UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB

(Mark One)

[X]      QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                For the quarterly period ended September 30, 2004

[ ]      TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                 For the transition period from______to________

                       Commission file number: 333-30158-A

                         Xstream Beverage Network, Inc.
                         ------------------------------
        (Exact name of small business issuer as specified in its charter)

          Nevada                                                 05-0547629
          ------                                                 ----------
(State or other jurisdiction                                    (IRS Employer
of incorporation or organization)                            Identification No.)

            4800 NW 15 Avenue, Bay A, Fort Lauderdale, Florida 33309
            --------------------------------------------------------
                    (Address of principal executive offices)

                                  954-598-7997
                                  ------------
                           (Issuer's telephone number)

                          Xstream Beverage Group, Inc.
                          ----------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: 2,722,551 shares of common stock as of
November 15, 2004.

Transitional Small Business Disclosure Format: Yes [ ] No [X]

<PAGE>


                         XSTREAM BEVERAGE NETWORK, INC.

               Form 10-QSB for the period ended September 30, 2004

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements in this quarterly report on Form 10-QSB contain or
may contain forward-looking statements that are subject to known and unknown
risks, uncertainties and other factors which may cause actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. These forward-looking statements were based on various factors and
were derived utilizing numerous assumptions and other factors that could cause
our actual results to differ materially from those in the forward-looking
statements. These factors include, but are not limited to, economic, political
and market conditions and fluctuations, government and industry regulation,
interest rate risk, U.S. and global competition, and other factors. Most of
these factors are difficult to predict accurately and are generally beyond our
control. You should consider the areas of risk described in connection with any
forward-looking statements that may be made herein. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date of this report. Readers should carefully review this quarterly report
in its entirety, including but not limited to our financial statements and the
notes thereto. Except for our ongoing obligations to disclose material
information under the Federal securities laws, we undertake no obligation to
release publicly any revisions to any forward-looking statements, to report
events or to report the occurrence of unanticipated events. For any
forward-looking statements contained in any document, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.

         When used in this quarterly report, the terms "Xstream Beverage," "we,"
"our," and "us" refers to Xstream Beverage Network, Inc. a Nevada corporation,
and our subsidiaries.

         All per share information contained in this Quarterly Report gives
proforma effect to the one for 20 reverse stock split of Xstream Beverage's
common stock effected on July 19, 2004.

                                      INDEX

Part I.  Financial Information

Item 1.  Financial Statements

Consolidated Balance Sheet at September 30, 2004 (unaudited)
         and December 31, 2004...............................................3

Consolidated Statements of Operations for the three months
         and nine months ended September 30, 2004 and 2003 (unaudited).......4

Consolidated Statements of Cash Flows (unaudited) for the
         nine months ended September 30, 2004 and 2003.......................5

Notes to Consolidated Financial Statements (unaudited) ......................6

Item 2.  Management's Discussion and Analysis or Plan of Operation..........22

Item 3.  Controls and Procedures............................................27

Part II  Other Information..................................................27

                                       2
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

              XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                        September 30, 2004  December 31, 2003
                                                                            (Unaudited)         (Audited)
                                                                           ------------       ------------
<S>                                                                        <C>                <C>
ASSETS
  Cash                                                                     $    261,942       $     51,764
  Accounts Receivable, net of allowance for doubtful                            925,040             89,533
    accounts of $130,544 and $52,787, respectively
  Inventory                                                                   1,019,834            198,847
  Other Current Assets                                                           68,654              7,405
                                                                           ------------       ------------
               Total Current Assets                                           2,275,470            347,549
                                                                           ------------       ------------

  Property and Equipment, net of accumulated                                    315,592             46,088
    depreciation of $31,062 and $8,440, respectively
  Cash - restricted                                                             919,591                 --
  Trademarks                                                                    303,017                 --
  Customer Lists, net                                                         2,040,219                 --
  Goodwill                                                                    1,953,936                 --
  Other Assets                                                                   41,595             39,635
                                                                           ------------       ------------
                Total Long Term Assets                                        5,573,950             85,723
                                                                           ------------       ------------
TOTAL ASSETS                                                               $  7,849,420       $    433,272
                                                                           ============       ============

LIABILITIES & STOCKHOLDERS' EQUITY/(DEFICIENCY)

  Accounts Payable                                                         $  1,582,250       $    707,286
  Accrued Expenses                                                              591,720            508,775
  Loans and notes payable                                                     1,083,154            215,974
  Loans Payable - Related Party                                                  50,355            224,640
  Other Current Liabilities                                                          --             31,337
                                                                           ------------       ------------
                Total Current Liabilities                                     3,307,479          1,688,012
                                                                           ------------       ------------

  Lease Payable                                                                  41,432                 --
  Long Term Notes, net of discount                                            3,154,248             55,628
  Other long term liabilities                                                    14,350                 --
                                                                           ------------       ------------
                 Total Long Term Liabilities                                  3,210,030             55,628

                 Total Liabilities                                            6,517,509          1,743,640

 Preferred Series B (43.2 shares), net of discount of $2,057,143               126,857                 --

                                                                           ------------       ------------
STOCKHOLDERS' Equity/(Deficiency)

Preferred Stock, $0.001 par value, 10,000,000 shares authorized,
  Series A, 200,000 shares issued and outstanding                                   200                200
Common Stock, $0.001 par value, 50,000,000 shares authorized,                     2,656              1,014
  2,656,423 and 1,013,814 shares issued and outstanding, respectively
Common Stock Issuable, 35,840 and 70, 640 shares, respectively                       36                 71
Paid in Capital                                                              24,046,776         18,440,558
Accumulated Deficit                                                         (22,806,114)       (16,868,669)
Less: Deferred costs                                                            (38,500)          (450,750)
Less: Stock subscription receivable                                                  --         (2,432,792)
                                                                           ------------       ------------
Total Stockholders' Equity/(Deficiency)                                       1,205,054         (1,310,368)
                                                                           ------------       ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY/(DEFICIENCY)                      $  7,849,420       $    433,272
                                                                           ============       ============
</TABLE>

                 See accompanying notes to financial statements.

                                       3
<PAGE>
                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                             Three Months Ended September 30,  Nine Months Ended September 30,
                                                  2004             2003             2004            2003
                                              -----------      -----------      -----------      -----------
<S>                                           <C>              <C>              <C>              <C>
Sales                                         $ 3,752,738      $   860,339      $ 5,622,281      $ 1,465,940

Cost of Goods Sold                              2,607,159          590,626        4,026,682          960,784
                                              -----------      -----------      -----------      -----------
Gross Profit                                    1,145,579          269,713        1,595,599          505,156
Expense
   Marketing & Selling                             22,582           22,773          395,998          117,987
   Warehouse & Delivery                           188,594           79,824          298,483          127,271
   Compensation                                 1,229,936          419,762        3,540,996          846,136
   Rent                                            90,037           36,201          179,432           64,413
   Consulting Fees                                328,137          880,552          710,043        1,437,248
   Professional Fees                              229,278           38,821          352,565          247,298
   Guarantee Fee                                       --               --          167,000               --
   Bad Debt Expense                                64,482            1,689           81,546           14,379
   Impairment Expense                                  --          334,324               --          334,324
   Other General & Administrative                 451,682           52,669          953,011          173,491
                                              -----------      -----------      -----------      -----------
     Total Operating Expense                    2,604,728        1,866,615        6,679,074        3,362,547
                                              -----------      -----------      -----------      -----------
Loss From Operations                           (1,459,149)      (1,596,902)      (5,083,475)      (2,857,391)
Other Income/(Expense)
   Other Income                                    28,557               --           33,590               --
   Settlement of employee options                      --               --               --         (418,750)
   Conversion loss on debentures                       --               --               --          (85,050)
   Interest Expense, net                         (669,055)              --         (759,136)              --
   Settlement gain/(loss)                          50,399               --           35,378         (193,000)
   Other expense                                  (32,689)         (52,640)         (14,855)        (134,214)
                                              -----------      -----------      -----------      -----------
     Total Other Income/(Expense)                (622,788)         (52,640)        (705,023)        (831,014)
                                              -----------      -----------      -----------      -----------
Net Loss                                      $(2,081,937)     $(1,649,542)     $(5,788,498)     $(3,688,405)
                                              ===========      ===========      ===========      ===========
Preferred Stock Dividends                        (147,806)              --         (147,806)              --
                                              -----------      -----------      -----------      -----------
Net Loss Available to Common Stockholders     $(2,229,743)     $(1,649,542)     $(5,936,304)     $(3,688,405)
                                              ===========      ===========      ===========      ===========

Net Loss per share - Basic and diluted        $     (0.86)     $     (1.98)     $     (2.92)     $     (5.46)
                                              ===========      ===========      ===========      ===========
Weighted Average Shares Outstanding
 -Basic and diluted                             2,589,786          832,060        2,032,601          676,149
                                              ===========      ===========      ===========      ===========
</TABLE>

                                       4
<PAGE>

                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                             CONSOLIDATED CASH FLOWS
                     FOR THE NINE MONTHS ENDED SEPTEMBER 30,
<TABLE>
<CAPTION>

                                                                          2004            2003
                                                                      -----------      -----------
<S>                                                                    <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                               (5,788,498)      (3,688,405)
Adjustments to reconcile net cash and operations:
Bad debt                                                                   80,405           17,233
Depreciation                                                               22,622            4,462
Amortization of deferred consulting                                       110,250          385,875
Amortization of debt discount and fees to interest expense                612,105               --
Amortization of Intangibles                                               119,145           53,818
Amortization of unearned compensation                                          --            7,000
Amortization of redemption premium on Series B                             43,200               --
Contributed Services                                                           --          252,621
Loss on conversion of debt                                                 23,921           85,050
Stock Based Settlement Gain/Loss                                           (3,000)       1,195,000
Stock Based Loan fee                                                      375,000               --
Interest Income on Subscription Receivable                                (14,030)        (124,188)
Stock Based expenses                                                    2,098,442          794,652
Goodwil Impairment                                                             --          334,324
Changes in operating assets and liabilities:
Accounts Receivable                                                      (325,180)         (12,588)
Inventory                                                                  32,659          (35,014)
Other current and non-current assets                                      (41,839)         (16,585)
Accounts Payable                                                         (200,342)         248,708
Accrued expenses                                                         (376,863)         150,431
Other current and non-current liabilities                                 429,861           28,030
                                                                      -----------      -----------
Net cash used in operating activities                                  (2,802,142)        (319,576)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                                     (88,626)         (22,240)
Payment for purchase of Ayer Beverage, net of cash acquired              (100,000)              --
Payment for purchase of Maui Juice Brand, net of cash acquired            (25,000)              --
Payment for purchase of Pacific Rim, net of cash acquired                 (15,500)              --
Payment for purchase of Master Distributors, net of cash acquired        (570,000)              --
Acquisitions, net of cash acquired                                             --         (240,093)
                                                                      -----------      -----------
Net Cash used in investing activities                                    (799,126)        (262,333)

CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds, net of loan costs                                        2,809,400          415,991
Restricted cash portion of loan proceeds                               (2,451,154)              --
Disbursement of restricted cash                                         1,531,563               --
Loan repayments                                                        (1,579,229)          (9,801)
Proceeds from sales of common stock, net of offering costs              1,340,866          142,223
Proceeds from sales of preferred stock                                  2,160,000               --
                                                                      -----------      -----------
Net cash provided by financing activities                               3,811,446          548,413
                                                                      -----------      -----------
Net cash increase (decrease)                                              210,178          (33,496)
Cash at beginning of period                                                51,764           46,298
                                                                      -----------      -----------
Cash at end of period                                                 $   261,942      $    12,802
                                                                      ===========      ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid during the period for:
  Interest paid                                                       $   117,602      $    11,760
  Taxes paid                                                                   --               --

SUPPLEMENT DISCLOSURE OF NON-CASH INVESTING AND
  FINANCING ACTIVITIES:

Acquisition of Customer List (Note payable and Stock)                 $        --           17,500
Common Stock issued for acquisitions                                      356,769        1,237,500
Common Stock issued for debt conversion                                   140,000           70,000
Common Stock issued for debt settlement                                    57,418            2,450
Cancellation of Common Stock for subscription receivable                2,446,822               --
Common Stock issued for deferred services                                  38,500          297,500
Common Stock issued for deferred compensation                              34,501           21,842
Equity Related Debt Discount                                            1,419,251               --
                                                                      -----------      -----------
                                                                        4,493,261        1,646,792
                                                                      ===========      ===========
</TABLE>
                                       5
<PAGE>


    XSTREAM BEVERAGE NETWORK, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

(A) Basis of Presentation
-------------------------

The accompanying unaudited consolidated financial statements of Xstream Beverage
Network, Inc. and its subsidiaries ("Xstream" or "the Company") have been
prepared in accordance with generally accepted accounting principles for interim
consolidated financial information. Accordingly, they do not include all the
information and notes necessary for comprehensive consolidated financial
statements.

