UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
      D.C. 20549





FORM
      10-QSB


QUARTERLY
      OR TRANSITIONAL REPORT





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





For
      the
      Quarterly Period Ended March 31, 2007




o
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
                ACT





Commission
      File Number 000-25039





BRAVO!
      BRANDS INC.


(Exact
      name of registrant as specified in its amended charter)





Delaware
      62-1681831


(State
      or
      other jurisdiction of (I.R.S. Employer


incorporation
      or organization) Identification No.)





11300
      US
      Highway 1, Suite 400, North Palm Beach, Florida 33408 USA


(Address
      of principal executive offices)





(561)
      625-1411


Registrant's
      telephone number





(Former
      name, former address and former fiscal year if changed since last
      report)





Check
      whether the issuer (1) filed all reports required to be filed by Section 13
      or 15(d) of the Securities Exchange Act of 1934, during the past 12 months
      (or for such shorter period that the registrant was required to file such
      reports), and (2) has been subject to such filing requirements for the past
      90
      days. Yes x No o




Indicate
      by check mark whether the registrant is a shell company (as
      defined in Rule 12b-2 of the Exchange Act). Yes o No x




**APPLICABLE
      ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**


**PROCEEDINGS
      DURING THE PRECEDING FIVE YEARS**




Check
      whether the registrant filed all documents and reports required to be filed
      by
      Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after
      the distribution of securities under a plan confirmed by a court.
      Yes o No o




**APPLICABLE
      ONLY TO CORPORATE ISSUERS**





The
      number of shares outstanding of each of the issuer's classes of common stock,
      as
      of the latest practicable date is as follows:




Date
              Class
              Shares
                  OutstandingMay
                  10, 2007
              Common
                  Stock
              249,974,695





Transitional
      Small Business Disclosure Format (Check One) YES o NO x








BRAVO!
                  BRANDS INC. AND SUBSIDIARYTABLE
                  OF CONTENTSPART
                  I. FINANCIAL INFORMATIONItem
              1.
                  Financial statementsConsolidated
                  balance sheets as of
              F-1
                  to F-2March
                  31, 2007 (unaudited) and December 31, 2006Consolidated
                  statements of operations and comprehensive
              F-3loss
                  for the three monthsended
                  March 31, 2007 and 2006 (unaudited)Consolidated
                  statements of cash flows
              F-4for
                  the three months endedMarch
                  31, 2007 and 2006 (unaudited)Notes
                  to consolidated financial statements (unaudited)
              F-5
                  to F-31Item
              2.
                  Management's Discussion and Analysis of Financial
              32
                  to 43Condition
                  and Results of OperationsItem
              3.
              
              Controls
                  and Procedures
              44
                  to 45PART
                  II - OTHER INFORMATIONItem
              2.
              
              Unregistered
                  Sales of Equity and Use of Proceeds
              45Item
              3.
              
              Default
                  on Senior Securities
              45Item
              6.
              
              Exhibits
              46
                  to 48SIGNATURES
              49





i


DOCUMENTS
      INCORPORATED BY REFERENCE: See Exhibits





FORWARD-LOOKING
      STATEMENTS





Statements
      that are not historical facts, including statements about our prospects and
      strategies and our expectations about growth contained in this report, are
      "forward-looking statements" within the meaning of Section 27A of the Securities
      Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
      1934,
      as amended. These forward-looking statements represent our present expectations
      or beliefs concerning future events. We caution that such forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      which may cause our actual results, performance or achievements to be materially
      different from any future results, performance or achievements expressed or
      implied by such forward-looking statements. Such factors include, among other
      things, the uncertainty as to our future profitability; the accuracy of our
      performance projections; and our ability to obtain financing on acceptable
      terms
      to finance our operations until we become profitable.








**BRAVO!
      BRANDS INC. AND SUBSIDIARY**


**CONSOLIDATED
      BALANCE SHEETS**


March
                31,
            
            December
                31,2007
            
            2006**(Unaudited)****Assets**Current
                assets:Cash
                and cash equivalents
            
            $
            202,333
            
            $
            3,783,562Accounts
                receivable, net of allowances for doubtful accountsof
                $140,000 at 2007 and 2006
            
            
            855,759
            
            
            965,733Inventories,
                net of allowance for slow moving and obsolete inventory of $603,514
                and
                $347,000, respectively
            
            
            1,212,774
            
            
            2,157,866Prepaid
                expenses
            
            
            399,905
            
            
            388,565Total
                current assets
            
            
            2,670,771
            
            
            7,295,726Fixed
                assets, net
            
            
            1,257,966
            
            
            1,211,556Intangible
                assets,net
            
            
            213,254
            
            
            18,537,612Other
                assets
            
            
            3,454,910
            
            
            3,332,856**Total
                assets**
            
            $
            7,596,901
            
            $
            30,377,750




**Liabilities,
                Redeemable Preferred Stock and Stockholders’
                Deficit**Current
                liabilities:Accounts
                payable
            
            $
            12,113,147
            
            $
            8,987,940Accrued
                liabilities
            
            
            6,509,889
            
            
            7,014,263Notes
                payable
            
            
            2,149,301
            
            
            243,968Convertible
                notes payable
            
            
            25,624,038
            
            
            25,486,990Derivative
                liabilities
            
            
            3,871,058
            
            
            19,941,082Total
                current liabilities
            
            
            50,267,433
            
            
            61,674,243Non-current
                notes payable
            
            
            53,228
            
            
            67,500




F-1
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **CONSOLIDATED
          BALANCE SHEETS**


March
                31,
            
            
            December
                31,2007
            
            
            2006**(Unaudited)****Redeemable
                preferred stock:**Series
                J, par value $0.001 per share, 500,000 shares designated, 8% Cumulative
                Convertible Preferred Stock, stated value $10.00 per share, 200,000
                shares
                issued and outstanding for 2007 and 2006
            
            
            1,807,130
            
            
            1,561,707Series
                K, par value $0.001 per share, 500,000 shares designated, 8% Cumulative
                Convertible Preferred Stock, stated value $10.00 per share, 95,000
                shares
                issued and outstanding for 2007 and 2006
            
            
            849,484
            
            
            837,769**Total
                redeemable preferred stock**
            
            
            2,656,614
            
            
            2,399,476**Stockholders’
                deficit:**Preferred
                stock, 5,000,000 shares authorized;Series
                B convertible, par value $0.001 per share, 1,260,000 shares designated,
                9%
                Convertible Preferred Stock, stated value $1.00 per share, 107,440
                shares
                issued and outstanding for 2007 and 2006
            
            
            107,440
            
            
            107,440Series
                H convertible, par value $0.001 per share, 350,000 shares designated,
                7%
                Cumulative Convertible Preferred Stock, stated value $10.00 per share,
                53,500 shares issued and outstanding for 2007 and 2006
            
            
            535,000
            
            
            535,000Common
                stock, par value $0.001 per share, 500,000,000 shares authorized,
                206,492,028 and 202,429,528 shares issued and outstanding for 2007
                and
                2006, respectively
            
            
            206,492
            
            
            202,430Additional
                paid-in capital
            
            
            131,286,442
            
            
            122,414,992Common
                stock subscription receivable
            
            
            (10,000
            )
            
            (10,000
            )Accumulated
                deficit
            
            
            (177,523,974
            )
            
            (157,031,836
            )Translation
                adjustment
            
            
            18,226
            
            
            18,505**Total****stockholders’
                deficit**
            
            
            (45,380,374
            )
            
            (33,763,469
            )**Total
                liabilities, redeemable preferred stock and
                stockholders’**
              **deficit**
            
            $
            7,596,901
            
            $
            30,377,750







**See
      accompanying notes.**




F-2


**BRAVO!
      BRANDS INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS**





Three
                Months Ended March 31,2007
            
            2006**(Unaudited)**
            
            **(Unaudited)**Revenues
            
            $
            3,152,892
            
            $
            3,561,215Product
                costs
            
            
            (3,184,947
            )
            
            (2,946,460
            )Shipping
                costs
            
            
            (277,201
            )
            
            (393,452
            )Gross
                margin
            
            
            (309,256
            )
            
            221,303Operating
                expenses:Marketing
                and advertising
            
            
            1,512,919
            
            
            949,964Selling
            
            
            2,253,299
            
            
            1,893,134General
                and administrative
            
            
            5,601,705
            
            
            1,765,846Impairment
                loss
            
            
            17,662,006
            
            
            --Product
                development
            
            
            84,928
            
            
            115,96327,114,857
            
            
            4,724,907Loss
                from operations
            
            
            (27,424,113
            )
            
            (4,503,604
            )Other
                income (expenses), net:Derivative
                income
            
            
            372,774
            
            
            4,949,188Interest
                income (expense), net and financing costs
            
            
            (2,342,411
            )
            
            (36,364
            )Liquidated
                damages
            
            
            --
            
            
            (685,887
            )(1,969,637
            )
            
            4,226,937Loss
                before income taxes
            
            
            (29,393,750
            )
            
            (276,667
            )Provision
                for income taxes
            
            
            --
            
            
            --Net
                loss
            
            
            (29,393,750
            )
            
            (276,667
            )Adjustments
                to net loss to arrive at loss applicable to common
                stockholders:Preferred
                stock dividends and accretion
            
            
            (326,948
            )
            
            (258,783
            )Loss
                applicable to common stockholders
            
            $
            (29,720,698
            )
            $
            (535,450
            )Basic
                and diluted loss per common share
            
            $
            (0.15
            )
            $
            (0.00
            )Weighted
                average common shares outstanding
            
            
            203,509,389
            
            
            184,253,753Comprehensive
                loss and its components consist of the following:Net
                loss
            
            $
            (29,393,750
            )
            $
            (276,667
            )Foreign
                currency translation
            
            
            (279
            )
            
            (690
            )Comprehensive
                loss
            
            $
            (29,394,029
            )
            $
            (277,357
            )




**See
      accompanying notes.**





F-3


**BRAVO!
      BRANDS INC. AND SUBSIDIARY**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


Three
                Months Ended March 312007
            
            
            2006**(Unaudited)**
            
            
            **(Unaudited)**Cash
                Flows from Operating Activities:Net
                (loss)
            
            $
            (29,393,750
            )
            $
            (276,667
            )Adjustments
                to net loss:Depreciation
                and amortization
            
            
            796,326
            
            
            896,505Impairment
                charge
            
            
            17,662,006
            
            
            --Bad
                debt expense
            
            
            --
            
            
            14,941Inventory
                obsolescence
            
            
            256,514
            
            
            --Derivative
                income
            
            
            (372,774
            )
            
            (4,949,188
            )Amortization
                of debt discount
            
            
            1,363,825
            
            
            11,076Stock
                option expense for consultants
            
            
            --
            
            
            347,566Stock
                compensation expense
            
            
            495,622
            
            
            111,592Loss
                on disposal of fixed assets
            
            
            --
            
            
            1,999Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            109,973
            
            
            1,596,042Inventories
            
            
            688,578
            
            
            (2,652,769
            )Prepaid
                expenses and other assets
            
            
            (9,816
            )
            
            (980,325
            )Accounts
                payable and accrued expenses
            
            
            2,620,832
            
            
            1,668,557Net
                cash used in operating activities
            
            
            (5,782,664
            )
            
            (4,210,671
            )Cash
                Flows from Investing Activities:Licenses,
                finance and trademark costs
            
            
            --
            
            
            (163,536
            )Purchases
                of equipment
            
            
            (97,319
            )
            
            (249,910
            )Net
                cash used in investing activities
            
            
            (97,319
            )
            
            (413,446
            )Cash
                Flows provided by Financing Activities:Proceeds
                from conversion of warrants
            
            
            --
            
            
            150,000Proceeds
                from convertible notes payable
            
            
            --
            
            
            169,323Proceeds
                from notes payable
            
            
            2,625,000
            
            
            --Payment
                of dividends
            
            
            (22,500
            )
            
            (11,257
            )Payment
                of notes payable
            
            
            (13,928
            )
            
            (4,317
            )Registration
                costs for financing
            
            
            (289,539
            )
            
            (17,143
            )Net
                cash provided by financing activities
            
            
            2,299,033
            
            
            286,606Effect
                of changes in exchange rates on cash
            
            
            (279
            )
            
            (690
            )Net
                (decrease) in cash and cash equivalents
            
            
            (3,581,229
            )
            
            (4,338,201
            )Cash
                and cash equivalent, beginning of period
            
            
            3,783,562
            
            
            4,947,986Cash
                and cash equivalent, end of period
            
            $
            202,333
            
            $
            609,785




**Supplemental
              Cash Flow Information**
            
            Three
                Months Ended March 31,2007
            
            2006Non-cash
                investing and financing activities:Conversion
                of notes payable
            
            $
            991,009
            
            $
            --




**See
      accompanying notes** *.*


F-4


**BRAVO!
        BRANDS INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


**Note
      1 -Nature of Business, Basis of Presentation and Liquidity and Management’s
      Plans**





**Nature
      of Business:**





Bravo!
      Brands Inc., a Delaware corporation, and subsidiary (“the Company”) is engaged
      in the sale of flavored milk products, primarily in the United States.





**Basis
      of Presentation:**





The
      accompanying unaudited consolidated financial statements have been prepared
      in
      accordance with generally accepted accounting principles for interim financial
      information and with the instructions to Form 10-QSB, Item 310(b) of
      Regulation S-B and Article 10 (01)(c) of Regulation S-X. Accordingly,
      the accompanying financial statements do not include all the information and
      footnotes required by generally accepted accounting principles for complete
      financial statements. These consolidated financial statements should be read
      in
      conjunction with the consolidated financial statements and notes thereto
      included in the Company’s Annual Report on Form 10-KSB. In the opinion of
      management, all adjustments (consisting of normal recurring adjustments)
      considered necessary for a fair presentation have been included in the
      accompanying financial statements. Operating results for the three-month period
      ending March 31, 2007 are not necessarily indicative of the results that may
      be
      expected for the year ended December 31, 2007.





We
      have
      made certain reclassifications to the statement of operations for the three
      months ended March 31, 2006 to conform to presentations and classifications
      in
      the current period. The consolidated balance sheet at December 31, 2006 is
      audited.





**Liquidity
      and Management’s** **Plans:**





Generally
      Accepted Accounting Principles contemplate that the Company will continue as
      a
      going concern for a reasonable period. As reflected in the accompanying
      consolidated financial statements, the Company has continued
      to incur operating losses and negative cash flows from operations and has a working
      capital deficiency
      of $47,596,662 at March 31,
      2007.  Based on recent performance and discussions with CCE, the Company's
      main distributor, management has determined that a material increase in revenues
      is highly unlikely, as was previously forecasted.  Accordingly, an updated
      analysis of future cash flows to be generated from the related intangible assets
      have resulted in a non-cash impairment charge
      of
      $17,662,006.  Furthermore ,
      on
      April 1, 2007 the Company became in default of certain provisions of its Senior
      Notes issued in July 2006, as amended in December 2006, due to failing to make
      the required quarterly interest payment of approximately $730,000.  The
      defaults entitle the holders to certain penalties including the acceleration
      of
      the notes at a premium.  Finally, the Company expects to be dependent on
      third party financing at least through the first three quarters of 2007. 
Ultimately, the Company’s ability to continue as a going concern is dependent
      upon the achievement of profitable operations. There is
      no assurance that further fun ding
      will
      be available at acceptable terms, if at all, or that the Company will be able
      to
      achieve profitability. These
      conditions raise substantial doubt about the Company’s ability to continue as a
      going concern.





The
      Company plans to increase its sales, primarily by securing new distribution
      partners and by introducing new dairy based products into different segments
      of
      the beverage market.  The Company’s margins are expected to improve due to
      increased sales, unit price increases and a major focus on cost containment
      measures.  Effective May 2007, the Company has reduced payroll expenses by
      approximately 55% and its total monthly cash expenditures by approximately
      66%. In
      addition, the Company is seeking to revise the existing Master Distribution
      Agreement (“MDA”) with CCE, primarily to remove the exclusivity and right of
      first refusal language.  CCE has agreed in principle to these
      changes.  Also, the investors who have provided approximately $1.2 million
      in recent financings are completing due diligence.  If such due diligence
      is satisfactory, Management believes additional funding will be available to
      fund future operations. In connection with the default of the Senior Notes,
      the
      Company is negotiating a 120
      day
      forbearance agreement with its July 2006 Senior Note holders.  If executed,
      the forbearance agreement will relieve the Company from paying interest and
      principal due on the notes and hold in abeyance the rights of the Senior Note
      holders arising from the enumerated defaults.  The forbearance agreement
      also will give the Company the time needed to restructure its capitalization
      and
      to seek strategic partners. There can be no assurance that the forbearance
      agreement will be
      executed.





F-5
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      accompanying financial statements do not reflect any adjustments that may result
      from the outcome of these uncertainties.





**Note
      2 - Summary of Significant Accounting Policies**





Use
      of
      Estimates





The
      preparation of 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 disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. The most significant estimates included in the
      Company’s financial statements are the following:





-
            Estimating
                the fair value of the Company’s financial instruments that are required to
                be carried at fair value.


-
            Estimating
                the recoverability of the Company’s long-lived assets.


-
            Estimating
                the Company’s reserve for unsalable and obsolete inventories that are
                carried at lower of cost or market.





The
      Company uses all available information and appropriate techniques to develop
      its
      estimates. However, actual results could differ from the Company’s estimates.





Business
      Segment and Geographic Information





The
      Company operates in one dominant industry segment that it has defined as the
      single serve flavored milk industry. The Company’s international business
      contributes less than 1% of the Company’s revenues, and the Company has no
      physical assets outside of the United States. The Company currently has one
      customer in the United States that provided 80% and 71% of its revenue during
      the quarters ended March 31, 2007 and 2006, respectively. The Company intends
      in
      the near future to focus on its domestic operations.





Revenue
      Recognition





Revenues
      are recognized pursuant to formal revenue arrangements with the Company’s
      customers, at contracted prices, when the Company’s product is delivered to
      their premises and collectibility is reasonably assured. The Company extends
      merchantability warranties to its customers on its products but otherwise does
      not afford its customers with rights of return. Warranty costs have historically
      been insignificant.





