Snap2 (VTPK) 10QSB 2005 Q3 Quarterly report (small business)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

[X]	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended: June 30, 2005
[   ]	Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934
	For the transition period ___________ to __________

SNAP2 CORPORATION

(Name of Small Business Issuer in its charter)

NEVADA	0-26839	88-0407246
(State of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

101 Plaza Real South, Suite 210, Boca Raton, FL 33436

(Address of principal executive offices and zip code)

2000 West Commercial Blvd. Suite 133, Fort Lauderdale, FL 33309

(Former address of principal executive offices and zip code)

(561) 368-4700

Registrant's telephone number, including area code:

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 such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [ ]

As of June 30, 2005 the Registrant has 48,994,250 shares of common stock outstanding.

Transitional Small Business Disclosure Format. Yes [   ] No [X]

	TABLE OF CONTENTS	Page
PART I - FINANCIAL INFORMATION
Item 1:	Financial Statements	3
Item 2:	Plan of Operation	4
Item 3:	Controls and Procedures	9
PART II - OTHER INFORMATION
Item 1:	Legal Proceedings	10
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	10
Item 3:	Defaults Upon Senior Securities	10
Item 4:	Submission of Matters to a Vote of Security Holders	10
Item 5:	Other Information	10
Item 6:	Exhibits	10

2

PART 1 - FINANCIAL INFORMATION

Item 1.     Financial Statements

Our unaudited financial statements included in this Form 10-QSB are as follows:

(a)   Condensed Consolidated Balance Sheet as of June 30, 2005;

(b)   Condensed Consolidated Statements of Operations for the nine and three months ended June 30, 2005 and 2004;

(c)   Condensed Statements of Cash Flow for the nine and three months ended June 30, 2005 and 2005;

(d)   Notes to Condensed Financial Statements.

These unaudited financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and the SEC instructions to Form 10-QSB. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. Operating results for the interim period ended June 30, 2005 are not necessarily indicative of the results that can be expected for the full year.

3

SNAP2 CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

JUNE 30, 2005

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	38,413
Accounts receivable		263,765
Inventory		19,474
Total current assets		321,652
FIXED ASSETS
Equipment		1,463
Less accumulated depreciation		(219	)
Total fixed assets		1,244
OTHER ASSETS
Goodwill		1,619,350
Total other assets		1,619,350
TOTAL ASSETS	$	1,942,246
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	512,777
Stockholder loan		11,446
Note payable		84,000
Loans payable		359,450
Total current liabilities		967,673
Long-term Liabilities
Commitments		631,556
Total liabilities		1,599,229
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.001 par value; 20,000,000 shares authorized;
0 shares issued and outstanding		-
Common stock, $.001 par value; 50,000,000 shares authorized;
48,994,250 shares issued and outstanding		48,994
Additional paid-in capital		8,151,863
Accumulated deficit		(7,857,840	)
Total stockholders' equity (deficit)		343,017
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)	$	1,942,246

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

F - 1

SNAP2 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 2005

	NINE MONTHS ENDED						THREE MONTHS ENDED
	June 30			June 30			June 30			June 30
	2005			2004			2005			2004
OPERATING REVENUE	$	6,635,662		$	440,935		$	989,335		$	440,935
COST OF OPERATIONS		6,537,051			433,770			958,597			433,770
GROSS PROFIT		98,611			7,165			30,738			7,165
OPERATING EXPENSES
Consulting fees		351,918			1,127,300			108,472			287,300
General and administrative		70,572			2,645			43,171			2,566
Insurance		12,000			-			-			-
Professional		143,875			-			91,225			-
Rent		43,850			18,500			23,477			18,500
Total operating expenses		622,215			1,148,445			266,345			308,366
OPERATING LOSS		(523,604	)		(1,141,280	)		(235,607	)		(301,201	)
OTHER EXPENSE
Impairment		-			(3,200,000	)		-			-
Total other expense		-			(3,200,000	)		-			-
LOSS BEFORE INCOME TAXES		(523,604	)		(4,341,280	)		(235,607	)		(301,201	)
Provision for income taxes		-			-			-			-
NET LOSS	$	(523,604	)	$	(4,341,280	)	$	(235,607	)	$	(301,201	)
BASIC AND DILUTED INCOME (LOSS) PER SHARE
Basic from continuing operations	$	(0.01	)	$	(0.02	)	$	(0.00	)	$	(0.01	)
Diluted from continuing operations	$	(0.01	)	$	(0.02	)	$	(0.00	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER OF BASIC		48,907,467			47,090,953			48,907,467			47,090,953
COMMON SHARES OUTSTANDING
WEIGHTED AVERAGE NUMBER OF DILUTED		48,907,467			47,090,953			48,907,467			47,090,953
COMMON SHARES OUTSTANDING