It is management's opinion, all material adjustments (consisting of normal
recurring adjustments) that are considered necessary for a fair presentation
have been included. Results for the interim periods presented are not
necessarily indicative of the results that might be expected for the entire
fiscal year.

XStream has completed five acquisitions according to its business strategy as
follows, Beverage Network of South Florida, Inc. ("BNSF")on April 9, 2003;
Beverage Network of Connecticut, Inc. ("BNCT") on May 1, 2003; Beverage Network
of Hawaii, Inc. ("BNHI") on March 1, 2004; Beverage Network of Massachusetts,
Inc. ("BNMA") on March 15, 2004; Beverage Network of Maryland, Inc. ("BNMD")on
July 1, 2004. These acquisitions were accounted for under the purchase method.
(See Note 3 for details.)

For further information, refer to the audited consolidated financial statements
and footnotes for the year ended December 31, 2003 included in XStream's Form
10-KSB.

(B) Principles of Consolidation
-------------------------------

The accompanying consolidated financial statements include the accounts of
XStream and its subsidiaries. All material intercompany balances and
transactions have been eliminated in consolidation.

(C) Revenue Recognition
-----------------------

The Company follows the criteria of the United States Securities and Exchange
Commission Staff Accounting Bulletin 104 for revenue recognition. The Company
recognizes revenue when persuasive evidence of an arrangement exists, delivery
of product has occurred, the sales price is fixed or determinable, and
collectibility is reasonably assured. The Company recognizes revenue upon
acceptance of delivery of its product by its customers at agreed prices. Based
on market conditions, the Company or its suppliers may choose to promote certain
brands by offering free product or case volume discounts. The cost of any
supplier-sponsored promotion is recoverable in whole or in part from the
supplier. The Company follows the guidance of Emerging Issues Task Force (EITF)
Issue 01-9 "Accounting for Consideration Given by a Vendor to a Customer" and
(EITF) Issue 02-16 "Accounting By a Customer (Including a Reseller) for Certain
Considerations Received from Vendors." Accordingly, the Company does not
recognize revenue on free promotional products, discounts or rebates received.
These incentives are recognized as a reduction of the cost of products.
Promotional products given to customers are recognized as a cost of sales, net
of any charge-backs received from vendors. Cash incentives provided to customers
are recognized as a reduction of the related sale price, and, therefore, are a
reduction in sales.

(D) Goodwill, Trademarks and Other Intangibles
------------------------------------------------

Acquired goodwill is considered to have an indefinite life pursuant to Statement
of Financial Accounting Standards No. SFAS 142, "Goodwill and Other Intangible
Assets," and accordingly is not amortized but subject to periodic impairment
tests. Acquired customer lists are considered to have a finite life, and
pursuant to SFAS 142, are to be amortized over the period the asset is expected
to contribute to the future cash flows. XStream expects the period to be five
years. The customer lists will also be subject to periodic impairment tests.
Acquired trademarks are considered to have an infinite life but will be subject
to impairment analysis on an annual basis. In accordance with SFAS No. 142, the
Company is required to evaluate the carrying value of its intangible assets
(goodwill, trademarks and customer lists) subsequent to their acquisition.
Between April 2003 through September 30, 2004, the Company acquired five
beverage distribution companies together with a natural juice company and
certain intellectual property rights related to other new age beverage names.
The Company's intangible assets, including goodwill, trademarks and customers
lists, were acquired in these acquisitions.

                                       6
<PAGE>

(E) Reverse Stock Split
-------------------------

On July 19, 2004, the Company affected a one-for-twenty reverse stock split. All
references in the consolidated financial statements to shares, share prices and
per share amounts have been adjusted retroactively for the one-for-twenty
reverse stock split.

(F) Accounting Estimates
-------------------------

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Estimates are used when accounting for allowances for doubtful accounts,
inventory reserves, depreciation and amortization, taxes, contingencies and
impairment allowances. Such estimates are reviewed on an on-going basis and
actual results could differ from those estimates.

(G) Restricted Cash
------------------------

The Company completed a $3,000,000 financing with Laurus Master Fund, Ltd.
("Laurus") in May 2004 through the issuance of a secured convertible term note
("Secured Note"). The terms of the Secured Note required Laurus to deposit
$2,855,000 of the proceeds of the Secured Note in a restrictive account
controlled by Laurus. The funds held in the restricted account are controlled by
Laurus until the Company consummates one or more acquisitions which will be
subject to the approval of Laurus or until all of the outstanding principal
amount of the Secured Note is converted into shares of the Company's common
stock. Of this amount, approximately $1,935,409 has been released to the Company
for working capital purposes and to close certain of its acquisitions. At
September 30, 2004 $919,591 remained on deposit in the restricted account.

(H) Going Concern
-----------------------

As reflected in the accompanying consolidated financial statements, the Company,
for the nine months ended September 30, 2004, has a net loss and cash used in
operations of $5,788,498 and $2,802,142, respectively, and an accumulated
deficit and working capital deficit of $22,806,114 and $1,032,009, respectively,
at September 30, 2004. The ability of the Company to continue as a going concern
is dependent on the Company's ability to further implement its business plan,
raise capital, and generate revenues. The Company continues to seek to raise
additional working capital to fund its current operations and to pursue its
acquisition plan. There are no assurances, however, that the Company will be
successful in raising additional working capital upon terms satisfactory to it,
if at all. The consolidated financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.

NOTE 2 - NET LOSS PER COMMON SHARE:

Basic net income (loss) per common share (Basic EPS) excludes dilution and is
computed by dividing net income (loss) available to common stockholder by the
weighted-average number of common shares outstanding for the period. Diluted net
income per share (Diluted EPS) reflects the potential dilution that could occur
if stock options or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of XStream. For the nine months ended September 30,
2004 and 2003, the diluted loss per share is the same as basic loss per share
since the effect of all common stock equivalents was anti-dilutive due to the
net loss. The total outstanding warrants which have been excluded from the
calculation of loss per share were 3,601,900 and 300,000 at September 30, 2004
and 2003, respectively. In addition the Company has Series A Cumulative
Convertible Preferred Stock that could convert into 200,000 and 200,000 shares
of common stock and Series B Convertible Preferred Stock that could convert into
1,440,000 and 0 shares of common stock at September 30, 2004 and 2003,
respectively. The Company also has convertible notes that could convert into
365,385 and 0 shares of common stock as a result of Master Distributors
acquisition and 2,000,000 and 0 shares of common stock as a result of the
Secured Note at September 30, 2004 and 2003, respectively. (See note 3-
Acquisitions and Note 13 -Notes Payable) The potential dilutive effects of the
convertible preferred stock and convertible notes have been excluded from the
calculation of net loss per common share.

NOTE 3 - ACQUISITIONS:

Squeeze Transaction - On January 14th, 2004, the Company's wholly owned
subsidiary, XStream Brands, Inc., a Florida corporation, entered into an
Assignment of Trademark with Squeeze Beverage, Inc., for the assignment of all
of its rights and interests in the mark "SQUEEZE" for carbonated flavored soft
drinks and seltzer water, including all variations thereof such any spelling,
formatives, phonetic variations and stylized designs of the same and all
goodwill associated therewith. The Company issued 20,000 shares of common stock
to Squeeze Beverages, Inc. in exchange for the assignment of the trademark.
Based upon the contemporaneous private placement offering price of $2.40 per
share the Company valued the acquisition at $48,000.

                                       7
<PAGE>

Maui Juice Transaction - On March 1, 2004, the Company's wholly owned
subsidiary, Xstream Brands, Inc., a Florida corporation, ("XStream Brands"),
entered into an Assignment of Trademark with The Maui Juice Company, Inc.
("Maui"), for the assignment of all of its rights and interests in the mark
"Maui Juice Company", including all variations thereof such any spelling,
formatives, phonetic variations and stylized designs of the same and all
goodwill associated therewith. The purchase price for the assignment of the mark
was $255,017 in cash with $25,000 paid at the acquisition date and $230,017 to
be paid under the terms of the agreement. The $230,017 is the present value of
the two notes imputing an annual interest rate at 6%, one for $75,000 gross and
the other for $200,000 gross. The terms of the $75,000 note are three quarterly
payments beginning July 1, 2004 of $25,000. As of September 30, 2004, the
Company has paid $50,000 on this note. The terms of the $200,000 note are 32
quarterly payments of $6,250 beginning April 1, 2005.

Pacific Rim Transaction - On March 1, 2004, the Company's wholly owned
subsidiary, Beverage Network of Hawaii, Inc. a Florida corporation ("BNHI"),
acquired substantially all of the assets and assumed certain liabilities of
Pacific Rim Natural Juice Company, Inc., a Hawaii corporation ("Pacific Rim").
This acquisition was consummated pursuant to an Asset Purchase Agreement (the
"Purchase Agreement") dated March 1, 2004 by and among BNHI (the "Acquirer") and
Pacific Rim. Under the terms of the Purchase Agreement, the Acquirer purchased
substantially all of the assets of Pacific Rim and assumed certain liabilities
for in exchange for 12,500 shares of XStream's common stock, which, based upon
the contemporaneous private placement offering price of $2.40 per share had a
value of $30,000. In addition, prior to the closing, the Company advanced
Pacific Rim, $15,500 resulting in a total purchase price of $45,500.

Simultaneously with the Asset Purchase agreement, Beverage Network of Hawaii,
Inc. entered in to a one-year consulting agreement (with the option for annual
renewals as agreed upon by both parties) with the owner of Pacific Rim. The
consulting fee (to be paid quarterly) is a calculation based on 1% of adjusted
gross profit with a minimum guaranteed payment of $1,250 per quarter.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition of Pacific Rim.


                                                       March 1, 2004
                                                        -------------

         Aggregate purchase price                          $ 45,500
                                                           ========
         Current assets                                    $ 10,911
         Fixed assets                                        17,650
         Customer list                                       38,350
         Goodwill                                            44,695
                                                           --------
                            Total assets acquired           111,606
                                                           --------
         Current liabilities assumed                         66,106
                                                           --------
                                   Net assets acquired     $ 45,500
                                                           ========

Goodwill recognized is expected to be deducted over a 15-year period for tax
purposes.

