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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
20549

FORM 10-QSB

(Mark One)

[ X ] Quarterly Report Pursuant To Section 13 Or 15(d) Of The
  Securities Exchange Act Of 1934
  For the quarterly period ended March 31, 2006

[]
  Transition Report Under Section 13 Or 15(d) Of The Securities Exchange Act Of
  1934 
  For the transition period ________ to ________

COMMISSION FILE NUMBER000-32011

BALSAM VENTURES, INC.(Name
of small business issuer in its charter)

|NEVADA                                                 | 52-2219056                          
|------------------------------------------------------ | ------------------------------------
|(State or other jurisdiction of incorporation
      or | (I.R.S. Employer Identification No.)
|organization)                                          |                                     

|1480Gulf Road, Suite 204                 |           
|---------------------------------------- | ----------
|Point Roberts, WA                        | 98281     
|(Address of principal executive offices) | (Zip Code)

(360) 306-0230Issuer's telephone number

Not ApplicableFormer 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 Exchange Act during the past twelve months
  (or for such shorter period that the registrant was required to file such reports),
  and (2) has been subject to such filing requirements for the past 90 days. Yes
  [ X ]No []

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

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of May 5,
2006, the Registrant had 26,000,000 shares of common stock, $0.001 par value per
share, outstanding.

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

1

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PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

2

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|                             
|FINANCIAL STATEMENTS         
|                             
|                             
|MARCH 31, 2006               
|(Unaudited)                  
|(Stated in U.S. Dollars)     

F-1

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|BALANCE SHEET                
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|                                                         |   | MARCH 31 |   |   | DECEMBER 31 |  
|-------------------------------------------------------- | - | -------- | - | - | ----------- | -
|                                                         |   | 2006     |   |   | 2005        |  
|ASSETS                                                   |   |          |   |   |             |  
|Current                                                  |   |          |   |   |             |  
|Cash                                                     | $ | 1,366    |   | $ | 1,700       |  
|LIABILITIES                                              |   |          |   |   |             |  
|Current                                                  |   |          |   |   |             |  
|Accounts payable and accrued
      liabilities           | $ | 357,396  |   | $ | 310,949     |  
|Convertible Notes Payable Net Of
      Discount On Notes |   |          |   |   |             |  
|Attributable
      To Beneficial Conversion Feature      |   | 13,395   |   |   | 3,040       |  
|                                                         |   | 370,791  |   |   | 313,989     |  
|Commitment And Contingencies(Notes 4)                    |   |          |   |   |             |  
|STOCKHOLDERS DEFICIENCY                                 |   |          |   |   |             |  
|Share Capital                                            |   |          |   |   |             |  
|Authorized:                                              |   |          |   |   |             |  
|100,000,000 common voting stock, par value with          |   |          |   |   |             |  
|$0.001
      per share                                   |   |          |   |   |             |  
|Issued and outstanding:                                  |   |          |   |   |             |  
|26,000,000 common stock at March 31, 2006                |   |          |   |   |             |  
|25,500,000 common stock at December 31, 2005             |   | 26,000   |   |   | 25,500      |  
|Additional
      paid-in capital                         |   | 602,000  |   |   | 572,500     |  
|Deficit
      Accumulated During The Development Stage   |   | (997,425 | ) |   | (910,289    | )
|                                                         |   | (369,425 | ) |   | (312,289    | )
|                                                         | $ | 1,366    |   | $ | 1,700       |  

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

F-2

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|BALSAM VENTURES INC.         
|-----------------------------
|(A Development Stage Company)
|                             
|STATEMENT OF OPERATIONS      
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|                                                 |   |                    |  |   |            |   |   | INCEPTION | 
|------------------------------------------------ | - | ------------------ |  | - | ---------- | - | - | --------- | 
|                                                 |   |                    |  |   |            |   |   | AUGUST 17 | 
|                                                 |   | THREE MONTHS ENDED |  |   | 1999 TO    |  
|                                                 |   | MARCH 31           |  |   | MARCH 31   |  
|                                                 |   | 2006               |  |   | 2005       |   |   | 2006      | 
|                                                 |   |                    |  |   |            |   |   |           | 
|Expenses                                         |   |                    |  |   |            |   |   |           | 
|Accretion
      of discount on convertible notes | $ | 10,355             |  | $ | 51         |   | $ | 13,395    | 
|Bank charges and interest                        |   | 6,531              |  |   | 6,446      |   |   | 66,223    | 
|Consulting
      services                        |   | 15,000             |  |   | 15,000     |   |   | 360,947   | 
|Domain registration                              |   | -                  |  |   | -          |   |   | 436       | 
|Foreign exchange
      loss                      |   | 15                 |  |   | (12        | ) |   | 1,210     | 
|License payment                                  |   | 50,000             |  |   | -          |   |   | 313,000   | 
|Office and
      sundry                          |   | 949                |  |   | -          |   |   | 12,895    | 
|Professional fees                                |   | 4,117              |  |   | 5,933      |   |   | 195,008   | 
|Regulatory                                       |   | 149                |  |   | -          |   |   | 11,152    | 
|Stock transfer services                          |   | 20                 |  |   | -          |   |   | 5,385     | 
|Travel                                           |   | -                  |  |   | -          |   |   | 9,099     | 
|Write off of software development costs          |   | -                  |  |   | -          |   |   | 8,675     | 
|                                                 |   |                    |  |   |            |   |   |           | 
|Net Loss
      For The Period                    | $ | 87,136             |  | $ | 27,418     |   | $ | 997,425   | 
|                                                 |   |                    |  |   |            |   |   |           | 
|                                                 |   |                    |  |   |            |   |   |           | 
|                                                 |   |                    |  |   |            |   |   |           | 
|Net Loss
      Per Share, basic and diluted      | $ | -                  |  | $ | -          |   |   |           | 
|                                                 |   |                    |  |   |            |   |   |           | 
|                                                 |   |                    |  |   |            |   |   |           | 
|Weighted Average Number                          |   |                    |  |   |            |   |   |           | 
|Of Shares Outstanding                            |   | 25,922,222         |  |   | 25,500,000 |   |   |           | 