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

F - 2

SNAP2 CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

FOR THE NINE MONTHS AND THREE MONTHS ENDED JUNE 30, 2005

	2005			2004
CASH FLOW FROM OPERATING ACTIVITIES
Continuing Operations:
Net loss	$	(523,604	)	$	(4,341,280	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation		219			-
Common stock issued for services		-			1,045,000
Impairment		-			3,200,000
Changes in assets and liabilities
(Increase) decrease in accounts receivable		60,598			(112,142	)
(Increase) decrease in inventory		14,709			(14,555	)
Inccrease in accounts payable and accrued liabilities		86,224			120,836
Total adjustments		161,750			4,239,139
Net cash used in operations		(361,854	)		(102,141	)
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(1,463	)		-
Net cash used in investing activities		(1,463	)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of stock		-			100,000
Amounts loaned to officer - net		(17,742	)		(6,133	)
Short term borrowings - net		359,450			-
Net cash provided by financing activities		341,708			93,867
NET DECREASE IN CASH AND CASH EQUIVALENTS		(21,609	)		(8,274	)
CASH AND CASH EQUIVALENTS -
BEGINNING OF PERIOD		60,022			12,800
CASH AND CASH EQUIVALENTS - END OF PERIOD	$	38,413		$	4,526
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest paid	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION:
Common stock issued for stock subscriptions	$	150,000		$	-
Common stock issued for services	$	-		$	1,045,000
Common stock issued for purchase of companies	$	-		$	3,200,000

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

F - 3

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2005 AND 2004

NOTE 1 -              NATURE OF BUSINESS

The condensed consolidated unaudited interim financial statements included herein have been prepared by Snap 2 Corporation (the “Company”) without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as allowed by such rules and regulations, and the Company believes that the disclosures are adequate to make the information presented not misleading. It is suggested that these condensed consolidated financial statements be read in conjunction with the September 30, 2004 audited consolidated financial statements and the accompanying notes thereto. While management believes the procedures followed in preparing these condensed consolidated financial statements are reasonable, the accuracy of the amounts are in some respects dependent upon the facts that will exist, and procedures that will be accomplished by the Company later in the year.

The management of the Company believes that the accompanying unaudited condensed consolidated financial statements contain all adjustments (including normal recurring adjustments) necessary to present fairly the operations, changes in stockholders’ equity (deficit), and cash flows for the periods presented.

Snap 2 Corporation, was incorporated as White Rock Enterprises, Ltd. On October 8, 1998 under the laws of the State of Nevada. The Company was originally formed to develop and market a dryer for boots and shoes. On February 28, 2000, the Company merged with ISES Corporation with the Company being the surviving entity. In connection with the merger, the Company issued 10,000,000 shares of common stock and 10,000 shares of convertible preferred stock automatically converted to 10,000,000 shares of common stock on February 28, 2002.

For accounting purposes, the transaction was been accounted for as a reverse acquisition under the purchase method of accounting. Accordingly, the Company will be treated as the continuing entity for accounting purposes, and the financial statements presented herein are those of the Company.