F-6
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      Company’s revenue arrangements often provide for industry-standard slotting fees
      where the Company makes cash payments to the respective customer to obtain
      rights to place the Company’s products on their retail shelves for a stipulated
      period of time. The Company also engages in other promotional discount programs
      in order to enhance its sales activities. The Company believes its participation
      in these arrangements is essential to ensuring continued volume and revenue
      growth in the competitive marketplace. These payments, discounts and allowances
      are recorded as reductions to the Company’s reported revenue. Unamortized
      slotting fees are recorded in prepaid expenses.





Principles
      of Consolidation





The
      Company’s consolidated financial statements include the accounts of Bravo!
      Brands Inc. and its wholly-owned subsidiary, Bravo! Brands (UK) Ltd. All
      material intercompany balances and transactions have been eliminated. Cumulative
      translation adjustments that the Company makes to reflect the accounts of Bravo!
      Brands (UK) Ltd. and its Canadian branch (neither of which is currently
      operational) into United States Dollars are recorded as a component of other
      comprehensive income (loss) and stockholders’ deficit.





Shipping
      and Handling Costs





Shipping
      and handling costs incurred to deliver products to the Company’s customers are
      included as a component of cost of sales. These costs amounted to $277,201
      and
      $393,452 for the three months ended March 31, 2007 and 2006,
      respectively.





Accounts
      Receivable





The
      Company’s accounts receivable are exposed to credit risk. During the normal
      course of business, the Company extends unsecured credit to its customers with
      normal and traditional trade terms. Typically credit terms require payments
      to
      be made by the thirtieth day following the sale. The Company regularly evaluates
      and monitors the creditworthiness of each customer. The Company provides an
      allowance for doubtful accounts based on its continuing evaluation of its
      customers’ credit risk and its overall collection history. As of March 31, 2007
      and December 31, 2006, the allowance for doubtful accounts aggregated $140,000.




Inventories





Inventories,
      which consist primarily of finished goods, are stated at the lower of cost
      on
      the first in, first-out method or market. Further, the Company’s inventories are
      perishable. Accordingly, the Company estimates and records lower-of-cost or
      market and unsalable-inventory reserves based upon a combination of the
      Company’s historical experience and on a specific identification basis. As of
      March 31, 2007 and December 31, 2006, the reserve for inventory obsolescence
      was
      $603,514 and $347,000, respectively. Inventory obsolescence charges are included
      as a component of product costs.





F-7
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Intangible
      Assets





The
      Company’s intangible assets, which are recorded at cost, consist of capitalized
      expenditures associated with a licensing agreement with Organic Valley and
      various trademarks at March 31, 2007. At December 31, 2006, intangible assets
      also included costs capitalized related to the CCE MDA, manufacturing agreements
      with Jasper Products, LLC (“Jasper”) and H.P. Hood (“Hood”) See "Impairment of
      Long-Lived Assets" below. The intangible assets remaining at March 31, 2007
      are
      being amortized on a straight line basis over their estimated useful lives,
      which range from three to five years.





Impairment
      of Long-Lived Assets





The
      Company evaluates the carrying value and recoverability of its long-lived assets
      when circumstances warrant such evaluation by applying the provisions of
      Financial Accounting Standard No. 144, Accounting
      for the Impairment or Disposal of Long-Lived Assets (“FAS
      144”). FAS 144 requires that long-lived assets be reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      an asset may not be recoverable through the estimated undiscounted cash flows
      expected to result from the use and eventual disposition of the assets. Whenever
      any such impairment exists, an impairment loss will be recognized for the amount
      by which the carrying value exceeds the fair value. The Company estimates fair
      value for these assets by discounting the future cash flows expected to be
      generated from use of the long lived assets to present value.





Recent
      discussions with CCE have indicated that the Company will not generate
      the sales previously expected, including rollout of the brands into new channels
      of distribution and access to key marketing and rebate programs. 
Furthermore, the Company has experienced a significant decline in sales from
      CCE
      during April and May, 2007, and overall quarter one revenues were much lower
      than originally forecasted. Management’s updated forecasted revenues from CCE,
      its primary customer, for 2007 and for future years have been revised downward
      significantly. Therefore, additional capacity secured through the Jasper and
      H.P. Hood agreements may not be necessary. Based on the updated forecast,
      management expects production penalties associated with unused capacity per
      the
      manufacturing agreements to continue.





The
      Company’s updated analysis of cash flows to be generated from the CCE MDA,
      Jasper and Hood agreements indicate negative net discounted cash flows.
      Accordingly, a
      non -cash
      impairment charge of $17,662,006 has been recognized during the quarter ended
      March 31, 2007 to write off the carrying value of these assets.





The
      Company is
      searching for a new strategic partner who would invest in and potentially
      distribute its products nationally.  Based on these developments, the
      Company has commenced preliminary discussions with CCE to revise substantially
      the exclusivity and other terms of the existing MDA. The Company also hopes
      to
      restructure its manufacturing agreements with Jasper and Hood. There can be
      no
      certainty that the Company will be able to successfully complete its
      negotiations with CCE or restructure its agreements with Jasper and
      Hood.




Financial
      Instruments





Financial
      instruments, as defined in Financial Accounting Standard No. 107 Disclosures
      about Fair Value of Financial Instruments (FAS
      107), consist of cash, evidence of ownership in an entity and contracts that
      both (i) impose on one entity a contractual obligation to deliver cash or
      another financial instrument to a second entity, or to exchange other financial
      instruments on potentially unfavorable terms with the second entity, and (ii)
      conveys to that second entity a contractual right (a) to receive cash or another
      financial instrument from the first entity, or (b) to exchange other financial
      instruments on potentially favorable terms with the first entity. Accordingly,
      the Company’s financial instruments consist of cash and cash equivalents,
      accounts receivable, accounts payable, accrued liabilities, notes payable,
      derivative financial instruments, convertible debt and redeemable preferred
      stock that the Company has concluded is more akin to debt than
      equity.





F-8
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      Company carries cash and cash equivalents, accounts receivable, accounts payable
      and accrued liabilities at historical costs; their respective estimated fair
      values approximate carrying values due to their current nature. The Company
      also
      carries notes payable, convertible debt and redeemable preferred stock at
      historical cost; however, fair values of debt instruments and redeemable
      preferred stock are estimated for annual disclosure purposes based upon the
      present value of the estimated cash flows at market interest rates applicable
      to
      similar instruments.





Derivative
      financial instruments, as defined in Financial Accounting Standard No. 133, Accounting
      for Derivative Financial Instruments and Hedging Activities (FAS
      133), consist of financial instruments or other contracts that contain a
      notional amount and one or more underlying (e.g. interest rate, security price
      or other variable), require no initial net investment and permit net settlement.
      Derivative financial instruments may be free-standing or embedded in other
      financial instruments. Further, derivative financial instruments are initially,
      and subsequently, measured at fair value and recorded as liabilities or, in
      rare
      instances, assets.





The
      Company generally does not use derivative financial instruments to hedge
      exposures to cash-flow, market or foreign-currency risks. However, the Company
      has entered into certain other financial instruments and contracts, such as
      debt
      financing arrangements, redeemable preferred stock arrangements and freestanding
      warrants with features that are either (i) not afforded equity classification,
      (ii) embody risks not clearly and closely related to host contracts, or (iii)
      may be net-cash settled by the counterparty. As required by FAS 133, these
      instruments are required to be carried as derivative liabilities, at fair value,
      in the Company’s financial statements.





The
      following table summarizes the effects on the Company’s income (loss) associated
      with changes in the fair values of its derivative financial instruments by
      type
      of financing for the quarters ended March 31, 2007 and 2006 (as discussed below,
      these amounts give effect to a change in accounting principle on January 1,
      2007):





Derivative
                income (expense):
            
            2007
            
            2006Convertible
                note and warrant financings
            
            $
            (42,037
            )
            $
            (50,904
            )Preferred
                stock and warrant financings
            
            
            407,152
            
            
            1,331,015Other
                warrants and derivative contracts
            
            
            7,659
            
            
            3,669,077**Total
                Derivative Income**
            
            **$**
            **372,774**
            
            **$**
            **4,949,188**





Additional
      information related to individual financing arrangements can be found in notes
      6
      through 8.





The
      following table summarizes the number of common shares indexed to the derivative
      financial instruments as of March 31, 2007:





Financing
                or other contractual arrangement:
            Note
            Conversion
              Features
            Warrants
            TotalJune
                2004 $600,000 Convertible Note Financing
            6(a)
            3,075,000
            -
            3,
                075,000May
                2006 $2,500,000 Note Financing
            10(c)
            -
            900,000
            900,000Series
                J Convertible Preferred Stock
            8(b)
            28,000,000
            -
            28,000,000**Total
                Common Shares Indexed**
            
            **31,075,000**
            **900,000**
            **31,975,000**





F-9
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


During
      December 2006, the Financial Accounting Standards Board issued FASB Staff
      Position (FSP) EITF 00-19-2, Accounting
      for Registration Payment Arrangements ,
      which
      amended Financial Accounting Standard No. 133 Accounting
      for Derivative Financial Instruments and Hedging Activities .
      Generally, the amendment provides for the exclusion of registration payments,
      such as the liquidated damages that the Company has incurred, from the
      consideration of classification of financial instruments, previously required
      under FAS133 and EITF 00-19. Rather, registration payments are to be accounted
      for pursuant to Financial Accounting Standard No. 5 Accounting
      for Contingencies ,
      which
      provides for the recognition of registration payments when they are both
      probable and reasonably estimable. The FSP was adopted by the Company on January
      1, 2007, as was required by the new accounting pronouncement. However, the
      Company had previously applied the view (provided in EITF 05-04) that
      registration payments required recognition pursuant to FAS 5. See Note 4,
      Accrued Liabilities for information about the recognition and amounts of
      registration payments.





Adoption
      of the FSP involved management’s reevaluation of the conditions for equity or
      liability classification of existing derivative financial instruments pursuant
      to the revised criteria of EITF 00-19. As a result of the reevaluation,
      management concluded that the embedded conversion feature and warrants,
      associated with the July 2006 $30,000,000 Convertible Note Financing, and
      previously classified as liabilities, should be afforded equity classification.
      Under the previous standard, management determined that the unlimited nature
      of
      contractual registration payments for non-registration and non-effectiveness
      rose to an uneconomic settlement alternative and the subject share-indexed
      securities required liability classification. Under the FSP, the registration
      payment provisions are not considered for purposes of classification. Rather,
      commencing January 1, 2007, those payments are accounted for under the
      provisions of FAS 5. As a result, the embedded conversion feature and warrants
      met the eight conditions for equity classification provided in EITF 00-19.
      Adoption of this new standard resulted in the reclassification of $6,516,000
      to
      additional paid in capital accompanied by a credit to retained earnings of
      $9,181,251 which represents the cumulative effect of this change in accounting
      principle.





Share-based
      payments





Effective
      January 1, 2005, the Company adopted Financial Accounting Standards No. 123(R), Share-Based
      Payments (FAS123R). Under the fair value method, the Company recognizes compensation
      expense for all share-based payments granted after January 1, 2005, as well
      as
      all share-based payments granted prior to, but not yet vested, as of January
      1,
      2005, in accordance with FAS No. 123. Under the fair value recognition
      provisions of FAS 123(R), the Company recognizes share-based compensation
      expense, net of an estimated forfeiture rate, over the requisite service period
      of the award. Prior to the adoption of FAS 123 and FAS 123(R), the Company
      accounted for share-based payments under Accounting Principles Board Opinion
      No.
      25 Accounting
      for Stock Issued to Employees and the
      disclosure provisions of FAS No. 123. For further information regarding the
      adoption of FAS No. 123(R), see Note 9 to the consolidated financial
      statements.





F-10


**BRAVO!
        BRANDS INC. AND SUBSIDIARY**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**





Loss
      Per Common Share




The
      Company’s basic loss per common share is computed by dividing the loss
      applicable to common stockholders by the weighted average number of common
      shares outstanding during the reporting period. Diluted loss per common share
      is
      computed similar to basic loss per common share except that diluted loss per
      common share includes dilutive common stock equivalents, using the treasury
      stock method and assumes that the convertible debt instruments were converted
      into common stock upon issuance, if dilutive. For the quarters ended March
      31,
      2007 and 2006 potential common shares arising from the Company’s stock options,
      stock warrants, convertible debt and convertible preferred stock amounting
      to
      271,474,228 and 81,913,744 shares, respectively, were not included in the
      computation of diluted loss per share because their effect was
      anti-dilutive.




Recent
      Accounting Pronouncements Affecting the Company:




*Statement
      of Financial Accounting Standard 159, Fair Value Option for Financial Assets
      and
      Financial Liabilities (“FAS 159”)*




In
      February 2007, the Financial Accounting Standards Board (FASB) issued
      FAS No. 159 (“FAS 159”), “Fair Value Option for Financial Assets and
      Financial Liabilities,” which permits entities to choose to measure many
      financial instruments and certain other items at fair value. The objective
      of
      FAS 159 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. The fair value option established by FAS 159 permits
      all
      entities to choose to measure eligible items at fair value at specified election
      dates. A business entity shall report unrealized gains and losses on items
      for
      which the fair value option has been elected in earnings at each subsequent
      reporting date. FAS 159 is effective for fiscal years beginning after
      November 15, 2007. The Company is currently evaluating the impact this
      standard will have on its financial condition, results of operations, cash
      flows
      or disclosures.




*Statement
      of Financial Accounting Standard 157, Fair Value Measurements (“FAS
      157”)*




On
      September 15, 2006, the Financial Accounting Standards Board issued a standard
      that provides enhanced guidance for using fair value to measure assets and
      liabilities. The standard applies whenever other standards require (or permit)
      assets or liabilities to be measured at fair value. The standard does not expand
      the use of fair value in any new circumstances. This Statement is effective
      for
      financial statements issued for fiscal years beginning after November 15, 2007,
      and interim periods within those fiscal years. Earlier application is
      encouraged, provided that the reporting entity has not yet issued financial
      statements for that fiscal year, including financial statements for an interim
      period within that fiscal year. The Company is currently evaluating the impact
      of adopting this pronouncement on its financial statements.




*FASB
      Interpretation No. 48, Accounting for Uncertainty in Income
      Taxes*




In
      June 2006, the Financial Accounting Standards Board issued FASB
      Interpretation No. 48 , *Accounting
      for Uncertainty in Income Taxes—an interpretation of FASB Statement
      No. 109* ** (FIN 48),  which
      provides clarification related to the process associated with accounting for
      uncertain tax positions recognized in consolidated financial statements.
      FIN 48 prescribes a more-likely-than-not threshold for financial statement
      recognition and measurement of a tax position taken, or expected to be taken,
      in
      a tax return. FIN 48 also provides guidance related to, among other things,
      classification, accounting for interest and penalties associated with tax
      positions, and disclosure requirements. This Interpretation is effective for
      fiscal years beginning
      after December 15, 2006. The Company adopted FIN 48 effective January 1, 2007.
      There was no major impact to the financial statements from the adoption of
      this
      pronouncement.




F-11
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


*FSP
      EITF 00-19-2 Accounting for Registration Payment Arrangements*






As
      more
      fully discussed above, the Company adopted the provisions of FSP EITF 00-19-2
      on
      January 1, 2007.




**Note
      3 - Intangible Assets**





At
      March
      31, 2007, the Company’s intangible assets consist of unamortized costs
      associated with warrants issued in connection with a licensing agreement with
      Organic Valley, and trademark and license costs. The useful lives of these
      assets range from three to five years. The following table summarizes the
      components of the Company’s intangible assets as of March 31, 2007 and December
      31, 2006:





2007
            
            2006CCE
                Distribution Agreement
            
            $
            --
            
            $
            15,960,531Manufacturing
                Agreement - Jasper
            
            
            0
            
            
            2,700,000Manufacturing
                Agreement - H.P. Hood
            
            
            0
            
            
            2,384,055Licensing
                Agreement - Organic Valley
            
            
            104,299
            
            
            104,299Trademark
                costs and other licenses
            
            
            232,916
            
            
            237,916Less
                accumulated amortization
            
            
            (123,961
            )
            
            (2,849,189
            )**Total
                Intangible Assets**
            
            **$**
            **213,254**
            
            **$**
            **18,537,612**





Amortization
      expense amounted to $652,136 and $848,500 for the quarters ended March 31,
      2007
      and 2006, respectively.





As
      discussed in Note 2, the Company wrote-off the remaining carrying value of
      the
      CCE MDA, Jasper, and H.P. Hood manufacturing agreement intangible assets during
      the quarter ended March 31, 2007 and recognized a non-cash impairment loss
      of
      $ 17,662,006.





**Note
      4** **-** **Accrued liabilities**





Accrued
      liabilities consist of the following as of March 31, 2007 and December 31,
      2006:





2007
            
            2006Production
                processor liability (a)
            
            $
            2,307,418
            
            $
            850,628Accrued
                payroll and related taxes
            
            
            529,761
            
            
            542,741Accrued
                interest
            
            
            1,211,225
            
            
            893,706Liquidated
                damages due to late registration (b)
            
            
            1,725,607
            
            
            3,397,419Radio
                advertising and promotion costs
            
            
            --
            
            
            716,944Other
                (c)
            
            
            735,878
            
            
            612,825**Total
                Accrued Liabilities**
            
            **$**
            **6,509,889**
            
            **$**
            **7,014,263**





(a)
      Represents accruals for certain amounts owed to Jasper, the Company’s
      3 rd party
      production processor. Included within this amount at March 31,
      2007 are $1.5 million in forecasted Q2 2007 production shortfall penalties
      that are both probable and estimable.





(b)
      Certain of the Company’s financing arrangements provide for penalties in the
      event of non-registration of securities underlying the financial instruments.
      Generally, these penalties are calculated as a percentage of the financing
      proceeds, usually between 1.0% and 3.0% each month. The Company records these
      liquidated damages when they are both probable and estimable pursuant to FAS
      5,
“Accounting for Contingencies.”