                                       8
<PAGE>

The table below summarizes the pro forma information of the results of
operations as though the business combinations had been completed as of January
1, 2003:

                                           Nine Months Ended
                                              September 30,
                                     ---------------------------------
                                         2004                 2003
                                     -----------           -----------

     Sales                           $ 5,674,228           $ 1,545,780
     Cost of Goods                     4,057,003             1,030,618
                                     -----------           -----------

     Gross Profit                      1,617,225               515,162
     Operating Expenses                6,821,088             3,625,153
                                     -----------           -----------

     Net Ordinary Loss                (5,203,863)           (3,109,991)

     Other Income (Expense)             (123,981)            (858,242)
                                     -----------           -----------

     Net Loss                        $(5,327,844)          $(3,968,233)
                                     ===========           ===========

     Net Loss per Share              $    (2.11)           $    (5.67)
                                     ===========           ===========

Ayer Beverage Transaction - On March 15, 2004, the Company's wholly owned
subsidiary, Beverage Network of Massachusetts, Inc., a Florida corporation
("BNMA") acquired substantially all of the assets and assumed certain
liabilities of Ayer Beverages, Inc., a Massachusetts corporation ("Ayer
Beverage"). This acquisition was consummated pursuant to an Asset Purchase
agreement (the "Purchase Agreement") dated March 15, 2004, by and among BNMA
(the "Acquirer") and Ayer Beverage. Under the terms of the purchase Agreement,
the Acquirer purchased substantially all of the assets of Ayer Beverage and
assumed certain of its liabilities for $100,000 cash, $100,000 in notes payable
and 20,000 shares of XStream's common stock which, based upon the
contemporaneous private placement offering price of $2.40 per share had a value
of $48,000 resulting in a total purchase price of $248,000. The terms of the
non-interest bearing note payable are four quarterly payments of $25,000 each,
not earlier than July 15, 2004; the first of the four payments of $25,000 was
made in August, 2004. BNMA has also entered into an employment agreement with
existing key management of Ayer Beverage. The employment agreement is for a
period of thirty-six months, commencing March 15, 2004, at a base salary of
$80,000 per year. The employee is also entitled to receive an issue of 750
common shares of Xstream's common stock upon completion of each the first and
second anniversary of the agreement and 1,500 shares upon completion of the
third anniversary of the agreement.
The agreement also stipulates for an employee bonus to be calculated on the
quarterly gross profit (from 2% - 3%) based upon performance as mandated by
management's profit targets.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition of Ayer Beverages.

                                                      March 15, 2004
                                                      --------------

         Aggregate purchase price                        $248,000
                                                         ========

         Current assets                                  $ 39,041
         Fixed assets                                      44,450
         Customer list                                    147,773
         Goodwill                                         171,620
                                                         --------
                            Total assets acquired         402,884
                                                         --------

         Current liabilities assumed                      154,884
                                                         --------
                                   Net assets acquired   $248,000
                                                         ========

Goodwill recognized is expected to be deducted over a 15-year period for tax
purposes.

                                       9
<PAGE>

The table below summarizes the pro forma information of the results of
operations as though the business combinations had been completed as of January
1, 2003:

                                           Nine Months Ended
                                               September 30,
                                     ---------------------------------
                                        2004                  2003
                                     -----------           -----------
     Sales                           $ 5,815,168           $ 1,829,822
     Cost of Goods                     4,255,769             1,480,598
                                     -----------           -----------
     Gross Profit                      1,559,399               349,224
     Operating Expenses                6,816,074             3,558,475
                                     -----------           -----------

     Net Ordinary Loss                (5,256,675)          (3,209,251)

     Other Income (Expense)             (121,536)            (836,176)
                                     -----------           -----------
     Net Loss                        $(5,378,211)         $(4,045,427)
                                     ===========           ===========

     Net Loss per Share              $     (2.13)          $    (5.78)
                                     ===========           ===========

Master Distributors Transaction - On July 9, 2004, the Company's wholly owned
subsidiary, Beverage Network of Maryland, Inc., a Florida corporation, announced
it has completed, effective July 1, 2004, the acquisition of substantially all
of the assets and certain liabilities of Master Distributors Inc. (d/b/a
Atlantic Beverage Company.), a Mid-Atlantic distributor of non-alcoholic
beverages serving Washington, D.C., Virginia and Maryland. Atlantic Beverage
Company, which operates under the corporate entity of Master Distributors, Inc.,
has a leased warehouse in Jessup, Maryland just outside of Baltimore. The
consideration and terms of the acquisition were 96,154 shares of the Company's
common stock (valued at $2.40 for accounting purposes), $570,000 in cash,
$554,648 in cash due within 60 days of the closing, a convertible promissory
note for $2,000,000 payable in 60 equal monthly payments and bearing 6% interest
and a separate $250,000 payment to be made in 12 equal weekly installments
commencing July 15, 2004 totaling $3,605,417. (See Note 14) As of September 30,
2004, the Company has paid $42,000 toward the $554,648 note, has paid off the
$250,000 installment note and paid $100,000 toward the $2,000,000 promissory
note. The holder of the convertible promissory note, at his discretion, may
elect to receive shares of Xstream's common stock in lieu of a cash payment. The
minimum conversion is $25,000 at a predetermined value of $5.20 per share. In
addition, Xstream issued 21,250 common stock shares to various non-owner
employees as an incentive to retain them. Beverage Network of Maryland, Inc, has
also entered into an employment agreement with existing key management of Master
Distributors, Inc. The initial term of the agreement is for a period of six
months, commencing July 1, 2004, at a monthly salary of $18,750. The final term
of the employment agreement, commencing December 31, 2004, for a period of eight
months, provides for a per-diem rate of $1,000 for each day that XStream may
request the services of the employee.

The following table summarizes the estimated fair values of the assets acquired
and liabilities assumed at the date of acquisition of Master Distributors, Inc.

                                                 July 1, 2004
                                                 ------------
         Accounts receivable                     $   554,648
         Inventory                                   841,519
         Fixed assets                                140,800
         Other assets                                 21,371
         Customer list                             1,973,240
         Goodwill                                  1,737,621
         Current liabilities                        (951,183)
         Loans and notes                            (700,249)
         Other liabilities                           (12,350)
                                                  ----------
             TOTAL PURCHASE PRICE                 $3,605,417
                                                  ==========

Goodwill recognized is expected to be deducted over a 15 year period for tax
purposes.

                                       10
<PAGE>

The table below summarizes the pro forma information of the results of
operations as though the business combinations had been completed as of January
1, 2003:

                                              Nine Months Ended
                                                September 30,
                                     ---------------------------------
                                        2004                  2003
                                     -----------           -----------
     Sales                           $ 6,100,225           $ 4,995,003
     Cost of Goods                     4,099,762             3,344,171
                                     -----------           -----------

     Gross Profit                      2,000,463             1,650,832
     Operating Expenses                2,164,637             2,470,040
                                     -----------           -----------
     Net Ordinary Loss                  (164,174)             (819,208)

     Other Income (Expense)              (67,721)              (93,080)
                                     -----------           -----------
     Net Loss                        $  (231,895)          $  (912,288)
                                     ===========           ===========

     Net Loss per Share              $      (.09)          $     (1.30)
                                     ===========           ===========

NOTE 4 - ACCOUNTS RECEIVABLE:

Accounts receivable, net of allowance for doubtful accounts for the nine months
ending September 30, 2004 and December 31, 2003 were $925,040 and $89,533,
respectively.

NOTE 5 - INVENTORY:

Inventories are stated at the lower of "first-in, first-out" cost or market. The
inventory balance consisted of the following:
<TABLE>
<CAPTION>
                                                 September 30, 2004        December 31, 2003
                                                 ------------------        -----------------
<S>                                                <C>                         <C>
Resalable products                                 $   952,407                 $  198,847
Proprietary brand raw materials                         67,427                        -0-
                                                   -----------                 ----------
         Total:                                    $ 1,019,834                 $  198,847
                                                   ==========                  ==========
</TABLE>

                                       11
<PAGE>

NOTE 6 - FIXED ASSETS:

Property and equipment, net of accumulated depreciation was $315,592 and $46,088
at September 30, 2004 and December 31, 2003, respectively. Depreciation expense
for the nine months ended September 30, 2004, and September 30, 2003 was $22,622
and $3,909, respectively.

NOTE 7 - TRADEMARKS:

Trademarks consist of the following:
<TABLE>
<CAPTION>

                                                 September 30, 2004    December 31, 2003
                                                 ------------------    -----------------
<S>                                                 <C>                              <C>
Squeeze Soda                                        $   48,000                      -0-
Maui Juice                                             255,017                      -0-
                                                    ----------              ----------
         Total:                                     $  303,017              $       -0-
                                                    ==========              ===========
</TABLE>

In March 2004 and January 2004, respectively, the Company acquired the
trademarks Maui Juice Company and Squeeze. Management believes that these
trademarks have indefinite life cycles based on the market life of the products.
In accordance with SFAS No. 142 , the Company has determined that the trademarks
acquired for Maui Juice Company and Squeeze have indefinite lives, as supported
by the Company's ability and intent to renew the trademarks as legally required
to continue the company's ownership of the trademark and management's belief
that these products have indefinite life cycles based on the market. (See Note 3
- Acquisitions)

NOTE 8 - CUSTOMER LIST:

The table below summarizes the balance of customer lists as of September 30,
2004:
<TABLE>
<CAPTION>

                                                  September 30, 2004    December 31, 2003
                                                  ------------------    -----------------
<S>                                                 <C>                            <C>
Beverage Network of Hawaii, Inc.                    $   38,350                      -0-
Beverage Network of Massachusetts, Inc.                147,774                      -0-
Beverage Network of Maryland, Inc.                   1,973,240                      -0-
                                                    ----------              -----------
Accumulated Amortization:                             (119,145)                     -0-
                                                    ----------              -----------
                  Total:                            $2,040,219                      -0-
                                                    ==========              ===========
</TABLE>

As a result of the acquisitions of the assets of Ayer Beverages, Pacific Rim
Natural Juice Company and Master Distributors, Inc., the Company recorded an
identifiable tangible asset classified as customer lists. The customer lists are
being amortized over a five-year period. Management does not believe that there
have been any events or circumstances that have resulted in the need for a
revision to the remaining period of amortization as defined in of SFAS No. 142.
Amortization expense for the nine months ending September 30, 2004 and September
30, 2003 is $119,145 and $39,018, respectively. (See Note 3 - Acquisitions)

NOTE 9 - GOODWILL:

The table below summarizes the balance of goodwill as of September 30, 2004:
<TABLE>
<CAPTION>

                                                September 30, 2004    December 31, 2003
                                                ------------------    -----------------
<S>                                                 <C>                           <C>
Beverage Network of Hawaii, Inc.                    $   44,695                   -0-
Beverage Network of Massachusetts, Inc.                171,620                   -0-
Beverage Network of Maryland, Inc.                   1,737,621                   -0-
                                                    ----------            ----------
                  Total:                            $1,953,936                   -0-
                                                    ==========            ==========
</TABLE>

                                       12
<PAGE>

Pursuant to SFAS No. 142, goodwill of a reporting unit is required to be tested
for impairment on an annual basis and between annual tests in certain
circumstances. Testing for impairment, beyond an annual basis, is required if
there is a significant adverse change in the entity carrying the goodwill. The
Company evaluates the carrying value of intangible assets as of the fiscal year
end for all entities. Management believes that there has been no significant
adverse change in the businesses of BNMA, BNHI or BNMD. Accordingly, management
has deemed it not necessary to perform an impairment evaluation at this interim
period.

NOTE 10 - ACCRUED EXPENSE-SALARIES, ACCRUED EXPENSE-OTHER:

Effective April 9, 2003, concurrent with closing its first acquisition, Xstream
entered into three-year employment agreements for President and CEO calling for
annual base compensation of $85,000 each. These employment agreements also
granted 100,000 options each at an exercise price of $28.00 per share, vesting
over the term of the agreement. Based on the contemporaneous offering price of
$10.00 per common share there was no compensation expense computed under the
intrinsic value method of APB 25. On June 1, 2003, concurrent with the
resignation of the previous officers, the options were cancelled under amended
employment agreements with each officer.