In connection with the reverse merger, the Company became a software product developer and software service provider for in-flight entertainment systems and set-top boxes for interactive television. The Company changed its name to Snap 2 Corporation pursuant to an Articles of Amendment filed July 12, 2000.

F - 4

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 1 -              NATURE OF BUSINESS (CONTINUED)

On March 31, 2003, the Company entered into an Escrow Agreement with its majority stockholder, and another entity, whereby the majority stockholder sold his interest in the Company constituting 74.2% of the issued and outstanding shares of the Company to the other entity for $100,000 in a private stock transaction. For the $100,000 consideration, the majority stockholder received the assets of the Company and assumed the liabilities of the Company, with the Company providing a promissory note to the majority stockholder for $84,000.

In accordance with the Escrow Agreement, the Company signed an indemnification agreement, indemnifying the Company of any liability with respect to the majority stockholder’s assumption of the debt acquired by him. The Company, however, in accordance with FASB 5 and FIN 45, has elected to recognize a liability on its books due to the guarantee imposed that the debt gets paid off. Under FIN 45, the Company recorded the liability at the inception of the guarantee and only will reflect a reduction of the payable, i.e. release from guarantee upon the expiration or settlement of the guarantee, by a systematic and rational amortization method or as the fair value of the guarantee changes.

On April 19^th 2004 The Company acquired the assets of Call Now America Prepaid LLC in a stock-for-assets acquisition.

The Company has amended its previously issued unaudited financial statements for the nine months ended June 30, 2004. The Company did not have an independent review of its financial statements by an independent certified public accountant. Additionally, the Company has restated its financial statements to take effect for the disposal of its business.

F - 5

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 2-               SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All significant intercompany accounts and transactions have been eliminated in consolidation.

Cash and Cash Equivalents

For financial statement presentation purposes, the Company considers short-term, highly liquid investments with original maturities of three months or less to be cash and cash equivalents. There were no cash equivalents at June 30, 2005 and 2004.

The Company maintains cash and cash equivalent balances at a financial institution that is insured by the Federal Deposit Insurance Corporation up to $100,000. There were no uninsured cash balances at June 30, 2005 and 2004.

Revenue Recognition

The Company records its transactions under the accrual method of accounting whereby income is recognized when the services are rendered and collection is reasonable assured.

Income Taxes

The provision for income taxes includes the tax effects of transactions reported in the financial statements. Deferred taxes would be recognized for differences between the basis for assets and liabilities for financial statement and income tax purposes. The major difference relates to the net operating loss carryforwards generated by sustaining deficits during the development stage. The Company lost all prior net operating loss carryforwards prior to June 30, 2004 due to the change in control.

F - 6

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 2-                 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                                 (CONTINUED)

Earnings (Loss) Per Share of Common Stock

Historical net income (loss) per common share is computed using the weighted average number of common shares outstanding. Diluted earnings per share (EPS) includes additional dilution from common stock equivalents, such as stock issuable pursuant to the exercise of stock options and warrants. Common stock equivalents are not included in the computation of diluted earnings per share when the Company reports a loss because to do so would be antidilutive for the periods presented.

The following is a reconciliation of the computation for basic and diluted EPS:

	June 30,			June 30,
	2005			2004
Net Income (loss)	$	(523,604	)	$	(4,341,280	)
Weighted-average common shares
outstanding (Basic)		48,909,467			47,090,953
Weighted-average common stock
equivalents:
Stock options and warrants		-			-
Weighted-average common shares
outstanding (Diluted)		48,909,467			47,090,953

The company at June 30, 2005 and 2004 had no common stock equivalents.

Property and Equipment

All property and equipment was recorded at cost and depreciated over their estimated useful lives, generally three, five or seven years, using the straight-line method. Upon sale or retirement, the costs and related accumulated depreciation are eliminated from their respective accounts, and the resulting gain or loss is included in the results of operations. Repairs and maintenance charges which do not increase the useful lives of the assets are charged to operations as incurred. The Company disposed of its assets on June 30, 2003.

