================================================================================

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

                                ----------------

                                   FORM 10-QSB

                                ----------------
(Mark One)

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

                For the quarterly period ended March 31, 2007

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

                 For the transition period from______to________

                       Commission file number: 331-30158A


                         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 Identification No.)
incorporation or organization)

            2 S. University Drive, Suite 220, Plantation Florida 33324
            --------------------------------------------------------
                    (Address of principal executive offices)

                                  954-473-0850
                                  ------------
                           (Issuer's telephone number)

         3511, W. Commercial Blvd., Suite 209, Fort Lauderdale, Florida 33309

                          ----------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act [ X ]

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) Yes [ ] No [X]

                      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: 57,911,900 shares of common stock as
of May 11, 2007.

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

================================================================================
<PAGE>

       CERTAIN CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

         Certain statements in this quarterly report 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, our ability to raise sufficient working
capital to fund our ongoing operations, pay our obligations and implement our
strategic initiatives, 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 and readers should carefully review this quarterly
report in its entirety. 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. These
forward-looking statements speak only as of the date of this quarterly report,
and you should not rely on these statements without also considering the risks
and uncertainties associated with these statements and our business.

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







                                      - 2 -

<PAGE>


                         XSTREAM BEVERAGE NETWORK, INC.
                                AND SUBSIDIARIES

                                      INDEX

                                                                            Page
                                                                            ----

Part I.  Financial Information

Item 1.  Financial Statements

         Consolidated Balance Sheet as of March 31, 2007
         (Unaudited)...........................................................4

         Consolidated Statements of Operations (Unaudited) for the three
         months ended March 31, 2007 and 2006..................................5

         Consolidated Statements of Cash Flows (Unaudited) for the three
         months ended March 31, 2007 and 2006 .................................6

         Notes to Consolidated Financial Statements (Unaudited) as of
         March 31, 2007 .......................................................7

Item 2.  Management's Discussion and Analysis or Plan of Operation............30

Item 3.  Controls and Procedures..............................................42

Part II. Other Information

Item 1.  Legal Proceedings....................................................43

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds..........43

Item 3.  Default on Senior Securities.........................................43

Item 4.  Submission of Matters to a Vote of Security Holders..................43

Item 5.  Other Information....................................................43

Item 6.  Exhibits.............................................................43









                                      - 3 -
<PAGE>


                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
                                                                                           March 31,
                                                                                             2007
                                                                                         ------------
                                                                                          (Unaudited)
<S>                                                                                      <C>
ASSETS
      Current Assets:
          Cash                                                                           $    122,900
          Note receivable - short term                                                        150,000
          Accounts receivable                                                                   8,871
          Inventory                                                                           205,409
          Prepaid expenses                                                                     42,908
          Assets of discontinued operations                                                     3,384
                                                                                         ------------
              Total current assets                                                            533,472
                                                                                         ------------

      Property and equipment, net of accumulated depreciation of $15,911                       14,654
                                                                                         ------------
      Other Assets:
          Note receivable - long term                                                       1,101,670
          Restricted marketable equity securities, at market                               12,364,687
          Capitalized funding costs,net                                                       774,456
          Other assets                                                                         17,118
                                                                                         ------------
              Total other assets                                                           14,257,931
                                                                                         ------------
Total Assets                                                                             $ 14,806,057
                                                                                         ============
LIABILITIES & STOCKHOLDERS' DEFICIENCY
      Liabilities:
          Current Liabilities:
              Loans payable                                                              $  1,734,555
              Loans payable - related party                                                    50,455
              Revolving line of credit                                                      1,027,051
              Convertible notes payable                                                     4,263,125
              Current portion of long term debt, net of discount of $110,542                1,454,614
              Preferred Series B ($0.001 par value, 40 Shares issued and outstanding),
                net of discount of $55,851                                                  1,452,149
              Accounts payable                                                                759,953
              Accrued expenses                                                              2,106,820
              Dividends payable                                                                 6,346
              Derivative liabilities                                                        3,085,466
              Liabilities of discontinued operations                                        1,304,617
                                                                                         ------------
                  Total current liabilities                                                17,245,151
                                                                                         ------------

          Long Term Liabilities:
              Notes payable, net of discount of $110,538                                    2,439,461
              Convertible notes payable, net of discount of $1,333,333                        849,667
                                                                                         ------------
                  Total long term liabilities                                               3,289,128
                                                                                         ------------
                  Total Liabilities                                                        20,534,279
                                                                                         ------------
      Stockholders' Deficiency
          Preferred Stock, $0.001 par value,
              Series A, 200,000 shares issued and outstanding                                     200
          Preferred Stock, $0.001 par value, 4,000,000 shares authorized
              Series D, 1,100,000 shares issued and outstanding                                 1,100
          Common Stock, $0.001 par value, 250,000,000 shares authorized,
          56,725,325 issued and outstanding                                                    56,725
          Additional paid in capital                                                       44,798,724
          Accumulated deficit                                                             (47,427,521)
          Subscription receivable                                                            (790,226)
          Accumulated other comprehensive loss                                             (2,155,313)
          Deferred consulting                                                                (211,911)
                                                                                         ------------
                  Total Stockholders' Deficiency                                           (5,728,222)
                                                                                         ------------
TOTAL LIABILITIES & STOCKHOLDERS'  DEFICIENCY                                            $ 14,806,057
                                                                                         ============

</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                      - 4 -

<PAGE>
                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                           For the Three Months Ended
                                                                    March 31,
                                                         ------------------------------
                                                             2007              2006
                                                         -------------    -------------
                                                          (Unaudited)      (Unaudited)

<S>                                                      <C>              <C>
Net sales                                                $       2,948    $     234,234

Cost of goods sold                                              15,195          162,846
                                                         -------------    -------------
Gross profit                                                   (12,247)          71,388
Expense
      Marketing, selling, general and administrative           793,452          861,034
                                                         -------------    -------------
          Total operating expense                              793,452          861,034
                                                         -------------    -------------
Loss from continuing operations                               (805,699)        (789,646)
Other Income/(Expense)
      Interest income                                            9,490             --
      Interest expense                                      (1,366,150)      (4,868,995)
      Derivative liability expense                                --           (765,528)
      Change in fair value of derivatives                     (659,188)      (4,029,608)
      Other expenses                                              --           (860,839)
      Realized loss- subscription receivable                  (863,909)            --
                                                         -------------    -------------
          Total other income/(expense)                      (2,879,757)     (10,524,970)
                                                         -------------    -------------
Income (Loss) from continuing operations                    (3,685,456)     (11,314,616)
                                                         -------------    -------------

Discontinued operations:
Gain from disposal of discontinued operations               16,844,821             --
Gain (Loss) from discontinued operations                      (110,704)        (218,462)
                                                         -------------    -------------

        Total gain (loss) from discontinued operations      16,734,117         (218,462)
                                                         -------------    -------------
Net Income (loss)                                           13,048,661      (11,533,078)
                                                         -------------    -------------

Unrealized loss - restricted investment                  $  (2,155,313)   $        --
                                                         -------------    -------------
Unrealized loss on subscription receivable               $        --      $    (521,053)
                                                         -------------    -------------
Comprehensive income (loss)                                 10,893,348      (12,054,131)
                                                         -------------    -------------
Preferred stock dividends                                      (12,501)         (32,878)
                                                         -------------    -------------

NET INCOME (LOSS) AVAILABLE TO COMMON STOCKHOLDERS       $  13,036,160    $ (11,565,956)
                                                         =============    =============

INCOME (LOSS) PER COMMON SHARE - BASIC:
  Income (loss) from continuing operations               $       (0.07)   $       (0.37)
  Income (loss) from discontinued operations                      0.30            (0.01)
                                                         -------------    -------------

   Net income (loss) per common share                    $        0.23    $       (0.38)
                                                         =============    =============

INCOME (LOSS) PER COMMON SHARE - DILUTED:
  Income (loss) from continuing operations               $       (0.02)   $       (0.37)
  Income (loss) from discontinued operations                      0.10            (0.01)
                                                         -------------    -------------

   Net income (loss) per common share                    $        0.08    $       (0.38)
                                                         =============    =============

Weighted Average Shares Outstanding -Basic                  55,364,745       30,981,381
                                                         =============    =============
Weighted Average Shares Outstanding -Diluted               162,558,784       30,981,381
                                                         =============    =============

</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                      - 5 -
<PAGE>
                 XSTREAM BEVERAGE NETWORK INC. and SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                           For the Three Months Ended
                                                                                    March 31,
                                                                          ----------------------------
                                                                              2007             2006
                                                                          ------------    ------------
                                                                          (Unaudited)      (Unaudited)
<S>                                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Loss from continuing operations                                           $ (3,685,456)   $(11,314,616)

Adjustments to reconcile loss from continuing operations to net cash
used in continuing operating activities:

Depreciation                                                                     1,483           1,257
Amortization of deferred fees and consulting                                   229,517         406,260
Amortization of debt discount to interest expense                              362,258       2,666,757
Liquidated damages for failure to timely file registration statement            56,550         261,000
Amortization of capitalized funding Costs                                      159,128       1,254,598
Stock based loan fee                                                            45,000         375,769
Stock based services                                                           250,136         218,997
Derivative liability expense                                                      --           765,528
Change in fair value of derivative liabilities                                 659,188       4,029,608
Realized loss-transfer of subscription receivable                              863,909            --

Changes in operating assets and liabilities:
Accounts receivable                                                              3,356        (219,952)
Inventory                                                                        2,609         (20,049)
Interest receivable included in notes receivable                                (9,490)           --
Other current and non-current assets                                            53,436          59,793
Accounts payable                                                               (53,172)        150,083
Accrued expenses                                                               (14,467)          8,291
Accrued interest included in notes payable and revolving line of credit        614,809         433,531
                                                                          ------------    ------------

Net cash used in continuing operating activities                              (461,206)       (923,145)
                                                                          ------------    ------------

Loss from discontinued operations                                           16,734,117        (218,462)

Adjustments to reconcile loss from discontinued operations to net cash
  provided by (used in) discontinued operating activities:
Loss on disposal of fixed assets                                                  --            11,430
Gain from disposal of discontinued operations                              (16,844,821)           --
Depreciation                                                                    12,668          21,388
Bad debt                                                                          --               354
Amortization of intangibles                                                     59,902         100,579
Decrease (Increase) in net assets from discontinued operations                 227,914         (39,700)
Increase (Decrease) in net liabilities from discontinued operations            (29,155)         89,730
                                                                          ------------    ------------

Net cash provided by (used in) discontinued operations                         160,625         (34,681)
                                                                          ------------    ------------

Net cash used in operating activities                                         (300,581)       (957,826)
                                                                          ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from note receivable                                                  757,820            --
Proceeds from disposition of fixed assets - discontinued operations               --             3,420
                                                                          ------------    ------------

Net cash provided by investing activities                                      757,820           3,420
                                                                          ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from related party loans                                                 --            50,000
Proceeds from non-related party loans                                             --         4,450,000
Repayments of non-related party loans                                         (275,000)     (3,366,782)
Capitalized funding costs                                                         --          (254,500)
Cash overdraft                                                                 (16,639)         (2,121)
Proceeds received from revolving line of credit                                144,287            --
Payments on revolving line of credit                                          (188,287)           --
                                                                          ------------    ------------

Net cash provided by financing activities                                     (335,639)        876,597
                                                                          ------------    ------------

Net cash increase (decrease)                                                   121,600         (77,809)
Cash at beginning of year                                                        1,300          84,326
                                                                          ------------    ------------
Cash at end of period                                                     $    122,900    $      6,517
                                                                          ============    ============

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:
     Interest paid                                                        $    214,003    $    836,935
     Taxes paid                                                           $       --      $       --

</TABLE>

     See accompanying notes to unaudited consolidated financial statements.

                                      - 6 -

<PAGE>


                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         ORGANIZATION AND NATURE OF BUSINESS
         -----------------------------------

         Xstream Beverage Network, Inc. ("XStream") is an operating brand
         development and distribution company and completed the first five
         acquisitions anticipated in its business strategy as follows:

         Beverage Network of South Florida, ("BNSF")          April 9, 2003
         Beverage Network of Connecticut, Inc. ("BNCT")         May 1, 2003
         Beverage Network of Hawaii ("BNHI")                  March 1, 2004
         Beverage Network of Massachusetts ("BNMA")          March 15, 2004
         Beverage Network of Maryland, Inc. ("BNMD")           July 1, 2004

         These acquisitions were accounted for under the purchase method.

         DISCONTINUED OPERATIONS
         -----------------------

         On December 15, 2006, the Company signed a Letter of Intent to sell its
         distribution subsidiary, Beverage Network of Maryland, Inc. ("BNMD"),
         to Global Beverage Solutions, Inc. ("Global Beverage"). The Company and
         Global Beverage signed an Agreement and Plan of Merger ("Merger
         Agreement") dated January 31, 2007, as amended on February 23, 2007,
         whereby the Company will sell its distribution subsidiary, Beverage
         Network of Maryland, Inc. ("BNMD"), to Global Beverage. The Company
         closed on this transaction on February 23, 2007.

