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

                                   FORM 10-QSB/A

(Mark One)

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

         For the quarterly period ended March 31, 2005

[ ]      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 of                                 (IRS Employer
 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: 3,664,454 shares of common stock as of
May 20, 2005. and 626 stockholders

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

<PAGE>
                         XSTREAM BEVERAGE NETWORK, INC.

                 Form 10-QSB/A for the period ended March 31, 2005

              CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

         Certain statements in this quarterly report on Form 10-QSB/A 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


                                                                            Page
                                                                            ----

Part I.  Financial Information

Item 1.  Financial Statements

Consolidated Balance Sheet as of March 31, 2005
 Restated Note 1 (B) (Unaudited)...............................................3

Consolidated Statements of Operations
for the three Months ended March 31, 2005
(Unaudited) and March 31, 2004.................................................4

Consolidated Statements of Cash Flows
for the three months ended March 31, 2005
(Unaudited) and three months ended March 31, 2004..............................5

Notes to Consolidated Financial Statements (Unaudited)
As of March 31, 2005...........................................................6

Item 2.  Management's Discussion and Analysis  or Plan of Operation...........21

Item 3.  Controls and Procedures..............................................26

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

Item 1.  Legal Proceedings....................................................27

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds..........27

Item 3.  Default on Senior Securities.........................................28

Item 4.  Submission of Matters to a Vote of Security Holders..................28

Item 5.  Other Information....................................................28

                                       1
<PAGE>

PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS



                                       2
<PAGE>
                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                              RESTATED - NOTE 1 (B)
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                               March 31,
                                                                                 2005
                                                                             ------------
<S>                                                                          <C>
ASSETS
     Current Assets:
        Cash                                                                 $    109,364
        Accounts Receivable, net of allowance for doubtful                        632,915
        accounts of $130,544
        Inventory                                                                 681,433
        Prepaid Expenses                                                          103,560
        Other Current Assets                                                       16,971
                                                                             ------------
           Total Current Assets                                                 1,544,243
                                                                             ------------

     Property and Equipment                                                       367,042
     Less: Accumulated Depreciation                                               (74,583)
                                                                             ------------
     Property and Equipment, Net                                                  292,459
                                                                             ------------
     Other Assets:
        Cash - restricted                                                             668
        Trademarks                                                                303,017
        Customer Lists, net                                                     1,824,282
        Goodwill                                                                1,953,936
        Other Assets                                                               34,396
                                                                             ------------
           Total Other Assets                                                   4,116,299
                                                                             ------------
TOTAL ASSETS                                                                 $  5,953,001
                                                                             ============
LIABILITIES & STOCKHOLDERS' DEFICIENCY
     Liabilities:
        Current Liabilities:
           Accounts Payable                                                  $  1,728,790
           Accrued Expenses                                                       770,961
           Overdraft Liability                                                    127,159
           Dividends Payable                                                       88,300
           Bottle Deposits                                                        113,301
           Loans and notes payable                                                516,332
           Loans Payable - Related Party                                          188,290
           Convertible Term Loan, net of discount of $219,488                      85,543
           Current Portion of Long Term Debt                                      773,275
           Other Current Liabilities                                               16,716
                                                                             ------------
              Total Current Liabilities                                         4,408,667
                                                                             ------------

        Long Term Liabilities:
           Long Term Notes, net of discount of $1,272,295                       3,001,688
           Other long term liabilities                                             14,350
                                                                             ------------
              Total Long Term Liabilities                                       3,016,038

                                                                             ------------
              Total Liabilities                                                 7,424,705
                                                                             ------------

        Preferred Series B (43.2 Shares), net of discount of $1,652,572           507,428
        Preferred Series B deferred fees                                       (1,100,719)
                                                                             ------------
              Total Preferred Series B                                           (593,291)

     Stockholders' Deficiency
        Preferred Stock, $0.001 par value, 10,000,000 shares authorized,
           Series A, 200,000 shares issued and outstanding                            200
        Common Stock, $0.001 par value, 50,000,000 shares authorized,
           3,619,493 issued and outstanding                                         3,619
                                                                             ------------
        Paid in Capital                                                        31,642,626
        Accumulated Deficit                                                   (29,674,175)
        Less: Deferred Consulting                                              (1,292,207)
        Less: Deferred Fees                                                    (1,558,476)
                                                                             ------------
              Total Stockholders' Deficiency                                     (878,413)
                                                                             ------------
TOTAL LIABILITIES & STOCKHOLDERS'  DEFICIENCY                                $  5,953,001
                                                                             ============
</TABLE>

        See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                 XSTREAM BEVERAGE NETWORK, INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                Three Months Ended
                                                                    March 31,
                                                               2005             2004
                                                           -----------      -----------
<S>                                                        <C>              <C>
Sales                                                      $ 2,533,686      $   604,560

Cost of Goods Sold                                           1,807,515          517,639
                                                           -----------      -----------
Gross Profit                                                   726,171           86,921
Expense
    Warehouse & Delivery                                       275,153          186,719
    Marketing & Selling                                        300,454           41,474
    Compensation                                               557,395        1,722,901
    Rent                                                        49,654           39,973
    Consulting Fees                                            633,667          169,096
    Professional Fees                                          118,110           69,956
    Loan and Loan Guarantee Fees                               156,651          125,250
    Bad Debt Expense                                             1,977               --
    Other General & Administrative                             299,126          158,804
                                                           -----------      -----------
        Total Operating Expense                              2,392,187        2,514,173
                                                           -----------      -----------
Loss From Operations                                        (1,666,016)      (2,427,252)
Other Income/(Expense)
    Other Income                                                10,000           29,375
    Interest Income                                              1,526           14,030
    Interest Expense                                          (740,478)          (4,634)
    Settlement loss                                                 --          (20,921)
    Other expense                                                  (10)         (18,021)
                                                           -----------      -----------
        Total Other Income/(Expense)                          (728,962)            (171)
                                                           -----------      -----------
Net Loss                                                    (2,394,978)      (2,427,423)

Preferred Stock Dividends                                     (320,798)              --
                                                           -----------      -----------

Net Loss Available to Common Stockholders                  $(2,715,776)     $(2,427,423)
                                                           ===========      ===========


Net Loss per share - Basic and diluted                     $     (0.80)     $     (1.78)
                                                           ===========      ===========

Weighted Average Shares Outstanding -Basic and diluted       3,380,528        1,361,947
                                                           ===========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4
<PAGE>
                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                             CONSOLIDATED CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                       Three Months Ended
                                                                            March 31,
                                                                       2005             2004
                                                                   -----------      -----------
<S>                                                                <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                           $(2,394,978)     $(2,427,423)

Adjustments to reconcile net cash and operations:
Depreciation                                                            22,605            1,983
Amortization of deferred consulting                                    580,360          216,800
Amortization of debt discount and fees to interest expense             666,743               --
Amortization of Intangibles                                            107,969               --
Amortization of redemption premium on Series B                          81,000               --
Stock issued for conversion of debt                                         --            6,809
Stock based settlement gain/loss                                            --           (3,000)
Stock based services                                                    12,391        1,567,265
Stock based settlement                                                      --           23,921

Changes in operating assets and liabilities:
Accounts receivable                                                     36,044          (48,894)
Inventory                                                              143,989            3,526
Other current  assets                                                  381,876           26,154
Accounts payable                                                        (9,116)         (55,027)
Accrued expenses                                                        15,708           34,625
Other current and non-current liabilities                               14,616            4,749
                                                                   -----------      -----------

Net cash used in operating activities                                 (340,793)        (648,512)

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of property and equipment                                   (5,887)              --
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)
                                                                   -----------      -----------
Net cash used in investing activities                                   (5,887)        (140,500)