F - 7

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 2-                SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
                                (CONTINUED)

Advertising

Costs of advertising and marketing are expensed as incurred. There were no advertising or marketing costs for the nine months ended June 30, 2005 and 2004.

Stock-Based Compensation

The Company has elected to follow Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), and related interpretations, in accounting for their employee stock options rather than the alternative fair value accounting allowed by SFAS No. 123, “Accounting for Stock-Based Compensation”, and has adopted the enhanced disclosure provisions of SFAS No. 148, “Accounting for Stock Based Compensation - Transition and Disclosures”, an amendment of SFAS No. 123. APB No. 25 provides that the compensation expense relative to the Company’s employee stock options is measured based on the intrinsic value of the stock option. SFAS No. 123 requires companies that continue to follow APB No. 25 to provide a pro-forma disclosure of the impact of applying the fair value method of SFAS No. 123.

Effective September 30, 2002, the Company’s Board of Directors, elected to expense the imputed compensation cost related to stock options repriced or newly granted during fiscal 2002. The calculations to estimate the fair value of the options were made using the Black-Scholes pricing model. Compensation cost for stock options issued other than to employees and directors, if any, is recognized at the date of grant.

Goodwill and Other Intangible Assets

In June 2001, the FASB issued Statement No. 142 "Goodwill and Other Intangible Assets." This Statement addresses financial accounting and reporting for acquired goodwill and other intangible assets and supersedes APB Opinion No.17, Intangible Assets. The statement addresses how intangible assets that are acquired are accounted for as well as the accounting for them after the initial recognized treatment. The company in January 2004 acquired various customer lists and assets from Digital Marketing Networks, LLC and EZ Direct Marketing, Inc. that they have impaired because they are not being utilized of $3,200,000. The company in May 2004 went in another direction and Acquired the assets of Call Now America prepaid Company, LLC that are being utilized and have recorded the corresponding goodwill of $1,619,350. The company will test for the impairment annually.

F - 8

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 3-                STOCKHOLDERS’ DEFICIT

The Company is authorized to issue 50,000,000 common shares and 20,000,000 preferred shares all of a par value of $.001. At June 30, 2005, the Company had 48,994,250 common shares outstanding, and no preferred shares issued and outstanding.

In May and June 2002, the Company issued an aggregate 307,500 shares of common stock to an unrelated entity providing various financial services. These aggregate transactions were valued at approximately $61,500 ($.20 per share), the fair value of the common stock based on the quoted closing price of the Company’s common stock on the date of the respective transactions.

On August 23, 2003, the Company issued 23,000,000 shares of its common stock for services rendered. The fair value of the common stock on the date of the issued shares was $.001 per share, with a value of $23,000.

On September 4, 2003, the Company authorized a 1 for 10 reverse stock split. The post-split shares at September 4, 2003 were 4,994,250.

On January 5, 2004, the Company agreed to acquire Digital Marketing Networks, LLC and Ez Direct Marketing, Inc., through a share for share exchange. The fair market value of the common stock on the date of the exchange date was $.10 per share and the 32,000,000 shares were issued on January 5, 2004.

On January 5, 2004, the Company issued 8,000,000 shares for consulting services provided. The fair market value of the common stock on the date of the issuance was $0.10 per share.

On March 9, 2004, the Company issued 100,000 shares for cash. The fair market value of the common stock on the date of the issuance was $0.10 per share.

On April 14, 2004, the Company issued 200,000 shares for consulting services provided. The fair market value of the common stock on the date of the issuance was $1.00 per share.

On May 7, 2004, the Company issued 3,000,000 shares for the acquisition of Call Now America Prepaid Company, LLC. The fair market value of the common stock on the date of the issuance was $0.54 per share.

F - 9

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 3-                STOCKHOLDERS’ DEFICIT (CONTINUED)

On May 20, 2004, the Company issued 100,000 shares for consulting services provided. The fair market value of the common stock on the date of the issuance was $0.45 per share.

On October 14, 2004, the Company issued 600,000 shares for cash. The fair market value of the common stock on the date of the issuance was $0.35 per share.

