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**UNITED STATESSECURITIES AND EXCHANGE COMMISSION** Washington, 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, 2004

 ̈ 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. 
  (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)                                    |                                     
|                                                 |                                     
|                                                 |                                     
|SUITE 200, 20 EAST FOOTHILL BOULEVARD            |                                     
|ARCADIA, CALIFORNIA                              | 91006                               
|(Address of principal executive offices)         | (Zip Code)                          

(626) 574-2911 
  Issuer's telephone number

SUITE 208, 20 EAST FOOTHILL BOULEVARD ARCADIA, CALIFORNIA 91006 
  Former name, former address and former fiscal year, if changed since last report

Check whether the issuer (1) filed all reports required to
  be filed by Section 13 or 15(d) of the 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 ̈

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
  15, 2004, the Registrant had 25,500,000 shares of common stock issued and outstanding.

Transitional Small Business Disclosure Format (check one):
  Yes  ̈   Nox

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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, 2004(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 |  
|------------------------------------------------------ | - | ------------ | - | - | ----------- | -
|                                                       |   | 2004         |   |   | 2003        |  
|                                                       |   |              |   |   |             |  
|ASSETS                                                 |   |              |   |   |             |  
|                                                       |   |              |   |   |             |  
|Current                                                |   |              |   |   |             |  
|Cash                                                   | $ | 165          |   | $ | 23          |  
|                                                       |   |              |   |   |             |  
|License Agreement(Note 4)                              |   | -            |   |   | -           |  
|                                                       |   |              |   |   |             |  
|                                                       | $ | 165          |   | $ | 23          |  
|                                                       |   |              |   |   |             |  
|LIABILITIES                                            |   |              |   |   |             |  
|                                                       |   |              |   |   |             |  
|Current                                                |   |              |   |   |             |  
|Accounts payable                                       | $ | 110,306      |   | $ | 44,620      |  
|                                                       |   |              |   |   |             |  
|Convertible Notes Payable(Note 6)                      |   | 286,000      |   |   | 266,500     |  
|                                                       |   | 396,306      |   |   | 311,120     |  
|                                                       |   |              |   |   |             |  
|SHAREHOLDER'S DEFICIENCY                               |   |              |   |   |             |  
|                                                       |   |              |   |   |             |  
|Share Capital                                          |   |              |   |   |             |  
|Authorized:                                            |   |              |   |   |             |  
|100,000,000
      common shares, par value with $0.001 |   |              |   |   |             |  
|per share                                              |   |              |   |   |             |  
|                                                       |   |              |   |   |             |  
|Issued and outstanding:                                |   |              |   |   |             |  
|25,500,000
      common shares at September 30, 2004   |   |              |   |   |             |  
|and 20,500,000 common shares at December 31,           |   |              |   |   |             |  
|2003                                                   |   | 25,500       |   |   | 20,500      |  
|                                                       |   |              |   |   |             |  
|Additional paid-in capital                             |   | 312,500      |   |   | 117,500     |  
|                                                       |   |              |   |   |             |  
|Deficit Accumulated During The Development Stage       |   | (734,141     | ) |   | (449,097    | )
|                                                       |   | (396,141     | ) |   | (311,097    | )
|                                                       |   |              |   |   |             |  
|                                                       | $ | 165          |   | $ | 23          |  