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loans                                           --           25,000
Proceeds from non-related party                                        300,000           12,499
Repayments of related party loans                                           --          (31,960)
Repayments of non-related party loans                                  (55,441)          (9,077)
Cash overdraft                                                         127,159          (27,898)
Proceeds from sales of common stock                                         --          930,696
Offering costs                                                              --         (108,370)

                                                                   -----------      -----------
Net cash provided by financing activities                              371,718          790,890
                                                                   -----------      -----------
Net increase in cash                                                    25,038            1,878
Cash at beginning of year                                               84,326           51,764
                                                                   -----------      -----------
Cash at end of year                                                $   109,364      $    53,642
                                                                   ===========      ===========


Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:
     Interest paid                                                 $   117,602      $     4,634
     Taxes paid                                                             --               --


</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005


NOTE 1 - STATEMENT OF ACCOUNTING PRESENTATION AND OTHER IMFORMATION:
--------------------------------------------------------------------

(A) Basis of Preparation and Summary of Accounting Policies

The accompanying unaudited consolidated financial statements of XStream Beverage
Network, Inc. and its subsidiaries (XStream) 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 is an operating brand development and distribution company and completed
the first four acquisitions anticipated in its business strategy as follows,
Beverage Network of South Florida, ("BNSF) on April 9, 2003; Beverage Network of
Connecticut, Inc. ("BNCT") on May 1, 2003; Beverage Network of Hawaii ("BNHI")
on March 1, 2004; Beverage Network of Massachusetts ("BNMA") on March 15, 2004.
These acquisitions were accounted for under the purchase method. XStream is now
an operating brand development and distribution company.

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

The Company follows the general criteria of the 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.

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, pursuant to
SFAS 142, 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
December 31, 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.

(B) Restatement of 2005

In the quarter ending March 31, 2005, the Company had deferred fees of
$1,100,719 related to the Series B financing (See Note 19 (A)-Preferred Stock)
in the equity section of the balance sheet instead of reflecting it with the
Mezzanine debt in the liability section. The adjustments to the financial
statements for the reclassifications was as follows.

Balance Sheet:

                           Deferred fees (equity) decreased from $2,659,195 to
                           $1,558,476; Preferred Series B deferred fees
                           increased from $-0- to $1,100,719.

For further information, refer to the audited consolidated financial statements
and footnotes for the year ended December 31, 2004 included in XStream's Form
10-KSB/A.

                                       6
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

NOTE 2 - RESTRICTED CASH
------------------------

         In conjunction with the sale in May 2004 to Laurus Master Fund, Ltd. of
         a $3,000,000 principal amount secured convertible term note, the
         Company agreed to initially place $2,855,000 of the proceeds of the
         secured convertible term note into a restrictive account controlled by
         Laurus Master Fund, Ltd. The funds held in the restricted account are
         controlled by Laurus Master Fund, Ltd. until the Company consummates
         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
         the Company's common stock. Of this amount, approximately $2,558,185
         has been released for working capital purposes and to close
         acquisitions. In February 2005, Laurus agreed to release the balance of
         the funds while simultaneously prepaying interest through June 2005.
         (See Note 5 - Prepaid Expenses)

NOTE 3 - NET LOSS PER COMMON SHARE:
-----------------------------------

         Basic net income (loss) per common share (Basic EPS) does not include
         common stock equivalents and is computed by dividing net income (loss)
         available to common stockholders 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 three months ended
         March 31, 2005 and 2004, the diluted loss per share is the same as
         basic loss per share since the effect of all common stock equivalents
         was antidilutive. The total outstanding warrants which have been
         excluded from the calculation of loss per share, were 5,035,904 and
         15,000 at March 31, 2005 and 2004, respectively. In addition as of
         March 31, 2005 and 2004, the Company has convertible preferred stock
         that could convert into 1,440,000 and -0- shares of common stock,
         respectively. Series B preferred stock dividends that could convert
         into 116,184 and -0- shares of common stock, respectively. The Company
         also has convertible notes that could convert into 2,684,615 and -0-
         shares of common stock at March 31, 2005 and 2004, respectively. (See
         Note 16- Long Term Notes Payable & Debt Discount) 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 4 - INVENTORY:
-------------------

         Inventories are stated at the lower of cost or market determined in a
         "first-in, first-out" basis. The Inventory balance consisted of the
         following:

                                                         March 31, 2005
                                                         --------------

         Resalable products                                $  642,432
         Proprietary brand raw materials                       39,001
                                                           ----------
         Total:                                            $  681,433
                                                           ==========

NOTE 5 - PREPAID EXPENSES:
--------------------------

         In February 2005, Laurus Funds released substantially all of the
         remaining balance of restricted cash for operations. The Company agreed
         to prepay accrued interest through June 2005.

                                       7
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

The Prepaid Expense balance consisted of the following:

                                                         March 31, 2005
                                                         --------------

         Interest (See Note 2 - Restricted Cash)           $ 56,163
         Warehouse/Office Supplies                           13,821
         Service Contracts                                    7,507
         Rent                                                 5,450
         Insurance                                           20,619
                                                           --------
         Total:                                            $103,560
                                                           ========

NOTE 6 - FIXED ASSETS:
----------------------

         Property and equipment, net of accumulated depreciation was $292,459 at
         March 31, 2005. Depreciation expense for the quarter ended March 31,
         2005 March 31, 2004 was $22,606 and $1,982, respectively.

Property and equipment at March 31, 2005 is as follows:

                                                March 31, 2005
                                               -----------------

         Delivery Trucks                           $110,198
         Warehouse Equipment                         35,433
         Coolers                                     72,777
         Office Equipment                            96,931
         Furniture & Fixtures                        14,945
         Leasehold Improvements                      36,758
                                                   --------
                                                    367,042
         Less: Accumulated depreciation             (74,583)
                                                   --------
         Net                                       $292,459
                                                   ========

NOTE 7 - TRADEMARKS:
--------------------

         Trademarks consist of the following:

                                                  March 31, 2005
                                                 -----------------

         Maui Juice                                 $ 48,000
         Squeeze Soda                                255,017
                                                    --------
            Total:                                  $303,017
                                                    ========

         In March and January 2004, respectively, the Company acquired the
         Trademark's 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 and management's
         belief that these products have indefinite life cycles based on the
         market.

                                       8
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

NOTE 8 - CUSTOMER LIST:
-----------------------

         The table below summarizes the balance of customer lists as of March
         31, 2005:

                                                          March 31, 2005
                                                        ------------------

         Beverage Network of Hawaii, Inc.                  $   38,350
         Beverage Network of Massachusetts, Inc.              147,773
         Beverage Network of Maryland, Inc.                 1,973,240
                                                           ----------
                                                            2,159,363

         Accumulated Amortization:                           (335,081)
                                                           ----------
                  Total:                                   $1,824,282
                                                           ==========

         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 intangible 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.

NOTE 9 - GOODWILL:
------------------

         Acquired goodwill is considered to have an indefinite life pursuant to
         SFAS 142 and accordingly is not amortized but subject to periodic
         impairment tests. Acquired customer lists are considered to have a
         finite life pursuant to SFAS 142 to be amortized over the period the
         asset is expected to contribute to the future cash flows.

         The table below summarizes the balance of goodwill as of December 31,
         2004:

                                                     December 31, 2004
                                                     ------------------

         Beverage Network of Hawaii, Inc.              $    44,695
         Beverage Network of Massachusetts, Inc.           171,620
         Beverage Network of Maryland, Inc.              1,737,621
                                                       -----------
                  Total:                               $ 1,953,936
                                                       ===========

         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 is currently having an impairment analysis performed for the
         subsidiaries of BNMA and BNHI, the results of which will be reported
         in the June 30, 2005 10-QSB. Accordingly, management has deemed it not
         necessary to perform an impairment evaluation for BNMD as there has
         been no significant adverse change in the business and the entity has
         been operating for less than one year.

NOTE 10 - OTHER ASSETS:
-----------------------

         The balance of other current assets in the amount of $34,396 as of
         March 31, 2005 is comprised of rental security deposits.