NOTE 4-                LINE OF CREDIT

The Company had a $200,000 line of credit with a bank bearing interest at the bank’s commercial base rate. This line of credit was guaranteed by an officer of the Company. Funds advanced were secured by the Company’s accounts receivable and equipment. The line of credit matured February 10, 2003 at which time the Company repaid all existing amounts due. The line was not renewed.

NOTE 5-               COMMITTMENTS

In accordance with the Escrow Agreement, the Company signed an indemnification agreement, indemnifying the Company of any liability with respect to the majority stockholder’s assumption of the debt acquired by him. The Company, however, in accordance with FASB 5 and FIN 45, has elected to recognize a liability on its books due to the guarantee imposed that the debt gets paid off. Under FIN 45, the Company recorded the liability at the inception of the guarantee and only will reflect a reduction of the payable, i.e. release from guarantee upon the expiration or settlement of the guarantee, by a systematic and rational amortization method or as the fair value of the guarantee changes. Statement of Financial Accounting Standards Number 5, discusses disclosures and recognition of liabilities relating to loss contingencies. A prime example discussed is the guarantees of indebtedness of others. Under this pronouncement, the Company has disclosed the guarantee and has recorded the liability, because the amounts currently due are probable and reasonably estimated.

NOTE 6-               LONG-TERM DEBT

On June 20, 1999, the Company entered into a promissory note with a related party of the Company’s president whereby $135,000 was borrowed by the Company. The note bears interest at 9% per annum on the unpaid principal balance. Under the terms of the note, principal payments of $10,385 along with interest are due in quarterly installments beginning

F - 10

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 6-                 LONG-TERM DEBT (CONTINUED)

July 1, 2001. The Company had not paid the $83,080 due under this note, as well as the accrued interest, since July 1, 2000. Principal payments had not been accelerated under this note by the noteholder. The former majority shareholder assumed the payments of this note pursuant to an Assignment of Indebtedness dated April 29, 2003. The Company has recorded this liability due to its guarantee on the debt (see Note 5).

On August 17, 1999, the Company entered into an agreement with the Iowa Department of Economic Development (“IDED”) whereby the Company would receive $100,000 of financial assistance of under the Community Economic Betterment Account (“CEBA”). Under the terms of the agreement, the Company shall pay an annual royalty equal to 1.5% of the prior year total gross revenues to IDED in semi-annual payments each June 1 and December 1, until a repayment amount of $200,000 has been reached. Approximately $66,000 was due under this agreement at June 30 2005 and 2004. The Company has recorded this liability due to its guarantee on the debt (see Note 5).

NOTE 7-               GOING CONCERN

The Company’s condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States of America which contemplate the realization of assets and liquidation of liabilities in the normal course of business.

On April 9, 2003, the Company disposed of its business. The Company became a development stage company when the former majority shareholder sold 74.2% of the common shares outstanding of the Company to new management in a private sale of stock.

There is substantial doubt about the Company’s ability to continue as a going concern without the implementation of a business plan that includes a plan to raise working capital needed to fund operations.

Management’s plans with respect to the Company’s future involve working with a newly formed Board of Directors that consists of responsible and experienced directors, and establishing and implementing a business plan that will enable the company to grow and support its operations and working capital needs.

F - 11

SNAP 2 CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2005 AND 2004

NOTE 8-               PROVISION FOR INCOME TAXES

Deferred income taxes will be determined using the liability method for the temporary differences between the financial reporting basis and income tax basis of the Company’s assets and liabilities. Deferred income taxes will be measured based on the tax rates expected to be in effect when the temporary differences are included in the Company’s tax return. Deferred tax assets and liabilities are recognized based on anticipated future tax consequences attributable to differences between financial statement carrying amounts of assets and liabilities and their respective tax bases.