         On December 15, 2006, the Company decided to discontinue the operations
         of BNSF, BNCT, BNHI, and BNMA because of (a) the disappointing
         performance of the subsidiaries including continuing operating losses;
         and (b) the Company's lack of ability to obtain working capital loans
         to finance the purchase of inventory and to finance accounts
         receivable.

         Accordingly, BNMD, BNSF, BNCT, BNHI, and BNMA are reported as
         discontinued operations, and prior periods have been restated in the
         Company's financial statements and related footnotes to conform to this
         presentation.

         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.

         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.

                                      - 7 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         USE OF ESTIMATES
         ----------------

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

         CASH AND CASH EQUIVALENTS
         -------------------------

         For purposes of the consolidated statements of cash flows, the Company
         considers all highly liquid instruments purchased with a maturity of
         three months or less and money market accounts to be cash equivalents.

         ACCOUNTS RECEIVABLE
         -------------------

         Accounts receivable result from the sale of the Company's products and
         is reported at anticipated realizable value. The Company estimates its
         allowance for doubtful accounts based on a specific identification
         basis and additional allowances as needed based upon historical
         collections experience. Accounts receivable is considered past due if
         payment has not been received from the customer within thirty days and
         management reviews the customer accounts on a routine basis to
         determine if an account should be reserved.

         RISKS AND UNCERTAINTIES
         -----------------------

         The Company maintains its cash and cash equivalent accounts in
         financial institutions. Accounts at these institutions are insured by
         the Federal Deposit Insurance Corporation ("FDIC") up to $100,000.
         During the three months ended March 31, 2007, the Company has reached
         bank balances exceeding the FDIC insurance limit. To reduce its risk
         associated with the failure of such financial institutions, the Company
         evaluates at least annually the rating of the financial institutions in
         which it holds deposits.

         PROPERTY AND EQUIPMENT
         ----------------------

         Property and equipment are stated at cost, and depreciation is computed
         using the straight line method over the estimated economic useful life.
         Leasehold improvements are amortized using the straight-line method
         over the lease term. Maintenance and repairs are charged to expense as
         incurred. Major improvements are capitalized.

                                      - 8 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS
         --------------------------------------------------

         We account for the impairment of long-lived assets in accordance with
         Financial Accounting Standards, SFAS No. 144, Accounting for the
         Impairment or Disposal of Long-Lived Assets, which requires that
         long-lived assets be reviewed for impairment whenever events or changes
         in circumstances indicate that the book value of the asset may not be
         recoverable. Recoverability of the asset is measured by comparison of
         its carrying amount to the undiscounted cash flow that the asset or
         asset group is expected to generate. If such assets or asset groups are
         considered to be impaired, the loss recognized is the amount by which
         the carrying amount of the property if any exceeds its fair market
         value. The Company did not consider it necessary to record any
         impairment charges during the year ended March 31, 2007.

         STOCK-BASED COMPENSATION
         ------------------------

         Effective January 1, 2006, the Company adopted Statement of Financial
         Accounting Standards No. 123 (revised 2004), Share Based Payment ("SFAS
         No. 123R"). SFAS No. 123R establishes the financial accounting and
         reporting standards for stock-based compensation plans. As required by
         SFAS No. 123R, the Company recognized the cost resulting from all
         stock-based payment transactions including shares issued under its
         stock option plans in the financial statements.

         Prior to January 1, 2006, the Company accounted for stock-based
         employee compensation plans (including shares issued under its stock
         option plans) in accordance with APB Opinion No. 25 and followed the
         pro forma net income, pro forma income per share, and stock-based
         compensation plan disclosure requirements set forth in the Statement of
         Financial Accounting Standards No. 123, Accounting for Stock-Based
         Compensation ("SFAS No. 123"). For the three months ended March 31,
         2007, the Company did not grant any stock options.

         REVENUE RECOGNITION
         -------------------

         The Company follows the 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.

                                      - 9 -


<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         INCOME TAXES
         ------------

         The Company accounts for income taxes under the Financial Accounting
         Standards Board Statement of Financial Accounting Standards No. 109
         "Accounting for Income Taxes" ("Statement 109"). Under Statement 109,
         deferred tax assets and liabilities are recognized for the future tax
         consequences attributable to differences between the financial
         statement carrying amounts of existing assets and liabilities and their
         respective tax bases. Deferred tax assets and liabilities are measured
         using enacted tax rates expected to apply to taxable income in the
         years in which those temporary differences are expected to be recovered
         or settled. Under Statement 109, the effect on deferred tax assets and
         liabilities of a change in tax rates is recognized as income in the
         period, which includes the enactment date.

         FAIR VALUE OF FINANCIAL INSTRUMENTS
         -----------------------------------

         Statement of Financial Accounting Standards No. 107, "Disclosures about
         Fair Value of Financial Instruments," requires disclosures of
         information about the fair value of certain financial instruments for
         which it is practicable to estimate that value. For purposes of this
         disclosure, the fair value of a financial instrument is the amount at
         which the instrument could be exchanged in a current transaction
         between willing parties, other than in a forced sale or liquidation.
         The carrying amounts of the Company's short-term financial instruments,
         including accounts receivable, accounts payable, accrued expenses, and
         other current asset and liabilities approximate fair value due to the
         relatively short period to maturity for these instruments.

         RECLASSIFICATION
         ----------------

         Certain amounts in the 2006 consolidated financial statements have been
         reclassified to conform to the 2007 presentation. Such
         reclassifications had no effect on the reported net loss.

         GOING CONCERN
         -------------

         As reflected in the accompanying consolidated financial statements, the
         Company, has a net income for the three months ended March 31, 2007 of
         $13,048,661, cash used in operations of $300,581 and an accumulated
         deficit of $47,427,521 at March 31, 2007, and a working capital deficit
         of $16,711,679 at March 31, 2007. Although the Company reported a net
         income for the three months ended March 31, 2007, the majority of which
         was derived from the sale the Company's subsidiary in February 2007,
         the Company is unable to predict whether it will continue to achieve
         profitability in the future. There could be no assurances that the
         Company will continue to recognize similar net income in the future.
         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
         to implement its business plan. The Company believes that these actions
         provide 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.

                                     - 10 -

<PAGE>
                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         RECENT ACCOUNTING PRONOUNCEMENTS
         --------------------------------

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
         of Financial Assets, an amendment of FASB Statement No. 140, Accounting
         for Transfers and Servicing of Financial Assets and Extinguishments of
         Liabilities". This statement requires all separately recognized
         servicing assets and servicing liabilities be initially measured at
         fair value, if practicable, and permits for subsequent measurement
         using either fair value measurement with changes in fair value
         reflected in earnings or the amortization and impairment requirements
         of Statement No. 140. The subsequent measurement of separately
         recognized servicing assets and servicing liabilities at fair value
         eliminates the necessity for entities that manage the risks inherent in
         servicing assets and servicing liabilities with derivatives to qualify
         for hedge accounting treatment and eliminates the characterization of
         declines in fair value as impairments or direct write-downs. SFAS No.
         156 is effective for an entity's first fiscal year beginning after
         September 15, 2006. The adoption of this statement is not expected to
         have a significant effect on the Company's future reported financial
         position or results of operations.

         In July 2006, the Financial Accounting Standards Board (FASB) issued
         FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income
         Taxes-an interpretation of FASB Statement No. 109." This interpretation
         provides guidance for recognizing and measuring uncertain tax
         positions, as defined in SFAS No. 109, "Accounting for Income Taxes."
         FIN No. 48 prescribes a threshold condition that a tax position must
         meet for any of the benefit of an uncertain tax position to be
         recognized in the financial statements. Guidance is also provided
         regarding de-recognition, classification, and disclosure of uncertain
         tax positions. FIN No. 48 is effective for fiscal years beginning after
         December 15, 2006. The Company does not expect that this interpretation
         will have a material impact on its financial position, results of
         operations, or cash flows.

         In September 2006, the FASB issued Statement of Financial Accounting
         Standards No. 157, "Fair Value Measurements" ("FAS 157"). This
         Statement defines fair value as used in numerous accounting
         pronouncements, establishes a framework for measuring fair value in
         generally accepted accounting principles and expands disclosure related
         to the use of fair value measures in financial statements. The
         Statement is to be effective for the Company's financial statements
         issued in 2008; however, earlier application is encouraged. The Company
         has adopted FAS 157 for the three months ended March 31, 2007.

         In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
         Considering the Effects of Prior Year Misstatements when quantifying
         Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108
         requires companies to evaluate the materiality of identified unadjusted
         errors on each financial statement and related financial statement
         disclosure using both the rollover approach and the iron curtain
         approach, as those terms are defined in SAB 108. The rollover approach
         quantifies misstatements based on the amount of the error in the
         current year financial statement, whereas the iron curtain approach
         quantifies misstatements based on the effects of correcting the
         misstatement existing in the balance sheet at the end of the current
         year, irrespective of the misstatement's year(s) of origin. Financial
         statements would require adjustment when either approach results in
         quantifying a misstatement that is material. Correcting prior year
         financial statements for immaterial errors would not require previously
         filed reports to be amended. If a Company determines that an adjustment
         to prior year financial statements is required upon adoption of

                                      - 11 -
<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

         SAB 108 and does not elect to restate its previous financial
         statements, then it must recognize the cumulative effect of applying
         SAB 108 in fiscal 2006 beginning balances of the affected assets and
         liabilities with a corresponding adjustment to the fiscal 2006 opening
         balance in retained earnings. SAB 108 is effective for interim periods
         of the first fiscal year ending after November 15, 2006. The adoption
         of SAB 108 did not have an impact on the Company's consolidated
         financial statements.

         In February 2007, the FASB issued FASB Statement No. 159, The Fair
         Value Option for Financial Assets and Financial Liabilities - Including
         an Amendment of FASB Statement No. 115 ("FAS 159"). This standard
         permits entities to choose to measure many financial assets and
         liabilities and certain other items at fair value. An enterprise will
         report unrealized gains and losses on items for which the fair value
         option has been elected at each subsequent reporting date. The fair
         value option may be applied on an instrument-by-instrument basis, with
         several exceptions, such as those investments accounted for by the
         equity method, and once elected, the option is irrevocable unless a new
         election date occurs. The fair value option can be applied only to
         entire instruments and not to portions thereof. FAS 159 is effective as
         of the beginning of an entity's fiscal year beginning after November
         15, 2007. Early adoption is permitted as of the beginning of the
         previous fiscal year provided that the entity makes that choice in the
         first 120 days of that fiscal year and also elects to apply the
         provisions of FASB Statement No. 157, Fair Value Measurements. The
         Company has adopted FAS 159 for the three months ended March 31, 2007.

         Other accounting standards that have been issued or proposed by the
         FASB or other standards-setting bodies that do not require adoption
         until a future date are not expected to have a material impact on the
         consolidated financial statements upon adoption.

                                      - 12 -

<PAGE>
                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 2 - NET LOSS PER COMMON SHARE

         In accordance with SFAS No. 128 "Earnings Per Share," Basic earnings
         per share is computed by dividing net income by the weighted average
         number of shares of common stock outstanding during the period. Diluted
         earnings per share is computed by dividing net income by the weighted
         average number of shares of common stock, common stock equivalents and
         potentially dilutive securities outstanding during each period. In the
         2006 period, diluted loss per common share is not presented because it
         is anti-dilutive. The following table presents a reconciliation of
         basic and diluted earnings per share for the three months ended March
         31, 2007:

           Net income                                       $ 13,048,661
           Weighted average shares outstanding - basic        55,364,745
           Income per share - basic                         $       0.23
                                                            ============
           Net income                                         13,048,661
           Adjustments-
               Derivative (income) expense                       659,188
                                                            ------------
           Net income - diluted/adjusted                    $ 13,707,849

           Weighted average shares outstanding - basic        55,364,745
           Effect of dilutive securities
              Convertible debentures                          66,227,814
              Convertible preferred stocks                    40,966,225
              Dilution from warrants                                  --
                                                            ------------
           Weighted average shares outstanding- diluted      162,558,784
                                                            ============
           Income (loss) per share - diluted                $       0.08
                                                            ============

NOTE 3 - 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,
                                                                2007
                                                            ------------
         Resalable products                                 $   162,089
         Proprietary brand raw materials                         43,320
                                                            ------------
         Total:                                             $   205,409
                                                            ============

NOTE 4 - FIXED ASSETS

         Property and equipment at March 31, 2007 is as follows:

                                   Useful life
         Office Equipment            5 years                $   29,565
         Furniture & Fixtures        7 years                     1,000
                                                            ----------
                                                                30,565
         Less: Accumulated depreciation                        (15,911)
                                                            ----------
         Net                                                $   14,654
                                                            ==========

         Depreciation expense for the three months ended March 31 is as follows:

                                                            2007         2006
                                                         ---------    ---------
         Depreciation expense                            $   1,483    $   1,257
         Depreciation expense - discontinued operations     12,668       21,388
                                                         ---------    ---------
         Total Depreciation expense                      $  14,151    $  22,645
                                                         =========    =========
                                      - 13 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 5 - CAPITALIZED FUNDING COSTS, NET

         The table below summarizes the balance of capitalized funding costs as
         of March 31, 2007:

         Capitalized Funding Costs                            $ 5,027,822

         Accumulated Amortization:                             (4,253,366)
                                                              -----------
                  Net:                                        $   774,456
                                                              ===========

         Amortization of capitalized funding cost for the three months ended
         March 31, 2007 and 2006 was $159,128 and $1,254,598, respectively.