F-12
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


(c)
      Represents primarily accruals for HP Hood production penalties and professional
      fees.





**Note
      5** **-** **Notes Payable**





Notes
      payable consist of the following as of March 31, 2007 and December 31,
      2006:





2007
            
            2006International
                Paper Note Payable (a)
            
            $
            187,743
            
            $
            187,743Notes
                Payable to GMAC (b)
            
            
            109,797
            
            
            123,725February
                2007 Short Term Financing (c)
            
            
            1,438,438
            
            
            0March
                2007 Short Term Financing (d)
            
            
            466,551
            
            
            0Total
                notes payable
            
            
            2,202,529
            
            
            311,468**Less
                current maturities**
            
            
            **2,149,301**
            
            
            **243,968****Long-term
                notes payable**
            
            **$**
            **53,228**
            
            **$**
            **67,500**








(a)
      In
      1999, the Company issued a promissory note to assume existing debt owed by
      its
      then Chinese joint venture subsidiary to a supplier, International Paper. The
      face value of that unsecured note was $282,637 at an annual interest rate of
      10.5%. The note originally required 23 monthly payments of $7,250 and a balloon
      payment of $159,862 due on July 15, 2000. During 2000, the Company negotiated
      an
      extension of this note to July 1, 2001. International Paper imposed a charge
      of
      $57,000 to renegotiate the note, which represents interest due through the
      extension date. The balance due on this note is $187,743 at March 31, 2007,
      all
      of which is delinquent. Interest accrued and unpaid as of March 31, 2007 and
      December 31, 2006 aggregated $114,330 and $109,470, respectively.





(b)
      In
      March 2006, the Company purchased eight vehicles that are used by its regional
      sales managers. This loan balance represents amounts payable to GMAC under
      36-month loan agreements. Annual interest rates are 1.5% (seven vehicles) and
      4.9% (one vehicle).





(c)
      In
      February 2007, the Company issued promissory notes with a face value of
      $2,000,000 and an annual interest rate of 12%. The notes are scheduled to be
      repaid on June 9, 2007 in full. The Company also issued 2,000,000 warrants
      associated with the notes, with an exercise price of $0.34.





(d)
      In
      March 2007, the Company issued promissory notes with a face value of $625,000
      and an annual interest rate of 12%. The notes are scheduled to be repaid on
      June
      9, 2007 in full. The Company also issued 625,000 warrants associated with the
      notes, with an exercise price of $0.34.





**Note
      6 - Convertible Notes Payable**





Convertible
      debt carrying values consist of the following as of March 31, 2007 and December
      31, 2006:





2007
            
            2006$600,000
                Convertible Note Payable, due December 2005 (a)
            
            $
            450,000
            
            $
            450,000$30,000,000
                Convertible Note Payable, due July 31, 2010 (b)
            
            
            25,174,038
            
            
            25,036,990**Total
                Convertible Notes Payable**
            
            **$**
            **25,624,038**
            
            **$**
            **25,486,990**





F-13
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


(a)
      $600,000 Convertible Note Financing:





On
      June
      29, 2004, the Company issued $600,000 of 10.0% convertible notes payable, due
      December 31, 2005, plus warrants to purchase 2,000,000 and 5,000,000 shares
      of
      the Company’s common stock with strike prices of $0.25 and $1.00, respectively,
      for periods of five and two years, respectively. Net proceeds from this
      financing arrangement amounted to $500,000. As of March 31, 2007 and December
      31, 2006, the outstanding principal balance on this note was $450,000. The
      reduction in principal was due to note conversions. This debt is past due and
      the outstanding carrying value of $450,000 does not include $62,124 of unpaid
      interest, which is being reflected in accrued liabilities. The note is
      convertible into a fixed number of the Company’s common shares based upon a
      conversion price of $0.15 with anti-dilution protection for sales of securities
      below the fixed conversion price. The Company has the option to redeem the
      convertible notes for cash at 120% of the face value. The holder has the option
      to redeem the convertible notes payable for cash at 130% of the face value
      in
      the event of defaults and certain other contingent events, including events
      related to the common stock into which the instrument is convertible,
      registration and listing (and maintenance thereof) of the Company’s common stock
      and filing of reports with the Securities and Exchange Commission (the “Default
      Put”). In addition, the Company extended registration rights to the holder that
      required registration and continuing effectiveness thereof; the Company is
      required to pay monthly liquidating damages of 2.0% for defaults under this
      provision.





In
      the
      Company’s evaluation of this instrument, the Company concluded that the
      conversion feature was not afforded the exemption as a conventional convertible
      instrument due to the anti-dilution protection; and it did not otherwise meet
      the conditions for equity classification. Since equity classification is not
      available for the conversion feature, the Company was required to bifurcate
      the
      embedded conversion feature and carry it as a derivative liability, at fair
      value. The Company also concluded that the Default Put required bifurcation
      because, while puts on debt instruments are generally considered clearly and
      closely related to the host, the Default Put is indexed to certain events,
      noted
      above, that are not associated with debt instruments. The Company combined
      all
      embedded features that required bifurcation into one compound instrument that
      is
      carried as a component of derivative liabilities. The Company also determined
      that the warrants did not meet the conditions for equity classification because
      these instruments did not meet all of the necessary criteria for equity
      classification. Therefore, the warrants were also required to be carried as
      a
      derivative liability, at fair value. As of December 31, 2005, all warrants
      related to the financing had been converted.





The
      Company estimated the fair value of the compound derivative on the inception
      date, and subsequently, using the Monte Carlo valuation technique, because
      that
      technique embodies all of the assumptions (including credit risk, interest
      risk,
      stock price volatility and conversion estimates) that are necessary to fair
      value complex derivative instruments. As a result of these estimates, the
      Company’s valuation model resulted in compound derivative balances associated
      with this financing arrangement of $496,304 and $454,267 as of March 31, 2007
      and December 31, 2006, respectively. These amounts are included in Derivative
      Liabilities on the Company’s balance sheet.





The
      following table illustrates fair value adjustments that the Company has recorded
      related to the derivative financial instruments associated with the $600,000
      convertible note financing:





Derivative
                income (expense)
            
            Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Compound
                derivative
            
            $
            (42,037
            )
            $
            (132,500
            )





F-14
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Changes
      in the fair value of the compound derivative and, therefore, derivative income
      (expense) related to the compound derivative is significantly affected by
      changes in the Company’s trading stock price and the credit risk associated with
      its financial instruments. Future changes in these underlying market conditions
      will have a continuing effect on derivative income (expense) associated with
      these instruments.





(b) $30,000,000
      Convertible Note Financing:





On
      July
      26, 2006, the Company issued $30,000,000 of 9.0% convertible notes payable,
      due
      January 27, 2010, plus warrants to purchase 12,857,143 shares (“Series A
      Warrants”) of the Company’s common stock at $0.73, for a period of five years.
      Net proceeds from this financing arrangement amounted to approximately
      $27,500,000 (net of approximately $2,500,000 in financing costs). There was
      a
      $1,000,000 note balance related to the May 2006 financing that was exchanged
      for
      an equal amount of convertible notes from this financing. The Company had a
      carrying value on this note of $25,174,038 as of March 31, 2007. The convertible
      notes were convertible into a fixed number of the Company’s common shares based
      upon a conversion price of $0.70 with anti-dilution protection for sales of
      securities below the fixed conversion price. The Company had the option to
      redeem the convertible notes for cash at an amount equal to the note balance
      plus accrued interest including the amount of unpaid interest that would have
      been paid through the third anniversary of the note. The holder has the option
      to redeem the convertible notes payable for cash at 125% of the face value
      in
      the event of default and certain other contingent events, including events
      related to the common stock into which the instrument is convertible,
      registration and listing (and maintenance thereof) of the Company’s common stock
      and filing of reports with the Securities and Exchange Commission (the “Default
      Put”). The Company has the option to redeem the notes payable at a date earlier
      than maturity (the “call option”). If the Company exercises the call option, the
      holders will have the right to exercise an additional 42,857,142 warrants and
      receive common shares to which the contingent warrants are indexed to (“Series B
      Warrants”). Absent the Company’s exercise of its call option to redeem the
      convertible notes, the holders have no rights to exercise the warrants and
      receive common shares to which the contingent warrants are indexed. The Company
      currently has no plans in the foreseeable future to exercise its call option.
      If
      the Company does exercise
      its call option, however, the number of its common shares that are issuable
      upon
      the exercise of the contingent warrants is limited to the number of its common
      shares underlying the convertible notes that have been redeemed. In
      addition, the Company extended registration rights to the holder that required
      registration and continuing effectiveness thereof; the Company is required
      to
      pay monthly liquidating damages of 3.0% for defaults under this
      provision.





In
      the
      Company’s initial evaluation of this instrument, the Company concluded that the
      conversion feature was not afforded the exemption as a conventional convertible
      instrument due to the anti-dilution protection, and it did not otherwise meet
      the conditions for equity classification specifically because the registration
      payment arrangement rose to an uneconomic settlement of the arrangement. Since
      equity classification was not available for the conversion feature, the Company
      was required to bifurcate the embedded conversion feature and carry it as a
      derivative liability, at fair value during 2006. The Company also concluded
      that
      the Default Put required bifurcation because, while puts on debt instruments
      are
      generally considered clearly and closely related to the host, the Default Put
      was indexed to certain events, noted above, that are not associated with risks
      of debt instruments. The Company combined all embedded features that required
      bifurcation into one compound instrument that was carried as a component of
      derivative liabilities. The Company also determined that the warrants did not
      meet the conditions for equity classification because the registration payment
      arrangement was also deemed to rise to an uneconomic settlement. Therefore,
      the
      warrants were also required to be carried as a derivative liability, at fair
      value during 2006.





F-15
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      Company estimated the fair value of the compound derivative on the inception
      date, and subsequently, using the Monte Carlo valuation technique, because
      that
      technique embodies all of the assumptions (including credit risk, interest
      risk,
      stock price volatility and conversion estimates) that are necessary to fair
      value complex derivative instruments. The Company estimated the fair value
      of
      the warrants on the inception date, and subsequently, using the
      Black-Scholes-Merton valuation technique, because that technique embodies all
      of
      the assumptions (including volatility, expected terms, and risk free rates)
      that
      are necessary to fair value freestanding warrants. These amounts are included
      in
      Derivative Liabilities on the Company’s balance sheet.





On
      August
      31, 2006, the Company entered into Amendment Agreements in which the investors
      agreed to release the Company from events of default that occurred under the
      terms of the original July 26, 2006 financing. In exchange, Amended and Restated
      Notes were issued in which the conversion price on the $15,000,000 financing,
      which was held in escrow, was reduced from $0.70 to $0.51. In addition, the
      holder could require the Company to redeem any portion of the Amended and
      Restated Note in cash or common stock at 125% from October 10, 2006 through
      December 15, 2006. This debt modification was deemed to be a modification rather
      than a debt extinguishment since it did not rise to the requirements of EITF
      96-19 to be deemed a debt extinguishment. The change in the conversion price
      caused an additional embedded conversion feature liability of approximately
      $646,000 which was also recorded as a reduction in the carrying amount of the
      debt.





On
      December 29, 2006, the Company entered into Amendment Agreements in which the
      investors agreed to waive their rights to exercise their “Default Put” when an
      event of default occurred related to the registration and listing (and
      maintenance thereof) of the Company’s common stock and filing of reports with
      the Securities and Exchange Commission. In exchange, Amended and Restated Notes
      were issued which increased the original face value of the financing to
      $33,750,000. In connection therewith, the Company recorded derivative expense
      of
      approximately $3,610,000. In addition, the conversion price on $15,000,000
      of the financing was reduced from $0.70 to $0.32. The conversion price on the
      other $15,000,000 of the financing was reduced from $0.51 to $0.32 (this was
      the
      portion of the financing adjusted in August 2006). The conversion price for
      the
      Series A warrants were reduced from $0.73 to $0.34 and the conversion price
      for
      the Series B warrants were reduced from $0.70 to $0.32. Based on guidance from
      EITF 06-6, this debt modification was deemed to be a debt extinguishment. The
      extinguishment of debt resulted in a net loss of approximately $28,000 which
      was
      also recorded as an increase in the carrying amount of the debt.





Effective
      January 1, 2007, management adopted the provisions of FSP EITF 00-19-2 and
      concluded that the embedded conversion feature and warrants, associated with
      the
      July 2006 $30,000,000 Convertible Note Financing, and previously classified
      as
      liabilities, should be afforded equity classification. As noted above, under
      the
      previous standard, management determined that the unlimited nature of
      contractual registration payments for non-registration and non-effectiveness
      rose to an uneconomic settlement alternative and the subject share-indexed
      securities required liability classification. Under the FSP, the registration
      payment provisions are not considered for purposes of classification. Rather,
      commencing January 1, 2007, those payments are accounted for under the
      provisions of FAS 5; See Note 4 Accrued Liabilities. As a result of the
      adoption, the embedded conversion feature and warrants met the eight conditions
      for equity classification provided in EITF 00-19. Adoption of this new standard
      resulted in the reclassification of $6,516,000 to additional paid in capital
      accompanied by a credit to retained earnings of $9,181,251 which represents
      the cumulative effect of this change in accounting principle.





F-16
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


During
      the three months ended March 2007, certain Note holders converted $1,300,000
      in
      principal into common stock at the $0.32 contract conversion rate. As a result
      of the adoption of the FSP, resulting in the recombining of the embedded
      conversion feature and the host debt instrument, the Company is able to treat
      conversions under contractual terms in accordance with AIN/APB 26, which
      precludes the recognition of gains or losses. Rather, the Company reclassified
      a
      proportional amount of the carrying value of the debt to paid-in capital to
      give
      effect to the conversion.








**Note
      7 - Derivative Liabilities**





The
      following table summarizes the components of derivative liabilities as of March
      31, 2007 and December 31, 2006:





Note
            2007
            2006Compound
                derivative financial instruments that have been bifurcated from the
                following financing arrangements:$
                600,000 Convertible Note Financing
            6(a)
            $496,304
            $
                454,267$30,000,000
                Convertible Note Financing
            6(b)
            -
            9,326,007Series
                J Preferred Stock Financing
            8(b)
            3,108,000
            3,416,000Series
                K Preferred Stock Financing
            8(c)
            40,413
            139,565Freestanding
                derivative contracts arising from financing and other business
                arrangements:Warrants
                issued with $2,500,000 Note Financing
            10(c)
            226,341
            234,000Warrants
                issued with $30,000,000 Convertible Notes
            6(b)
            -
            6,371,243**Total
                derivative liabilities**
            
            **$
                3,871,058**
            **$
                19,941,082**





See
      the
      notes referenced in the table for details of the origination and accounting
      for
      these derivative financial instruments. Also, see the discussion of the effects
      on the Company’s accounting for derivative financial instruments following the
      adoption of FSP EITF 00-19-2, below and in Note 2.





The
      Company estimates fair values of derivative financial instruments using various
      techniques (and combinations thereof) that are considered to be consistent
      with
      the objective of measuring fair values. In selecting the appropriate technique,
      the Company considers, among other factors, the nature of the instrument, the
      market risks that it embodies and the expected means of settlement. For less
      complex derivative instruments, such as free-standing warrants, the Company
      generally uses the Black-Scholes-Merton option valuation technique because
      it
      embodies all of the requisite assumptions (including trading volatility,
      estimated terms and risk free rates) necessary to fair value these instruments.
      For complex derivative instruments, such as embedded conversion options, the
      Company generally uses the Flexible Monte Carlo valuation technique because
      it
      embodies all of the requisite assumptions (including credit risk, interest-rate
      risk and exercise/conversion behaviors) that are necessary to fair value these
      more complex instruments. For forward contracts that contingently require
      net-cash settlement as the principal means of settlement, the Company projects
      and discounts future cash flows applying probability-weightage to multiple
      possible outcomes. Estimating fair values of derivative financial instruments
      requires the development of significant and subjective estimates that may,
      and
      are likely to, change over the duration of the instrument with related changes
      in internal and external market factors. In addition, option-based techniques
      are highly volatile and sensitive to changes in the trading market price of
      the
      Company’s common stock, which has a high-historical volatility. Since derivative
      financial instruments are initially and subsequently carried at fair values,
      the
      Company’s income will reflect the volatility in these estimate and assumption
      changes.





F-17
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**





During
      December 2006, the Financial Accounting Standards Board issued FASB Staff
      Position (FSP)
      EITF 00-19-2, Accounting
      for Registration Payment Arrangements ,
      which
      amended Financial Accounting Standard No. 133 Accounting
      for Derivative Financial Instruments and Hedging Activities .
      Generally, the amendment provides for the exclusion of registration payments,
      such as the liquidated damages that the Company has incurred, from the
      consideration of classification of financial instruments, previously required
      under FAS133 and EITF 00-19. Rather, registration payments are to be accounted
      for pursuant to Financial Accounting Standard No. 5 Accounting
      for Contingencies ,
      which
      provides for the recognition of registration payments when they are both
      probably and reasonably estimable. The FSP was adopted by the Company on January
      1, 2007, as was required by the new accounting pronouncement. However, the
      Company had previously applied the view (provided in EITF 05-04) that
      registration payments required recognition pursuant to FAS 5. See Note 4,
      Accrued Liabilities for information about the recognition and amounts of
      registration payments.





Adoption
      of the FSP involved management’s reevaluation of the conditions for equity or
      liability classification of existing derivative financial instruments pursuant
      to the revised criteria of EITF 00-19. As a result of the reevaluation,
      management concluded that the embedded conversion feature and warrants,
      associated with the July 2006 $30,000,000 Convertible Note Financing, and
      previously classified as liabilities, should be afforded equity classification.
      Under the previous standard, management determined that the unlimited nature
      of
      contractual registration payments for non-registration and non-effectiveness
      rose to an uneconomic settlement alternative and the subject share-indexed
      securities required liability classification. Under the FSP, the registration
      payment provisions are not considered for purposes of classification. Rather,
      commencing January 1, 2007, those payments are accounted for under the
      provisions of FAS 5. As a result, the embedded conversion feature and warrants
      met the eight conditions for equity classification provided in EITF 00-19.
      Adoption of this new standard resulted in the reclassification of $6,516,000
      to
      additional paid in capital accompanied by a credit to retained earnings of
      $9,181,251 which represents the cumulative effect of this change in accounting
      principle.




