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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 September 30, 2006

[   ] Transition Report Under Section 13 Or 15(d) Of
The Securities Exchange Act Of 1934

For the transition period ________ to ________

COMMISSION FILE NUMBER**000-32011**

BALSAM VENTURES, INC.(Exact name of small business issuer as specified in its
charter)

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

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

(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 12 months
(or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [X]No [   ]

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
November 10, 2006, the Registrant had 36,226,663 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

SEPTEMBER 30, 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)     

|                                                         |   | SEPTEMBER 30 |   |   | DECEMBER 31 |  
|-------------------------------------------------------- | - | ------------ | - | - | ----------- | -
|                                                         |   | 2006         |   |   | 2005        |  
|                                                         |   |              |   |   |             |  
|ASSETS                                                   |   |              |   |   |             |  
|                                                         |   |              |   |   |             |  
|Current                                                  |   |              |   |   |             |  
|Cash                                                     | $ | 441          |   | $ | 1,700       |  
|                                                         |   |              |   |   |             |  
|LIABILITIES                                              |   |              |   |   |             |  
|                                                         |   |              |   |   |             |  
|Current                                                  |   |              |   |   |             |  
|Accounts payable
      and accrued liabilities           | $ | 422,259      |   | $ | 310,949     |  
|                                                         |   |              |   |   |             |  
|Convertible Notes Payable Net Of Discount
      On Notes |   |              |   |   |             |  
|Attributable
      To Beneficial Conversion Feature      |   | 260,000      |   |   | 3,040       |  
|                                                         |   | 682,259      |   |   | 313,989     |  
|                                                         |   |              |   |   |             |  
|Commitments And Contractual Obligations(Note 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 September 30, 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   |   | (1,309,818   | ) |   | (910,289    | )
|                                                         |   | (681,818     | ) |   | (312,289    | )
|                                                         |   |              |   |   |             |  
|                                                         | $ | 441          |   | $ | 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 |  |   | NINE MONTHS ENDED |   |   | 1999 TO      | 
|                            |   | SEPTEMBER 30       |  |   | SEPTEMBER 30      |   |   | SEPTEMBER 30 | 
|                            |   | 2006               |  |   | 2005              |   |   | 2006         |  |   | 2005       |   |   | 2006      | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Expenses                    |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Accretion of discount on    |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|convertible
      notes     | $ | 200,985            |  | $ | 445               |   | $ | 256,960      |  | $ | 690        |   | $ | 260,000   | 
|Bank charges and interest   |   | 6,643              |  |   | 6,610             |   |   | 19,720       |  |   | 19,611     |   |   | 79,412    | 
|Consulting services         |   | 15,000             |  |   | 15,000            |   |   | 45,000       |  |   | 45,000     |   |   | 390,947   | 
|Domain registration         |   | -                  |  |   | -                 |   |   | -            |  |   | -          |   |   | 436       | 
|Foreign exchange
      loss |   | 38                 |  |   | 331               |   |   | 272          |  |   | 1,088      |   |   | 1,467     | 
|License payment             |   | -                  |  |   | -                 |   |   | 50,000       |  |   | -          |   |   | 313,000   | 
|Office and sundry           |   | 724                |  |   | 908               |   |   | 1,981        |  |   | 2,390      |   |   | 13,927    | 
|Professional fees           |   | 5,582              |  |   | 18,827            |   |   | 23,517       |  |   | 39,666     |   |   | 214,408   | 
|Regulatory                  |   | 552                |  |   | 874               |   |   | 1,894        |  |   | 1,857      |   |   | 12,897    | 
|Stock transfer services     |   | 25                 |  |   | (40               | ) |   | 185          |  |   | (40        | ) |   | 5,550     | 
|Travel                      |   | -                  |  |   | -                 |   |   | -            |  |   | -          |   |   | 9,099     | 
|Write off of developmental  |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|costs software              |   | -                  |  |   | -                 |   |   | -            |  |   | -          |   |   | 8,675     | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Net Loss For The Period     | $ | 229,549            |  | $ | 42,955            |   | $ | 399,529      |  | $ | 110,262    |   | $ | 1,309,818 | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Net Loss Per Share, basic   |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|and diluted                 | $ | -                  |  | $ | -                 |   | $ | -            |  | $ | -          |   |   |           | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|                            |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Weighted Average Number     |   |                    |  |   |                   |   |   |              |  |   |            |   |   |           | 
|Of Shares Outstanding       |   | 26,000,000         |  |   | 25,500,000        |   |   | 25,976,190   |  |   | 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)     

