SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM
10-K
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
For the fiscal year ended
January 31, 2009
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________
to ___________.
Commission file number
000-50560
UPSNAP,
INC.
(Exact name of registrant as specified
in its charter)
|
Nevada
(State
or other jurisdiction of
incorporation
or organization)
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20-0118697
(IRS
Employer Identification No.)
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c/o
Duratech Group Inc.
2920
9
th
Avenue North
Lethbridge, Alberta, Canada
T1H 5E4
(Address
of principal executive offices)
(403)
320-1778
(Issuer's
telephone number)
Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock, par value $.001 per share
Indicate
by check mark whether the registrant is a well-known seasoned issuer, as defined
in Rule 405 of the Securities Act. Yes No
x
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes No
x
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for shorter period that the registrant as 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 if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. Yes No
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting
company
x
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act) Yes No
x
Aggregate
market value of the voting and non-voting common stock of the registrant held by
non-affiliates of the registrant at January 31, 2009, computed by reference to
the closing price of $0.01 per share as January 30, 2009:
$254,794
As of
January 31, 2009, there were outstanding 75,224,676 shares of the issuer's
common stock, par value $.001.
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Part
I
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Item
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Item
2.
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Item
3.
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Item
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Part
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Item
5.
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Item
6
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Item
7.
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Item
7A.
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Item
8.
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Item
9.
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Item
9A.
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Item
9A(T)
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Item
9B.
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Part III
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Item
10.
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Item
11.
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Item
12.
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Item
13.
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Item
14.
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Part
IV
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Item
15.
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41
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PART
I
CAUTIONARY
STATEMENT REGARDING FORWARD LOOKING INFORMATION
The
discussion contained in this 10-K under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), contains forward-looking statements that involve
risks and uncertainties. The issuer's actual results could differ significantly
from those discussed herein. These include statements about our expectations,
beliefs, intentions or strategies for the future, which we indicate by words or
phrases such as "anticipate," "expect," "intend," "plan," "will," "we believe,"
"the Company believes," "management believes" and similar language, including
those set forth in the discussion under "Business," and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" as well as those
discussed elsewhere in this Form 10-K. We base our forward-looking statements on
information currently available to us, and we assume no obligation to update
them.
History
of Our Company
UpSnap
USA Inc. was founded in April 2004 as a mobile search engine using text
messaging and pay-per-call advertising. The mobile search engine helps consumers
find merchants, content and local services from their mobile handset. During
2004, the company developed its intellectual property platform, and was occupied
almost solely with research and development.
On
November 15, 2005, UpSnap USA completed a reverse acquisition transaction with
Manu Forti Group, Inc., or “Manu Forti” a Nevada corporation that had been
formed on July 25, 2003. In connection with the reverse acquisition transaction,
UpSnap USA, Inc. became a wholly-owned subsidiary and the name was changed from
Manu Forti Group Inc. to UpSnap, Inc.
Manu
Forti issued 11,730,000 shares of its Common Stock, constituting 55.5% of its
then outstanding shares of Common Stock, to the stockholders of UpSnap USA in
exchange for all of the issued and outstanding capital stock of UpSnap USA.
UpSnap USA thereby became a wholly-owned subsidiary and the former stockholders
of UpSnap USA became our controlling stockholders. The shares were issued to the
stockholders of UpSnap USA in reliance upon an exemption from registration
requirements of the Securities Act afforded by Section 4(2) of the Securities
Act for offers and sales of securities that do not involve a public
offering.
For
accounting purposes, the share exchange transaction was treated as a reverse
acquisition with UpSnap USA as the acquirer and UpSnap, Inc. as the acquired
party.
On
January 6, 2006, we acquired the assets of XSVoice Inc., a provider of streaming
media for mobile phones. The acquisition gave us a rich portfolio of audio
content, including premier entertainment and news outlets including more than
100 music and entertainment channels. XSVoice has provided nearly 2 million
mobile consumers with access to a variety of audio content.
At this
point in time, our operations consisted solely of the operations of UpSnap
USA, which was our wholly owned subsidiary, as well as that of the business
acquired from XSVoice.
On August
9, 2007, we entered into an Agreement and Plan of Merger with Mobile
Corporation, Inc., a California corporation or MGI, and UpSnap Acquisition
Corp., a Californian corporation and a newly-formed wholly-owned subsidiary of
the Company, or Merger Sub. On January 14, 2008 we amended the Merger Agreement
to extend the termination date to February 29, 2008. The Merger Sub was to
be merged with and into MGI, with MGI continuing as the surviving corporation
and a wholly-owned subsidiary of the Company. MGI is a private corporation
engaged in providing content to the mobile phone industry. The MGI
Agreement and Plan of Merger was terminated on March 5, 2008 and the transaction
was not consummated.
In fiscal
2006, we derived approximately 97% of our revenues from subscription revenue
from one major US mobile operator. In our fourth fiscal quarter July - September
2007, our dependency on this carrier was reduced to approximately 89% of our
revenues, as the Company moved towards the more lucrative and higher margin
search and advertising related revenues
On
September 17, 2008, we completed a reverse merger with Duratech Group Inc., a
corporation organized and existing under the laws of the province of Alberta,
Canada (“Duratech”), pursuant to a Share Exchange Agreement, dated August 29,
2008 (the “Share Exchange Agreement”). In connection with the
reverse merger, Duratech became a majority owned subsidiary of UpSnap, and the
Duratech Shareholders acquired control of UpSnap. Pursuant to the
exchange, P&R Gateway Developments Inc. and 1371009 Alberta Ltd., the fifty
percent owned joint venture companies of Duratech, became indirectly controlled
by the Company.
As part
of the reverse merger, 50,349,342 shares of common stock and 18,950,334 options
to purchase Common Stock were issued to the Duratech Shareholders, representing
approximately 71% of the issued and outstanding shares of Common Stock and
options to purchase Common Stock of the Company post reverse
merger. These shares were issued in reliance on an exemption from
registration provided by Regulation S under the Securities Act of 1933, as
amended. We expect to change the Company’s name from UpSnap Inc. to
Duratech Group Inc. as soon as the filings can be completed.
For
accounting purposes, the share exchange transaction was treated as a reverse
acquisition with Duratech as the acquirer and UpSnap, Inc. as the acquired
party. When we refer in this annual report to business and financial information
for periods prior to the consummation of the reverse acquisition, we are
referring to the business and financial information of Duratech.
In
addition, after the closing of the reverse merger on September 17, 2008, the
Duratech Shareholders, Duratech and the Company entered into a
Preferred Stock Exchange Agreement, dated January 8, 2009, 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 (collectively referred to as the “UpSnap
Securities”) 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 which
are held by the Duratech Shareholders (the “Preferred Stock
Exchange”). An information statement has been filed with the
Commission disclosing, among other things, the terms of the Preferred Stock
Exchange and is under review. However, the UpSnap Securities have not
been authorized for issuance to date and the closing of the Preferred Stock
Exchange is conditioned on, among other things, the amendment of the Company’s
articles of incorporation to permit the issuance of the required 466,506,480
shares of Common Stock under the Preferred Stock Exchange
Agreement. If the articles of incorporation are not amended as
proposed, the Preferred Stock Exchange will not be completed.
The
Preferred Stock Exchange will enable the Duratech Shareholders to increase their
percentage ownership of the outstanding Common Stock and options on Common Stock
of the Company from approximately 71% to 95%, which was their initial goal in
negotiations leading up to the completed reverse merger
transaction. The limitation on the number of shares of Common Stock
that could be issued in the reverse merger due to the Company’s authorized
Common Stock of only 97,500,000 shares prevented the Duratech Shareholders from
acquiring their desired level of ownership in the Company at that
time. Nonetheless, they exchanged all of their common stock equity in
Duratech for the 50,349,342 shares of Common Stock and 18,950,334 options to
purchase Common Stock referred to above, but they retained a preferred stock
ownership in Duratech equal to approximately 35% of the total equity
capitalization of Duratech.
If the
authorized capital stock of the Company is successfully amended in a sufficient
amount to complete the Preferred Stock Exchange, and the other closing
conditions are met, the Preferred Stock Exchange Agreement may be
completed. In exchange for the issuance of additional shares of
Common Stock and options on Common Stock to the Duratech Shareholders, the
Company’s ownership of the outstanding common and preferred equity
capitalization of Duratech will increase from approximately 65% to 99% as a
result of the Preferred Stock Exchange.
In
connection with the closing of the reverse merger transaction described above,
our existing businesses were disposed of to UpSnap Services, LLC, a North
Carolina limited liability company organized and owned by Tony Philipp, our
former Chairman and CEO. Henceforth, we will engage in the businesses
of Duratech and such other businesses as may be acquired by us. The
description of business that follows consists solely of a description of the
business engaged in by Duratech.
SUMMARY
OF OPERATIONS
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 through its
Duratech Contracting division; 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 through
its Duratech Structures division.
Duratech
had $6.68 million in revenues for its fiscal year end January 31, 2009 compared
to $4.97 million for fiscal year end January 31, 2008 and $1.53 million the
prior fiscal year. Gross profit was $2,051,000 for the fiscal year end January
31, 2009 compared to $858,000 for the prior fiscal year. Including
reorganization, acquisition costs and foreign currency translation gains and
losses, the net income for the period end January 31, 2009 was
$(935,916) compared to $(104,735) for the prior fiscal
year.
STRATEGY
FOR GROWTH
Duratech
has two principal strategies for growth: 1) build construction for its existing
marketplace and 2) expand through strategic acquisitions both in its existing
market and the United States.
Build Existing
Market:
In its
existing marketplace, Duratech supplies the three principal products previously
described. Given its competitive advantages in these product areas and the
strong growth prospects within Alberta and Saskatchewan, the Company believes
that it will be able to grow its three product lines within its existing
marketplace.
Expand through Strategic
Acquisitions:
In
addition to expanding its existing operations in its existing market, Duratech
fully expects to leverage its operational success and the experience of its
Chairman, CEO and largest shareholder, Peter Van Hierden, to pursue attractive
and strategic acquisition targets within its existing market and also in the
United States where the real estate market and other business areas offers many
potential opportunities, principally businesses with revenues of $750,000 to $10
million and profits of $250,000 to $3 million. Mr. Van Hierden has been an
entrepreneur for 30 years and in the past 15 years has successfully helped
restore the profitability of six corporations that had losses to generating
revenues of $1 million to $30 million.
