---

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,
2005

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

For the transition period _______________ to _______________

COMMISSION FILE NUMBER000-32011

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

|NEVADA                                                 | 52-2219056                          
|------------------------------------------------------ | ------------------------------------
|(State or other
      jurisdiction of incorporation or | (I.R.S. Employer Identification No.)
|organization)                                          |                                     
|                                                       |                                     
|1480 Gulf
      Road, Suite 204                        |                                     
|Point
      Roberts, WA                                | 98281                               
|(Address of
      principal executive offices)         | (Zip
      Code)                    
|                                                       |                                     
|(360)
      306-0230                                   |                                     
|Issuer's
      telephone number                        |                                     

Not ApplicableFormer name, former address and
former fiscal year, if changed since last report

Check whether the issuer (1) filed all reports required to be
  filed by Section 13 or 15(d) of the 
  Exchange Act during the past twelve months (or for such shorter period that
  the registrant was required 
  to file such reports), and (2) has been subject to such filing requirements
  for the past 90 days. Yes xNo  ̈

Indicate by check mark whether the registrant is a shell company
  (as defined in Rule 12b-2 of the 
  Exchange Act). Yes xNo  ̈

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 18, 2005, the Registrant had 25,500,000 shares of common stock,
$0.001 par value per share, outstanding.

Transitional Small Business Disclosure Format (check one): Yes
   ̈ No x

1

---

PART I - FINANCIAL INFORMATION

ITEM
1.               
FINANCIAL STATEMENTS.





2

---

BALSAM VENTURES, INC.(A Development Stage Company)

FINANCIAL STATEMENTS

SEPTEMBER 30, 2005(Unaudited) 
  (Stated in U.S. Dollars)



F-1

---

BALSAM VENTURES, INC.(A Development Stage Company)

BALANCE SHEET(Unaudited) 
  (Stated in U.S. Dollars)

|                                                         |   | SEPTEMBER
      30 |   |   | DECEMBER
      31 |  
|-------------------------------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                                         |   | 2005               |   |   | 2004              |  
|                                                         |   | (unaudited)        |   |   | (audited)         |  
|ASSETS                                                   |   |                    |   |   |                   |  
|                                                         |   |                    |   |   |                   |  
|Current                                                  |   |                    |   |   |                   |  
|Cash                                                     | $ | 6,731              |   | $ | 1,033             |  
|                                                         |   |                    |   |   |                   |  
|LIABILITIES                                              |   |                    |   |   |                   |  
|                                                         |   |                    |   |   |                   |  
|Current                                                  |   |                    |   |   |                   |  
|Accounts payable
      and accrued liabilities           | $ | 274,387            |   | $ | 159,117           |  
|                                                         |   |                    |   |   |                   |  
|Convertible Notes Payable Net Of Discount
      On Notes |   |                    |   |   |                   |  
|Attributable To Beneficial Conversion Feature            |   |                    |   |   |                   |  
|(Note 3)                                                 |   | 690                |   |   | -                 |  
|                                                         |   | 275,077            |   |   | 159,117           |  
|                                                         |   |                    |   |   |                   |  
|Commitment And Contingencies(Notes 2 and 4)              |   |                    |   |   |                   |  
|                                                         |   |                    |   |   |                   |  
|STOCKHOLDERS DEFICIENCY                                 |   |                    |   |   |                   |  
|                                                         |   |                    |   |   |                   |  
|Share Capital                                            |   |                    |   |   |                   |  
|Authorized:                                              |   |                    |   |   |                   |  
|100,000,000 common voting stock, par value with          |   |                    |   |   |                   |  
|$0.001 per share                                         |   |                    |   |   |                   |  
|                                                         |   |                    |   |   |                   |  
|Issued and outstanding:                                  |   |                    |   |   |                   |  
|25,500,000 common stock                                  |   | 25,500             |   |   | 25,500            |  
|                                                         |   |                    |   |   |                   |  
|Additional paid-in capital                               |   | 572,500            |   |   | 572,500           |  
|                                                         |   |                    |   |   |                   |  
|Deficit Accumulated During The Development Stage         |   | (866,346           | ) |   | (756,084          | )
|                                                         |   | (268,346           | ) |   | (158,084          | )
|                                                         |   |                    |   |   |                   |  
|                                                         | $ | 6,731              |   | $ | 1,033             |  