                                       9
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

NOTE 11 - ACCRUED EXPENSE-SALARIES, ACCRUED EXPENSE-OTHER:
----------------------------------------------------------

         Effective February 5, 2004, the Company executed revised employment
         agreements for its Chairman, President, and Vice President stipulating
         an annual base compensation of $130,000 each. Accrued compensation
         reflecting officers, new hires, and acquisitions, for the period ending
         March 31, 2005 was as follows:

         Accrued Expense-Salaries: Officers/Directors      $321,271
         Accrued Expense-Salaries: Other                    226,316
         Accrued Expense-Liquidated Damages                 205,200
         Accrued Expense-Other                               18,174
                                                           --------

                                Total Accrued Expenses:    $770,961
                                                           ========

         The Company has accrued salaries of $321,271, in aggregate, due to the
         Chairman, President and Vice President. The remaining accrued salaries
         balance of $226,316 consists of $36,908 due to a former employee and
         $189,408 of current payroll paid in April, 2005.

NOTE 12 - DIVIDENDS PAYABLE:
----------------------------

         The Series B Preferred pays cumulative semi-annual dividends of 6% per
         annum, payable at the Company's option in cash, registered shares of
         its common stock or additional shares of its Series B Preferred (See
         note 19 (A)- Preferred Stock). The dividends payable as of March 31,
         2005, was $88,300.

NOTE 13 - LOANS PAYABLE AND RELATED PARTY:
------------------------------------------

         XStream Beverage, Inc. ("XBI"), a principal stockholder of the Company
         owned by XStream's chairman, periodically loans money to XStream.
         XStream's loans from XBI are undocumented, non-interest bearing, and
         due on demand. The balance due was $50,355 at March 31, 2005.

         In October 2004, a shareholder advanced $137,000 to the Company as an
         interest bearing demand note at 6% per annum with no specified term.
         The principal balance with accrued interest was $137,935 at March 31,
         2005.

         Loans Payable:

         Bank Line of Credit 6% per annum(1)                      $ 11,200
         Automotive equipment loan       (1)                           923
         March 2004, $22,692 Plus 8%interest per year,
          due June 2004 (loan in default) (1)                       21,807
         March 2004, non-interest bearing, due April, 2005 (1)      72,934
         July 2004, interest bearing demand note 6%
          per annum, (3)                                           409,468
                                                                  --------
           Total Loans Payable - Other                             516,332

           Loans Payable, Related Party                            188,290
                                                                  --------
           Total Loans Payable                                    $704,622
                                                                  ========

                                       10
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         (1) Resulted from the acquisition of Beverage Network of Massachusetts,
         Inc.("BNMA") (See 2004 10K-SB/A: Note 3 Acquisitions)
         (2) Resulted from the acquisition of Maui Juice trademark
         (3) Resulted from the acquisition of Beverage Network of Maryland, Inc.
         ("BNMD") (See 2004 10K-SB/A: Note 3 Acquisitions)

NOTE 14 - CONVERTIBLE TERM LOAN:
--------------------------------

         In February 2005, the Company secured $300,000 in financing from
         select, accredited investors at a term note at 18% per annum, due
         September 1, 2005. As a pledge for collateral, the Company issued
         100,000 shares of restricted common stock to be held in escrow. The
         notes also contain, at the discretion of the holder, a conversion
         option contingent upon a future secondary offering. The purchasers were
         also issued common stock warrants with a five year term, exercisable at
         $1.50. Should the Company default, the exercise price of the warrants
         automatically reduce by 5% for each 30 day period in which the Company
         remains in default. The 300,000 warrants issued to the debt holders
         were valued using the Black-Scholes model and is being amortized over
         the term of the note as debt discount. (See Note 19 (C) - Stock Options
         and Warrants) The balance as of March 31, 2005 is as follows:

                Term note 18% per annum                    $ 305,031
                Less: debt discount (1)                     (219,488)
                                                           ---------
                                                           $  85,543
                                                           =========

NOTE 15 - CURRENT PORTION, LONG TERM DEBT
-----------------------------------------

         The current portion of long term debt as of March 31, 2005 is as
         follows (See note 16 below):

         July 2004, secured convertible Note 6% interest per annum     $521,123
         May 2004, secured convertible Note prime +2% interest
          per annum                                                     211,764
         March 2004, demand note 6% interest per annum, due
          April 2012                                                     40,388
                                                                       --------
                                    Total:                             $773,275
                                                                       ========

NOTE 16 - LONG TERM NOTES PAYABLE & DEBT DISCOUNT:
--------------------------------------------------

         The following table reflects long-term notes as of March 31, 2005:

         Interest bearing demand note 6% per annum, due
          April 2012 (Maui Trademark)                             $   182,430
         Secured 6% convertible note ("BNMD")                       1,970,710
         Senior secured convertible note ("Laurus")                 2,894,118
         Debt discount on senior secured convertible note          (1,272,295)
                                                                  -----------
                                                                    3,774,963

         Current portion of 6% interest bearing demand note           (40,388)
         Current portion of secured 6% convertible note              (521,123)
         Current portion of Senior Secured convertible note          (211,764)
                                                                  -----------
                                                                  $ 3,001,688
                                                                  ===========

                                       11
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         On March 1, 2004, our wholly owned subsidiary, XStream Brands, Inc., a
         Florida Corporation, ("XStream Brands"), entered into an Assignment of
         Trademark with The Maui Juice Company. 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. (See 2004 10K-SB/A: Note 3 Acquisitions)

         On July 9, 2004, the Company's wholly owned subsidiary, Beverage
         Network of Maryland, Inc. ("BNMD"), (a Florida Corporation) announced
         it has completed, the acquisition of substantially all of the assets
         and certain liabilities of Master Distributors Inc. Pursuant to the
         terms of the agreement, the Company issued a convertible promissory
         note for $2,000,000 payable in 60 equal monthly payments and bearing 6%
         interest per annum. The Company executed an amended agreement to defer
         all payment of the note until June 15, 2005. The holder, at his
         discretion, may elect to receive XStream stock in lieu of a cash
         payment. The minimum conversion is $25,000 at a predetermined value of
         $5.20 per share. In January 2005, the Company issued 150,000 shares of
         restricted common stock to the principal owner of Master Distributors,
         Inc. as consideration for deferring all debt payments until June 15th
         2005. (See 2004 10K-SB/A: Note 3 Acquisitions)

         On May 14, 2004, the Company secured a financing arrangement with
         Laurus Master Funds, Ltd. ("Laurus Funds"). The financing consists of a
         $3 million Senior Secured Convertible Note that bears interest at the
         rate per annum of prime plus two percent and has a term of three years
         (May 14, 2007). The Note is convertible into shares of the Company's
         common stock, only upon effectiveness of a registration statement
         registering the underlying shares, at a 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 first conversion price was reduced
         to $1.50 per share as a result of the Series B financing transaction.
         (See Note 17 - Mezzanine Debt)

         In connection with the financing, Laurus Funds was also issued a
         Warrant (the "Warrant") 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 note
         and (iii) $131,000 for debt issuance 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 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. Accumulated amortization of the debt
         discounts through March 31, 2005 was $277,956.

         To secure the payment of all Obligations, XStream Beverage Network, Inc
         "XBNI" and its subsidiaries entered into a Master Security Agreement
         which assigns and grants to Laurus Funds a continuing security interest
         in all of the following property now owned or at any time upon
         execution of the agreement, acquired by XBNI or it's subsidiaries, or
         in which any Assignor now has or at any time in the future may acquire
         any right, title or interest (the "Collateral"): all cash, cash
         equivalents, accounts, deposit accounts, inventory, equipment, goods,
         documents, instruments (including, without limitation, promissory
         notes), contract rights, general tangibles, chattel paper, supporting

                                       12
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         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 has 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 has obtained a commitment from a
         financing source to finance such equipment from an unrelated third
         party, Laurus Funds agrees to release its security interest on such
         hereafter-acquired equipment so financed by such third party financing
         source.