|                                                         |   |                   |   |   |              |   |   | INCEPTION  |  
|-------------------------------------------------------- | - | ----------------- | - | - | ------------ | - | - | ---------- | -
|                                                         |   |                   |   |   |              |   |   | AUGUST 17  |  
|                                                         |   | NINE MONTHS ENDED |   |   | 1999 TO      |  
|                                                         |   | SEPTEMBER 30      |   |   | SEPTEMBER 30 |  
|                                                         |   | 2006              |   |   | 2005         |   |   | 2006       |  
|                                                         |   |                   |   |   |              |   |   |            |  
|Cash provided by (used in):                              |   |                   |   |   |              |   |   |            |  
|Operating Activities                                     |   |                   |   |   |              |   |   |            |  
|Net loss for the
      period                            | $ | (399,529          | ) | $ | (110,262     | ) | $ | (1,309,818 | )
|Items not involving cash:                                |   |                   |   |   |              |   |   |            |  
|Write off of software development costs                  |   | -                 |   |   | -            |   |   | 8,675      |  
|Interest accrued on convertible notes payable            |   | 19,446            |   |   | 19,464       |   |   | 78,000     |  
|Shares issued to extend license agreement                |   | 30,000            |   |   | -            |   |   | 293,000    |  
|Accretion of discount on convertible debentures          |   | 256,960           |   |   | 690          |   |   | 260,000    |  
|Changes in non-cash
      operating working capital:     |   |                   |   |   |              |   |   |            |  
|Change in accounts payable
      and accrued liabilities |   | 91,864            |   |   | 95,806       |   |   | 604,259    |  
|                                                         |   | (1,259            | ) |   | 5,698        |   |   | (65,884    | )
|                                                         |   |                   |   |   |              |   |   |            |  
|Investing Activity                                       |   |                   |   |   |              |   |   |            |  
|Software development costs                               |   | -                 |   |   | -            |   |   | (8,675     | )
|                                                         |   |                   |   |   |              |   |   |            |  
|Financing Activity                                       |   |                   |   |   |              |   |   |            |  
|Issuance of common stock                                 |   | -                 |   |   | -            |   |   | 75,000     |  
|                                                         |   |                   |   |   |              |   |   |            |  
|Increase (decrease) in Cash                              |   | (1,259            | ) |   | 5,698        |   |   | 441        |  
|                                                         |   |                   |   |   |              |   |   |            |  
|Cash, Beginning of Period                                |   | 1,700             |   |   | 1,033        |   |   | -          |  
|                                                         |   |                   |   |   |              |   |   |            |  
|Cash, End of Period                                      | $ | 441               |   | $ | 6,731        |   | $ | 441        |  
|                                                         |   |                   |   |   |              |   |   |            |  
|Supplemental Disclosure of Cash Flow Information         |   |                   |   |   |              |   |   |            |  
|Interest paid                                            | $ | 44                |   | $ | 147          |   | $ | 1,110      |  
|Income taxes paid                                        |   | -                 |   |   | -            |   |   | -          |  

Non-Cash Financing and Investing Activities

During the nine months ended September 30, 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
|                             
|SEPTEMBER 30, 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 financial position and results of operations of Balsam Ventures
  Inc. (the Company) for the periods presented. The unaudited financial
  information should be read in conjunction with the Companys audited financial
  statements and notes thereto included in the Companys Form 10-KSB 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-KSB for the fiscal year
  ended December 31, 2005, has been omitted. The results of operations for the
  nine-month period ended September 30, 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) | Organization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company was incorporated in the State of Nevada,
        U.S.A., on August 17, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | b) | Development Stage Activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company currently plans to raise funds to develop,
        evaluate, test, and if technological feasibility is then established,
        commercialize and exploit the self-chilling beverage container technology
        that it acquired in 2004. There can be no assurance that the Company will
        be successful in completing product development, establishing and defending
        related intellectual property, demonstrating necessary safety standards,
        and achieving scale economies. The Company has not generated any revenue
        to date.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | The Company is in the development stage. Recovery of
        its assets is dependent upon future events, the outcome of which is indeterminable.
        In addition, successful completion of the Companys development program
        and its transition, ultimately to the attainment of profitable operations
        is dependent upon obtaining adequate financing to fulfil its development
        activities and achieve a level of sales adequate to support its cost structure.                                                                                    
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | c) | Going Concern                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |    | These financial statements have been prepared on a going
        concern basis which contemplates that the Company will continue in operation
        for the foreseeable future and will be able to realize its assets and
        discharge its liabilities in the normal course of business.                                                                                                                                                                                                                                                                                