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

F-2

---

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 |  
|                              |   | 2005               |   |   | 2004              |  |   | 2005         |   |   | 2004       |   |   | 2005      | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Expenses                      |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Accretion of discount on      |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|convertible notes             | $ | 445                |   | $ | -                 |  | $ | 690          |   | $ | -          |   | $ | 690       | 
|Bank charges and interest     |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|                              |   | 6,610              |   |   | 6,590             |  |   | 19,611       |   |   | 19,804     |   |   | 53,066    | 
|Consulting services           |   | 15,000             |   |   | 15,000            |  |   | 45,000       |   |   | 45,000     |   | $ | 330,947   | 
|Domain registration           |   | -                  |   |   | -                 |  |   | -            |   |   | -          |   |   | 436       | 
|Foreign exchange loss         |   | 331                |   |   | -                 |  |   | 1,088        |   |   | -          |   |   | 1,088     | 
|License payment               |   | -                  |   |   | -                 |  |   | -            |   |   | 200,000    |   |   | 263,000   | 
|Office and sundry             |   | 908                |   |   | 415               |  |   | 2,390        |   |   | 432        |   |   | 11,796    | 
|Professional fees             |   | 18,827             |   |   | 8,791             |  |   | 39,666       |   |   | 17,938     |   |   | 171,567   | 
|Regulatory                    |   | 874                |   |   | 365               |  |   | 1,857        |   |   | 1,805      |   |   | 10,617    | 
|Stock transfer services       |   | (40                | ) |   | -                 |  |   | (40          | ) |   | 65         |   |   | 5,365     | 
|Travel                        |   | -                  |   |   | -                 |  |   | -            |   |   | -          |   |   | 9,099     | 
|Write off of software         |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|development
      costs       |   | -                  |   |   | -                 |  |   | -            |   |   | -          |   |   | 8,675     | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Net Loss For The
      Period | $ | 42,955             |   | $ | 31,161            |  | $ | 110,262      |   | $ | 285,044    |   | $ | 866,346   | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Net Loss Per Share            | $ | -                  |   | $ | -                 |  | $ | -            |   | $ | (0.01      | ) |   |           | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|                              |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Weighted Average Number       |   |                    |   |   |                   |  |   |              |   |   |            |   |   |           | 
|Of Shares Outstanding         |   | 25,500,000         |   |   | 20,200,000        |  |   | 25,500,000   |   |   | 23,072,993 |   |   |           | 

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

F-3

---

BALSAM VENTURES, INC.(A Development Stage Company)

STATEMENT OF CASH FLOWS(Unaudited) 
  (Stated in U.S. Dollars)

|                                                         |   |                   |   |   |              |   |   | CUMULATIVE  |  
|-------------------------------------------------------- | - | ----------------- | - | - | ------------ | - | - | ----------- | -
|                                                         |   |                   |   |   |              |   |   | PERIOD      |  
|                                                         |   |                   |   |   |              |   |   | FROM        |  
|                                                         |   |                   |   |   |              |   |   | AUGUST 17   |  
|                                                         |   |                   |   |   |              |   |   | 1999        |  
|                                                         |   |                   |   |   |              |   |   | (INCEPTION) |  
|                                                         |   | NINE MONTHS ENDED |   |   | TO           |  
|                                                         |   | SEPTEMBER 30      |   |   | SEPTEMBER 30 |  
|                                                         |   | 2005              |   |   | 2004         |   |   | 2005        |  
|                                                         |   |                   |   |   |              |   |   |             |  
|Cash provided by (used in):                              |   |                   |   |   |              |   |   |             |  
|Operating Activities                                     |   |                   |   |   |              |   |   |             |  
|Net loss for the
      period                            | $ | (110,262          | ) | $ | (285,044     | ) | $ | (866,346    | )
|                                                         |   |                   |   |   |              |   |   |             |  
|Adjustments To Reconcile Net Loss To Operating           |   |                   |   |   |              |   |   |             |  
|Cash Flows                                               |   |                   |   |   |              |   |   |             |  
|Write off of software
      development costs            |   | -                 |   |   | -            |   |   | 8,675       |  
|Interest accrued on convertible
      notes payable      |   | 19,464            |   |   | 19,500       |   |   | 52,000      |  
|Shares issued to
      extend license agreement          |   | -                 |   |   | 200,000      |   |   | 263,000     |  
|Change in accounts payable and accrued
      liabilities |   | 95,806            |   |   | 65,686       |   |   | 482,387     |  
|Accretion of discount
      on convertible debentures    |   | 690               |   |   | -            |   |   | 690         |  
|                                                         |   | 5,698             |   |   | 142          |   |   | (59,594     | )
|                                                         |   |                   |   |   |              |   |   |             |  
|Investing Activity                                       |   |                   |   |   |              |   |   |             |  
|Software development
      costs                         |   | -                 |   |   | -            |   |   | (8,675      | )
|                                                         |   |                   |   |   |              |   |   |             |  
|Financing Activity                                       |   |                   |   |   |              |   |   |             |  
|Share capital                                            |   | -                 |   |   | -            |   |   | 75,000      |  
|                                                         |   |                   |   |   |              |   |   |             |  
|Increase In Cash                                         |   | 5,698             |   |   | 142          |   |   | 6,731       |  
|                                                         |   |                   |   |   |              |   |   |             |  
|Cash, Beginning Of Period                                |   | 1,033             |   |   | 23           |   |   | -           |  
|                                                         |   |                   |   |   |              |   |   |             |  
|Cash, End Of Period                                      | $ | 6,731             |   | $ | 165          |   | $ | 6,731       |  
|                                                         |   |                   |   |   |              |   |   |             |  
|Supplemental Disclosure Of Cash Flow Information         |   |                   |   |   |              |   |   |             |  
|Interest paid                                            | $ | 147               |   | $ | 303          |   | $ | 1,066       |  
|Income taxes paid                                        |   | -                 |   |   | -            |   |   | -           |  