         The Secured Term Note Agreement stipulates the note 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
         Funds 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 Fifty Thousand Dollars ($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 Two Million
         Nine Hundred Fifty Thousand Dollars ($2,950,000) aggregate principal
         amount of the Note ("Tranche B"). The conversion repayment states that
         each month by the fifth (5th) business day prior to each Amortization
         Date, the Laurus Funds shall deliver to the Company a written notice
         converting the Monthly Amount payable on the next Repayment Date in
         either cash or Common Stock, or a combination of both. If a Repayment
         Notice is not delivered by Laurus Funds 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 Funds in an amount equal to 102% of the
         principal portion of the Monthly Amount due. If Laurus Funds converts
         all or a portion of the Monthly Amount in shares of 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, as
         adjusted at $1.50.

         The allocation of proceeds was as follows: $131,000 was distributed for
         management, due diligence/documentation fees and escrow agent fees,
         $102,292 to payoff a term loan and line of credit at a commercial
         lending institution; $50,000 paid to Master Distributors, Inc., as a
         deposit, and $266,708 to the company as operating capital. The balance
         of $2,450,000 was deposited by Laurus Funds on behalf of the Company
         into an account, which is in the sole dominion and control of Laurus
         Funds. 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. In February, 2005 Laurus released substantially all of the
         remaining balance, less a withholding for the prepayment of interest,
         resulting in a balance of $668 as of March 31, 2005. (See Note 2 -
         Restricted Cash)

         A registration rights agreement was executed to register the shares
         underlying the note and warrants. Certain liquidated damages of 2% of
         the note balance, per month, accrue if stipulated deadlines are not
         met. The SB-2 registration was originally submitted on September 30,
         2004, and resubmitted on January 31, 2005. As per the stipulations of
         the agreement, there are $205,200 in accrued liquidated damages due as
         of March 31, 2005.

                                       13
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

NOTE 17 - MEZZANINE DEBT
------------------------

         On August 2, 2004 Xstream Beverage Group, Inc. sold 43.2 shares of its
         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. Pursuant to the
         terms of the placement documents (stipulating the debt instrument is
         convertible or redeemable at the discretion of the holder 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 is reflected
         as of March 31, 2005 (See Note 19 (A) - Preferred Stock)

NOTE 18 - 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. BNSF renewed the lease for twelve months in November,
         2004. The current facility is 7,200 sq. ft. at a monthly rate of
         $4,776. Rent expense for the period ending March 31, 2005 was $14,327.

         BNCT leases a 13,622 square foot facility in Bristol, CT. The rent is
         $5,108 per month and the lease expires in October 2008. Rent expense
         for the period ending March 31, 2005, was $17,027.

         BNHI assumed the current lease as part of acquiring the assets of
         Pacific Rim. The terms are month-to- month with 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 $2,200. 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 period ending
         March, 2005 was $9,757.

         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. Rent expense
         charged to operations for the period ending March 31, 2005 was $4,887.

         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 sq. ft. of warehouse space along with parking spaces adjacent to
         the building. The total space subleased yields $14,950 per month which
         is offset against rent expense. The total rent charged to operations
         for the period was $3,257 as of March 31, 2005.

(B) EMPLOYMENT AGREEMENTS:
--------------------------

         See Note 11 for details regarding accrued compensation.

NOTE 19 - STOCKHOLDER'S EQUITY AND RECAPITALIZATION:
----------------------------------------------------

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

         The Company has authorized 10,000,000 shares of preferred stock at
         $0.001 par value. The Board of Directors is authorized to issue two
         series of preferred stock and to fix the designation, powers,
         preferences, and rights of the shares of each series. In addition, the
         Company may pay dividends of common stock to preferred stockholders. In

                                       14
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         October 2001, the Board of Directors authorized Series A preferred
         stock, which is cumulative voting and convertible and does not have
         dividend rights. Each share of preferred stock is convertible to one
         share of common stock and each share of preferred stock is entitled to
         5 votes on each matter submitted to a vote of the total capital stock
         of the Company. There were 200,000 preferred Series A shares
         outstanding at March 31, 2005.

         On August 2, 2004 XStream 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. XStream received gross proceeds of
         $2,160,000. The designations, rights, and preferences of the Series B
         Preferred provide that the Series B shares (i) have a liquidation
         preference of $50,000 per share; (ii) are convertible into shares of
         XStream common stock equal to the liquidation preference divided by the
         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,
         Xstream issues or sells 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 Company's common stock, subject to a waiver by the holder of these
         limitations upon 61 days notice to the Company. Gross proceeds of
         $2,160,000 from the issuance of 43.2 shares of Series B Preferred, five
         year Series A detachable common stock purchase warrants to purchase
         1,440,000 shares of the Company's common stock with an exercise price
         of $2.00 per share and five year Series B detachable common stock
         warrants to purchase 720,000 shares of the Company's common stock with
         an exercise price of $4.00 per share. 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 December 31, 2004,
         and March 31, 2005 the Company recorded $317,142 and $320,798,
         respectively, 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 $416,000.

         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 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 (the "redemption date"), 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 equal to the
         liquidation preference plus all accrued but unpaid dividends divided by
         the conversion price then in effect, or for cash at a price equal to

                                       15
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         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.

         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 the Articles of Incorporation or By-laws in a
         manner which would materially and adversely affect 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, (ii) so long as at least
         $1,500,000 of the Series B Preferred is outstanding (which represents
         30 shares), authorize or create any class of securities which ranks
         senior to our pari passu with the Series B Preferred.

         The Series B Preferred has no voting rights, it ranks senior to
         Xstream'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 indebtness, and it pays cumulative
         semi-annual dividends of 6% per annum, payable at the Company's option
         in cash, registered shares of common stock or additional shares of the
         Company's Series B Preferred. The dividends payable as of March 31,
         2005, were $88,300. If Xstream chooses to pay the dividends in
         registered shares of The Company's common stock, the shares are valued
         at the then conversion price of the Series B Preferred and if Xstream
         chooses to pay the dividends in shares of Series B Preferred, those
         shares are valued at the liquidation preference of the stock.

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

          On January 3, 2005, the Company entered into a one year agreement for
          consulting services. As consideration for these services, the
          consultant was issued 150,000 restricted shares of the Company's
          common stock valued at $1.70, the closing price of the stock on the
          grant date. The Company recognized consulting expense of $63,750 for
          the 3 months ended March 31, 2005, with a remaining deferred component
          of $191,250.

          In January 2005, the Company entered into a second, one year agreement
          for consulting services. As consideration for these services, the
          consultant was issued 200,000 restricted shares of the Company's
          common stock valued at $1.67, the closing price of the stock on the
          grant date. The Company recognized consulting expense of $83,500 for
          the three months ended March 31, 2005, with a remaining deferred
          component of $250,500.

          On February 8, 2005, the Company issued 10,000 shares of its
          restricted common stock in consideration of a debt holder for
          deferring cash payments. that were due on October 15, 2004 and January
          15, 2005, respectively. The shares were valued at $1.40, the closing
          price on the date of grant. Interest expense in the amount of $14,000
          was recognized for the three months ending March 31, 2005.

          The Company also issued 150,000 shares of its restricted common stock
          to Morris Stodard, principal of Master Distributors, (See 2004 10-K
          SB, Note 3, Acquisitions) in consideration for deferring all cash
          payments until June 15, 2005. The stock was valued at $1.62, the
          closing price on the date of grant. For the three months ended March,
          31, 2005, the Company recognized interest expense of $126,056 with a
          remaining deferred component of $116,944.

          The Company issued 4,472 shares of restricted common stock for legal
          services rendered. The shares were valued at $1.50, the closing price
          on the date of grant, with an expense of $6,708 being recognized as of
          March 31, 2005.

