---

|UNITED STATES                     
|----------------------------------
|SECURITIES AND EXCHANGE COMMISSION
|Washington, D.C. 20549            
|                                  
|Form 10-QSB                       

(Mark One)

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

For the quarterly period ended September 30,
2007

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE
ACT

For the transition period from __________to __________

Commission file number 333-109990

MELT INC.(Exact name of
small business issuer as specified in its charter)

|Nevada                                                               | 47-0925451                       
|-------------------------------------------------------------------- | ---------------------------------
|(State or other jurisdiction of incorporation or
      organization) | (IRS Employer Identification No.)

22912 Mill Creek Dr, Suite D, Laguna Hills, CA
92653(Address of principal executive offices)

949.707.0456(Issuer's telephone number)

32222 Corte Tomatlan, Temecula, CA
92592(Former name, former address and former fiscal year, if changed
since last report)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS

Check whether the issuer has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. Yes [ ] No [ ]

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 21,290,000
common shares issued and outstanding as of November 13, 2007

Transitional Small Business Disclosure Format (Check one): Yes [
] No [X]

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

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|Item 1. | Financial Statements.
|------- | ---------------------

It is the opinion of management that the interim consolidated
financial statements for the quarter ended September 30, 2007 include all
adjustments necessary in order to ensure that the interim consolidated financial
statements are not misleading.

2

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MELT INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2007 and December 31, 2006

3

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|MELT INC. AND SUBSIDIARIES 
|---------------------------
|Consolidated Balance Sheets

ASSETS

|                                              |   | September 30, |  |   | December 31, | 
|--------------------------------------------- | - | ------------- |  | - | ------------ | 
|                                              |   | 2007          |  |   | 2006         | 
|                                              |   | (Unaudited)   |  |   |              | 
|CURRENT ASSETS                                |   |               |  |   |              | 
|Cash                                          | $ | -             |  | $ | 555,230      | 
|Receivables, net of allowance
      of $5,000 |   | 262,855       |  |   | 804,685      | 
|Prepaid expenses                              |   | -             |  |   | 7,500        | 
|Inventory                                     |   | -             |  |   | 4,130        | 
|Total Current Assets                          |   | 262,855       |  |   | 1,371,545    | 
|FIXED ASSETS, NET                             |   | 50,871        |  |   | 51,518       | 
|OTHER ASSETS                                  |   |               |  |   |              | 
|Trademark, net                                |   | 871           |  |   | 1,239        | 
|Deposits                                      |   | 6,500         |  |   | 196,817      | 
|Total
      Other Assets                      |   | 7,371         |  |   | 198,056      | 
|ASSETS FROM DISCONTINUED OPERATIONS (NOTE 4)  |   | 364,000       |  |   | 732,624      | 
|TOTAL
      ASSETS                            | $ | 685,097       |  | $ | 2,353,743    | 

The accompanying notes are an integral part of these
consolidated financial statements.4

---

|MELT INC. AND SUBSIDIARIES             
|---------------------------------------
|Consolidated Balance Sheets (Continued)

LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)

|                                                        |   | September 30, |  |   | December 31, | 
|------------------------------------------------------- | - | ------------- |  | - | ------------ | 
|                                                        |   | 2007          |  |   | 2006         | 
|                                                        |   | (Unaudited)   |  |   |              | 
|CURRENT LIABILITIES                                     |   |               |  |   |              | 
|                                                        |   |               |  |   |              | 
|Cash overdraft                                          | $ | 94,144        |  | $ | -            | 
|Accounts payable                                        |   | 445,937       |  |   | 870,058      | 
|Accrued expenses                                        |   | 455,157       |  |   | 192,498      | 
|Accrued management fees  related party                 |   | 81,911        |  |   | 63,911       | 
|Notes payable - related party                           |   | 311,260       |  |   | 242,000      | 
|Accrued interest - related party                        |   | 68,676        |  |   | 40,328       | 
|Notes payable                                           |   | 512,130       |  |   | 113,239      | 
|Accrued interest                                        |   | 7,167         |  |   | 10,195       | 
|Deferred revenue                                        |   | 250,000       |  |   | 550,000      | 
|                                                        |   |               |  |   |              | 
|Total
      Current Liabilities                         |   | 2,226,382     |  |   | 2,082,229    | 
|                                                        |   |               |  |   |              | 
|LIABILITIES FROM DISCONTINUED OPERATIONS
      (NOTE 4) |   | -             |  |   | 326,507      | 
|                                                        |   |               |  |   |              | 
|TOTAL
      LIABILITIES                                 |   | 2,226,382     |  |   | 2,408,736    | 

STOCKHOLDERS EQUITY (Deficit)

|Common stock; $0.001 par value, 100,000,000         |   |            |   |   |            |  
|--------------------------------------------------- | - | ---------- | - | - | ---------- | -
|shares authorized, 21,290,000 and 21,200,000 shares |   |            |   |   |            |  
|issued and outstanding,
      respectively          |   | 21,290     |   |   | 21,200     |  
|Additional paid-in capital                          |   | 1,897,001  |   |   | 1,767,017  |  
|Deferred equity compensation                        |   | (73,653    | ) |   | -          |  
|Accumulated deficit                                 |   | (3,385,923 | ) |   | (1,843,210 | )
|                                                    |   |            |   |   |            |  
|Total Stockholders Equity (Deficit)                |   | (1,541,285 | ) |   | (54,993    | )
|                                                    |   |            |   |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY          | $ | 685,097    |   | $ | 2,353,743  |  

The accompanying notes are an integral part of these
consolidated financial statements. 5

---

|MELT INC. AND SUBSIDIARIES           
|-------------------------------------
|Consolidated Statements of Operations
|(Unaudited)                          

|                                            |   | For the Three Months Ended |   |   | For the Nine Months Ended |  
|------------------------------------------- | - | -------------------------- | - | - | ------------------------- | -
|                                            |   | September 30,              |   |   | September 30,             |  
|                                            |   | 2007                       |   |   | 2006                      |  
|REVENUES                                    |   |                            |   |   |                           |  
|                                            |   |                            |   |   |                           |  
|Food and beverage sales                     | $ | 594,660                    |   | $ | 229,387                   |  
|Royalty and marketing fees                  |   | 167,660                    |   |   | 49,203                    |  
|Franchise fees                              |   | 225,000                    |   |   | 100,000                   |  
|Miscellaneous finders and professional fees |   | 16,875                     |   |   | 5,738                     |  
|                                            |   |                            |   |   |                           |  
|Total Revenues                              |   | 1,004,195                  |   |   | 384,328                   |  
|                                            |   |                            |   |   |                           |  
|COST OF SALES                               |   |                            |   |   |                           |  
|                                            |   |                            |   |   |                           |  
|Cost of food and beverage                   |   | 467,988                    |   |   | 181,606                   |  
|Materials and supplies                      |   | 108,645                    |   |   | 14,729                    |  
|                                            |   |                            |   |   |                           |  
|Total
      Cost of Sales                   |   | 576,633                    |   |   | 196,335                   |  
|                                            |   |                            |   |   |                           |  
|GROSS PROFIT                                |   | 427,562                    |   |   | 187,993                   |  
|                                            |   |                            |   |   |                           |  
|EXPENSES                                    |   |                            |   |   |                           |  
|                                            |   |                            |   |   |                           |  
|Depreciation and amortization               |   | 2,635                      |   |   | 1,839                     |  
|Marketing                                   |   | 29,280                     |   |   | 48,162                    |  
|Professional fees                           |   | 30,388                     |   |   | 44,645                    |  
|Rent                                        |   | 9,951                      |   |   | 7,098                     |  
|Salaries and wages                          |   | 172,665                    |   |   | 57,369                    |  
|Management fees                             |   | 6,000                      |   |   | 27,600                    |  
|Bad debt expense                            |   | 1,592                      |   |   | -                         |  
|General and administrative                  |   | 56,047                     |   |   | 126,260                   |  
|                                            |   |                            |   |   |                           |  
|Total Expenses                              |   | 308,558                    |   |   | 312,973                   |  
|                                            |   |                            |   |   |                           |  
|INCOME (LOSS) FROM OPERATIONS               |   | 119,004                    |   |   | (124,980                  | )
|                                            |   |                            |   |   |                           |  
|OTHER INCOME (EXPENSES)                     |   |                            |   |   |                           |  
|                                            |   |                            |   |   |                           |  
|Interest expense                            |   | (11,520                    | ) |   | (9,551                    | )
|Interest income                             |   | 909                        |   |   | 2,855                     |  
|Gain (Loss) on sale of fixed assets         |   | -                          |   |   | -                         |  
|                                            |   |                            |   |   |                           |  
|Total Other Income
      (Expense)          |   | (10,611                    | ) |   | (6,696                    | )
|                                            |   |                            |   |   |                           |  
|INCOME (LOSS) BEFORE MINORITY               |   |                            |   |   |                           |  
|INTEREST, DISCONTINUED
      OPERATIONS     |   |                            |   |   |                           |  
|AND INCOME TAXES                            |   | 108,393                    |   |   | (131,676                  | )
|                                            |   |                            |   |   |                           |  
|MINORITY INTEREST                           |   | -                          |   |   | 15,110                    |  