COMPANY
MARKETS
Duratech’s
principle operating markets are Alberta and Saskatchewan, Canada, which have
historically experienced very strong growth because of the various commodities
that are indigenous to the provinces, including oil, uranium and diverse
mining. Alberta is a business friendly province with the lowest tax
load of any province in Canada, including no provincial retail tax. Alberta has
massive oil reserves with some estimates as high as 1.3 trillion barrels of
oil. For 2007, Statistics Canada confirmed Alberta’s and
Saskatchewan’s continued economic growth as evidenced by the increase in real
Gross Domestic Product of 3.1% and 3.0%, respectively, and the Saskatchewan
Bureau of Statistics reported that total corporate profits before taxes advanced
at an annual rate of 22.4% in the province. As of October 1, 2008,
Statistics Canada also showed an increase in the annual population growth rate
of 2.36% and 1.49% for Alberta and Saskatchewan, respectively, and an employment
growth rate of 2.8% and 2.2%, respectively. The global financial
crisis began to impact Canada and these provinces in late 2008 and thus growth
rates have deteriorated. The Company does expect long-term growth
will return once the global financial recession subsides and future growth is
expected to last well into the next decade.
The
homebuilding industry is highly competitive and fragmented. We do not have a
significant market presence in any of the geographic areas where we are
currently building homes or where we expect to build homes in the future. Most
of our competitors have substantially greater financial resources than we do,
and they have much larger staffs and marketing organizations. However, we
believe we compete effectively in our existing markets as a result of our
product design, development expertise, and our reputation as a producer of
quality homes. We compete for homebuyers on the basis of
price, location, design,
quality, service, and reputation
. In addition to competition for
homebuyers, we also compete with other homebuilders for desirable properties,
raw materials and reliable, skilled labor.
The
manufactured housing industry is highly competitive at both the manufacturing
and retail levels, with competition based upon several factors, including price,
product features, reputation for service and quality, depth of field inventory,
promotion, merchandising and the terms of retail customer financing. We compete
with other producers of manufactured homes, as well as companies offering for
sale homes repossessed from wholesalers or consumers. In addition, manufactured
homes compete with new and existing site-built homes, as well as apartments,
townhouses and condominiums.
We do not
view any of our competitors as being dominant in the industry as a whole or the
principal markets in which we compete, although a number of our competitors
possess substantially greater financial, manufacturing, distribution and
marketing resources.
The
Company’s principal competitors for job site structures would be: Northern
Trailer, Arcticore Structures, Atco and BCT Structures. In the homebuilding and
ready-to-move homes area it would be: commercial stick builders, SRI Homes and
Triple M Homes. The Company has not found competition from these
larger competitors to be a constraint to future growth given the historical
growth that has occurred in the market.
BUSINESS
AND COMPETITIVE ADVANTAGE
Duratech’s
key business and competitive advantages are: 1) Factory construction advantage;
2) Direct sales advantage; and 3) Ready-to-move (RTM) advantage.
Factory Construction
Advantage:
Alberta
has unique traffic laws which allow transporting homes to a width of 35 feet on
the highway. Building homes in a factory has many significant advantages,
including: 1) reduced construction time from 6-8 months to 2-3 weeks; 2) improve
efficiency in hours of construction by more than 40%; and 3) reduce labor costs
by as much as 50% due to using all company staff versus sub-contractors. Overall
cost savings of building in a factory is at least 30% compared to on-site,
stick-built homes. Using a factory also helps avoid potential weather
issues.
Direct Sales
Advantage:
Whereas
traditional modular house builders market their product through a sophisticated
dealer network, Duratech buys lots, sets the homes on the foundation and then
markets their product through the local Multiple Listing Service (MLS) Real
Estate. Duratech increases its profitability by 30% by bypassing the
dealer network. The Company has also established joint venture relationships
with P&R Gateway Development Inc. and 1371009 Alberta Ltd. that are
interested in carrying approximately $2 million of the cost of homes until they
sell.
Ready-to-move (RTM)
Advantage:
Duratech
is also not constrained to its local real estate market, because the homes it
builds can be moved to “hot” real estate markets in Alberta and Saskatchewan, as
necessary. This is an advantage compared to stick built homes and allows the
company to put the house on a lot with basement and garage (taking out the
middleman). No marketing department is required as the company relies on
realtors to determine demand levels of individual areas.
SALES
AND MARKETING
Duratech
does not require an extensive in-house marketing department to sell its homes
because it has the flexibility of moving its homes to whatever market may be
“hot” in Alberta or Saskatchewan at a particular time. The Company uses real
estate brokers and realtors to identify opportunities and to sell the homes that
are constructed. The Company also engages a marketing consultant based in
Calgary that helps with job site structures (camp sites for oil mining
industry).
The
principle factors that affect sales volumes and prices are the economies of the
markets that the Company serves, principally Alberta and Saskatchewan. There are
other risk factors that could impact the company’s business operations,
including the impact of global geo-political issues and financial markets beyond
the company’s control
Duratech
had $6.68 million in revenues for its fiscal year end January 31, 2009 compared
to $4.97 million for the prior fiscal year.
New
Products
Duratech
is continually refining its manufacturing process to ensure the most efficient
operations possible. The Company’s management team is experienced in
cost management and process improvement and encourages this philosophy among its
manufacturing personnel. The Company is also continually exploring
new construction techniques that might allow it to develop new products in the
homebuilding industry. This is done through on-going discussions with
subject matter experts in the construction industry, including individuals
experimenting with alternative materials and construction techniques which are
proprietary in nature. The company does not currently have any
patents on such techniques, but may file for such in the future.
RAW
MATERIALS AND SUPPLIERS
Duratech
is basically an assembler of components purchased from outside sources. The
major components used by Duratech are lumber, plywood, shingles, vinyl and wood
siding, steel, aluminum, insulation, home appliances, furnaces, plumbing
fixtures, hardware, and floor coverings. The suppliers are many and range in
size from large national companies to very small local companies. At the present
time, the Company is obtaining sufficient materials to fulfill its
needs.
REGULATION
The
Company’s principal regulatory bodies are the building code of each respective
province in which it does business. Duratech is Canadian Standards Association
(CSA) Certified as part of the A277 Program and Part 9 of 2006 Alberta Building
Code. CSA-A277 is the residential code and CSA-Z240 is the
manufactured home code.
CSA is a
governing body in the RTM, modular and manufactured home industry. It
abides by and inspects to the National Building Code of Canada 1995, as well as
all provincial building codes and has a higher standard than both. It
has a strict quality control procedure that inspects the homes at every level of
the building process from blueprint to completion stage. Only companies meeting
strict criteria can obtain CSA certification as it can overrule jurisdictions’
local codes and is recognized over provincial codes because of its high
standards.
Another
certification Duratech holds is Part 10 of the National Building Code of Canada,
which governs relocatable commercial structures. It is regulated by a
strict quality control manual and program, which Duratech has in place, and is
continuously monitored and evaluated to insure compliance is being met. Both of
our certifications enable us to offer a quality product to the customer and give
the customer greater assurance of a problem-free structure because of the
guidelines, codes and regulations we as a builder must meet to keep the
certification.
The
Alberta Building Code attempts to detail the minimum provisions acceptable to
maintain the safety of buildings, with specific regard to public health, fire
protection, accessibility and structural sufficiency. The Building
Code sets forth technical provisions for construction, renovation and demolition
of structures. Part 9 is applicable to housing and small buildings
and directly impacts the Company’s operations. It is very
prescriptive in nature and is intended to be able to be applied by
contractors.
Compliance
with the Alberta Building Code is necessary in order for a structure to be
deemed fit for occupancy and is a cost of doing business. The Code is
enforceable by the Alberta Municipal Affairs Department, which in addition to
producing the Building Code is responsible for the development and dissemination
of Code interpretations, variances and bulletins.
Saskatchewan
does not have its own provincial building code but rather utilizes the standards
of the National Building Code of Canada 1995 as adopted by regulations under the
Uniform Building and Accessibility Standards Act. All site- and
factory-built homes and structures in Saskatchewan must comply with these
standards.
EMPLOYEES
Duratech
Group Inc. has a staff of approximately 30 employees, of which 15 are employed
on a full-time basis and approximately 15 are on a contract or part-time basis.
This number will fluctuate on a month-to-month basis.
The
Company leases its facilities at the following locations:
The
company’s headquarters is located at #1 2920 9
th
Avenue
North, Lethbridge, Alberta, Canada T1H 5E4 and is comprised of 1,100 square feet
of office space and 27,000 square feet of plant.
The
Company previously had a plant in Cardston, Alberta, Canada located at 855
2
nd
Avenue E, which was comprised of 38,000 square feet, but decided to consolidate
its operations in Lethbridge in early 2009 in an effort to reduce costs in
response to the global economic environment. The Company
continues to utilitze a Calgary, Alberta, Canada office located at 95
Sandringham Way NW, comprised of 1,000 square feet.
Item
3. Legal Proceed
ings
We know
of no material, active or pending legal proceedings against us, our subsidiaries
or our property, nor are we involved as a plaintiff in any material proceedings
or pending litigation. There are no proceedings in which any of our directors,
officers or affiliates, or any registered or beneficial shareholders are an
adverse party or have a material interest adverse to us.
Item
4. Submission of Matters to a Vote of Security Hold
ers.
No matter
was submitted to a vote of security holders, other than as set forth below,
during the twelve months of the fiscal year covered by this Report.
On
October 6, 2008, the majority shareholders of the Company signed a Unanimous
Written Consent to approve a change of the name of the Company to “Duratech
Group Inc.,” increase the number of shares of authorized Common Stock from
97,500,000 shares to 1,000,000,000 shares and to create 10,000,000 authorized
shares of “blank check” preferred stock, par value $.001, with each series
having the terms, rights and features as determined by the Board of Directors
upon issuance. An information statement has been filed with the
Commission with respect to this action and is under review.
PART
II
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Item
5.
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Market
for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securi
ties
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Market
Information
Our
common stock is currently quoted on a limited basis on the Over-the-Counter
Bulletin Board (“OTCBB”) under the symbol “UPSN”. The quotation of our common
stock on the OTCBB does not assure that a meaningful, consistent and liquid
trading market currently exists. We cannot predict whether a more active market
for our common stock will develop in the future. In the absence of an active
trading market:
(1)
Investors may have difficulty buying and selling or obtaining market
quotation;
(2)
Market visibility for our common stock may be limited; and
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(3)
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A lack of visibility of our
common stock may have a depressive effect on the market price for our
common stock.
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The
following table sets forth the range of bid prices of our common stock as quoted
on the OTCBB during the periods indicated. The prices reported represent prices
between dealers, do not include markups, markdowns or commissions and do not
necessarily represent actual transactions.
The
Company’s common stock is currently approved for quotation on the OTC Bulletin
Board maintained by the National Association of Securities Dealers, Inc. under
the symbol “UPSN,” but there is currently no liquid trading market. The
challenge for the Company will be to educate the market as to the values
inherent in a home and manufactured housing market in Canada, and to develop an
actively trading market.
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Hi
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Lo
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Oct
1 – Dec 31, 2006
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NA
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NA
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Jan
1 – Mar 31, 2007
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NA
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NA
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Apr
1 – Jun 30, 2007
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.45
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.25
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Jul
1 – Sep 30, 2007
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.51
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.19
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Oct
1 – Dec 31, 2007
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.42
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.15
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Jan
1 – Mar 31, 2008
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.23
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.07
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Apr
1 – Jun 30, 2008
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.10
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.02
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Jul
1 – Sep 30, 2008
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.08
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.015
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Nov
1, 2008 – Jan 31, 2009
(1)
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.06
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.002
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(1)
The
Company changed its fiscal year end from September 30 to January 31on December
15, 2008.