NOTE 6 - NOTE RECEIVABLE

         In February 2007, the Company received a $2 million secured promissory
         note in connection with the sale of the Company's subsidiary, Beverage
         Network of Maryland, Inc., to Global Beverage. The note bears interest
         at 6% per annum and matures in March 31, 2011. The note shall be paid
         as follows:

         A) $229,000 payable upon closing of sale
         B) 40% of any cash proceeds received by Global from a private placement
            offering in February 2007.
         C) The remainder of the balance to be paid in minimum installments of
            $25,000 per month commencing on September 1, 2007.

         Additionally, in the event Global raises any equity capital while the
         note is outstanding, Global shall pay down the note equal to 35% of the
         net proceeds from such equity raise. The Company received proceeds of
         $757,820 during the three months ended March 31, 2007. The balance of
         the note receivable as of March 31, 2007 was $1,251,670 (Current
         portion of $150,000 and long term portion of $1,101,670).

NOTE 7 - INVESTMENT IN RESTRICTED MARKETABLE SECURITIES

         On February 23, 2007, the Company completed the sale of its wholly
         owned subsidiary, Beverage Network of Maryland, Inc., to Global
         Beverage Solutions, Inc. ("Global Beverage"). As part of the
         transaction, the Company received 60,500,000 shares in Global Beverage
         common stock. The Company has adopted FASB issued Statement of
         Financial Accounting Standards No. 157, "Fair Value Measurements" ("FAS
         157") and FASB Statement No. 159, The Fair Value Option for Financial
         Assets and Financial Liabilities. FAS 157 defines fair value,
         establishes a framework for measuring fair value in generally accepted
         accounting principles. FAS 159 permits entities to choose to measure
         many financial assets and liabilities and certain other items at fair
         value. At the time of issuance, the Company recorded the cost of the
         investment at $14,520,000 representing the market value of the shares
         less a 25% discount for restrictions relating to restricted stocks. The
         Company revalued the investment (using the bid and ask prices taking
         into account the 25% discount for restrictions relating to restricted
         stocks) at March 31, 2007 which resulted in a $2,155,313 decrease in
         the fair value which has been recorded as other comprehensive loss in
         stockholders' deficiency.

                                      - 14 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 8 - 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.

         In January 2007, the Company issued 3.51 shares of preferred series B
         shares which converted to the payment of $175,407 of accrued dividends.
         The dividends payable as of March 31, 2007 was $6,346.

NOTE 9 - LOANS PAYABLE AND LOANS PAYABLE-RELATED PARTY

         XStream Beverage, Inc. ("XBI"), a principal stockholder of the Company
         owned by XStream's Chairman, periodically loans money to XStream. In
         March 2004, the principal shareholder advanced $25,000 to the Company;
         XStream's loans from XBI are non-interest bearing demand notes with no
         specified term. The balance due was $50,455 at March 31, 2007.

         Loans payable at March 31, 2007 were as follows:

         December 2005 - May 2006, 60 day demand notes,
            5% per month                                          $1,425,228
         April 2006, 120 day demand note,
            fixed interest of $25,000                                309,327
                                                                  ----------
           Total Loans Payable                                    $1,734,555
                                                                  ==========

         From December 2005 to March 2006, the Company executed sixty day demand
         notes to investors that resulted in $550,000 of proceeds to the
         Company. The notes contain maturity dates ranging from February 23,
         2006 to May 1, 2006 and contain provisions for fixed interest that
         amounts to $65,000 if repaid according to terms. The notes accrue 5%
         interest per month if in arrears along with a provision whereby the
         note holder is entitled to an interest penalty in the amount of $50,000
         per month if the notes are not repaid by August 31, 2006. Interest
         expense of $331,387 was recognized for the three months ended March 31,
         2007. Additionally, on December 15, 2006, in connection with these
         notes, the Company issued 900,000 shares of its common stock for non
         payment of the principal and accrued interest in August 2006 and
         recognized interest expense of $45,000 during the three months ended
         March 31, 2007. The total balance of the principal notes and accrued
         interest as of March 31, 2007 was $1,425,228.

         In April 2006, the Company executed a $250,000, 120 day demand note,
         fixed interest of $25,000 due August 5, 2006. The note accrues 1.5%
         interest per month after due date. The proceeds to the Company were
         $210,000 after paying a placement fee of $40,000. The Company recorded
         interest expense of $13,512 for the three months ended March 31, 2007.
         The total balance of the principal notes and accrued interest as of
         March 31, 2007 was $309,327.

                                      - 15 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 10 - LAURUS MASTER FUND REVOLVING LINE OF CREDIT

         On March 31, 2006, the Company was issued a $4 million line of credit
         with the Laurus Master Fund. ("Laurus Debt"). The line of credit bears
         interest at the higher of 9% or prime plus 2% and matures in March 2009
         and interest is payable monthly. The balance with accrued interest was
         $1,027,051 as of March 31, 2007.


NOTE 11 - CONVERTIBLE NOTES PAYABLE

         The balance of the convertible term notes, accrued interest and related
         debt discount at March 31, 2007 is as follows:

                   Term note 18% per annum                       $  369,607
                   Term note 12% per annum                        2,994,500
                   Accrued interest                                 899,018
                                                                 ----------
                                                                 $4,263,125

         The Company secured $725,000 from investors resulting from a debt
         placement offering originating in February 2005. The debt instruments
         were convertible term notes at 18% per annum, with maturity dates
         ranging from September 1 to November 15, 2005. As collateral for these
         notes the Company pledged 100,000 shares of common stock and Theodore
         Farnsworth, our CEO, pledged 100,000 shares of common stock personally
         owned by him. Attached to the notes was a provision whereby the
         purchasers were issued common stock warrants, with a five year term and
         exercisable at $1.50, in an amount equivalent to the face value of each
         note. Should the Company default, the exercise price of the warrants is
         automatically reduce by 5% for each 30 day period in which the Company
         remains in default. The notes also contain, at the discretion of the
         holder, a conversion option contingent upon a future secondary offering
         prior to maturity date. The 725,000 warrants issued to these debt
         holders were valued at $635,511 and recorded as a derivative liability
         at the date of their respective issuances. During the three months
         ended March 31, 2007, the Company repaid $200,000 of the principal
         amount of these notes and issued 214,870 shares of common stock for
         payment of principal including interest of $14,007. As of March 31,
         2007, the Company reflected a balance of principal and accrued interest
         of $369,607 and $260,674, respectively.

         In September 2005, we received a notice of default in connection with
         the 18% secured promissory notes issued above by the Company from two
         note holders in the aggregate principal amount of $300,000. These notes
         were due and payable on September 1, 2005. The Company has repaid
         $100,000 of the principal balance, however, the note holders are
         demanding payment of $233,279. In August 2006 the Company received a
         notice of final default judgment from the note holders demanding
         $270,106 of principal and accrued interest. The Company was unable to
         satisfy the entire balance due and the bank account was garnished for
         $98,829 by the note holders; $45,403 was remitted to the note holders
         and while $53,426 was returned to the Company as it was secured through
         a deposit control agreement between Wachovia Bank and Laurus Master
         Fund, LTD, our senior secured lender. The Company has repaid $200,000
         of the principal amount of these notes during the three months ended
         March 31, 2007 with a balance due of $53,924 at March 31, 2007.

                                      - 16 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 11 - CONVERTIBLE NOTES PAYABLE (continued)

         As of November 8, 2005, the Company had completed the sale of
         $3,019,500 units of its securities to 44 institutional and/or
         accredited investors. The units consisted of $100,000 principal amount
         of convertible notes, warrants to purchase 100,000 shares of common
         stock at an exercise price of $0.76 per share with a term of five years
         and 10,000 shares of common stock. The maturity date of the notes range
         from July 6 through November 8, 2006 and bear interest at the rate of
         12% per annum payable at the maturity date or upon conversion of the
         notes if prior to the maturity date. The holders of the notes have the
         option to convert the notes into common shares of the Company at a
         price equal to the public offering price of common shares of the
         Company in any underwritten registered public offering involving common
         stock of the Company less a discount of 20%. If the Company does not
         complete a public offering prior to maturity, the holders may, at their
         option, convert their notes at maturity into common shares at a price
         of $0.76 per share, subject to adjustment in the event of any dilution
         events. In January 2007, the Company issued 390,625 shares of common
         stock for payment of principal including interest of $26,215. The
         issuance of the Laurus Master Fund convertible loan on March 31, 2006
         triggered an adjustment in the conversion price from $0.76 to $0.45 and
         further decrease to $.06 due to the conversion of notes payable in
         January 2007. As of March 31, 2007, the Company reflected a balance of
         principal and accrued interest due amounting to $2,994,500 and
         $638,344, respectively.

         Notice of Default:

         The event of default under the Laurus Secured Convertible Term Note
         (See Note 15 - Long Term Notes Payable), prior to being paid as of
         March 31, 2006, has triggered an event of default under the 12%
         unsecured promissory notes in the aggregate principal amount of
         $2,994,500 which the Company issued to an aggregate of 44 purchasers in
         a private placement of our securities between June and November, 2005.
         At the option of the holders of greater than 50% of the face amount of
         these outstanding notes, the notes will become immediately due and
         payable. The Company does not know at this time what action, if any,
         the note holders may take.

NOTE 12 - CURRENT PORTION, LONG TERM DEBT

         The current portion of long term debt and debt discount as of March 31,
         2007 is as follows:

         Interest bearing demand note 6% per annum, due
            April 2012 (Maui Trademark)                         $  200,481
         Senior secured note ("Laurus")*                         1,364,675
         Debt discount on Senior secured note ("Laurus")*         (110,542)
                                                                ----------
          * (See Note 15 - Long Term Notes Payable)              1,454,614
                                                                ==========

         On June 28, 2006, the Company received a notice of final default
         judgment from the principal owner of the Maui Juice Company for failure
         to pay principal payments under the terms of the Purchase and Sale
         Agreement for the Maui Juice trademark. The amount in arrears is
         approximately $80,000 and the Company's attorney is negotiating with
         the plaintiffs for an alternative payment schedule. The balance due as
         of March 31, 2007 is $200,481.

                                      - 17 -

<PAGE>
                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 12 - CURRENT PORTION, LONG TERM DEBT (continued)

         The Company issued a convertible promissory note for $2,000,000 payable
         in 60 equal monthly payments and bearing 6% interest per annum in
         connection with the acquisition of BNMD in July 2004. In connection
         with the sale of Beverage Network of Maryland to Global in February
         2007, Master Distributors, Inc. received from Global a secured
         convertible promissory note in the amount of $2,000,000 and other
         consideration as a novation for the initial promissory note in the same
         amount issued by the Company on July 1, 2004 as part of the initial
         acquisition by the Company of Beverage Network of Maryland. Global
         assumed the principal balance including interest of $2,088,374 in
         connection with this sale. The Company is in the process of obtaining
         its original promissory note and formal confirmation of the novation of
         that obligation.

         On March 31, 2006, the Company issued a $4 million non convertible
         secured note ("Laurus Debt"). The Laurus Debt bears interest at the
         highest of 9% or prime plus 2% and matures in March 2009. Interest on
         the $4 million secured note is payable monthly. Principal on the $4
         million secured note is payable monthly as follows:$75,000 a month
         between December 2006 and November 2007, $137,500 a month between
         December 2007 and November 2008, $187,500 a month between December 2008
         and March 2009, with the remaining balance due in March 2009.
         Accordingly, the Company recorded $1,364,675 of this secured note as
         current portion as well as the related debt discount of $110,542 (See
         Note 15 - Long Term Notes Payable).

NOTE 13 - DERIVATIVE LIABILITY

         The fair value of the derivative liabilities at March 31, 2007 are as
         follows:

         Embedded conversion features and liquidated damages
         and freestanding warrants issued to investors-
            $3,000,000 convertible note                           $    43,180
         $2,000,000 convertible note                                  269,567
         Series B preferred shares                                  2,335,971
         Convertible notes                                            270,276
         Freestanding warrants issued to placement agents:
         $3,000,000 convertible note                                   20,164
         Series B preferred shares                                     20,770
         Convertible notes                                             36,970
         Other warrants                                                88,568
                                                                  -----------
                                                                  $ 3,085,466
                                                                  ===========

         The Company used the following assumptions to measure the identified
         derivatives as follows:

         Embedded conversion feature and liquidated damages

                                             At March 31, 2007
                                             -----------------
          Market price:                           $0.06
          Conversion price:                       $0.06-1.50
          Term:                                   1.5-3.00 years
          Volatility:                             170%
          Risk-free interest rate:                4.57%
          Maximum liability:
          $2,000,000 convertible note            $4,016,721
          Series B preferred shares               3,955,121
          Convertible notes                       6,299,658
                                      - 18 -
<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 13 - DERIVATIVE LIABILITY (continued)

          Freestanding warrants
                                             At March 31, 2007
                                             -----------------
          Market price:                          $ 0.06
          Exercise price:                        $ 0.20-100
          Term:                                   1.75-3.25 years
          Volatility:                             170%
          Risk-free interest rate:                4.57%
          Outstanding other
          options and warrants                  9,955,423

         The embedded conversion features are as follows:

         Reset Feature Following Subsequent Financing-: 50% for all debt
         financing, which is the effective discount to market value the Company
         would offer in the event we provide for a subsequent private placement
         financing

         Liquidated Damage Clause: 46% and 48.75% for the convertible note and
         the preferred Series B shares, respectively, which is the difference,
         in months between the time the underlying shares are free-trading and
         the grace period to obtain a registration statement, multiplied by the
         liquidated damage rate ranging between 1.25% to 2% per month.