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

F-3

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|STATEMENT OF CASH FLOWS      
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|                                                       |   |                    |   |   |          |   |   | CUMULATIVE       |  
|------------------------------------------------------ | - | ------------------ | - | - | -------- | - | - | ---------------- | -
|                                                       |   |                    |   |   |          |   |   | PERIOD FROM      |  
|                                                       |   |                    |   |   |          |   |   | AUGUST 17        |  
|                                                       |   |                    |   |   |          |   |   | 1999 (INCEPTION) |  
|                                                       |   | THREE MONTHS ENDED |   |   | TO       |  
|                                                       |   | MARCH 31           |   |   | MARCH 31 |  
|                                                       |   | 2006               |   |   | 2005     |   |   | 2006             |  
|                                                       |   |                    |   |   |          |   |   |                  |  
|Cash provided by (used in):                            |   |                    |   |   |          |   |   |                  |  
|Operating Activities                                   |   |                    |   |   |          |   |   |                  |  
|Net loss
      for the period                          | $ | (87,136            | ) | $ | (27,418  | ) | $ | (997,425         | )
|                                                       |   |                    |   |   |          |   |   |                  |  
|Items not
      involving cash:                        |   |                    |   |   |          |   |   |                  |  
|Write off of software development costs                |   | -                  |   |   | -        |   |   | 8,675            |  
|Interest accrued on convertible notes payable          |   | 6,411              |   |   | 6,411    |   |   | 64,965           |  
|Shares issued to extend license agreement              |   | 30,000             |   |   | -        |   |   | 293,000          |  
|Accretion of discount on convertible debentures        |   | 10,355             |   |   | 51       |   |   | 13,395           |  
|                                                       |   | (40,370            | ) |   | (20,956  | ) |   | (617,390         | )
|Changes in
      non-cash operating working capital:   |   |                    |   |   |          |   |   |                  |  
|Change in accounts payable and accrued liabilities     |   |                    |   |   |          |   |   |                  |  
|                                                       |   | 40,036             |   |   | 21,064   |   |   | 552,431          |  
|                                                       |   | (334               | ) |   | 108      |   |   | (64,959          | )
|Investing Activity                                     |   |                    |   |   |          |   |   |                  |  
|Software development costs                             |   | -                  |   |   | -        |   |   | (8,675           | )
|                                                       |   |                    |   |   |          |   |   |                  |  
|Financing Activity                                     |   |                    |   |   |          |   |   |                  |  
|Issuance of common stock                               |   | -                  |   |   | -        |   |   | 75,000           |  
|                                                       |   |                    |   |   |          |   |   |                  |  
|Increase (decrease) in Cash                            |   | (334               | ) |   | 108      |   |   | 1,366            |  
|                                                       |   |                    |   |   |          |   |   |                  |  
|Cash, Beginning of Period                              |   | 1,700              |   |   | 1,033    |   |   | -                |  
|                                                       |   |                    |   |   |          |   |   |                  |  
|Cash, End of Period                                    | $ | 1,366              |   | $ | 1,141    |   | $ | 1,366            |  
|                                                       |   |                    |   |   |          |   |   |                  |  
|Supplemental Disclosure of Cash Flow
      Information |   |                    |   |   |          |   |   |                  |  
|Interest paid                                          | $ | 44                 |   | $ | 35       |   | $ | 1,110            |  
|Income taxes paid                                      |   | -                  |   |   | -        |   |   | -                |  

Non-Cash Financing and Investing Activities

During the three months ended March 31, 2006, the Company issued
  500,000 common shares, with a value of $30,000, as consideration for the extension
  of a license.

During the year ended December 31, 2004 the Company issued 5,000,000
  common shares, with a value of $200,000, as consideration for a license.

During the year ended December 31, 2003, the Company issued 300,000
  common shares, with a value of $63,000 to initiate and extend the arrangement
  for a chilling beverage container technology.