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 |  
|                      |   | 2004               |   |   | 2003              |  |   | 2004         |   |   | 2003       |  |   | 2004      | 
|                      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Expenses              |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Bank charges and      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|interest              | $ | 6,590              |   | $ | -                 |  | $ | 19,804       |   | $ | -          |  | $ | 26,882    | 
|Consulting services   |   | 15,000             |   |   | 33,000            |  |   | 45,000       |   |   | 99,000     |  |   | 270,947   | 
|Domain registration   |   | -                  |   |   | -                 |  |   | -            |   |   | 185        |  |   | 436       | 
|Professional fees     |   | 8,791              |   |   | 3,052             |  |   | 17,938       |   |   | 15,181     |  |   | 131,641   | 
|Office and sundry     |   | 415                |   |   | 327               |  |   | 432          |   |   | 378        |  |   | 9,657     | 
|Regulatory            |   | 365                |   |   | -                 |  |   | 1,805        |   |   | -          |  |   | 8,399     | 
|Stock transfer        |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|services              |   | -                  |   |   | 380               |  |   | 65           |   |   | 459        |  |   | 5,405     | 
|Travel                |   | -                  |   |   | -                 |  |   | -            |   |   | -          |  |   | 9,099     | 
|Write off of software |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|development           |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|costs                 |   | -                  |   |   | -                 |  |   | -            |   |   | -          |  |   | 8,675     | 
|License extension     |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|payment               |   | -                  |   |   | -                 |  |   | -            |   |   | -          |  |   | 63,000    | 
|License payment       |   | -                  |   |   | -                 |  |   | 200,000      |   |   | -          |  |   | 200,000   | 
|                      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Net Loss For The      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Period                | $ | 31,161             |   | $ | 36,759            |  |   | 285,044      |   | $ | 115,203    |  | $ | 734,141   | 
|                      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Net Loss Per Share    | $ | (0.01              | ) | $ | 0.01              |  | $ | (0.01        | ) | $ | 0.01       |  |   |           | 
|                      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Weighted Average      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Number Of Shares      |   |                    |   |   |                   |  |   |              |   |   |            |  |   |           | 
|Outstanding           |   | 25,500,000         |   |   | 20,200,000        |  |   | 23,072,993   |   |   | 20,200,000 |  |   |           | 

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 |  
|                                              |   | 2004              |   |   | 2003         |   |   | 2004      |  
|                                              |   |                   |   |   |              |   |   |           |  
|Cash Flows From Operating Activities          |   |                   |   |   |              |   |   |           |  
|Net loss for the period                       | $ | (285,044          | ) | $ | (115,203     | ) | $ | (734,141  | )
|                                              |   |                   |   |   |              |   |   |           |  
|Adjustments To Reconcile Net Loss To          |   |                   |   |   |              |   |   |           |  
|Net Cash Used By Operating Activities         |   |                   |   |   |              |   |   |           |  
|Write off of software development
      costs |   | -                 |   |   | -            |   |   | 8,675     |  
|Shares issued to extend license               |   |                   |   |   |              |   |   |           |  
|agreement                                     |   | -                 |   |   | -            |   |   | 63,000    |  
|Shares issued for license                     |   | 200,000           |   |   | -            |   |   | 200,000   |  
|Change in accounts payable                    |   | 85,186            |   |   | 115,158      |   |   | 396,306   |  
|                                              |   | 142               |   |   | (45          | ) |   | (66,160   | )
|                                              |   |                   |   |   |              |   |   |           |  
|Cash Flows From Investing Activity            |   |                   |   |   |              |   |   |           |  
|Software development costs                    |   | -                 |   |   | -            |   |   | (8,675    | )
|                                              |   |                   |   |   |              |   |   |           |  
|Cash Flows From Financing Activity            |   |                   |   |   |              |   |   |           |  
|Share capital                                 |   | -                 |   |   | -            |   |   | 75,000    |  
|                                              |   |                   |   |   |              |   |   |           |  
|Increase (Decrease) In Cash                   |   | 142               |   |   | (45          | ) |   | 165       |  
|                                              |   |                   |   |   |              |   |   |           |  
|Cash, Beginning Of Period                     |   | 23                |   |   | 45           |   |   | -         |  
|                                              |   |                   |   |   |              |   |   |           |  
|Cash, End Of Period                           | $ | 165               |   | $ | -            |   | $ | 165       |  

F-4

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BALSAM VENTURES INC.(A Development Stage Company)

STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)