At June 30, 2005 deferred tax assets consist of the following:

Net deferred tax assets	$	1,960,000
Less: valuation allowance		(1,960,000	)
	$	-0-

At June 30, 2005, the Company had federal net operating loss carryforwards in the approximate amounts of $7,858,000, available to offset future taxable income through 2025. The Company established a valuation allowance equal to the full amount of the deferred tax asset due to the uncertainty of the utilization of the operating losses in future periods.

NOTE 9-                MAJOR CUSTOMERS AND MAJOR SUPPLIERS

In the three months ended June 30, 2005 the company collected ten percent of more of its revenues from each of three customers, 58%, 24% and 18% specifically, and purchased ten percent or more of its goods to be sold from four suppliers, 31%, 25%, 23% and 14% specifically. In the nine months ended June 30, 2005 the company collected ten percent of more of its revenues from each of four customers, 47%, 30%, 13% and 10% specifically, and purchased ten percent or more of its goods to be sold from four suppliers, 48%, 16%, 13% and 13% specifically.

NOTE 10-              SUBSEQUENT EVENTS

On November 7, 2005, the Company announced the pre-launch of VIP Travel Rewards, Inc., a wholly owned subsidiary of Snap 2 Corporation.

F - 12

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS

Forward-Looking Statements

Historical results and trends should not be taken as indicative of future operations. Management’s statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934 (the “Exchange Act”), as amended. Actual results may differ materially from those included in the forward-looking statements. The Company intends such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” “prospects,” or similar expressions. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on the operations and future prospects of the Company on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. Further information concerning the Company and its business, including additional factors that could materially affect the Company’s financial results, is included herein and in the Company’s other filings with the SEC.

General

The Company was incorporated on October 8, 1998 under the laws of the State of Nevada originally for the purpose of developing and marketing its only product, a boot dryer that dries both boots and shoes for commercial and consumer use. Effective February 28, 2000 the Company merged with ISES Corporation (an Iowa corporation originally incorporated on May 14, 1997) ("ISES") with the Company being the survivor. In connection with the merger, the Company disposed of its boot dryer product to the original owner. The Company's name was subsequently changed to SNAP2 Corporation pursuant to Articles of Amendment filed July 12, 2000.

Prior to March 31, 2004 SNAP2 Corporation (f/k/a White Rock Enterprises, Ltd.) (the "Company") was a software product developer and software service provider for in-flight entertainment systems (IFE) for passenger aircraft and interactive set-top boxes (STB) for interactive television. As of March 2003 the Company discontinued all prior operations.

The Company is registered with the SEC as SNAP2 Corporation and is traded on the over-the-counter bulletin board: OTCBB:SPTO.

4

On December 3, 2003, the Company acquired Digital Marketing Networks, LLC and Ez Direct Marketing, Inc. through a share for share exchange. Digital Marketing Networks, LLC is a software company concentrating in internet sales. Ez Direct Marketing, Inc is a marketing company focusing on retail sales. Additionally, on April 19, 2004, the Company acquired the assets of Call Now America Prepaid Corporation. Call Now America sells prepaid phone services.

Digital Marketing Networks, LLC was an inactive company and had no assets or liabilities. Digital Marketing Networks was acquired for its president’s ideas and its contacts.

Ez Direct Marketing, Inc. was an inactive company and had no assets or liabilities. Ez Direct Marketing, Inc. was acquired for its president’s ideas, its contacts and customer lists.

Call Now America Prepaid, LLC distributes prepaid phone cards for the domestic, international and wireless markets in Florida, Georgia, New York and Texas through distributors in each of the respective states.

Operations

The Company operates from 101 Plaza Real South, Suite 210, Boca Raton, FL 33432.

Products

Prior to March 31, 2004 the Company marketed software applications for the in flight entertainment and interactive television markets. On March 31, 2004 the Company discontinued marketing of its applications for the in flight entertainment and interactive television markets and discontinued its operations. As of this time the Company’s primary product is pre-paid phone cards.

Assets

As of June 30, 2005 our assets were $1,942,246.

Liabilities and Stockholders’ Deficit

Our total liabilities as of June 30, 2005, were $1,599,229.