         Prepayment Penalty: 25% for the convertible note, which is the stated
         penalty rate in the event of prepayment.

         Default Premium: 25% and 23% for the convertible notes and the
         Preferred Series B shares, respectively, which is the stated premium in
         event of default.

         Incremental Default Interest Rate: 54% for the convertible notes, which
         is the difference between the default rate and the stated rate,
         multiplied by the term of the loan.

         The variation in fair value of the derivative liabilities between
         measurement dates amounted to an increase of approximately $660,000 and
         $4 million during the three months ended March 31, 2007 and 2006,
         respectively. The increase in fair value of the derivative liabilities
         has been recognized as a component of other expenses.

NOTE 14 - SERIES B CONVERTIBLE PREFERRED STOCK

         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 the debt instrument is convertible or
         redeemable at the discretion of the holder at the end of the 42 month
         term. The Company recognized interest expense of $167,956 from
         amortization of debt discount for the three months ended March 31,
         2007. In January 2007, the Company issued 3.51 shares of preferred
         series B shares which converted to the payment of $175,407 of accrued
         dividends. Additionally, in January 2007, the Company issued 4.32
         shares of preferred series B shares which converted to the payment of
         $215,167 of accrued liquidated damages. The balance of the Series B
         Convertible preferred stock liabilities net of debt discount of $55,851
         was $1,452,149 as of March 31, 2007.

                                      - 19 -

<PAGE>

                          XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 15 - LONG TERM - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE

         The following table reflects the principal amounts plus accrued
         interest and debt discount as of March 31, 2007:

         Senior Secured convertible note ("Laurus")                $ 2,183,000
         Senior secured note ("Laurus")                              3,914,674
         Less: Debt discount Secured convertible note ("Laurus")    (1,333,333)
         Less: Debt discount on senior secured note   ("Laurus")      (110,538)
         Less: Current portion of senior secured note *             (1,364,675)
                                                                   -----------
                                                                   $ 3,289,128
                                                                   ===========
         ---------
         * (see Note 12 - Current Portion of Long Term Debt)

         On March 31, 2006, the Company issued a $4 million secured note, a $2
         million senior secured convertible note and a $4 million line of credit
         ("Laurus Debt"). The Laurus Debt bears interest at the highest of 9% or
         prime plus 2% and matures in March 2009. Interest on the $2 million
         senior secured convertible note is due at maturity, while interest on
         the $4 million secured note and $4 million line of credit is payable
         monthly (See Note 10- Laurus Master Fund revolving Line of Credit). The
         $2 million senior convertible note is convertible at a fixed rate of
         $0.45 per share.

         Principal on the $4 million secured note is payable monthly as follows:
         $75,000 a month between December 2006 and November 2007, $137,500 a
         month between December 2007 and November 2008, $187,500 a month between
         December 2008 and March 2009, with the remaining balance due in March
         2009. In December 2006, the Company paid $75,000 towards the principal
         balance of the $4 million secured note.

         Additionally, if the Company's cash flows from operating activities
         adjusted for the aforementioned principal repayments ("Excess Cash
         flows") exceeds the fixed principal repayments, the Company shall make
         additional principal repayments of 50% of the Excess Cash Flows. In the
         event of default, the Laurus Debt bears additional interest of 2% per
         month, a default payment amounting to 130% of the outstanding principal
         at the time of default.

         The proceeds from the $4 million secured note were disbursed as
         follows:

          1.   $3,486,192 to Laurus in satisfaction of all amounts due and
               payable including principal, interest and penalties, under the
               terms of a secured convertible term note dated May 14, 2006
               issued to Laurus by the Company;
          2.   $254,500 as placement fees and recognized as capitalized funding
               cost;
          3.   $259,308 to the Company for working capital.

         The $2 million note was issued for payment of liquidated damages of
         $1,170,000 and default interest of $332,563. Accordingly, the remaining
         balance was recognized as debt discount in connection with the $2
         million and $4 million secured note which amounted to $165,812 and
         $331,625, respectively, and is being amortized to interest expense over
         the term of the notes.

                                      - 20 -

<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 15 - LONG TERM - NOTES PAYABLE AND CONVERTIBLE NOTES PAYABLE (continued)

         Additionally, the $2 million convertible note was stripped of its
         conversion feature due to the accounting for the conversion feature as
         a derivative, which was recorded using the residual proceeds method.
         The conversion feature (an embedded derivative) included in this note
         resulted in an additional debt discount of $1,834,188 (See Note 13
         -Derivative Liability). In accordance with EITF No. 00-19, EITF No.
         00-27, Application of Issue No. 98-5 to Certain Convertible
         Instruments, the values assigned to both the note, and conversion
         feature were allocated based on their fair values. The amount allocated
         as a discount on the note for the value of the conversion option is
         being amortized to interest expense, using the effective interest
         method, over the term of the note.

         Amortization of debt discount in connection with the $2 million and $4
         million secured note during the three months ended March 31, 2007
         amounted to $166,667 and $27,635, respectively.

         The balance of principal and accrued interest on the $2 million secured
         convertible note was $2,183,000 as of March 31, 2007.

         The balance of principal and accrued interest on the $4 million note
         was $3,914,674 as of March 31, 2007. The Company recorded $1,364,675 of
         this secured note as current portion as well as the related debt
         discount of $110,542 (See Note 12- Current portion of long term debt).

         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 its
         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 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.

                                      - 21 -

<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 16 - COMMITMENTS AND CONTINGENCIES

         LITIGATIONS

         Our subsidiary, Beverage Network of Massachusetts, Inc. was named as a
         party in a legal proceeding filed by Kraft Foods, Inc. in the Superior
         Court of the County of Middlesex, Commonwealth of Massachusetts with
         respect to Civil Docket Number MICV2005-02503. For financial reasons
         the Company was unable to contest the plaintiff's claims and on August
         26, 2005 a default order was entered in favor of Kraft Foods, Inc.
         against Beverage Network of Massachusetts, Inc. On October 4, 2005
         Beverage Network of Massachusetts, Inc. was served with an execution
         order in the amount of $91,902, which includes costs. The Company
         agreed the terms of a payment plan with the plaintiff's attorney to
         remit monthly payments of $14,172 until the entire balance is paid. The
         remaining balance due was $20,905 as of March 31, 2007.

         On September 12, 2005 the Company received a notice of default under
         the terms of two secured promissory notes issued by us to investors in
         the aggregate principal amount of $300,000. The notes were due and
         payable on September 1, 2005. As collateral for these notes the Company
         pledged 100,000 shares of restricted common stock and Theodore
         Farnsworth, our CEO, pledged 100,000 shares of common stock personally
         held by him. The note holders are demanding payment of $328,814. As we
         have been unable to pay these amounts, the note holders are entitled to
         foreclose on the collateral at any time. On March 16, 2006, an
         agreement was made with the two note holders whereby the Company would
         redeem the notes and make all payments due to the note holders, on or
         before March 31, 2006. As consideration, the Company granted each note
         holder 750,000 shares restricted common stock along with 500,000 shares
         of restricted common stock to each note holder which would be subject
         to release from escrow on March 31, 2006 should the notes not be
         redeemed by that date. The Company failed to redeem the notes and
         consequently, the shares in escrow have been released by the escrow
         agent to the note holders. On July 10, 2006 the Company received a
         notice of final judgment by default from the note holders in the amount
         of $270,106. The Company was unable to satisfy the entire balance due
         and the bank account was garnished for $98,829 by the note holders;
         $45,403 was remitted to the note holders and while $53,426 was returned
         to the Company as it was secured through a deposit control agreement
         between Wachovia Bank and Laurus Master Fund, LTD, our senior secured
         lender. The remaining balance due to these note holders was $243,691 as
         of March 31, 2007. The default under these notes created another event
         of default under the unsecured convertible term notes in the principal
         amount of $3,019,500.

         On September 29, 2005 the Company received a notice of default from
         Morris Stodard and Master Distributors, Inc. under the terms of an
         unsecured promissory note issued in connection with our purchase of
         Master Distributors, Inc., as well as under an employment agreement
         with Mr. Stodard. The note holder is demanding payment of $517,735, the
         amount of outstanding principal and interest due under the note and the
         employment agreement. Progress payments are being made as funds become
         available. The default under this note has created another event of
         default under the unsecured convertible

                                      - 22 -

<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued)

         LITIGATIONS (continued)

         term notes in the principal amount of $3,019,500. The note to Mr.
         Stodard and Master Distributors was assumed by Global Beverage
         Solutions in the February 23, 2007 sale of Beverage Network of
         Maryland, Inc.

         In October 2005, American Beverage, Inc. filed a demand against
         Beverage Network of Connecticut and Beverage Network of Massachusetts
         in the amount of $69,452. We obtained an agreement for a settlement
         plan with their attorneys but have not been able to abide by the terms
         due to insufficient operating capital during fiscal 2006 and 2005. We
         do not know what action, if any, the vendor will take at this time.

         In October 2005, Good-O Beverages was awarded a judgment on the amount
         of $28,500 against Beverage Network of Connecticut for product ordered
         by the Company in fiscal 2004. We have made regular payments in
         settlement of this amount and there is a balance of $1,904 as of March
         31, 2007.

         On November 16, 2005 Beverage Network of Connecticut received a demand
         letter from the attorneys representing Food Collage, Inc. for payment
         of $17,068 on products ordered by the Company in 2004. Although we
         agreed on a settlement with their attorneys, we have not been able to
         abide by a payment arrangement due to insufficient operating capital
         during fiscal 2006 and 2005. We do not know what action, if any, the
         vendor will take at this time.

         On December 5, 2005 Hobarama, Inc. obtained a judgment in the amount of
         $16,740 against Beverage Network of Connecticut. Although we agreed on
         a settlement with their attorneys, we have not been able to abide by a
         payment arrangement due to insufficient operating capital during fiscal
         2006 and 2005. We do not know what action, if any, the vendor will take
         at this time.

         On January 15, 2006 Export Development Canada obtained a judgment
         against Total Beverage Network, Inc.,("BNSF") in the amount of $22,357.
         We have not yet reached an agreement with the plaintiff and we do not
         know what action, if any, the vendor will take at this time.

         On January 25, 2006, the Company received a Civil Action Summons from
         the attorney for the Maui Juice Company and Lawrence Lassek for breach
         of contract, for failure to pay certain installment payments under the
         terms of the Purchase and Sale Agreement with Maui Juice Company in the
         amount of $55,000. Although we agreed on a settlement with Mr. Lassek's
         attorneys, we have not been able to abide by a payment arrangement due
         to insufficient operating capital during fiscal 2006 and 2005. We do
         not know what action, if any, Mr. Lassek will take at this time.

         In February, 2006 the Company received a demand letter from Ayer
         Beverage, Inc. in the amount of $72,934 for payments due under the
         Purchase and Sale Agreement between Ayer Beverage and Beverage Network
         of Massachusetts. Under the same agreement, the Company is also
         required to make payments under obligations that was assumed for $7,889
         plus costs and interest to Citizen's Bank and $30,000 to Mr. Tom
         MacIntire. We have reached agreement with Mr. Lehan and Ayer Beverage,
         Inc. to pay the obligations due to Mr. MacIntire. The Citizen's Bank
         obligation was satisfied in April 2006; the balance due to Mr.
         MacIntire is $12,600 as of March 31, 2007. Although we agreed to pay
         Ayer Beverage, Inc. $36,467 followed by three monthly payments

                                      - 23 -

<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 16 - COMMITMENTS AND CONTINGENCIES (continued)

         LITIGATIONS (continued)
         -----------------------

         thereafter of $9,467, we have not been able to abide by the terms of
         this agreement due to insufficient operating capital during 2006. We do
         not know what action, if any, the Mr. Lehan will take at this time.

         In February 2006, Total Beverage Network ("BNSF") received a demand
         from Le Natures, Inc in the amount of $17,057 for product that was
         ordered in 2004 but not paid in full. We have not yet reached an
         agreement with the plaintiff and we do not know what action, if any,
         the vendor will take at this time.

