The prevailing exchange rate used to translate the Canadian dollars to U.S dollars at July 31, 2009 and January 31, 2009 was 0.9269 and .0.81248, respectively. The average for the quarter ending July 31, 2009 and 2008 was 0.88265 and 0.9862, respectively.

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Assets and liabilities denominated in respective functional currencies are translated into United States Dollars at the exchange rate as of the balance sheet date. The share capital and retained earnings are translated at exchange rates prevailing at the time of the transactions. Revenues, costs, and expenses denominated in respective functional currencies are translated into United States Dollars at the weighted average exchange rate for the period. The effects of foreign currencies translation adjustments are included as a separate component of accumulated other comprehensive income.

Revenue Recognition— Revenues from long-term construction contracts (over one year) of the Duratech Contracting division, which builds on-site conventional homes, are recognized using the percentage-of-completion method. Revenues from short-term contracts of the Duratech Structures division, which builds ready-to-move homes and modular camp sites, are recognized as the work is performed and related costs are incurred. Contract costs include all direct materials and labor costs and those indirect costs related to contract performance, such as indirect labor, supplies, tools, and repair costs. General and administrative costs are charged to expense as incurred.

As a result of the global economic environment and decrease in natural resource prices, demand for on-site conventional homes (long-term construction contracts) have slowed slightly and prices have decreased up to 10% in some markets. In regards to short-term contracts, the Company has found continued demand for ready-to-move (RTM) homes and a moderation of demand for modular camp sites for the oil mining industry. The Company expects demand for modular camp sites to accelerate with any increase in natural resource prices, principally oil and natural gas.

Revenue and all related costs and expenses from house and land sales are recognized at the time that closing has occurred, when title and possession of the property and the risks and rewards of ownership transfer to the buyer, and we do not have a substantial continuing involvement in accordance with SFAS No. 66, “Accounting for Sales of Real Estate” (“SFAS 66”). In order to properly match revenues with expenses, we estimate construction and land development costs incurred and to be incurred, but not paid at the time of closing. Estimated costs to complete are determined for each closed home and land sale based upon historical data with respect to similar product types and geographical areas and allocated to closings along with actual costs incurred based on a relative sales value approach. We monitor the accuracy of estimates by comparing actual costs incurred subsequent to closing to the estimate made at the time of closing and make modifications to the estimates based on these comparisons.

Revenue is recognized for long-term construction contract sales on the percentage-of-completion method when the land sale takes place prior to all contracted work being completed. Pursuant to the requirements of SFAS 66, if the seller has some continuing involvement with the property and does not transfer substantially all of the risks and rewards of ownership, profit shall be recognized by a method determined by the nature and extent of the seller’s continuing involvement. In the case of our land sales, this involvement typically consists of final development activities. We recognize revenue and related costs as work progresses using the percentage-of-completion method, which relies on estimates of total expected costs to complete required work. Revenue is recognized in proportion to the percentage of total costs incurred in relation to estimated total costs at the time of sale. Actual revenues and costs to complete construction in the future could differ from our current estimates. If our estimates of development costs remaining to be completed and relative sales values are significantly different from actual amounts, then our revenues, related cumulative profits and costs of sales may be revised in the period that estimates change.

Comprehensive Income (Loss)—The Company adopted Financial Accounting Standards Board Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income”, which establishes standards for the reporting and display of comprehensive income and its components in the consolidated financial statements. The other comprehensive income (loss) applicable to the Company during the periods covered in the consolidated financial statements were foreign currency translation gains/(loss).

Cash and Bank Overdraft—Cash consists of cash, cash equivalents and checks issued in excess of cash on deposit. Cash is put in the Bank account which has a negative balance. For the purpose of the cash flow statement, Bank overdrafts are also classified as cash.

Advertising Costs—Advertising costs are expensed as incurred. For the quarter ended July 31, 2009 and 2008, the company incurred $8,933 and $22,857 respectively. For year to date ended July 31, 2009 and 2008, the company incurred $17,393 and 22,857, respectively.