The accompanying notes are an integral part of these
consolidated financial statements. 6

---

|MELT INC. AND SUBSIDIARIES                       
|-------------------------------------------------
|Consolidated Statements of Operations (Continued)
|(Unaudited)                                      

|                                                 |   | Three Months Ended |  |   | For the Nine Months Ended |  
|------------------------------------------------ | - | ------------------ |  | - | ------------------------- | -
|                                                 |   | September 30,      |  |   | September 30,             |  
|                                                 |   | 2007               |  |   | 2006                      |  
|                                                 |   |                    |  |   |                           |  
|INCOME (LOSS) BEFORE DISCONTINUED                |   |                    |  |   |                           |  
|OPERATIONS                                       | $ | 108,393            |  | $ | (116,566                  | )
|                                                 |   |                    |  |   |                           |  
|(Loss) from sale of subsidiary
      (Note 3)    |   | -                  |  |   | (22,149                   | )
|(Loss) from discontinued operations (Note 3)     |   | -                  |  |   | (30,220                   | )
|Income (Loss) from
      discontinued operations |   |                    |  |   |                           |  
|(Note 4)                                         |   | 321,337            |  |   | 66,523                    |  
|                                                 |   |                    |  |   |                           |  
|TOTAL INCOME (LOSS) FROM                         |   |                    |  |   |                           |  
|DISCONTINUED                                     |   |                    |  |   |                           |  
|OPERATIONS                                       |   | 321,337            |  |   | 14,154                    |  
|                                                 |   |                    |  |   |                           |  
|INCOME (LOSS) BEFORE INCOME TAXES                |   | 429,730            |  |   | (102,412                  | )
|                                                 |   |                    |  |   |                           |  
|INCOME TAX EXPENSE                               |   | -                  |  |   | -                         |  
|                                                 |   |                    |  |   |                           |  
|NET INCOME (LOSS)                                | $ | 429,730            |  | $ | (102,412                  | )
|                                                 |   |                    |  |   |                           |  
|BASIC AND DILUTED NET                            |   |                    |  |   |                           |  
|INCOME (LOSS) PER SHARE:                         |   |                    |  |   |                           |  
|                                                 |   |                    |  |   |                           |  
|Income
      (loss) per share on continuing      |   |                    |  |   |                           |  
|operations                                       | $ | 0.00               |  | $ | (0.01                     | )
|                                                 |   |                    |  |   |                           |  
|Income (loss) per share
      on discontinued    |   |                    |  |   |                           |  
|Operations                                       |   | 0.02               |  |   | 0.00                      |  
|                                                 |   |                    |  |   |                           |  
|Net
      income (loss) per share                | $ | 0.02               |  | $ | 0.01                      |  
|                                                 |   |                    |  |   |                           |  
|WEIGHTED AVERAGE NUMBER                          |   |                    |  |   |                           |  
|OF SHARES OUTSTANDING                            |   | 21,290,000         |  |   | 20,280,000                |  
|                                                 |   |                    |  |   |                           |  
|FULLY DILUTED WEIGHTED AVERAGE                   |   |                    |  |   |                           |  
|NUMBER OF SHARES OUTSTANDING                     |   | 22,109,000         |  |   | 21,210,000                |  

The accompanying notes are an integral part of these
consolidated financial statements. 7

---

|MELT INC. AND SUBSIDIAIES                               
|--------------------------------------------------------
|Consolidated Statement of Stockholders Equity (Deficit)

|                                  |  |              |  |   |         |  |   | Additional |   |   |              |   |   |            |  
|--------------------------------- |  | ------------ |  | - | ------- |  | - | ---------- | - | - | ------------ | - | - | ---------- | -
|                                  |  | Common Stock |  |   | Paid-in |  |   | Deferred   |   |   | Accumulated  |  
|                                  |  | Shares       |  |   | Amount  |  |   | Capital    |   |   | Compensation |   |   | Deficit    |  
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Balance, December 31, 2006        |  | 21,200,000   |  | $ | 21,200  |  | $ | 1,767,017  |   | $ | -            |   | $ | (1,843,210 | )
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Common stock issued for           |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Services and accrued services     |  | 90,000       |  |   | 90      |  |   | 45,810     |   |   | -            |   |   | -          |  
|(unaudited)                       |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Stock options issued for          |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|deferred equity compensation      |  | -            |  |   | -       |  |   | 172,264    |   |   | (172,264     | ) |   | -          |  
|(unaudited)                       |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Amortization of deferred equity   |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Compensation (unaudited)          |  | -            |  |   | -       |  |   | -          |   |   | 10,521       |   |   | -          |  
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Cumulative effect of stock option |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|forfeiture (unaudited)            |  | -            |  |   | -       |  |   | (88,090    | ) |   | 88,090       |   |   | -          |  
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Net loss for the nine months      |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|ended September 30, 2007 -        |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|(unaudited)                       |  | -            |  |   | -       |  |   | -          |   |   | -            |   |   | (1,542,713 | )
|                                  |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|Balance, September 30, 2007 -     |  |              |  |   |         |  |   |            |   |   |              |   |   |            |  
|(unaudited)                       |  | 21,290,000   |  | $ | 21,290  |  | $ | 1,897,001  |   | $ | (73,653)     |   | $ | (3,385,923 | )

The accompanying notes are an integral part of these
consolidated financial statements.8

---

|MELT INC. AND SUBSIDIAIES            
|-------------------------------------
|Consolidated Statements of Cash Flows
|(Unaudited)                          