SEPTEMBER 30, 2004(Unaudited) 
  (Stated in U.S. Dollars)

|                             | COMMON STOCK |  |   |        |  |   |            |   |   |               |   |   |          |  
|---------------------------- | ------------ |  | - | ------ |  | - | ---------- | - | - | ------------- | - | - | -------- | -
|                             |              |  |   |        |  |   | ADDITIONAL |   |   | SHARE         |   |   |          |  
|                             |              |  |   |        |  |   | PAID-IN    |   |   | SUBSCRIPTIONS |   |   |          |  
|                             | SHARES       |  |   | AMOUNT |  |   | CAPITAL    |   |   | RECEIVABLE    |   |   | DEFICIT  |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Shares issued for cash at    |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|$0.001                       | 5,000,000    |  | $ | 5,000  |  | $ | -          |   | $ | -             |   | $ | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Shares issued for cash at    |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|$0.01                        | 5,000,000    |  |   | 5,000  |  |   | 45,000     |   |   | -             |   |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Shares issued for cash at    |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|$0.20                        | 100,000      |  |   | 100    |  |   | 19,900     |   |   | -             |   |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Subscriptions receivable     | -            |  |   | -      |  |   | -          |   |   | (2,500        | ) |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Net loss for the period      | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (2,926   | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, December 31,        |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|1999                         | 10,100,000   |  |   | 10,100 |  |   | 64,900     |   |   | (2,500        | ) |   | (2,926   | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Subscriptions receivable     | -            |  |   | -      |  |   | -          |   |   | 2,500         |   |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Net loss for the year        | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (31,342  | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, December 31,        |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|2000                         | 10,100,000   |  |   | 10,100 |  |   | 64,900     |   |   | -             |   |   | (34,268  | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Net loss for the year        | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (18,989  | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, December 31,        |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|2001                         | 10,100,000   |  |   | 10,100 |  |   | 64,900     |   |   | -             |   |   | (53,257  | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Stock split (2 for 1)        | 10,100,000   |  |   | 10,100 |  |   | (10,100    | ) |   | -             |   |   | -        |  
|Net loss for the year        | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (163,424 | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, December 31,        |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|2002                         | 20,200,000   |  |   | 20,200 |  |   | 54,800     |   |   | -             |   |   | (216,681 | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Shares issued for license    |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|extension payment at         |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|$0.21                        | 300,000      |  |   | 300    |  |   | 62,700     |   |   | -             |   |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Net loss for the year        | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (232,416 | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, December 31,        |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|2003                         | 20,500,000   |  |   | 20,500 |  |   | 117,500    |   |   | -             |   |   | (449,097 | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Shares issued for license at |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|$0.04                        | 5,000,000    |  |   | 5,000  |  |   | 195,000    |   |   | -             |   |   | -        |  
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Net loss for the period      | -            |  |   | -      |  |   | -          |   |   | -             |   |   | (285,044 | )
|                             |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|Balance, September 30,       |              |  |   |        |  |   |            |   |   |               |   |   |          |  
|2004                         | 25,500,000   |  | $ | 25,500 |  | $ | 312,500    |   | $ | -             |   | $ | (734,141 | )

F-5

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BALSAM VENTURES INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2004(Unaudited)(Stated in U.S. Dollars)

|1. | BASIS OF PRESENTATION AND OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Basis of Presentation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   | The unaudited financial statements as
        of September 30, 2004 included herein have been prepared without audit
        pursuant to the rules and regulations of the Securities and Exchange Commission.
        Certain information and footnote disclosures normally included in financial
        statements prepared in accordance with United States generally accepted
        accounting principles have been condensed or omitted pursuant to such
        rules and regulations. In the opinion of management, all adjustments (consisting
        of normal recurring accruals) considered necessary for a fair presentation
        have been included. It is suggested that these financial statements be
        read in conjunction with the December 31, 2003 audited financial statements
        and notes thereto.
|  
|2. | NATURE OF OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

F-6

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BALSAM VENTURES INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2004(Unaudited)(Stated in U.S. Dollars)

|2. | NATURE OF OPERATIONS(Continued)                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|3. | SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   | The financial statements of the Company
        have been prepared in accordance with generally accepted accounting principles
        in the United States. Because a precise determination of many assets and
        liabilities is dependent upon future events, the preparation of financial
        statements for a period necessarily involves the use of estimates which
        have been made using careful judgement.
|  
|   | The financial statements have, in management's
        opinion, been properly prepared within reasonable limits of materiality
        and within the framework of the significant accounting policies summarized
        below:                                                                                                                                                                                                 
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                               
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                  