Effective February 5, 2004, the Company executed revised employment agreements
for its Chairman, President, and Vice Chairman stipulating an annual base
compensation of $130,000 each. Accrued compensation reflecting officers, new
hires, and acquisitions, for the period ending September 30, 2004 was as
follows:

         Accrued Expense Salaries-Officers/Directors:     $ 311,793
         Accrued Expense Salaries-Other                     196,631
         Accrued Expense - Other                             40,096
                                                          ---------

                                Total Accrued Expenses:   $ 548,520
                                                          =========

The Company has accrued salaries at September 30, 2004 of $311,793, in
aggregate, due to the Chairman, President and Vice Chairman. The remaining
accrued salaries balance at September 30, 2004 of $196,631 consists of $36,908
due to a former employee and $159,723 of current payroll paid in October 2004.

NOTE 11 - LOANS PAYABLE AND LOANS PAYABLE, RELATED PARTY:

Loans payable at September 30, 2004 were as follows:

Loans Payable:

   Bank Line of Credit 6% Interest (1)                                  11,200
   Automotive equipment loan (1)                                           923
   $100,000 non-interest bearing, due April, 2005 (2)                   75,435
   $275,000 notes in aggregate (3)                                     182,429
   $22,692 Plus 8%, due June 2004 (1) (loan in default)                 22,692
   July 2004, interest bearing demand note 6%, (1)                     462,277
   July 2004, secured convertible Note 6%, (1)                         328,198
                                                                    ----------
  Total Loans Payable - Other                                       $1,083,154

  Loans Payable, Related Party                                          50,355
                                                                    ----------
   Total Loans Payable                                              $1,133,509
                                                                    ==========

(1)  Loans were assumed as part of the Ayer Beverage acquisition.

(2)  Note issued as part of the Ayer Beverage acquisition purchase price.

(3)  This represents the notes issued as part of the Maui Juice Brand
     acquisition purchase price.

(4)  Notes issued as part of the Master Distributors acquisition purchase price.

 (See details at Note 3 - Acquisitions).

                                       13
<PAGE>

In January 2004, an agreement was made to convert a $15,000 third party,
non-interest bearing demand note to equity with the common shares valued at the
contemporaneous private placement offering price of $2.40 per share. The
transaction resulted in the Company recognizing a gain on conversion of $3,000.

In March 2004, a principal shareholder advanced an additional $32,500 to the
Company. All advances from the shareholder are represented by a non-interest
bearing demand note with no specified term.


NOTE 12 - LEASE PAYABLE:

BNMD assumed an equipment lease from Master Distributors, Inc. The agreement was
executed on July 16, 2003 with a term of five years. The Company settled with
the leasing company on October 11, 2004 by paying $19,230, and will recognize a
settlement gain of $22,202 in the fourth quarter of fiscal 2004.

NOTE 13 -LONG TERM NOTES, NET OF DISCOUNT:

The following table reflects long-term notes at September 30, 2004:

               Senior secured convertible note                    $ 3,000,000
               Secured 6% convertible note                          1,913,572
               Debt discount on senior secured convertible note    (1,431,126)
                                                                  -----------
                                                                    3,482,446
               Current portion of secured 6% convertible note        (328,198)
                                                                  -----------
                                                                  $ 3,154,248
                                                                  ===========

On May 14, 2004, the Company secured a financing arrangement with Laurus. The
financing consists of a $3 million Secured Note that bears interest at the rate
of prime plus two percent and has a term of three years (May 14, 2007). The
Secured Note is convertible into shares of the Company's common stock, only upon
effectiveness of a registration statement registering the underlying shares, at
an initial fixed price of $4.60 per share for the first $50,000 with the
remaining $2,950,000 convertible at a fixed price of $5.20 per share, a premium
to the 22-day average closing share price as of May 14, 2004. The conversion
price of the Secured Note is subject to adjustment upon the occurrence of
certain events. As a result of the subsequent sale of the Series B Convertible
Preferred Stock, the initial conversion price was reduced to $1.50 per share
(See Note 14 - Series B Convertible Preferred Offering)

In connection with the financing, Laurus was also issued warrants to purchase up
to 225,000 shares of the Company's common stock. The warrants are exercisable as
follows: 75,000 shares at $6.40 per share; 75,000 shares at $7.80 per share and
the balance at $9.00 per share. The Company recorded a debt discount of (i)
$822,000 for the valuation of the 225,000 warrants issued with the note
(computed using a Black-Scholes model with an interest rate of 2.53%, volatility
of 149%, zero dividends and expected term of three years); (ii) $597,251 for a
beneficial conversion feature inherent in the Secured Note and (iii) $131,000
for debt issue costs paid to affiliates of the lender, for a total discount of
$1,550,251. The $822,000 and $131,000 are being amortized over the term of the
Secured Note. Since the conversion is contingent on the effectiveness of the
registration statement, which date cannot be determined, the Company will begin
amortizing the $597,251 over the remaining term of the debt once the
registration statement is declared effective. On September 30, 2004 the Company
filed the registration statement with the Securities and Exchange Commission and
the registration statement remains pending as of the date of this report.
Amortization of the debt discounts through September 30, 2004 was $119,125.

On July 20, 2004, the Company issued Laurus warrants to purchase 125,000 shares
of the Company's common stock with an exercise price of $3.00 per share and a
term of 10 years. The warrants were issued as compensation to Laurus for the
release of $250,000 of the restricted cash. The Company recognized interest
expense from this issuance of $492,980 during the three and nine months ending
September 30, 2004.

To secure the payment of all obligations, Xstream entered into a Master Security
Agreement which assigns and grants to Laurus a continuing security interest in
all of the following property now owned or at any time upon execution of the
agreement, acquired by the Company or subsidiaries, or in which any assignor now
have or at any time in the future may acquire any right, title or interest: all
cash, cash equivalents, accounts, deposit accounts, inventory, equipment, goods,
documents, instruments (including, without limitation, promissory notes),
contract rights, general tangibles, chattel paper, supporting obligations,
investment property, letter-of-credit rights, trademarks, trademark
applications, patents, patent applications, copyrights, copyright applications,
tradestyles and any other intellectual property, in each case, in which any
Assignor now have or may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all
additions, accessions and substitutions. In the event any Assignor wishes to
finance an acquisition in the ordinary course of business of any
hereafter-acquired equipment and have obtained a commitment from a financing
source to finance such equipment from an unrelated third party, Laurus agrees to
release its security interest on such hereafter-acquired equipment so financed
by such third party financing source.

                                       14
<PAGE>

The Secured Notes stipulates that the Secured Note is to be repaid using cash
payment along with an equity conversion option; the details of both methods for
repayment are as follows: The cash repayments stipulate that beginning on
September 1, 2004, or the first amortization date, the Company shall make
monthly payments to Laurus on each repayment date until the maturity date, each
in the amount of $1,470.59 (the "Tranche A Monthly Principal Amount"), together
with any accrued and unpaid interest to date on such portion of the first
$50,000 aggregate principal amount of the note ("Tranche A") and each in the
amount of $16,176.47 (the "Tranche B Monthly Principal Amount"), together with
any accrued and unpaid interest to date on such portion of the next $2,950,000
aggregate principal amount of the note ("Tranche B"). The conversion repayment
states that each month by the fifth business day prior to each amortization
date, Laurus shall deliver to the Company a written notice converting the
monthly amount payable on the next repayment date in either cash or shares of
common stock, or a combination of both. If a repayment notice is not delivered
by Laurus on or before the applicable notice date for such repayment date, then
the Company pays the monthly amount due in cash. Any portion of the monthly
amount paid in cash shall be paid to Laurus in an amount equal to 102% of the
principal portion of the monthly amount due. If Laurus converts all or a portion
of the monthly amount in shares of the Company's common stock, the number of
such shares to be issued by the Company will be the number determined by
dividing the portion of the monthly amount to be paid in shares of common stock,
by the applicable fixed conversion price, which is presently $1.50 per share.

The allocation of proceeds was as follows: $131,000 was used to pay an affiliate
of Laurus for management, due diligence/documentation fees and escrow agent
fees; $102,292 was used to payoff a term loan and line of credit at a commercial
lending institution; $50,000 was paid to Master Distributors, Inc., as a
deposit, and $266,708 was used by the Company as operating capital.
The balance of $2,450,000 was deposited by Laurus on behalf of the Company into
an account, which is in the sole dominion and control of Laurus. The purpose of
the account is to ensure funds are readily accessible for the cash-financing
portion of acquisitions or for any other purpose that Laurus Funds deemed
appropriate for use of such funds. The balance with accumulated interest at
September 30, 2004 was $919,591. SEE NOTE 1 - (G) RESTRICTED CASH.

A registration rights agreement was executed requiring the Company to register
the shares of its common stock underlying the Secured Note and warrants so as to
permit the public resale thereof. Liquidated damages of 2% of the Secured Note
balance per month accrue if stipulated deadlines are not met. The registration
statement was filed with the Securities and Exchange Commission on September 30,
2004.

Pursuant to the terms of the acquisition of substantially all of the assets of
Master Distributors, Inc. as partial consideration for the purchase price the
Company issued a secured convertible note for $2,000,000 payable in 60 equal
monthly payments and bearing 6% interest. The holder, at his discretion, may
elect to receive shares of Xstream's common stock in lieu of a cash payment. The
minimum conversion is $25,000 at a predetermined value of $5.20 per share.

NOTE 14 - SERIES B CONVERTIBLE PRFERRED STOCK OFFERING

On August 2, 2004 the Company sold 43.2 shares of Series B Convertible Preferred
Stock to nine accredited investors and issued the purchasers Series A Common
Stock Purchase Warrants and Series B Common Stock Purchase Warrants in a private
transaction exempt from registration under the Securities Act of 1933 in
reliance on Section 4(2) of that act and Rule 506 of Regulation D. The Company
received gross proceeds of $2,160,000. See Note 16, Stockholders' Equity and
Recapitalization - Preferred Stock for a description of the designations, rights
and preferences of the Series B Convertible Preferred Stock.

The Company issued the purchasers of the Series B Preferred two series of
five-year common stock purchase warrants. The Series A Warrants are exercisable
into a number of shares of the Company's common stock equal to 100% of the
shares issuable upon the conversion of the Series B Preferred at an exercise
price of $2.00 per share. The Series B Warrants are exercisable into a number of
shares of the Company's common stock equal to 50% of the shares issuable upon
the conversion of the Series B Preferred at an exercise price of $4.00 per
share. All other terms of the warrants are identical, and include:

         (i) the warrants are transferable at the discretion of the holder,

         (ii) the number of shares underlying the warrant and the exercise price
of each warrant are subject to adjustment in the event of recapitalization,
reorganization, reclassifications, consolidations, mergers or a sale of all or
substantially all of the Company's assets or properties, stock dividends,
subdivisions and combinations and distributions as well as issuance of
additional shares of the Company's common stock or any common stock equivalents
(as that term is defined in the warrant) at a price less than the then current
exercise price of the warrant or if the Company purchases any shares of its
common stock at a price greater than the market value or the current exercise
price,

                                       15
<PAGE>

         (iii) holders are restricted in their ability to exercise the warrants
if at the time of exercise the number of shares of common stock to be issued,
together with all other shares of common stock owned by the holder, would result
in the holder owning in excess of either 4.9% or 9.9% of the then issued and
outstanding shares of the Company's common stock, subject to a waiver by the
holder of these limitations upon 61 days notice to the Company, and

         (iv) beginning 12 months from the effective date of the registration
statement covering the resale of the shares of common stock underlying the
warrants as described below, at the Company's option upon 20 days notice the
Company can call up to 100% of the warrants at $0.01 per share if the market
value of its common stock has been greater than 400% of the conversion price
then in effect for the Series B Preferred for 20 trading days immediately
preceding the call notice, subject to certain requirements.

The Company paid a 10% cash commission ($216,000) and five year common stock
purchase warrants to purchase 228,000 shares of its common stock at an exercise
price of $1.50 per share as an offering cost, which is charged against the
proceeds of the offering for financial accounting purposes. In connection with
the transaction, the Company also agreed to pay the attorney's fees of the
purchasers in an amount not to exceed $35,000. The Company also granted the
purchasers a three year right of first offer and refusal for certain subsequent
financings, other than those it may enter into with Laurus, Ltd. or any entity,
which Laurus, Ltd. may introduce to the Company.