|                                                        |   | For the Nine Months Ended |  
|------------------------------------------------------- | - | ------------------------- | -
|                                                        |   | September 30,             |  
|                                                        |   | 2007                      |  
|CASH FLOWS FROM OPERATING ACTIVITIES                    |   |                           |  
|                                                        |   |                           |  
|Net loss after discontinued operations                  | $ | (1,542,713                | )
|Less: loss from discontinued operations                 |   | (1,064,083                | )
|                                                        |   |                           |  
|Net loss before discontinued operations                 |   | (478,630                  | )
|Items to reconcile net loss to net                      |   |                           |  
|cash
      provided (used) by operating activities:     |   |                           |  
|Depreciation and
      amortization                     |   | 8,567                     |  
|Bad debt
      expense                                  |   | 6,592                     |  
|Amortization of deferred
      equity compensation      |   | 10,521                    |  
|Common
      stock issued for services                  |   | 34,650                    |  
|Minority interest                                       |   | -                         |  
|(Gain)
      loss on sale of fixed assets               |   | 3,502                     |  
|Changes in operating assets and liabilities:            |   |                           |  
|(Increase) decrease in receivables                      |   | 332,664                   |  
|Decrease in supplies and
      inventory                |   | 4,130                     |  
|Decrease
      in prepaid expenses                      |   | 7,500                     |  
|(Increase) in other
      assets                        |   | (72                       | )
|Increase
      in accounts payable and accrued expenses |   | 16,230                    |  
|Increase in interest
      payable  related party      |   | 25,320                    |  
|Increase
      in interest payable                      |   | -                         |  
|Increase in management
      fees payable               |   | 18,000                    |  
|Increase
      (decrease) in deferred revenue           |   | (300,000                  | )
|                                                        |   |                           |  
|Net Cash Provided (Used) by Operating Activities        |   | (311,026                  | )
|                                                        |   |                           |  
|Net Cash Used by Discontinued Activities                |   | (791,867                  | )
|                                                        |   |                           |  
|Total Net Cash Used by Operating and Discontinued       |   |                           |  
|Activities                                              |   | (1,102,893                | )
|                                                        |   |                           |  
|CASH FLOWS FROM INVESTING ACTIVITIES                    |   |                           |  
|                                                        |   |                           |  
|Proceeds from sale of
      fixed assets                |   | 1,546                     |  
|Purchases
      of fixed assets                         |   | (16,178                   | )
|                                                        |   |                           |  
|Net Cash Used by Investing Activities                   |   |                           |  
|
      Continuing Operations                           |   | (14,632                   | )
|                                                        |   |                           |  
|Net Cash
      Provided by Investing Activities         |   |                           |  
| Discontinued Operations                               |   | -                         |  
|                                                        |   |                           |  
|Net Cash Provided (Used) by Investing Activities        | $ | (14,632                   | )

The accompanying notes are an integral part of these
consolidated financial statements. 9

---

|MELT INC. AND SUBSIDIAIES                        
|-------------------------------------------------
|Consolidated Statements of Cash Flows (Continued)
|(Unaudited)                                      

|                                                            |   | For the Nine Months Ended |  
|----------------------------------------------------------- | - | ------------------------- | -
|                                                            |   | September 30,             |  
|                                                            |   | 2007                      |  
|CASH FLOWS FROM FINANCING ACTIVITIES                        |   |                           |  
|Increase in cash overdraft                                  | $ | 94,144                    |  
|Proceeds from notes payable                                 |   | 400,000                   |  
|Payments on notes payable                                   |   | (1,109                    | )
|Proceeds from notes payable  related party                 |   | 201,260                   |  
|Payments on notes payable  related party                   |   | (132,000                  | )
|Net Cash
      Provided by Financing Activities             | $ | 562,295                   |  
|INCREASE (DECREASE) IN CASH                                 |   | (555,230                  | )
|CASH AT BEGINNING OF PERIOD                                 |   | 555,230                   |  
|CASH AT END OF PERIOD                                       | $ | -                         |  
|CASH PAID FOR:                                              |   |                           |  
|Interest                                                    | $ | 16,155                    |  
|Income taxes                                                | $ | -                         |  
|NON CASH INVESTING AND FINANCING ACTIVITIES                 |   |                           |  
|Common stock issued for services and
      accrued services | $ | 34,650                    |  

The accompanying notes are an integral part of these
consolidated financial statements. 10

---

|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 1 - | ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
|-------- | ------------------------------------------------

This summary of significant accounting
policies of Melt Inc. and Subsidiaries is presented to assist in understanding
the Companys consolidated financial statements. The consolidated financial
statements and notes are representations of the Companys management, which is
responsible for their integrity and objectivity. These accounting policies
conform to accounting principles generally accepted in the United States of
America and have been consistently applied in the preparation of the
consolidated financial statements.

a. Organization and Business
Activities

Melt Inc. (Hereinafter referred to as
the Company) was organized on July 18, 2003, under the laws of the State of
Nevada. The Company operates as a holding company for operating
subsidiaries.

Melt (California), Inc. a wholly owned
subsidiary (hereinafter referred to as Melt (CA)) was organized on August 6,
2003, under the laws of the State of California.

Melt Franchising LLC (hereinafter
referred to as Melt (FA)) a wholly owned subsidiary of Melt Inc was organized on
February 2, 2005 under the laws of the State of Nevada. Melt Franchising LLC is
responsible for selling franchises to allow franchisees to own and operate
stores trading under the name of Melt  gelato italiano, Melt  café &
gelato bar and Melt  gelato & crepe café. To-date Melt Franchising LLC has
sold thirty-two franchises of which twenty-three are operating and four are in
the process of finding suitable locations to operate their stores. During the
three months ended September 2007, Melt (CA) discontinued its business of
constructing franchisee sites and completed the construction of three sites and
abandoned construction of six sites (see Note 4).

b. Depreciation

The cost of the equipment and property
is depreciated over the estimated useful life of 5 and 7 years, respectively.
Depreciation is computed using the straight-line method beginning when the
assets are placed in service. Depreciation expense on assets used in continuing
operations for the nine months ended September 2007 and 2006 was $8,567 and
$20,655, respectively.

c. Accounting Method

The Companys consolidated financial
statements are prepared using the accrual method of accounting. The Company has
elected a December 31 year-end.

d. Cash and Cash Equivalents

For the purpose of the statement of
cash flows, the Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.

11

---

|MELT INC. AND SUBSIDIARIES                    
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 1 - | ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
      (Continued)
|-------- | -----------------------------------------------------------------

e. Estimates

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

f. Revenue Recognition

The Companys revenues are derived
primarily from the operation of corporate owned retail stores and franchising
activities, including revenue from store development, acquisition and
construction services on behalf of its franchisees.

Food and Beverage

Revenue from the sale of food and
beverages at corporate owned stores and to franchisees is recognized as products
are sold and when all rights and obligations of the Company have been met.

Franchise Fee Revenue

The Companys franchise agreements
require an initial franchise fee of $25,000 and have seven year terms with two
seven year options. The agreements also call for weekly royalty payments of six
percent and a one percent marketing fee.

Revenue from initial franchise fees are
recognized when the Company has completed its obligation to the franchisee, the
franchise store has opened and there is (a) no remaining obligation or intent to
refund an amounts paid, (b) substantially all of the initial services required
by the Uniform Franchise Offering Circular have been performed, and (c) there
are no other material conditions or obligations related to substantial
performance. Franchise fees collected for franchise agreements that are
ultimately terminated are recognized as revenue only when the Company has met
its obligations under the Uniform Franchise Offering Circular and there are no
material conditions or obligations remaining. The Company opened 7 new franchise
stores during the nine months ended September 30, 2007 and recognized $450,000
in franchise fee revenue.

Revenue from continuing royalties and
marketing fees, which are based on a percentage of net sales of franchised
restaurants, are recognized as income is earned and when it becomes receivable
from the franchisee.

Deferred Revenue

As of September 30, 2007 the company
maintained deferred revenue of $250,000. This represents ten sites in deferred
revenue.

12

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|MELT INC. AND SUBSIDIARIES                    
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 1 - | ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
      (Continued)
|-------- | -----------------------------------------------------------------

f. Revenue Recognition (Continued)

Build and Sale of Franchise
Stores

Due to the short-term nature of the
Companys store construction contracts, the Company accounts for the build and
sale of franchise stores in accordance with ARB 45 Long-Term Construction-Type
Contracts using the completed-contract method, whereby, income is only
recognized when the contract is completed, or substantially completed.
Accordingly, costs of contracts in process and current billings are accumulated
but there are no interim charges or credits to income other than provisions for
losses. A contract is regarded as substantially completed if remaining costs are
not significant in amount.

Miscellaneous Finder and
Professional Fees

Miscellaneous finder and professional
fees revenue consists of services performed by the Company for franchise store
design, lease review and site finders fees. The revenue from these professional
fees is recognized as services are performed and when all rights and obligations
of the Company have been met.

g. Accounts Receivable and Allowance
for Doubtful Accounts

Accounts receivable consists primarily
of amounts related to franchise royalties, rents and other miscellaneous items.