Net Loss per Common Share—Statement of Financial Accounting Standard (SFAS) No. 128 requires dual presentation of basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator of the EPS computations. Basic earnings per share amounts are based on the weighted average shares of common stock outstanding. If applicable, diluted earnings per share would assume the conversion, exercise or issuance of all potential common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the period presented. There were no adjustments required to net loss for the period presented in the computation of diluted earnings per share.

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes—Income taxes are provided in accordance with Statement of Financial Accounting Standards (SFAS) No. 109, “Accounting for Income Taxes.” A deferred tax asset or liability is recorded for all temporary differences between financial and tax reporting and net operating loss-carryforwards.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that, and some portion or the entire deferred tax asset will not be realized. Deferred tax assets and liabilities are adjusted for the effect of changes in tax laws and rates on the date of enactment.

Fair Value of Financial Instruments—The carrying amounts reported in the consolidated balance sheet for cash, accounts receivable and payable approximate fair value based on the short-term maturity of these instruments.

Accounts Receivable— Accounts deemed uncollectible are written off in the year they become uncollectible. For the quarters ended July 31, 2009 and 2008, no amounts were deemed uncollectible as of July 31, 2009. Outstanding Accounts Receivable as of July 31, 2009 was $1,046,850. Typical payment terms for short-term contracts are 30% down, 60% upon completion and 10% holdback to be released once the structure is on-site and attached. Typical payment terms for stick-built homes (long-term construction contracts) are four draws from bank upon completion of backfill, lockup, ready-to-paint and at completion and a 10% holdback is held for 45 days to allow for builder liens by lawyer. Accounts receivable are considered current as long as there is reasonable expectation that payments will be made as agreed upon or otherwise negotiated, but in no event longer than 12 months. The Company evaluates collectability based on receiving payments as agreed upon or as otherwise negotiated.

Impairment of Long-Lived Assets— Using the guidance of Statement of Financial Accounting Standards (SFAS) No. 144, “Accounting for the Impairment or Disposal of 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.

Inventory—Inventory is stated at the lower of accumulated cost or fair value, as determined in accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long Lived Assets” (“SFAS 144”). Accumulated cost includes costs associated with land acquisition, land development, and home construction costs, including certain direct and indirect overhead costs related to development and construction. Land acquisition and development costs are allocated to individual lots using actual lot cost determined based on the total expected land acquisition and development costs and the total expected home closings for the project. The specific identification method is used to accumulate home construction costs.

Cost of sales includes the construction cost of the home, the actual lot cost for the home or project, and commissions and closing costs applicable to the home. The construction cost of the home includes amounts paid through the closing date of the home. Any costs incurred but not yet paid are expensed as incurred and are typically very nominal in nature because the construction projects have been completed before recorded as sales. The construction cycles for the long-term construction projects (stick-built homes) are approximately one year and for the short-term construction projects (modular and ready-to-move homes) are approximately two to three months.

For those projects for which construction and development activities have been idled for an extended period of time, longer than three months, an impairment analysis will be performed to determine if an adjustment may be necessary. If the fair market value of a home (based on comparable units in the market) is less than its cost, this would suggest impairment and an appropriate adjustment would be made. Recent market activity has shown that such fair market value estimates are not very sensitive or subjective. These analyses are performed on a regular basis and confirmed before filing documents with the Commission.

Property and Equipment—Property and equipment is stated at cost. Depreciation is provided by the straight-line method over the estimated economic life of the property and equipment. The following table shows the estimated useful life used for each class of fixed asset:

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Asset	Estimated Useful Life

Buildings	25	years
Shed	10	years
Tools and Equipment	5	years
Small tools and equipment	4	years
Computer and Office Equipment	3	years
Automobiles	3	years
Leasehold Improvements	5	years
Computer Hardware	2.5	years

The estimated annual depreciation expense is $124,397 per year. Total depreciation expense for the years ended January 31, 2009 and 2008 were $124,397 and $21,598 respectively.

Customer Deposits—The cash deposit received from customers when project in progress are shown in the balance sheet as current liabilities and apply against the revenue expected from customers when the project is terminated and the customers are billed. The deposit is without interest.