As of June 30, 2005, total Stockholders’ equity totaled $343,017.

Results of Operations - Nine Months Ended June 30, 2005

All revenues reported by Snap 2 Corporation are derived from the sale of pre-paid phone cards. Total revenues for the nine months ended June 30, 2005 and June 30, 2004 were $6,635,662 and $440,935, respectively. The increase in revenue of $6,194,727 was the direct result of revenue derived from the sale of pre-paid phone cards.

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Cost of operations for the nine months ended June 30, 2005 and June 30, 2004 were $6,537,051 (98.5%) and $443,770 (98.4%), respectively. The increase in gross cost of operations of $6,093,281 was the direct result of revenue derived from the sale of pre-paid phone cards.

Gross profit for the nine months ended June 30, 2005 and June 30, 2004 were $98,611 (1.5%) and $7,165 (1.6%), respectively. The increase in gross profit dollars of $91,446 is the direct result of revenue derived from the sale of pre-paid phone cards.

Total operating expenses for the nine months ended June 30, 2005 and June 30, 2004 were $622,215 and $1,148,445, respectively. The decrease of $526,230 in the current period is attributable to expenses incurred to operate the company due to its new product offering, pre-paid phone cards.

The operating loss for the nine months ended June 30, 2005 was $(523,604) compared to $(1,141,280) for the nine months ended June 30, 2004, a decrease of $617,676. As discussed above, the decrease primarily consists of increased revenue and decreased operating expenses.

Total other income (expense) for the nine months ended June 30, 2005 was $0 as compared to $(3,200,000) for the nine months ended June 30, 2004, a decrease in other expenses of $3,200,000. During the nine months ended June 30, 2004, Snap 2 Corporation recognized the impairment of stock issued. On January 5, 2004, the Company agreed to acquire Digital Marketing Networks, LLC and Ez Direct Marketing, Inc., through a share for share exchange. The fair market value of the common stock on the date of the exchange date was $.10 per share and the 32,000,000 shares were issued on January 5, 2004.

The loss before provisions for income taxes for the nine months ended June 30, 2005 was $(523,604) compared to $(4,341,280) for the nine months ended June 30, 2004, a decrease of $3,817,676 As discussed above, the decrease primarily consists of increased revenue and decreased operating expenses.

There was no provision for income taxes for the nine months ended June 30, 2005 and June 30, 2004.

Net loss for the nine months ended June 30, 2005 was $(523,604) compared to $(4,341,280) for the nine months ended June 30, 2004, a decrease of $3,817,676.  As discussed above, the decrease primarily consists of increased revenue and decreased operating expenses.

Results of Operations - Three Months Ended June 30, 2005

All revenues reported by Snap 2 Corporation are derived from the sale of pre-paid phone cards. Total revenues for the three months ended June 30, 2005 and June 30, 2004 were $989,335 and $440,935, respectively. The increase in revenue of $548,400 was the direct result of revenue derived from the sale of pre-paid phone cards.

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Cost of operations for the three months ended June 30, 2005 and June 30, 2004 were $958,597 (96.9%) and $433,770 (98.4%), respectively. The increase in gross cost of operations of $524,827 was the direct result of revenue derived from the sale of pre-paid phone cards.

Gross profit for the three months ended June 30, 2005 and June 30, 2004 were $30,738 (3.1%) and $7,165 (1.6%), respectively. The increase in gross profit dollars of $23,573 is the direct result of revenue derived from the sale of pre-paid phone cards.

Total operating expenses for the three months ended June 30, 2005 and June 30, 2004 were $266,345 and $308,366, respectively. The decrease of $42,021 in the current period is attributable to expenses incurred to operate the company due to its new product offering, pre-paid phone cards.

The operating loss for the three months ended June 30, 2005 was $(235,607) compared to $(301,201) for the three months ended June 30, 2004, a decrease of $65,594. As discussed above, the decrease primarily consists of increased revenue and decreased operating expenses.