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

F-4

---

BALSAM VENTURES, INC.(A Development Stage Company)

STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)

PERIOD FROM AUGUST 17, 1999 (INCEPTION) TO SEPTEMBER
  30, 2005(Unaudited) 
  (Stated in U.S. Dollars)

|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   | DEFICIT     |   |   |          |  
|---------------------------------- |  | ------------ |  | - | ----------- |  | - | ---------- | - | - | ------------ | - | - | ----------- | - | - | -------- | -
|                                   |  | COMMON STOCK |  |   | ACCUMULATED |  |   |            |  
|                                   |  |              |  |   |             |  |   | ADDITIONAL |   |   | SHARE        |   |   | DURING THE  |   |   |          |  
|                                   |  |              |  |   | PAR         |  |   | PAID-IN    |   |   | SUBSCRIPTION |   |   | DEVELOPMENT |   |   |          |  
|                                   |  | SHARES       |  |   | VALUE       |  |   | CAPITAL    |   |   | RECEIVABLE   |   |   | STAGE       |   |   | TOTAL    |  
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for cash at $0.0005   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|                                   |  | 10,000,000   |  | $ | 10,000      |  | $ | (5,000     | ) | $ | -            |   | $ | -           |   | $ | 5,000    |  
|Stock issued for cash at $0.005    |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|                                   |  | 10,000,000   |  |   | 10,000      |  |   | 40,000     |   |   | -            |   |   | -           |   |   | 50,000   |  
|Stock issued for cash at $0.10     |  | 200,000      |  |   | 200         |  |   | 19,800     |   |   | -            |   |   | -           |   |   | 20,000   |  
|Subscriptions receivable           |  | -            |  |   | -           |  |   | -          |   |   | (2,500       | ) |   | -           |   |   | (2,500   | )
|Net loss for the period            |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (2,926      | ) |   | (2,926   | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 1999         |  | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | (2,500       | ) |   | (2,926      | ) |   | 69,574   |  
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Subscriptions received             |  | -            |  |   | -           |  |   | -          |   |   | 2,500        |   |   | -           |   |   | 2,500    |  
|Net loss for the year              |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (31,342     | ) |   | (31,342  | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2000         |  | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (34,268     | ) |   | 40,732   |  
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (18,989     | ) |   | (18,989  | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2001         |  | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (53,257     | ) |   | 21,743   |  
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the year              |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (163,424    | ) |   | (163,424 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2002         |  | 20,200,000   |  |   | 20,200      |  |   | 54,800     |   |   | -            |   |   | (216,681    | ) |   | (141,681 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Beneficial conversion feature of   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|convertible notes                  |  | -            |  |   | -           |  |   | 260,000    |   |   | -            |   |   | -           |   |   | 260,000  |  
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for license extension |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|payment at $0.21                   |  | 300,000      |  |   | 300         |  |   | 62,700     |   |   | -            |   |   | -           |   |   | 63,000   |  
|Net loss for the year              |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (232,416    | ) |   | (232,416 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2003         |  | 20,500,000   |  |   | 20,500      |  |   | 377,500    |   |   | -            |   |   | (449,097    | ) |   | (51,097  | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Stock issued for license at $0.04  |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|                                   |  | 5,000,000    |  |   | 5,000       |  |   | 195,000    |   |   | -            |   |   | -           |   |   | 200,000  |  
|Net loss for the year              |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (306,987    | ) |   | (306,987 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, December 31, 2004         |  | 25,500,000   |  |   | 25,500      |  |   | 572,500    |   |   | -            |   |   | (756,084    | ) |   | (158,084 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Net loss for the period            |  | -            |  |   | -           |  |   | -          |   |   | -            |   |   | (110,262    | ) |   | (110,262 | )
|                                   |  |              |  |   |             |  |   |            |   |   |              |   |   |             |   |   |          |  
|Balance, September 30, 2005        |  | 25,500,000   |  | $ | 25,500      |  | $ | 572,500    |   | $ | -            |   | $ | (866,346    | ) | $ | (268,346 | )