The Company recognizes allowances for
doubtful accounts to ensure receivables are not overstated due to
uncollectibility. Bad debt reserves are maintained for customers in the
aggregate based on a variety of factors, including the length of time
receivables are past due, significant one-time events and historical experience.
An additional reserve for individual accounts is recorded when the Company
becomes aware of potential uncollectibility. The allowance for doubtful accounts
is $5,000 at September 2007 for accounts receivable from continuing operations,
while bad debt expense from continuing operations totalled $1,592 for the period
ended September 30, 2007.

h. Advertising and Marketing

The Company follows the policy of
charging the costs of marketing and advertising to expense as incurred.
Marketing and Advertising expense for the nine months ended September 30, 2007
and 2006 was $240,102 and $73,584, respectively.

13

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|MELT INC. AND SUBSIDIARIES                    
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 1 - | ORGANIZATION AND SUMMARY OF ACCOUNTING POLICIES
      (Continued)
|-------- | -----------------------------------------------------------------

j. Principles of Consolidation

The consolidated financial statements
include the amounts of Melt Inc. and its wholly owned subsidiaries, Melt
(California) Inc., Melt Franchising LLC and formerly owned subsidiary Villa Melt
LLC, a company in which Melt Inc. controlled and owned 50% of the equity until
it was sold in August 2006 (see Note 3). All material inter-company accounts and
transactions have been eliminated.

k. Long Lived Assets

The Company adopted Statement of
Financial Accounting Standards No. 144 (SFAS 144), "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 develops one accounting
model (based on the model in SFAS 121) for long-lived assets that are to be
disposed of by sale, and addresses the principal implementation issues. SFAS 144
requires that long-lived assets that are to be disposed of by sale be measured
at the lower of book value or fair value less cost to sell. This requirement
eliminates APB30's requirement that discontinued operations be measured at net
realizable value or that entities include under discontinued operations in the
financial statements amounts for operating losses that have not yet occurred.
Additionally, SFAS 144 expands the scope of discontinued operations to include
all components of an entity with operations that (1) can be distinguished from
the rest of the entity and (2) will be eliminated from the ongoing operations of
the entity in a disposal transaction.

l. Fair Value of Financial
Instruments

The carrying amounts of the Companys
financial instruments, including cash, accounts payable, and accrued
liabilities, approximate fair value due to their short maturities.

14

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|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 2 - | SIGNIFICANT EVENTS
|-------- | ------------------

Franchise Locations

During the first nine months of 2007,
five franchisee locations elected to terminate their franchise agreement. The
franchise fees associated with those locations are non refundable and were
included in deferred revenue at December 31, 2006. We have recorded $125,000 in
franchise fee revenue associated with these five franchise agreement
terminations. Three of these five locations are with the franchisee described in
the litigation note below.

On March 12, 2007, the franchisee for
the Valencia Mall ceased to operate. On March 15, 2007, the company terminated
the franchise agreement and is seeking post closure remedies to collect
outstanding bills. All outstanding receivables as of March 15, 2007 were written
off.

On June 23, 2007, the franchisee for
the Mid Rivers Mall ceased to operate. On June 30, 2007, the company wrote off a
$100,000 note receivable due from this franchisee as management determined it
was uncollectible. On July 2, 2007 the company terminated the franchise
agreement and entered into a negotiated settlement for outstanding bills.

Litigation

Melt Franchising, LLC and Melt
(California), Inc. v. Steven A. Field, M.D., MMSCoconut
Point, LLC, and MMS King of Prussia Court, LLC (Respondents).

On March 18, 2007, Melt (FA) and Melt
(CA) filed a demand for arbitration against Respondents seeking a finding and/or
declaration of entitlement to terminate respondents franchises. Claimants also
seek unpaid royalties and advertising contributions; rent and other charges due
under subleases between respondents and Melt (CA); an amount equal to all unpaid
construction invoices; an amount equal to all unpaid invoices for products
purchased by respondents; and costs and expenses of arbitration and attorneys
fees. An arbitrator has been appointed and a preliminary hearing was held
wherein Respondents, who have not responded to the demand for arbitration,
alleged that the arbitration clause contained in Respondents franchise
agreements violates California law and is therefore unenforceable. Further,
Respondents are seeking to disqualify the Arbitrator because the Arbitrator is
local counsel for our co-counsel Faegre & Benson (who has subsequently been
removed as co-counsel). As of October 31, 2007 the demand is still pending
subject to resolution of these preliminary matters.

David Gold, Elena Gold, EAOA,
Inc., Steven Field, MMS Management, LLC, MMSCoconut Point,
LLC, Jong Han, Yon Ho Kim, Young Suk Kim, Kang Won Lee, Yoo &Lee Enterprises, Inc., Charindra Liyanage, Liyange Investments, LLC
(Plaintiffs) v.Melt, Inc., Melt (California), Inc., Melt
Franchising, LLC, Clive V. Barwin, BrandonBarwin, Michael
Zorehkey, Rick Zorehkey, Eddie Ollman, Scott Miller, and Alin Cruz.

On September 19, 2007, Plaintiffs filed
a punative class action against us, our affiliates, and our officers and
employees alleging damages and injunctive relief under state Franchise Acts,

15

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|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 2 - | SIGNIFICANT EVENTS (CONTINUED)
|-------- | ------------------------------

Litigation(Continued)

restitution and injunctive relief under
unfair business practices act, damages and injunctive relief under the
Cartwright act, fraud, interference with prospective economic advantage, and
declaratory relief. Plaintiffs purport to represent a class of our franchisees.
We and our affiliates and employees deny the allegations and intend to respond
to this litigation.

Financing

On July 30, 2007, the company borrowed
$400,000 from Money for Gelato, Inc (MFG). The loan is convertible into
restricted common stock at fixed conversion prices over the next five years, if
not repaid within twelve months. The loan carries an interest only payment of
prime plus 3%. Due to the conversion price being greater than the market price
of the Companys common stock at issuance, no beneficial conversion feature was
recognized as a result of entering into the loan.

Franchise Closure

On July 2, 2007 the company entered
into a settlement agreement with our St Louis franchisee. The settlement covers
this store and a franchise agreement for a second store as well as two sublease
agreements. As part of this settlement the company is now liable for the rent
payment on these two stores.

Commitments and
Contingencies

On March 15, 2007, one of the eleven
noncancelable leases held by the Company was assigned to a franchisee. With the
assignment, the company is no longer liable for any future minimum lease
payments. In addition, one other noncancelable lease was subleased to a
franchisee.

Common Stock Issuance

On April 19, 2007, the Company issued
90,000 shares of its common stock to an investor relations firm as a result of a
December 1, 2006 consultant agreement. Pursuant to the terms of the six month
consultant agreement, the Company agreed to pay $15,000 on signing as payment
for the first and last months payment and $7,500 on or before the first day of
each of the next four months and issue 90,000 shares of its common stock.

|NOTE 3 - | SALE OF SUBSIDIARY
|-------- | ------------------

On August 22, 2006, the Company entered
into an agreement to sell its equity interest in its 50% owned subsidiary Villa
Melt, LLC to the remaining interest holders for $145,000. A cash payment of
$50,000 was received upon closing and a receivable of $95,000 was recorded at
September 30, 2006. Upon close of the sale, the Company recognized a loss on
sale of assets of $22,149.