         In March of 2004, the Company contracted with Florida Employer
         Solutions, Inc. "FES" to process the Company payroll and certain other
         employee benefits such as health insurance. The collection and payment
         of payroll taxes was an integral part of this service. In June 2005,
         the Company was informed by the Internal Revenue Service and other
         state tax agencies that payroll tax payments had not been remitted on
         our behalf. The Company had remitted all required taxes to "FES" for
         payment of payroll taxes. The principals of "FES" admitted to the
         Company and to the IRS that they had not made the mandatory payments
         when due. The IRS has agreed to waive certain penalties upon receiving
         the principal balance due. In September 2005 the Company filed a
         complaint in the 17th Judicial Circuit in and for Broward County,
         Florida against "FES" along with Luis Ferrer and Maria G. Legarda,
         officers of "FES". The complaint alleges breach of contract, fraud,
         conversion, violation of the Florida Unfair and Deceptive Trade
         Practices Act and unjust enrichment and seeks judgment against "FES"
         for all damages, interests and costs. In September 2006 mediation
         hearing, the Company was awarded a judgment in the amount of $679,466
         against "FES". This represented the amount of principal tax along with
         damages in the form of estimated penalties, interest and legal
         expenses. The IRS negotiated a voluntary payment arrangement whereby
         Xstream Beverage Network, Inc. ("XBNI") would remit payments of $20,000
         per month until the entire balance is paid. The balance due as of March
         31, 2007 is $330,515 whereby $8,870 of this amount is related to
         continuing operations and the remaining amount of $321,645 is related
         to discontinued operations which was included in liabilities of
         discontinued operations in the accompanying consolidated balance sheet.

         Our subsidiary, Beverage Network of Massachusetts, Inc. was named as a
         party in a legal proceeding filed by Fuze Beverage, LLC in the Superior
         Court for the County of Middlesex, Commonwealth of Massachusetts with
         respect to Civil Docket Number MICV2005-01392. For financial reasons
         the Company was unable to contest the plaintiff's claims and on May 27,
         2005 a default order was entered in favor of Fuze Beverage, LLC against
         Beverage Network of Massachusetts, Inc. The court has entered a
         judgment in the amount of $36,873 and was included in liabilities of
         discontinued operations in the accompanying consolidated balance sheet.

                                      - 24 -

<PAGE>
                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 17 - STOCKHOLDERS' DEFICIENCY

         PREFERRED STOCK
         ---------------

         In January 2007, the Company issued 3.51 shares of preferred series B
         shares which converted to the payment of $175,407 of accrued dividends.
         Additionally, in January 2007, the Company issued 4.32 shares of
         preferred series B shares which converted to the payment of $215,167 of
         accrued liquidated damages. The balance of the Series B Convertible
         preferred stock liabilities net of debt discount of $55,851 was
         $1,452,149 as of March 31, 2007.

         COMMON STOCK
         ------------

         During the three months ended March 31, 2007, the Company issued a
         total of 4,007,745 shares of restricted common stock. Shares issued for
         services, compensation and loan fees are valued at the closing price of
         the stock on the grant date and recognized over the term of the
         corresponding contract and/or agreements; shares issued from the
         conversion of notes payable including accrued interest are valued at
         the converted amount of liability.

         The table below represents the activity of shares issued as of March
         31, 2007:
<TABLE>
<CAPTION>
                                                                       Aggregate      Deferred       Expense
                 Consideration        No. Shares      Price Range        Value        Balance      Recognized
           ------------------------    ----------     -------------    -----------   -----------   -----------
           <S>                         <C>           <C>              <C>            <C>           <C>
           Services                    2,502,250     $0.06 - $0.10    $   250,136    $       -0-   $   260,136

           Loan Fees                     900,000      0.05                 45,000            -0-        45,000

           Conversion of notes payable
            and accrued interest         605,495      0.06                 40,221            -0-           -0-
                                      ----------     -------------    -----------     -----------   -----------
           TOTAL:                      4,007,745      N/A             $   335,357    $       -0-   $    295,135
                                      ----------     -------------    -----------     -----------   -----------
</TABLE>
         STOCK WARRANTS
         --------------

         A summary of the options and warrants issued as of March 31, 2007 is
         presented below:
                                                                Weighted
                                                                Average
                                                  Number of     Exercise
                                                  Warrants      Price
                                                  ---------     -------
             Balance at beginning of year         9,955,423     $  0.98
             Granted                                     --          --
             Exercised                                   --          --
             Forfeited                                   --          --
                                                  ---------     -------
             Balance at March 31, 2007            9,955,423     $  0.66
                                                  =========     =======
             Warrants exercisable at
               March 31, 2007                     9,955,423     $  0.66
                                                  ---------     -------
             Weighted average fair value of
                options granted during the year                  $   --
                                                                =======
                                      - 25 -
<PAGE>


                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 17 - STOCKHOLDERS' DEFICIENCY  (continued)

         STOCK WARRANTS (continued)
         --------------------------

         The following table summarizes information about stock warrants
         outstanding at March 31, 2007:

                   Warrants Outstanding and exercisable
           ---------------------------------------------------------------------
                                                      Weighted         Weighted
            Range of               Number              Average          Average
            Exercise            Outstanding and       Remaining        Exercise
             Price              exercisable          Contractual         Price
           -----------         -----------------    -----------       --------

           $6.40 - 100.00           240,000         6.65 Years        $  12.25
            3.00 -   6.39           147,500         7.31 Years            3.34
             .76 -   2.99         1,599,000         4.75 Years            1.68
                     0.20             9,464         2.00 Years            0.20
                     0.06         7,959,459         2.83 Years            0.06
                                  ---------                           --------
                                  9,955,423                           $   0.66
                                  =========                           ========

NOTE 18 - SUBSCRIPTION RECEIVABLE

         The Company has entered into a series of related agreements with a
         placement agent and certain investors pursuant to which the Company has
         issued 19,736,848 common shares at a purchase price of $0.76 per share.
         The fair value of such shares at the date of issuance amounted to
         $15,000,000. The price per common share was based on a discount of 20%
         from the closing price of the common stock in June 2005. In connection
         with the issuance of shares, the investors deposited $15,000,000 in US
         government bonds, which are held by the placement agent for the
         potential future benefit of the Company.

         In conjunction with this investment, the Company and the placement
         agent entered into an escrow agreement with the investors as well as
         Cogent pursuant to which the 15,789,472 shares, as well as the bonds,
         were deposited with the designated escrow agent.

         In addition, the Company and the placement agent entered into the
         following agreements:

         1.   2002 Master Agreement conforming to the form of the International
              Swaps and Derivatives Association, Inc.;

         2.   Credit Support Annex to the Master Agreement consistent with the
              ISDA form;

         3.   Equity swap transaction letter of agreement; and

         4.   Equity option transaction letter of agreement.

         Under the terms of the equity swap, the 15,789,472 common shares and
         the bonds are maintained in escrow until the earlier of 42 months from
         June 2005 or such time as all of these shares are covered by an
         effective registration statement filed with the SEC. The Company,
         however, is not obligated to register the common shares.

                                      - 26 -

<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 18 - SUBSCRIPTION RECEIVABLE (continued)

         Pursuant to the series of arrangements with the placement agent, the
         consideration that the Company will receive in connection with the
         issuance of the shares to the investors will vary based on the
         Company's stock price at predetermined periods ("Subscription
         Receivable"). In addition, the Company unilaterally can terminate the
         agreement by exercising the call option for the common shares in
         escrow. The Company does not intend to exercise its call option.

         The Subscription Receivable is computed as follows: at the earliest of
         the Company's completion of a registration statement covering the
         19,736,848 common shares of the Company or the common shares have
         satisfied the holding period under Rule 144-K at June 10, 2007, the
         Company will be entitled to receive a quarterly amount equal to
         2,631,578 shares times the Company's price per share of common stock
         for the last ten days of the preceding quarter. At that time, the
         shares and the corresponding value of the funds are released from
         escrow to the appropriate party.

         As additional consideration, the Company has agreed to compensate the
         private placement agent with a monthly payment amounting to LIBOR +
         1.25% times $15,000,000, less the interest earned on the US Government
         bonds. This amount is payable until the funds and the shares are
         released from escrow. The Company estimates the aggregate payments
         under this arrangement to amount to $1,178,250 over the terms of the
         agreement. The Company has recorded a corresponding amount as accrual
         for placement agent fees at the date of issuance of shares, which was
         offset against additional paid-in capital. The balance of accrued
         expenses related to this transaction was $1,150,470 as of March 31,
         2007.

         The Company adjusts quarterly the amount of the Subscription Receivable
         to reflect the variations in its stock price. Additionally, the Company
         discounts the Subscription Receivable to reflect the time value of
         money until it is entitled to receive the Subscription Receivable.

         At the date of issuance of the shares, the Company recorded a
         Subscription Receivable of $12,718,150, adjusted for a discount of
         $1,082,211. The Company used a discount rate of 3.66% at the date of
         issuance and a stock price of $0.92. At March 31, 2007, the
         Subscription Receivable amounted to $790,226. The Subscription
         Receivable at March 31, 2007 is based on a discount rate of 4.90% and a
         stock price of $0.05. The decrease in subscription receivable for the
         three months ended March 31, 2007 amounted to $863,909 and is reflected
         as a realized loss in the accompanying consolidated statements of
         operations.

                                      - 27 -


<PAGE>

                      XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 19 - DISCONTINUED OPERATIONS

         As described in Note 1, on December 15, 2006, the Company decided to
         discontinue the operations of BNMD, BNHI, BNSF, BNMA, and BNCT. These
         subsidiaries are reported as a discontinued operation and prior periods
         have been restated in the Company's financial statements and related
         footnotes to conform to this presentation.

         On December 15, 2006, the Company signed a Letter of Intent to sell its
         distribution subsidiary, Beverage Network of Maryland, Inc. ("BNMD"),
         to Global Beverage Solutions, Inc. ("Global Beverage"). The Company and
         Global Beverage signed an Agreement and Plan of Merger ("Merger
         Agreement") dated January 31, 2007, as amended on February 23, 2007,
         whereby the Company will sell its distribution subsidiary, Beverage
         Network of Maryland, Inc. ("BNMD"), to Global Beverage. The Company
         closed on this transaction on February 23, 2007.

         The Company received 60,500,000 in Global Beverage common stock based
         on the agreement and calculated at $.24 per share taking into account
         the 25% discount for restrictions relating to restricted stocks on
         February 23, 2007 (closing date) or $14,520,000. In addition, Global
         Beverage issued a $2 million note payable to the Company (See Note 6 -
         Note receivable). Global Beverage assumed the principal balance
         including interest of a note payable to Masters Distributors, Inc.
         amounting to $2,088,374 (See Note 12 - Current portion of long term
         debt). Accordingly, in connection with the sale of BNMD, for the three
         months ended March 31, 2007, the Company recorded a gain from disposal
         of discontinued operations of $16,844,821.

         The remaining assets and liabilities of discontinued operations are
         presented in the balance sheet under the caption "Assets of
         discontinued operation" and "Liabilities of discontinued operation".
         The carrying amounts of the major classes of these liabilities as of
         March 31, 2007 are summarized as follows:

         Assets:
         -------

         Cash                                                 $     2,475
         Accounts receivable                                          398
         Other receivable                                             511
                                                              -----------
         Assets of discontinued operation                     $     3,384
                                                              ===========

         Liabilities:

         Notes payable (1)                                    $    86,524
         Accounts payable and accrued expenses                  1,218,093
                                                              -----------
         Liabilities of discontinued operation                $ 1,304,617
                                                              ===========

         ------------
         (1)  Resulted from the acquisition of Beverage Network of Massachusetts
             Inc. ("BNMA")

                                      - 28 -

<PAGE>

                  XSTREAM BEVERAGE NETWORK INC.
                                AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                 March 31, 2007


NOTE 19 - DISCONTINUED OPERATIONS (continued)

         The following table sets forth for the three months ended March 31,
         2007 indicated selected financial data of the Company's discontinued
         operations.


           Revenues                                          $  1,303,314
           Cost of sales                                        1,145,180
                                                             ------------
           Gross profit                                           158,134
           Operating and other non-operating expenses            (268,838)
                                                             ------------

           Loss from discontinued operations                     (110,704)

           Gain from disposal of discontinued operations       16,844,821
                                                             ------------

           Total gain from discontinued operations           $ 16,734,117
                                                             ============


NOTE 22 - SUBSEQUENT EVENTS


         On May 4, 2007, the Company issued 900,000 shares of common stock for
         failure to pay the balance of the principal and accrued interest to a
         certain note holder after its maturity date. The Company valued these
         common shares at the fair market value on the date of grant at $.03 per
         share or $27,000. In connection with the issuance of these shares, the
         Company recorded an interest expense of $27,000.

         On May 4, 2007, the Company issued 500,000 shares of common stock for a
         three months consulting agreement. The Company valued these common
         shares at the fair market value on the date of grant at $.03 per share
         or $15,000. In connection with the issuance of these shares, the
         Company recorded deferred consulting fees of $15,000 for investor
         relations services to be amortized over the service period.



                                     - 29 -


<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 Interim Report.

OVERVIEW

         We develop, market, and sell new age beverage category natural sodas,
fruit juices and energy drinks. Following our acquisition in April 2003 of Total
Beverage Network, our focus was to build a network of small to medium sized
beverage distribution businesses in the Eastern United States, with the goal of
becoming a leading distributor of beverage products through multiple
distribution channels. Between April 2003 and July 2004, we acquired additional
beverage distribution companies together with a natural juice company and
certain intellectual property rights related to other beverage names.