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

F-5

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005(Unaudited) 
  (Stated in U.S. Dollars)

|1. | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | The unaudited financial information furnished
        herein reflects all adjustments, which in the opinion of management are
        necessary to fairly state the Companys financial position and the
        results of its operations for the periods presented. This report on Form
        10-Q should be read in conjunction with the Companys financial statements
        and notes thereto included in the Companys Form 10-K for the fiscal
        year ended December 31, 2004. The Company assumes that the users of the
        interim financial information herein have read or have access to the audited
        financial statements for the preceding fiscal year and that the adequacy
        of additional disclosure needed for a fair presentation may be determined
        in that context. Accordingly, footnote disclosure, which would substantially
        duplicate the disclosure contained in the Companys Form 10-K for
        the fiscal year ended December 31, 2004, has been omitted. The results
        of operations for the nine-month period ended September 30, 2005 are not
        necessarily indicative of results for the entire year ending December
        31, 2005.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|2. | NATURE OF BUSINESS AND ABILITY TO CONTINUE
        OPERATIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | c)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-6

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005(Unaudited) 
  (Stated in U.S. Dollars)

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

F-7

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005(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 related to the accretion of the discount for the quarter
        ended September 30, 2005 was $445 (2004 - $Nil). The remaining discount
        on the convertible debentures as of September 30, 2005 was $259,310 (2004
        - $260,000).                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Interest of $52,000 on these convertible notes
        payable has accrued to September 30, 2005 (December 31, 2004 - $32,536).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|4. | LICENSE AGREEMENT                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | Pursuant to an exclusive license agreement
        (the Agreement) with NorPac Technologies, Inc (formerly Cool
        Can Technologies, Inc.) (the Licensor), dated November 30,
        2003, the Company acquired the exclusive right and license (the License),
        for a period of 40 years, to use, commercialize and exploit the Licensors
        proprietary trademarks, patents, process information, technical information,
        designs and drawings associated with the Licensors self- chilling
        beverage containers technology (the Technology), including
        the right to manufacture, use and sell apparatus and products embodying
        the Technology within the countries comprising the European Union and
        the Peoples Republic of China. The Company also has the right to
        sub-license the right to manufacture, use and sell products embodying
        the Technology.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | In consideration for the Agreement, the Company
        agreed to:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-8

---

BALSAM VENTURES, INC.(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2005(Unaudited) 
  (Stated in U.S. Dollars)

|4. | LICENSE AGREEMENT(Continued)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|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, 2005, directors compensation
      totalled $Nil (2004 - $Nil);                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   | As at September 30, 2005, accounts payable includes $8,717 due to a director
      and officer and $15,000 due to a former director and officer (December 31,
      2004 -20,873 due to directors). Convertible notes payable includes $3,899
      due to a director and officer and $30,000 due to a former director and officer
      (December 31, 2004 - $33,899 due to directors).                                                                                                                                                                   

F-9

---

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

Cautionary Statement Regarding Forward-Looking
Statements

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

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

DESCRIPTION OF BUSINESS

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, 2005 and changes in our financial condition
from December 31, 2004. 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, 2004.