The Company also granted the purchasers registration rights covering the shares
of its common stock issuable upon the conversion of the Series B Preferred and
the exercise of the Series A and Series B warrants, including the shares
underlying the warrants issued to the placement agent (the "Registrable
Securities"). The Company agreed to file a registration statement with the
Securities and Exchange Commission within 30 days of the closing of this
offering which, when declared effective, will permit the public resale of the
Registrable Securities. If the Company should fail to file the registration
statement on a timely basis or if the registration statement is not declared
effective by the Securities and Exchange Commission within 120 days from its
filing date, or in certain other instances specified in the registration rights
agreement, the Company is required to pay the holders liquidated damages equal
to 2% of their initial investment for the first month or any portion of that
month and thereafter 1.25% for each successive month or any portion of that
month until the registration statement is effective or the Company has cured the
other events of default. The Company did not file the registration statement
until September 30, 2004; accordingly, the Company has recognized an expense of
$43,200 during the three months ended September 30, 2004 representing the
liquidated damages during that quarter for the failure to file the registration
statement on a timely basis.

The Company recorded the fair value of the 1,440,000 Series A warrants and the
720,000 Series B warrants issued with the Series B preferred stock utilizing the
Black-Scholes pricing model with the following assumptions: an interest rate of
2.53%, volatility of 149%, zero dividends and expected term of five years. The
Company calculated the fair value of the warrants at $2,160,000, which will be
recognized as a constructive dividend ratably over the 42 month term to the
redemption date.

Pursuant to the terms of the placement documents (stipulating the debt
instrument is convertible or redeemable at the discretion of the holders at the
end of the 42 month term), the transaction was classified as mezzanine financing
and the balance of the $2,160,000 gross proceeds and the discount of $2,160,000
resulting from the fair value of the warrants are reflected as of September 30,
2004 (See Note 16 - Preferred Stock). Additionally, if the instrument is
redeemed, the redemption price is the result of the number of shares that would
be issued upon conversion times $1.85 per share. The result is a premium of
$504,000 that based upon the current conversion price of $1.50. The redemption
premium will be accreted into dividends during the term of the instrument, 42
months. Therefore, for the three and nine month periods ending September 30,
2004, the Company recognized an additional dividend of $24,000 on the Series B
preferred stock.

NOTE 15 - COMMITMENTS AND CONTINGENCIES:

 (A) FACILITY LEASES
-------------------

Effective December 1, 2003, XStream terminated its month-to-month lease at its
corporate headquarters in Boca Raton and co-located with its subsidiary, BNSF.
Effective June 1, 2003, BNSF entered into a 24-month lease for new distribution
facilities. In November 2003, this lease was cancelled by the landlord and
succeeded by another lease effective December 1, 2003 for a 12-month term ending
November 30, 2004. The rent is $4,552 per month. Rent expense for corporate
headquarters and BNSF was $38,341 and $25,308 for the nine months ending
September 30, 2004 and 2003, respectively.

Effective November 1, 2003, BNCT entered into a 60-month lease for new
distribution facilities. The rent is $5,108 per month for the 13,622 square foot
facility. Rent expense for BNCT was $48,474 and $7,500 for the nine months
ending September 30, 2004 and 2003, respectively.

                                       16
<PAGE>

BNHI assumed the current lease as part of acquiring the assets of Pacific Rim.
The terms are month-to-month with the rent of $1,038 per month. In March of
2004, BNHI entered into a month-to-month lease agreement for management
facilities with monthly rent of $4,200. The space is being utilized as housing
for marketing consultants and other individuals active in expanding the brand
and current distribution territory. Rent expense charged to operations for the
nine months ending September 30, 2004 was $29,532.

BNMA assumed the lease from Ayer Beverage, Inc., consisting of a 4,300 square
foot facility at a cost of $1,425 monthly. The current lease expires on June 30,
2005 with an annual renewal option. On June 1, 2004, BNMA entered into a second
lease agreement for 13,500 sq. ft. of space located in Lawrence, MA. The terms
are month-to-month at a cost of $5,000 per month. The rent charged to operations
was $31,775 as of September 30, 2004.

BNMD assumed the lease from Master Distributors, Inc., consisting of a 70,261
square foot facility at a cost of $24,053 monthly. The current lease expires on
March 31, 2008. BNMD also subleases to four tenants, 12,250 square feet of
warehouse space along with parking spaces adjacent to the building. The total
space subleased yields $12,950 per month, which is offset against rent expense.

The total rent charged to operations, post acquisition, was $31,309 for the nine
months ending September 30, 2004.

B) EMPLOYMENT AGREEMENTS
-------------------------

See Note 10 for details regarding employment agreements with the Company's
chairman, president and Vice Chairman.

NOTE 16 - STOCKHOLDER'S EQUITY AND RECAPITALIZATION:

 (A) PREFERRED STOCK
-------------------

The Company has authorized 10,000,000 shares of preferred stock at $0.001 par
value, issuable in such series and with such designations, rights and
preferences as the Board of Directors may determine from time to time in its
sole discretion. In October 2001, the Board of Directors authorized 200,000
shares of Series A preferred stock, which is cumulative voting and convertible
and does not have dividend rights. Each share of Series A preferred stock is
convertible to one share of common stock and each share of Series A preferred
stock is entitled to five votes on each matter submitted to a vote of the
Company's shareholders. There were 200,000 preferred Series A shares outstanding
at September 30, 2004.

In August 2004 in connection with its sale of 43.2 shares of Series B
Convertible Preferred Stock the Board of Directors authorized a series of 80
shares of Series B Convertible Preferred Stock.

The designations, rights, and preferences of the Series B Preferred provide that
the shares of Series B preferred stock (i) the shares have a liquidation
preference of $50,000 per share; (ii) dividends are cumulative and payable at
the option of the Company into cash, shares of Series B preferred series or
registered common shares; (iii) the shares are convertible at any time on or
after the effective date of a registration statement registering the underlying
shares into shares of common stock equal to the liquidation preference divided
by the current conversion price of $1.50 per share. The conversion price is
subject to adjustment in the event of stock splits and combinations, dividends
or distributions, reclassifications or reorganizations, or in the event the
Company should issue or sell any additional shares of common stock or other
securities, which are convertible into common stock or common stock equivalents
at a price less than the then current conversion price. Holders are restricted
in their ability to convert the Series B Preferred into common stock if at the
time of conversion the number of shares of common stock to be issued, together
with all other shares of common stock owned by the holder, would result in the
holder owning in excess of either 4.9% or 9.9% of the then issued and
outstanding shares of the Company's common stock, subject to a waiver by the
holder of these limitations upon 61 days notice to the Company. The Series B
Preferred, which has a liquidation preference of $50,000 per share, is
convertible into shares of the Company's common stock equal to the liquidation
preference divided by the conversion price of $1.50 per share. The estimated
fair value of the warrants and the beneficial conversion feature, in accordance
with EITF 00-27, is $2,160,000, which is allocated to additional paid in capital
and recorded as a dividend over the term of the Series B Preferred, 42 months.
As of September 30, 2004, the Company recorded $102,857 of the discount to
dividend. The commission on this financing is 10% of the gross proceeds. The
commission results in a reduction of additional paid in capital of $216,000.

The holders have the right to require XStream to redeem all or a portion of the
shares the Series B Preferred under certain circumstances, including (i) upon
the occurrence of a Major Transaction (as that term is defined in the
designations of the Series B Preferred). In this event, the redemption price


                                       17
<PAGE>

would be equal to 100% of the liquidation preference plus all accrued but unpaid
dividends, and (ii) upon the occurrence of a Triggering Event (as that term is
defined in the designations of the Series B Preferred). In this event, the
redemption price would be equal to 120% of the amount of the liquidation
preference plus all accrued but unpaid dividends. Upon either occurrence, at the
Company's discretion XStream can pay the redemption price in cash or shares of
common stock based upon the then current conversion price.

On the date which is 42 months from the date of issuance of the Series B
Preferred , at the option of the holder XStream is required to redeem the
outstanding shares of Series B Preferred into such number of shares of its
common stock as equal to the liquidation preference plus al l accrued but unpaid
dividends divided by the conversion price then in effect, or at the option of
the holder for cash at a price equal to the number of shares of common stock
each holder would be entitled to receive at the conversion price then in effect
multiplied by $1.85 which as of the issuance date is computed as $2,664,000. The
$504,000 premium is being accreted over the 42 month term with a charge to
accumulated deficit as a constructive dividend. Accretion for the period ended
September 30, 2004 was $24,000 as a constructive dividend.

So long as the Series B Preferred is outstanding, without the consent of the
holders of at least 3/4 of the outstanding shares of Series B Preferred the
Company cannot (i) amend the provisions of the Series B Preferred, (ii)
repurchase, redeem or pay any dividends on its common stock or any other
securities which rank junior to the Series B Preferred, (iii) amend its Articles
of Incorporation or By-laws in a manner which would materially and adversely any
right of the Series B Preferred, (iv) make any distribution with respect to any
junior security, (v) voluntarily file for bankruptcy, liquidate its assets or
make an assignment for the benefit of its creditors (vi) change the nature of
its business, or, (vii) so long as at least $1,500,000 of the Series B Preferred
is outstanding (which represents 30 shares), the Company cannot authorize or
create any class of securities which ranks senior to or pari passu with the
Series B Preferred.

The Series B Preferred has no voting rights. The Series B ranks senior to the
Company's common stock and to all other classes of its securities which do not
specifically provide that they are senior to the Series B, but subordinate to
all of the Company's indebtedness, and it pays cumulative semi-annual dividends
of 6% per annum, payable at the Company's option in cash, registered shares of
the Company's common stock or additional shares of the Company's Series B
Preferred. The dividends payable as of September 30, 2004, were $20,949. If the
Company elects to pay the dividends in registered shares of its common stock,
the shares are valued at the then conversion price of the Series B Preferred and
if the Company elects to pay the dividends in shares of Series B Preferred,
those shares are valued at the liquidation preference of the stock.

The Company recorded cumulative dividend in Series B preferred stock of $20,949
for the quarter ended September 30, 2004.

(B) COMMON STOCK
----------------

In February 2002, the Company issued 213,375 of its common shares to its founder
and principal stockholder, XStream Beverage, Inc. ("XBI"). XBI is controlled by
an officer of the Company. For purposes of results of operations, the issuance
was considered in substance, a compensation expense to be recognized during the
service period pursuant to a verbal consulting agreement, which was effective
April 1, 2002. Accordingly, the value of $10,668,750 had been recorded as a
deferred compensation expense at March 31, 2002. In July 2002, effective April
1, 2002 the Company rescinded the consulting agreement and received a
subscription for the 213,375 common shares, paid for in the form of a promissory
note at the contemporaneous offering price of $10.00 per share resulting in a
subscription promissory note receivable of $2,133,750. Under Nevada law, the
promissory note was considered valid consideration for the issuance of capital
stock. The note bore interest at 8% and was due August 13, 2003. Due to the
rescission of the consulting agreements, the $10,668,750 deferred compensation
and related $10,664,483 additional paid-in capital were reversed. Interest
income for 2003 and 2002 was $170,700 and $128,142, respectively and accrued
interest receivable was $299,042 and was deducted from equity as a subscription
receivable at December 31, 2003. In January 2004, the Company forgave the
subscription receivable promissory note for its parent and related accrued
interest in exchange for the return of the 213,375 subscribed shares. The shares
have been returned to the Company's treasury and have been cancelled.

On January 15, 2003, the Company issued 17,500 shares pursuant to a twelve-month
consulting agreement. The 17,500 shares were vested at the grant date resulting
in a value of $350,000 based on the trading price on the grant date to be
recognized over the twelve-month service period. During the twelve months ended
December 31, 2003, $321,450 was recognized as consulting expense $28,550 as
deferred. The deferred balance of $28,550 was recognized as consulting expense
during the nine months ending September 30, 2004.