In October 2003, the Company settled $260,000 of accounts payable
  by the issue of convertible notes.

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

F-4

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|MARCH 31, 2006               
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|1. | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | The unaudited financial information furnished
        herein reflects all adjustments, which in the opinion of management are
        necessary to fairly state the Companys financial position and the
        results of its operations for the periods presented. This report on Form
        10-Q should be read in conjunction with the Companys financial statements
        and notes thereto included in the Companys Form 10-K for the fiscal
        year ended December 31, 2005. The Company assumes that the users of the
        interim financial information herein have read or have access to the audited
        financial statements for the preceding fiscal year and that the adequacy
        of additional disclosure needed for a fair presentation may be determined
        in that context. Accordingly, footnote disclosure, which would substantially
        duplicate the disclosure contained in the Companys Form 10-K for
        the fiscal year ended December 31, 2005, has been omitted. The results
        of operations for the three-month period ended March 31, 2006 are not
        necessarily indicative of results for the entire year ending December
        31, 2006.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|2. | NATURE OF BUSINESS AND ABILITY TO CONTINUE
        OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

F-5

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|MARCH 31, 2006               
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|2. | NATURE OF BUSINESS AND ABILITY TO CONTINUE
        OPERATIONS(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|3. | CONVERTIBLE NOTES PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | During the year ended December 2003, the
        Company issued convertible notes, maturing October 1, 2006, aggregating
        $260,000 and bearing interest of 10% per annum. The notes are convertible
        into common shares at the lesser of $0.03 per share or 50% of the
        average trading price of the Companys common shares for the ten
        trading days prior to conversion. The Company may, at its option, elect
        to pay a portion of the interest by issuing common stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   | Emerging Issues Task Force Release No. 98-5
        and 00-27 states that any embedded beneficial conversion features present
        in convertible securities should be valued separately at issuance. The
        embedded beneficial conversion feature should be recognized and measured
        by allocating a portion of the proceeds equal to the intrinsic value of
        that feature to additional paid-in capital. That amount should be calculated
        at the commitment date as the difference between the effective conversion
        price and the fair value of the common stock or other securities into
        which the security is convertible, multiplied by the number of shares
        into which the security is convertible. The Emerging Issues Task Force
        observed that in certain circumstances, the intrinsic value of the beneficial
        conversion feature may be greater than the proceeds allocated to the convertible
        instrument. In those situations, the amount of the discount assigned to
        the beneficial conversion feature is limited to the amount of the proceeds
        allocated to the convertible instrument. For convertible instruments that
        have a stated redemption date (such as term debt) the discount resulting
        from recording a beneficial conversion option should be accreted from
        the date of issuance to the stated redemption date of the convertible
        instrument. In the event of early conversion or default, the remaining
        discount would be recognized as interest expense during the period in
        which such early conversion or default occurs.

F-6

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|MARCH 31, 2006               
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|3. | CONVERTIBLE NOTES PAYABLE(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In applying the provisions of Emerging Issues
        Task Force Release Nos. 98-5 and 00-27, the Company recorded a discount
        on the convertible debentures in the amount of $260,000. This discount
        is being accreted to interest expense using the interest method over the
        life of the notes (three years). As the effective interest rate, which
        is determined by dividing the actual interest rate on the convertible
        debentures by the discounted debt amount, approaches infinity, the interest
        expense to be recorded approximates the future cash payments. Interest
        expense recorded relating to the accretion of the discount for the quarter
        ended March 31, 2006 was $10,355 (2005 - $51). The remaining discount
        on the convertible debentures as of March 31, 2006 was $246,605 (December
        31, 2005 - $256,960).                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | During the quarter ended March 31, 2006, $6,411
        (2005 -$6,411) of interest expense was accrued and charged to the statement
        of operations. No cash payments of interest were made during the respective
        periods.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Interest of $64,965 on these convertible notes
        payable has accrued to March 31, 2006 (December 31, 2005 - $58,554).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|4. | COMMITMENTS AND CONTRACTUAL OBLIGATIONS
         LICENSE AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | Pursuant to an exclusive license agreement
        (the Agreement) with NorPac Technologies, Inc (formerly Cool
        Can Technologies, Inc.) (the Licensor), dated November 30,
        2003, the Company acquired the exclusive right and license (the License),
        for a period of 40 years, to use, commercialize and exploit the Licensors
        proprietary trademarks, patents, process information, technical information,
        designs and drawings associated with the Licensors self-chilling
        beverage containers technology (the Technology), including
        the right to manufacture, use and sell apparatus and products embodying
        the Technology within the countries comprising the European Union and
        the Peoples Republic of China. The Company also has the right to
        sub-license the right to manufacture, use and sell products embodying
        the Technology.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | In consideration for the Agreement, the Company
        agreed to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                