From
February 1 to April 30, 2009, the highest and lowest prices of our common shares
on the OTC Bulletin Board were $0.04 per share and $0.005 per share. On May 15,
2009, the closing price of our common stock on the OTC Bulletin Board on the
last day it traded before the filing of this Annual Report was $0.01 per
share.
As a
result of our Share Exchange Agreement with Tony Philipp, Duratech Group Inc.,
Peter van Hierden and the Duratech Shareholders on September 17, 2008,
50,349,342 shares of common stock and 18,950,334 options to purchase Common
Stock were issued to the Duratech Shareholders pursuant to an exemption afforded
by Regulation S under the Securities Act of 1933, as
amended. The total outstanding common stock was
73,719,666 immediately after the closing of the Share Exchange
Agreement.
As of
January 30, 2009, there were 62 shareholders of record of 97,500,000 outstanding
shares of common stock of the Company.
Dividends
We have
not previously paid any cash dividends on its common stock and do not anticipate
paying dividends on its common stock in the foreseeable future. It is the
present intention of management to retain any earnings to provide funds for the
operation and expansion of our business. Any future determination to pay
dividends will be at the discretion of our board of directors and will depend on
our results of operation, financial condition, contractual and legal
restrictions and other factors the board of directors deem
relevant.
Shares Authorized Under
Equity Compensation Plans
On
November 2, 2006, our Board of Directors approved a 2006 Omnibus Stock and
Incentive Plan. The Plan made 4,000,000 shares of common stock, 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 7,500,000 total shares
on August 8, 2007. The Board plans to make any necessary changes to this plan to
accommodate the conversion of 2,235,610 options to purchase Duratech common
stock into UpSnap options.
Series
B Warrants and other Warrants
There are
1,800,000 Series B warrants and 560,000 Viant Capital warrants outstanding that
give the holders thereof the right to acquire 2,360,000 shares of our common
stock,
|
|
Series
B warrants for the purchase of 1,100,000 and 700,000 shares of our common
stock to Sundar Communications and Executives Corner LLC, respectively.
These warrants are fully vested and have an exercise price of $1.10 per
share and a term of five years expiring in November 2010. The Series B
warrants are subject to earlier expiration and must be exercised after our
common stock trades above the exercise price of series B warrant for more
than 10 days with 10 day total trading volume at least two times the
number of series B warrant shares
outstanding.
|
|
|
Warrants
for the purchase of 560,000 shares of our common stock to Viant Capital
LLC. These warrants are fully vested and have an exercise price of $0.90
per share and a term of five years expiring in November 2010. These
warrants are subject to early expiration and must be exercised in their
entirety within 90 days after the mandatory exercise provision of the
Series B warrants has been triggered or will
lapse.
|
Other
Equity Awards
A summary
of the time-based stock awards as of January 31, 2009, and changes during the
quarter ended January 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)
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
January 31, 2009
|
|
|
21,520,334
|
|
|
$
|
0.056
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at January 31, 2009
|
|
|
2,570,000
|
|
|
$
|
0.10
|
|
The
following tables summarize information about fixed stock options outstanding and
exercisable at January 31, 2009:
|
|
|
|
Stock
Options Outstanding
|
|
Range
of Exercise Prices
|
|
Number
of
Shares
Outstanding
|
|
Weighted
Average
Contractual
Life
in
Years
|
|
|
$0.10
|
|
700,000
|
|
8.25
|
|
|
$0.10
|
|
170,000
|
|
9.34
|
|
|
$0.10
|
|
1,700,000
|
|
9.42
|
|
|
$0.10
|
|
18,950,334
|
|
9.67
|
|
|
|
|
21,520,334
|
|
9.60
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
18,950,334
|
|
$0.05
|
|
|
|
|
|
|
|
|
|
|
|
21,520,334
|
|
|
There was
no aggregate intrinsic value as of January 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.
|
Plan
category
|
Number
of securities to be issued upon exercise of outstanding options, warrants,
rights
|
Weighted-average
exercise price of outstanding options, warrants and rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in
column 2)
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
23,880,334
|
$0.15
|
0
|
|
Equity
compensation plans not approved by security holders
|
0
|
0
|
0
|
|
Total
|
23,880,334
|
$0.15
|
0
|
Recent Sales of Unregistered
Securities
In
connection with the Share Exchange Agreement, as of September 17, 2008, the
Company issued to the Duratech Shareholders 50,349,342 shares of common stock in
a transaction intended to be exempt from registration under the Securities Act
pursuant to Regulation S. The Company relied on Regulation S in issuing the
shares in the Share Exchange based on the fact that all of the offerees of
common stock and options on common stock were non-“U.S. persons” within the
meaning of Rule 902 of the Securities Act of 1933, as amended. In
addition, the Duratech Shareholders were issued options to purchase 18,950,334
shares of the Registrant’s Common Stock in substitution for options to purchase
2,235,610 shares of Duratech common stock which they owned prior to the
transaction. Pursuant to Regulation S, the consideration for the issuance of the
shares of common stock and options was the exchange by the Duratech Shareholders
of 100% of the common share capital of Duratech Group Inc. Pursuant to the
exchange, P&R Gateway Developments Inc. and 1371009 Alberta Ltd. became 50%
owned indirect subsidiaries of the Company.
On January 31, 2009 the Company issued 1,495,010 and 10,000 shares
of common stock, repectivly, to a supplier and a buiness broker in
connection with the Company purchase of Truss equipment used in its operations.
The Company relied on Regulation S in issuing the shares based on the fact that
all of offerees were non "U.S. Persons" within the meaning of rule 902 of the
Securities Act 1933, as amended.
The
options that were granted to the Duratech Shareholders pursuant to the UpSnap,
Inc. Amended 2006 Omnibus Stock and Incentive Plan had the following terms and
conditions:
|
1.
|
Exercise
Price
. Various
prices ranging from $0.10 to $1.00 prior to
conversion.
|
|
2.
|
Option
Term
.
Typically a ten (10) year
term.
|
|
3.
|
Time and Method of
Exercise
. Each option holder has vesting requirements ranging from
a four year vesting period, consistent with their continued employment
with the company, to fully vested as a result of an issuance as part of a
financing agreement. Each option is entitled to one share of
common stock of Duratech. At the time the option holder
exercises its option and pays its exercise fee, it will be issued, at the
company’s earliest convenience s, common shares in the
company.
|
Purchases of Equity
Securities by Issuer and Affiliated Purchasers
We have
not repurchased any of our common stock and have no publicly announced
repurchase plans or programs as of January 31, 2009.
Item
6. Selected Financial D
ata
Not
applicable.
Item
7. Management's Discussion and Analysis of Financial Condition and
Results of Opera
tions
PRELIMINARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
discussion contains forward-looking statements. The reader should understand
that several factors govern whether any forward-looking statement contained
herein will be or can be achieved. Any one of those factors could cause actual
results to differ materially from those projected herein. These forward-looking
statements include plans and objectives of management for future operations,
including plans and objectives relating to the products and the future economic
performance of the company. Assumptions relating to the foregoing involve
judgments with respect to, among other things, future economic, competitive and
market conditions, future business decisions, and the time and money required to
successfully complete development projects, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
company. Although the company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of those
assumptions could prove inaccurate and, therefore, there can be no assurance
that the results contemplated in any of the forward-looking statements contained
herein will be realized. Based on actual experience and business development,
the company may alter its marketing, capital expenditure plans or other budgets,
which may in turn affect the company's results of operations. In light of the
significant uncertainties inherent in the forward-looking statements included
therein, the inclusion of any such statement should not be regarded as a
representation by the company or any other person that the objectives or plans
of the company will be achieved.
OVERVIEW
On September 17, 2008, the Company
consummated a reverse merger with Duratech Group Inc., a corporation organized
and existing under the laws of the province of Alberta
(“Duratech”). As a result, Duratech became a
majority
owned subsidiary of the Company, and
the existing businesses of the Company were disposed of.
one day after the closing.
From and after September 1
8
, 2008, the Company
has and
will engage
only
in Duratech’s businesses, and any other
businesses that it may acquire
.
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 through its
Duratech Contracting division; 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 through
its Duratech Structures division.
Duratech
had $6.68 million in revenues for its fiscal year end January 31, 2009 compared
to $4.97 million for fiscal year end January 31, 2008 and $1.53 million the
prior fiscal year. Gross profit was $2,051,000 for the fiscal year end January
31, 2009 compared to $858,000 for the prior fiscal year. Including
reorganization, acquisition costs and foreign currency translation gains and
losses, the net income for the period end January 31, 2009 was
$(935,916) compared to $(104,735) for the prior fiscal year. Duratech
has two principal strategies for growth: 1) build construction for its existing
marketplace and 2) expand through strategic acquisitions both in its existing
market and the United States.
RESULTS OF
OPERATIONS
The
following table shows the financial data of the consolidated statements of
operations of the Company and its subsidiaries for the years ended January 31,
2009 and January 31, 2008. The data should be read in conjunction with the
audited consolidated financial statements of the Company and related notes
thereto.
|
|
|
|
|
|
|
For
the
|
|
|
|
|
|
|
For
the year ended
|
|
|
|
|
|
|
|
|
|
|
|
January
31,2009
|
|
|
|
|
January
31, 2008
|
|
|
|
|
|
|
US$
|
|
%
of Revenue
|
|
|
US$
|
|
|
%
of Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
REVENUES
|
6,678,563
|
|
|
100.0
|
%
|
|
|
4,974,460
|
|
|
|
100.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS
PROFIT
|
2,051,640
|
|
|
30.7
|
%
|
|
|
858,572
|
|
|
|
17.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
991,689
|
|
|
14.9
|
%
|
|
|
396,670
|
|
|
|
7.9
|
%
|
|
Payroll
expense
|
1,712,613
|
|
|
25.6
|
%
|
|
|
489,321
|
|
|
|
9.8
|
%
|
|
Bad
debt expense
|
62
|
|
|
*
|
%
|
|
|
3,746
|
|
|
|
*
|
%
|
|
Depreciation
|
124,397
|
|
|
1.9
|
%
|
|
|
21,598
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
OPERATING EXPENSES
|
2,828,761
|
|
|
42.4
|
%
|
|
|
911,335
|
|
|
|
18.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) FROM OPERATIONS
|
(777,121)
|
|
|
(11.6)
|
%
|
|
|
(52,763)
|
|
|
|
(1.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Income
|
-0-
|
|
|
-0-
|
%
|
|
|
-0-
|
|
|
|
-0-
|
%
|
|
Interest
Expense
|
(277,653)
|
|
|
(4.1)
|
%
|
|
|
(48,704)
|
|
|
|
(*)
|
%
|
|
Interest
Income
|
3,781
|
|
|
*
|
%
|
|
|
2,600
|
|
|
|
*
|
%
|
|
NET
OTHER INCOME/(EXPENSE)
|
(273,872)
|
|
|
(4.1)
|
%
|
|
|
(46,104)
|
|
|
|
*
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) FROM CONTINUE OPERATIONS
|
(1,050,993)
|
|
|
(15.7)
|
%
|
|
|
(98,867)
|
|
|
|
(2.0)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Gain/(Loss)
|
115,077
|
|
|
1.7
|
%
|
|
|
(5,868)
|
|
|
|
(*)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS)
|
(935,916)
|
|
|
(14.0)
|
|
|
|
(104,735)
|
|
|
|
(2.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax benefit
|
-0-
|
|
|
-0-
|
%
|
|
|
-0-
|
|
|
|
-0-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
(935,916)
|
|
|
(14.0)
|
%
|
|
|
(104,735)
|
|
|
|
(2.1)
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss per share – Basic and diluted
|
(0.02)
|
|
|
|
|
|
|
(0.54)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding – Basic and diluted
|
44,257,967
|
|
|
|
|
|
|
195,514
|
|
|
|
|
|
* Less
than one percent.