F-7

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BALSAM VENTURES INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2004(Unaudited)(Stated in U.S. Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|  
|   | b)                                        
|  
|   |                                           
|  
|   | c)                                        
|  
|   |                                           
|  
|   | d)                                        
|  
|   |                                           
|  
|   |                                           
|  
|   | e)                                        
|  
|   |                                           
|  
|   |                                           
|   |                                           
|   |                                           

F-8

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BALSAM VENTURES INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2004(Unaudited)(Stated in U.S. Dollars)

|3. | SIGNIFICANT ACCOUNTING POLICIES(Continued)
|-- | ------------------------------------------
|   |                                           
|   | f)                                        
|  

| |    | The Company measures compensation cost for stock
        based compensation using the intrinsic value method of accounting as prescribed
        by A.P.B. Opinion No. 25  "Accounting for Stock Issued to Employees".
        The Company has adopted those provisions of Statement of Financial Accounting
        Standards No. 123  "Accounting for Stock Based Compensation", which
        require disclosure of the pro-forma effect on net earnings and earnings
        per share as if compensation cost had been recognized based upon the estimated
        fair value at the date of grant for options awarded.                                                                                                                       
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
|
| | g) | Basic and Diluted Loss Per Share                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
|
| |    | In accordance with SFAS No. 128  "Earnings
        Per Share", the basic loss per common share is computed by dividing net
        loss available to common stockholders by the weighted average number of
        common shares outstanding. Diluted loss per common share is computed similar
        to basic loss per common share except that the denominator is increased
        to include the number of additional common shares that would have been
        outstanding if the potential common shares had been issued and if the
        additional common shares were dilutive. At September 30, 2004, the Company
        has no stock equivalents that were anti-dilutive and excluded in the earnings
        per share computation.

|4. | LICENSE                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | Pursuant to an exclusive license agreement,
        dated November 30, 2003, the Company has acquired the exclusive right
        and license for a period of 40 years to use, commercialize and exploit
        the technology for self-chilling beverage containers within the countries
        comprising the European Union and the Republic of China. In consideration
        of the grant of the exclusive license, the Company agreed to:
|  
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   | During the period ended September 30, 2004,
        the Company issued 5,000,000 common shares at $0.04 per share for a value
        of $200,000 under the license agreement. This amount has been charged
        to operations in the current period.                                                                                                                                                                                          

F-9

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BALSAM VENTURES INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2004(Unaudited)(Stated in U.S. Dollars)

|5. | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   | During the period ended September 30, 2004, director's
        compensation totalled $Nil (2003 - $54,000).                                                                                                                                                                                                                                                                                                                                                          
|  
|   | Accounts payable includes $16,636 (2003 - $46,535)
        due to directors.                                                                                                                                                                                                                                                                                                                                                                                         
|  
|6. | CONVERTIBLE NOTES PAYABLE                                                                                                                                                                                                                                                                                                                                                                                                                                            
|  
|   | During the year ended December 31, 2003, the Company
        issued $260,000 of three year convertible notes bearing interest of 10%
        per annum. The notes are convertible into common shares at the lesser
        of $0.03 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 shares.

F-10

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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" within the meaning of Section 27A of the Securities
  Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities
  Exchange Act of 1934 (the "Exchange Act"). 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.

DESCRIPTION OF BUSINESS


The following discussion and analysis summarizes our plan
  of operations for the next twelve months, our results of operations for the
  three month and nine month periods ended September 30, 2004 and changes in our
  financial condition from December 31, 2003. This discussion should be read in
  conjunction with the Management's Discussion and Analysis or Plan of Operations
  included in our Annual Report on Form 10-KSB for the year ended December 31,
  2003.

We are in the business of developing and marketing a patented
  unique proprietary technology (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.