F-7

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|MARCH 31, 2006               
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|4. | LICENSE AGREEMENT(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | On January 14, 2006, the Company entered
        into an agreement (the Extension Agreement) with the Licensor,
        to amend the terms of their Agreement. Under the Extension Agreement,
        the Licensor agreed to extend the date on which the Company is required
        to commence paying the Minimum Royalty Payments to January 15, 2007.                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | In consideration for the Extension Agreement,
        the Company agreed to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   | The Technology and patents and trademarks
        of the Licensor included in the Technology remain the property of the
        Licensor subject to the terms of the License granted under the Agreement.
        However, the Company has a right of first refusal to acquire the intellectual
        property subject to the Agreement should the Licensor seek to dispose
        of the Technology during the Agreement. The Agreement supercedes all prior
        arrangements and agreements between the Company and the Licensor in respect
        of the Technology                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Licensor suspended all research and
        development activities on the Technology in November 2002 due to a lack
        of funds. Due to the costs involved in applying for and receiving extensions
        from the U.S. Patent and Trademark Office and the uncertainty relating
        to the successful commercialization of the technology, the Licensor ceased
        filing for trademark extensions in September 2001. It believes that it
        will be able to re-institute ownership of the trademarks, or the equivalent
        thereof, when product development is completed.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|5. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | Amounts paid to related parties were based
        on exchange amounts which represented the amounts agreed upon by the related
        parties. Amounts paid or payable to related parties not disclosed elsewhere
        include the following:                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | During the quarter ended March 31, 2006,
        directors compensation totalled $Nil (2005 - $Nil);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | As at March 31, 2006, accounts payable includes
        $8,997 (December 31, 2005 - $8,901) due to a director and officer
        and $9,000 (December 31, 2005 -$13,504) due to a former director
        and officer. Convertible notes payable includes $3,899 (December 31,
        2005 - $3,899) due to a director and officer and $0 (December
        31, 2005 - $20,000) due to a former director and officer.                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-8

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION.

Cautionary Statement Regarding Forward-Looking
Statements

Certain statements contained in this Quarterly Report
constitute "forward-looking statements". These statements, identified by words
such as plan, "anticipate", "believe", "estimate", "should", "expect" and
similar expressions include our expectations and objectives regarding our future
financial position, operating results and business strategy. These statements
reflect the current views of management with respect to future events and are
subject to risks, uncertainties and other factors that may cause our actual
results, performance or achievements, or industry results, to be materially
different from those described in the forward-looking statements. Such risks and
uncertainties include those set forth under the caption "Management's Discussion
and Analysis or Plan of Operation" and elsewhere in this Quarterly Report. We do
not intend to update the forward-looking information to reflect actual results
or changes in the factors affecting such forward-looking information. We advise
you to carefully review the reports and documents we file from time to time with
the Securities and Exchange Commission (SEC), particularly our Annual Reports
on Form 10-KSB and our Current Reports on Form 8-K.

As used in this Quarterly Report, the terms "we", "us", "our",
and Balsam mean Balsam Ventures, Inc. unless otherwise indicated. All dollar
amounts in this Quarterly Report are in U.S. dollars unless otherwise
stated.

INTRODUCTION

We are in the business of developing and marketing a patented,
  unique, proprietary technology for self-chilling beverage containers (the “Cool
  Can Technology”) that we have licensed from NorPac Technologies, Inc.
  (formerly Cool Can Technologies, Inc.) (“NorPac”). Our license from
  NorPac allows us to sublicense and manufacture self-chilling beverage containers
  based upon the Cool Can Technology. Our business plan is to develop and commercialize
  the Cool Can Technology within those regions to which we have obtained an exclusive
  license from NorPac, being those countries comprising the European Union and
  the People’s Republic of China (the “Exclusive Region”). However,
  there is no assurance that we will be able to do so.

The following discussion and analysis summarizes our plan of
operation for the next twelve months, our results of operations for the three
month period ended March 31, 2006 and changes in our financial condition from
December 31, 2005. This discussion should be read in conjunction with the
Managements Discussion and Analysis or Plan of Operation included in our Annual
Report on Form 10-KSB for the year ended December 31, 2005.

PLAN OF OPERATION

Subject to our ability to obtain the necessary financing, our
plan of operation for the next welve months consists of the following:

| | (1) | We plan to seek sub-licensing agreements to
        finance approximately $300,000 for the development of the Cool Can Technology.
        We plan to proceed with product development and the production of samples
        of self-chilling beverage container modules. This phase of development
        will include the following elements and will take approximately nine months
        once financing is in place:
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                            
| |     | (a)                                                                                                                                                                                                                                                                                                                                                                                                                        

3

---

| |     | (b)                                                                                                                                                                                                  | Follow up on prototype development including analysis,
        testing and fine tooling required for production and finalizing all production
        drawings and specifications; and                                                                                                                                                       
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                              
| |     | (c)                                                                                                                                                                                                  | Producing high-volume production cost estimates and
        methods, including estimation of tooling costs, sourcing production facilities
        and requesting bids for tender from potential manufacturers of component
        parts, and analysis and cost estimates for projected method of assembling
        of the chilling module.
| |     |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                              
| | (2) | We anticipate spending approximately $20,000
        on professional fees over the next twelve months in complying with our
        reporting obligations under the Securities Exchange Act of 1934.
| |     |                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                              
| | (3) | We anticipate spending approximately $140,000
        on general overhead expenses, including office expenses and consulting
        fees.                                                          

Subject to our obtaining adequate financing, we anticipate that
we will be spending approximately $460,000 over the next twelve-month period
pursuing our stated plan of operation. Of these anticipated expenditures, we
anticipate that $230,000 will be spent on our plan of operation over the next
six months. Our present cash reserves are not sufficient for us to carry out our
plan of operation without substantial additional financing. We are currently
attempting to arrange for financing through sub-licensing arrangements that
would enable us to proceed with our plan of operation.