FISCAL
YEAR ENDED JANUARY 31, 2009 COMPARED TO THE FISCAL YEAR ENDED JANUARY 31,
2008
Operating Revenues
. Revenues
for the 2009 fiscal year were $6.68 million, compared to revenues for the 2008
fiscal year of $4.97 million. The increase in revenues of $1.71 million is
principally attributable to the growth in housing sales of $1 million through
its Duratech Structures division and $650,000 through Duratech Contracting
division. Sales for Duratech Contracting division increased from
$3.12 million for fiscal year 2008 to $3.76 million for fiscal year 2009 due to
an increase in new home sales. The Duratech Structures division went
from $1.857 million for fiscal year 2008 to $2.921 million in sales for fiscal
year 2009 due to the increase in sales of modular structures.
Gross Profit
. Gross profit
for the 2009 fiscal year was $2,051,640 compared to gross profit for the 2008
fiscal year of $858,572. The increase in gross profit is attributable to an
increase in sales of the company as described above. The gross profit
for Duratech Contracting division increased from $336,000 to $1,227,000
principally due to increase in new home sales. The gross profit for
Duratech Structures division increased from $522,000 to $824,000 reflecting the
increase in sales of modular structures.
Selling, General and Administrative
Expenses
. Selling, general and administrative expenses for the 2009
fiscal year were $991,689, compared to selling, general and administrative
expenses for the 2008 fiscal year of $396,670, an increase of about $600,000
principally due to transition costs associated with turning-around and expanding
its core business and additional overhead expenses associated with taking the
company public.
Payroll Expense
. Payroll
expense for the 2009 fiscal year were $1,712,613, compared to payroll expense
for the 2008 fiscal year expense of $489,321 principally due to an increase in
business operations at Duratech Contracting division and Duratech Structures
division in anticipation of greater growth that did not materialize because of
global economic conditions. The Company subsequently scaled back its
operations and overhead to be more in line with expected on-going operations
going forward.
Other Expenses
. Bad debt
expense for the 2009 fiscal year was $62 compared to $3,746 for the same period
in the prior year; interest expense for the 2009 fiscal year was $277,653
compared to $48,709 for the 2008 fiscal year due to larger borrowings associated
with more houses under construction; and depreciation and amortization expense
for 2009 was $124,397 compared to $21,598 for the 2008 fiscal year due to
greater property plant and equipment associated with larger operations and
purchase of Truss Equipment which is expected to save the company money in the
future.
Net Other Income
. Net other
income for the 2009 fiscal year was $3,781 compared to $2,600 for the 2008
fiscal year. This income is from interest earned on balances carried
by the company.
Net Income
. Net loss for the
2009 fiscal year was $(1,050,993) compared to net loss for the 2008 fiscal year
of $(98,867). The increase in net loss is principally attributable to the
increase in payroll and selling, general and administrative expenses in fiscal
year 2009 including turn-around costs and acquisition expenses related to
reverse merger. The company does not expect to continue incurring losses going
forward as the company has scaled back its operations and overhead in line with
current revenue levels and can increase staff as economic conditions
improve. The net loss for 2008 was $(72,515) for Duratech Contracting
division and $(26,352) for Duratech Structures division principally due to
expansion and overhead costs incurred by each entity. The net loss
for fiscal year 2009 was $(774,965) for Duratech Contracting division which
included overhead expenses for the Company and $(276,028) for Duratech
Structures division.
Foreign Currency
Gains/Losses
. Because the Company operates in Alberta and Saskatchewan,
Canada, the company does incur foreign currency gains/losses for US GAAP
reporting purposes. The Company incurred a gain on currency conversion of
$115,077 for the 2009 fiscal year compared to a loss of $5,868 for the 2008
fiscal year. The prevailing exchange rate used to translate the Canadian dollars
to U.S dollars at January 31, 2009 was 0.81248. The average was
0.907744.
Liquidity
and Capital Resources
As of
January 31, 2009, cash and cash equivalents totaled $0. The net cash used in
operations for fiscal year 2009 of $589,559 decreased from 2008 fiscal year of
$2,106,132 principally due to an decrease in inventories and receivables
associated with new housing production as well as an increase in accounts
payable. The net cash used in investing activities of $447,336 was mainly due to
additions to property, plant and equipment (including (Truss equipment which was
paid for with common stock) compared to $99,696 for the prior fiscal year. The
decrease in financing activities of $1,036,895 for fiscal year 2009 compared to
$2,196,550 in fiscal year 2007 was mainly due to the decrease in the proceeds of
loans from shareholders of $592,435 which was converted into stock at the time
of the reverse merger, an issuance of shares as part of the reverse-merger and
less new long-term debt which was $1,454,770 in the prior fiscal
year.
The
working capital at January 31, 2009 was $(218,588), comprised of accounts
receivable, net of $812,355, other receivables of $117,973 and inventory of
$1,947,581 less payables of $961,195, customer deposit of $273,289, short term
loans of $319,263; current portion of notes payable of $2,136,664 and current
portion of shareholder notes payable of $70,308.
The
Company is currently experiencing the effects of a worldwide recession and
decreased demand for its products. The western provinces of Canada such as
Alberta and Saskatchewan, which had seen a shift in Canada’s economic power to
those areas because of oil revenues, have been keenly affected because of the
sharp decline in oil prices that began in the last quarter of
2008. The slump in oil prices has caused oil companies in the
region to curtail investment spending, which has resulted in, among other
things, increased unemployment, lower wages, a slowdown in housing construction
and a weakening housing market. In addition, construction of modular
campsites for oil production facilities has declined as a result of the slower
growth in the oil industry.
If
economic conditions were to worsen and the Company’s products became unsellable,
the Company would not be able to recover the full cost of its
inventory. As a result, operations could deteriorate and our
liquidity would be further diminished. This risk, however, is
principally related to the Company’s Duratech Contracting division which builds
stick-built homes and has approximately $1 million in inventory. The
Company does not expect that this inventory would be unsellable altogether, but
may well have to be sold at a lower profit then in the past. The
Company does not expect at this time that it would have to sell such inventory
below its cost. The Company’s Duratech Structures division builds
modular homes and other structures on a contractual basis and is paid as work is
done so there is little risk that the Company’s inventory for these lines of
business would be impacted.
Going
forward we will rely substantially on revenue from existing contracts, new
business development efforts, and friendly investors that have indicated a
willingness to support the Company. Actual sales will be recorded
upon completion of each project while sales and service revenue will be recorded
as earned. To date, the Company has had investors willing to
contribute equity or private loans to finance on-going operations. In
addition, the Company does have existing relationships with lending institutions
to provide financing on inventory and/or completed homes, including joint
venture relationships with P&R Gateway Development Inc. and 1371009 Alberta
Ltd., which are willing to finance up to $250,000 of the cost of a
project.
However,
private parties are under no legal obligation to provide us with future capital
infusions and the global economic environment could impact banks willingness to
continue to lend on real estate. Furthermore, the economic conditions
within Canada, particularly as a result of natural resources markets, could
impact future interest in housing and modular buildings. Overall, we
have funded our cash needs from inception through January 31, 2009 with a series
of private loan, debt and equity transactions.
Demand
for our products will be dependent upon, among other things, market acceptance
of our products, the real estate market in general, and global economic
conditions. Inasmuch as a major portion of our activities is the
receipt of revenues from the sales of new home services, our business operations
may be adversely affected by our competitors and prolonged recessionary
periods. The Company does believe that the Alberta and Saskatchewan
regions, where its principle operations are located, will continue to be
attractive Canadian markets, and that these areas will be less impacted by
overall economic conditions, but there is no guarantee this will remain so going
forward.
The
Company has provided a detailed list of risks and cautionary statements in prior
filings, including Form 8-K filed with the Commission on September 24, 2008
which is incorporated herein by reference.
Critical
Accounting Policies and Estimates
The
discussion and analysis of Duratech’s financial condition presented in this
section are based upon the audited consolidated financial statements of Duratech
Group Inc., which have been prepared in accordance with the generally accepted
accounting principles in the United States. During the preparation of the
financial statements Duratech is required to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses, and
related disclosure of contingent assets and liabilities. On an ongoing basis,
Duratech evaluates its estimates and judgments, including those related to
sales, returns, pricing concessions, bad debts, inventories, investments, fixed
assets, intangible assets, income taxes and other contingencies. Duratech bases
its estimates on historical experience and on various other assumptions that it
believes are reasonable under current conditions. Actual results may differ from
these estimates under different assumptions or conditions.
In
response to the SEC’s Release No. 33-8040, “Cautionary Advice Regarding
Disclosure About Critical Accounting Policy,” Duratech identified the most
critical accounting principles upon which its financial status depends. Duratech
determined that those critical accounting principles are related to the use of
estimates, inventory valuation, revenue recognition, income tax and impairment
of intangibles and other long-lived assets. Duratech presents these
accounting policies in the relevant sections in this management’s discussion and
analysis, including the Recently Issued Accounting Pronouncements discussed
below.
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 January 31, 2009 was
0.81248. The average was 0.907744.
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 are recognized using the
percentage-of-completion method. Revenues from short-term contracts of the
Duratech Structures division 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
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. There were no items of comprehensive income (loss)
applicable to the Company during the periods covered in the consolidated
financial statements.
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 has a negative
balance. For the purpose of the cash flow statement, Bank overdrafts are also
classified as cash.
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.
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 years ended January 31, 2009 and
2008, no amounts were deemed uncollectible as of January 31,
2009. Outstanding Accounts Receivable as of January 31, 2009 was
$812,355. 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.
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.
Recently
Issued 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. 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 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.
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.
Item
7A. Quantitative and Qualitative Disclosures about Market
Risk
Exchange
Rate Risk
The
Company cannot guarantee that the current exchange rate will remain steady;
therefore there is a possibility that the Company could post the same amount of
profit for two comparable periods and because of the fluctuating exchange rate
actually post higher or lower profit depending on exchange rate of Canadian$
converted to US$ on that date. The exchange rate could fluctuate depending on
changes in economic environments without notice.