          The Company entered into a consulting agreement for a term of six
          months. As consideration for services, the consultants were granted
          15,000 shares of restricted common stock valued at $1.20. This was the
          closing price of stock on the date of grant resulting in an expense of
          $7,500 with a deferred balance of $10,500 as of March 31, 2005.

                                       16
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

          Pursuant to the terms of a consulting agreement commencing in October
          2004, the Company issued 8,000 shares of restricted common stock for
          services rendered. The shares were valued at $1.20 and the Company
          recognized a consulting expense of $9,600.

          According to the terms of the convertible term loan (See Note 14 -
          Convertible Term Loan), the Company issued 100,000 shares of
          restricted common stock as a pledge for collateral. The shares were
          valued at $1.32 according to the closing price on the grant date. The
          loan is due on September 1, 2005; the Company recognized interest
          expense of $22,000 with a remaining deferred component of $110,000.

          In March 2005, the Company issued 4,546 shares of restricted common
          stock to a consultant for services rendered. An expense of $5,683
          was recognized with the shares being valued at the grant date price of
          $1.25.

          The Company also issued 7,000 shares, previously recorded as issuable,
          as of December 31, 2004.


         (C) STOCK OPTIONS AND WARRANTS:
         -------------------------------

         In March 2004, the Company signed an agreement with a company to act as
         placement agent to arrange the sale of debt, equity or equity-linked
         securities on behalf of the company. In accordance with the terms of
         the agreement, the Company granted the placement agent a retainer
         consisting 37,500 warrants exercisable at $0.20 for five years, 37,500
         warrants exercisable at $1.50 for five years, 37,500 warrants
         exercisable at $3.00 for five years. The warrants were valued at an
         aggregate $556,009 or $6.57, $6.51, $6.51 per option, respectively,
         recognized over the one year term of the agreement. This resulted in a
         consulting expense of $417,007 as of December 31, 2004 and the
         remaining deferred component of $139,002 being expensed as of March 31,
         2005. The fair market value of the stock warrants granted to the
         consultant was estimated on the date of grant using the Black-Scholes
         Model in accordance with Statement No. 123 using the following
         assumptions: expected dividend yield 0%, risk-free interest rate of
         1.58%, volatility 191% and expected term of five
           years.

         On May 14, 2004, the Company secured a financing arrangement with
         Laurus Master Funds, Ltd. ("Laurus Funds") (See note 14-Notes
         Payable-Long Term & Debt Discount, Secured Convertible Note) The
         financing consists of a $3 million Senior Secured Convertible Note that
         bears interest at the rate of prime plus two percent and has a term of
         three years (May 14, 2007). The Company then issued 426,250 options to
         the placement agent mentioned above, as they were directly engaged in
         securing the Laurus transaction. The warrants are exercisable at $1.50
         for five years; the Company valued the transaction at $1,879,809 as
         deferred loan fees and is being recognized over the 36 month term of
         the Laurus funding. The Company recorded a loan fee expense of $391,627
         as of December 31, 2004, and $156,651 as of March 31, 2005,
         respectively, with a remaining deferred component of $1,331,531 to be
         amortized through May, 2007. (The transaction was valued using the
         Black-Scholes Model with the following assumptions expected dividend
         yield of 0% risk-free interest rate of 2.53%, volatility 124% and
         expected term of 5 years.)

         On August 2, 2004 Xstream Beverage Group, Inc. sold 43.2 shares of our
         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. Pursuant to the
         terms of the placement documents (stipulating the debt instrument is
         convertible or redeemable at the discretion of the holder at the end of
         the 42 month term), the transaction was classified as Mezzanine

                                       17
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         Financing and the balance of the $2,160,000 gross proceeds is reflected
         as of December 31, 2004. (See Note 17 - Preferred Stock) The Company
         compensated a placement agent engaged in the transaction with warrants
         to purchase consisting of 160,941 warrants exercisable at $1.50 for
         five years, 118,588 warrants exercisable at $2.00 for five years,
         144,000 warrants exercisable at $4.00, for five years. The warrants
         were valued at an aggregate $1,359,712 or $3.25, $3.23, $3.15 per
         option, respectively, to be amortized over the term of the conversion
         period of 42 months. The Company recognized $161,870 and $97,122, as of
         December 31, 2004 and March 31, 2005, respectively, as dividends
         related to this transaction. The remaining deferred component of
         $1,100,719 will be amortized through January, 2008. The transaction was
         valued using the Black-Scholes Model with the following assumptions:
         expected dividend yield of 0%, risk- free interest rate of 2.51%,
         volatility 161% and expected term of five years.

         In December 2004, the Company entered into a one year agreement for
         consulting services commencing in January 2005. The agreement
         stipulated that a warrant to purchase 50,000 shares of common stock be
         issued. The warrants are exercisable at $2.00 per share. For the three
         months ended March 31, 2005, the Company recorded consulting expense of
         $17,298 and deferred consulting expense of $51,894, or $1.38 per share
         for the valuation of the 50,000 warrants. (computed using a
         Black-Scholes model with an interest rate of 3.01%, volatility of 96%,
         zero dividends and expected term of five years)

         On January 3, 2005, the Company entered into a one year agreement for
         consulting services. The agreement called for warrants to purchase
         200,000 shares of common stock to be issued, as follows: 100,000
         warrants at $4.00 per share and 100,000 at $5.00 per share. As of the
         quarter ended March 31, 2005, the Company recorded a consulting expense
         of $55,004, or $.28 per share, with a deferred balance of $165,013, for
         the valuation of the 200,000 warrants. (computed using a Black-Scholes
         model with an interest rate of 3.22%, volatility of 104.25%, zero
         dividends and expected term of five years).

         The Company entered into another one year agreement for consulting
         services. The agreement stipulates that warrants to purchase 300,000
         shares of common stock to be issued, as follows: 100,000 warrants at
         $2.00 per share, 100,000 warrants at $2.50 per share, 100,000 warrants
         at $3.00 per share. As of the quarter ended March 31, 2005, the Company
         recorded a consulting expense of $92,956, or $.31 per share, with a
         deferred balance of $278,869, for the valuation of the 300,000
         warrants. (computed using a Black-Scholes model with an interest rate
         of 3.22%, volatility of 104.25%, zero dividends and expected term of
         five years).

         On January 15, 2005, the Company issued Laurus warrants to purchase
         165,000 shares of the Company's common stock with an exercise price of
         $2.00 per share which expire July 20, 2014. The warrants were issued as
         compensation to Laurus for the release of $398,595 of the restricted
         cash. The Company recognized interest expense from this issuance of
         $216,215.56, or $1.31 per share, during the quarter ended March 31,
         2005. The transaction was valued using the Black-Scholes Model with
         the following assumptions: expected dividend yield of 0.0%, risk-free
         interest rate of 3.22%, volatility of 88.93% and expected term of 10
         years.

         On February 25, 2005, the Company issued warrants to purchase 300,000
         warrants exercisable at $1.50 in accordance with the terms of the
         convertible term loan. (See Note 14 - Convertible Term Loan) The
         Company recognized interest expense from this issuance of $50,000 with
         a remaining debt discount of $219,488 to be amortized through September
         30, 2005. (computed using a Black-Scholes model with an interest rate
         of 3.38%, volatility of 87.86%, zero dividends and expected term of
         five years).

         On February 25, 2005, the Company entered into a six month agreement
         for financial consulting services. The agreement stipulates that
         warrants to purchase 40,000 shares of restricted common stock to be
         issued, as follows: $1.50 per share and the Company recorded a
         consulting expense of $6,750 or $.90 per share, with deferred balance
         of $29,182 for the valuation of the 40,000 warrants, for the quarter
         ended March 31, 2005. (computed using a Black-Scholes model with an
         interest rate of 3.38%, volatility of 87.86%, zero dividends and
         expected term of five years).