                                       18
<PAGE>

In November 2003, the company issued 25,000 shares as a loan fee in
consideration of a one-year $125,000 note. The value of $250,000 based on the
contemporaneous offering price of $10.00 per share was being recognized over the
one-year term. On May 31, 2004, the principal balance of note was converted into
52,083 common shares based on the then contemporaneous offering price of $2.40.
For the year ending December 31, 2003, the Company recognized $42,000 as a loan
fee. The remaining deferred component was recognized as an expense as of
September 30, 2004.

In November of 2003, the Company issued 25,050 shares of common stock in
consideration of $109,000 of substituted collateral to secure a commercial line
of credit for Beverage Network of Connecticut. A guarantee fee computed as
$250,500 based on the then contemporaneous private placement offering of $10.00
per share is recognized over the six month term with $83,500 charged to loan and
loan guarantee fees in 2003 and $167,000 deferred as a component of equity at
December 31, 2003. The Company recognized an expense of $125,250 with a deferred
balance of $41,750 as of March 31, 2004. The $41,750 balance was expensed as of
June 30, 2004.

In December 2003, the Company issued 15,000 shares of common stock to a
consultant for services under a nine month contract. The resulting expense of
$36,000 based on the then contemporaneous offering price of $2.40 per share was
to be recognized over the nine month term beginning in 2004.

In January 2004, the Company issued 5,500 shares of common stock as compensation
for legal services provided to the Company. The shares were valued at the then
contemporaneous private placement offering price of $2.40 per share with the
expense of $13,200 recognized immediately.

In the first quarter of fiscal 2004, a $15,000 third party, non-interest bearing
demand note was converted into 5,000 common shares valued at the then
contemporaneous private placement offering price of $2.40 per share. The
transaction resulted in the Company recognizing a gain on conversion of $3,000.

In January 2004, the Company issued 775 of common stock to consultants for past
services. The shares were valued at the then contemporaneous offering price of
$2.40 per share with the expense of $1,860 recognized immediately.

In January 2004, our wholly owned subsidiary, XStream Brands, Inc. entered into
an Assignment of Trademark with Squeeze Beverage, Inc., for the assignment of
all of its rights and interests in the Mark of "SQUEEZE" for carbonated flavored
soft drinks and seltzer water, including all variations thereof such any
spelling, formatives, phonetic variations and stylized designs of the same an
all goodwill associated therewith. The Company issued 20,000 shares of common
stock valued based upon the then contemporaneous private placement offering
price of $2.40 per share resulting in a valuation of $48,000. (See Note 3 -
Acquisitions)

The Company also issued 3,750 common shares to a consultant valued at the then
contemporaneous private placement offering price of $2.40 per share as
compensation for services. The services provided were for a period of six
months, January 1, 2004 through June 30, 2004) with the entire $9,000 expensed
as of September 30, 2004.

In February 2004, the Company issued 500,000 shares of common stock in
consideration of employment services provided to the Company, with 300,000
shares issued to Theodore Farnsworth, Chairman and 100,000 shares each issued to
Jerome Pearring, President and Barry Willson, Vice Chairman/Secretary. The
Company retained the services of an independent accounting firm to perform a
valuation analysis on this transaction which resulted in the 300,000 shares
being valued at $2.50 per share, and the remaining 200,000 shares were valued at
$3.00 per share. The shares were issued as a bonus, therefore, the expense of
$1,350,000 was recognized immediately.

In February 2004, the Company entered into a Termination Agreement, Waiver and
Release with two prior officers, terminating their consulting agreement of June
2003 by issuing 16,268 shares of common stock valued at the then contemporaneous
offering price of $2.40 per share. A loss of $23,921 was recognized immediately
as a result of the transaction.

In March of 2004, the Company issued 5,208 shares of common stock for as
compensation for legal services provided to the Company. The shares were valued
at the then contemporaneous offering price of $2.40 per share with the expense
of $12,500 recognized immediately.

In March 2004, the Company also issued 147 shares of common stock to a
consultant as compensation pursuant to the execution of a 12-month agreement,
which stipulated that 147 shares are to be issued quarterly. Pursuant to the
agreement, the shares were valued at $8.20 per share and an expense of $1,206
was recognized immediately.

In March 2004, the Company issued 30,000 shares of common stock to an investment
banker for consulting services. The shares were valued at the then
contemporaneous offering price of $2.40, with the Company recognizing an expense
of $72,000.

In March 2004, the Company issued 12,500 shares of common stock as partial
consideration for the acquisition of all of the assets and the assumption of
certain liabilities of Pacific Rim Natural Juice Company. The shares were valued
at the then $2.40 contemporaneous private placement offering price resulting in
a value of $30,000. (See Note 3)

In March 2004, the Company issued 20,000 shares of its common stock as partial
consideration for the acquisition of substantially all of the assets and the
assumption of certain liabilities of Ayer Beverage, Inc. The shares were valued
at $48,000 based on the then contemporaneous private placement offering price of
$2.40 per share.
(See Note 3 - Acquisitions)

                                       19
<PAGE>

In January 2004, the Company issued 16,268 common shares to two former officers
in exchange for $57,418 of liabilities due to them. The shares were valued at
the closing price of the Company's common stock of $5.00 on the agreement date
or a total $81,339 resulting in a loss on settlement of $23,921.

During the first quarter, 2004, the Company issued 330,707 shares of common
stock in consideration of subscriptions for the then contemporaneous private
placement memorandum at an offering price of $2.40 per share for gross proceeds
of $793,696 and received an additional $137,000 pursuant to subscriptions for
which 57,083 shares were recorded as issuable. Offering costs were $108,370.

In April 2004, the Company issued 32,500 shares of common stock to employees.
The shares were valued at the then contemporaneous private placement offering
price of $2.40 per share with Company recognizing a compensation expense of
$78,000.

In April 2004 the Company entered into a six-month consulting agreement and
agreed to pay 5,000 shares of common stock as consideration for the services.
The Company issued the shares recognizing an expense of $11,000, with a
remaining deferred component of $1,000 as of September 30, 2004.

On April 8, 2004, the Company executed a contract with a member of its Advisory
Board. The term of the contract will continue until either advisor or the
Company terminates the agreement or the advisor's participation in the Advisory
Board by sending written notice to the other party. The Company issued 2,500
shares of common stock pursuant to the terms of the contract and recognized an
expense of $6,000 based on the then contemporaneous offering price of $2.40 per
share.

The company also issued 2,500 shares to a second member of its strategic
advisory board for the execution of a consulting agreement. The term of the
contract will continue until either Advisor or the Company terminates the
agreement or the Advisor's participation in the advisory board by sending
written notice to the other party. The company recognized an expense of $6,000
based on the then contemporaneous private placement offering price of $2.40 per
share.

In May 2004, the company issued 30,000 shares to an investment banker for past
services rendered. The company recognized an expense of $72,000 based on the
then contemporaneous offering price of $2.40 per share.

In May 2004, a note payable of $125,000 was converted into 52,083 common shares
valued at the then contemporaneous private placement offering price of $2.40 per
share, resulting in no gain or loss.

On July 9, 2004 in connection with the Company's purchase of substantially all
of the assets of Master Distributors, Inc. the Company agreed to issue 21,250
shares of its common stock to current employees of Master Distributors, Inc. as
consideration of services rendered as well as being an incentive to remain in
their current positions to ensure a seamless transition for all parties
involved. The Company issued 21,250 shares of stock on June 8, 2004 with the
contingency that the certificates were to be held by an escrow agent until after
the six month anniversary date of the closing of the asset purchase agreement.
The Company also issued 96,154 shares to the principal owner of Master
Distributors, Inc. in advance of the purchase agreement and upcoming closing of
the transaction. The shares, totaling 96.154, were valued at the then
contemporaneous offering price of $2.40 with the Company recording an
acquisition cost of $230,769 and 21,250 shares recorded as compensation for
employees valued at $51,000 as of September 30, 2004.

In April, May and June 2004, the Company issued 69,861 shares of common stock,
previously recorded as issuable as of March 31, 2004.

During the quarter ended June 30, 2004, the Company issued 255,000 shares of
common stock in consideration of subscriptions from the then current private
placement memorandum at an offering price of $2.40 per share for gross proceeds
of $612,000. Additionally, as of June 2004, 100,000 shares of common stock
became issuable for $240,000 proceeds received as of June 30, 2004. Offering
costs were $138,590.

In July, August and September 2004, the Company issued 67,500 shares of common
stock, previously recorded as issuable, as of June 30, 2004.

During the third quarter, 2004, the Company issued 48,300 shares of common stock
in consideration of subscriptions for the then contemporaneous private placement
memorandum at an offering price of $2.40 per share for gross proceeds of
$115,920 and received an additional $24,000 pursuant to subscriptions for which
10,000 shares of common stock were recorded as issuable. Offering costs were
$23,790.

In July 2004, the Company entered into a 90-day contract with a firm to provide
for investor relations services. The contract stipulated that the consultants
were to be issued 15,000 shares of common stock as compensation. The shares of
common stock were valued at the current offering price of $2.40 and an expense
of $36,000 was recognized as of September 30, 2004.

                                       20
<PAGE>

A six-month consulting agreement was executed on July 1, 2004 which provided
that the consultant was to be issued 2,500 shares of common stock as
compensation for his services under the agreement. For the nine months ending
September 30, 2004 the Company recognized an expense of $3,000, with a deferred
component of $3,000 as of September 30, 2004.

In August 2004, the Company issued 7,500 shares of its common stock to an
employee pursuant to the stipulations of the employment agreement which has a
term of six months. The shares were valued at the private placement offering
price of $2.40; an expense of $9,000 was recognized for the period ending
September 30, 2004, with the remaining component of $9,000 being deferred.

In September 2004, the Company issued 47,098 shares of common stock to
employees. The stock was valued at $2.40 per share with the Company recognizing
a compensation expense of $113,035.

In August, 2004 the Company issued 4,167 shares of common stock as a settlement
for a note on behalf of its subsidiary, Beverage Network of Hawaii, Inc. and for
services rendered. The shares were valued at $2.40, which resulted in a
settlement gain of $39,999.

In September 2004, the Company issued 3,600 shares of common stock to a
consultant as compensation for services. The shares were valued at $2.40 and the
company recognized an expense of $8,640 for the period ending September 30,
2004.

In August 2004, the Company issued 2,500 shares of common stock to a member of
its Advisory Board for the execution of a consulting agreement. The term of the
contract will continue until either advisor or the Company terminates the
agreement or the advisor's participation in the advisory board by sending
written notice to the other party. The Company recognized an expense of $6,000
for this period.

In September 2004, the Company issued 43,750 shares of common stock to an
investment banking firm as compensation for its services in connection with the
Series B Convertible Preferred Stock offering. The shares were valued at $2.40;
the Company recognized offering costs charged to additional paid in capital of
$105,000 as of September 30, 2004.

In September 2004, the Company issued 20,000 shares of common stock to a
consultant as compensation under the terms of an agreement for investor
relations services. The agreement is to remain in effect until cancelled by
either party. Upon valuing the shares at $2.40, the Company recognized an
expense of $48,000 for the period ending September 30, 2004.

NOTE 17 - SUBSEQUENT EVENTS:

On October 7, 2004 the Company filed an amendment to its Articles of
Incorporation which increased the number of our authorized shares of common
stock from 5,000,000 to 50,000,000 shares and changed the name of the company
from Xstream Beverage Group, Inc. to Xstream Beverage Network, Inc. These
changes were approved by its Board of Directors and the holders of a majority of
its outstanding voting securities. On September 13, 2004 the Company filed a
definitive Information Statement on Schedule 14C with the SEC regarding these
actions.

In November 2004 the Company issued 46,269 shares of its common stock to
consultants for services rendered. These shares were valued at $61,075 on the
date of issuance and an expense in that amount will be recognized during the
fourth quarter of fiscal 2004.