         Our business strategy was predicated upon our ability to raise
sufficient working capital and acquisition funds concurrently with the expansion
of our business. While we raised capital from time to time, much of the capital
was in the form of debt and the amount of funding we received was not sufficient
for our working capital needs. During fiscal 2006, we were unable to meet our
funding requirements. As a result, we were unable to execute our acquisition
plan successfully, nor did we have sufficient capital to fund our ongoing
operations and satisfy our debt obligations. During fiscal our distribution
operations in New England, Hawaii, Connecticut, and South Florida were non
operational and in December 2006 we determined to discontinue their operations.
In February 2007 we sold our Beverage Network of Maryland ("BNMD") subsidiary
which historically represented a significant portion of our revenues. The effect
of the sale of this subsidiary on our financial statements for the three months
ended March 31, 2007 is described later in this section.

         As a result of the foregoing, we have adopted the sole business
strategy to remain as developers and marketers of new age beverage category
natural sodas, fruit juices and energy drinks. We will seek distribution of our
proprietary brands to our target markets, through independent distributors and
gain access to retail chains through direct negotiation for sales of our
products with each chain at a national or semi-national level.

         We are in default under various loan covenants and agreements which
could be accelerated by the parties involved as described in notes to our
consolidated financial statements (unaudited) appearing elsewhere in this
report. We do not currently have sufficient assets or resources to satisfy these
obligations at the present time and do not have immediate prospects of obtaining
such financing at this juncture. Laurus Master Fund has a security interest in
substantially all of our assets, and it is unlikely that any of the other
parties who have obligations owing to them by us would be in a position to
receive any recovery in the event that Laurus Master Fund were to exercise
dominion over our assets should it seek to exercise its remedies on the default.
We are in discussions with all of the affected parties, and while we believe we
have a reasonable relationship with all of these parties, there can be no
assurances that any of these parties might proceed to undertake legal action
against our Company or pursue other measures to enforce any remedies to which
they would be entitled.

SALE OF SUBSIDIARY AND DISCONTINUED OPERATIONS

         On December 15, 2006, we decided to discontinue the operations of our
subsidiaries Beverage Network of South Florida ("BNSF"), Beverage Network of
Connecticut ("BNCT"), Beverage Network of Hawaii ("BNHI"), and Beverage Network
of Massachusetts ("BNMA") because of the disappointing performance of the
subsidiaries including continuing operating losses and our inability to raise
sufficient working capital to fund their operations.


                                     - 30 -

<PAGE>

         On February 23, 2007, we sold our BNMD subsidiary to Global Beverage
Solutions, Inc. As consideration, we received 60,500,000 shares of Global
Beverage's common stock valued at $14,520,000 and a $2 million principal amount
secured promissory note maturing on March 31, 2011. The note, as amended, bears
interest at 6% per annum and is collateralized by a blanket security interest in
Global Beverage's assets under the terms of a Master Security Agreement,
guaranteed by the BNMD subsidiary (after consummation of the merger) and a
pledge to us of the stock of Global Merger Corp., the Global Beverage subsidiary
which was merged into BNMD at closing, and the stock of BNMD, both pursuant to a
Stock Pledge Agreement. The payment terms of the note, as amended, provide:


         o        we received $229,000 at the closing of the transaction as a
                  reduction in principal;

         o        we were entitled to receive 40% of any cash proceeds received
                  by Global Beverage from an offering it conducted which
                  resulted in an additional $463,796 principal reduction;

         o        we are to receive a minimum of $25,000 per month against the
                  outstanding principal and interest due under the note,
                  commencing September 1, 2007; and

         o        if Global Beverage raises any additional equity capital we are
                  entitled to receive payments towards the note in an amount
                  equal to 35% of the net proceeds received by Global Beverage
                  in such equity raise.

         During the three months ended March 31, 2007 we received $757,820 in
proceeds as payment under this note.

         The note also includes a provision whereby Global Beverage may prepay
the note in whole, or in part at any time, with accrued interest to the date of
prepayment. In the event of default (as defined in the note), the interest rate
increases to 10%.

         Global Beverage has agreed to file a registration statement with the
Securities and Exchange Commission to register for resale the 60,500,000 shares
of its common stock issued to us as partial consideration, which represented
approximately 49% of its outstanding common stock at the closing of the
transaction.

         In connection with the sale of BNMD to Global Beverage, Global Beverage
assumed the outstanding balance of $2,088,374 due Master Distributors, Inc., the
company from whom we purchased the assets which comprised BNMD, under a note we
issued in July 2004 as part of our initial acquisition of the asset of Master
Distributors.

         Under the terms of our loan agreements with Laurus Master Fund, Ltd.,
we have granted Laurus Master Fund a blanket security interest in all of our
assets and pledge the stock of our subsidiary corporations as collateral. The
stock and assets of our BNMD subsidiary remain subject to these terms. We have
orally advised Laurus Master Fund of the closing of the sale of BNMD to Global
Beverage and we will seek to cause Laurus Master Fund to execute such releases
as are necessary so that the asset and stock of BNMD is released from the
collateral position to the benefit of Laurus Master Fund. We are currently
engaged in dialogue with the Laurus Master Fund to obtain their formal
acceptance and release for the sale of BNMD while simultaneously restructuring
our debt obligations to them. We anticipate this to be completed as of June 30,
2007.

         Accordingly, BNMD, BNSF, BNCT, BNHI, and BNMA are reported as
discontinued operations, and prior periods have been restated in our financial
statements and related footnotes to conform to this presentation. In connection
with the sale of BNMD, we recorded a gain form disposal of discontinued
operations of $16,844,821 during the three months ended March 31, 2007.

                                     - 31 -

<PAGE>

         So long as we hold shares of Global Beverage under generally accepted
accounting principles we are required to "mark to market" the carrying value of
these securities on a quarterly basis. At the time of issuance, we recorded the
cost of the investment at $14,520,000 representing the market value of the
shares less a 25% discount for restrictions relating to restricted stocks. We
revalued the securities using the bid and ask prices of Global Beverage's common
stock as quoted on the OTC Bulletin Board at March 31, 2007 taking into account
the 25% discount for restrictions relating to restricted stocks which resulted
in a $2,155,313 decrease in the fair value which has been recorded as other
comprehensive loss in stockholders' deficiency.

Special considerations regarding the Investment Company Act of 1940

         U.S. companies that have more than 100 shareholders or are publicly
traded in the U.S. and are, or hold themselves out as being, engaged primarily
in the business of investing, reinvesting or trading in securities are subject
to regulation under the Investment Company Act of 1940. While we do not believe
our company is an "investment company" within the scope of the Investment
Company Act of 1940, by virtue of the percentage of the value of Global Business
Solutions' securities that we hold to our total assets, under certain
circumstances we could be subject to the provisions of the Investment Company
Act of 1940.

         Because Investment Company Act regulation is, for the most part,
inconsistent with our core business of marketing and selling proprietary brands
of new age beverages, we cannot feasibly operate our business as a registered
investment company. Our board of directors has adopted a resolution stating that
it is not our intent to become subject to the Investment Company Act of 1940 and
authorizing our officers to take such actions as are necessary, including the
periodic liquidation of any marketable equity securities we may own to reduce
those holdings below the threshold level as prescribed by the Investment Company
Act of 1940. Notwithstanding that we have been grated registration rights over
these securities, there are no assurances we will be able to timely liquidate a
sufficient number of these shares to reduce our holdings to a level below the
necessary threshold. If we are deemed to be, and are required to register as, an
investment company, we will be forced to comply with substantive requirements
under the Investment Company Act of 1940, including:

         o        limitations on our ability to borrow;

         o        limitations on our capital structure;

         o        restrictions on acquisitions of interests in associated
                  companies;

         o        prohibitions on transactions with affiliates;

         o        restrictions on specific investments; and

         o        compliance with reporting, record keeping, voting, proxy
                  disclosure and other rules and regulations.

         Given the significant number of shares that we own, it is likely that
our future sales of the Global Beverage securities will create downward pressure
on the trading price for that stock. We are unable at this time to predict the
amount of proceeds we will inevitably receive from the sale of these shares.


                                     - 32 -

<PAGE>

Results of Operations

Three Months Ended March 31, 2007 as compared to the three months ended March
31, 2006

<TABLE>
<CAPTION>
                                                               Increase        Increase
                            (Unaudited)      (Unaudited)      (Decrease)      (Decrease)
                               2007             2006              $               %
                           ------------     ------------     ------------    -----------
<S>                        <C>              <C>              <C>                    <C>
Sales                      $      2,948     $    234,234     $  (231,286)          -99%
Cost of Goods Sold               15,195          162,846        (147,651)          -91%
                           ------------     ------------
Gross Profit                    (12,247)          71,388         (83,635)         -117%

Expenses
Selling, General &
 Administrative                 793,452          861,034         (67,582)         -8%
                           ------------     ------------
Total Operating Expenses        793,452          861,034         (67,582)         -8%

Loss from continuing
 operations                    (805,699)        (789,646)         (16,053)         2%

Other Income/(Expense):
Interest Income                   9,490               --            9,490          NM
Interest Expense             (1,366,150)      (4,868,995)       3,502,845         -72%
Derivative Liability
 Expense                             --         (765,528)         765,528        -100%
Change in Fair Value of
 Derivative                    (659,188)      (4,029,608)       3,370,420         -84%
Other Expense                        --         (860,839)         860,839        -100%
Realized loss-transfer         (863,909)              --         (863,909)         NM
                           ------------    -------------
Total Other Income/
 (Expense)                   (2,879,757)     (10,524,970)       7,645,213          -73%
                           ------------    -------------
Income(Loss) from
 continuing operations       (3,685,456)     (11,314,616)       7,629,160          -67%
                           ------------    -------------
Total Gain(Loss) from
  discontinued operations    16,734,117         (218,462)      16,515,655         -7560%
                           ------------    -------------

Net Income (Loss)          $ 13,048,661    $ (11,533,078)     $24,581,739          -213%
                           ============    =============
NM: Not Meaningful

</TABLE>

Net Sales

         Our net sales for the three months ended March 31, 2007 were $2,948 as
compared to net sales of $234,234 for the three months ended March 31, 2006, a
decrease of $231,286 or approximately 99%. During the three months ended March
31, 2007, we spent a substantial amount of time coordinating and facilitating
the sale of our BNMD subsidiary to Global Beverage as described above which
diverted management's attention from our core business. Additionally, the
decline in sales was due do to a change in product mix between third party and
proprietary brands following the discontinuing of our distribution operations
as described above. During the three months ended March 31, 2007, distribution
of third party brands represented approximately 77% of our sales and sales of
our proprietary products represented approximately 23% of our sales. For the
three months ended March 31, 2006 sales of third party brands and sales of our
proprietary products represented approximately 86% and approximately 14%,
respectively, of our sales. While we continue to implement our strategy of
developing and growing corporate owned brands, given our lack of working capital
and other contingencies facing our company we cannot assure that we will ever be
able to successfully implement our current business strategy or increase our
revenues in future periods.


                                     - 33 -


<PAGE>

Cost of Goods Sold

         Our cost of goods sold includes the cost of buying third-party beverage
products as well the manufacturing costs of our proprietary brands and along
with warehouse and distribution costs for all products sold. The cost of goods
sold as a percentage of net sales was approximately 515% and 70%, respectively,
for the three months ended March 31, 2007 and 2006. Our cost of sales as a
percentage of net sales increased due to a decreased in net sales during the
three months ended March 31, 2007 while we still continuously incur warehouse
related expenses. These warehouse related expenses should decrease for the
remainder of fiscal 2007. We anticipate that our cost of goods sold should
decrease and related gross profit margins to increase, if ever, we are
successful in increasing sales of our proprietary products, which carry higher
gross profit margins.

Sales, General, and Administrative Expenses

         Sales, general, and administrative expenses are comprised primarily of
consulting fees, salaries and benefits of our sales and administrative staff,
marketing programs and related sales expenses. The decrease in selling, general
and administrative expenses during the three months ended March 31, 2007 when
compared to the same period during 2006, is primarily attributable to:

          * an increase of approximately $13,000 in marketing and selling
expenses of our parent company. The increase during the three months ended March
31, 2007 was primarily due to an increase in brand development and promotional
expenses as compared to the same period during 2006. These expenses include
promotional spending at point of sale along with salaries and commissions of
sales personnel. We anticipate that our marketing expenses will continue to
decrease for the remainder year fiscal 2007, subject to our ability to generate
working capital.

         * a decrease of approximately $79,000 in compensation during the three
months ended March 31, 2007 as compared to the same period during 2006. The
number of employees was reduced during 2007 due to insufficient working capital
and in our efforts to maximize the utilization of financial resources. The
decreases were in both our parent company and subsidiaries that are reported in
discontinued operations. We anticipate that the compensation expense will
decrease for the remainder year fiscal 2007.

          * an increase of approximately $4,000 or approximately 68%, in rent
expenses which reflects the costs associated with a lease for our principal
executive offices we entered into in February 2006.

         * a decrease of approximately $39,000, or 8%, for consulting, financial
advisory and public relations firms. The decrease in such expenses is primarily
due to the decline in executed agreements utilizing stock based compensation as
compared to the same period in 2006. We anticipate that consulting fees will
remain relatively constant for the remainder year fiscal 2007.