                                       18
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         The following table summarizes information about stock options and
         warrants outstanding at March 31, 2005:

<TABLE>
<CAPTION>
                   Options Outstanding                                              Options Exercisable
-----------------------------------------------------------------------------------------------------------------
                                                         Weighted         Weighted                       Weighted
            Range of                 Number               Average          Average          Number        Average
            Exercise              Outstanding at         Remaining        Exercise      Exercisable at   Exercise
             Price               March 31, 2005         Contractual        Price      March 31, 2005       Price
        --------------           -----------------      -----------       --------    -----------------  ---------
<S>                                  <C>                <C>               <C>             <C>            <C>
       $   6.40 - 100.00               242,125          9.79 Years        $  12.46          242,125      $  12.46
       $   3.00 -   6.39             1,714,000          5.79 Years        $   4.59        1,714,000      $   4.59
       $   1.50 -   2.99             3,042,279          5.89 Years        $   1.88        3,042,279      $   1.88
                    0.20                37,500          5.07 Years        $   0.20           37,500      $   0.20
                                     ---------                            --------        ---------      --------
                                     5,035,904                            $   3.02        5,035,904      $   3.02
                                     =========                            ========        =========      ========
</TABLE>

NOTE 20 - RELATED PARTIES:
--------------------------

The balance due to a corporate principal stockholders controlled by a Director
at March 31, 2005 was $50,355. (See Note 13)

NOTE 21 - GOING CONCERN:
------------------------

As reflected in the accompanying consolidated financial statements, the Company,
has a net loss in 2005 of $2,394,978, cash used in operations in 2005 of
$340,793 and an accumulated deficit of $29,674,175 at March 31, 2005,
stockholders' deficiency of $1,979,132 and a working capital deficit of
$2,864,424 at March 31, 2005. 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 raise
capital and is continuing its acquisition plan. The Company believes that these
actions provide it the ability to continue as a going concern. 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 22 - SUBSEQUENT EVENTS:
----------------------------

In April 2005 the Company entered into a twelve month consulting agreement. In
consideration for the services, the consultant is to be issued 150,000 warrants
to purchase common stock at $1.50.

The Company also entered into a consulting agreement with a term of six months.
In consideration, the consultant is to be issued 200,000 shares of restricted
common stock.

In May 2005, the Company issued 5,000 shares of restricted common stock, valued
at $1.00, to a debt holder in consideration of deferring payments through
June 5, 2005.

The Company also issued 5,035 shares to a consultant for services rendered in
April and May 2005, valued at $1.00.

         In April 2005, the Company entered into an agreement with Maxim Group,
         LLC to provide general financial advisory and investment banking
         services to on an exclusive basis. Under the terms of this agreement,
         the Company paid Maxim Group, LLC an initial retainer, and thereafter
         the Company pays the firm a monthly fee and reimbursement for expenses.
         Maxim Group is entitled to a fee for any financing transactions the
         Company may consummate; the Company also granted Maxim Group a right of
         first refusal as to additional financings transactions in which the
         Company may engage. The agreement may be terminated by either party on
         30 days' notice, and the Company agreed to indemnify Maxim Group in
         certain circumstances.

On April 28, the Company's wholly owned subsidiary, Beverage Network of Hawaii,
Inc. (BNHI) executed a lease for a facility containing office and warehouse
space. The operation will move from its current facility, where it leases space
month-to-month, to the new 2,750 sq. ft. space for a term of three years. The
base rent for the three years is: $2,750, $2,877 and $3,025, respectively.

As of April 1, 2005 the Company has received an additional $425,000 as
convertible term notes at 18% per annum, due September 1, 2005. (See Note 14 -
Convertible Term Note)


                                       19
<PAGE>
                          XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2005

         It is the intent of Maxim and the Company to conduct a series of
         financings for the Company through private and public offerings as are
         described in more detail in the attached agreement. In the event these
         offerings are successful, the Company has agreed to compensate Maxim in
         accordance with the fee schedule attached to the agreement.

         On April 28, the Company's wholly owned subsidiary, Beverage Network of
         Hawaii, Inc. (BNHI) executed a lease for a facility containing office
         and warehouse space. The operation will move from its current facility,
         where it leases space month-to-month, to the new 2,750 sq. ft. space
         for a term of three years. The base rent for the three years is:
         $2,750, $2,877 and $3,025, respectively.

         As of April 1, 2005 the Company has received an additional $425,000 as
         convertible term notes at 18% per annum, due September 1, 2005. (See
         Note 14 - Convertible Term Note)

                                       20
<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.

                                       21
<PAGE>

         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.

         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 ended March 31, 2005 were $2,533,686 as
compared to $604,560 for the three months ended March 31, 2004, an increase of
$1,929,126, or approximately 319% The increase in sales is attributable to the
implementation of our acquisition strategy which we believe is the key driver
for our company to grow. Our sales for the three months ended March 31, 2005
include revenues attributable to Ayer Beverages which we acquired in March of
2004 and Master Distributors, which we acquired in July of 2004, for which no
sales were reflected in the comparable period of 2004.

         Sales attributable to Master Distributors for the three months ended
March 31, 2005 were $2,083,379. If sales were adjusted for the three months
ended March 31, 2005 to exclude sales from Master Distributors, our sales
declined approximately $154,253 for the three months ended March 31, 2005 as
compared to the three months ended March 31, 2004. This decrease in sales is
attributable to our lack of working capital during fiscal 2005 which prohibited
us from maintaining an adequate inventory of third party brands for distribution
and resulted in decreased sales in our Connecticut and S. Florida locations. We
anticipate that our sales will continue to increase during the balance of fiscal
2005 as a result of the sales attributable to the acquired companies.

         The cost of goods sold as a percentage of sales for the three months
ended March 31st 2005 was approximately 71% of sales as compared to
approximately 86% for the comparable period in fiscal 2004. The improvement in
our operating margins for the three months ended March 31, 2005 is attributable
to a change in product mix sold, principally as a result of the addition of
Master Distributors' business, whose cost of goods for the three month period
ended March 31, 2005 was $1,465,017 which represents 58% of sales for the
period. During the period ending March 31, 2005 , we generated sales from both
our proprietary products as well as the sale of third party beverage brands sold
through our distributor subsidiaries. Sales for proprietary brands were
approximately 4% of sales for the three months ending March 31, 2005 as compared
to approximately 5% of sales for the three months ending March 31, 2004.

         We recorded total operating expenses for the three months ended March
31, 2005 of $2,392,187 compared to $2,514,173 for the three month period ended
March 31,2004, a decrease of approximately $121,986 or approximately 5%. The
decrease primarily includes:

         * an increase of $88,434, or approximately 47%, in marketing and
selling expense. Marketing expense includes marketing and promotion of Yohimbe
Energy Drink and direct selling expenses and a one time charge of approximately
$85,000 for brand development related to our Chinese Rocket Fuel and
shelf-stable Maui Juice products. The increase in marketing and selling expense
is primarily attributable to results of operations of Master Distributors for
the three months ended March 31, 2005 following our acquisition of that business
during the third quarter of fiscal 2004. For the three month period ended March
31, 2005, Master Distributors marketing and selling expenses were $107,758, or
approximately 39%, of our total marketing and selling expense of $275,153. These
expenses include promotional spending at point of sale and salaries and
commissions of sales personnel. We anticipate that our marketing expense will
increase during the course of fiscal 2005, provided that we are success- ful in
raising the additional capital required, in order for us to implement our
strategy of developing and growing corporate owned brands. In addition, as our
sales increase our marketing and selling expenses will have a corresponding
increase as salaries and commissions of sales personnel are recorded within this
expense category,