16

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|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 3 - | SALE OF SUBSIDIARY (CONTINUED
|-------- | -----------------------------

All assets, liabilities and operating
results of Villa Melt, LLC are included in discontinued operations as of
September 30, 2006. No tax benefit has been attributed to discontinued
operations. The following is an unaudited summary of the loss from discontinued
operations resulting from the sale of Villa Melt, LLC:

| |                                   |   | For the       |   |   | For the       |  
| | --------------------------------- | - | ------------- | - | - | ------------- | -
| |                                   |   | Three Months  |   |   | Nine Months   |  
| |                                   |   | Ended         |   |   | Ended         |  
| |                                   |   | September 30, |   |   | September 30, |  
| |                                   |   | 2006          |   |   | 2006          |  
| | REVENUES                          | $ | 75,583        |   | $ | 312,472       |  
| | COST OF SALES                     |   | 29,003        |   |   | 99,992        |  
| | GROSS PROFIT                      |   | 46,580        |   |   | 212,480       |  
| | EXPENSES                          |   |               |   |   |               |  
| | Depreciation and amortization     |   | 11,702        |   |   | 46,808        |  
| | Professional fees                 |   | 1,520         |   |   | 1,520         |  
| | Rent                              |   | 20,944        |   |   | 97,345        |  
| | Salaries and wages                |   | 23,356        |   |   | 112,026       |  
| | General and administrative        |   | 17,728        |   |   | 65,891        |  
| | Total Expenses                    |   | 76,800        |   |   | 323,590       |  
| | LOSS FROM OPERATIONS              |   | (30,220       | ) |   | (111,110      | )
| | OTHER EXPENSE                     |   |               |   |   |               |  
| | Interest expense                  |   | -             |   |   | 46            |  
| | Total Other Expense               |   | -             |   |   | 46            |  
| | LOSS FROM DISCONTINUED OPERATIONS | $ | (30,220       | ) | $ | (111,156      | )

|NOTE 4 - | DISCONTINUED OPERATIONS
|-------- | -----------------------

During the period ended September 2007,
Melt (CA) elected to discontinue the operations related construction and sale of
store locations for franchisees, its store in a box program due to continuing
losses. During the period Melt (CA) completed construction on three stores and
abandoned construction activities on six stores.

All assets, liabilities and operating
results related to store construction are therefore included in discontinued
operations as of September 30, 2007. No tax benefit has been attributed to

17

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|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 4 - | DISCONTINUED OPERATIONS (CONTINUED)
|-------- | -----------------------------------

discontinued operations. The following
is an unaudited summary of the assets and liabilities related to discontinued
operations of construction activities:

| |                                           |   | September 30, |  |   | December 31, | 
| | ----------------------------------------- | - | ------------- |  | - | ------------ | 
| |                                           |   | 2007          |  |   | 2006         | 
| | CURRENT ASSETS                            |   |               |  |   |              | 
| | Accounts receivable 
      related party | $ | 364,000       |  | $ |              | 
| | Construction in-process                   |   | -             |  |   | 732,624      | 
| | Total Current Assets                      | $ | 364,000       |  | $ | 732,624      | 
| | CURRENT LIABILITIES                       |   |               |  |   |              | 
| | Construction deposits                     | $ | -             |  | $ | 326,507      | 

The following is an unaudited summary
  of the loss from discontinued operations resulting from the discontinuation
  of construction activities:

| |                        |   | For the Three
      Months Ended |  |   | For the Nine Months
      Ended | 
| | ---------------------- | - | -------------------------------- |  | - | ------------------------------- | 
| |                        |   | September 30,                    |  |   | September 30,                   | 
| |                        |   | 2007                             |  |   | 2006                            | 
| | REVENUES               |   |                                  |  |   |                                 | 
| |                        |   |                                  |  |   |                                 | 
| | Franchise              |   |                                  |  |   |                                 | 
| | stores                 |   |                                  |  |   |                                 | 
| | construction/          |   |                                  |  |   |                                 | 
| | equipment              | $ | 675,594                          |  | $ | 807,945                         | 
| | Professional           |   |                                  |  |   |                                 | 
| | and
      finders      |   |                                  |  |   |                                 | 
| | fees                   |   | 14,534                           |  |   | 106,500                         | 
| |                        |   |                                  |  |   |                                 | 
| | Total                  |   |                                  |  |   |                                 | 
| | Revenues               |   | 690,128                          |  |   | 914,445                         | 
| |                        |   |                                  |  |   |                                 | 
| | COST OF SALES          |   |                                  |  |   |                                 | 
| |                        |   |                                  |  |   |                                 | 
| | Franchise
      stores |   |                                  |  |   |                                 | 
| | construction/          |   |                                  |  |   |                                 | 
| | equipment
      costs  |   | 120,221                          |  |   | 847,922                         | 
| | Professional           |   |                                  |  |   |                                 | 
| | and
      finders fees |   | 12,000                           |  |   | -                               | 
| |                        |   |                                  |  |   |                                 | 
| | Total Cost of          |   |                                  |  |   |                                 | 
| | Sales                  |   | 132,221                          |  |   | 847,922                         | 

18

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|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 4 - | DISCONTINUED OPERATIONS (CONTINUED)
|-------- | -----------------------------------

| |                   |   | For the Three Months Ended |  |   | For the Nine Months Ended | 
| | ----------------- | - | -------------------------- |  | - | ------------------------- | 
| |                   |   | September 30,              |  |   | September 30,             | 
| |                   |   | 2007                       |  |   | 2006                      | 
| |                   |   |                            |  |   |                           | 
| | GROSS PROFIT      |   |                            |  |   |                           | 
| | (DEFICIT)         | $ | 557,907                    |  | $ | 66,523                    | 
| |                   |   |                            |  |   |                           | 
| | EXPENSES          |   |                            |  |   |                           | 
| |                   |   |                            |  |   |                           | 
| | Bad debt          |   | -                          |  |   | -                         | 
| | Rent              |   | 5,514                      |  |   | -                         | 
| |                   |   |                            |  |   |                           | 
| | Total Expenses    |   | 5,514                      |  |   | -                         | 
| |                   |   |                            |  |   |                           | 
| | INCOME (LOSS)     |   |                            |  |   |                           | 
| | FROM              |   |                            |  |   |                           | 
| | OPERATIONS        |   | 552,393                    |  |   | 66,523                    | 
| |                   |   |                            |  |   |                           | 
| | OTHER EXPENSE     |   |                            |  |   |                           | 
| |                   |   |                            |  |   |                           | 
| | Loss on write-off |   |                            |  |   |                           | 
| | of construction   |   |                            |  |   |                           | 
| | work in-process   |   | 231,056                    |  |   | -                         | 
| |                   |   |                            |  |   |                           | 
| | INCOME (LOSS)     |   |                            |  |   |                           | 
| | FROM              |   |                            |  |   |                           | 
| | DISCONTINUED      |   |                            |  |   |                           | 
| | OPERATIONS        | $ | 321,337                    |  | $ | 66,523                    | 

|NOTE 5 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS
|-------- | -----------------------------------------------

Employee Stock Options

On April 2, 2007, the Company issued
1,760,000 stock options to employees with an exercise price of $0.40, which was
the previous five day weighted average price of the Companys common stock when
issued. The options have a five year term and vest over a 4 year period at a
rate of 25% per year. The options terminate upon leaving the Company prior to
vesting and as such, four employees have resigned and forfeited a total of
800,000 options. The Company deferred $172,264 in calculated fair value of the
options expected to vest and amortized $10,766 of the value to expense during
the period.