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.

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,

3

---

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 OPERATION

Our plan of operation 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 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-licenses that would enable us to
proceed with our plan of operation. We have reached a verbal agreement with BIG
K.G. for a proposed private placement equity financing; however, 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 InstaCool technology and to earn revenues. In the event that
we are not successful in developing and commercializing the InstaCool
technology, we intend to focus on the advertising and marketing campaign for our
U.S. immigration web site business.

4

---

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 /2005
    2004
    (Decrease)
    
    2005
    2004
    (Decrease)Revenue
    Nil
    Nil
    n/a
    
    Nil
    Nil
    n/aExpenses
    $42,955
    $31,161
    37.8%
    
    $110,262
    $285,044
    (61.3)%Net Income (Loss)
    $(42,955)
    $(31,161)
    37.8%
    
    $(110,262)
    $(285,044)
    (61.3)%


Revenue

We did not earn any revenues during the quarter ended September
30, 2005. We do not anticipate earning revenues until we are successful
completing the development and commercialization of the Cool Can Technology, of
which there is no assurance. We are presently in the development stage and we
can provide no assurance that we will be successful in earning revenues from the
Cool Can Technology even if we achieve the financing necessary to develop this
technology.

Expenses

Our expenses for the quarterly periods ended September 30, 2005
and 2004 consisted of the following:

Third Quarter Ended
      September 30
    
    Nine Months Ended September 30Percentage
    
    
    
    Percentage2005
    2004
    Inc. / (Dec.)
    
    2005
    2004
    Inc.
      / (Dec.)Accretion of Discount on
    $445
    $ -
    100%
    
    $690
    $-
    100%Convertible NotesBank Charges and Interest
    6,610
    6,590
    0.3%
    
    19,611
    19,804
      (0.97)%Consulting Services
    15,000
    15,000
    Nil
    
    45,000
    45,000
    NilForeign Exchange (Gain)
    331
    -
    100%
    
    1,088
    -
    100%LossLicense Payment
    -
    -
    n/a
    
    -
    200,000
    (100)%Office and Sundry
    908
      415
      118.8%
    
    2,390
    432
    453.2%Professional Fees
    18,827
    8,791
    114.2%
    
    39,666
    17,938
    121.1%Regulatory
    874
      365
      139.5%
    
    1,857
    1,805
    2.9%Stock Transfer Services
    (40)
      -
      (100)%
    
    (40)
    65
    (161.5)%Total Operating Expenses
    $42,955
    $31,161
    37.8%
    
    $110,262
    $285,044
    (61.3)%


5

---

Our expenses during the quarter ended September 30, 2005
consisted primarily of consulting fees in the amount of $15,000, incurred on
account of general administrative and accounting services and for services
provided in connection with our regulatory filings, and professional fees in the
amount of $18,827, incurred in connection with meeting our ongoing reporting
obligations under applicable securities laws. We also incurred interest and bank
charges of $6,610. The increase in expenses as compared to the expenses for the
three month period ended September 30, 2004 is primarily a result of a $10,036
increase in professional fees.

LIQUIDITY AND FINANCIAL CONDITION

Working Capital

|                          |                             |                            | Percentage           
|------------------------- | --------------------------- | -------------------------- | ---------------------
|                          | At
      September 30, 2005 | At
      December 31, 2004 | Increase / (Decrease)
|Current Assets            | $6,731                      | $1,033                     | 551.6%               
|Current
      Liabilities | 274,387                     | 159,117                    | 72.4%                
|Working Capital (Deficit) | $(267,656)                  | $(158,084)                 | 69.3%                

Our working capital deficit increased by 69.3% during the past
nine months as a result of the fact that we had no revenues or significant
sources of financing. We had cash of $6,731 at September 30, 2005 as compared to
cash of $1,033 at December 31, 2004.

Cash Flows

|                                                     | Nine Months Ended September 30
|---------------------------------------------------- | ------------------------------
|                                                     | 2005                          
|Cash Flows From (Used In) Operating Activities       | $5,698                        
|Cash Flows From
      (Used In) Investing Activities | -                             
|Cash Flows From (Used In) Financing Activities       | -                             
|Net Increase
      (Decrease) In Cash During Period  | $5,698                        

Financing Requirements

From inception to September 30, 2005, we have suffered
cumulative losses in the amount of $866,346. 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.