Inflation
Inflationary
factors, such as increases in the cost of raw materials and overhead costs,
could impair our operating results. Although we do not believe that inflation
has had a material impact on our financial position or results of operations to
date, a high rate of inflation in the future may have an adverse effect on our
ability to maintain current levels of gross margin and selling, general and
administrative expenses as a percentage of sales revenue if the selling prices
of our products do not increase with these increased costs.
Item
8. Financial Statements and Supplementary
Data
--------------------
CONSOLIDATED
AUDITED FINANCIAL STATEMENTS
UpSnap
Inc. F/K/A Duratech Group Inc.
January
31, 2009
-------------------
TABLE OF
CONTENTS
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING F
IRM
To the
Board of Directors and
Stockholders
of Duratech Group, Inc. F/K/A Duratech Contracting, Inc.
We have
audited the accompanying consolidated balance sheets of UpSnap Inc. F/K/A
Duratech Group, Inc. as of January 31, 2009 and 2008, and the related
consolidated statements of income, stockholders’ equity and comprehensive
income, and cash flows for each of the years in the two-year period ended
January 31, 2009. UpSnap Inc. F/K/A Duratech Group, Inc.’s management is
responsible for these financial statements. Our responsibility is to express an
opinion on these financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of UpSnap Inc. F/K/A Duratech Group,
Inc. as of January 31, 2009 and 2008, and the results of its operations and its
cash flows for each of the years in the two-year period ended January 31, 2009
in conformity with accounting principles generally accepted in the United States
of America.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. As discussed in Note K to the financial statements,
the Company has suffered a loss and has a net deficiency. These factors raise
substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are also described in Note K. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
|
/s/
Traci J. Anderson, CPA
|
|
|
Traci
J. Anderson, CPA
|
|
Huntersville,
NC
|
|
|
May
14, 2009
|
|
|
|
|
|
|
|
|
Consolidated
Balance Sheet
|
|
|
|
|
|
|
|
|
|
|
|
|
As
of
|
|
|
As
of
|
|
|
|
|
January 31, 2009
|
|
|
January 31, 2008
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
|
|
|
|
Cash
and Cash Equivalents
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Accounts
Receivable--Related Party
|
|
|
-
|
|
|
$
|
89,289
|
|
|
Accounts
Receivable
|
|
|
812,355
|
|
|
|
466,522
|
|
|
Other
Receivables (Deposits/Holdback)
|
|
|
117,973
|
|
|
|
-
|
|
|
Inventory
|
|
|
1,947,581
|
|
|
|
2,193,015
|
|
|
TOTAL
CURRENT ASSETS
|
|
|
3,542,131
|
|
|
|
2,748,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
ASSETS
|
|
|
365,934
|
|
|
|
-
|
|
|
PROPERTY,
PLANT, AND EQUIPMENT, NET
|
|
|
638,305
|
|
|
|
190,969
|
|
|
TOTAL
ASSETS
|
|
$
|
3,882,148
|
|
|
$
|
2,939,795
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY/(DEFICIT)
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Bank
Overdraft
|
|
$
|
319,263
|
|
|
$
|
539,319
|
|
|
Notes
Payable, current
|
|
|
2,136,664
|
|
|
|
1,597,324
|
|
|
Shareholder
Notes Payable, current
|
|
|
70,308
|
|
|
|
662,743
|
|
|
Accounts
Payable and Accrued Liabilities
|
|
|
961,195
|
|
|
|
290,481
|
|
|
Customer
Deposits
|
|
|
273,289
|
|
|
|
53,682
|
|
|
TOTAL
LIABILITIES
|
|
|
3,760,719
|
|
|
|
3,143,549
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS'
EQUITY/(DEFICIT)
|
|
|
|
|
|
|
|
|
|
Preferred
Non-Voting Shares, Class C, unlimited shares authorized, 158,096
issued
|
|
|
-
|
|
|
|
38,000
|
|
|
Class,
A, B, and C Common Voting Shares, unlimited shares
authorized,
195,514
issued
|
|
|
-
|
|
|
|
9,776
|
|
|
Class
D, E, and F non-voting shares, unlimited authorized, none
issued
|
|
|
-
|
|
|
|
-
|
|
|
Common
Stock ($.001 par value, 97,500,000 authorized;
75,224,676
issued and outstanding)
|
|
|
75,225
|
|
|
|
|
|
|
Paid
in Capital
|
|
|
1,403,688
|
|
|
|
(52,160
|
)
|
|
Retained
Earnings/(Accumulated Deficit)
|
|
|
(1,357,484
|
)
|
|
|
(199,370
|
)
|
|
TOTAL
STOCKHOLDERS' EQUITY/(DEFICIT)
|
|
|
(121,429
|
)
|
|
|
(203,754
|
)
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS' EQUITY/(DEFICIT)
|
|
$
|
3,882,148
|
|
|
$
|
2,939,795
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
Consolidated
Statement of Operations
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended January
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
SALES AND COST OF SALES
|
|
|
|
|
|
|
|
Sales
|
|
$
|
6,678,563
|
|
|
$
|
4,974,460
|
|
|
Cost
of Sales
|
|
|
4,626,923
|
|
|
|
4,115,888
|
|
|
Gross
Profit
|
|
|
2,051,640
|
|
|
|
858,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
Selling,
general and administrative
|
|
|
991,689
|
|
|
|
396,670
|
|
|
Payroll
Expense
|
|
|
1,712,613
|
|
|
|
489,321
|
|
|
Bad
Debt Expense
|
|
|
62
|
|
|
|
3,746
|
|
|
Depreciation
|
|
|
124,397
|
|
|
|
21,598
|
|
|
TOTAL
EXPENSES
|
|
|
2,828,761
|
|
|
|
911,335
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income/(Loss) from Operations
|
|
|
(777,121
|
)
|
|
|
(52,763
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER INCOME/(EXPENSE)
|
|
|
|
|
|
|
|
|
|
Other
Income
|
|
|
-
|
|
|
|
-
|
|
|
Interest
Expense
|
|
|
(277,653
|
)
|
|
|
(48,704
|
)
|
|
Interest
Income
|
|
|
3,781
|
|
|
|
2,600
|
|
|
NET
OTHER INCOME/(EXPENSE)
|
|
|
(273,872
|
)
|
|
|
(46,104
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) FROM CONTINUED OPERATIONS
|
|
|
(1,050,993
|
)
|
|
|
(98,867
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME (LOSS)
|
|
|
|
|
|
|
|
|
|
Foreign
Currency Translation Gain/(Loss)
|
|
|
115,077
|
|
|
|
(5,868
|
)
|
|
|
|
|
|
|
|
|
|
|
|
COMPREHENSIVE
INCOME (LOSS)
|
|
|
(935,916
|
)
|
|
|
(104,735
|
)
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
Consolidated
Statement of Stockholders' Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Duratech (Pre-Merger)
|
|
|
Duratech (Pre-Merger)
|
|
|
UpSnap (Post-Merger)
|
|
|
|
|
|
|
|
|
|
|
Preferred Shares--Class C
|
|
|
Class A
|
|
|
Class A
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Stock
|
|
|
Shares
|
|
|
Paid
in Capital/(Distributions)
|
|
|
Retained
Earnings/(Accumulated Deficit)
|
|
|
Balances,
February 1, 2007
|
|
|
158,096
|
|
|
$
|
38,000
|
|
|
|
222,693
|
|
|
$
|
11,443
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(24,035
|
)
|
|
$
|
89,732
|
|
|
Adjustment
to Stock
|
|
|
-
|
|
|
|
-
|
|
|
|
(27,179)
|
|
|
|
(1,467)
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Negative
Equity from Structures Acquisition
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(184,367)
|
|
|
Net
Income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(98,867)
|
|
|
Comprehensive
Income (Loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,868)
|
|
|
Balances,
January 31, 2008
|
|
|
158,096
|
|
|
$
|
38,000
|
|
|
|
195,514
|
|
|
$
|
9,976
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(52,160
|
)
|
|
$
|
(199,370
|
)
|
|
Adjustment
to Stock (Reverse Merger)
|
|
|
(158,096)
|
|
|
|
(38,000)
|
|
|
|
(195,514)
|
|
|
|
(9,976)
|
|
|
|
73,720
|
|
|
|
73,719,666
|
|
|
$
|
1,027,205
|
|
|
|
-
|
|
|
Net
Income (loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,050,993)
|
|
|
Comprehensive
Income (Loss)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
115,077
|
|
|
Issuance
of New Shares
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,505
|
|
|
|
1,505,010
|
|
|
|
428,643
|
|
|
|
-
|
|
|
Prior
year adjustments
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(222,198)
|
|
|
Balances,
January 31, 2009
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
75,225
|
|
|
|
75,224,676
|
|
|
|
1,403,688
|
|
|
|
(1,357,484)
|
|
The
accompanying notes are an integral part of these financial
statements.
|
|
|
Consolidated
Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended January 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
Net
Income/(loss) from continued operations
|
|
$
|
(1,050,993
|
)
|
|
$
|
(98,867
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by (used in)
|
|
|
|
|
|
|
|
|
|
operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
124,397
|
|
|
|
21,598
|
|
|
Bad
Debt Expense
|
|
|
62
|
|
|
|
3,746
|
|
|
Foreign
Currency Translation Gain/(Loss)
|
|
|
115,077
|
|
|
|
(5,868
|
)
|
|
Changes
in Assets and Liabilities:
|
|
|
|
|
|
|
|
|
|
(Increase)/Decrease
in Accounts Receivable
|
|
|
(345,833
|
)
|
|
|
(364,378
|
)
|
|
(Increase)/Decrease
in Accounts Receivable--Related Party
|
|
|
89,289
|
|
|
|
(89,289
|
)
|
|
(Increase)/Decrease
in Current Portion of Loans and Notes Receivable
|
|
|
(539,340
|
)
|
|
|
4,530
|
|
|
(Increase)/Decrease
in Other Receivables
|
|
|
(117,973
|
)
|
|
|
-
|
|
|
(Increase)/Decrease
in Inventories
|
|
|
245,434
|
|
|
|
(1,789,061
|
)
|
|
Increase/(Decrease)
in Accounts Payable and Accrued Expenses
|
|
|
670,714
|
|
|
|
157,775
|
|
|
Increase/(Decrease)
In Customer Deposits
|
|
|
219,607
|
|
|
|
53,682
|
|
|
NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
|
|
|
(589,559
|
)
|
|
|
(2,106,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Purchase
of Property, Plant, and Equipment
|
|
|
(447,336
|
)
|
|
|
(99,696
|
)
|
|
NET
CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
|
|
|
(447,336
|
)
|
|
|
(99,696
|
)
|
|
|
|
|
|
|
|
|
|
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds/(Payment)
of Notes Payable
|
|
|
-
|
|
|
|
(9,471
|
)
|
|
Proceeds/(Payment)
of Shareholder Loans
|
|
|
-
|
|
|
|
(236,852
|
)
|
|
Proceeds
from Long-term Debt
|
|
|
-
|
|
|
|
1,454,770
|
|
|
Proceeds
from Shareholder Loans
|
|
|
(592,435
|
)
|
|
|
662,743
|
|
|
Issuance
of shares for Equipment
|
|
|
431,653
|
|
|
|
-
|
|
|
Conversion
of Shareholder Loans to Equity
|
|
|
592,435
|
|
|
|
-
|
|
|
Conversion
of Duratech Stock for UpSnap Stock
|
|
|
825,298
|
|
|
|
-
|
|
|
Bank
Overdraft
|
|
|
(220,056
|
)
|
|
|
539,319
|
|
|
Proceeds/(Payment)
from Share Redemption
|
|
|
-
|
|
|
|
(29,592
|
)
|
|
Payment
for Structures Acquisition
|
|
|
-
|
|
|
|
(184,367
|
)
|
|
NET
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES
|
|
|
1,036,895
|
|
|
|
2,196,550
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
INCREASE IN CASH AND
|
|
|
|
|
|
|
|
|
|
CASH
EQUIVALENTS
|
|
|
-
|
|
|
|
(9,278
|
)
|
|
CASH
AND CASH EQUIVALENTS:
|
|
|
|
|
|
|
|
|
|
Beginning
of Period
|
|
|
-
|
|
|
|
9.278
|
|
|
|
|
|
|
|
|
|
|
|
|
End
of Period
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
|
CASH
PAID DURING THE PERIOD FOR:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
277,653
|
|
|
$
|
131,850
|
|
|
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of these financial
statements.