A summary of the status of the
Companys outstanding stock warrants as of September 30, 2007 and December 31,
2006 and changes during the periods is presented below:

19

---

|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 5 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS (CONTINUED)
|-------- | -----------------------------------------------------------

| | Employee Stock Options(Continued) |  |            |   |   |          |  |   |                  | 
| | --------------------------------- |  | ---------- | - | - | -------- |  | - | ---------------- | 
| |                                   |  |            |   |   | Weighted |  |   | Weighted         | 
| |                                   |  |            |   |   | Average  |  |   | Average          | 
| |                                   |  | Options    |   |   | Price    |  |   | Fair
      Value | 
| |                                   |  |            |   |   |          |  |   |                  | 
| | Outstanding, December 31, 2006    |  | -          |   | $ | -        |  | $ | -                | 
| |                                   |  |            |   |   |          |  |   |                  | 
| | Issued                            |  | 1,760,000  |   |   | 0.40     |  |   | 0.20             | 
| | Exercised                         |  | -          |   |   | -        |  |   | -                | 
| | Forfeited                         |  | (1,330,000 | ) |   | 0.40     |  |   | 0.20             | 
| | Expired                           |  | -          |   |   | -        |  |   | -                | 
| |                                   |  |            |   |   |          |  |   |                  | 
| | Outstanding, September 30, 2007   |  | 430,000    |   | $ | 0.40     |  | $ | 0.20             | 
| |                                   |  |            |   |   |          |  |   |                  | 
| | Exercisable, September 30, 2007   |  | -          |   | $ | -        |  | $ | -                | 

| |   |          |  |             |  |  | Outstanding |  |   |          |  |  | Exercisable | 
| | - | -------- |  | ----------- |  |  | ----------- |  | - | -------- |  |  | ----------- | 
| |   |          |  |             |  |  | Weighted    |  |   |          |  |  |             | 
| |   |          |  | Number      |  |  | Average     |  |   | Weighted |  |  | Number      | 
| |   | Range of |  | Outstanding |  |  | Remaining   |  |   | Average  |  |  | Exercisable | 
| |   | Exercise |  | at          |  |  | Contractual |  |   | Exercise |  |  | at          | 
| |   | Prices   |  | 9/30/07     |  |  | Life        |  |   | Price    |  |  | 9/30/07     | 
| |   |          |  |             |  |  |             |  |   |          |  |  |             | 
| | $ | 0.40     |  | 430,000     |  |  | 4.50        |  | $ | 0.40     |  |  | -           | 

The Company estimated the fair value of
the stock options at the grant date by using the Black-Scholes option pricing
model based on the following assumptions:

| | Risk free interest rates | 4.54%  
| | ------------------------ | -------
| | Expected lives           | 5 years
| | Expected volatilities    | 50%    
| | Dividend yields          | 0.00%  
| | Expected forfeitures     | 50%    

As a result of forfeitures being in
excess of expected amounts, the Company recorded a cumulative effect adjustment
related to the excess forfeitures as a reduction of deferred equity compensation
in the amount of $87,845, reduced recognized compensation year-to-date by $244
and reduced additional paid-in capital by $88,090.

Stock Warrants

A summary of the status of the
Companys outstanding stock warrants as of September 30, 2007 and December 31,
2006 and changes during the periods is presented below:

20

---

|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 5 - | OUTSTANDING STOCK PURCHASE WARRANTS AND OPTIONS
      (CONTINUED)
|-------- | -----------------------------------------------------------------

Stock Warrants(Continued)

| |                                 |  |           |   |   | Weighted |  |   | Weighted         | 
| | ------------------------------- |  | --------- | - | - | -------- |  | - | ---------------- | 
| |                                 |  |           |   |   | Average  |  |   | Average          | 
| |                                 |  | Warrant   |   |   | Price    |  |   | Fair
      Value | 
| |                                 |  |           |   |   |          |  |   |                  | 
| | Outstanding, December 31, 2006  |  | 1,390,000 |   | $ | 0.82     |  | $ | 0.57             | 
| |                                 |  |           |   |   |          |  |   |                  | 
| | Issued                          |  | -         |   |   | -        |  |   | -                | 
| | Exercised                       |  | -         |   |   | -        |  |   | -                | 
| | Forfeited                       |  | -         |   |   | -        |  |   | -                | 
| | Expired                         |  | (930,000  | ) |   | 0.75     |  |   | 0.75             | 
| |                                 |  |           |   |   |          |  |   |                  | 
| | Outstanding, September 30, 2007 |  | 460,000   |   | $ | 0.95     |  | $ | 0.95             | 
| |                                 |  |           |   |   |          |  |   |                  | 
| | Exercisable, September 30, 2007 |  | 460,000   |   | $ | 0.95     |  | $ | 0.95             | 

| |   |                   |  |  |             |  |  | Outstanding |  |   |          |  |  | Exercisable | 
| | - | ----------------- |  |  | ----------- |  |  | ----------- |  | - | -------- |  |  | ----------- | 
| |   |                   |  |  |             |  |  | Weighted    |  |   |          |  |  |             | 
| |   |                   |  |  | Number      |  |  | Average     |  |   | Weighted |  |  | Number      | 
| |   | Range of          |  |  | Outstanding |  |  | Remaining   |  |   | Average  |  |  | Exercisable | 
| |   | Exercise          |  |  | at          |  |  | Contractual |  |   | Exercise |  |  | at          | 
| |   | Prices            |  |  | 9/30/07     |  |  | Life        |  |   | Price    |  |  | 9/30/07     | 
| |   |                   |  |  |             |  |  |             |  |   |          |  |  |             | 
| | $ | 0.90 
      1.00 |  |  | 460,000     |  |  | 1.05        |  | $ | 0.95     |  |  | 460,000     | 

|NOTE 6 - | GOING CONCERN
|-------- | -------------

The Company's consolidated financial
statements are prepared using Generally Accepted Accounting Principals
applicable to a going concern that contemplates the realization of assets and
liquidation of liabilities in the normal course of business. However, the
Company has accumulated significant losses, has negative working capital and a
deficit in stockholders' equity. All of these items raise substantial doubt
about its ability to continue as a going concern. Management's plans with
respect to alleviating the adverse financial conditions that caused management
to express substantial doubt about the Company's ability to continue as a going
concern are as follows:

Management believes that, based upon
the current operating plan of divesting itself of operations failing to produce
cash flows from operations should help alleviate the adverse financial condition
of the Company. If the Company is not successful in identifying positive cash
flow revenue streams from its franchising activities, the Company may be forced
to raise additional equity or debt financing to fund its ongoing obligations,
seek protection under existing bankruptcy laws or cease doing business. If
additional funds are raised through the issuance of equity securities, the
percentage ownership of the Company's then-current stockholders would be
diluted. If additional funds are raised through the issuance of debt securities,
the Company will incur interest charges until the related debt is paid off.

21

---

|MELT INC. AND SUBSIDIAIES                     
|----------------------------------------------
|Notes to the Consolidated Financial Statements
|September 30, 2007 and December 31, 2006      

|NOTE 6 - | GOING CONCERN (CONTINUED)
|-------- | -------------------------

There can be no assurance that the
Company will be able to achieve its business plans, raise any required capital
or secure the financing necessary to achieve its current operating plan. The
ability of the Company to continue as a going concern is dependent upon its
ability to successfully accomplish the plan described in the preceding paragraph
and eventually attain profitable operations. The accompanying consolidated
financial statements do not include any adjustments that might be necessary if
the Company is unable to continue as a going concern.

22

---

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

FORWARD LOOKING STATEMENTS

This quarterly report contains forward-looking statements as
that term is defined in the Private Securities Litigation Reform Act of 1995.
These statements relate to future events or our future financial performance. In
some cases, you can identify forward-looking statements by terminology such as
"may", "should", "expects", "plans", "anticipates", "believes", "estimates",
"predicts", "potential" or "continue" or the negative of these terms or other
comparable terminology. These statements are only predictions and involve known
and unknown risks, uncertainties and other factors, including the risks in the
section entitled "Risk Factors", that may cause our company's or our industry's
actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States Dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
"common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our"
and "Melt" mean Melt, Inc. our wholly-owned subsidiaries, Melt (California) Inc.
and Melt Franchising LLC. The term Melt CA refers to Melt (California) Inc.,
and the term Melt Franchising refers to Melt Franchising LLC, unless otherwise
indicated.

You should read the following discussion of our financial
condition and results of operations together with the unaudited financial
statements and the notes to unaudited financial statements included elsewhere in
this filing prepared in accordance with accounting principles generally accepted
in the United States. This discussion contains forward-looking statements that
reflect our plans, estimates and beliefs. Our actual results could differ
materially from those anticipated in these forward-looking statements.