**Note
      8 - Preferred Stock**





The
      Company’s articles of incorporation authorize the issuance of 5,000,000 shares
      of preferred stock. The Company has designated this authorized preferred stock,
      as follows:





(a) Series
      H Preferred Stock :





The
      Company has designated 350,000 shares of its preferred stock as Series H
      Cumulative Convertible Preferred Stock with a stated and liquidation value
      of
      $10.00 per share. Series H Preferred Stock has cumulative dividend rights at
      7.0% of the stated amount, ranks senior to common stock and is non-voting.
      As of
      March 31, 2007 and December 31, 2006, the preferred stock balance was $535,000.
      The Series H preferred stock is convertible into the Company’s common stock at a
      fixed conversion price of $0.40 per common share. The Series H Preferred Stock
      is mandatorily redeemable for common stock on the fifth anniversary of its
      issuance. The Company has the option to redeem the Series H Preferred Stock
      for
      cash at 135% of the stated value. The holder has the option to redeem the Series
      H Preferred Stock for cash at 140% of the stated value in the event of defaults
      and certain other contingent events, including events related to the common
      stock into which the instrument is convertible, listing of the Company’s common
      stock and filing of reports with the Securities and Exchange Commission (the
      “Default Put”). However, the terms of an amended agreement that were ratified by
      investors on December 29, 2006, eliminated the holder’s option to redeem the
      Series H Preferred Stock in the event of default and other contingent events
      related to the common stock into which the instrument is convertible (the
“Default Put”).





F-18
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Initially,
      based upon the Company’s evaluation of the terms and conditions of the Series H
      Preferred Stock, the Company concluded that it was more akin to a debt
      instrument than an equity instrument, which meant that the Company’s accounting
      conclusions were based upon those related to a traditional debt security, and
      that it should be afforded the conventional convertible exemption regarding
      the
      embedded conversion feature because the conversion price was fixed. Therefore,
      the Company was not required to bifurcate the embedded conversion feature and
      carry it as a liability. However, the Company concluded that the Default Put
      required bifurcation because, while puts on debt-type instruments are generally
      considered clearly and closely related to the host, the Default Put is indexed
      to certain events, noted above, that are not associated with debt-type
      instruments. In addition, due to the default and contingent redemption features
      of the Series H Preferred Stock, the Company initially classified this
      instrument as redeemable preferred stock, outside of stockholders’ equity.





Based
      upon the Company’s evaluation of the terms and conditions of the Series H
      Preferred Stock subsequent to the Amended Agreements between the Company and
      investors, the Company concluded that it was more akin to equity rather than
      debt and thus has been reclassified to stockholders’ equity.





Between
      December 2001 and March 2002, the Company issued 175,500 shares of Series H
      Preferred Stock for cash of $1,755,000, plus warrants to purchase an aggregate
      of 4,387,500 shares of common stock at $0.50 for five years. As of March 31,
      2007 and December 31, 2006, shares of preferred stock outstanding were 53,500,
      and there were no warrants outstanding. The Company initially allocated
      $1,596,228 of the proceeds from the Series H Preferred financings to the
      warrants at their fair values because the warrants did not meet all of the
      conditions necessary for equity classification. However, due to amended
      agreements, the warrants currently meet all of the conditions necessary for
      equity classification and, accordingly, are carried as stockholders’ equity, at
      fair value.





The
      Company estimated the fair value of the derivative warrants on the inception
      date, and subsequently, using the Black-Scholes-Merton valuation technique.
      As a
      result of applying this technique, the Company’s valuation of the derivative
      warrants amounted to $0 and $327,903 as of March 31, 2007 and March 31, 2006,
      respectively. The Company estimated the fair value of the Default Puts on the
      inception date, and subsequently, using a cash flow technique that involves
      probability-weighting multiple outcomes at net present values. Since the Default
      Put was eliminated as a result of amended terms agreed to with the investors
      on
      December 29, 2006, the value has been reduced to $0. Significant assumptions
      underlying the probability-weighted outcomes included both the Company’s history
      of similar default events, all available information about the Company’s
      business plans that could give rise to or risk defaults and the imminence of
      impending or current defaults. As a result of these subjective estimates, the
      Company’s valuation model resulted in Default Put balances associated with the
      Series H Preferred Stock of $-0- as of March 31, 2007 and December 31, 2006,
      respectively. The following table illustrates fair value adjustments that the
      Company has recorded related to the Default Puts on the Series H Preferred
      Stock.





F-19
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Derivative
                income (expense)
            
            Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Default
                Put
            
            $
            0
            
            $
            (14,985
            )Warrant
                derivative
            
            $
            0
            
            $
            327,903








The
      discounts to the Series H Preferred Stock that resulted from the aforementioned
      allocations have been accreted through periodic charges to retained earnings
      using the effective method. The following table illustrates the components
      of
      preferred stock dividends and accretions for the quarters ended March 31, 2007
      and 2006:





Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Cumulative
                dividends at 7%
            
            $
            35,100
            
            $
            35,100Accretions
            
            $
            0
            
            $
            39,174





As
      of
      March 31, 2007, $347,026 of cumulative dividends are in arrears on Series H
      Preferred Stock.





(b)
      Series J Preferred Stock :





The
      Company has designated 500,000 shares of its preferred stock as Series J
      Cumulative Convertible Preferred Stock with a stated and liquidation value
      of
      $10.00 per share. Series J Preferred Stock has cumulative dividend rights at
      8.0% of the stated amount, ranks senior to common stock and is non-voting.
      It is
      also convertible into the Company’s common stock at a conversion price of $0.20
      per common share. The Series J Preferred Stock is mandatorily redeemable for
      common stock on the fifth anniversary of its issuance. The Company has the
      option to redeem the Series J Preferred Stock for cash at 135% of the stated
      value. The holder has the option to redeem the Series J Preferred Stock for
      cash
      at 140% of the stated value in the event of defaults and certain other
      contingent events, including events related to the common stock into which
      the
      instrument is convertible, registration and listing (and maintenance thereof)
      of
      the Company’s common stock and filing of reports with the Securities and
      Exchange Commission (the “Default Put”).





Based
      upon the Company’s evaluation of the terms and conditions of the Series J
      Preferred Stock, the Company concluded that its features were more akin to
      a
      debt instrument than an equity instrument, which means that the Company’s
      accounting conclusions are generally based upon standards related to a
      traditional debt security. The Company’s evaluation concluded that the embedded
      conversion feature was not afforded the exemption as a conventional convertible
      instrument due to certain variability in the conversion price, and it further
      did not meet the conditions for equity classification. Therefore, the Company
      is
      required to bifurcate the embedded conversion feature and carry it as a
      liability. The Company also concluded that the Put required bifurcation because,
      while puts on debt-type instruments are generally considered clearly and closely
      related to the host, the Default Put is indexed to certain events, noted above,
      that are not associated with debt-type instruments. The Company combined all
      embedded features that required bifurcation into one compound instrument that
      is
      carried as a component of derivative liabilities. In addition, due to the
      default and contingent redemption features of the Series J Preferred Stock,
      the
      Company classified this instrument as redeemable preferred stock, outside of
      stockholders’ equity.





F-20
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


In
      September 2002, February 2003 and May 2003, the Company issued 100,000 shares,
      50,000 shares and 50,000 shares, respectively, of Series J Preferred Stock
      for
      cash of $2,000,000. The Company also issued warrants for an aggregate of
      14,000,000 shares of the Company’s common stock in connection with the financing
      arrangement. The warrants have terms of five years and an exercise price of
      $0.25. The Company initially allocated proceeds of $658,000 and $1,190,867
      from
      the financing arrangements to the compound derivative discussed above and to
      the
      warrants, respectively. Since these instruments did not meet the criteria for
      classification, they are required to be carried as derivative liabilities,
      at
      fair value.





The
      Company estimated the fair value of the compound derivative on the inception
      dates, and subsequently, using the Monte Carlo valuation technique, because
      that
      technique embodies all of the assumptions (including credit risk, interest
      risk,
      stock price volatility and conversion estimates) that are necessary to fair
      value complex derivative instruments. The Company estimated the fair value
      of
      the warrants on the inception dates, and subsequently, using the
      Black-Scholes-Merton valuation technique, because that technique embodies all
      of
      the assumptions (including volatility, expected terms, and risk free rates)
      that
      are necessary to fair value freestanding warrants. As a result of these
      estimates, the Company’s valuation model resulted in compound derivative
      balances associated with the Series J Preferred Stock of $3,108,000 and
      $3,416,000 as of March 31, 2007 and December 31, 2006, respectively. These
      amounts are included in Derivative Liabilities on the Company’s balance sheet.





The
      following table illustrates fair value adjustments that the Company has recorded
      related to the derivative financial instruments associated with the Series
      J
      Preferred Stock.





Derivative
                income (expense)
            
            Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Compound
                derivative
            
            $
            308,000
            
            $
            924,000





Changes
      in the fair value of the compound derivative and, therefore, derivative income
      (expense) related to the compound derivative is significantly affected by
      changes in the Company’s trading stock price and the credit risk associated with
      its financial instruments. The fair value of the warrant derivative is
      significantly affected by changes in the Company’s trading stock prices. Future
      changes in these underlying market conditions will have a continuing effect
      on
      derivative income (expense) associated with these instruments.





The
      discounts to the Series J Preferred Stock that resulted from the aforementioned
      allocations are being accreted through periodic charges to retained earnings
      using the effective method. The following table illustrates the components
      of
      preferred stock dividends and accretions for the quarters ended March 31, 2007
      and 2006:





Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Cumulative
                dividends at 8%
            
            $
            40,000
            
            $
            40,000Accretions
            
            $
            245,423
            
            $
            136,885





F-21
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


As
      of
      March 31, 2007 $660,894 of cumulative dividends are in arrears on Series J
      Preferred Stock.





(c)
      Series K Preferred Stock :





The
      Company has designated 500,000 shares of the Company’s preferred stock as Series
      K Cumulative Convertible Preferred Stock with a stated and liquidation value
      of
      $10.00 per share. Series K Preferred Stock has cumulative dividend rights at
      8.0% of the stated amount, ranks senior to common stock and is non-voting.
      It is
      also convertible into the Company’s common stock at a fixed conversion price of
      $0.10 per common share. The Series K Preferred Stock is mandatorily redeemable
      for common stock on the fifth anniversary of its issuance. The Company has
      the
      option to redeem the Series K Preferred Stock for cash at 120% of the stated
      value. The holder has the option to redeem the Series K Preferred Stock for
      cash
      at 140% of the stated value in the event of defaults and certain other
      contingent events, including events related to the common stock into which
      the
      instrument is convertible, listing of the Company’s common stock and filing of
      reports with the Securities and Exchange Commission (the “Default Put”).





Based
      upon the Company’s evaluation of the terms and conditions of the Series K
      Preferred Stock, the Company concluded that it was more akin to a debt
      instrument than an equity instrument, which means that the Company’s accounting
      conclusions are based upon those related to a traditional debt security, and
      that it should be afforded the conventional convertible exemption regarding
      the
      embedded conversion feature because the conversion price is fixed. Therefore,
      the Company is not required to bifurcate the embedded conversion feature and
      carry it as a liability. However, the Company concluded that the Default Put
      required bifurcation because, while puts on debt-type instruments are generally
      considered clearly and closely related to the host, the Default Put is indexed
      to certain events, noted above, that are not associated with debt-type
      instruments. In addition, due to the default and contingent redemption features
      of the Series K Preferred Stock, the Company classified this instrument as
      redeemable preferred stock, outside of stockholders’ equity.





In
      March
      2004, the Company issued 80,000 shares of Series K Preferred Stock for cash
      of
      $800,000. In April 2004, the Company issued 15,000 shares of Series K Preferred
      Stock to extinguish debt with a carrying value of $150,000. At the time of
      these
      issuances, the trading market price of the Company’s common stock exceeded the
      fixed conversion price and, as a result, the Company allocated $160,000 and
      $60,000 from the March and April issuances, respectively, to stockholders’
equity which amount represented a beneficial conversion feature. In addition,
      the Company recorded a debt extinguishment loss of $60,000 in connection with
      the April exchange of Series K Preferred Stock for debt because the Company
      estimated that it had a fair value that exceeded the carrying value of the
      extinguished debt by that amount. Finally, the Company allocated approximately
      $59,000 and $11,000 to the Default Puts, representing fair values, in connection
      with the March and April issuances, respectively.





The
      Company estimated the fair value of the Default Puts on the inception dates,
      and
      subsequently, using a cash flow technique that involves probability-weighting
      multiple outcomes at net present values. Significant assumptions underlying
      the
      probability-weighted outcomes included both the Company’s history of similar
      default events, all available information about the Company’s business plans
      that could give rise to or risk defaults and the imminence of impending or
      current defaults. As a result of these subjective estimates, the Company’s
      valuation model resulted in Default Put balances associated with the Series
      K
      Preferred Stock of $40,413 and $139,565 as of March 31, 2007 and December 31,
      2006, respectively. These amounts are included in Derivative Liabilities on
      the
      Company’s balance sheet. The following table illustrates fair value adjustments
      that the Company has recorded related to the Default Puts on the Series K
      Preferred Stock.





F-22
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Derivative
                income (expense)
            
            Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Compound
                derivative
            
            $
            99,152
            
            $
            (3,138
            )





Derivative
      income (expense) related to the Default Put includes changes to the fair value
      arising from changes in the Company’s estimates about the probability of default
      events and amortization of the time-value element embedded in the Company’s
      calculations. Lower derivative expense in the period ended March 31, 2007,
      when
      compared to the same periods of 2006, reflected the decreased probability that
      the Default Put would become exercisable because the Company would not timely
      file certain reports with the Securities and Exchange Commission.





The
      discounts to the Series K Preferred Stock that resulted from the aforementioned
      allocations are being accreted through periodic charges to retained earnings
      using the effective method. The following table illustrates the components
      of
      preferred stock dividends and accretions for the quarters ended March 31, 2007
      and 2006:





Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Cumulative
                dividends at 8%
            
            $
            19,000
            
            $
            19,000Accretions
            
            $
            11,715
            
            $
            11,015





As
      of
      March 31, 2007, $233,368 of cumulative dividends are in arrears on Series K
      Preferred Stock.





(d)
      Other
      Preferred Stock Designations and Financings:





Series
      B Preferred :
      The
      Company has designated 1,260,000 shares of its preferred stock as Series B
      Convertible Preferred Stock with a stated and liquidation value of $1.00 per
      share. Series B Preferred has cumulative dividend rights of 9.0%, ranks senior
      to common stock and has voting rights equal to the number of common shares
      into
      which it may be converted. Series B Preferred is convertible into common stock
      on a share for share basis. Based upon the Company’s evaluation of the terms and
      conditions of the Series B Preferred Stock, the Company has concluded that
      it
      meets all of the requirements for equity classification. The Company has 107,440
      shares of Series B Preferred outstanding as of March 31, 2007 and December
      31,
      2006.





Series
      F Preferred :
      The
      Company has designated 200,000 shares of its preferred stock as Series F
      Convertible Preferred Stock with a stated and liquidation value of $10 per
      share. The shares were fully converted by September 30, 2006. Series F Preferred
      is non-voting and convertible into common stock at a variable conversion price
      equal to the lower of $0.60 or 75% of the trading prices near the conversion
      date. In addition, the holder had the option to redeem the convertible notes
      payable for cash at 125% of the face value in the event of defaults and certain
      other contingent events, including events related to the common stock into
      which
      the instrument is convertible, registration and listing (and maintenance
      thereof) of the Company’s common stock and filing of reports with the Securities
      and Exchange Commission (the “Default Put”). The Company concluded that the
      conversion feature was not afforded the exemption as a conventional convertible
      instrument due to a variable conversion feature, and it did not otherwise meet
      the conditions for equity classification. Since equity classification is not
      available for the conversion feature, the Company was required to bifurcate
      the
      embedded conversion feature and carry it as a derivative liability, at fair
      value. The Company also concluded that the Default Put required bifurcation
      because, while puts on debt-type instruments are generally considered clearly
      and closely related to the host, the Default Put is indexed to certain events,
      noted above, that are not associated with debt-type instruments. These two
      derivative features were combined into one compound derivative
      instrument





F-23
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      following table summarizes derivative income (expense) related to compound
      derivatives and freestanding warrant derivatives that arose in connection with
      the preferred stock transactions discussed above.





Derivative
                income (expense)
            
            Three
                months ended
              March
                31,
              2007
            
            Three
                months ended
              March
                31,
              2006Compound
                derivative
            
            $
            0
            
            $
            5,303Warrant
                derivative
            
            $
            0
            
            $
            91,932





**Note
      9 - Stock Based Compensation Plans**





On
      February 28, 2007, the Company’s Board of Directors granted a total of
      22,125,000 stock options to employees and directors.  Of the 22,125,000
      options, the Board granted 1,275,000 under the Company’s 2005 Incentive Stock
      Option Plan and 20,850,000 under its 2006-2007 Incentive Stock Option
      Plan.  All options granted have a contractual life of 10 years, and two
      thirds of the options vest equally over two years in equal annual installments,
      provided that the individual is continuously in the Company’s employ, with the
      first third exercisable as of the grant date. The Company’s Board of Directors
      also granted 3,851,724 stock options to employees on January 17, 2007 under
      its
      2006-2007 Incentive Stock Option Plan.





On
      January 1, 2006, the Company adopted Financial Accounting Standard 123 (revised
      2004), Share-Based
      Payments (“FAS
      123(R)”) which is a revision of FAS No. 123, using the modified prospective
      method. Under this method, compensation cost recognized for the year ended
      December 31, 2006 includes compensation cost for all share-based
      payments modified or granted prior to, but not yet vested, as of January 1,
      2006, based on the grant date fair value estimated in accordance with the
      original provisions of FAS No. 123. Compensation cost is being recognized on
      a
      straight-line basis over the requisite service period for the entire award
      in
      accordance with the provisions of FAS 123(R).