UPSNAP
INC. F/K/A DURATECH GROUP
, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
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 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.) 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 which are experiencing very rapid
growth primarily because of commodities such as oil, uranium and diverse
mining.
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; Third, the company builds modular comp sites
for the oil mining industry; and Fourth, the company brings modular and
manufactured homes from the United States where markets have been depressed and
homes can be bought at discount prices.
On July
1
st
,
2007, Duratech Contracting Inc. acquired Duratech Structures Inc. (Previously
known as Jobsite Structures).
In 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 January 31, 2009 was
0.81248. The average was 0.907744.
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
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 are recognized using the
percentage-of-completion method. Revenues from short-term contracts of the
Duratech Structures division 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
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. There were no items of comprehensive income (loss)
applicable to the Company during the periods covered in the consolidated
financial statements.
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 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
years ended January 31, 2008 and 2007, the company incurred $39,019 and $14,773
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.
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.
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE A—SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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 years ended January 31, 2009 and
2008, no amounts were deemed uncollectible as of January 31,
2009. Outstanding Accounts Receivable as of January 31, 2009 was
$812,355. 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:
|
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.
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE A—SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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. 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 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.
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 years ended January 31, 2009 and
2008 is summarized as follows:
Cash
paid during the years for interest and income taxes:
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
277,653
|
|
|
$
|
131,580
|
|
|
Income
Taxes
|
|
$
|
-
|
|
|
$
|
-
|
|
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
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.
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
|
|
|
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
|
|
|
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
|
)
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE
D—INCOME TAXES
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
|
%
|
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
|
|
|
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
|
)
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
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%
|
|
$
|
279,519
|
|
|
Note
due June 30, 2009
|
prime
rate plus 2%
|
|
$
|
135,492
|
|
|
Demand
Note
|
various
|
|
$
|
119,418
|
|
|
Demand
Note
|
various
|
|
$
|
851,988
|
|
|
Residential
Line of Credit
a
|
various
|
|
$
|
750,247
|
|
|
|
|
|
$
|
2,136,664
|
|
|
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 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
|
|
$
|
72,939
|
|
|
Work
in Progress
|
|
$
|
1,382,604
|
|
|
Finished
Goods
|
|
$
|
492,038
|
|
|
|
|
$
|
1,947,581
|
|
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
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 year ended January 31, 2009 are as
follows:
|
Net Sales by Segment
|
|
For the year ended January 31,
2009
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Sales,
net
|
|
$
|
2,921,420
|
|
|
$
|
3,757,143
|
|
|
$
|
6,678,563
|
|
|
Cost
of Sales
|
|
|
2,096,948
|
|
|
|
2,529,975
|
|
|
|
4,626,923
|
|
|
Gross
Profit
|
|
$
|
824,472
|
|
|
$
|
1,227,168
|
|
|
$
|
2,051,640
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the year ended January 31,
2009
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Net
Operating Profit/(Loss)
|
|
$
|
(276,028
|
)
|
|
$
|
(774,965
|
)
|
|
$
|
(1,050,993
|
)
|
The Net Sales and
Profit/(Loss) by Segment for the year ended January 31, 2008 are as
follows:
|
Net Sales by Segment
|
|
For the year ended January 31,
2008
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Sales,
net
|
|
$
|
1,857,508
|
|
|
$
|
3,116,952
|
|
|
$
|
4,974,460
|
|
|
Cost
of Sales
|
|
|
1,334,844
|
|
|
|
2,781,043
|
|
|
|
4,115,888
|
|
|
Gross
Profit
|
|
$
|
522,664
|
|
|
$
|
335,908
|
|
|
$
|
858,572
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit/(Loss) by Segment
|
|
For the year ended January 31,
2008
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Net
Operating Profit/(Loss)
|
|
$
|
(26,352
|
)
|
|
$
|
(72,515
|
)
|
|
$
|
(98,867
|
)
|
Total Assets by Segment as
of January 31, 2009 and 2008 are as follows:
|
Total Assets by Segment
|
|
For the year ended January 31,
2009
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Total
Assets
|
|
$
|
1,034,908
|
|
|
$
|
2,847,240
|
|
|
$
|
3,882,148
|
|
|
Total Assets by Segment
|
|
For the year ended January 31,
2008
|
|
|
|
|
Duratech Structures, Inc.
|
|
|
Duratech Contracting, Inc.
|
|
|
Totals
|
|
|
Total
Assets
|
|
$
|
718,535
|
|
|
$
|
2,221,260
|
|
|
$
|
2,939,795
|
|
The
accounting policies used for segment reporting are the same as those described
in Note A “Summary of Significant Accounting Policies”;
NOTE
H—EQUITY
The
outstanding share data as at January 31, 2009 and September 30, 2007 is as
follows:
|
|
|
Number of shares
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
75,224,676
|
|
|
|
22,170,324
|
|
Options
to purchase common shares
|
|
|
21,520,334
|
|
|
|
1,120,000
|
|
Warrants
to purchase common shares
|
|
|
2,360,000
|
|
|
|
2,360,000
|
|
|
Debentures
convertible to common shares
|
|
|
-
|
|
|
|
-
|
|
|
Accrued
interest convertible to common shares
|
|
|
-
|
|
|
|
-
|
|
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE
H—EQUITY (CONTINUED)
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 January 31, 2009 are shown in the following table:
|
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.
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE
H—EQUITY (CONTINUED)
A summary of the time-based stock awards as of January 31, 2009,
and changes during the quarter ended January 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)
|
|
|
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
or expired
|
|
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding
January 31, 2009
|
|
|
21,520,334
|
|
|
$
|
0.056
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable
at January 31, 2009
|
|
|
2,570,000
|
|
|
$
|
0.10
|
|
The
following tables summarize information about fixed stock options outstanding and
exercisable at January 31, 2009:
|
|
|
|
Stock
Options Outstanding
|
|
Range
of Exercise Prices
|
|
Number
of
Shares
Outstanding
|
|
Weighted
Average
Contractual
Life
in
Years
|
|
|
$0.10
|
|
700,000
|
|
8.25
|
|
|
$0.10
|
|
170,000
|
|
9.34
|
|
|
$0.10
|
|
1,700,000
|
|
9.42
|
|
|
$0.10
|
|
18,950,334
|
|
9.67
|
|
|
|
|
21,520,334
|
|
9.60
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
18,950,334
|
|
$0.05
|
|
|
|
|
|
|
|
|
|
|
|
21,520,334
|
|
|
The
exercise price of stock options granted during the period ended January 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 January 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.
UPSNAP
INC. F/K/A DURATECH GROUP, INC.
NOTES TO
CONSOLIDATED AUDITED FINANCIAL STATEMENTS
FOR THE
YEARS ENDED JANUARY 31, 2009 AND 2008
NOTE
H—EQUITY (CONTINUED)
A summary
of warrant activity for the period ended January 31, 2009 is as
follows:
|
Series
B
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Warrants
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Warrants
Exercisable
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
September 30, 2007
|
|
|
1,800,000
|
|
|
$
|
1.10
|
|
|
|
1,800,000
|
|
|
$
|
1.10
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 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,
September 30, 2007
|
|
|
560,000
|
|
|
$
|
0.90
|
|
|
|
560,000
|
|
|
$
|
0.90
|
|
|
Granted
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding,
January 31, 2009
|
|
|
560,000
|
|
|
$
|
0.90
|
|
|
|
560,000
|
|
|
$
|
0.90
|
|
At
January 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
|
|
|
|
2.53
|
|
|
|
1,800,000
|
|
|
$
|
1.10
|
|
|
$
|
0.90
|
|
|
|
560,000
|
|
|
$
|
0.90
|
|
|
|
2.62
|
|
|
|
560,000
|
|
|
$
|
0.90
|
|
|
|
|
|
|
|
2,360,000
|
|
|
|
|
|
|
|
|
|
|
|
2,360,000
|
|
|
|
|
|
The
Company may from time to time reduce the exercise price for any of the warrants
either permanently or for a limited period or extend their expiration
date.
RETAINED
EARNINGS—PRIOR YEAR ADJUSTMENT
The
Company made a prior year adjustment of $222,198 to reflect cost of goods sold
for two projects that had been completed and sold in the period ending January
31, 2008.
NOTE
I—COMMITMENTS/LEASES
As of
January 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 Other receivable.
NOTE J—RELATED
PARTIES
The
Company has an outstanding amount Due to a shareholder in the amount of
$70,308. 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 year
ended January 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
$1,357,484.
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.
Item
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclos
ure
Not
Applicable.
Item
9A. Controls and Proce
dures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer, Peter van Hierden
CEO”) and Chief Financial Officer, Richard von Gnechten (“CFO”), of the
effectiveness of the Company’s disclosure controls and procedures (as defined
under Rule 13a-15(e) or 15d-15(e) under the Exchange Act) as of the end of the
period covered by this report. Based upon that evaluation, the Company’s CEO and
CFO concluded that the Company’s disclosure controls and procedures were
effective to provide reasonable assurance that information required to be
disclosed by the Company in the reports that the Company files or submits under
the Exchange Act, is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules, regulations and forms, and that such
information is accumulated and communicated to the Company’s management,
including the Company’s CEO and CFO, as appropriate, to allow timely decisions
regarding required disclosure.