F-5

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|SEPTEMBER 30, 2006           
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|2. | NATURE OF BUSINESS AND ABILITY TO CONTINUE OPERATIONS(Continued)
|-- | ----------------------------------------------------------------

| | c) | Going Concern (Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |    | Since inception, the Company has suffered recurring
        losses and net cash outflows from development stage activities. The Company
        expects to continue to incur substantial losses to complete the development
        of its business. Since its inception, the Company has funded its activities
        through common stock issuances, related party loans, and the support of
        creditors in order to meet its strategic objectives. Management believes
        that sufficient funding will be available to meet its 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 the Company will be able to obtain
        sufficient funds to continue development and, if successful, to commence
        the sale of its products under development. As a result of the foregoing,
        there exists substantial doubt about the Companys ability to continue
        as a going concern. These financial statements do not include any adjustments
        that might result from the outcome of this uncertainty.

|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
|                             
|SEPTEMBER 30, 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 September 30, 2006 was $200,985 (2005
  - $445). The remaining discount on the convertible debentures as of September
  30, 2006 was $Nil (December 31, 2005 - $256,960).

During the quarter ended September 30,
  2006, $6,553 (2005 -$6,571) 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 $78,000 on these convertible
  notes payable has accrued to September 30, 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) | issue 5,000,000 restricted shares of its common
        stock (issued in 2004);
| | -- | -------------------------------------------------------------------------------
| |    |                                                                                
| | b) | pay royalties on the following basis:                                          
| |    |                                                                                
| |    | i)                                                                             
| |    | ii)                                                                            
| |    | iii)                                                                           

F-7

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|SEPTEMBER 30, 2006           
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|4. | COMMITMENTS AND CONTRACTUAL OBLIGATIONS 
      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) | issue 500,000 shares of its common stock (issued in
        2006);
| | -- | ------------------------------------------------------------------
| |    |                                                                   
| | b) | pay $20,000 on or before January 31, 2006 (paid 2006).            

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 September 30,
  2006, directors compensation totalled $Nil (2005 - $Nil);

As at September 30, 2006, accounts payable
  includes $9,208 (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 $Nil (December 31, 2005 - $20,000) due to a former director
  and officer.

F-8

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|BALSAM VENTURES, INC.        
|-----------------------------
|(A Development Stage Company)
|                             
|NOTES TO FINANCIAL STATEMENTS
|                             
|SEPTEMBER 30, 2006           
|(Unaudited)                  
|(Stated in U.S. Dollars)     

|6. | SUBSEQUENT EVENT
|-- | ----------------

On October 1, 2006, all noteholders converted
  their convertible notes in the amount of $260,000. In accordance with the convertible
  note agreements, the Company issued 8,666,663 common shares for the conversion
  and an additional 1,560,000 common shares to satisfy the accrued interest payable
  on the notes.

.

F-9

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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 United States 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 nine
month period ended September 30, 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.

RECENT CORPORATE DEVELOPMENTS

The following recent corporate developments have occurred since
the end of our fiscal year ended December 31, 2005:

|1. | Effective on October 1, 2006, we issued an aggregate of
      10,226,663 shares of our common stock to holders of the 10% convertible
      notes (the Convertible Notes) that we issued in December, 2003 as
      payment in full of the principal and interest owing thereunder. 8,666,663
      shares of our common stock were issued to the Convertible Note holders on
      account of the principal amount owing on the Convertible Notes at a
      conversion price of $0.03 per share. An additional 1,560,000 shares of our
      common stock were issued on account of interest owing on the Convertible
      Notes at a conversion price of $0.05 per share. The shares issued to the
      Convertible Note holders were issued in reliance upon the provisions of
      Regulation S promulgated under the Securities Act of 1933 (the Securities
      Act).
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

3

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|2. | In June and July of 2006, we entered into ongoing
      discussions with a German brewery and packaging company to sublicense the
      Cool Can Technology. Part of these discussions entail the development of a
      limited number of prototypes of the Cool Can Technology to be used and
      examined by the brewery company. Samples of some components of the
      chilling mechanism were sent to Germany in August, 2006 and are being
      examined by the brewery company. Our negotiations with respect to this
      sublicense are ongoing. No definitive agreements have been reached and
      there are no assurances that a definitive agreement will be entered into
      with the Germany brewery company.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