Deposits/Holdback—The deposits referenced under Deposits/Holdbacks are land deposits for future development that are refundable and not deposits from customers for home construction. The holdbacks included under Deposits/Holdback are deficiency holdbacks that are held by the closing attorney on a completed project until it’s determined that there will not be any further claims by sub-contractors on the project.

Recent Accounting Pronouncements—In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value for Financial Assets and Financial Liabilities—including an amendment of FASB Statement No. 115”. This statement permits entities to choose to measure many financial instruments and certain other items at value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. This Statement is expected to expand the use of fair value measurement, which is consistent with the Board’s long-term measurement objectives for accounting for financial instruments. Effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. No entity is permitted to apply the Statement retrospectively to fiscal years preceding the effective date unless the entity chooses early adoption. The Company has adopted these pronouncements and determined that it had no effect on the Company’s results of operations or its financial position.

In December 2007, the FASB issued SFAS 141(revised 2007), Business Combinations (“SFAS 141R”). SFAS 141R will significantly change the accounting for business combinations in a number of areas including the treatment of contingent consideration, contingencies, acquisition costs, IPR&D and restructuring costs. In addition, under SFAS 141R, changes in deferred tax asset valuation allowances and acquired income tax uncertainties in a business combination after the measurement period will impact income tax expense. SFAS 141R is effective for fiscal years beginning after December 15, 2008. Adoption of this standard is not expected to have a material effect on the Company’s results of operations or its financial position.

In December 2007, the FASB issued SFAS 160, Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”). SFAS 160 will change the accounting and reporting for minority interests, which will be recharacterized as noncontrolling interests (NCI) and classified as a component of equity. This new consolidation method will significantly change the account with minority interest holders. SFAS 160 is effective for fiscal years beginning after December 15, 2008. Adoption of this standard is not expected to have a material effect on the Company’s results of operations or its financial position.

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities — an amendment to FASB Statement No. 133.” SFAS No. 161 is intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations; and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with early adoption encouraged. The adoption of this statement, which is expected to occur in the first quarter of 2009, is not expected to have a material effect on the Company’s financial statements.

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE A—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted Accounting Principles.” SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board amendments to AU Section 411, “The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles.” The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts — An interpretation of FASB Statement No. 60.” SFAS No. 163 requires that an insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement No. 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprise’s risk-management activities. SFAS No. 163 requires that disclosures about the risk-management activities of the insurance enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted.

The adoption of this statement is not expected to have a material effect on the Company’s financial statements.

NOTE B—SUPPLEMENTAL CASH FLOW INFORMATION

Supplemental disclosures of cash flow information for the quarter ended July 31, 2009 and year ended January 31, 2009 is summarized as follows:

Cash paid during the years for interest and income taxes:

	July 31, 2009		Jan, 31 2009

Interest	$	192,655	$	277,653
Income Taxes	$	-	$	-

NOTE C—PROPERTY AND EQUIPMENT

Property and equipment consisted of the following as of January 31, 2009:

Asset	Cost		Accumulated Depreciation		Net Book Value

Land	$	32,855	$	-	$	32,855
Buildings		69,088		6,660		62,428
Tools and Equipment		457,908		72,045		385,863
Small Tools and Equipment		19,294		9,878		9,416
Computer and Office Equipment		47,002		22,473		24,529
Automobiles		97,485		55,486		41,999
Leasehold Improvements		99,752		18,537		81,215
	$	823,384	$	185,079	$	638,305

One half of the depreciation is used in the year of acquisition.

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE D—INCOME TAXES

Due to the prior years’ operating losses and the inability to recognize an income tax benefit therefrom, there is no provision for current or deferred federal or state income taxes or Canadian taxes for the year ended January 31, 2009. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

For the twelve month periods ended September 30, 2008 and 2007, prior to the reverse-merger with Duratech, the Company incurred net operation 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. For the period ending September 30, 2008, the Company had additional net operating loss carry-forward for its operations through September 17 prior to the completion of its share exchange agreement with Duratech. The figures here reflect an estimate of those net operating loss carry-forward (see the Company’s 10-QSB for the period ending June 30, 2008 filed on August 13, 2008 for additional information). Thus, at September 30, 2008, the Company had approximately $8,881,662 of accumulated net operating losses. The net operating loss carry-forwards, if not utilized, will begin to expire in 2022.