ITEM
9A(T). Controls and Proced
ures
Management Report on
Internal Control over Financial Reporting
Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting for the company in accordance with Rules
13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over
financial reporting is designed to provide reasonable assurance regarding the
(i) effectiveness and efficiency of operations, (ii) reliability of financial
reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles, and (iii) compliance
with applicable laws and regulations.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Management
conducted an evaluation of the effectiveness of the Company’s internal control
over financial reporting based on the criteria set forth in Internal Control -
Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO). Based on this evaluation, management has concluded
that the Company’s internal control over financial reporting is effective as of
January 31, 2009.
As a
result of the evaluation of the effectiveness of the Company’s internal control
over financial reporting, referred to in the paragraph above, the Company’s
management has identified a material weakness related to its inability to
provide management’s annual report on internal control over financial reporting
on a timely basis. A material weakness is a deficiency or combination
of deficiencies in internal control over financial reporting, such that there is
a reasonable possibility that a material misstatement of the annual or interim
financial statements will not be prevented or detected on a timely
basis.
This
annual report does not include an attestation report of the Company's registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the SEC that permit the
Company to provide only management's report in this annual report.
Changes in Internal
Controls
During
the year ended December 31, 2008 there were no changes in our internal control
over financial reporting that materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
Item
9B. Other Inform
ation
None.
PART
III
Item
10. Directors, Executive Officers and Corporate Gover
nance
Directors
and Executive Officers
Our
Bylaws provide that we shall have that number of directors determined by the
majority vote of the board of directors. Currently we have two directors. Each
director will serve until our next annual shareholder meeting. Directors are
elected for one-year terms. Our Board of Directors elects our officers at the
regular annual meeting of the Board of Directors following the annual meeting of
shareholders. Vacancies may be filled by a majority vote of the remaining
directors then in office. Our directors and executive officers are as
follows:
|
Name
|
Age
|
Position
|
|
|
|
|
|
Peter
van Hierden
|
49
|
President,
Chief Executive Officer, Director
|
|
Richard
von Gnechten
|
44
|
Chief
Financial Officer,
Director
|
Backgrounds
of Directors
Executive
Officers and Directors
Peter Van
Hierden
, a director, is President and CEO and principal owner of Duratech
Group, Inc. Duratech is engaged in the homebuilding and manufactured housing
business in Alberta and Saskatchewan, Canada, which are experiencing rapid
growth primarily because of commodities such as oil, uranium and diverse mining.
Duratech operates through its business units Duratech Contracting and Duratech
Structures and through its ownership of 50% of the share capital of two joint
venture companies: P&R Gateway Developments Inc. and 1371009 Alberta Ltd.,
both Alberta corporations. Mr. Van Hierden has been an entrepreneur for over 30
years, having started, run, bought and sold companies over that time period.
Over the past 15 years, he helped successfully turn around the profitability,
from a loss to a profit, of six companies ranging from $1 million to $30 million
in revenue.
Richard von
Gnechten
, a director since April 19, 2006, has served since 2005 as
President and CEO of Ravon Corp., which provides corporate financial advisory
services. Mr. von Gnechten joined Hawaiian Electric Company (HECO) in 1991 and
served as Financial Vice President & CFO from 2000 to 2004,
managing/implementing Sarbanes-Oxley, SEC and NYSE compliance. During his
tenure, Hawaiian Electric was recognized by a Dow Jones public company survey as
a top 5 company for corporate governance and top 10 for disclosure transparency.
Mr. von Gnechten also serves as Managing Director and CEO for Global Kingdom
Finance Co. and Partner of Naviscent Group, LLC and board member for several
companies. He has an MBA from Dartmouth’s Tuck School of Business,
Financial Management Program graduate from Stanford’s Graduate School of
Business and a degree in Economics from the University of Denver.
Family
Relationships
There are
no familial relationships between our officers and directors.
Meetings
of Our Board of Directors
Our Board
of Directors met in person or via telephone occasionally during our fiscal year
ended January 31, 2009. Each member of the Board of Directors attended at least
75% of the meetings.
Board
Committees
The
Company presently does not have a compensation committee or nominating
committee. The Company does have an audit committee, with committee duties
currently carried out by a member of our Board of Directors. Our Board of
Directors has determined that the audit committee member has sufficient
knowledge in financial and accounting matters to serve on the committee and that
the member is an “audit committee financial expert” as defined by the rules of
the Securities and Exchange Commission. The Board of Directors has not adopted a
written charter for the audit committee as the management of the Company
believes that until this point it has been premature at the current stage of the
Company’s management and business development to adopt a formal
charter.
The same
reasoning applies to the decision not to form a compensation or nominating
committee. However, the new management of the Company may form a compensation
and nominating committee in the future. Until these committees are established,
these decisions will continue to be made by the Board of Directors. New
management may also adopt a formal audit committee charter. Although the Board
of Directors has not established any minimum qualifications for director
candidates, when considering potential director candidates, the Board considers
the candidate’s character, judgment, skills and experience in the context of the
needs of the Company and the Board of Directors.
The
Company’s Board of Directors does not currently provide a process for
stockholders to send communications to the Board of Directors as the Company
management believes that until this point it has been premature given the
limited liquidity of the common stock of the Company to develop such processes.
However, the new management of the Company may establish a process for
stockholder communications in the future.
Director
Compensation
We have
no standard arrangement pursuant to which our directors are compensated for
their services in their capacity as directors. The Board of Directors may award
special remuneration to any director undertaking any special services on behalf
of our company other than services ordinarily required of a
director.
Significant
Employees
Other
than the two individuals serving as directors and officer described above, we do
not expect any other individuals to make a significant contribution to our
business.
Involvement
in Legal Proceedings
None of
our directors, executive officers, promoters or control persons has been
involved in any of the following events during the past five years:
|
Ÿ
|
any
bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that
time;
|
|
Ÿ
|
any
conviction in a criminal proceeding or being subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
|
Ÿ
|
being
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
|
Ÿ
|
being
found by a court of competent jurisdiction (in a civil action), the SEC or
the Commodity Futures Trading Commission to have violated a federal or
state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
|
Code
of Ethics
The
Company has adopted a Code of Ethics that applies to the Company’s chief
executive officer, chief financial officer, comptroller, chief accounting
officer and persons performing similar functions, (the "Code of Ethics"), a copy
of which is included as Exhibit 14 to our Form 10-KSB for the fiscal year ended
September 30, 2005, and is incorporated herein by reference. The Code of Ethics
is designed with the intent to promote the following:
|
|
Honest
and ethical conduct
|
|
|
|
|
–
|
Accurate
financial records and periodic reports
|
|
|
|
|
–
|
Compliance
with all applicable governmental laws, rules and
regulations
|
Section
16(a) Beneficial Ownership Reporting Compliance
Under
Section 16(a) of the Exchange Act, all executive officers, directors, and each
person who is the beneficial owner of more than 10% of the common stock of a
company that files reports pursuant to Section 12 of the Exchange Act, are
required to report the ownership of such common stock, options, and stock
appreciation rights (other than certain cash-only rights) and any changes in
that ownership with the Commission. Specific due dates for these reports have
been established, and the Company is required to report, in this Form 10-K, any
failure to comply therewith during the fiscal year ended January 31, 2009. The
Company believes that all of these filing requirements were satisfied by its
executive officers, directors and by the beneficial owners of more than 10% of
the Company’s common stock. In making this statement, the Company has relied
solely on copies of any reporting forms received by it, and upon any written
representations received from reporting persons.
Item
11. Executive Compensa
tion
Compensation
Discussion and Analysis
We
maintain a peer-based executive compensation program comprised of fixed and
performance variable elements. The design and operation of the program reflect
the following objectives:
|
-
|
Recruiting
and retaining talented leadership.
|
|
-
|
Implementing
measurable performance targets.
|
|
-
|
Correlating
compensation directly with shareowner value.
|
|
-
|
Emphasizing
performance based compensation, progressively weighted with seniority
level.
|
|
-
|
Adherence
to high ethical, safety and leadership
standards.
|
Designing
a Competitive Compensation Package
Recruitment
and retention of leadership to manage our Company requires a competitive
compensation package. Our Board of Directors emphasizes (i) fixed compensation
elements of base salary that compare with our compensation peer group of
companies, and (ii) variable compensation contingent on above-target
performance. The compensation peer group consists of those companies in the
Alberta, Canada province that we deem to compete with our Company for executive
talent. Individual compensation will vary depending on factors such as
performance, job scope, abilities, tenure, and retention risk.
Fixed
Compensation
The
principal element of fixed compensation not directly linked to performance
targets is based salary. We target the value of fixed compensation generally at
the median of our compensation peer group to facilitate a competitive
recruitment and retention strategy.
Incentive
Compensation
Our
incentive compensation programs are linked directly to earnings growth, cash
flow, and total shareowner return. Annual bonuses are tied to the current year’s
performance of our company. Restrictive stock awards are tied to an individual’s
success in exceeding targeted results set by management.
No
compensation in excess of $100,000 was awarded to, earned by, or paid to any
executive officer of UpSnap, Inc. during the years 2008, 2007 and 2006, except
as described below. The following table and the accompanying notes provide
summary information for each of the last three fiscal years concerning cash and
non-cash compensation paid or accrued by our chief executive officer and other
executive officers earning in excess of $100,000 for the past three
years.
SUMMARY
COMPENSATION TABLE
|
Name
of officer
|
Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Non-Equity
Incentive Plan Compensation
|
|
|
Nonqualified
Deferred Compensation
|
|
|
All
Other Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peter
Van Hierden
|
2009
|
|
$
|
30,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
30,000
|
|
|
CEO
|
2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard
Von Gnechten
|
2009
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2008
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
2007
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tony
Philipp
(1)
|
2007
|
|
$
|
120,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
120,000
|
|
|
|
2006
|
|
$
|
120,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
$
|
120,000
|
|
|
|
2005
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
(1)
Mr.
Philipp was our former Chairman and CEO who resigned as CEO on September 17,
2008.
Option
Grants in Last Fiscal Year
There
were no options granted to Philipp during the year ended September 30, 2007.
There were options to purchase 1,000,000 shares of Common Stock granted to
Philipp during the nine-months ended June 30, 2008, exercisable at $.10 per
share, vesting over a four year period, with all unvested options to vest upon
the Closing.
During
the year ended September 30, 2007 and the nine-months ended June 30, 2008,
Philipp did not exercise any stock options.
|
GRANTS
OF PLAN-BASED AWARDS
|
|
Name
|
Grant
Date
|
|
Estimated
Future Payouts Under Non-Equity Incentive Plan Awards
|
|
|
Estimated
Future Payouts Under Equity Incentive Plan Awards
|
|
|
All
Other Stock Awards: Number of Shares of Stocks or Units
(#)
|
|
|
All
Other Option Awards: Number of Securities Underlying Options
(#)
|
|
|
Exercise
or Base Price of Option Awards
($/Sh)
|
|
|
Grant
Date Fair Value of Stock and Option Awards
|
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
Threshold
($)
|
|
|
Target
($)
|
|
|
Maximum
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tony
Philipp
|
5/14/08
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,000,000
|
|
|
$
|
0.10
|
|
|
|
0
|
|
Employment
Agreements
The
Company has no employment agreements with any of its employees.