PLAN OF OPERATION

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

|(1) | We plan to continue to seek sub-licensing agreements to
      finance approximately $300,000 for the development of the Cool Can
      Technology. We are currently in discussions with a German brewery and
      packaging company to sublicense the Cool Can Technology. Samples of the
      chilling mechanism have been sent to Germany for their examination,
      however no definitive agreements with respect to this sublicense have been
      reached and there are no assurances that a definitive agreement will be
      entered into.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | Regardless of the outcome of our discussions with the
      Germany brewery company, 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)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | (b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|    | (c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|(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

4

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(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

Third Quarter and Nine Months Summary

Third Quarter Ended September 30
    
    Nine Months Ended September 30Percentage
    
    
    
    PercentageIncrease /
    
    
    
    Increase /2006
    2005
    (Decrease)
    
    2006
    2005
    (Decrease)Revenue
    $Nil
    $Nil
    n/a
    
    $Nil
    $Nil
    n/aExpenses
    (229,549)
    (42,955)
    434.4%
    
    (399,529)
    (110,262)
    262.3%Net Income (Loss)
    $(229,549)
    $(42,955)
    434.4%
    
    $(399,529)
    $(110,262)
    262.3%


Revenue

We did not earn any revenues during the quarter ended September
30, 2006. We do not anticipate earning revenues until we are successful in
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 September 30, 2006
and 2005 consisted of the following:

Third Quarter Ended September 30
    
    Nine Months Ended September 30Percentage
    
    
    
    PercentageIncrease /
    
    
    
    Increase /2006
    2005
    (Decrease)
    
    2006
    2005
    (Decrease)Accretion of Discount on
      Convertible Notes
    $200,985
    $445
    45,065.2%
    
    $256,960
    $690
    37,140.6%Bank Charges and Interest
    6,643
    6,610
    0.5%
    
    19,720
    19,611
    0.6%Consulting Services
    15,000
    15,000
    N/A
    
    45,000
    45,000
    N/AForeign Exchange Loss
    38
    331
    (88.5%)
    
    272
    1,088
    (75%)License Payment
    -
    -
    N/A
    
    50,000
    -
    100%Office and Sundry
    724
    908
    (20.3%)
    
    1,981
    2,390
    (17.1%)


5

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Professional Fees
    5,582
    18,827
    (70.4%)
    
    23,517
    39,666
    (40.7%)Regulatory
    552
    874
    (36.8%)
    
    1,894
    1,857
    2.0%Stock Transfer Services
    25
    (40)
    (162.5%)
    
    185
    (40)
    (562.5%)Total Operating Expenses
    $229,549
    $42,955
    434.4%
    
    $399,529
    $110,262
    262.3%


We recorded operating expenses in the amount of $399,529 for
the nine month period ended September 30, 2006 as compared to $110,262 for the
same period ended in 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 under
our license agreement with NorPac (the License Agreement), and the accretion
of the discount on the convertible notes (the Convertible Notes) that we
issued in October, 2003. The professional fees in the amount of $23,517 were
incurred in meeting our ongoing reporting obligations under the Securities
Exchange Act of 1934. The increases in our overall expenses for the nine month
period ended September 30, 2006 were 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 Notes. The principal and interest owing on the
Convertible Notes was paid in full by the issuance of an aggregate of 10,226,663
shares of our common stock effective on October 1, 2006 in accordance with the
terms of those notes.

LIQUIDITY AND FINANCIAL CONDITION

|Working Capital           |                             |                            |                      
|------------------------- | --------------------------- | -------------------------- | ---------------------
|                          |                             |                            | Percentage           
|                          | At
      September 30, 2006 | At
      December 31, 2005 | Increase / (Decrease)
|Current Assets            | $441                        | $1,700                     | (74.1%)              
|Current Liabilities       | (422,259)                   | (310,949)                  | 35.8%                
|Working Capital (Deficit) | $(421,818)                  | $(309,249)                 | 36.4%                

We had $441 cash on hand as at September 30, 2006 as compared
to cash of $1,700 as at December 31, 2005. Our working capital deficit increased
by 36.4% during the past nine 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                                           |                                |       
|---------------------------------------------------- | ------------------------------ | ------
|                                                     | Nine Months Ended September 30
|                                                     | 2006                           | 2005  
|Cash Flows From (Used In)
      Operating Activities | $(1,259)                       | $5,698
|Cash Flows From (Used In) Investing
      Activities | -                              | -     
|Cash Flows From (Used In)
      Financing Activities | -                              | -     
|Net Increase (Decrease) In Cash During Period        | $(1,259)                       | $5,698