In November 2004 the Company issued 5,000 shares of its common stock which was
classified as issuable at September 30, 2004.

On November 11, 2004, the Company issued Laurus warrants to purchase 100,000
shares of the Company's common stock with an exercise price of $2.00 per share
and a term of 10 years. The warrants were issued as compensation to Laurus for
the release of $1000, 000 of the restricted cash. The Company will recognize
interest expense from this issuance of $161,692 during the fourth quarter of
fiscal 2004.


                                       21
<PAGE>

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

         The following discussion and analysis should be read in conjunction
with our financial statements and the accompanying notes appearing elsewhere in
this Quarterly Report.

OVERVIEW

         We develop, market, sell and distribute new age beverage category
products under our own trademarks, including gourmet sodas, fruit juices, fruit
drinks and energy drinks. We are also a wholesale distributor of third party new
age beverages, energy drinks, juices and non-carbonated sodas, specialty and
nutritional drinks, vitamin waters and non-alcoholic beer. New Age or
alternative beverages are distinguishable from mainstream carbonated soft drinks
in that they are uncarbonated or tend to have less carbonation and are made from
primarily natural ingredients. As a general rule, three criteria have been
established for such a classification, including relatively new introductions to
the market-place, a perception by consumers that consumption is healthful when
compared to mainstream carbonated soft drinks and the use of natural ingredients
and flavors in the products. This beneficial perception by consumers allows the
soft drink industry to charge higher prices than those commanded by regular
carbonated soft drinks. For this reason, new age beverages are sometime referred
to as value added beverages.

         Our goal is to become a leading brand owner and distributor of beverage
products through multiple distribution channels. We believe that our acquisition
strategy is key to our ability to grow our company. Since our acquisition of
Total Beverage Network in April 2003 through September 30, 2004, we have
acquired additional beverage distribution companies together with a natural
juice company and certain intellectual property rights related to other new age
beverage names. The acquisitions included:

         *        April 2003 - Total Beverage Network.
         *        April 2003 - Universal Florida Beverage Distributors
         *        May 2003 - Finish-Line Distributors
         *        January 2004 - SQUEEZE trademark
         *        March 2004 - Pacific Rim Natural Juice Company
         *        March 2004 - Maui Juice Company trademark
         *        March 2004 - Ayer Beverages
         *        July 2004 - Master Distributors

         Our business strategy includes the acquisitions of additional
distribution companies and proprietary value-added brands currently being
commercialized in various segments of the new age beverage industry. Our success
is dependent on our ability to make these additional acquisitions and then to
effectively integrate their operations into our company.

         The formation of Coca Cola Enterprises and then The Pepsi Bottling
Group began the demise of the independent beverage distributors, whose fate was
sealed when Cadbury Schweppes began buying up strong brands such as Snapple, Dr
Pepper, Seven Up and Mistic and running them through a few strong regional
distribution companies, such as S.E. Atlantic in the southeast U.S. The former
strong independents have consolidated and acquired many smaller competitors.
Most of the surviving small distributors are under- resourced, entrepreneurial
operations with weak core brand business and inadequate infrastructures.

                                       22
<PAGE>

         It is within this group of companies, distributors with solid
management but without the means to grow, that we have identified potential
acquisition targets. Our business objective is to market a full range of
proprietary new age brands. To achieve this goal, we are acquiring and
developing brands and products that we believe are appropriate and desirable for
target consumers, as well as acquiring a network of beverage distribution
companies. Our strategy is to complete our network of small to medium sized
beverage distributors in major markets throughout the United States. We believe
that we will generate stronger than industry average margins by selling
value-added proprietary brands and third party value-added brands that are
dependent upon our multi-market distribution network. We also believe that the
acquisition of beverage distribution companies will give us access to our target
customers as well as enabling us to earn revenues by distributing a portfolio of
third party brands.

RESULTS OF OPERATIONS

         Our sales for the three months and nine months ended September 30, 2004
increased $2,892,399, or approximately 336% and $4,156,341, or approximately
284%, respectively, from the comparable periods in fiscal 2003. The increase in
sales is attributable to the implementation of our acquisition strategy which we
believe is the key driver to grow our company and to a lesser extent, sales
growth in our New England Operations. Our sales for the three and nine months
ended September 30, 2004 includes revenues attributable to our Total Beverage
Network, Universal Florida Beverage Distributors and Finish-Line Distributors
for the entire period reported as compared to sales reported for only a portion
of the comparable period in fiscal 2003 as a result of the timing of the
acquisitions. In addition, sales for the three and nine months ended September
30, 2004 include revenues attributable to Ayer Beverages, Pacific Rim and Master
Distributors, with no sales reflected in the comparable periods of 2003, as a
result of the acquisition being completed in fiscal year 2004.We anticipate that
our sales will continue to increase during the balance of fiscal 2004 as a
result of the continued implementation of our acquisition strategy.

         The cost of goods sold as a percentage of sales for the three months
and nine months ended September 30, 2004 was approximately 69% and approximately
72%, respectively, of sales as compared to approximately 69% and approximately
66%, respectively, for the comparable periods in fiscal 2003. The slight decline
in our operating margins for the nine months ended September 30, 2004 is
attributable to a change in product mix sold as a result of the expansion or our
business. During the period of September 30, 2004 and September 30, 2003, we
generated sales from both our proprietary products as well as the sale of third
party beverage brands sold through our distributor subsidiaries; while the third
party products have lower margins, we believe that the increased volume of sales
attributable to a broader product line will in time create better margins and
contribute to our overall profitability. Sales for proprietary brands were
$272,006 and $51,935, respectively, for the nine months ending September 30,
2004 and September 30, 2003. Proprietary brand sales for the three months ending
September 30, 2004 and September 30, 2003 were $140,455 and $32,474,
respectively.

         Total operating expenses for the three months and nine months ended
September 30, 2004 increased approximately $738,113 or 40% and approximately
$3,316,527 or 100%, respectively, from the three months and nine months ended
September 30, 2003. For the nine months ended September 30, 2004 as compared to
the nine months ended September 30, 2003, this increase, which is attributable
to the growth of our company during fiscal 2004, primarily includes:

         * an increase of $278,011, or approximately 236%, in marketing and
selling expense . Marketing expense includes marketing and promotion of Yohimbe
Energy Drink and direct selling expenses. We anticipate hat our marketing
expense will increase over the next year in order for us to implement our
strategy of developing and growing corporate owned brands.

                                       23
<PAGE>

         * an increase of $171,212, or approximately 135%, in warehouse and
delivery, which includes truck leasing and truck repairs in New England and
Maryland and truck repairs in New England. This increase is primarily
attributable to the growth in the business as reflected in sales growth. We
anticipate that our warehouse and delivery costs will increase as we acquire
additional distribution companies and expand our routes in existing markets.

         * an increase of $2,694,860, or approximately 319%, in compensation
expense. Compensation expense includes cash and stock compensation issued
certain employees and to the board of directors. Included in this increase in
fiscal 2004 is an increase of approximately $1,589,663 which reflects non-cash
compensation paid which includes $1,350,000 attributable to the one time
issuance of 500,000 shares of our common stock to the executives officers in
February 2004. The 500,000 shares of our common stock were issued as bonuses to
the executives of the Company. We do not presently anticipate we will record any
similar non-cash expenses during the balance of fiscal 2004. We anticipate that
the cash component of our compensation expense will remain relatively constant
during the balance of fiscal 2004, subject to increases if we acquire additional
companies and their related personnel,

         * an increase of $115,019, or approximately 179%, in rent expense which
is attributable to the addition of physical locations as a result of our various
acquisitions during fiscal 2004. We anticipate that rent expense will remain
relatively constant during the balance of fiscal 2004, subject to increase if we
acquire additional companies,

         * a decrease of $727,205, or approximately 51%, in consulting fees
which is attributable to the termination of third party services associated with
the company in its developmental stages. We anticipate that consulting fees will
remain relatively constant during the balance of fiscal 2004,

         * an increase of $105,267, or approximately 43%, in professional fees
which is primarily attributable to legal and accounting fees incurred for
acquisitions closed during fiscal 2004, as well as legal and accounting fees
related to various financing transactions we have undertaken and the filing of a
registration statement with the SEC to register the shares of our common stock
underling the securities sold in those financing transactions. We anticipate
that professional fees will remain at these levels during the balance of fiscal
2004,

         * a one time guarantee fee of $167,000 during fiscal 2004 for which
there was no comparable expense during fiscal 2003. This guarantee fee related
to our acquisition of Beverage Network of Connecticut and our issuance of shares
of our common stock as substitution of collateral for a commercial line of
credit.

         * an increase of $67,167, or approximately 467%, in bad debt expense.
This increase is primarily attributable to the increase in sales resulting from
the acquisitions. We anticipate that bad debt expense will remain relatively
constant during the balance of fiscal 2004, subject to increase if we acquire
additional companies.

         * an impairment loss on the valuation of goodwill of $334,324 was
recognized during fiscal 2003 for which there was no comparable expense during
fiscal 2004.

         * an increase of $779,521, or approximately 449%, in other general and
administrative expenses. Other general and administrative expense includes
non-recurring brand development costs, amortization of fixed assets and
intangibles, insurance and utilities costs. This increase is primarily
attributable to the acquisitions completed in 2004.

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<PAGE>


         Total other expense, net for the nine months ended September 30, 2004
decreased $125,991 or approximately 15% from the nine months ended September 30,
2003. This decrease is primarily attributable to one-time settlements we
recognized during the nine months ended June 30, 2003. The decrease was
partially offset by interest expense of approximately $493,000 recognized for
the issuance of warrants to Laurus as compensation to release $250,000 of the
restricted cash. These one-time settlements were with trade vendors as well as
former employees and consultants for both cash and stock. As a result of the
$3,000,000 principal amount secured convertible note we issued in May 2004 to
Laurus Master Fund, Ltd. we anticipate that our interest expense will
significantly increase during the balance of fiscal 2004.

LIQUIDITY AND CAPITAL RESOURCES

         We have a history of losses and at September 30, 2004 we had an
accumulated deficit of $22,806,114 and a working capital deficit of $1,032,009.
At September 30, 2004 we also have $919,591 of restricted cash, which represents
a portion of net proceeds from the sale of the $3 million secured convertible
note to Laurus Master Fund, Ltd. in May 2004. Subsequent to September 30, 2004,
we have used an additional $100,000 of this restricted cash for general working
capital needs.

         Net cash used in operating activities for the nine months ended
September 30, 2004 was $2,802,142 as compared to $319,576 for the nine months
ended September 30, 2003. The increase was primarily attributable to:

         *        an increase of approximately $2,100,000 in our net loss,

         *        a decrease of approximately $276,000 in amortization of
                  deferred consulting expenses,

         *        an increase of approximately $843,000 from net cash used in
                  operations resulting from the net change in operating assets
                  and liabilities,

         *        an increase of approximately $148,000 of non-cash expenses
                  related to expenses and settlements,

         *        These changes are off-set by an increase of approximately
                  $868,000 consisting of $375,000 in stock based loan fees
                  captured in professional fees and $493,000 for warrants
                  captured in interest expense.

         Net cash used in investing activities for the nine months ended
September 30, 2004 was $799,126 as compared to $262,333 in the comparable nine
month period in fiscal 2003. in the net cash used for investing activities is
primarily the use of cash for acquisitions. Net cash provided by financing
activities for the nine months ended September 30, 2004 was $3,811,446 as
compared to $548,413 for the nine months ended September 30, 2003. The increase
in fiscal 2004 is primarily attributable to proceeds from the sale of shares of
our common stock, preferred stock and convertible secured note, net of offering
costs. The net proceeds from the sales of common stock were approximately
$1,341,000. The proceeds from the sale of Series B preferred stock were
approximately $2,160,000. The proceeds from the Secured Note to Laurus were
approximately $3,000,000. These proceeds were partially offset by the loan
repayment of approximately $1,579,000 and the net deposit into a restricted cash
account of approximately $919,000. Subsequent to September 30, 2004 an
additional $100,000 of as been released to us which we used for general working
capital. The balance of the funds held in the restricted account are controlled
by Laurus Master Fund, Ltd. until we consummate one or more acquisitions which
will be subject to the approval of Laurus Master Fund, Ltd. or until all of the
outstanding principal amount of the secured convertible term note is converted
into shares of our common stock.