As
      the
      Company had previously adopted the fair-value provisions of FAS No. 123,
      effective January 1, 2005, the adoption of FAS 123(R) had a negligible impact
      on
      the Company’s earnings. The Company recorded compensation costs of $495,622 and
      $111,592 for the quarters ended March 31, 2007 and March 31, 2006, respectively.
      The Company recognized no tax benefit for share-based compensation arrangements
      due to the fact that it is in a cumulative loss position and recognized no
      tax
      benefits in its Consolidated Statement of Operations.




As
      required by FAS 123(R), the Company estimates forfeitures of employee stock
      options and recognizes compensation cost only for those awards expected to
      vest.
      Forfeiture rates are determined for two groups of employees - directors /
      officers and key employees based on historical experience. The Company adjusts
      estimated forfeitures to actual forfeiture experience as needed. The cumulative
      effect of adopting FAS 123(R) of $17,000, which represents estimated forfeitures
      for options outstanding at the date of adoption, was not material and therefore
      has been recorded as a reduction of the Company’s stock-based compensation costs
      in Selling and General and Administrative expenses rather than displayed
      separately as a cumulative change in accounting principle in the Consolidated
      Statement of Operations.





F-24
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


The
      Company estimates the fair value of each stock option on the date of grant
      using
      a Black-Scholes-Merton (BSM) option-pricing formula, applying the following
      assumptions and amortize that value to expense over the option’s vesting period
      using the straight-line attribution approach:





**First**
              
              **First****Quarter**
              
              **Quarter****2007**
              
              **2006*******Expected
                  Term (in years)
              
              
              6
              
              
              n/aRisk-free
                  rate
              
              
              4.56
              %
              
              n/aExpected
                  volatility
              
              
              116
              %
              
              n/aExpected
                  dividends
              
              
              0
              %
              
              n/a*
                  No options were granted during this period.
 *
        No
        options were granted during this period.





*Expected
      Term:* The
      expected term represents the period over which the share-based awards are
      expected to be outstanding. It has been determined as the midpoint between
      the
      vesting date and the end of the contractual term.





*Risk-Free
      Interest Rate:* The
      Company based the risk-free interest rate used in its assumptions on the implied
      yield currently available on U.S. Treasury zero-coupon issues with a remaining
      term equivalent to the stock option award’s expected term.





*Expected
      Volatility:* The
      volatility factor used in the Company’s assumptions is based on the historical
      price of the Company’s stock over the most recent period commensurate with the
      expected term of the stock option award.





*Expected
      Dividend Yield* :
      The
      Company does not intend to pay dividends on its common stock for the foreseeable
      future. Accordingly, the Company uses a dividend yield of zero in its
      assumptions.




A
      summary
      of option activity under the stock incentive plans for the three months ended
      March 31, 2007 is presented below:




F-25
 
 **BRAVO!
          BRANDS INC. AND SUBSIDIARY**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


**Weighted-****Average****Weighted-**
              
              **Remaining****Average**
              
              **Contractual**
              
              **Aggregate****Exercise**
              
              **Term**
              
              **Intrinsic****Options**
              
              **Shares**
              
              **Price**
              
              **(in
                  years)**
              
              **Value**Outstanding
                  at December 31, 2006
              
              
              9,403,755
              
              $
              0.31Granted
              
              
              25,976,724
              
              $
              0.33Exercised
              
              
              -
              
              
              -Forfeited
              
              
              -
              
              
              -Expired
              
              
              -
              
              
              -Outstanding
                  at March 31, 2007
              
              
              35,380,479
              
              $
              0.33
              
              
              9.24
              
              $
              392,169Vested
                  or expected to vest at March 31 2007
              
              
              34,218,360
              
              $
              0.33
              
              
              9.24
              
              $
              385,446Exercisable
                  at March 31 , 2007
              
              
              15,404,766
              
              $
              0.33
              
              
              8.98
              
              $
              261,963


At
      March
      31, 2007, the Company had $7,412,686 of total unrecognized compensation expense
      related to non-vested stock options, which is expected to be recognized over
      a
      weighted-average period of three years.





As
      a
      result of a restructuring plan that the Company commenced in late April 2007
      (refer to note 12), 9,133,332 of stock options previously granted to now
      terminated employees were cancelled.





**Note
      10 -** ** **Stockholders’
      Equity**





(a) Issuance
      of Common Stock





During
      the quarter ended March 31, 2007, the Company issued 4,062,500 shares of common
      stock pursuant to conversions by holders of the July 2006 convertible note.
      The
      shares of common stock underlying the convertible note were issued pursuant
      to a
      registration statement declared effective by the Securities and Exchange
      Commission on December 29, 2006.





(b) Convertible Preferred Stock





The
      Company has designated 1,260,000 shares of its preferred stock as Series B
      Convertible Preferred Stock. Series B Preferred accumulates dividends at the
      rate of 9% per annum, payable only upon liquidation or redemption, as a
      percentage of the stated value, out of the assets and available funds. Voting
      rights of the Series B Convertible Preferred stock are the same as the Company’s
      common stock. Series B Convertible Preferred stock is convertible anytime after
      December 31, 1997 to the Company’s common stock at the fixed ratio of one share
      of common stock for one share of Series B Convertible Preferred stock
      surrendered for conversion. As of March 31, 2007, there were 107,440 shares
      of
      Series B Preferred Stock issued and outstanding. The Company accounts for Series
      B Preferred Stock as perpetual preferred equity.





The
      Company has designated 350,000 shares of its preferred stock as Series H
      Convertible Preferred Stock. Series H Preferred accumulates dividends at the
      rate of 7% per annum, payable only upon liquidation or redemption, as a
      percentage of the stated value, out of the assets and available funds. Voting
      rights of the Series H Convertible Preferred stock are the same as the Company’s
      common stock. Series H Convertible Preferred stock is convertible anytime after
      January 4, 2002 into a number of the Company’s common stock equaling the stated
      value divided by $0.40. As of March 31, 2007, there were 53,500 shares of Series
      H Preferred Stock issued and outstanding. The Company accounts for Series H
      Preferred Stock as perpetual preferred equity.





F-26
 
 **BRAVO!
            BRANDS INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


(c)
      Common Stock Warrants





As
      of
      March 31, 2007, the Company had the following outstanding warrants:





Warrants
            
            Grant
                date
            
            Expiration
                date
            
            Warrants/
                Options Granted
            
            Exercise
                PriceWarrant
                to Licensor
            
            
            6/20/2005
            
            
            6/19/2007
            
            
            500,000
            
            
            0.050Warrant
                to Consultant
            
            
            4/8/2005
            
            
            4/7/2007
            
            
            1,000,000
            
            
            0.250Warrant
                to Distributor
            
            
            8/30/2005
            
            
            8/29/2008
            
            
            30,000,000
            
            
            0.360November
                2005 Bridge Loan
            
            
            11/14/2005
            
            
            11/13/2010
            
            
            150,000
            
            
            0.710November
                2005 Common Stock Financing
            
            
            11/28/2005
            
            
            11/27/2010
            
            
            40,749,991
            
            
            0.320May
                2006 Financing
            
            
            5/12/2006
            
            
            5/11/2011
            
            
            900,000
            
            
            0.320July
                2006 Convertible Note Financing
            
            
            7/27/2006
            
            
            7/26/2011
            
            
            27,605,040
            
            
            0.340July
                2006 Convertible Note - Transfer Agent
            
            
            7/27/2006
            
            
            7/26/2011
            
            
            1,793,067
            
            
            0.340Warrant
                to Processor
            
            
            9/19/2006
            
            
            9/18/2012
            
            
            5,870,000
            
            
            0.730Warrant
                to Licensor
            
            
            10/25/2006
            
            
            10/24/2011
            
            
            300,000
            
            
            0.800February
                2007 Financing
            
            
            2/14/2007
            
            
            2/13/2012
            
            
            2,000,000
            
            
            0.340March
                2007 Financing
            
            
            3/15/2007
            
            
            3/14/2012
            
            
            625,000
            
            
            0.340**Total
                Warrants**
            
            
            
            
            
            
            
            
            **111,493,098**





Derivative
      income (expense) associated with these other warrants for the quarters ended
      March 31, 2007 and 2006 are as follows:





Derivative
                income (expense)
            
            Three
                months ended
              March
                31, 2007
            
            Three
                months ended
              March
                31, 2006Warrant
                derivative
            
            $
            7,659
            
            $
            3,669,077








**Note
      11** **-** **Commitments
      and Contingencies**





Lease
      of Office





The
      Company leases office space at its corporate office in North Palm Beach, Florida
      under an original operating lease that commenced in February 1999. As of January
      1, 2007, the Company has executed an expansion of its office space in North
      Palm
      Beach, Florida to include 9,358 total square feet. The term of this lease has
      been renewed for an additional ten-year period that will expire December 31,
      2016.





F-27
 
 **BRAVO!
            BRANDS INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Future
      minimum rental payments, which exclude variable common area maintenance and
      employee parking charges, required under the operating lease as of
      March 31, 2007 are as follows:





AmountNine
                months ending December 31, 2007
            
            $
            121,070Years
                ending December 31,2008
            
            $
            161,4262009
            
            $
            161,4262010
            
            $
            161,4262011
            
            $
            161,4262012
            
            $
            161,426





Rent
      expense, which also includes maintenance and parking fees, for the three months
      ended March 31, 2007 and 2006 was $97,056 and $23,217,
      respectively.





Royalties:





The
      Company licenses trademarks and trade dress from certain Licensors for use
      on
      its products. Royalty advances are payable against earned royalties on a
      negotiated basis for these licensed intellectual property rights. The table
      below identifies each Licensor to which the Company’s licenses require future
      guaranteed payments as of March 31, 2007:





Licensor
            
            Remaining
                Term
            
            Aggregate
                Remaining GuaranteeMasterfoods-
                USA
            
            
            Six
                years
            
            $
            12,150,000Masterfoods-
                Canada
            
            
            Six
                years
            
            $
            1,287,810Masterfoods-
                Mexico
            
            
            Six
                years
            
            $
            772,700Diabetes
                Research Institute
            
            
            Seven
                months
            
            $
            17,000General
                Mills
            
            
            Five
                years
            
            $
            600,000








Marketing
      Commitments





In
      August
      2005, the Company executed an MDA with CCE. Pursuant to this agreement, the
      Company was contractually obligated to spend an aggregate of $5,000,000 on
      marketing activities in
      2005
      and 2006 for the Company’s products that are distributed by CCE. Beginning in
      2007, the Company is further obligated to spend an amount annually in each
      country within a defined territory equal or greater than 3% of the Company’s
      total CCE revenues in such territory (on a country by country basis). Such
      national and local advertising for the Company’s products includes actively
      marketing the Slammers mark, based on a plan to be mutually agreed each year.
      The Company is required to maintain its intellectual property rights necessary
      for the production, marketing and distribution of its products by CCE.





During
      the period commencing at the inception of the CCE agreement through the period
      ended March 31, 2007, the Company has met its obligation on marketing activities
      pursuant to its agreement with CCE. The Company is in discussions with CCE
      to
      significantly amend several terms of the MDA, including the existing marketing
      commitment. As discussed in Note 2, the Company wrote off the remaining value
      of
      its intangible asset associated with this agreement during the quarter ended
      March 31, 2007.





F-28
 
 **BRAVO!
            BRANDS INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


Production
      and Supply Agreements





Jasper
      Products LLC





On
      December 27, 2005, the Company executed a multi-year non-exclusive production
      agreement with Jasper Products, L.L.C. of Joplin, Missouri for the production
      of
      the Company’s products through 2011. Under the terms of the agreement, the
      parties have agreed to annual volume commitments for the ordering and production
      of the Company’s various lines of shelf stable single serve flavored milk
      beverages. To secure the production commitments, as well as the right of first
      refusal for Jasper's additional production capacity going forward, the Company
      paid a one time equipment mobilization payment of $2.7 million to Jasper. The
      agreement incorporates per unit (single bottle) monetary penalties for both
      unused capacity by the Company and any production shortfall by Jasper. During
      the quarter ended March 31, 2007, the Company incurred $2,762,859 in unused
      capacity fees which included an accrual for estimated future penalties. As
      discussed in Note 2, the Company wrote off the remaining value of its intangible
      asset associated with this agreement during the quarter ended March 31,
      2007.








HP
      Hood LLC





On
      September 19, 2006, the Company executed a six-year non-exclusive production
      agreement with HP Hood LLC of Chelsea, Massachusetts, for the production of
      the
      Company’s products through 2012.  Under the terms of the agreement, the
      parties have agreed to annual volume commitments for the ordering and production
      of the Company’s various lines of shelf-stable, single-serve flavored milk
      beverages.  The agreement incorporates per unit monetary penalties for
      unused capacity by the Company .  The agreement also required the Company
      to deposit $1,000,000 in an escrow account as security for potential non-payment
      of production fees to Hood.  To date, the Company has not
      paid the deposit or ordered product from Hood.  While the parties have
      agreed to a delayed production schedule, the Company currently has not utilized
      Hood’s production capacity, resulting in non-use penalties in the amount of
      $693,750 through March 31, 2007.





In
      connection with the agreement, the Company issued a six year warrant to HP
      Hood
      for the purchase of 5,870,000 shares of the Company’s common stock at an
      exercise price of $0.73 per share. The Company has a conditional right to call
      the exercise of the warrant. As discussed in Note 2, the Company wrote off
      the
      remaining value of its intangible asset associated with the warrants issued
      pursuant to this agreement during the quarter ended March 31, 2007.





The
      Company is engaged in discussions with Hood to restructure and expand the scope
      of the production agreement, pursuant to which Hood would not only produce
      but
      distribute, market and sell certain of the Company’s co-branded Masterfoods
      products.  Under this type of arrangement, no deposit would be required,
      and no production shortfall penalties would remain in the contract. There
      can be no assurance that the Company will be able to successfully complete
      its
      negotiations with Hood.





Cagnazzi
      Racing





On
      November 1, 2006, the Company entered into a one year sponsorship agreement
      with
      Cagnazzi Racing for $3,500,000.  That agreement requires the Company to pay
      $300,000 on January 1, 2007 and $1,300,000 on April 1, 2007, plus certain
      expenses.  The Company’s total payments to date under this sponsorship
      agreement amount to $200,000, which was paid in February 2007.  The Company
      has informed Cagnazzi Racing that it does not intend to pay the balance of
      the
      contract fee, and the Company has requested that Cagnazzi immediately commence
      its obligation to mitigate its damages under the sponsorship contact.  The
      Company has been informed that Cagnazzi has removed the Slammers® logo and trade
      dress from its race cars and is seeking a new sponsor. On May 14 2007, Cagnazzi
      Racing commenced a lawsuit in the State courts of North Carolina to recover
      the
      balance owed under this agreement.





F-29
 
 **BRAVO!
            BRANDS INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


William
      Neilson Limited





On
      June
      14, 2006, the Company executed a three-year non-exclusive production agreement
      with William Neilson Limited of Ontario, Canada, for the production of the
      Company’s products, which will commence on the date of the Company’s first
      order. Under the terms of the agreement, the parties have agreed to annual
      volume commitments for the ordering and production of the Company’s various
      lines of shelf-stable, single-serve flavored milk beverages. The agreement
      incorporates per unit monetary penalties for unused capacity by the Company.
      The
      Company incurred no penalties related to annual volume commitments during the
      quarter ended March 31, 2007.





**Note
      12 -** ** **Subsequent
      Events**





On
      April
      1, 2007, the Company became in default under the terms and conditions of the
      senior convertible notes (the “Senior Notes”) issued pursuant to the Securities
      Purchase Agreement, dated July 26, 2006, by and among the Company and certain
      note holders identified therein (the “Securities Purchase Agreement”). The
      default occurred due to the Company’s failure to make the required quarterly
      interest payment of approximately $730,000. The Company is in the process of
      completing the terms and conditions of a Forbearance and Amendment Agreement
      (the “Forbearance Agreement”) with such note holders. In connection with the
      Forbearance Agreement, the Company has agreed to enter into a Pledge and
      Security Agreement (the “Security Agreement”), pursuant to which the Company
      will grant to the note holders a first priority security interest in certain
      of
      its assets and to cause (“Bravo! Brands, UK, Ltd.) (the “Subsidiary Guarantor”)
      to enter into a Subsidiary Guaranty (the “Subsidiary Guaranty”, together with
      the Forbearance Agreement and the Security Agreement, the “Forbearance
      Documents”) guaranteeing the obligations of the Company under the senior
      convertible notes, the Securities Purchase Agreement, the Forbearance Agreement
      and the Security Agreement. The Company and the note holders have preliminarily
      agreed to the following terms under the Forbearance Agreement.





The
      note
      holders have agreed to refrain from exercising any of their rights or remedies
      under the Securities Purchase Agreement, the senior convertible notes and any
      other related transaction documents, that may exist as a result of any existing
      default that occurred under the senior convertible notes as long as (i) there
      is
      no event of default (other than an existing event of default or permitted event
      of default) under one or more of the senior convertible notes, (ii) the Company
      and the subsidiary guarantor comply with the terms on the Forbearance Documents
      and other related transaction documents, (iii) any representations made by
      the
      Company or the Subsidiary Guarantor set forth in the Forbearance Documents
      or
      related transaction documents is not materially false or misleading as of the
      date when made, (iv) the Company uses its reasonable best efforts to repay
      and
      redeem the Senior Notes and (v) there is no occurrence of other certain events
      described in the Forbearance Agreement (items (i) to (vi), each a “Forbearance
      Default”).