There was no provision for income taxes for the six months ended June 30, 2005 and June 30, 2004.

Net loss for the three months ended June 30, 2005 was $(235,607) compared to $(301,201) for the three months ended June 30, 2004, a decrease of $65,594. As discussed above, the decrease primarily consists of increased revenue and decreased operating expenses.

Employees

At June 30, 2005, the Company had no full time employees. The Company's President has agreed to allocate a portion of his time to the activities of the Registrant, without compensation.  The President anticipates that the business plan of the Company can be implemented by his devoting approximately 10 hours per month to the business affairs of the Company and, consequently, conflicts of interest may arise with respect to the limited time commitment by such officer.

Liquidity and Capital Resources

At June 30, 2005, the Company had cash, accounts receivable and inventory of $321,652 and current liabilities of $967,673.

Cash used by operating activities. The Company used $(361,854) in cash for operating activities for the nine months ended June 30, 2005. This consisted of cash flows provided by the net loss generated for nine months and the decrease in net receivables and increase in net payables.

Cash used by investing activities. The Company used $(1,463) in cash for investing activities in the nine months ended June 30, 2005. This consisted of the use of proceeds for capital expenditures.

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Cash provided by financing activities. The Company provided $341,708 in cash for financing activities for the nine months ended June 30, 2005. This consisted of proceeds from short term borrowings and payments to the Company’s officer.

Going Concern

Our independent registered public accounting firm has stated in their Report included in our annual report on Form 10-KSB/A for the period ended September 30, 2004 that we have incurred operating losses, accumulated deficit, and negative cash flow from operations. Our ability to raise capital through future issuances of common stock is unknown. Our future is dependent on our ability to obtain financing and develop the business of Call Now America Prepaid. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our financial statements do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

Critical Accounting Policies And Estimates

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonably based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. To the extent there are material differences between these estimates, judgments and assumptions and actual results, our financial statements will be affected. The significant accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

·   Revenue recognition;

·   Allowance for doubtful accounts; and

·   Accounting for income taxes.

In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management's judgment in its application. There are also areas in which management's judgment in selecting among available alternatives would not produce a materially different result. Our senior management has reviewed these critical accounting policies and related disclosures. See Notes to Condensed Consolidated Financial Statements, which contain additional information regarding our accounting policies and other disclosures required by GAAP.

Off Balance Sheet Arrangements

As of June 30, 2005, there were no off balance sheet arrangements.

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ITEM 3.   CONTROL AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). This term refers to the controls and procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized, and reported within the required time periods.

In July of 2003 the company was moved from the over the counter bulletin boards to the pinks sheets as the result of the former management’s failure to timely file its periodic reports under the SEC rules and regulated governing such companies. Current management has determined that effective controls and procedures were not in place at the end of the period covered by this report.

Current management is attempting to bring those periodic reports current and will then request to have the company moved back to the bulletin boards. There is no guarantee that this will happen.

The current management has implemented effective controls and procedures as of this time. They have concluded that, as of this date, former management's disclosure controls and procedures were not effective at December 31, 2004 in ensuring that the required information was disclosed on a timely basis. However, current management has put procedures in place that will ascertain that the timely filing of reports will be attained. Additionally those reports will contain the necessary disclosures to comply with current standards.

Changes in Internal Control over Financial Reporting

The company has made dramatic change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The company has made these changes because former management did not exhibit the proper controls as defined in rules 13a-15f and 15d-15f.

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PART II.   OTHER INFORMATION

ITEM 1.   LEGAL PROCEEDINGS

None.

ITEM 2.    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.    DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.   SUBMISSION OF MATTTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5.   OTHER INFORMATION

None.

ITEM 6.   EXHIBITS

Exhibit Number	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

In accordance with the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Snap2 Corporation

Date:   December 27, 2005

By:/s/      Kevin D. Johnson                                                                         
                 Kevin D. Johnson
Title:        Chief Executive Officer, Chief Financial Officer,
                 and Director

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