We have reached a verbal agreement with BIG K.G. (BIG), a
German company, pursuant to which BIG has agreed to act as our agent for the
purpose of locating European placees for a proposed private placement of
40,000,000 units at a price of $0.025 per unit for total potential proceeds of
$1,000,000 (the Private Placement). Under the terms of our verbal agreement,
each unit to be issued under the proposed Private Placement will consist of one
share in our common stock and one share purchase warrant entitling the warrant
holder to purchase one additional share of our common stock at a price of $0.05
per share. BIG is to receive a commission of $100,000 for services provided in
connection with the proposed Private Placement. Although we have reached a
verbal agreement with BIG in respect of the proposed Private Placement, there
exists a substantial doubt that we will be able to complete the proposed Private
Placement. We do not have any other financing arrangements in place and there is
no assurance that we will be able to achieve sufficient financing required to
commercialize the Cool Can Technology and to earn revenues.

Our actual expenditures and business plan may differ from the
one stated above. Our board of directors may decide not to pursue this plan. In
addition, we may modify the plan based on available financing.

RESULTS OF OPERATIONS

First Quarter Summary

|                  |   | First Quarter Ended March 31 |  
|----------------- | - | ---------------------------- | -
|                  |   |                              |  
|                  |   | 2006                         |  
|Revenue           | $ | Nil                          |  
|Expenses          |   | (87,136                      | )
|Net Income (Loss) | $ | (87,136                      | )

4

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Revenue

We did not earn any revenues during the quarter ended March 31,
2006. We do not anticipate earning revenues until we are successful completing
the development and commercialization of the Cool Can Technology, of which there
is no assurance. We are presently in the development stage and we can provide no
assurance that we will be successful in earning revenues from the Cool Can
Technology even if we achieve the financing necessary to develop this
technology.

Expenses

Our expenses for the quarterly periods ended March 31, 2006 and
2005 consisted of the following:

|                                           |   | First
      Quarter Ended March 31 | 
|------------------------------------------ | - | ---------------------------------- | 
|                                           |   |                                    | 
|                                           |   | 2006                               | 
|Accretion of Discount on Convertible Notes | $ | 10,355                             | 
|Bank Charges and Interest                  |   | 6,531                              | 
|Consulting Services                        |   | 15,000                             | 
|Foreign Exchange (Gain) Loss               |   | 15                                 | 
|License Payment                            |   | 50,000                             | 
|Office and Sundry                          |   | 949                                | 
|Professional Fees                          |   | 4,117                              | 
|Regulatory                                 |   | 149                                | 
|Stock Transfer Services                    |   | 20                                 | 
|Total Operating Expenses                   | $ | 87,136                             | 

We incurred operating expenses in the amount of $87,136 for the
  quarter ended March 31, 2006 as compared to $27,418 for the quarter ended March
  31, 2005. The two largest components of our operating expenses were a license
  payment made to NorPac to extend the date on which we are required to commence
  paying minimum royalty payments of $5,000 per month (the “Minimum Royalty
  Payments”) under our license agreement with NorPac (the “License
  Agreement”), and consulting fees associated with general administrative
  and accounting work and for services provided in connection with our regulatory
  filings. The professional fees in the amount of $4,117 were incurred in meeting
  our ongoing reporting obligations under the Securities Exchange Act of 1934.
  The increase in our overall expenses for the first fiscal quarter of 2006 is
  primarily attributable to the license payment made to NorPac during the period
  and to the increase in the accretion of the discount on the convertible debentures
  issued by us in 2003.

LIQUIDITY AND FINANCIAL CONDITION

|Working Capital           |   |                           |   |   |                              |   |  |                       | 
|------------------------- | - | ------------------------- | - | - | ---------------------------- | - |  | --------------------- | 
|                          |   |                           |   |   |                              |   |  | Percentage            | 
|                          |   | At
        March 31, 2006 |   |   | At
        December 31, 2005 |   |  | Increase / (Decrease) | 
|Current Assets            | $ | 1,366                     |   | $ | 1,700                        |   |  | 19.6%                 | 
|Current Liabilities       |   | (357,396                  | ) |   | (310,949                     | ) |  | 14.9%                 | 
|Working Capital (Deficit) | $ | (356,030                  | ) | $ | (309,249                     | ) |  | 15.1%                 | 