Upon
      the
      occurrence of a Forbearance Default, each note holder shall have the right
      to
      collect from the Company and the subsidiary guarantor any payments and
      obligations due to the note holder accrued under the Forbearance Documents
      since
      the effective date of the Forbearance Agreement. The note holders have agreed
      further to forbear from taking any action with respect to any notice of
      redemption submitted to the Company in connection with an event of default,
      except upon an occurrence of a Forbearance Default. As long as a Forbearance
      Default does not occur, the note holders have waived any adjustment to the
      conversion price of the senior convertible notes and the exercise price of
      the
      warrants issued to each note holder pursuant to the Securities Purchase
      Agreement with respect to any issuance of any common stock, preferred stock,
      other equity security or subordinated debt of the Company which generates gross
      proceeds of five (5) million dollars or less. As a result of the Company being
      in default under the Senior Notes, the interest rate on the notes shall be
      increased to fourteen percent (14.0%), and in the event that such default is
      cured, the increase in interest rate shall cease to be effective as of such
      date; provided that the interest as calculated and unpaid at the increased
      rate
      during the period the Company was in default shall continue to apply to the
      extent relating to the days after the Company went into default through and
      including the date such default is cured. As an inducement to each note holder
      to enter into the Forbearance Agreement, the Company has agreed to use its
      best
      efforts to explore strategic alternatives to obtaining funds sufficient to
      effect each note holder’s notes payoff amount.





F-30
 
 **BRAVO!
            BRANDS INC. AND SUBSIDIARY**
 **NOTES
            TO CONSOLIDATED FINANCIAL STATEMENTS**
 **(UNAUDITED)**


As
      discussed in Note 1, the Company has continued to incur operating losses and
      negative cash flows. Management is undertaking major cost containment measures
      to improve financial performance. On April 27, 2007, the Company terminated
      34
      of its 62 employees, including the Chief Marketing Officer. On April 30, 2007,
      the Company’s Board of Directors voted to terminate the employment of Roy
      Warren, Chief Executive Officer of the Company since May 1999. Mr. Warren
      remains as a director of the Company. The Company’s Chief Revenue Officer was
      also terminated, effective May 1, 2007. Finally, 6 employees were terminated
      on
      May 4, 2007. As a result of these actions, the Company’s headcount has decreased
      from 62 to 20 employees, and monthly payroll expense has been reduced by more
      than 50%. Also, 9,133,332 of nonvested stock options previously granted to
      the
      terminated employees were cancelled.





During
      April, 2007, $5,400,000 of principal from the July 2006 Financing was converted
      at an exercise price of $0.32 per common share.




On
      May 1,
      2007, the Company closed a funding transaction with six accredited institutional
      investors, for the issuance and sale of 18.5 million shares of the Company’s
      common stock to the Subscribers for $743,193. The Company also issued five
      year
      warrants for the purchase of an additional 9.25 million shares of common stock
      at an exercise price of $0.04 per share. The securities are restricted and
      have
      been issued pursuant to an exemption to the registration requirements of Section
      5 of the Securities Act of 1933 for “transactions of the issuer not involving
      any public offering” provided in Section 4(2) of the Act and pursuant to a
      Regulation D offering.”





F-31




**ITEM
      2.**  **MANAGEMENT’S
      DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**





**FORWARD-LOOKING
      STATEMENTS**





Statements
      that are not historical facts, including statements about our prospects and
      strategies and our expectations about growth contained in this report, are
      "forward-looking statements" within the meaning of Section 27A of the Securities
      Act of 1933, as amended, and Section 21E of the Securities Exchange Act of
      1934,
      as amended. These forward-looking statements represent the present expectations
      or beliefs concerning future events. We caution that such forward-looking
      statements involve known and unknown risks, uncertainties and other factors
      which may cause our actual results, performance or achievements to be materially
      different from any future results, performance or achievements expressed or
      implied by such forward-looking statements. Such factors include, among other
      things, the uncertainty as to our future profitability; the accuracy of our
      performance projections; and our ability to obtain financing on acceptable
      terms
      to finance our operations until we are profitable.





**OVERVIEW**





We
      develop, market, distribute and sell nutritious single serve flavored aseptic
      milk products throughout the United States using our Company owned Slammers® and
      Bravo!TM trademarked brands. Our aseptic (shelf stable) innovation offers several
      competitive advantages, including eliminating the need for refrigerated
      warehousing and trucking and offering real milk products with shelf lives of
      up
      to eight months. In order to create brand recognition, we have adopted a
      co-branding strategy and negotiated strategic license agreements with
      Masterfoods (Milky Way®, Starburst®, 3 Musketeers®, Dove®) General Mills (TrixTM,
      Cocoa PuffsTM) and Organic Valley® (organic milk). Our broad product offering
      targets several specific demographic groups and lifestyles. For instance, we
      have milk available for candy lovers of any age through our Milky Way®, 3
      Musketeers®, Dove®, and Starburst® flavored products. Our Slim-Slammers®, Bravo!
      BlendersTM and Organic Valley® milk products target health conscious adults, and
      our Cocoa Puffs® and Trix® flavored milk products focus on kids from ages 6 to
      12. Our products have been primarily distributed through Coca Cola Enterprises
      Inc. (“CCE”). In the future, we plan to increase our revenues by securing
      additional distribution channels and entering into new categories including
      sports, energy and coffee milk based beverages.




**RECENT
      DEVELOPMENTS**





Disappointing
      financial performance has had an adverse impact on our operation and on plans
      and programs discussed in the 10-KSB for the year ended December 31, 2006.
      With
      the direction of our Board of Directors, we have developed a remedial plan
      to
      address the most critical needs of the Company. These plans address our failure
      to meet top line revenue expectations, high costs of running and financing
      the
      Company and relationships with all of our stakeholders.





First,
      top line revenues. Our distribution plans with CCE did not meet the expectations
      of either Bravo or CCE, and we are actively seeking new avenues of distribution.
      While we still are working with CCE, the anticipated growth will not be
      forthcoming. To help remedy this deficiency, we have entered into an interim
      distribution agreement with Snapple Distributors and, effective May 2007, we
      have commenced shipments to Snapple Distributors in the metropolitan New York
      area. In addition to Snapple, our plan is to expand distribution regionally,
      branching out from the NY area into New England and down the East Coast. In
      that
      regard, we are talking to other distributors that could give us national
      distribution for some of our products. Similarly, our marketing program has
      been
      revamped to eliminate long term costly programs, such as our racing
      sponsorships, in favor of a more limited and focused approach on a region by
      region basis that will be tied to specific promotional activities. Our strategy
      has changed from utilizing a broad based marketing scheme for the creation
      of
      sales, to utilizing highly focused marketing to support sales, and only when
      it
      is cost effective.





32


Second,
      the cost of running the Company. During April 2007, we made deep cuts in our
      personnel including the terminations of Mike Edwards, our former Chief Revenue
      Officer and Stan Harris our former Chief Marketing Officer, and we reduced
      our
      employee headcount from 62 to 21, resulting in an approximate 55% reduction
      in
      payroll expense. In addition, as reported in an 8-K filing, on April 30, 2007,
      the Board of Directors terminated the employment of Roy Warren as the Company’s
      President and Chief Executive Officer. Furthermore, we are in the process of
      reviewing all expenditures, including reduced selling expenses through the
      more
      efficient utilization of transportation for delivery of our products, and,
      as
      noted above, we have made significant cuts in marketing plans. Finally, we
      are
      initiating tighter expenditure controls with a clear focus on making immediate
      adjustments to anticipated spending, dependent upon revenue and margin trends.
      As we have announced in the past, Cowen and Company has been engaged to explore
      strategic alternatives, and this process continues. We believe that the actions
      taken to reduce our overhead will make the Company more attractive to a
      potential strategic partner.





Third,
      the cost of our financial structure. We have the support of many of our largest
      shareholders as well as our note holders. We are working to negotiate a 120
      day
      forbearance agreement with our July convertible debt holders. If agreed to
      with
      our note holders, this agreement will give us relief from paying interest and
      principal due on the notes during this forbearance period. It also allows us
      the
      time we need to restructure our capitalization and to seek strategic partners.
      In addition, some of our largest shareholders have funded our operations with
      an
      aggregate total of approximately $1.2 million as we seek to recapitalize our
      balance sheet. These same investors are now doing due diligence with the goal
      of
      providing additional funds should their review convince them that Bravo has
      a
      sustainable business model and path toward future profitability. While there
      can
      be no assurances of this future funding, we have been encouraged by our
      investors continued interest in pursuing this opportunity. Furthermore, our
      cash
      burn has been reduced by approximately 66%, and we are working diligently to
      reduce our spending in all areas.





Fourth,
      our relationships. We are making a concerted effort to continue or, where
      necessary, to re-establish normal, credible relationships with our suppliers,
      distributors and processors. To date, we have reached out and talked or met
      with
      our licensors and processors. In certain instances, we have commenced
      negotiations with such parties to restructure our agreements to effect a more
      economically appropriate relationship. Our experience with these parties to
      date
      has been supportive. We have had similar responses from a number of our largest
      shareholders.





In
      summary, we are involved with addressing our critical challenges and are
      addressing each on a proactive basis. We are dedicated to working through these
      issues as diligently as possible to make Bravo a viable company. We have the
      support of large shareholders and many of our strategic partners. Our employees
      are wearing many hats and are committed to working to bring the Company out
      of
      the difficult times we are facing.





**CRITICAL
      ACCOUNTING POLICIES**





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. The most critical estimates included in our
      financial statements are the following:





33


-
            Estimating
                the fair value of our complex derivative financial instruments that
                are
                required to be carried as liabilities at fair value pursuant to Statements
                on Financial Accounting Standards No. 133*Accounting
                for Derivative Financial Instruments and Hedging Activities (FAS
                133)*


-
            Estimating
                the future recoverability of our long-lived assets, consisting of
                property
                and equipment and intangible assets, pursuant to Statements on Financial
                Accounting Standards No. 144*Accounting
                for the Impairment or Disposal of Long-lived Assets (FAS
                144)*


-
            Estimating
                the Company’s reserve for unsalable and obsolete inventories that are
                carried at lower of cost or market.





We
      use
      all available information and appropriate techniques to develop our estimates.
      However, actual results could differ from our estimates.





***Derivative
      Financial Instruments***





We
      do not
      use derivative financial instruments to hedge exposures to cash-flow, market
      or
      foreign-currency risks. However, we frequently enter into certain other
      financial instruments and contracts, such as debt financing arrangements,
      redeemable preferred stock arrangements and freestanding warrants with features
      that are either (i) not afforded equity classification, (ii) embody risks not
      clearly and closely related to host contracts or (iii) may be net-cash settled
      by the counterparty to a financing transaction. As required by FAS 133, these
      instruments are required to be carried as derivative liabilities, at fair value,
      in our financial statements.





We
      estimate fair values of derivative financial instruments using various
      techniques (and combinations thereof) that are considered to be consistent
      with
      the objective measuring of fair
      values. In selecting the appropriate technique(s), we consider, among other
      factors, the nature of the instrument, the market risks that such instruments
      embody and the expected means of settlement. For less complex derivative
      instruments, such as free-standing warrants, we generally use the Black Scholes
      Merton option valuation technique, since it embodies all of the requisite
      assumptions (including trading volatility, estimated terms and risk free rates)
      necessary to fair value these instruments. For complex derivative instruments,
      such as embedded conversion options, we generally use the Flexible Monte Carlo
      valuation technique since it embodies all of the requisite assumptions
      (including credit risk, interest-rate risk and exercise/conversion behaviors)
      that are necessary to fair value these more complex instruments. For forward
      contracts that contingently require net-cash settlement as the principal means
      of settlement, we project and discount future cash flows applying
      probability-weightage to multiple possible outcomes. Estimating fair values
      of
      derivative financial instruments requires the development of significant and
      subjective estimates that may, and are likely to, change over the duration
      of
      the instrument with related changes in internal and external market factors.
      In
      addition, option-based techniques are highly volatile and sensitive to changes
      in our trading market price which has high-historical volatility. Since
      derivative financial instruments are initially and subsequently carried at
      fair
      values, our income will reflect the volatility in these estimate and assumption
      changes.





During
      December 2006, the Financial Accounting Standards Board issued FASB Staff
      Position (FSP) EITF 00-19-2, Accounting
      for Registration Payment Arrangements ,
      which
      amended Financial Accounting Standard No. 133 Accounting
      for Derivative Financial Instruments and Hedging Activities .
      Generally, the amendment provides for the exclusion of registration payments,
      such as the liquidated damages that the Company has incurred, from the
      consideration of classification of financial instruments, previously required
      under FAS133 and EITF 00-19. Rather, registration payments are to be accounted
      for pursuant to Financial Accounting Standard No. 5 Accounting
      for Contingencies ,
      which
      provides for the recognition of registration payments when they are both
      probable and reasonably estimable. The FSP was adopted by the Company on January
      1, 2007, as was required by the new accounting pronouncement. However, the
      Company had previously applied the view (provided in EITF 05-04) that
      registration payments required recognition pursuant to FAS 5. See Note 4,
      Accrued Liabilities for information about the recognition and amounts of
      registration payments.





34


***Impairment
      of Long-Lived Assets***





Our
      long-lived assets consist principally of intangible assets, and to a much lesser
      extent, furniture and equipment. We evaluate the carrying value and
      recoverability of our long-lived assets when circumstances warrant such
      evaluation by applying the provisions of Financial Accounting Standard No.
      144, Accounting
      for the Impairment or Disposal of Long-Lived Assets (“FAS
      144”). FAS 144 requires that long-lived assets be reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      an asset may not be recoverable through the estimated undiscounted cash flows
      expected to result from the use and eventual disposition of the assets. Whenever
      any such impairment exists, an impairment loss will be recognized for the amount
      by which the carrying value exceeds the fair value.




***Reserve
        for Inventory Obsolescence***
 
 Since
        our
        inventories are perishable, we estimate and record unsaleable inventory based
        on
        a combination of historical experience and specific identification.


**RESULTS
      OF OPERATIONS**





**Three
      Months Ended March 31, 2007 Compared to the Three Months Ended March 31,
      2006**





**Consolidated
      Revenues**





**2007**
            
            **2006**
            
            **$
                Change**
            
            **%
                Change****Revenues**
            
            $
            3,152,892
            
            $
            3,561,215
            
            $
            (408,323
            )
            
            (11.5
            )%





The
      decrease in our revenues resulted from a combination of the change in the CCE
      product mix and liquidation sales. Increased distribution in schools of our
      new
      eight-ounce shelf stable products shifted the CCE product mix to a lower selling
      price, resulting in decreased revenues for the quarter ending March 31,
      2007.  In addition products surpassing CCE’s required shelf life were sold
      through liquidators at prices below cost. Despite the decrease in sales revenue,
      cases sold to CCE during the quarter ended March 31, 2007 at 290,537 reflected
      a
      slight increase over the quarter ended March 31, 2006 at 290,130.





Revenues
      are net of industry-standard slotting fees and cash discounts of $66,197 and
      $279,973 for the quarters ended March 31, 2007 and March 31, 2006, respectively.
      Slotting fees, which totaled $42,320 and $269,182 for the quarters ended March
      31, 2007 and March 31, 2006, are common in the large store channel and represent
      cash payments made for rights to place our products on customer retail shelves
      for a stipulated period of time.





Geographically,
      our current revenues are 100% within the United States of America.





Our
      sales
      strategy and growth plan has evolved since the issuance of our 10-KSB for the
      year ended December 31, 2006. Under our current strategy, we are aiming to
      increase revenue by pursuing additional national and regional distributors,
      rather than relying primarily on CCE for product sales. We also plan to expand
      our product lines into new sectors of the beverage industry. The new strategy
      requires a much smaller sales force, and we have reduced our headcount
      accordingly.





**Consolidated**  **Product
      Costs and Gross Margin**





**2007**
            
            **%
                of Revenues**
            
            **2006**
            
            **%
                of Revenues**
            
            **$
                Change**
            
            **%
                Change****Product
                costs**
            
            $
            3,184,947
            
            
            101.0
            %
            $
            2,946,460
            
            
            82.7
            %
            $
            238,487
            
            
            8.1
            %**Shipping
                costs**
            
            
            277,201
            
            
            8.8
            %
            
            393,452
            
            
            11.0
            %
            
            (116,251
            )
            
            (29.5
            )%**Total**
            
            $
            3,462,148
            
            
            109.8
            %
            $
            3,339,912
            
            
            93.8
            %
            $
            122,236
            
            
            3.7
            %**Gross
                Margin**
            
            
            (309,256
            )
            
            
            
            
            221,303
            
            
            
            
            
            (530,559
            )
            
            (239.7
            )%**Margin
                %**
            
            
            (9.8
            )%
            
            
            
            
            6.2
            %





35


Gross
      margin has deteriorated from 6.2% in the quarter ended March 31, 2006 to (9.8)%
      in the quarter ended March 31, 2007 primarily for two reasons. First, we sold
      certain products with remaining shelf life of less than what is allowed under
      the CCE agreement to liquidators at a margin loss aggregating $315,000. Second,
      we recorded inventory obsolescence expense of $256,514 in the quarter ended
      March 31, 2007 compared to $0 in the quarter ended March 31, 2006. The 2007
      expense represents an increase in the obsolescence reserve due to an analysis
      of
      the aging of our inventory existing at March 31, 2007. We
      expect
      liquidation sales and obsolescence expense to be significantly reduced in the
      future. Controls have been implemented to monitor production levels based on
      customer orders. Previous forecasts were developed based on anticipated CCE
      demand, which turned out to be unreliable.





Our
      shipping cost decreased 2.3% as a percentage of revenues. With the initial
      CCE
      pipeline fill lasting through the quarter ended March 31, 2006, we shipped
      several less than full truck loads to CCE sales centers in order to have the
      product available throughout the CCE network. The majority of the cases shipped
      during the quarter ended March 31, 2007 were full truck loads, therefore driving
      down average shipping costs as a percentage of revenue.