Pension,
Retirement or Similar Benefit Plans
There are
no arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers. We have no material bonus or
profit sharing plans pursuant to which cash or non-cash compensation is or may
be paid to our directors or executive officers, except that stock options may be
granted at the discretion of the Board of Directors or a committee
thereof.
Directors’
and Officer’s Liability Insurance
During
the preceding year the Company had insurance insuring directors and officers
against liability.
Change
of Control
As of
January 31, 2009, we had no pension plans or compensatory plans or other
arrangements which provide compensation on the event of termination of
employment or change in control of us.
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Ma
tters
|
The
following table sets forth as of January 31, 2009, the number of shares of the
Company’s Common Stock owned of record or beneficially by each person known to
be the beneficial owner of 5% or more of the issued and outstanding shares of
the Company’s voting stock, and by the directors and officers of the Company.
The number of common shares issued and outstanding as of January 31, 2009, was
97,500,000, each with a par value of $0.001, and 23,780,334 options or warrants
on common shares.
|
Title
of Class
|
Name
and Address
|
|
Number
of
Shares
Owned
(1)
|
|
|
Percent
of
Voting
Power
(2)
|
|
|
|
|
|
|
|
|
|
|
|
Principal
Stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
Janet
Van Hierden
2920
9
th
Avenue North
Lethbridge,
Alberta, Canada T1H 5E4
|
|
|
48,340,284
|
(3)
|
|
|
49.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
Tony
Philipp
P.O.
Box 2399
Davidson,
North Carolina 28036
|
|
|
4,910,000
|
(4)
|
|
|
5.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Directors
and Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
Peter
Van Hierden
2920
9
th
Avenue North
Lethbridge,
Alberta, Canada T1H 5E4
|
|
|
48,340,284
|
(3)
|
|
|
49.5
|
%
|
|
Common
|
Richard
von Gnechten
2920
9
th
Avenue North
Lethbridge,
Alberta, Canada T1H 5E4
|
|
|
1,365,265
|
(5)
|
|
|
1.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
|
All
Officers and Directors as a Group (2 persons)
|
|
|
49,705,549
|
|
|
|
51.0
|
%
|
(1)
Except
as otherwise indicated, the shares are owned of record and beneficially by the
persons named in the table.
|
(2)
|
Based
on 73,719,666 issued and outstanding shares of common stock and 23,780,334
options to purchase shares of common stock as of the Closing Date, for a
total of 97,500,000 issued and outstanding.shares and shares reserved for
issuance.
|
|
(3)
|
Janet
Van Hierden and Peter Van Hierden are husband and wife, and beneficially
own the 6,387,729 and 41,255,710 shares, respectively, of Common Stock
owned by each and 2,765,292 options to purchase Common Stock owned by
Peter Van Hierden. In addition, Mr. and Mrs. Van Hierden beneficially own
580,703 shares of Common Stock owned by their son Jason Van Hierden and
the 116,141 shares of Common Stock owned by their son Brendon Van
Hierden. They also beneficially own the 547,837 options to
purchase shares of Common Stock owned by their daughter Amanda Van Hierden
and the 273,919 options to purchase shares of Common Stock owned by their
daughter Carlarene Van Hierden.
|
|
(4)
|
Mr.
Philipp’s shareholdings are comprised of 1,000,000 fully-vested options
and 3,910,000 shares. Mr. Philipp is the former CEO of the
Company, who resigned on September 17,
2008.
|
(5)
Mr.
von Gnechten owns 1,054 shares of Common Stock and 1,364,211 options to purchase
Common Stock.
Item
13. Certain Relationships, Related Transactions and Director Indepen
dence
For the
ten-months ended July 31, 2008, Philipp, the CEO, advanced a total of $61,333 to
the Company. For the year ended September 30, 2007 and 2006, Philipp advanced $0
and $0 to the Company, respectively. Philipp was paid $32,000 by the Company for
2008 (as of July 31, 2008), and has an accrued salary for 2008 amounting to
$61,333 (as of July 31, 2008).
After the
consummation of the transactions contemplated by the Share Exchange Agreement,
the Company sold 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”).
Over the
past few years the Company has sustained continued financial losses and revenue
declines as its business has grown more competitive, it has not been able to
raise additional capital to expand its operations, it has recent concerns about
obligations to its creditors and its continuation as a going concern, and
subsequent to the termination of the proposed merger transaction with Mobile
Greetings, Inc., it has explored various financing and acquisition alternatives.
Based upon management’s review of alternatives, the Share Exchange Agreement and
the Asset Purchase Agreement present the most viable present possibility for
future enhancement of shareholder value and for payment of
creditors.
Pursuant
to the Share Exchange Agreement and the Asset Purchase Agreement, Philipp has
agreed, among other things, to indemnify and hold harmless the Company from and
against all liabilities as of the Closing Date up to $200,000. As part of the
Asset Purchase Agreement, the Company has agreed to contribute $130,000 to
UpSnap Services at Closing solely toward the payment and discharge of the
Assumed Liabilities (as defined). The $130,000 contribution is not to be used to
pay any of Philipp’s advances to the Company or his accrued salary. Duratech has
agreed to fund this $130,000 capital contribution. The Asset Purchase Agreement
was approved by a majority of the Board of Directors, with Philipp abstaining,
in accordance with Nevada Revised Statutes 78.140.
Richard
A. von Gnechten, a member of the Board of the Company and also a Managing
Director and CEO for Global Kingdom Finance Co., an affiliate of Duratech, was
appointed as Chief Financial Officer of the Company as of September 17, 2008. He
does not plan to have a salary paid by the Company, nor will he have an
employment contract with the Company.
Except
for the transactions described above, there are no proposed transactions and no
transactions during the past two years to which the Company was (or is) a party,
and in which any officer, director, or principal stockholder, or their
affiliates or associates, was also a party.
Director
Independence
Our
securities are quoted on the OTC Bulletin Board which does not have any director
independence requirements. Once we engage further directors and
officers, we will develop a definition of independence and scrutinize our Board
of Directors with regard to this definition.
Item
14. Principal Accountant Fees and S
ervices
Fees
Billed For Audit and Non-Audit Services
The
following table represents the aggregate fees billed for professional audit
services rendered by the accounting firm of Tracy J. Anderson, CPA, our
current independent auditor, and all fees billed for other services rendered by
the said firms during those periods.
|
Year
Ended January 31
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Accounting Fees and Services
|
|
|
|
|
|
|
|
|
|
(1)
|
Audit Fee
. These are
fees for professional services for the audit of the Company's annual
financial statements, and for the review of the financial statements
included in the Company's filings on Form 10-Q, and for services that are
normally provided in connection with statutory and regulatory filings or
engagements.
|
|
|
|
|
(2)
|
Audit-Related Fee
.
These are fees for the assurance and related services reasonably related
to the performance of the audit or the review of the Company's financial
statements.
|
|
|
|
|
(3)
|
Tax Fees
. These are
fees for professional services with respect to tax compliance, tax advice,
and tax planning.
|
|
|
|
|
(4)
|
All Other Fees
. These
are fees for permissible work that does not fall within any of the other
fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax
Fees.
|
Pre-Approval
Policy for Audit and Non-Audit Services
The
Company implemented pre-approval policies and procedures related to the
provision of audit and non-audit services. Under these procedures, our Board of
Directors, performing the duties of the Audit Committee, reviews all audit and
non-audit related fees at least annually. The Board of Directors as the Audit
Committee pre-approved all audit related services in the year ended January 31,
2009.
Item
15. Exhibits, Financial Statement Schedules and Reports on
Form 8-K
(a)
(1) Financial Statements
See
“Table of Contents to Consolidated Financial Statements” set forth on page
19.
(a)
(2) Financial Statement Schedules
None. The
financial statement schedules are omitted because they are inapplicable or the
requested information is shown in our financial statements or related notes
thereto.
(a)
(3) Exhibits
|
Exhibit
Number
|
Exhibit
Description
|
|
|
|
|
2.1
|
Share
Exchange Agreement by and among UPSN, Duratech Group Inc., Philipp, van
Hierden and the Duratech Shareholders , dated August 29, 2008
(1)
|
|
2.2
|
Asset
Purchase Agreement between UPSN, UpSnap Services, LLC and Philipp, dated
August 29, 2008 (1)
|
|
3.1
|
Articles
of Incorporation of the Company(2)
|
|
3.2
|
By-laws
of the Company (2)
|
|
3.3
|
Certificate
of Amendment to Articles of Incorporation changing name of corporation and
authorizing 3:1forward split (3)
|
|
14.1
|
Code
of Ethics (4)
|
|
21.1
|
|
|
31.1
|
|
|
31.2
|
|
|
32
|
|
|
(1)
|
Included
as an exhibit to our Form 8-K filed with the Commission on September 24,
2008.
|
|
(2)
|
Incorporated
by reference from Exhibits 3.1 and 3.2 to UPSN’s Registration Statement on
Form SB-2 filed with the Commission on September 18,
2003.
|
|
(3)
|
Incorporated
by reference to Exhibit 3.1 from Form 8-K filed on November 17,
2005.
|
|
(4)
|
Incorporated
by reference from Exhibit 14 to our Annual Report on Form 10-KSB for the
fiscal year ended September 30, 2005, filed with the Commission on
December 27, 2005.
|
|
(5)
|
Filed
herewith.
|
Reports on Form 8-K Filed in
the Last Fiscal Quarter of 2008
|
(1)
|
On
December 10, 2008, the Company filed a Form 8-K regarding the resignation
of a director effective December 8, 2008.
|
|
(2)
|
On
December 15, 2008, the Company filed a Form 8-K regarding the adoption of
January 31 as the end of its new fiscal year.
|
|
(3)
|
On
January 20, 2009, the Company filed a Form 8-K regarding the entry into a
material definitive agreement and the unregistered sale of securities in
connection with the transactions contemplated by the Preferred Stock
Exchange Agreement.
|
In
accordance with the Section 13 or 15(d) of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
|
|
UPSNAP,
INC.
|
|
|
|
|
|
|
|
Date:
May 18, 2009
|
By:
|
/
s/ Peter van
Hierden
|
|
|
|
|
Peter
van Hierden
|
|
|
|
|
Chief
Executive Officer
|
|
|
|
|
|
|
Pursuant
to the requirements of the Exchange Act, this report has been signed by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
|
Signature
|
Title
|
Date
|
|
/s/ Peter van Hierden
|
Chairman,
Chief Executive Officer and Director
|
May
18, 2009
|
|
Peter
van Hierden
|
|
|
|
/s/Richard von Gnechten
|
Chief
Financial Officer
|
May
18, 2009
|
|
Richard
von Gnechten
|
|
|