         * an increase of approximately $51,000, or 61%, in professional fees.
This item represents both accounting and legal fees and was attributable to
legal fees associated with the Global Beverage Transaction. We project that
professional fees will remain at such levels for the remainder year fiscal 2007,
unless we engage in capital funding and incur fees attributable to these
efforts.

           * a decrease of approximately $7,000 in general overhead due to
eliminating expenses as a result of insufficient working capital primarily in
office support and administrative expenses.


                                     - 34 -


<PAGE>
Other income/expenses

Interest Expense

         Interest expense consists primarily of amortization of debt discount
resulting from the issuance of both common stock and common stock purchase
warrants as provisions contained within various debt instruments issued by us.
The decrease is primarily attributable to a decrease in issuance of shares of
common stock for payment deferral and non payment of the principal and accrued
interest of notes payable after its maturity date. We only issued 900,000 shares
of common stock during the three months ended March 31, 2007 as compared to
3,532,500 shares of common stock for the comparable period in 2006. We
anticipate that our interest expense may increase significantly during the
remainder year fiscal 2007 as the Company refinanced its outstanding $3 million
senior secured convertible note with the Laurus Master Fund on March 31, 2006.
The Company refinancing transaction resulted in the issuance of a $4 million
revolving line of credit, a secured convertible promissory note for $2 million,
and a $4 million secured non-convertible note. The notes mature March 31, 2009,
bear interest subject to the current prime rate, and never less than nine
percent per annum. Although the $2 million note to Master Distributors was
assumed by Global Beverage Solutions, we anticipate interest expense to remain
at current levels for the remainder of fiscal 2007.

Derivative Liability Expense

         The decrease in derivative liability expenses was attributable to a
decrease of approximately $765,000 for original issuance of derivative
liabilities associated with convertible notes payable during the three months
ended March 31, 2006 for which we did not have a comparable transaction during
the three months ended March 31, 2007.

Change in Fair Value of Derivatives

         The decrease in the fair value of derivative liabilities during the
three months ended March 31, 2007 when compared to the comparable period in 2006
is attributable to a decrease in value of derivatives liabilities between
measurement dates.

Other Expense

         The decrease in other expenses was primarily attributable to one-time
expenses of approximately $168,000 for costs associated with potential
acquisitions and a default premium paid to Laurus Master Fund for the repayment
of the senior secured convertible loan on March 31, 2006 in the amount of
approximately $692,000 during three months ended March 31, 2006 for which there
were no comparable expenses during the fiscal 2007 period.

Realized Loss on Subscription Receivable

         The realized loss on subscription receivable consists of losses on our
investment from Cogent Capital for approximately $864,000 during the three
months ended March 31, 2007 which resulted from a decline in value of our stock
during the period.

Income (loss) from continuing operations

         We reported a loss before discontinued operations of $3,685,456 for the
three months ended March 31, 2007 as compared to a loss before discontinued
operations of $11,314,616 for the three months ended March 31, 2006.

Total Gain (Loss) from discontinued operations

         For the three months ended March 31, 2007, we recorded a total gain
from discontinued operations of $16,734,117 associated with the discontinuation
of our subsidiaries, BNMD, BNHI, BNSF, BNMA, and BNCT and the disposal of our
subsidiary, BNMD in February 2007 as compared to a total loss from discontinued
operations of $218,462 for the three months ended March 31, 2006. The increase
is primarily attributable to the disposal of our subsidiary, BNMD in February
2007. A further discussion of the effects of these discontinued operations is
included in Note 19 of the notes to consolidated financial statements
(unaudited) appearing elsewhere in this report.

                                     - 35 -
<PAGE>
Net Income (Loss)

         We reported a net income of $13,048,661 for the three months ended
March 31, 2007 as compared to a net loss of $11,533,078 for the three months
ended March 31, 2006.

Unrealized Loss - restricted investment

         We reported an unrealized loss of $2,155,313 which was attributable to
the sale of our wholly owned subsidiary, Beverage Network of Maryland, Inc., to
Global Beverage. As part of the transaction, we received 60,500,000 shares in
Global Beverage common stock. We have adopted FASB issued Statement of Financial
Accounting Standards No. 157, "Fair Value Measurements" ("FAS 157"). At the time
of issuance, we recorded the cost of the investment at $14,520,000 representing
the market value of the shares less a 25% discount for restrictions relating to
restricted stocks . We revalued the investment (using the bid and ask prices
taking into account the 25% discount for restriction relating to restricted
stocks under Rule 144) at March 31, 2007 and resulted in a $2,155,313 decrease
in the fair value which has been recorded as other comprehensive loss in
stockholders' deficiency.

Unrealized Loss on Subscription Receivable

         We reported an unrealized loss of $521,053 for the three months ended
March 31, 2006 against the $15,000,000 subscription receivable resulting from
the Cogent transaction as a result of the mark-to-market valuation of this
instrument as it is directly attributable the market price of our common stock.
We did not have a comparable loss during the three months ended March 31, 2007,
due to the restriction of the common shares held in escrow by Cogent until June
2006.

Preferred Stock Dividends

         We recorded preferred stock dividends during the three months ended
March 31, 2007 and 2006 of $12,501 and $32,878, respectively, which are payable
to our Series B Convertible Preferred Stock.

Net Income (Loss) Available to Common Stockholders

         We reported a net income available to common stockholders of
$13,036,160 for the three months ended March 31, 2007 as compared to a net loss
available to common stockholders of $11,565,956 for the three months ended March
31, 2006. This translates to an overall basic per-share income available to
shareholders of $.23 for the three months ended March 31, 2007 compared to basic
per-share loss of $.38 for the three months ended March 31, 2006. This
translates to an overall diluted income per-share of $.08 for the three months
ended March 31, 2007 compared to diluted per-share loss of $.38 for the three
months ended March 31, 2006.

LIQUIDITY AND CAPITAL RESOURCES

         Net cash used in operating activities for the three months ended March
31, 2007 was $(300,581) as compared to $(957,826) for the three months ended
March 31, 2006 and includes the following:

     *    A net increase of $24,581,739 in our net income (decrease of
          $7,629,160 from loss from continuing operations and an increase of
          $16,952,579 from discontinued operations),


     *    A net decrease of $8,494 in depreciation due to disposal of certain
          fixed asset during 2006.

     *    A decrease of $176,743 in amortization of deferred fees and consulting
          that relates to a stock based expenses attributable to payment
          deferral of our notes payable and consulting agreements entered during
          prior years. The decrease was primarily attributable to a decrease in
          issuance of shares of common stock for payment deferral and consulting
          services. These agreements provide for the issuance of shares of our
          common stock as consideration for payment deferral of our notes
          payable and services,

     *    A decrease of $765,528 in derivative liability expenses. During 2006,
          we issued a convertible debt related to the Laurus Master Fund
          refinance that occurred on March 31, 2006 which we have accounted for
          as a derivative due to its conversion feature. We did not have a
          comparable transaction during the three months ended March 31, 2007.

                                     - 36 -
<PAGE>

     *    A decrease of $2,304,499 in amortization of debt discount and fees to
          interest expense relating to our outstanding debt instruments with the
          Laurus Master Fund including a $4,000,000 secured non-convertible note
          and a $2,000,000 secured convertible note; it also includes our Series
          B Convertible Preferred Stock and convertible term loans. The decrease
          is attributable to the retirement of the secured convertible note with
          the Laurus Master Fund in March 2006 and amortized the remaining
          balance of $1,375,000 in debt discount for the three months ended
          March 31, 2006 and the amortization of debt discount related to our
          12% convertible notes which was fully amortized during 2006,

     *    A decrease of $40,677 in amortization of intangibles associated with
          discontinued operations, which are related to our acquired customer
          lists. The decrease was due to the impairment loss recognized during
          2006 which reduced the monthly amortization basis,

     *    A decrease of $1,095,470 in amortization of capital funding costs
          attributable to our 12% convertible notes which was fully amortized
          during 2006,

     *    A decrease of $204,450 in liquidated damages for the failure of our
          registration statement on Form SB-2 to be declared effective on a
          timely basis. The decrease was primarily attributable to the
          refinancing of our outstanding $3 million senior secured convertible
          note with the Laurus Master Fund on March 31, 2006. We paid liquidated
          damages of $1,170,000 with the issuance of $2 million secured
          convertible loan on March 31, 2006. We anticipate recognizing accrued
          liquidated damages through the remainder year fiscal 2007,

     *    A decrease of stock based loan fees of $330,769 attributable to a
          decrease in issuance of shares of common stock for non payment of
          notes payable and debt instruments and to defer payments on certain
          debt instruments;

     *    An increase in stock based expenses of $31,139 during the three months
          ended March 31, 2007,

     *    A decrease of $3,370,420 in the change of the fair value of the
          derivative liability. This results from the issuance of warrants for
          services under contract agreements and warrants issued as a provision
          on certain convertible debt instruments as well as the convertible
          loans and liability in connection with the Series B preferred shares.
          The decrease is attributable to a decrease in fair value of
          derivatives liabilities between measurement dates,

     *    A decrease of $11,430 associated with discontinued operations as a
          loss on the disposition of fixed assets during three months ended
          March 31, 2006,

     *    An increase of $863,909 from the transfer of the unrealized loss on
          the subscription receivable associated with the Cogent transaction,

     *    An increase of $16,844,821 from gain on disposal of discontinued
          operations associated with the sale of our subsidiary, BNMD,

     *    A decrease of $3,356 in accounts receivable due to a decrease in our
          net sales,

     *    A decrease of $2,609 in inventory,

     *    a decrease of $53,436 in other current and non-current assets,
          primarily due to prepaid expenses and rental security deposits,

     *    A decrease of $53,172 in accounts payable,

     *    An increase of $600,342 in accrued expenses and accrued interest,

     *    A decrease of $227,914 in net assets from discontinued operations

     *    A decrease of $29,155 in net liabilities from discontinued operations

                                     - 37 -
<PAGE>
         Net cash provided by investing activities for the three months ended
March 31, 2007 was $757,820 as compared to $3,420 for the three months ended
March 31, 2006 includes the following:

     *    An increase of $757,820 on proceeds received from notes receivable
          issued to us for the sale of our subsidiary, BNMD to Global Beverage.

     *    A decrease of $3,420 from the proceeds included in the disposition of
          fixed assets related to discontinued operations.

         Net cash provided by (used in) financing activities for the three
months ended March 31, 2007 was ($335,639) as compared to $876,597 for the three
months ended March 31, 2006 and includes the following:

     *    A decrease of $4,450,000 from the proceeds of non-related party loans,
          primarily from the Laurus Master Fund and the convertible term loans,

     *    A decrease of $3,091,782 for payment of non-related party loans
          resulting primarily to the Laurus Master Fund and convertible term
          loan holders,

     *    An increase in proceeds received and repayments on the revolving line
          of credit of $144,287 and $188,287, respectively in connection with
          the issuance of the $4 million line of credit with Laurus Master fund
          in March 2006.

     *    A decrease of $254,500 in capitalized funding costs. During 2006, we
          paid $254,500 in connection with the Laurus Master Fund $4,000,000
          secured non-convertible note and the $2,000,000 secured convertible
          note issued in March 2006 and $40,000 in connection with the issuance
          of a $250,000 note payable in April 2006,

     *    A decrease of $14,518 in the cash overdraft liability,

     *    A decrease of $50,000 from the proceeds received from related party
          loans,

         On September 12, 2005 we received a notice of default under the terms
of two secured promissory notes issued by us to investors in the aggregate
principal amount of $300,000. These notes were due and payable by us on
September 1, 2005. As collateral for these notes Mr. Theodore Farnsworth, our
CEO, pledged 100,000 shares of our common stock owned by him. The note holders
are demanding payment of $233,279. In February 2006, we executed an agreement in
consideration for 2,500,000 shares of restricted common stock, to defer payments
of these note holders until May 10, 2006. In August 2006 we received a notice of
final default judgment from these note holders demanding $270,106 of principal
and accrued interest. As we have been unable to pay these amounts, the note
holders are entitled to foreclose on the collateral at any time. We were unable
to satisfy the entire balance due we were unable to satisfy the judgment; the
note holders subsequently garnished our bank account in the amount of $45,393.
As of March 2007, we have utilized $200,000 received from the proceeds of the
Global Beverage note as partial satisfaction of the amounts due these note
holders. The balance due is $59,600 as of March 31, 2007. The default under this
note has created another event of default under the Secured Convertible Term
Note due Laurus Master Fund, Ltd. as well as under the unsecured promissory
notes in the principal amount of $3,019,500. On September 29, 2005 we received a
notice of default from Morris Stodard and Master Distributors, Inc. under the
terms of an unsecured promissory note issued in connection with our purchase of
Master Distributors, Inc. as well as under an employment agreement with Mr.
Stodard. The balance due to Master Distributors was assumed by Global Beverage
Solutions as a provision of their acquisition of BNMD in February 2007. The
original default under this note, however, created another event of default
under the unsecured promissory notes in the principal amount of $3,019,500. On
June 28, 2006, we received a notice of final default judgment from the principal
owner of the Maui Juice Company for failure to pay principal payments under the
terms of the Purchase and Sale Agreement for the Maui Juice trademark. The
amount in arrears is approximately $80,000 and we are negotiating with the
plaintiffs for an alternative payment schedule. The defaults were waived by
Laurus Master Fund, L.P. in connection with the restructure of our obligations
to them in March 2006. Laurus is currently assisting management in assessing
various options for the Company in both operations and capital financing.