5

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We had cash of $1,366 as at March 31, 2006 as compared to cash
of $1,700 as at December 31, 2005. Our working capital deficit increased by
15.1% during the past three months as a result of the fact that we had no
revenues or significant sources of financing with which to pay down our current
liabilities.

|Cash Flows                                           |   |                             |   |   |      | 
|---------------------------------------------------- | - | --------------------------- | - | - | ---- | 
|                                                     |   | Three Months Ended March 31 |  
|                                                     |   | 2006                        |   |   | 2005 | 
|Cash Flows From (Used In) Operating
      Activities | $ | (334                        | ) | $ | 108  | 
|Cash Flows From (Used In) Investing Activities       |   | -                           |   |   | -    | 
|Cash Flows From (Used In) Financing
      Activities |   | -                           |   |   | -    | 
|Net Increase (Decrease) In Cash During Period        | $ | (334                        | ) | $ | 108  | 

Financing Requirements

From inception to March 31, 2006 we have suffered cumulative
  losses in the amount of $997,425. We expect to continue to incur substantial
  losses as we continue the development of our business. Since our inception,
  we have funded operations through common stock issuances, related party loans,
  and the support of creditors in order to meet our strategic objectives. Our
  management believes that sufficient funding will be available to meet our business
  objectives, including anticipated cash needs for working capital, and is currently
  evaluating several financing options, including a public offering of securities.
  However, there can be no assurance that we will be able to obtain sufficient
  funds to continue the development of and, if successful, to commence the sale
  of, our products. As a result of the foregoing, our independent auditors believe
  that there exists substantial doubt about our ability to continue as a going
  concern.

We will require additional financing in order to complete our
plan of operation. There is no assurance that we will be able to obtain
additional financing if and when required. We anticipate that any additional
financing may be in the form of sales of additional shares of our common stock
which would result in dilution to our current shareholders.

We have reached a verbal agreement with BIG, a German company,
pursuant to which BIG has agreed to act as our agent for the purpose of locating
European placees for a proposed private placement of 40,000,000 units at a price
of $0.025 per unit for total potential proceeds of $1,000,000 (the Private
Placement). Under the terms of our verbal agreement, each unit to be issued
under the proposed Private Placement will consist of one share in our common
stock and one share purchase warrant entitling the warrant holder to purchase
one additional share of our common stock at a price of $0.05 per share. BIG is
to receive a commission of $100,000 for services provided in connection with the
proposed Private Placement. Although we have reached a verbal agreement with BIG
in respect of the proposed Private Placement, we have not yet formalized our
agreement with BIG. As a considerable period of time has passed without our
being able to reach a formalized agreement with BIG, there is a substantial
doubt that the proposed Private Placement will actually be completed. We do not
have any other financing arrangements in place.

OFF-BALANCE SHEET ARRANGEMENTS

We have no significant off-balance sheet arrangements that have
or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that are
material to stockholders.

6

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CRITICAL ACCOUNTING POLICIES

The preparation of financial statements in conformity with
United States generally accepted accounting principles requires our management
to make estimates and assumptions that affect the reported amount 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. Actual results could differ from those estimates.
Our management routinely makes judgments and estimates about the effects of
matters that are inherently uncertain.

We have identified certain accounting policies, described
below, that are most important to the portrayal of our current financial
condition and results of operation.

Foreign Currency Translation

Our functional currency is the U.S. dollar. Transactions in
foreign currency are translated into U.S. dollars as follows:

| | i)   | monetary items at the exchange rate prevailing at the
        balance sheet date;                       
| | ---- | --------------------------------------------------------------------------------------------------------
| | ii)  | non-monetary items at the historical exchange rate;
        and                                         
| | iii) | revenue and expense items at the average rate in effect
        during the applicable accounting period.

Translation adjustments resulting from this process are
recorded in Stockholders Equity as a component of Accumulated Other
Comprehensive Income (Loss).

Gains and losses arising on translation or settlement of
foreign currency denominated transactions or balances are recorded in the
Statement of Operations.

Convertible Notes Payable

During the year ended December 2003, we issued convertible
notes, maturing October 1, 2006, aggregating $260,000 and bearing interest of
10% per annum. The notes are convertible into common shares at the lesser of
$0.03 per share or 50% of the average trading price of our common shares for the
ten trading days prior to conversion. We may, at our option, elect to pay a
portion of the interest by issuing common stock.

In applying the provisions of Emerging Issues Task Force
Release No. 98-5 and 00-27, we recorded a discount on the convertible debentures
in the amount of $260,000. This discount is being accreted to interest expense
using the interest method over the life of the notes (three years). As the
effective interest rate, which is determined by dividing the actual interest
rate on the convertible debentures by the discounted debt amount, approaches
infinity, the interest expense to be recorded approximates the future cash
payments. Interest expense recorded relating to the accretion of the discount
for the year ended March 31, 2006 was $10,355 (2005 - $51). The remaining
discount on the convertible debentures as of March 31, 2006 was $246,605 (2005 -
$256,960).