RESULTS OF OPERATIONS

Nine Months ending September 30, 2007 compared to nine
months ending September 30, 2006

The period covered by our unaudited financial statements is for
the nine months ended September 30, 2007 during which time we generated
$2,219,630 in revenue from continuing operations and recognized a net loss
before discontinued operations of $478,630 during the same period last year we
generated $1,042,031 in revenue from continuing operations and incurred a loss
of $202,255 from continuing operations. The revenue was generated from franchise
fees, from revenue generated in royalty revenues and from food and supplies sold
to our franchise owned stores. The increase in revenues from continuing
operations for the current period was in almost all categories of revenue with
royalty income up approximately 248%, franchisee fee income up 157% and sales of
food and beverage up 87%. Cost of sales from continuing operations amounted to
$1,305,325, resulting in gross profit from continuing operations of $914,305, or
41% compared to cost of sales of $618,375 during the same period last year,
resulting in gross profit from continuing operations of $423,656, or 41%. The
percentage gross profit is in line with the prior year adjusted gross
profit.

Salaries and wages from continuing operations amounted to
$686,129 or 31% of sales and $178,870 or 17% of sales for the same period last
year. The percentage increase is due to the increase in corporate staff. General
and administrative expenses from continuing operations amounted to $201,872 or
9% of sales and $255,231 or 24% of sales for the same period last year.
Marketing expenses were $240,102 or 11% of sales and $73,584 or 7% of sales for
the same period last year. Marketing expenditures include retail marketing
designed to increase store traffic and

23

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revenue, franchise marketing designed to find more qualified
franchisees, and investor relations designed to improve the liquidity and price
of our common stock. Professional fees were $175,374 or 8% of revenue and
$100,073 or 10% of revenue for the same period last year.

Three Months ending September 30, 2007 compared to three
month ending September 30, 2006

The period covered by our unaudited financial statements is for
the three months ended September 30, 2007 during which time we generated
$1,004,195 in revenue from continuing operations and recognized net income
before discontinued operations of $108,393 during the same period last year we
generated $384,324 in revenue from continuing operations and incurred a net loss
of $116,566 from continuing operations. The revenue was generated from franchise
fees, from revenue generated in royalty revenues and from food and supplies sold
to our franchise owned stores. The increase in revenues for the current period
was in almost all categories of revenue with royalty income up approximately
241%, franchisee fee income up 125% and sales of food and beverage up 159%. Cost
of sales from continuing operations amounted to $576,633, resulting in gross
loss from continuing operations of $427,562, or 43% compared to cost of sales of
$196,335, resulting in gross profit from continuing operations of $187,993, or
49% for the same period last year. The percentage decrease is due mainly to the
increase in food and beverage costs relative to sales prices.

Salaries and wages from continuing operations amounted to
$172,665 or 17% of sales and $57,369 or 15% of sales for the same period last
year. The percentage increase is due to the increase in corporate staff. General
and administrative expenses from continuing operations amounted to $56,047 or 6%
of sales and $126,260 or 33% of sales for the same period last year. Marketing
expenses were $29,280 or 3% of sales and $48,162 or 13% of sales for the same
period last year. Marketing expenditures include retail marketing designed to
increase store traffic and revenue, franchise marketing designed to find more
qualified franchisees, and investor relations designed to improve the liquidity
and price of our common stock. Professional fees were $30,388 or 3% of revenue
and $44,645 or 12% of revenue for the same period last year.

During the period, three franchised stores opened and one store
closed. At the end of the quarter, there were twenty three stores open.

LIQUIDITY AND CAPITAL RESOURCES

At September 30, 2007 we had $0 cash on hand and negative
working capital of $1,963,527. As of September 30, 2007 our total current assets
were $262,855, and our total assets were $685,097.

At September 30, 2007 our total liabilities were $2,226,382 of
which all were considered to be current.

For the nine months ended September 30, 2007, net cash used by
operating activities from continuing operations was $311,026 compared to net
cash provided by operations of $566,965 for the same period last year. Net cash
used by investing activities for continuing operations was $14,632 compared to
cash used by investing activities for continuing operations of $33,929 for same
period last year. Net cash provided by financing activities was $562,295
compared to $106,980 for the same period last year.

Presently, we have insufficient revenue and cash flow to
support our growth plan. Management is in the process of raising an additional
$2,500,000 in capital. We believe this will be enough capital for our 2007 and
2008 growth plan. During July 2007 management was able to secure a $400,000
convertible loan, please see note 2 of the financial statements.

There are no assurances that we will be able to obtain further
funds required for our continued operations. We are pursuing various financing
alternatives to meet our immediate and long-term financial requirements. There
can be no assurance that additional financing will be available to us when
needed or, if available, that it can be obtained on commercially reasonable
terms. If we are not able to obtain the additional financing on a timely basis,
we will not be able to proceed with our expansion program at the level
anticipated.

24

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FUTURE OPERATIONS

Immediate Objectives

Our primary objective for the 12 month period ending September
30, 2008 will be to expand our franchise program into three (3) new states, and
secure new retail locations in all states that we operate. We also plan on
expanding our marketing program with the intention of creating some brand
awareness and thus increasing sales at our franchise owned stores. We also plan
on introducing additional products into our stores during the second half of
2007.

Retail Locations

Our business plan for the 12 month period ending September 30,
2008, envisions opening 8 new franchise stores and no corporate owned stores for
a total of 8 new operating stores. The stores will range from kiosks of
approximately 180 square feet to sit down gelaterias of up to 1,200 square
feet.

Cash Requirements

Presently, our cash is sufficient to fund our normal operating
expenses. Management projects that we will require at least $1,250,000 to fund
continuing operations over the next twelve months. We have signed retail leases
for new stores that the we plan to award to franchisees, if our company is not
able to find franchisees for these committed leases we will be required to
raise additional funds to build out and operate the stores until they can be
sold to interested franchisees.

APPLICATION OF CRITICAL ACCOUNTING POLICIES

Our consolidated financial statements and accompanying notes
are prepared in accordance with generally accepted accounting principles used in
the United States. Preparing financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses. These estimates and assumptions are affected
by management's application of accounting policies. We believe that
understanding the basis and nature of the estimates and assumptions involved
with the following aspects of our consolidated financial statements is critical
to an understanding of our financials.

RISK FACTORS

Much of the information included in this quarterly report
includes or is based upon estimates, projections or other "forward looking
statements". Such forward looking statements include any projections or
estimates made by us and our management in connection with our business
operations. While these forward-looking statements, and any assumptions upon
which they are based, are made in good faith and reflect our current judgment
regarding the direction of our business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions
or other future performance suggested herein.

Such estimates, projections or other "forward looking
statements" involve various risks and uncertainties as outlined below. We
caution the reader that important factors in some cases have affected and, in
the future, could materially affect actual results and cause actual results to
differ materially from the results expressed in any such estimates, projections
or other "forward looking statements".

Our common shares are considered speculative during the
development of our new business operations. Prospective investors should
consider carefully the risk factors set out below.

RISKS RELATED TO OUR BUSINESS

We have only commenced our business operations in July, 2003
and opened our first retail store in November, 2003 and thus have a limited
operating history. If we cannot successfully manage the risks normally faced by
early stage companies, our business may fail.

We have a limited operating history. Our future is subject to
the risks and expenses encountered by early stage companies, such as uncertainty
regarding level of future revenue and inability to budget expenses and manage

25

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growth accordingly, uncertainty regarding acceptance of our
products and retail operations and inability to access sources of financing when
required and at rates favourable to us. Our limited operating history and the
highly competitive nature of the retail confectionery industry make it difficult
to predict future results of our operations.

We may not establish a customer following that will make us
profitable, which might result in the loss of some or all of your investment in
our common stock.

If we are unable to protect our trade name, our efforts to
increase public recognition of our Melt brand may be impaired and we may be
required to incur substantial costs to protect our trade name.