                                     - 38 -
<PAGE>

         We do not generate sufficient profits to pay our operating expenses. We
have historically relied on funds from financing transactions to provide capital
to pay our expenses and the terms of these transactions have resulted in
significant non-cash expense to us during the three months ended March 31, 2007
and 2006. In addition, the swap transaction entered into with Cogent Capital may
never result in any capital for us notwithstanding the issuance of shares of our
common stock which represented approximately 75% of our issued and outstanding
common stock.

         At March 31, 2007 we had a working capital deficit of approximately
$16.7 million and cash on hand of $122,900. In addition to the foregoing, we
have past due obligations and judgments of approximately $896,000. We do not
have any firm commitments for raising capital at this time. While we are owed
approximately $1.2 million from Global Beverage however, these proceeds will not
be sufficient to sustain our operations and pay our obligations. In addition,
unless there are further postponements by the Securities and Exchange Commission
of the enactment of Section 404 of the Sarbanes-Oxley Act of 2002 as it relates
to small business issuers such as our company, in connection with our annual
report for our fiscal year ending December 31, 2007 our management will be
required to provide an assessment of the effectiveness of our internal control
over financial reporting; including a statement as to whether or not internal
control over financial reporting is effective. In order to comply with this
requirement we will need to engage a consulting firm to undertake an analysis of
our internal controls as we do not have the expertise to conduct the necessary
evaluation. While we have yet to engage such a consulting firm, we expect the
costs associated with the development of the necessary documentation and testing
procedures required will be significant.

         We will need to raise significant additional capital to fund our
operating expenses, pay our obligations and grow our company. We do not
presently have any firm commitments for any additional capital and our financial
condition may make our ability to secure this capital difficult. There are no
assurances that we will be able to continue our business and we may be forced to
cease operations if we do not raise significant additional working capital in
which event investors could lose their entire investment in our Company.

RECENT ACCOUNTING PRONOUNCEMENTS

         In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing
of Financial Assets, an amendment of FASB Statement No. 140, Accounting for
Transfers and Servicing of Financial Assets and Extinguishments of Liabilities".
This statement requires all separately recognized servicing assets and servicing
liabilities be initially measured at fair value, if practicable, and permits for
subsequent measurement using either fair value measurement with changes in fair
value reflected in earnings or the amortization and impairment requirements of
Statement No. 140. The subsequent measurement of separately recognized servicing
assets and servicing liabilities at fair value eliminates the necessity for
entities that manage the risks inherent in servicing assets and servicing
liabilities with derivatives to qualify for hedge accounting treatment and
eliminates the characterization of declines in fair value as impairments or
direct write-downs. SFAS No. 156 is effective for an entity's first fiscal year
beginning after September 15, 2006. The adoption of this statement is not
expected to have a significant effect on the Company's future reported financial
position or results of operations.

         In July 2006, the Financial Accounting Standards Board (FASB) issued
FASB Interpretation (FIN) No. 48, "Accounting for Uncertainty in Income Taxes-an
interpretation of FASB Statement No. 109." This interpretation provides guidance
for recognizing and measuring uncertain tax positions, as defined in SFAS No.
109, "Accounting for Income Taxes." FIN No. 48 prescribes a threshold condition
that a tax position must meet for any of the benefit of an uncertain tax
position to be recognized in the financial statements. Guidance is also provided
regarding de-recognition, classification, and disclosure of uncertain tax
positions. FIN No. 48 is effective for fiscal years beginning after December 15,
2006. The Company does not expect that this interpretation will have a material
impact on its financial position, results of operations, or cash flows.

                                     - 39 -

<PAGE>

         In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157, "Fair Value Measurements" ("FAS 157"). This Statement defines
fair value as used in numerous accounting pronouncements, establishes a
framework for measuring fair value in generally accepted accounting principles
and expands disclosure related to the use of fair value measures in financial
statements. The Statement is to be effective for the Company's financial
statements issued in 2008; however, earlier application is encouraged. The
Company has adopted FAS 157 for the three months ended March 31, 2007.

         In September 2006, the SEC issued Staff Accounting Bulletin No. 108,
Considering the Effects of Prior Year Misstatements when quantifying
Misstatements in Current Year Financial Statements ("SAB 108"). SAB 108 requires
companies to evaluate the materiality of identified unadjusted errors on each
financial statement and related financial statement disclosure using both the
rollover approach and the iron curtain approach, as those terms are defined in
SAB 108. The rollover approach quantifies misstatements based on the amount of
the error in the current year financial statement, whereas the iron curtain
approach quantifies misstatements based on the effects of correcting the
misstatement existing in the balance sheet at the end of the current year,
irrespective of the misstatement's year(s) of origin. Financial statements would
require adjustment when either approach results in quantifying a misstatement
that is material. Correcting prior year financial statements for immaterial
errors would not require previously filed reports to be amended. If a Company
determines that an adjustment to prior year financial statements is required
upon adoption of SAB 108 and does not elect to restate its previous financial
statements, then it must recognize the cumulative effect of applying SAB 108 in
fiscal 2006 beginning balances of the affected assets and liabilities with a
corresponding adjustment to the fiscal 2006 opening balance in retained
earnings. SAB 108 is effective for interim periods of the first fiscal year
ending after November 15, 2006. The adoption of SAB 108 did not have an impact
on the Company's consolidated financial statements.

         In February 2007, the FASB issued FASB Statement No. 159, The Fair
Value Option for Financial Assets and Financial Liabilities - Including an
Amendment of FASB Statement No. 115 ("FAS 159"). This standard permits entities
to choose to measure many financial assets and liabilities and certain other
items at fair value. An enterprise will report unrealized gains and losses on
items for which the fair value option has been elected at each subsequent
reporting date. The fair value option may be applied on an
instrument-by-instrument basis, with several exceptions, such as those
investments accounted for by the equity method, and once elected, the option is
irrevocable unless a new election date occurs. The fair value option can be
applied only to entire instruments and not to portions thereof. FAS 159 is
effective as of the beginning of an entity's fiscal year beginning after
November 15, 2007. Early adoption is permitted as of the beginning of the
previous fiscal year provided that the entity makes that choice in the first 120
days of that fiscal year and also elects to apply the provisions of FASB
Statement No. 157, Fair Value Measurements. The Company has adopted FAS 159 for
the three months ended March 31, 2007.

         Other accounting standards that have been issued or proposed by the
FASB or other standards-setting bodies that do not require adoption until a
future date are not expected to have a material impact on the consolidated
financial statements upon adoption.

CRITICAL ACCOUNTING POLICIES

         Financial Reporting Release No. 60 requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. Note 1 to our consolidated financial statements includes a
summary of the significant accounting policies and methods used in the
preparation of our consolidated financial statements. The following is a brief
discussion of the more significant accounting policies and methods used by us.

                                     - 40 -


<PAGE>

ESTIMATES

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

PRINCIPLES OF CONSOLIDATION

         The consolidated financial statements include the accounts of the
Company and its wholly owned Subsidiaries. All material inter-company
transactions have been eliminated.

INVENTORY

         Inventory is stated at the lower of cost or market determined in a
"first-in, first-out" basis consisting of raw materials and finished goods.

REVENUE RECOGNITION

         The Company follows the 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. 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.

FAIR VALUE OF FINANCIAL INSTRUMENTS

         Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosures of information about
the fair value of certain financial instruments for which it is practicable to
estimate that value. For purposes of this disclosure, the fair value of a
financial instrument is the amount at which the instrument could be exchanged in
a current transaction between willing parties, other than in a forced sale or
liquidation. The carrying amounts of the Company's short-term financial
instruments, including accounts receivable, accounts payable, accrued expenses,
and other current asset and liabilities approximate fair value due to the
relatively short period to maturity for these instruments.

                                     - 41 -

<PAGE>

ITEM 3.  CONTROLS AND PROCEDURES

         As required by Rule 13a-15 under the Securities Exchange Act of 1934,
as of March 31, 2007, the end of the period covered by this report, our Chief
Executive Officer who also serves as our principal financial and accounting
officer concluded his evaluation of the effectiveness of the design and
operation of our disclosure controls and procedures. Disclosure controls and
procedures are controls and procedures designed to reasonably assure that
information required to be disclosed in our reports filed under the Securities
Exchange Act of 1934, such as this report, is recorded, processed, summarized
and reported within the time periods prescribed by SEC rules and regulations,
and to reasonably assure that such information is accumulated and communicated
to our management, including our Chief Executive Officer, to allow timely
decisions regarding required disclosure.

         Our management does not expect that our disclosure controls and
procedures will prevent all error and all fraud. A control system, no matter how
well designed and operated, can provide only reasonable, not absolute, assurance
that the control system's objectives will be met. Further, the design of a
control system must reflect the fact that there are resource constraints, and
the benefits of controls must be considered relative to their costs. Because of
the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, have been detected. These inherent limitations include the realities that
judgments in decision-making can be faulty, and that breakdowns can occur
because of simple error or mistake. The design of any system of controls is
based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its
stated goals under all potential future conditions.

         As of the evaluation date, our Chief Executive Officer concluded that
we maintain disclosure controls and procedures that are effective in providing
reasonable assurance that information required to be disclosed in our reports
under the Securities Exchange Act of 1934 is recorded, processed, summarized and
reported within the time periods prescribed by SEC rules and regulations, and
that such information is accumulated and communicated to our management,
including our Chief Executive Officer, to allow timely decisions regarding
required disclosure.

         There have been no changes in our internal control over financial
reporting during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.


                                     - 42 -
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

            NONE

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

         In January 2007, the Company executed two consulting agreements in
consideration of 2,500,000 shares of restricted common stock. The shares were
valued at $0.10; the closing price on the date of grant. The recipients were
accredited investors and the securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on the exemption
provided by Section 4(2) of that act.

         In January 2007, the Company converted a term loan in the principal
amount of $25,000 into 390,625 shares of common stock. The conversion price was
$0.06 per share, adjusted down from $0.45 attributable to the Laurus Master Fund
transaction in March 2006. The recipient was an accredited investor and the
securities were issued in a transaction exempt from registration under the
Securities Act of 1933 in reliance on the exemption provided by Section 3(a)(9)
of that act.

         As a result of the issuance of the above securities, we were required
to make adjustments in the conversion and exercise prices of an aggregate of
7,959,459 common shares underlying various securities issued to investors in
previous transactions based upon an adjusted price of $0.06 per share.

         In March 2007, the Company issued 214,870 shares of common stock in
consideration of the conversion of a term loan in the principal amount of
$10,000, based on a conversion price of $0.06 per share. The recipient was an
accredited investor and the securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on the exemption
provided by Section 4(2) of that act.

         In March 2007, the Company issued 900,000 shares of common stock in
accordance with the provisions of a debt instrument as penalties for non-payment
of the note. The shares were valued at $0.05; the closing price on the date of
grant. The recipient was an accredited investor and the securities were issued
in a transaction exempt from registration under the Securities Act of 1933 in
reliance on the exemption provided by Section 4(2) of that act.

         In March the Company also issued 2,250 shares of stock in accordance
with the terms of a service agreement. The shares were valued at $0.06; the
closing price of the stock on the date of grant. The recipient was an accredited
investor and the securities were issued in a transaction exempt from
registration under the Securities Act of 1933 in reliance on the exemption
provided by Section 4(2) of that act.

ITEM 3.  DEFAULT UPON SENIOR SECURITIES

         NONE

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

         NONE

ITEM 5.  OTHER INFORMATION

         On May 4, 2007, the Company issued 900,000 shares of common stock for
failure to pay the balance of the principal and accrued interest to a certain
note holder after its maturity date. The Company valued these common shares at
the fair market value on the date of grant at $.03 per share or $27,000. The
recipient was an accredited investor and the securities were issued in a
transaction exempt from registration under the Securities Act of 1933 in
reliance on the exemption provided by Section 4(2) of that act.

         On May 4, 2007, the Company issued 500,000 shares of common stock for a
three month consulting agreement. The Company valued these common shares at the
fair market value on the date of grant at $.03 per share or $15,000. The
recipient was an accredited investor and the securities were issued in a
transaction exempt from registration under the Securities Act of 1933 in
reliance on the exemption provided by Section 4(2) of that act.

ITEM 6.  EXHIBITS

EXHIBIT NO.                   DESCRIPTION
-----------                   -----------
31.1         Rule 13a-14(a)/15d-14(a) certification of Chief Executive Officer
31.2         Rule 13a-14(a)/15d-14(a) certificate of principal financial officer
32.1         Section 1350 certification of Chief Executive Officer

                                     - 43 -

<PAGE>


                                   SIGNATURES


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



                                           Xstream Beverage Network, Inc.



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

Dated: May 18, 2007.



















                                     - 44 -