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

	Twelve Month Period Ended September 30			Twelve Month Period Ended September 30

	2008			2007

Federal and state income tax benefit	$	5,909,622		$	1,040,214
Change in valuation allowance on deferred tax assets		(5,909,622	)		(1,040,214	)
Net deferred tax assets	$	-		$	-

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

	2008			2007

Federal and state statutory rate	$	5,909,622		$	1,040,214
Change in valuation allowance on deferred tax assets		(5,909,622	)		(1,040,214	)
	$	-		$	-

The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the year ended September 30, 2008 is as follows:

	2008			2007
Income tax computed at the federal statutory rate		34	%		34	%
State income tax, net of federal tax benefit		0	%		0	%
Total		34	%		34	%
Valuation allowance		-34	%		-34	%
Total deferred tax asset		0	%		0	%

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE D—INCOME TAXES (CONTINUED)

The Company’s principle subsidiary (Duratech Group Inc.) is subject to income taxes on income arising in or derived from the tax jurisdiction in which it is domiciled and operates (Canada). However, because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by $1,050,993 and $98,867 for the year ended January 31, 2009 and 2008 respectively.

The components of Company’s estimated deferred tax asset, calculated using federal and state effective tax rates, as of January 31, 2009 and 2008 are as follows:

	Twelve Month Period Ended January 31			Twelve Month Period Ended January 31

	2009			2008

Federal and state income tax benefit	$	1,050,993		$	98,867
Change in valuation allowance on deferred tax assets		(1,050,993	)		(98,867	)
Net deferred tax assets	$	-		$	-

As of January 31, 2009, the Company had Canadian net operating loss carryforwards of approximately $1,372,058 which will expire at various times through the year 2028.

NOTE E—NOTES PAYABLE

Description	Rate	Balance

Note due September 30, 2017	prime rate plus 1.5%	$	103,270
Note due June 30, 2009	prime rate plus 2%	$	146,110
Demand Note	Vary 8-18%	$	376,867
Demand Note	Vary 8-18%	$	1,200,538
Residential Line of Credit a	Vary 6-8%	$	259,532
		$	2,086,317
a This is a residential loan line of credit. Progress loans are available upon satisfactory inspection

There are no covenants associated with the above debt arrangements.

NOTE F—FINISHED GOODS AND WORK IN PROGRESS INVENTORY

Land (finished goods) and residential spec home inventory is valued at the lower of cost and net realizable value with the cost being determined on an actual cost basis. Presold residential homes in work in Progress are recorded at the actual expenses incurred to date.

Raw materials inventory is stated at the lowest cost, on first-in, first-out basis, and net realizable value. Periodic inventory method is used for it evaluation.

Inventories are as follows:

Raw Materials	$	54,010
Work in Progress	$	1,674,117
Finished Goods	$	508,831
	$	2,236,958

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE G—SEGMENT REPORTING

The Company has two reportable segments—Duratech Structures, Inc. and Duratech Contracting, Inc.

The Net Sales and Profit/(Loss) by Segment for the six-months ended July 31, 2009 are as follows:

Net Sales by Segment	For the six-months ended July 31, 2009
	Duratech Structures, Inc.			Duratech Contracting, Inc.			Totals
Sales, net	$	472,112		$	1,387,032		$	1,859,144
Cost of Sales (excluding depreciation)		524,604			1,042,464			1,567,068

Profit/(Loss) by Segment	For the six-months ended July 31, 2009
	Duratech Structures, Inc.			Duratech Contracting, Inc.			Totals
Net Operating Profit/(Loss)	$	(373,867	)	$	(591,767	)	$	(965,634	)

The Net Sales and Profit/(Loss) by Segment for the six-months ended July 31, 2008 are as follows:

Net Sales by Segment	For the six-months ended July 31, 2008
	Duratech Structures, Inc.			Duratech Contracting, Inc.		Totals
Sales, net	$	671,496		$	1,505,071	$	2,176,567
Cost of Sales (excluding depreciation)		496,375			1,095,850		1,592,225

Profit/(Loss) by Segment	For the six-months ended July 31, 2008
	Duratech Structures, Inc.			Duratech Contracting, Inc.		Totals
Net Operating Profit/(Loss)	$	(224,886	)	$	(386,493)	$	(611,379)

Total Assets by Segment as of July 31, 2009 and January 31, 2009 are as follows:

Total Assets by Segment	For the period ended July 31, 2009
	Duratech Structures, Inc.		Duratech Contracting, Inc.		Totals
Total Assets	$	2,779,085	$	3,246,611	$	6,025,696

Total Assets by Segment	For the year ended January 31, 2009
	Duratech Structures, Inc.		Duratech Contracting, Inc.		Totals
Total Assets	$	1,794,626	$	2,087,522	$	3,882,148

The accounting policies used for segment reporting are the same as those described in Note A “Summary of Significant Accounting Policies”;

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE H—EQUITY

OUTSTANDING SHARE DATA

The outstanding share data as at July 31, 2009 and January 31, 2009 is as follows:

	Number of shares outstanding

	2009

Common shares		78,379,167
Options to purchase common shares		20,380,702
Warrants to purchase common shares		2,360,000
Debentures convertible to common shares		-
Accrued interest convertible to common shares		-

Shares Issued from Share Exchange Agreement

The following common shares were issued to Duratech Shareholders following the closing of the Share Exchange Agreement on September 17, 2008:

Janet van Hierden			6,387,729
Jason van Hierden			580,703
Peter van Hierden			41,255,711
Brendon van Hierden			116,141
George Sawatzky			2,009,058

Total			50,349,342

Stock Plan

On November 2, 2006 the Board of Directors of UpSNAP, Inc. approved a 2006 Omnibus Stock and Incentive Plan. The Plan made four million (4,000,000) shares, either unissued or reacquired by the Company, available for awards of either options, stock appreciation rights, restricted stocks, other stock grants, or any combination thereof. Eligible recipients include employees, officers, consultants, advisors and directors. Options granted generally have a ten-year term and vest over four years from the date of grant. Certain of the stock options granted under the Plan have been granted pursuant to various stock option agreements. Each stock option agreement contains specific terms. The Board of Directors increased the size of the Plan to seven and one half million (7,500,000) total shares on August 8, 2007, which was ratified by stockholders in September 2007.

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. The Company has awarded stock-based compensation both as restricted stock and stock options.

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.

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 quarter ended July 31, 2009 are shown in the following table:

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE H—EQUITY (CONTINUED)

Expected volatility	70.0%
Expected dividends	0%
Expected terms	6.0-6.25 years
Pre-vesting forfeiture rate	50%
Risk-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 seventeen 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 was based upon plan to date experience. As required under SFAS No. 123(R), we will adjust the estimated forfeiture rate to our actual experience. Management will continue to assess the assumptions and methodologies used to calculate estimated fair value of share-based compensation. Circumstances may change and additional data may become available over time, which could result in changes to these assumptions and methodologies, and thereby materially impact our fair value determination.

A summary of the time-based stock awards as of July 31, 2009, and changes during the quarter ended July 31, 2009, is as follows:

	Shares		Weighted Average Exercise Price

Outstanding at June 30, 2008		2,570,000	$	0.10
Granted (part of Share Exchange Agreement)		17,810,702	$	0.05
Forfeited or expired		-	$	-
Outstanding July 31, 2009		20,380,702	$	0.056

Exercisable at July 31, 2009		2,570,000	$	0.10

The following tables summarize information about fixed stock options outstanding and exercisable at July 31, 2009:

	Stock Options Outstanding
Range of Exercise Prices	Number of Shares Outstanding	Weighted Average Contractual Life in Years
$0.10	700,000	7.75
$0.10	170,000	8.84
$0.10	1,700,000	8.92
$0.10	17,810,702	9.17
	20,380,702	9.10

	Stock Options Exercisable
Range of Exercise Prices	Number of Shares Exercisable	Weighted Average Exercise Price
$0.10	2,570,000	$0.10
$0.016 – 0.125	3,422,912	$0.05

	15,992,912

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE H—EQUITY (CONTINUED)

The exercise price of stock options granted during the period ended July 31, 2009 was equal to the market price of the underlying common stock on the grant date.