**Consolidated** **Operating
      Expenses**





**2007**
            
            **%
                of Revenues**
            
            **2006**
            
            **%
                of Revenues**
            
            **$
                Change**
            
            **%
                Change****Marketing
                and Advertising**
            
            $
            1,512,919
            
            
            48.0
            %
            $
            949,964
            
            
            26.7
            %
            $
            562,955
            
            
            59.3
            %**Selling**
            
            
            2,253,299
            
            
            71.5
            %
            
            1,893,134
            
            
            53.2
            %
            
            360,165
            
            
            19.0
            %**General
                and administrative**
            
            
            5,601,705
            
            
            177.7
            %
            
            1,765,846
            
            
            49.6
            %
            
            3,835,859
            
            
            217.2
            %**Impairment
                loss**
            
            
            17,662,006
            
            
            560.2
            %
            
            --
            
            
            0.0
            %
            
            17,662,006
            
            
            100.0
            %**Product
                development**
            
            
            84,928
            
            
            2.7
            %
            
            115,963
            
            
            3.3
            %
            
            (31,035
            )
            
            (26.8
            )%**Total**
            
            $
            27,114,857
            
            
            860.0
            %
            $
            4,724,907
            
            
            132.7
            %
            $
            22,389,950
            
            
            473.9
            %





Marketing
      Expense and Advertising:





Our
      marketing expenses and advertising increased primarily due to our sponsorship
      of
      National Hot Rod Association (“NHRA”) pro stock race cars.  We incurred
      approximately $885,000 in expenses surrounding our NHRA advertising during
      the
      first quarter of 2007, compared to $379,300 in the quarter ended March 31,
      2006.  As mentioned previously, we are looking to mitigate our exposure
      under the NHRA sponsorship contract.  This action, together with the
      restructuring plan that we completed in May 2007 and strict cost containment
      measures, is expected to significantly decrease quarterly marketing expenses
      going forward.





Selling
      Expense:





Our
      selling expenses in the quarter ended March 31, 2007 increased primarily due
      to
      the hiring of additional sales personnel.  During April 2007, due to our
      inability to come to an acceptable working relationship with CCE, we have made
      the difficult decision to materially pare back the sales team that was set
      up to
      work with CCE. Going forward, we will be working with independent distributors
      throughout the US, as well as by selling directly to supermarket, drug and
      mass
      merchandiser chains. This is already underway in the Northeast with the Snapple
      Distributors Inc., a unit of Cadbury Schweppes Americas Beverages.  Since
      our new sales structure is much less costly, selling expenses are expected
      to
      decline materially through the remainder of 2007.





36


General
      and Administrative Expense:





The
      increase in general and administrative during the three months ended March
      31,
      2007 is due primarily to unused capacity penalties of approximately $3.5 million
      incurred as a result of our manufacturing agreements with Jasper Products and
      Hood. These expenditures were a necessary byproduct of our strategic plan for
      securing additional capacity given the limited FDA approved shelf-stable plant
      arena in the United States. This capacity was secured at a time when we
      anticipated a major ramp up in revenues. This increase in revenues has not
      taken
      place.




As
      a
      percentage of total revenue, our general and administrative expense increased
      from 50% during the three months ended March 31, 2006 to 178% during
      the three months ended March 31, 2007. We expect that the expense as a
      percentage of revenue will be reduced due to revenue growth, cost cutting
      efforts and the refinement of business operations. Although we are working
      with
      our processing partners to restructure the manufacturing agreements in order
      to
      eliminate the production penalties, there can be no assurance that we will
      be
      successful in our negotiations.




Impairment
      Loss:




Recent
      discussions with CCE have indicated that we
      will
      not receive the sales previously expected, including rollout of the brands
      into
      new channels of distribution and access to key marketing and rebate
      programs.  Furthermore, we have experienced a significant decline in sales
      from CCE during April and May, 2007, and overall quarter one revenues were
      much
      lower than originally budgeted. Management’s updated forecasted revenues from
      CCE, its primary customer, for 2007 and for future years have been revised
      downward significantly. Therefore, we expect production penalties associated
      with the manufacturing agreements to continue.





Our
      updated analysis of cash flows to be generated from the CCE MDA, Jasper and
      Hood
      agreements indicate negative net discounted cash flows. Accordingly, a
      non -cash
      impairment charge of $17,662,006 has been recognized during the quarter ended
      March 31, 2007 to write off the carrying value of these assets.





We
      are searching for a new strategic partner that will invest in and potentially
      distribute our products nationally.  Based on these developments, we have
      commenced preliminary discussions with CCE to revise substantially the
      exclusivity and other terms of the existing MDA. We also hope to restructure
      our
      manufacturing agreements with Jasper and Hood. There can be no certainty that
      we
      will be able to successfully complete our negotiations with CCE or restructure
      our agreements with Jasper and Hood.




Product
      Development Expense:





Product
      development expense in both 2007 and 2006 relates to costs associated with
      package development. There was a slight decrease in expense in 2007 compared
      to
      2006 due to a more efficient utilization of our resources. Our focus continues
      to be the development of innovative new products while expanding our current
      product base.





**Consolidated
      Other Income (Expense)**





**2007**
            
            **%
                of Revenues**
            
            **2006**
            
            **%
                of Revenues**
            
            **$
                Change**
            
            **%
                Change****Derivative
                income (expense)**
            
            $
            372,774
            
            
            11.8
            %
            $
            4,949,188
            
            
            139.0
            %
            $
            (4,576,414
            )
            
            (92.5
            )%**Interest
                expense**
            
            
            (2,342,411
            )
            
            74.3
            %
            
            (36,364
            )
            
            1.0
            %
            
            (2,306,047
            )
            
            6,341.6
            %**Liquidated
                damages**
            
            
            --
            
            
            0.0
            %
            
            (685,887
            )
            
            19.3
            %
            
            685,887
            
            
            (100.0
            )%**Total**
            
            $
            (1,969,637
            )
            
            62.5
            %
            $
            4,226,937
            
            
            118.7
            %
            $
            (6,196,574
            )
            
            (146.6
            )%





37


Derivative
      Income/Expense





Derivative
      (income) expense arises from changes in the fair value of our derivative
      financial instruments and, in rare instances, day-one losses when the fair
      value
      of embedded and freestanding derivative financial instruments issued or included
      in financing transactions exceed the proceeds or other basis. Derivative
      financial instruments include freestanding warrants and compound embedded
      derivative features that have been bifurcated from debt and preferred stock
      financings. In addition, derivative financial instruments arose from the
      reclassification of other non-financing derivative and other contracts from
      stockholders’ equity because share settlement was presumed not to be within our
      control while certain variable share price indexed financing instruments were
      outstanding. We continue to review our derivative liabilities and the terms
      and
      conditions that give rise to their liability classification.





Changes
      in the fair value of compound derivatives indexed to our common stock are
      significantly affected by changes in our trading stock price and the credit
      risk
      associated with our financial instruments. The fair value of warrant derivatives
      is significantly affected by changes in our trading stock prices. The fair
      value
      of derivative financial instruments that are settled solely with cash fluctuate
      with changes in management’s weighted probability estimates following the
      financing inception and are generally attributable to the increasing probability
      of default events on debt and preferred stock financings. Since these
      instruments are measured at fair value, future changes in assumptions, arising
      from both internal factors and general market conditions, may cause further
      variation in the fair value of these instruments. Future changes in these
      underlying internal and external market conditions will have a continuing effect
      on derivative expense associated with our derivative financial
      instruments.




Our
          derivative income amounted to $372,774 for the quarter ended March 31,
          2007,
          compared to derivative income of $4,949,188 for the quarter ended March
          31,
          2006. Derivative income for the quarters ended March 31, 2007 and 2006
          are
          primarily due to the decline in our common stock price during both
          quarters.





During
      December 2006, the Financial Accounting Standards Board issued FASB Staff
      Position (FSP) EITF 00-19-2, Accounting
      for Registration Payment Arrangements ,
      which
      amended Financial Accounting Standard No. 133 Accounting
      for Derivative Financial Instruments and Hedging Activities .
      Generally, the amendment provides for the exclusion of registration payments,
      such as the liquidated damages that the Company has incurred, from the
      consideration of classification of financial instruments, previously required
      under FAS133 and EITF 00-19. Rather, registration payments are to be accounted
      for pursuant to Financial Accounting Standard No. 5 Accounting
      for Contingencies ,
      which
      provides for the recognition of registration payments when they are both
      probably and reasonably estimable. The FSP was adopted by the Company on January
      1, 2007, as was required by the new accounting pronouncement. However, the
      Company had previously applied the view (provided in EITF 05-04) that
      registration payments required recognition pursuant to FAS 5. See Note 4,
      Accrued Liabilities for information about the recognition and amounts of
      registration payments.





38


Adoption
      of the FSP involved management’s reevaluation of the conditions for equity or
      liability classification of existing derivative financial instruments pursuant
      to the revised criteria of EITF 00-19. As a result of the reevaluation,
      management concluded that the embedded conversion feature and warrants,
      associated with the July 2006 $30,000,000 Convertible Note Financing, and
      previously classified as liabilities, should be afforded equity classification.
      Under the previous standard, management determined that the unlimited nature
      of
      contractual registration payments for non-registration and non-effectiveness
      rose to an uneconomic settlement alternative and the subject share-indexed
      securities required liability classification. Under the FSP, the registration
      payment provisions are not considered for purposes of classification. Rather,
      commencing January 1, 2007, those payments are accounted for under the
      provisions of FAS 5. As a result, the embedded conversion feature and warrants
      met the eight conditions for equity classification provided in EITF 00-19.
      Adoption of this new standard resulted in the reclassification of $6,516,000
      to
      additional paid in capital accompanied by a credit to retained earnings of
      $9,181,251 which represents the cumulative effect of this change in accounting
      principle.




Interest
      Expense





The
      increase in interest expense for the three months ended March 31, 2007 compared
      to the three months ended March 31, 2006 was due to an increase in our debt
      balance. Subsequent to March 2006, we issued in excess of $32 million in new
      debt financings. We also allocated proceeds from these financings to warrants
      and other features that required bifurcation from hybrid, convertible debt
      instruments. As a result, our debt is recorded at a discount, and we are
      required to amortize this discount through periodic charges to interest expense
      using the effective method. During the three months ended March 31, 2007 and
      2006, amortization of debt discounts amounted to approximately $1,363,825 and
      $11,077, respectively. Applying the effective method results in an increasing
      interest (or amortization) over the term of the debt. We also amortized deferred
      financing fees associated with the July 2006, February 2007, and March 2007
      debt
      financings. During the three months ended March 31, 2007 and 2006, amortization
      of deferred financing fees amounted to approximately $65,063 and $2,357,
      respectively.





Liquidated
      Damages





During
      the three months ended March 31, 2006, we recorded liquidated damages expense
      of
      $685,887 compared to $0 during the three months ended March 31, 2007. We have
      entered into registration rights agreements with certain investors that require
      us to file a registration statement covering underlying indexed shares, become
      effective on the registration statement, maintain effectiveness and, in some
      instances, maintain the listing of the underlying shares. Certain of these
      registration rights agreements require our payment of cash penalties to the
      investors in the event we do not achieve the requirements. We record our best
      estimate of liquidated damages penalties as liabilities and charges to our
      income when the cash penalties are probable and estimable. We will evaluate
      our
      estimate of liquidated damages in future periods and adjust our estimates for
      changes, if any, in the facts and circumstances underlying their calculation.




**Consolidated
      Net Loss**





We
      reported a net loss for the period ended March 31, 2007 of $29,393,750 compared
      with a net loss of $276,667 for the same period in 2006. There were several
      factors that led to the magnitude of our loss for the period ended March 31,
      2007. First, we recorded an impairment loss of $17,662,006 related to the
      write-off of the CCE, Hood and Jasper intangible assets. Second, we
      incurred approximately $3.5 million in unused capacity penalties. Third, we
      realized a margin loss of $315,000 due to liquidation sales of short code dated
      products.





39


**Consolidated
      Loss Applicable to Common Shareholders**





We
      reported a loss applicable to common shareholders for the quarter ended March
      31, 2007 of $29,720,698 compared with $535,450 for the quarter ended March
      31,
      2006. Loss applicable to common shareholders represents net loss as adjusted
      for
      preferred stock dividends and accretion of our redeemable preferred stock and
      our equity classified preferred stock to redemption values using the effective
      method. Many of our preferred stock series have cumulative dividend features,
      and we will continue to reflect preferred stock dividends in our loss applicable
      to common shareholders until the preferred stock is converted, if ever. In
      addition, many of our redeemable preferred stock series were initially
      discounted due to the allocation of financing proceeds to detachable warrants
      and embedded derivative financial instruments. We use the effective method
      to
      amortize these discounts. The use of the effective method involves the accretion
      of our discounted redeemable preferred stock to redemption values. Accretion
      is
      the change of present value of a financing instrument to its appropriate future
      value over the anticipated life of the instrument. This method causes accretion
      to increase over the redemption period of these instruments as the carrying
      values increase. Accordingly, accretions will increase in future periods until
      the preferred stock is fully accreted to redemption values or converted.





**Consolidated
      Loss per Common Share Applicable to Common Stockholders**





The
      Company’s basic loss per common share applicable to common stockholders for the
      quarter ended March 31, 2007 was $(0.15) compared with a basic loss per common
      share applicable to common stockholders for the quarter ended March 31, 2006
      of
      $(0.00). Because the Company experienced net losses during the quarter ended
      March 31, 2007 and 2006, all potential common share conversions existing in
      our
      financial instruments would have an antidilutive impact on earnings per share;
      therefore, diluted loss per common share equals basic loss per common share
      for
      both years.





The
      weighted average common shares outstanding increased from 184,253,753 for the
      quarter ended March 31, 2006 to 203,509,389 for the quarter ended March 31,
      2007. The increase is attributed primarily to conversions of our convertible
      debt and preferred instruments into common shares. Potential common stock
      conversions excluded from the computation of diluted earnings per share amounted
      to 271,474,228 and 81,913,744 for
      2007 and 2006, respectively.





**Comprehensive
      Loss**




Comprehensive
      loss differs from net loss for 2007 and 2006 by $(279) and $(690), respectively,
      which represents the effects of foreign currency translation on the financial
      statements of our subsidiaries denominated in foreign currencies. Our foreign
      operations are currently not significant. Increases in our foreign operations
      will likely increase the effects of foreign currency translation adjustments
      on
      our financial statements.





**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      have
      yet to achieve profitability, and our ability to continue as a going concern
      will be dependent upon receiving additional third party financings to fund
      our
      business at least through the first three quarters of 2007. Furthermore,
      on April 1, 2007 we became in default of certain provisions of our Senior Notes
      issued in July 2006 due to failing to make the required quarterly interest
      payment of approximately $730,000. The defaults entitle the holders to certain
      penalties including the acceleration of the notes at a premium. Ultimately,
      our ability to continue is dependent upon the achievement of profitable
      operations. There is
      no assurance that further fun ding
      will
      be available at acceptable terms, if at all, or that we will be able to achieve
      profitability. These conditions raise substantial doubt about our ability to
      continue as a going concern. The
      accompanying financial statements do not reflect any adjustments that may result
      from the outcome of this uncertainty.





40


Our
      current and future monthly cash needs have decreased materially from what we
      communicated in our 10-KSB for the year ended December 31, 2006. This is largely
      due to a major employee restructuring plan and to cost containment measures.
      During April and May 2007, we terminated 42 of our 62 employees, including
      Roy
      Warren, who had held the position of Chief Executive Officer since May 1999.
      As
      a result, our monthly payroll expense has been reduced by in excess of 50%.
      While cuts have been made across the board to sales personnel, executive and
      administrative positions, key personnel have been retained to enable us to
      move
      forward in implementing possible new distribution and production
      agreements.





A
      moratorium on discretionary spending including travel restrictions and close
      Board oversight of all spending is expected to significantly reduce expenditures
      throughout all departments. We do, however, have outstanding accounts payable
      of
      approximately $12.1 million at March 31, 2007 and significant financial
      commitments that will impact our future cash flows.





Material
      Covenants of Debt Obligations





On
      April
      1, 2007, we became in default of certain provisions of our Senior Notes issued
      in July 2006, as amended in December 2006, due to our failure to make the
      required quarterly interest payment of approximately $730,000. The defaults
      entitle the holders of our Senior Notes to certain penalties including the
      acceleration of the Notes at a premium.





On
      February 14, 2007, the Securities and Exchange Commission declared effective
      a
      Form SB-2 registration statement covering 60.55% of the securities in a July
      2006 transaction, as amended, pursuant
      to which we issued and sold $30 million senior convertible notes that are due
      in
      2010 and warrants that expire in July 2011. The
      senior notes are convertible into 105,468,750 shares of our common stock, and
      the warrants can be exercised to purchase an additional 27,605,040 shares of
      our
      common stock. Of the securities underlying the notes and warrants, the February
      14, 2007 registration statement was limited to and registered 60.55% of the
      securities in the July 2006 transaction, as amended, consisting of 74.2% of
      the
      common stock issuable upon a conversion of the notes and 8.6% of the common
      stock issuable upon the exercise of the warrants. We anticipate filing an
      additional registration statement to cover the underlying shares of our common
      stock not covered by the February 14, 2007 effective statement, as soon as
      we
      have the legal ability to do so.





External
      Sources of Liquidity:





On
      February 12, 2007, we obtained financing in the amount of $2,000,000 and issued
      promissory notes aggregating that principal amount to three accredited
      investors. The notes provide for rights of participation in a subsequent
      financing by us. We also issued five year warrants for 2,000,000 shares of
      our
      common stock at an exercise price of $0.34 per share in connection with this
      financing. The warrants and underlying common stock were issued pursuant to
      Regulation D. The notes, plus accrued interest at an annual rate of 12%, have
      a
      due date of June 9, 2007.





On
      March
      15, 2007, we issued promissory notes to three accredited investors aggregating
      $625,000, and obtained financing from them in that principal amount.  The
      notes provide for interest at 12% per annum, a maturity date of July 12, 2007,
      rights of participation in a subsequent financing by us and the ability of
      the
      investors to convert the notes to common stock at $0.34 per share upon an event
      of default.  We also issued five year warrants for the purchase of 625,000
      shares of our common stock at an exercise price of $0.34 per share in connection
      with this financing.  The warrants and underlying common stock were issued
      pursuant to an exemption to Section 5 of the Securities Act of 1933. The
      notes, plus accrued interest at an annual rate of 12%, have a due date of June
      9, 2007.