During the quarter ended March 31, 2006, $6,411 (2004 - $6,411)
of interest expense was accrued and charged to the statement of operations. No
cash payments of interest were made during the respective periods.

Interest of $64,965 on these convertible notes payable has
accrued to March 31, 2006 (December 31, 2005 - $58,554).

7

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RISKS AND UNCERTAINTIES

We may not be able to continue our business as a going
concern.

We have suffered recurring losses and net cash outflows since
our inception and we expect to continue to incur substantial losses to complete
the development of our business.

Our ability to continue as a going concern is dependent upon
our ability to obtain additional financing, restructure our debt, and reduce our
costs. We are currently in the process of identifying sources of additional
financing, negotiating changes to our debt structure and evaluating our
strategic options. However, there are no assurances that these plans can be
accomplished on satisfactory terms, or at all, or that they will provide
sufficient cash to fund our operations, pay the principal of, and interest on,
our indebtedness, fund our other liquidity needs or permit us to refinance our
indebtedness. Our inability to obtain additional financing, restructure our
indebtedness, or reduce our costs would have a material adverse effect on our
financial condition, results of operations and ability to satisfy our
obligations, and may result in our pursuing a restructuring of our indebtedness
either on a consensual basis or under the provisions of bankruptcy legislation,
or liquidating our business and operations. Further, our inability to obtain
additional financing or restructure our indebtedness, or our pursuing a
restructuring of our indebtedness either on a consensual basis or under the
provisions of bankruptcy legislation, may result in our stockholders losing all
or a material portion of their investment in our securities.

We require additional financing to continue our plan of
operation.

Our plan of operation calls for significant expenses in
connection with the development of the Cool Can Technology and the Cool Can
product. Our current operating funds are insufficient to complete our plan of
operation which will require an estimated $460,000 to be spent over the next 12
months developing and marketing a prototype of the Cool Can product in order to
accomplish our goals. As of March 31, 2006, we had cash of $1,366. Therefore, we
will need to obtain additional financing in order to complete our prototype
development. We will also require additional financing if the costs of the Cool
Can Technology and Cool Can product development are greater than anticipated.
There is no assurance that actual cash requirements will not exceed our
estimates. In particular, additional capital may be required in the event that:

| | 1. | we incur unexpected costs in completing the development
      of a prototype or encounter any unexpected technical or other
      difficulties;
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                
| | 2. | we incur delays and additional expenses as a result of
      technology failure;                                                               
| |    |                                                                                                                                                
| | 3. | we are unable to create a substantial market for the Cool
      Can product; or                                                                
| |    |                                                                                                                                                
| | 4. | we incur any significant unanticipated
  expenses.                                                                                             

The occurrence of any of the aforementioned events could
adversely affect our ability to meet our plan of operation.

If we are unable to obtain additional financing in the amounts
and on terms deemed acceptable to us, our business and future success may be
adversely affected.

Risks Related To The Protection Of Intellectual Property
Rights.

Ownership of patents granted for the Cool Can Technology
resides with NorPac, who has licensed worldwide exclusivity to make, use and
sell products based on such patent applications to us in consideration of
license fees and royalties payable to NorPac. We are relying on the patent

8

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applications of NorPac to protect our core technologies and
products from competition. Under the License Agreement between us and NorPac, we
are required to prosecute, within the Exclusive Region, any possible
infringements upon NorPacs patents relating to the Cool Can Technology.

A portion of NorPacs proprietary technology depends upon
unpatented trade secrets and know-how. Without the patent protection we would be
vulnerable to competition from third parties who could develop competing
products through reverse engineering. Also, without the patent protection,
competitors may independently develop substantially equivalent technology or
otherwise gain access to our trade secrets, know-how or other proprietary
information.

Our product development program may not be
successful.

If we complete development of a prototype of the Cool Can
product there is no assurance that the prototype will work as expected. In the
event we successfully develop a prototype, there is no assurance that we will be
able to manufacture the prototype at a reasonable cost. Even if we are able to
manufacture the prototype at a reasonable cost, there is no assurance that the
price of the Cool Can product will not be excessive, precluding the product from
generating sufficient consumer or market acceptance.

If we are unable to achieve market acceptance for our
products, we will be unable to build our business.

To date, we have not entered into any sub-licensing or other
agreements with respect to the Cool Can Technology licensed by us. Our success
will depend on the acceptance of the Cool Can Technology by the beverage
industry, as well as by related businesses and the general public. Achieving
such acceptance will require significant research and development investment.
The Cool Can Technology generally, and the proposed Cool Can product
specifically, may not achieve widespread acceptance by businesses in general, or
by major beverage suppliers, beverage manufacturers or agents thereof, which
could limit our ability to develop and expand our business. The market for
self-chilling beverages is relatively new and is evolving. Our ability to
generate revenue in the future depends on the acceptance by both our customers
and beverage manufacturers in general. The adoption of the Cool Can Technology
could be hindered by the perceived costs of this new technology to consumers and
beverage brand owners. Accordingly, in order to achieve commercial acceptance,
we will have to educate prospective customers, including large, established
beverage manufacturers, about the uses and benefits of the Cool Can Technology.
If these efforts fail, or if the Cool Can Technology does not achieve commercial
acceptance, our business could be harmed.