The Cool Can Technology is being used to develop a product
  referred to by NorPac as the "InstaCool" product. The InstaCool product consists
  of a module for insertion into an aluminum beverage container and incorporates
  a cartridge of liquid carbon dioxide ("CO2") that is held in place by a cartridge
  holder. This module would be inserted into the aluminum beverage container during
  an automated canning process and the containers would be identified and sold
  as self-chilling beverage containers. To start the chilling process, a consumer
  would pull the tab off the container as with a regular non-chilling beverage
  container. When the tab on the lid of the beverage container is pulled, a valve
  mechanism would release the compressed liquid CO2. The escaping CO2 would then
  form into small particles of frozen snow at extremely cold temperatures and
  rapidly impart a chilling action to the beverage. The targeted result is to
  allow consumers to purchase and store a beverage at room temperature and enjoy
  it cold without having to refrigerate the beverage.

3

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On November 30, 2003, we entered into a license agreement
  (the "License Agreement") with NorPac which grants us the exclusive right and
  license (the "License"), for a period of 40 years, to enjoy, commercialize and
  exploit the Cool Can Technology in countries comprising the European Union and
  the Peoples Republic of China (the "Exclusive Region"). Under the License Agreement,
  we have the right, within the Exclusive Region, to manufacture, use and sell
  apparatus and products embodying the Cool Can Technology and grant sub-licenses
  of our right to manufacture, use and sell products embodying the Cool Can Technology.
  The License Agreement further provides us with a right of first refusal with
  respect to any transfers, sales or assignments of the Cool Can Technology by
  NorPac, including patents, trademarks or other intellectual property rights.
  We also have a right of first refusal with respect to any licensing rights for
  countries which are not a party to the North American Free Trade Agreement and
  are outside of the Exclusive Region. In consideration for the rights granted
  to us under the License Agreement, we agreed to:

| | (a) | issue to NorPac 5,000,000 shares of our common stock,
        which shares were issued in May, 2004; and                                                                                                                                                                                                                                                           
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) | pay ongoing royalties to NorPac equal to 2% of gross
        profits from the sale of products and 5% of gross licensing revenues.
        Notwithstanding that we may not earn gross profits from the sale of products
        or gross licensing revenues, we have agreed to pay NorPac minimum royalties
        of $5,000 per month beginning January 15, 2006.

PLAN OF OPERATIONS

Our plan of operations for the next twelve months will include the following components:

|(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 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 Exchange Act.                                                                                                                                                                                                                                      
|   
|(3) | We anticipate spending approximately $140,000
        on general overhead expenses, including office expenses and consulting
        fees.                                                                                                                                                                                                                                                                             

4

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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 operations. Of these anticipated expenditures, we
  anticipate that $230,000 will be spent on our plan of operations over the next
  six months. Our present cash reserves are not sufficient for us to carry out
  our plan of operations without substantial additional financing. We are currently
  attempting to arrange for financing through sub-licenses that would enable us
  to proceed with our plan of operations. Other than the proposed financing with
  BIG K.G. described below, we do not have any financing arrangements in place
  and there is no assurance that we will be able to achieve sufficient financing
  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
      30
|         |                                        |           |                                     
|         |                                        |           | Percentage                          
|         | 2004                                   | 2003      | Increase /                          
|         |                                        |           | (Decrease)                          
|Revenue  | $nil                                   | $nil      | n/a                                 
|Expenses | 31,161                                 | 36,759    | (15.2)%                             
|Net Loss | $(31,161)                              | $(36,759) | (15.2)%                             

Revenue

We did not earn any revenues during the quarter ended September
  30, 2004. 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.

Operating Expenses


Our operating expenses during the quarter ended September
  30, 2004 consisted primarily of banking charges and interest in the amount of
  $6,590, consulting fees in the amount of $15,000 and professional fees in the
  amount of $8,791, paid in connection with fulfilling our reporting obligations
  under applicable securities and other laws.