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<PAGE>

         The report from of our independent auditor on our audited financial
statements at December 31, 2003 contains an explanatory paragraph regarding
doubt as to our ability to continue as a going concern. While a significant
portion of our net loss for the nine months ended September 30, 2004 is
non-cash, in order to sustain our current operations as well as to expand sales
of our existing products we will require funds to satisfy our current
obligations, increase our product inventory, move our subsidiary to a new
facility in Maui and equip that facility with additional manufacturing
equipment, and for receivable financing. We will also need funds to satisfy
existing obligations, including the balance of notes due from the Master
Distributors acquisition. We will also require additional capital to continue to
implement our acquisition strategy. We do not presently have any commitments for
additional working capital and there are no assurances that such capital will be
available to us when needed or upon terms and conditions which are acceptable to
us. In addition, if we raise additional working capital through the issuance of
debt or additional dividend paying securities our future interest and dividend
expenses will increase. If we are unable to secure additional working capital as
needed, our ability to grow our sales and meet our operating and financing
obligations as they become due could be in jeopardy.

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 148, Accounting
for Stock-Based Compensation - Transition and Disclosure. Statement 148 provides
alternative methods of transition to Statement 123's fair value method of
accounting for stock-based employee compensation. It also amends the disclosure
provisions of Statement 123 and APB Opinion No. 28, Interim Financial Reporting,
to require disclosure in the summary of significant accounting policies of the
effects of an entity's accounting with respect to stock-based employee
compensation on reported net income and earnings per share in annual and interim
financial statements. Statement 148's amendment of the transition and annual
disclosure requirements of Statement's 123 are effective for fiscal years ending
after December 15, 2002. Statement 148's amendment of the disclosure
requirements of Opinion 28 is effective for interim periods beginning after
December 15, 2002. The adoption of the disclosure provisions of Statement 148 as
of December 31, 2002 did not have a material impact on our financial condition
or results of operations.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." This
Statement establishes standards for how an issuer classifies and measures
certain financial instruments with characteristics of both liabilities and
equity. This Statement is effective for financial instruments entered into or
modified after May 31, 2003, and otherwise is effective for the first interim
period beginning after June 15, 2003, with certain exceptions. The adoption of
SFAS No. 150 did not have a significant impact on our consolidated financial
position or results of operations.

         In November 2002, the FASB issued FASB Interpretation No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others" (FIN 45). FIN 45 requires that
upon issuance of a guarantee, a guarantor must recognize a liability for the
fair value of an obligation assumed under a guarantee. FIN 45 also requires
additional disclosures by a guarantor in its interim and annual financial
statements about the obligations associated with guarantees issued. The
recognition provisions of FIN 45 are effective for any guarantees issued or
modified after December 31, 2002. The disclosure requirements are effective for
financial statements of interim or annual periods ending after December 15,
2002. The adoption of this pronouncement does not have a material effect on our
earnings or financial position.

                                       26
<PAGE>

         In January 2003, the FASB issued Interpretation No. 46 (FIN 46),
"Consolidation of Variable Interest Entities." FIN 46 requires that if an entity
has a controlling financial interest in a variable interest entity, the assets,
liabilities, and results of activities of the variable interest entity should be
included in the consolidated financial statements of the entity. FIN 46 requires
that its provisions are effective immediately for all arrangements entered into
after January 31, 2003. We do not have any variable interest entities created
after January 31, 2003. For those arrangements entered into prior to January 31,
2003, the FIN 46 provisions are required to be adopted at the beginning of the
first interim or annual period beginning after June 15, 2003. We have not
identified any variable interest entities to date and will continue to evaluate
whether it has variable interest entities that will have a significant impact on
its consolidated balance sheet and results of operations.

CRITICAL ACCOUNTING POLICIES

         The preparation of financial statements in conformity with generally
accepted accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from those estimates.

ITEM 3.  CONTROLS AND PROCEDURES

         Our management, which includes our Chief Executive Officer who also
serves as our principal financial officer, have conducted an evaluation of the
effectiveness of our disclosure controls and procedures (as defined in Rule
13a-14(c) promulgated under the Securities and Exchange Act of 1934, as amended)
as of a date (the "Evaluation Date") as of the end of the period covered by this
report. Based upon that evaluation, our management has concluded that our
disclosure controls and procedures are effective for timely gathering, analyzing
and disclosing the information we are required to disclose in our reports filed
under the Securities Exchange Act of 1934, as amended. There have been no
significant changes made in our internal controls or in other factors that could
significantly affect our internal controls subsequent to the end of the period
covered by this report based on such evaluation.

PART II. OTHER INFORMATION

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

         In July 2004 we issued 20,000 shares of our common stock valued at
$48,000 as compensation to a public relations company for investor relations
services under the terms of a 90 day consulting agreement. The recipient was an
accredited investor and the securities were issued in reliance on an exemption
from registration provided by Section 4(2) of the Securities Act of 1933. The
recipient represented that it was acquiring the shares for investment purposes
only, and not with a view towards distribution or resale except in compliance
with applicable securities laws. No general solicitation or advertising was used
in connection with the issuances, and the certificates evidencing the shares
that were issued contained a legend restricting their transferability absent
registration under the Securities Act of 1933 or the availability of an
applicable exemption therefrom.

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<PAGE>

         In July 2004 we entered into a six month consulting agreement with a
consultant to provide business advisory services to us. Under the terms of this
agreement issued the consultant 2,500 shares of our common stock which were
valued at $6,000. The recipient was a sophisticated investor and the securities
were issued in reliance on an exemption from registration provided by Section
4(2) of the Securities Act of 1933. The recipient represented that it was
acquiring the shares for investment purposes only, and not with a view towards
distribution or resale except in compliance with applicable securities laws. No
general solicitation or advertising was used in connection with the issuances,
and the certificates evidencing the shares that were issued contained a legend
restricting their transferability absent registration under the Securities Act
of 1933 or the availability of an applicable exemption therefrom.

         In July and September 2004 we issued 47,098 shares of our common stock
to two employees as compensation for past services valued at approximately
$113,035 in reliance on an exemption provided by Section 4(2) of the Securities
Act off 1933. Each of the recipients was an accredited or otherwise
sophisticated investor and represented that he was acquiring the shares for
investment purposes only, and not with a view towards distribution or resale
except in compliance with applicable securities laws. No general solicitation or
advertising was used in connection with the issuances, and the certificates
evidencing the shares that were issued contained a legend restricting their
transferability absent registration under the Securities Act of 1933 or the
availability of an applicable exemption therefrom.

         In August, 2004 we issued 4,167 shares of our common stock to an
individual as compensation for accrued expenses and for past professional fees
in a transaction exempt from registration in reliance on an exemption provided
by Section 4(2) of the Securities Act of 1933. We valued these shares at $10,001
which resulted in a gain of $39,999. The recipient was a sophisticated investor
and the securities were issued in reliance on an exemption from registration
provided by Section 4(2) of the Securities Act of 1933. The recipient
represented that she was acquiring the shares for investment purposes only, and
not with a view towards distribution or resale except in compliance with
applicable securities laws. No general solicitation or advertising was used in
connection with the issuances, and the certificates evidencing the shares that
were issued contained a legend restricting their transferability absent
registration under the Securities Act of 1933 or the availability of an
applicable exemption therefrom.

         In September 2004 we issued 3,600 shares of our common stock valued at
$8,640 to a consultant under the terms of an agreement. The recipient was as
sophisticated investor and the securities were issued in reliance on an
exemption from registration provided by Section 4(2) of the Securities Act of
1933. The recipient represented that he was acquiring the shares for investment
purposes only, and not with a view towards distribution or resale except in
compliance with applicable securities laws. No general solicitation or
advertising was used in connection with the issuances, and the certificates
evidencing the shares that were issued contained a legend restricting their
transferability absent registration under the Securities Act of 1933 or the
availability of an applicable exemption therefrom.

         In September 2004 we issued 2,500 shares of our common stock valued at
$6,000 to Mr. Morris Stoddard, a member of our advisory board, as compensation
for business advisory services to us rendered in a transaction exempt from
registration in reliance on an exemption provided by Section 4(2) of the
Securities Act of 1933. The recipient was as sophisticated investor and the
securities were issued in reliance on an exemption from registration provided by
Section 4(2) of the Securities Act of 1933. The recipient represented that he
was acquiring the shares for investment purposes only, and not with a view
towards distribution or resale except in compliance with applicable securities
laws. No general solicitation or advertising was used in connection with the
issuances, and the certificates evidencing the shares that were issued contained
a legend restricting their transferability absent registration under the
Securities Act of 1933 or the availability of an applicable exemption therefrom.

                                       28
<PAGE>

         In September 2004 we issued 20,000 shares of our common stock valued at
$48,000 to a public relations company for investor relations services. The
recipient was an accredited investor and the securities were issued in reliance
on an exemption from registration provided by Section 4(2) of the Securities Act
of 1933. The recipient represented that it was acquiring the shares for
investment purposes only, and not with a view towards distribution or resale
except in compliance with applicable securities laws. No general solicitation or
advertising was used in connection with the issuances, and the certificates
evidencing the shares that were issued contained a legend restricting their
transferability absent registration under the Securities Act of 1933 or the
availability of an applicable exemption therefrom.

ITEM 5.  OTHER INFORMATION

         On October 7, 2004 we filed an amendment to our Articles of
Incorporation which increased the number of our authorized shares of common
stock from 5,000,000 to 50,000,000 shares and changed the name of our company
from Xstream Beverage Group, Inc. to Xstream Beverage Network, Inc. These
changes were approved by our Board of Directors and the holders of a majority of
our outstanding voting securities. On September 13, 2004 we filed a definitive
Information Statement on Schedule 14C with the SEC regarding these actions.

         On November 9, 2004, Mr. Jerry Pearring, who had served as our CEO and
President since April 2003, resigned the position of CEO. Mr. Theodore
Farnsworth, our Chairman, was appointed CEO by our Board of Directors. Mr.
Pearring continues to serve as our President.

         On November 10, 2004 we hired Ms. Gail Babitt as our Chief Financial
Officer. From November 1999 through August 2004 Ms. Babitt was Chief Financial
Officer of Visual Data Corporation (Nasdaq: VDAT). From 1999 through October
2000 Ms. Babitt served as Vice President of Finance, North America and Corporate
Controller for TeleComputing ASA. TeleComputing ASA is a leading application
service provider. From 1997 to 1999 Ms. Babitt served as Manager-Transaction
Services for Price Waterhouse Coopers LLP. During 1997 Ms. Babitt served as
Director of Finance for ToppTelecom, Inc. Topp Telecom is a prepaid cellular
company based in Miami. From 1994 to 1997 Ms. Babitt worked in the audit group
with Price Waterhouse Coopers LLP (formerly Price Waterhouse LLP) and with Ernst
& Young LLP from 1992 to 1994. Ms. Babitt has received a MBA from Boston
University and a B.S. from Nova Southeastern University.

ITEM 6.  EXHIBITS

Exhibit No.                                 Description

31.1       Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
31.2       Rule 13a-14(a)/15d-14(a) certificate of principal financial officer
32.1       Section 1350 certification of Chief Executive Officer

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<PAGE>

                                   SIGNATURES

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

                                          Xstream Beverage Network, Inc.

                                          By: /s/ Theodore Farnsworth
                                          -----------------------------------
                                          Theodore Farnsworth, CEO, principal
                                          executive officer and
                                          principal financial officer

Dated: November 22, 2004


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