During the year ended December 31, 2003, we issued the
Convertible Notes with principal amounts totaling $260,000, maturing on October
1, 2006 and bearing interest at a rate of 10% per annum. Effective on October 1,
2006 we converted the principal and interest on the Convertible Notes into an
aggregate of 10,226,663 shares of our common stock. In accordance with the terms
of the convertible notes, the principal on the convertible notes was converted
at a rate of $0.03 per share and interest owing on the convertible notes was
converted at a rate of $0.05 per share. The shares issued to the

6

---

convertible note holders were issued in reliance upon the
provisions of Regulation S promulgated under the Securities Act.

Financing Requirements

From inception to September 30, 2006, we have suffered
cumulative losses in the amount of $1,309,818. 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 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.

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.

7

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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 Nos. 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 quarter ended September 30, 2006 was $200,985 (2005 -
$445). The remaining discount on the convertible debentures as of September 30,
2006 was $Nil (2005 - $256,960).

During the quarter ended September 30, 2006, $6,553 (2005 -
$6,571) 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 $78,000 on these convertible notes payable has
accrued to September 30, 2006 (December 31, 2005 - $58,554).

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

8

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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
twelve months developing and marketing a prototype of the Cool Can product in
order to accomplish our goals. As of September 30, 2006, we had $441 cash on
hand. Therefore, we 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 continue 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.

We face 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
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.

Even if we complete development of a prototype of the Cool Can
product, there is no assurance that the prototype will work as expected.
Furthermore, in the event that 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.

9

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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 September 30, 2006,
  we had a working capital deficit of $421,818. 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
independent auditors 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 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 has concluded that these disclosure controls and procedures
are effective.

There were no changes in our internal control over financial
reporting during the quarter ended September 30, 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.

During the year ended December 31, 2003, we issued the
Convertible Notes with principal amounts totaling $260,000, maturing on October
1, 2006 and bearing interest at a rate of 10% per annum. Effective on October 1,
2006 we converted the principal and interest on the Convertible Notes into an
aggregate of 10,226,663 shares of our common stock. In accordance with the terms
of the convertible notes, the principal on the convertible notes was converted
at a rate of $0.03 per share and interest owing on the convertible notes was
converted at a rate of $0.05 per share. The shares issued to the convertible
note holders were issued in reliance upon the provisions of Regulation S
promulgated under the Securities Act. We did not engage in a distribution of
this offering in the United States. The convertible note holders were not US
persons as defined in Regulation S and provided representations indicating that
they were acquiring our securities for investment purposes only and not with a
view towards distribution. No underwriting discounts or commissions were
involved.

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.

|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    |  | Amendment #1
        to Exclusive License Agreement dated September 2, 2002. (3)                                                                                                                              
|        |  |                                                                                                                                                                                                               
|10.3    |  | Exclusive License
        Agreement dated November 30, 2003 with Cool Can Technologies, Inc.(4)                                                                                                               
|        |  |                                                                                                                                                                                                               
|10.4    |  | Extension Agreement
        dated January 16, 2006 with NorPac Technologies, Inc.(6)                                                                                                                          
|        |  |                                                                                                                                                                                                               
|14.1    |  | Code of Ethics.
        (5)                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                               
|31.1    |  | Certification
        of Principal Executive Officer and Principal Financial Officer pursuant
        to Section 302 of the Sarbanes-Oxley Act of 2002.                                                       
|        |  |                                                                                                                                                                                                               
|32.1    |  | Certification
        of Principal Executive Officer and Principal 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, 2002.                               
|(3) | Filed as an Exhibit to our Quarterly Report on Form
      10-QSB filed on November 14, 2002.                      
|(4) | Filed as an Exhibit to our Current Report on Form 8-K
      filed on January 9, 2004.                             
|(5) | Filed as an Exhibit to our Annual Report on Form 10-KSB
      filed on May 17, 2005.                              
|(6) | Filed as an Exhibit to our Current Report on Form 8-K
      filed on January 19, 2006.                            

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:
    November 13, 2006
    By:
    /s/ John BoschertJOHN BOSCHERTChief Executive Officer, Chief
      Financial Officer,President, Secretary and
      Treasurer(Principal Executive Officer andPrincipal Financial Officer)


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