5

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LIQUIDITY AND FINANCIAL CONDITION

|                          |                       |                      | Percentage           
|------------------------- | --------------------- | -------------------- | ---------------------
|                          | At September 30, 2004 | At December 31, 2003 | Increase / (Decrease)
|Current Assets            | $165                  | $23                  | 617.4%               
|Current Liabilities       | 110,306               | 44,620               | 147.2%               
|Working Capital (Deficit) | $(110,141)            | $(44,597)            | 146.9%               

Our working capital deficit increased by 146.9% during the
  past nine months as a result of the fact that we had no revenues or significant
  sources of financing to offset the increase in our accounts payable arising
  from our operations. We had cash of $165 at September 30, 2004 as compared to
  cash of $23 at December 31, 2003.

|Cash Flows                                     |                                      |      
|---------------------------------------------- | ------------------------------------ | -----
|                                               | Nine Months Ended
      September 30
|                                               |                                      |      
|                                               | 2004                                 | 2003 
|Cash Flows from (used in) Operating Activities | $142                                 | $(45)
|Cash Flows from (used in) Investing Activities | Nil                                  | nil  
|Cash Flows from (used in) Financing Activities | Nil                                  | nil  
|Net Increase (decrease) in Cash During Period  | $142                                 | $(45)

Financing Requirements


From inception to September 30, 2004, we have suffered cumulative
  losses in the amount of $734,141. 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 are 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
  there exists substantial doubt about our ability to continue as a going concern.

We will require additional financing if we are not successful
  in earning revenues from the Cool Can Technology. 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 may result in dilution to our current shareholders.

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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ITEM 3.         CONTROLS
  AND PROCEDURES.

Evaluation Of Disclosure Controls And Procedures

As of the end of the period covered by this report, our management
  carried out an evaluation, under the supervision and with the participation
  of our principal executive officer and principal financial officer, of the effectiveness
  of the design and operation of our disclosure controls and procedures (as defined
  in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on this evaluation,
  our principal executive officer and principal financial officer have concluded
  that our disclosure controls and procedures are, as of the date covered by this
  Quarterly Report, effective to ensure that the information required to be disclosed
  by us in the reports that we file or submit under the Exchange Act is recorded,
  processed, summarized and reported within the time periods specified in the
  SEC rules and forms.

Changes In Internal Controls Over Financial Reporting

In connection with the evaluation of our internal controls
  during our last fiscal quarter, our principal executive officer and principal
  financial officer have determined that there have been no changes to our internal
  controls over financial reporting that has materially affected, or is reasonably
  likely to materially effect, our internal controls over financial reporting.

7

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PART II - OTHER INFORMATION

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

PROPOSED PRIVATE PLACEMENT OF SECURITIES

We have reached a verbal agreement with BIG K.G. ("BIG"),
  a German company, pursuant to which BIG will 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"). Each unit to be issued under the proposed Private
  Placement will consist of one share of 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 will receive a fee 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 this agreement.
  In view of the delay in formalizing the agreement with BIG, there is significant
  doubt that the Private Placement will be completed. In the event that the Private
  Placement is not completed, we will need to seek alternative sources of equity
  financing in order to proceed with our business plan. We do not currently have
  any alternative financing arrangements in place and there is no assurance that
  we will be able to obtain such alternative sources of financing on terms which
  are acceptable to us or at all.

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           |  | Exclusive License
        Agreement dated November 30, 2003 with Cool Can Technologies, Inc.(3)                                                                       
|               |  |                                                                                                                                                                       
|31.1           |  | Certification
        of Principal Executive Officer pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002.                                              
|               |  |                                                                                                                                                                       
|31.2           |  | Certification
        of Principal Financial Officer pursuant to Section 302 of the Sarbanes-
        Oxley Act of 2002.                                              
|               |  |                                                                                                                                                                       
|32.1           |  | Certification
        of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as
        adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|               |  |                                                                                                                                                                       
|32.2           |  | Certification
        of 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) | Previously Filed as an Exhibit to our Form SB-2
        Registration Statement originally filed with the SEC on March 30, 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------
|(2) | Previously Filed as an Exhibit to our Current Report
        on Form 8-K filed on June 20, 2004                                
|(3) | Previously Filed as an Exhibit to our Current Report
        on Form 8-K filed on January 9, 2004.                             
|    |                                                                                                                                

8

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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.

|By: | /s/ David Lam                                                    | 
|--- | ---------------------------------------------------------------- | 
|    | DAVID LAMPRESIDENT AND DIRECTOR
      Date:    November 18, 2004 | 

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