6

---

We have reached a verbal agreement with BIG K.G. (BIG), a
German company, pursuant to which BIG has agreed to act as our agent for the
purpose of locating European placees for a proposed private placement of
40,000,000 units at a price of $0.025 per unit for total potential proceeds of
$1,000,000 (the Private Placement). Under the terms of our verbal agreement,
each unit to be issued under the proposed Private Placement will consist of one
share in our common stock and one share purchase warrant entitling the warrant
holder to purchase one additional share of our common stock at a price of $0.05
per share. BIG is to receive a commission of $100,000 for services provided in
connection with the proposed Private Placement. Although we have reached a
verbal agreement with BIG in respect of the proposed Private Placement, 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.

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 state
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.

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

7

---

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
related to the accretion of the discount for the quarter ended September 30,
2005 was $445 (2004 - $Nil). The remaining discount on the convertible
debentures as of September 30, 2005 was $259,310 (2004 - $260,000).

Interest of $52,000 on these convertible notes payable has
accrued to September 30, 2005 (December 31, 2004 - $32,536).

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.

8

---

PART II - OTHER INFORMATION

ITEM
5.               
OTHER INFORMATION.

All information required to be disclosed in a Current Report on
Form 8-K during the period covered by this Quarterly Report has been previously
disclosed by the filing of such reports on Form 8-K.

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

|Exhibit |  |                                                                                                                                                                                                           
|------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Number  |  | Description of Exhibit                                                                                                                                                                                    
|        |  |                                                                                                                                                                                                           
|3.1     |  | Articles of Incorporation.(1)                                                                                                                                                                             
|        |  |                                                                                                                                                                                                           
|3.2     |  | Bylaws.(1)                                                                                                                                                                                                
|        |  |                                                                                                                                                                                                           
|10.1    |  | Exclusive License Agreement dated
        June 5, 2002 with Cool Can Technologies, Inc.(2)                                                                                                                
|        |  |                                                                                                                                                                                                           
|10.2    |  | Exclusive License Agreement dated
        November 30, 2003 with Cool Can Technologies, Inc.(3)                                                                                                           
|        |  |                                                                                                                                                                                                           
|14.1    |  | Code of Ethics.(4)                                                                                                                                                                                        
|        |  |                                                                                                                                                                                                           
|31.1    |  | Certification
        of Principal Executive Officer and Chief Financial Officer pursuant to
        Section 302 of the Sarbanes-Oxley Act of 2002.                                                       
|
|        |  |                                                                                                                                                                                                           
|32.1    |  | Certification
        of Principal Executive Officer and Chief Financial Officer pursuant to
        18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
        Act of 2002.
|
|

|    |                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------
|(1) | Filed as an Exhibit to our Form SB-2 Registration Statement
      originally filed with the SEC on March 30, 2000.
|(2) | Filed as an Exhibit to our Current Report on Form 8-K filed
      on June 20, 2004.                               
|(3) | Filed as an Exhibit to our Current Report on Form 8-K filed
      on January 9, 2004.                             
|(4) | Filed as an
      Exhibit to our Annual Report on Form 10-KSB filed on May 17, 2005.                              

REPORTS ON FORM 8-K

The following Current Reports on Form 8-K were filed during the
quarterly period ended September 30, 2005. We did not file any Current Reports
on Form 8-K since the quarterly period ended September 30, 2005:

|Date of Form 8-K | Date of Filing with the SEC | Description of the Form
        8-K                                                               
|---------------- | --------------------------- | --------------------------------------------------------------------------------------------------
|                 |                             |                                                                                                   
|August 10, 2005  | August 16, 2005             | Item 5.02 Departure
        of Directors or Principal Officers; Appointment of Principal Officers.
|

9

---

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 21, 2005 |  | By: | /s/
      John Boschert                                
|      |                   |  |     | **JOHN BOSCHERT**                                      
|      |                   |  |     | Chief Executive Officer, Chief Financial
      Officer,
|      |                   |  |     | President, Secretary and Treasurer                     
|      |                   |  |     | (Principal Executive Officer and                       
|      |                   |  |     | Principal Financial Officer)                           

---