We have a limited operating history.

We have a relatively short operating history and we are
involved in a rapidly evolving and unpredictable industry. As of March 31, 2006
we had a working capital deficit of $356,030. We will need to generate
significant revenues to achieve profitability, which may not occur. We expect
operating expenses to increase as a result of the further implementation of our
business plan. Even if we achieve profitability, we may be unable to sustain or
increase profitability on a quarterly or annual basis in the future. It is
possible that we will never achieve profitability.

We have yet to earn revenues, and, because our ability to
sustain new operations is dependent on our ability to raise financing, our
accountants have expressed a substantial doubt about our ability to continue as
a going concern.

Since our inception, we have suffered recurring losses and net
cash out flows from our activities. To date, we have funded our activities
through issuances of our common stock, related party loans and the support of
creditors. There are no assurances that we will be able to obtain financing
sufficient to

9

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support our ongoing activities. As a result, Telford Sadovnick,
PLLC, our independent auditors, has expressed a substantial doubt about our
ability to continue as a going concern.

ITEM 3. CONTROLS AND PROCEDURES.

Under the supervision and with the participation of our
management, including the Chief Executive Officer and Chief Financial Officer,
we have evaluated the effectiveness of our disclosure controls and procedures as
required by Exchange Act Rule 13a-15(b) as of the end of the period covered by
this report. Based on that evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that these disclosure controls and procedures
are effective.

There were no changes in our internal control over financial
reporting during the quarter ended March 31, 2006 that have materially affected,
or are reasonably likely to materially affect, our internal control over
financial reporting.

10

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PART II - OTHER INFORMATION

|ITEM 1. | LEGAL PROCEEDINGS.
|------- | ------------------

None.

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

Effective January 14, 2006, we agreed to issue 500,000 shares
  of our common stock to NorPac in consideration for NorPacs agreement to
  extend the date upon which the Minimum Royalty Payments are to commence under
  the License Agreement. These shares were sold to NorPac pursuant to the exemption
  from registration contained in Section 4(2) of the Securities Act of 1933. NorPac
  is a principal stockholder of the Company, beneficially owning greater than
  10% of our common stock and, as such, has (a) the ability to understand the
  risks of an investment in our common stock, and (b) access to the type of information
  that would normally be contained in a registration statement. In addition, Bruce
  Leitch, the President and sole director of NorPac, is a close personal friend
  and close business associate of John Boschert, the sole executive officer and
  sole director of the Company, and is a sophisticated person with extensive experience
  in investing in similar types of securities.

|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------

None.

|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
|------- | ----------------------------------------------------

None.

|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

None.

11

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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

|Exhibit |                                                                                                                                                                                                     
|------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  | Description of
      Exhibit                                                                                                                                                                        
|3.1     | Articles of Incorporation.(1)                                                                                                                                                                       
|3.2     | Bylaws.(1)                                                                                                                                                                                          
|10.1    | Exclusive License Agreement dated June 5, 2002
      with Cool Can Technologies, Inc.(2)                                                                                                            
|10.2    | Exclusive License Agreement dated November 30, 2003 with Cool
      Can Technologies, Inc.(3)                                                                                                       
|10.3    | Extension Agreement dated January 16, 2006
      with NorPac Technologies, Inc.(4)                                                                                                                  
|31.1    | Certification of Principal Executive
      Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.                                                     
|32.1    | Certification of
      Principal Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
      Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
      of 2002.

| | (1) | Filed as an Exhibit to our Form SB-2 Registration
      Statement originally filed with the SEC on March 30, 2000.
| | --- | ------------------------------------------------------------------------------------------------------------------
| | (2) | Filed as an Exhibit to our Current Report on Form 8-K
      filed on June 20, 2004.                               
| | (3) | Filed as an Exhibit to our Current Report on Form 8-K
      filed on January 9, 2004.                             
| | (4) | Filed as an Exhibit to our Current Report on Form 8-K
      filed on January 19, 2006.                            

REPORTS ON FORM 8-K

No reports on Form 8-K were filed by us during our fiscal
quarter ended March 31, 2006 and from the end of that fiscal quarter to the date
of filing of this Quarterly Report.

12

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SIGNATURES

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

|      |                    |     | BALSAM VENTURES, INC.                            
|----- | ------------------ | --- | -------------------------------------------------
|      |                    |     |                                                  
|      |                    |     |                                                  
|      |                    |     |                                                  
|Date: | May 11,
      2006 | By: | /s/ John
      Boschert                          
|      |                    |     | JOHN BOSCHERT                                    
|      |                    |     | Chief Executive Officer, Chief Financial Officer,
|      |                    |     | President, Secretary and Treasurer               
|      |                    |     | (Principal Executive Officer and                 
|      |                    |     | Principal Financial Officer)                     

---