         * an increase of $258,980, or approximately 624%, in warehouse and
delivery, which includes truck leasing in New England and Maryland and truck
repairs in New England and salaries of warehouse personnel. Of our total
warehouse and delivery expense for the three months ended March, 2005, $200,221
is attributable to Master Distributors. When the increase for the three months
ended March 31, 2005 is adjusted to exclude the warehouse and delivery expenses
attributable to Master Distributors, for which there were no corresponding
expenses during the three months ended March 31, 2004, our warehouse and
delivery expenses increased approximately $58,759 or 142% from the comparable

                                       22
<PAGE>

period in fiscal 2004. Of this increase, $35,933 relates to the Hawaiian and
Massachusetts businesses being included for the entire 2005 fiscal period. The
balance of the increase relates to the change of warehouse location of our South
Florida and Connecticut operations We anticipate that our warehouse and delivery
costs during the balance of fiscal 2005 will increase in connection with
availability of working capital and if we are able to expand our routes in
existing markets as part of our organic growth strategy,

         * a decrease of $1,165,506, or approximately 68%, in compensation
expense. Compensation expense includes cash and stock compensation issued to
certain employees and to the board of directors. Included in the compensation
expense for the period ending on March 31, 2004 is $1,350,000 attributable to
the one time issuance of 500,000 shares of our common stock as bonuses to the
executive officers in February 2004. We do not presently anticipate that we will
record any similar non-cash expenses during the balance of fiscal 2005. We
anticipate that the cash component of our compensation expense will remain
relatively constant during the balance of fiscal 2005, subject to increases if
we acquire additional companies and their related personnel.

         * an increase of $9,681, or approximately 24%, in rent expense which is
attributable to the addition of physical locations as a result of our various
acquisitions during fiscal 2004 but offset by a one time credit of $24,000 for
leasehold improvements completed in our Baltimore rented facility. We anticipate
that rent expense will remain relatively constant during the balance of fiscal
2005, subject to increase if we acquire additional businesses.

         * an increase of $464,571, or approximately 275%, in consulting fees,
$47,623 of which relate to cash payments and $586,044 relate to stock based
transactions. Of the cash transactions, $30,000 relates to the agreement which
allowed us to acquire the rights to SPA water for the USA. The stock based
transactions include amortization expenses of $156,299 for the HC Wainwright
Retainer warrants. $105,000 deferred consulting payments to Morris Stodard and
$304,810 to South Mountain Enterprises and SOS Resource Services for financial
consulting services. We anticipate that consulting fees will show some increase
as we will be outsourcing some of our financial and expansion needs during the
balance of fiscal 2005.

         * an increase of $48,154, or approximately 69%, in professional fees
which is primarily attributable to 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 underlying the
securities sold in those financing transactions. We anticipate that professional
fees will remain at these levels during the balance of fiscal 2005,

         * an increase of $31,401 or approximately 25% in loan and loan
guarantee fees which is attributable to capital raising transactions during the
three months ended March 31, 2005 for which there were no comparable fees during
the three months ended March 31, 2004. This expense in fiscal 2005 represents
the value of securities deposited in escrow as collateral in connection with a
debt placement. We anticipate similar expenses in the balance of fiscal 2005,

         * bad debt expense of $1,977 versus no bad debt expenses for the same
period in 2004. 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 2005, and could increase if we
acquire additional companies.

         * an increase of $140,322, or approximately 88%, 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 other general and administrative expenses pertaining to Master

                                       23
<PAGE>

Distributors of $181,520 for the three months ended March 31, 2005. There were
no comparable expenses during the three months ended March 31, 2004, as a result
of the timing of the acquisition during the third quarter of fiscal 2004. We
anticipate that other general and administrative expenses will remain at the
current level for the balance of fiscal year 2005 unless, subject to the
availability of sufficient funds, we make additional acquisitions.

         * Total other (expense), net for the three months ended March 31, 2005
increased $728,791 or approximately 4,262% from the three months ended March 31,
2004. This increase is primarily attributable to:

         * interest income and interest (expense) for the three months ended
March 31, 2005 increased $748,348 from the three months ended March 31, 2004.
Included in this increase was interest, including stock issued as payment for
interest together with a $81,000 penalty payable to our Series B Convertible
Preferred Stockholders related to the pending registration statement. We
anticipate that our interest expense may increase during the balance of fiscal
2005 if we are successful in raising additional capital,

         * no gain or loss on settlement for the three months ended March 31,
2005 as compared to a settlement loss of $20,921 for the three months ended
March 31, 2004 which reflected settlements with vendors,

         * Other income decreased $19,375 for the three months ended March 31,
2005 from the three months ended March 31, 2004. Other income represents a
contract termination fee reimbursed by a vendor for $10,000 and $9,375 in
unclaimed bottle deposit fees,

         * Other (expense) decreased $18,011 for the three months ended March
31, 2005 as compared to the three months ended March 31, 2004. Other (expense)
represents one time bottle deposit reimbursements.

         We reported a net loss of $2,394,798 for the three months ended March
31, 2005 as compared to a net loss of $2,427,423 for the three months ended
March 31, 2004.

         For the three months ended March 31, 2005 we recorded preferred stock
dividends of $320,798 attributable to our Series B Convertible Preferred Stock
sold in August 2004 for which there was no comparable expense during the three
months ended March 31, 2004. In accordance with the designations, rights and
preferences of the Series B Convertible Preferred Stock, we expect to record
preferred stock dividends during the balance of fiscal 2005.

         We reported a net loss available to common stockholders of $2,715,776
for the three months ended March 31, 2005 as compared to a net loss available to
common stockholders of $2,427,423 for the three months ended March 31, 2004.

LIQUIDITY AND CAPITAL RESOURCES

         We have a history of losses and at March 31, 2005 we had an accumulated
deficit of $29,674,175 and a working capital deficit of $2,864,424

         Net cash used in operating activities for the three months ended March
31, 2005 was $340,793 as compared to $648,512 for the three months ended March
31, 2004 and includes the following:

         * an decrease of $32,445 in our net loss,

         * an increase of $20,622 in depreciation which relates to assets
acquired in our acquisition of Master Distributors in July 2004,

         * an increase of $363,560 in amortization of deferred consulting and
deferred fees which relates to an increase in expenses attributable to
consulting agreements entered into during fiscal 2005 which provide for the
issuance of shares of our common stock and common stock purchase warrants issued
as compensation under long-term agreements,

                                       24
<PAGE>

         * an increase of $666,743 in the amortization of debt discount and fees
to interest expense relating to our outstanding $3,000,000 principal secured
convertible note as well as our Series B Convertible Preferred Stock,

         * an increase of $107,969 in amortization of intangibles which is our
customer lists, including the first time entry of customer lists from Master
Distributors due to the timing of the acquisition during the third quarter of
fiscal 2004,

         * an increase of $81,000 in liquidated damages which relates to the
failure of the registration statement on Form SB-2 filed by us with the SEC
relative to the Series B Convertible Preferred Stock to be declared effective on
a timely basis. As this registration statement remains pending, we anticipate
that we will continue to incur additional penalties during the balance of fiscal
2005 until such time as the registration statement is ultimately declared
effective by the SEC,

         * a decrease of $1,554,874 of non-cash expenses related to a decrease
in stock based compensation paid to consultants under short-term agreements,

         * an increase in accounts receivable of $84,938 primarily due to the
addition of Master Distributors in July 2004,

         * an increase in inventory of $140,463 primarily due to the additional
product inventory required following the acquisition of Master Distributors in
July 2004,

         * an increase of current and non-current assets of $355,722 primarily
due to the acquisition of assets in the Master Distributors transaction,

         * a decrease in accounts payable of $45,911.

         * a decrease $18,917 in accrued expenses which relates to a reduction
in salary accruals.

         Net cash used in investing activities for the three months ended March
31, 2005 was $5,887 as compared to $140,500 in the comparable three month
period in fiscal 2004. This change reflects the payment for the purchase of Ayer
Beverage, Maui Juice brand and Pacific Rim, net of cash acquired, during fiscal
2004 for which comparable transactions did not occur in the six month period
ended June 30, 2005.