There was no aggregate intrinsic value as of July 31, 2009. 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.

Warrants

The Company has recorded the warrant instruments 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.

A summary of warrant activity for the period ended July 31, 2009 is as follows:

Series B
	Number of Warrants		Weighted- Average Exercise Price		Warrants Exercisable		Weighted- Average Exercise Price


Outstanding, January 31, 2009		1,800,000	$	1.10		1,800,000	$	1.10
Granted		-
Expired		-
Exercised		-		-				-

Outstanding, July 31, 2009		1,800,000	$	1.10		1,800,000	$	1.10


	Number of Warrants		Weighted- Average Exercise Price		Warrants Exercisable		Weighted- Average Exercise Price


Outstanding, January 31, 2009		560,000	$	0.90		560,000	$	0.90
Granted		-
Exercised		-

Outstanding, July 31, 2009		560,000	$	0.90		560,000	$	0.90

At July 31, 2009, the range of warrant prices for shares under warrants and the weighted-average remaining contractual life is as follows:

		Warrants Outstanding						Warrants Exercisable
Range of Warrant Exercise Price		Number of Warrants		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Number Of Warrants		Weighted- Average Exercise Price

$	1.10		1,800,000	$	1.10		2.28		1,800,000	$	1.10
$	0.90		560,000	$	0.90		2.37		560,000	$	0.90
			2,360,000						2,360,000

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UPSNAP, INC. F/K/A Duratech Group Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE AND SIX MONTHS ENDED JULY 31, 2009 AND 2008

(Unaudited)

NOTE H—EQUITY (CONTINUED)

Shares to be Issued from Preferred Stock Exchange Agreement

On January 8, 2009, the Company and certain individuals (the “Sellers”) entered into the Preferred Stock Exchange Agreement, pursuant to which the Company agreed to issue 338,938,010 shares of Common Stock, when the same are authorized, and to issue 127,568,470 options on Common Stock of the Company, when the same are authorized in exchange for not less than 3,198,362 shares of Preferred Stock of Duratech, and up to 1,203,790 options on Preferred Stock of Duratech. The exchange ratio under the Preferred Stock Exchange Agreement for the exchange of both the Common Stock of the Company for the Preferred Stock of Duratech, and for the options on Common Stock of the Company for options on the Preferred Stock of Duratech is equal to 105.97 to one.

The Preferred Stock of Duratech has a designation which entitles it to one vote per share, has a $1.00 liquidation preference and is not entitled to any dividend or conversion privilege. Following this conversion, there are also 158,096 shares of Duratech Preferred Non-Voting Stock that remain oustanding, which have a $1.00 liquidation preference, are not entitled to any dividend or conversion privilege, and are to be liquidated in three years.

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 I—COMMITMENTS/LEASES

As of July 31, 2009, the company had commitments for the acquisition of residential lots and land. The company had paid non-refundable deposits $24,374. This deposit is included in Deposits/Holdback..

NOTE J—RELATED PARTIES

The Company has an outstanding amount Due to a shareholder in the amount of $129,364. This outstanding amount is due upon demand, is unsecured and does not bear an interest rate.

NOTE K—GOING CONCERN

As shown in the accompanying financial statements, the Company had a loss for the period ended July 31, 2009. During the years ended January 31, 2009 and 2008, the Company had a net loss of $935,916 and $104,735 respectively. The Company has a net deficiency of $2,555,842.

Management believes that actions presently being taken to win more contracts, raise equity capital, seek strategic relationships and alliances, and build its marketing efforts to generate positive cash flow provide the means for the Company to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

UpSnap, Inc. - FORM 8-K/A - EX-99.2 - DURATECH?S UNAUDITED BALANCE SHEET - November 20, 2009

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