41


On
      May 1,
      2007, we
      closed a funding transaction with six
      accredited institutional investors, for the
      issuance and sale of 18.5 million shares of our common stock to the Subscribers
      for $740,000. We also issued five year warrants for the purchase of an
      additional 9.25 million shares of common stock at an exercise price of $0.04
      per
      share.





It
      will
      be necessary for the Company to complete additional financings in the near
      term
      in order to continue its operations. Although the Company has begun to explore
      possible financing alternatives, there can be no assurance that the Company
      will
      be able to obtain any financing or that any such financings will be on
      acceptable terms.





**Information
      about our cash flows**





**Cash
                provided by (used in):**
            
            **Quarter
                Ended**
              **March
                31, 2007**
            
            **Quarter
                Ended**
              **March
                31, 2006**
            
            **$
                Change**
            
            **%
                Change****Operating
                activities**
            
            $
            (5,782,664
            )
            $
            (4,210,671
            )
            $
            (1,571,993
            )
            
            (37.3
            )%**Investing
                activities**
            
            
            (97,319
            )
            
            (413,446
            )
            
            316,127
            
            
            76.5
            %**Financing
                activities**
            
            
            2,299,033
            
            
            286,606
            
            
            2,012,427
            
            
            702.2
            %





The
      net
      increase in cash used in operating activities is due to a number of factors.
      Our
      net loss increased from $276,667 for the quarter ended March 31, 2006 to
      $29,393,750 for the quarter ended March 31, 2007. However, our net loss for
      the
      quarter ended March 31, 2006 included a non-cash derivative gain of $4,949,188,
      while our net loss for the quarter ended March 31, 2007 included a non-cash
      derivative gain of $372,774. Also, our net loss for the quarter ended March
      31,
      2007 included a non-cash impairment charge related to the asset capitalized
      with
      our distribution agreement with CCE, and our manufacturing agreements with
      Hood
      and Jasper of $17,662,006. Amortization of our debt discount amounted to
      $1,363,825 during the quarter ended March 31, 2007 compared to $11,076 for
      the
      quarter ended March 31, 2006. The increase is due to the issuance of $30 million
      convertible notes in July 2006. Changes in accounts receivable contributed
      to a
      decrease in cash used by operating activities of $109,973 for the quarter ended
      March 31, 2007, as compared to $1,596,042 for the same period in 2006. Cash
      used
      by operating activities decreased as a result of changes in inventory during
      the
      quarter ended March 31, 2007 by $688,578, as compared to contributing to an
      increase of $2,652,769 for the same period in 2006. This was the result of
      our
      building inventory during 2006 in connection with the continued implementation
      of our MDA with CCE. The changes in accounts payable and accrued liabilities
      for
      the quarter ended March 31, 2007 contributed to a reduction in cash used by
      operating activities of $2,620,832 as compared to $1,668,557 for the same period
      in 2006. Cash flows generated by our operating activities were inadequate to
      cover our cash disbursement needs for the quarter ended March 31, 2007, and
      we
      had to rely on private placement financing and new debt financing to cover
      operating expenses.





Cash
      used
      in the quarter ended March 31, 2007 in our investing activities was $97,319
      for
      equipment purchases, compared to $413,446 for the same period in 2006, which
      included equipment purchases and license and trademark costs.





Net
      cash
      provided by our financing activities for the quarter ended March 31, 2007 was
      $2,299,033. Net cash provided by financing activities for the same period in
      2006 was $286,606, for a net increase of $2,012,427. The increase is attributed
      to proceeds received from convertible notes payable of $2,625,000 in
      2007.





42


**CORPORATE
      GOVERNANCE**





**The
      Board of Directors**





Our
      board
      has positions for seven directors that are elected as Class A or Class B directors at alternate annual
      meetings of our shareholders. The policy of the board is that a majority of
      the
      directors will not be current employees of the Company and will otherwise meet
      appropriate standards of independence. In determining independence, the board
      considers the definition of “independent director” in the listing standards of
      the NASDAQ Stock Market. Under this definition, six of our seven current
      directors are considered independent. The only board member deemed not to be
      independent is Roy G. Warren due to his previous position as CEO of the
      Company.





The
      board
      meets regularly either in person or by telephonic conference and all directors
      have access to the information necessary to enable them to discharge their
      duties. Our shareholders elect directors after nomination by the board, or
      the
      board appoints directors when a vacancy arises prior to an election.




**Audit
      Committee**





Our
      audit
      committee is composed of three independent directors and functions to assist
      the
      board in overseeing our accounting and reporting practices. Our financial
      information is recorded in house by our Vice President - Treasurer's office,
      from which we prepare financial reports. Lazar Levine & Felix LLP,
      independent registered public accountants and auditors, audit or review these
      financial reports. The committee reviews the preparation of our audited and
      unaudited periodic financial reporting and internal control reports prepared
      by
      our Vice President - Treasurer. The committee reviews significant changes in
      accounting policies and addresses issues and recommendations presented by our
      internal accountants as well as our auditors.




**Compensation
      Committee**





Our
      compensation committee, which is composed of three independent directors,
      reviews the compensation structure and policies concerning executive
      compensation. The committee develops proposals and recommendations for executive
      compensation and presents those recommendations to the full board for
      consideration. The committee periodically reviews the performance of our other
      members of management and the recommendations of the chief executive officer
      with respect to the compensation of those individuals. The board must approve
      all compensation packages that involve the issuance of our stock or stock
      options. Currently, there is one vacancy on the compensation
      committee.




**Nominating
      Committee**





The
      nominating committee was established in the second quarter of 2002 and consists
      of those members of the director Class not up for election. The committee is
      charged with determining those individuals who will be presented to the
      shareholders for election at the next scheduled annual meeting. The full board
      fills any mid term vacancies by appointment.




**EFFECTS
      OF INFLATION**





We
      believe that inflation has not had any material effect on our net sales and
      results of operations.


43




**ITEM
      3. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




We
      maintain “disclosure controls and procedures,” as such term is defined in Rules
      13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Our disclosure
      controls and procedures are designed to:





·
            ensure
                information required to be disclosed by us is recorded, processed,
                summarized and reported within the time periods specified in Securities
                and Exchange Commission rules, regulations, and forms, and





·
            ensure
                that such information is accumulated and communicated to our management,
                including our President and Vice President- Treasurer, as appropriate,
                to
                allow timely and appropriate decisions regarding required disclosure
                to be
                made.





Our
      evaluation was performed under the supervision and with the participation of
      our
      audit committee and senior management, including our President and Vice
      President- Treasurer. We evaluated the effectiveness of the design and operation
      of our disclosure controls and procedures pursuant to Exchange Act Rules
      13a-15(b) and 15d-15(b). During this evaluation, management considered the
      impact of any material weaknesses and other deficiencies in our internal control
      over financial reporting.





Based
      upon this evaluation, in July 2006 we determined that the following material
      weakness existed:





·
            inadequate
                controls existed over the process for the identification and
                implementation of the proper accounting for complex and non-routine
                transactions





·
            inappropriate
                accounting for compound derivative instruments embedded within our
                financial instruments





These
      weaknesses were the most significant factors that drove our need to restate
      our
      consolidated financial statements for each of the two years ended
      December 31, 2004 and 2005 in order to present those financial statements
      properly.





Because
      the material weakness identified above had not been fully remedied at March
      31,
      2007, our President and our Vice President- Treasurer have concluded that our
      disclosure controls and procedures relating to compound derivative instruments
      embedded within our financial statements were not effective as of March 31,
      2007.





To
      address the issues raised by this control deficiency, the Company has undertaken
      the following actions:





·
            Hired
                two additional full-time experienced accountants, whose key
                responsibilities include creating a sound internal control structure
                over
                the financial reporting function


·
            Restructured
                departmental responsibilities to properly align financial reporting
                responsibilities to the employees most experienced in this
                area


·
            Engaged
                an external CPA firm with extensive experience in accounting for
                complex
                derivative instruments to assist us in properly accounting and reporting
                of our financial instruments


·
            Commenced
                a project to significantly improve overall internal controls. This
                plan
                includes the implementation of a new accounting information system
                and
                hiring of consultants experienced in implementing effective internal
                controls, inclusive of financial reporting for compound derivative
                instruments embedded within our financial
                instruments.





44


We
      expect
      that we will remediate the material weakness identified above during
      2007.





**PART
      II - OTHER INFORMATION**





**Item
      1. Legal Proceedings**





On
      May
      14, 2007, Cagnazzi Racing commenced a lawsuit in the State courts of North
      Carolina to recover the balance owed by us under a NHRA sponsorship agreement
      entered into by the parties on November 1, 2006. This
      $3,500,000 sponsorship agreement requires us to pay $300,000 on January 1,
      2007
      and $1,300,000 on April 1, 2007, plus certain expenses.  Our total payments
      to date under this sponsorship agreement amount to $200,000, which was paid
      in
      February 2007.  We have informed Cagnazzi Racing that we do not intend to
      pay the balance of the contact at this time, and we have requested that Cagnazzi
      immediately commence its obligation to mitigate its damages under the
      sponsorship agreement.  We have been informed that Cagnazzi has removed the
      Slammers® logo and trade dress from its race cars and is seeking a new
      sponsor.





**Item
      2.**  **Unregistered
      Sales of Equity Securities and Use of Proceeds**





None.





**Item
      3. Default on Senior Securities**





On
      April
      1, 2007, we became in default of certain provisions of our Senior Notes issued
      in July 2006, as amended in December 2006, due to our failure to make the
      required quarterly interest payment of approximately $730,000. The defaults
      entitle the holders of our Senior Notes to certain penalties including the
      acceleration of the Notes at a premium.





**Item
      4. Submission of Matters to a Vote of Security Holders**





None.





**Item
      5. Subsequent Events**





See
      Note
      12 of Notes to Consolidated Financial Statements.








45




**Item
      6.**  **Exhibits**





**Exhibit
                No.**
            **Document
                Description**
            **Incorporated
                by Reference**
            **Filed
                Herewith**3.1
            Articles
                of Incorporation
            (1)3.2
            Amended
                Articles (name change)
            (1)3.4
            Restated
                Bylaws
            (1)4
            Rights
                of Equity Holders4.1
            Preferred,
                Series B Designation
            (1)4.2
            Preferred,
                Series F Designation
            (2)4.3
            Preferred,
                Series G Designation
            (3)4.4
            Preferred,
                Series H Designation
            (4)4.5
            Preferred,
                Series I Designation
            (5)4.6
            Preferred,
                Series J Designation
            (6)4.7
            Preferred,
                Series K Designation
            (8)4.8
            Subscription
                Agreement dated November 2003 entered with Gamma Opportunity Capital
                Partners, LP
            (9)4.9
            Class
                A Common Stock Purchase Warrant issued to Gamma Opportunity Capital
                Partners, LP
            (9)4.10
            Class
                B Common Stock Purchase Warrant issued to Gamma Opportunity Capital
                Partners, LP
            (9)4.11
            Convertible
                Note issued to Gamma Opportunity Capital Partners, LP dated November
                2003
            (9)4.12
            Class
                A Common Stock Purchase Warrant issued to Libra Finance,
                S.A.
            (9)4.13
            Subscription
                Agreement dated November 2003 entered with MID-AM CAPITAL,
                L.L.C
            (9)4.14
            Class
                A Common Stock Purchase Warrant issued to MID-AM CAPITAL,
                L.L.C.
            (9)4.15
            Class
                B Common Stock Purchase Warrant issued to MID-AM CAPITAL,
                L.L.C
            (9)4.16
            Convertible
                Note issued to MID-AM CAPITAL, L.L.C. dated November 2003
            (9)4.17
            Subscription
                Agreement dated April 2, 2004 entered with Alpha Capital
                Aktiengesellschaft and
              Longview
                Fund LP
            (9)4.18
            Convertible
                Note issued to Alpha Capital Aktiengesellschaft dated April
                2004
            (9)4.19
            Convertible
                Note issued to Longview Fund LP dated April 2004
            (9)4.20
            Common
                Stock Purchase Warrant issued to Alpha Capital Aktiengesellschaft
                dated
                April 2004
            (9)4.21
            Common
                Stock Purchase Warrant issued to Longview Fund LP dated April
                2004
            (9)4.22
            Subscription
                Agreement entered by and between the Company and Mid-AM Capital LLC
                dated
                June 2004
            (10)4.23
            Convertible
                Note issued to Mid-AM Capital LLC dated June 2004
            (10)4.24
            Common
                Stock Purchase Warrant A issued to Mid-AM Capital LLC dated June
                2004
            (10)4.25
            Common
                Stock Purchase Warrant B issued to Mid-AM Capital LLC dated June
                2004
            (10)




46


4.26
            Subscription
                Agreement entered by and between the Company and Alpha Capital, Longview
                Fund LP, Stonestreet Limited Partnership, Whalehaven Funds Limited
                and
                Gamma Opportunity Capital Partners LP dated June 2004
            (10)4.27
            Form
                of Common Stock Purchase A issued to Alpha Capital, Longview Fund
                LP,
                Stonestreet Limited Partnership, Whalehaven Funds Limited and Gamma
                Opportunity Capital Partners LP dated June 2004
            (10)4.28
            Form
                of Common Stock Purchase B issued to Alpha Capital, Longview Fund
                LP,
                Stonestreet Limited Partnership, Whalehaven Funds Limited and Gamma
                Opportunity Capital Partners LP dated June 2004
            (10)4.29
            Form
                of Convertible Note issued to Alpha Capital, Longview Fund LP, Stonestreet
                Limited Partnership, Whalehaven Funds Limited and Gamma Opportunity
                Capital Partners LP dated June 2004
            (10)4.30
            Subscription
                Agreement entered by and between the Company and Alpha Capital, Longview
                Fund LP, Stonestreet Limited Partnership and Whalehaven Funds Limited
                dated October 2004
            (10)4.31
            Form
                of Common Stock Purchase C issued to Alpha Capital, Longview Fund
                LP,
                Stonestreet Limited Partnership and Whalehaven Funds Limited dated
                October
                2004
            (10)4.32
            Form
                of Convertible Note issued to Alpha Capital, Longview Fund LP, Stonestreet
                Limited Partnership, Whalehaven Funds Limited and Gamma Opportunity
                Capital Partners LP dated October 2004
            (10)4.33
            Subscription
                Agreement entered by and between the Company and Momona Capital Corp.
                and
                Ellis International Ltd. dated December 2004
            (10)4.34
            Form
                of Common Stock Purchase C issued to Momona Capital Corp. and Ellis
                International Ltd. dated December 2004
            (10)4.35
            Form
                of Convertible Note issued to Momona Capital Corp. and Ellis International
                Ltd. dated December 2004
            (10)4.36
            Form
                of Convertible Note issued to Alpha Capital, Longview Fund LP, Longview
                Equity Fund LP, Longview International Equity Fund LP and Whalehaven
                Funds
                Limited dated January 2005
            (11)4.37
            Subscription
                Agreement entered by and between the Company and Alpha Capital, Longview
                Fund LP, Longview Equity Fund LP, Longview International Equity Fund
                LP
                and Whalehaven Funds Limited dated January 2005
            (11)4.38
            Form
                of Common Stock Purchase Warrant issued to Alpha Capital, Longview
                Fund
                LP, Longview Equity Fund LP, Longview International Equity Fund LP
                and
                Whalehaven Funds Limited dated January 2005
            (11)4.39
            Form
                of Securities Purchase Agreement with 13 institutional investors
                in
                connection with November 28, 2005 $20,250,000 financing
            (12)4.40
            Form
                of Stock Purchase Warrant in connection with November 28, 2005 $20,250,000
                financing
            (12)10
            Material
                Contracts




47


10.6
            MoonPie
                License Agreement
            (8)10.7
            Marvel
                License Agreement (US)
            (8)10.9
            Real
                Estate Lease Amendment Extending Term
            (8)10.10
            Masterfoods
                License
            (11)10.11
            Marvel
                Enterprises License (UK)
            (11)10.12
            Coca-Cola
                Enterprises Master Distribution Agreement
            (13)16.1
            Letter
                on change or certifying accountant
            (7)31.1
            Certification
                of President, Rules 13a-14(a) & 15d-14(a)
            
            X31.2
            Certification
                of CAO, Rules 13a-14(a) & 15d-14(a)
            
            X32.1
            Certifications
                of President & CAO, 18 U.S.C. Sec. 1350
            
            X





(1)
            Filed
                with Form 10SB/A First Amendment





(2)
            Filed
                with Form 10K-SB for 12-31-99





(3)
            Filed
                with Form 10QSB for 6-30-00





(4)
            Filed
                with Form 10K-SB 2001





(5)
            Filed
                with Form 10QSB for 6-30-02





(6)
            Filed
                with Form 8-K for 10-02-02





(7)
            Filed
                with Form 8-K for 3-26-04





(8)
            Filed
                with Form 10K-SB 2003





(9)
            Filed
                with Form SB-2 June 4, 2004





(10)
            Filed
                with Form SB-2 January 21, 2005





(11)
            Filed
                with Form 10K-SB 2004





(12)
            Filed
                with Form 8-K for 11-28-05





(13)
            Filed
                with Form 10QSB for 9-30-05








48




**SIGNATURES**





In
      accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
      Bravo! Brands, Inc. has caused this report to be signed on its behalf by the
      undersigned, thereunder duly authorized.





BRAVO!
      BRANDS INC.


(Registrant)


Date:
      May
      15, 2007





/s/Ben
      Patipa


President
      (Principal Executive Officer)





In
      accordance with the Securities Exchange Act of 1934, Bravo! Brands, Inc. has
      caused this report to be signed on its behalf by the undersigned in the
      capacities and on the dates stated.




Signature
              
              Title
              
              Date/S/
                  Benjamin Patipa
              
              President
              
              May
                  15, 2007(Principal
                  Executive Officer)/S/
                  Tommy E. Kee
              
              Vice
                  President and Treasurer,
              
              May
                  15, 2007(Principal
                  Accounting Officer)


49