         Net cash provided by financing activities for the three months ended
March 31, 2005 was $371,718 as compared to $790,890 for the three months ended
March 31, 2004. This change from the three months ended March 31, 2004 to the
three months ended March 31, 2005 includes:

         * a reduction of $25,000 in related party loans,

         * an increase in proceeds from non-related party loans of $287,501,

         * a decrease in repayments of related party loans of $31,960,

         * an increase in repayments of non-related party loans of $46,364 which
represents principal payments to Laurus Master Fund of $52,941,

         * an increase in a cash overdraft of $155,057.


                                       25
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

         In December 2004, the FASB issued SFAS 123 (revised 2004) "Share-Based
Payment". This Statement requires that the cost resulting from all share-based
transactions be recorded in the financial statements. The Statement establishes
fair value as the measurement objective in accounting for share-based payment
arrangements and requires all entities to apply a fair-value-based measurement
in accounting for share-based payment transactions with employees. The Statement
also establishes fair value as the measurement objective for transactions in
which an entity acquires goods or services from non-employees in share-based
payment transactions. The Statement replaces SFAS 123 "Accounting for
Stock-Based Compensation" and supersedes APB Opinion No. 25 "Accounting for
Stock Issued to Employees". The provisions of this Statement will be effective
for the Company beginning with its fiscal year ending 2006. The Company is
currently evaluating the impact this new Standard will have on its financial
position, results of operations or cash flows.

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 Chief Executive Officer who also serves as our principal financial
officer, has conducted an evaluation of the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) 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 the report. As set forth below and
in Note 1(B) to the Company's Consolidated Financial Statements (unaudited)
appearing elsewhere in this report, management determined that there was a
material weakness in the Company's internal control over financial reporting as
of March 31, 2005 as more fully described below. Based upon that evaluation, the
Company's Chief Executive Officer has concluded that our disclosure controls and
procedures were not effective because of the material weakness described below.

         In this Quarterly Report on Form 10-QSB/A the Company is restating its
consolidated balance sheet (unaudited) at March 31, 2005 which appeared in its
Quarterly Report on Form 10-QSB for the period ended March 31, 2005 as
previously filed with the Securities and Exchange Commission. These restatements
were made to reflect the reclassification of deferred financing fees related to
its Series B convertible preferred stock. The restatements resulted from
comments from the staff of the Securities and Exchange Commission to a pending
Registration Statement on Form SB-2.

         As a result of this restatement the amount of total Series B preferred
stock on its balance sheet at March 31, 2005 (unaudited) as originally reported
was overstated and the amount of deferred fees appearing in the stockholders'
deficiency presentation and the total stockholders' deficiency was understated.
These changes to the balance sheet resulted in a decrease of the value
attributable to the Company's Series B preferred stock from $507,428 to
$(593,291) and an increase in its total stockholders' deficiency from
$(1,979,132) to $(878,413).

         Because of this accounting error, the Company has determined that a
deficiency in internal controls existed related to the accounting for deferred
fees. ^Accordingly, management determined that this control deficiency
constituted a material weakness. ^

         Management has taken the remedial steps necessary to eliminate the
material weakness relating to financial disclosure controls that resulted in the
restatement discussed above. Other than the changes discussed above, there have
been no changes made in the Company's internal controls or in other factors that
could materially affect its internal controls subsequent to the end of the
period covered by this report based on such evaluation.

                                       26
<PAGE>

PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On March 21, 2005 we received a notice from Mirador Consulting, Inc.
that it intends to pursue an arbitration proceeding against us for breach of a
consulting agreement. We deny any breach of this agreement, have engaged counsel
to defend our position and intend to vigorously assert all available defenses
against any arbitration proceeding. The ultimate resolution of this matter
cannot be determined with any certainty. Until such time as we are served in
this proceeding, we are unable to provide further information.

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

         For the quarter ended March 31, 2005, the Company issued shares of
restricted common stock in consideration of services detailed below. The
transactions, with the shares at market value on the date of grant, will be
recognized according to the term of each respective agreement. The securities
were issued in reliance of the exemption provided under section 4(2) of the
Securities act of 1933. The consideration is as follows: (See Financial
Statement footnote 19 - Common Stock for detail)

         377,546 for consulting services

         160,000 for the deferral of payments to certain debt holders

         100,000 for collateral on a term note

         4,472 for legal services rendered

         On April 7th, we entered into a consulting agreement with Adelphia
Holdings, LLC.(Adelphia) in which Adelphia has been retained as a non exclusive
financial advisor and investment banker. The agreement has a 12 month term and
is subject to termination by either party at any time during the term upon
written notice. In return for Adelphia's services under the agreement a copy of
which is filed with this form 10 QSB, the company agreed to pay a monthly fee of
$2,500 which would increase to $5,000 for each month that the agreement is in
effect following the successful organization of financing by Adelphia for the
company in excess of $1,000,000, The company has also agreed to issue 150,000
warrants to purchase 150,000 shares of the company's common stock at an exercise
price of $1.50. The warrants vest, 50% upon the execution of the agreement and


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<PAGE>

the balance vest monthly at 6,818 per month through the 12th month of the term.
The agreement includes an exercise price ratchet in the event that the company
transacts common stock at a price below the exercise price of $1.50. The
recipient was a sophisticated investor. The securities were issued in reliance
of the exemption provided under section 4(2) of the Securities Act of 1933

         On April 18th, we entered into a six month term financial advisory
agreement with Farrand Financial Services, LLC. The agreement is for financial
services for which we have agreed to issue 200,000 shares of the company's
restricted common stock. The agreement may be extended upon the mutual consent
of the parties. The recipient was an accredited investor. The securities were
issued in reliance of the exemption provided under section 4(2) of the
Securities Act of 1933

         In April 2005, we entered into an agreement with Maxim Group, LLC to
provide general financial advisory and investment banking services to us on an
exclusive basis. Under the terms of this agreement, we paid Maxim Group, LLC an
initial retainer, and thereafter we pay the firm a monthly fee and reimbursement
for expenses. Maxim Group is entitled to a fee for any financing transactions we
may consummate, and we granted Maxim Group a right of first refusal as to
additional financings transactions in which we may engage. The agreement may be
terminated by either party on 30 days' notice, and we agreed to indemnify Maxim
Group in certain circumstances. The recipient was an accredited investor. The
securities were issued in reliance of the exemption provided under section 4(2)
of the Securities Act of 1933

         Our Series B Preferred shares pay a cumulative, semi-annual dividend of
6% per annum, payable at the Company's option in cash, registered shares of its
common stock or additional shares of its Series B Preferred (See note 19 (A)-
Preferred Stock). The dividends payable as of March 31, 2005, were $88,300. The
company's board of directors has resolved to pay the dividends as registered
shares of its common stock.

ITEM 3.  DEFAULT ON SENIOR SECURITIES

         None

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

         None

ITEM 5.  OTHER INFORMATION

         Beverage Network of Hawaii currently rents approximately 1,800 square
feet in Wailuku, Hawaii on a month to month basis. We pay $1,103 per month rent.
The primary use of this space is for our Hawaiian manufacturing and warehousing
operations. We are scheduled to move to a larger FDA, USDA compliant production
facility in May 2005. The new space in Wailuku, is 2,750 sq feet with a total
monthly rent of $3,490. The landlord is an unaffiliated third party, the lease
is for an initial term of three years, commencing May 15th 2005.

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ITEM 6.  EXHIBITS

Exhibit No.                 Description

 4.1       Form of Bridge Loan Promissory Note*
 4.2       Form of Warrant*
10.1       Beverage Network of Hawaii Lease Agreement*
10.2       Maxim Financial Advisory Agreement*
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


------------
*  Previously Filed
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                                   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: October 7, 2005

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