Our service mark "Melt-gelato italiano" has been registered
with the US Patent & Trade Mark Office. However, these measures may not be
adequate to prevent the unauthorized use of our trade names. We may be unable to
prevent third parties from acquiring and using names that are similar to,
infringe upon or otherwise decrease the value of our trademarks and other
proprietary rights. We may need to bring legal claims to enforce or protect such
intellectual property rights. Any litigation, whether successful or
unsuccessful, could result in substantial costs and diversions of resources. Any
claims, by or against us, could be time consuming and costly to defend or
litigate, divert our attention and resources and result in the loss of goodwill
associated with our trade names. An adverse outcome in litigation or similar
proceedings could subject us to significant liabilities to third parties,
require expenditure of significant resources to develop non-infringing trade
name and trade marks, any of which could have a material adverse effect on our
business, operating results and financial condition.

The establishment and maintenance of brand identity of our
Melt brand gelato products is critical to our future success. If we are unable
to promote and maintain our Melt brand our business could fail.

Since we expect that substantially all of our revenues will be
generated from purchases by the consumer of our gelato and related products at
corporate and franchise owned and operated retail outlets, market acceptance of
our products is critical to our future success. Factors such as market
positioning, retail locations, the availability and price of competing products
(in particular, frozen deserts), and the introductions of new products will
affect the market acceptance of our business.

We believe that establishing and maintaining brand identity of
our products will increase the appeal of our products to prospective customers.
Consumer recognition and a preference of our "Melt" brand products over similar
products offered by our competition will be critical to our future success.
Promotion and enhancement of our gelato and related products will depend largely
on our success in continuing to provide high quality products and service. In
order to attract and retain customers and to promote and maintain our "Melt"
brand in response to competitive pressures, we may increase our financial
commitment to creating and maintaining a distinct brand loyalty among our
customers. Currently, given the large number of factors and variables in
achieving and maintaining consumer recognition and brand loyalty, we cannot
anticipate or estimate how much we may be required to spend to establish such
loyalty. If we are unable to provide high quality products, or otherwise fail to
promote and maintain our "Melt" brand, incur excessive expenses in an attempt to
improve, or promote and maintain our brand, we may not be able to successfully
implement our business plan and achieve a profitable level of operations.

Due to the nature of our products, we will be subject to
specific risks unique to the retail frozen desert industry.

Specialty retail food businesses such as ours are often
affected by changes in consumer and competitive conditions, including changes in
consumer tastes; national, regional, and local economic conditions and
demographic trends; and the type, number, and location of competing businesses.
Adverse publicity resulting from food quality, illness, injury, or other health
concerns or operating issues stemming from one of our products may adversely
affect our retail operations. We, as well as our competitors, are subject to the
foregoing risks, the occurrence of any of which would impair or prevent our
efforts to establish and expand our frozen desert operations. The occurrence of
such risks may result in an investor losing some or all of their investment in
our common stock.

Because we face intense competition, an investment in our
company is highly speculative.

The retail confectionery industry is characterized by intense
and substantial competition. We believe that our business competes with large
and established ice cream retailers such as Ben & Jerry's, Haagen-Dazs,
Dreyers, Baskin-Robbins, Dairy Queen and Cold Stone Creamery Company, as well
as other small to medium sized ice cream and gelato business entities that
provide similar products.

26

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A number of our competitors are well established, substantially
larger and have substantially greater market recognition, greater resources and
broader distribution capabilities than we have. These existing and future
competitors may be able to respond more quickly to new or changing
opportunities, product and customer requirements than us and may be able to
undertake more extensive promotional activities, offer more retail locations to
customers and adopt more aggressive pricing policies than we do. Increased
competition by these existing and future competitors could materially and
adversely affect our ability to commence, maintain, or expand our
operations.

Our operations are subject to governmental regulation
associated with the food service industry, the operation and enforcement of
which may restrict our ability to carry on our business.

We are in the perishable food industry. The development,
manufacture and marketing of products sold by us will be subject to extensive
regulation by various government agencies, including the U.S. Food and Drug
Administration and the U.S. Federal Trade Commission, as well as various state
and local agencies. These agencies regulate production processes, product
attributes, packaging, labelling, advertising, storage and distribution. These
agencies establish and enforce standards for safety, purity and labelling. In
addition, other governmental agencies (including the U.S. Occupational Safety
and Health Administration), establish and enforce health and safety standards
and regulations in the workplace, including those in our retail locations. Our
retail locations will be subject to inspection by federal, state, and local
authorities. We will seek to comply at all times with all such laws and
regulations. We will obtain and maintain all necessary permits and licenses
relating to our operations, and will ensure that our facilities and practices
comply with applicable governmental laws and regulations. Nevertheless, there is
no guarantee that we will be able to comply with any future laws and
regulations. Our failure to comply with applicable laws and regulations could
subject us to civil remedies including fines, injunctions, recalls or seizures
as well as potential criminal sanctions.

As a result of such regulations we may encounter a variety of
difficulties or extensive costs, which could delay or preclude us from marketing
our products or continuing or expanding our operations. We cannot predict if all
necessary approvals will be granted or that if granted, any approval will be
received on a timely basis. If approvals are not obtained or are delayed, this
may also preclude us from marketing our products or continuing or expanding our
operations.

Because our officers, directors and principal shareholders
control a substantial portion of our common stock, investors will have little or
no control over our management or other matters requiring shareholder
approval.

Our officers and directors and their affiliate, in the
aggregate, beneficially own 26.9% of issued and outstanding shares of our common
stock. As a result, they have the ability to exert significant influence over
matters affecting minority shareholders, including the election of our
directors, the acquisition or disposition of our assets, and the future issuance
of our shares. Because our officers, directors and one of our principal
shareholders (specifically Glynis Sive, the wife of Clive Barwin) can exercise
such influence over our company, investors may not be able to replace our
management if they disagree with the way our business is being run. Because
control by these insiders could result in management making decisions that are
in the best interest of those insiders and not in the best interest of the
investors, you may lose some or all of the value of your investment in our
common stock.

Because we might not have sufficient insurance to cover any
losses that may arise, we might have uninsured losses, increasing the
possibility that you would lose your investment.

We may incur uninsured liabilities and losses as a result of
the conduct of our business. We do currently maintain comprehensive liability
and property insurance. However there can be no assurance that we have coverage
sufficient to satisfy potential claims. We do not carry any business
interruption insurance. Should uninsured losses occur, any purchasers of our
common stock could lose their entire investment.

Because we can issue additional common shares, purchasers of
our common stock may incur immediate dilution and may experience further
dilution.

We are authorized to issue up to 100,000,000 common shares, of
which 21,235,801 are issued and outstanding. Our board of directors has the
authority to cause our company to issue additional shares of common stock or
issue

27

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warrants or options to purchase shares of common stock without
the consent of any of our shareholders. Consequently, our shareholders may
experience more dilution in their ownership of our company in the future.

RISKS ASSOCIATED WITH OUR COMMON STOCK

Trading on the OTC Bulletin Board may be volatile and
sporadic, which could depress the market price of our common stock and make it
difficult for our stockholders to resell their shares.

Our common stock is quoted on the OTC Bulletin Board service of
the National Association of Securities Dealers. Trading in stock quoted on the
OTC Bulletin Board is often thin and characterized by wide fluctuations in
trading prices, due to many factors that may have little to do with our
companys operations or business prospects. This volatility could depress the
market price of our common stock for reasons unrelated to operating performance.
Moreover, the OTC Bulletin Board is not a stock exchange, and trading of
securities on the OTC Bulletin Board is often more sporadic than the trading of
securities listed on a quotation system like Nasdaq or a stock exchange like
Amex. Accordingly, shareholders may have difficulty reselling any of the
shares.

Our stock is a penny stock. Trading of our stock may be
restricted by the SECs penny stock regulations and the NADSDs sales practice
requirements, which may limit a stockholders ability to buy and sell our
stock.

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customers account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customers
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchasers written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission, the NASD has adopted rules that require that
in recommending an investment to a customer, a broker-dealer must have
reasonable grounds for believing that the investment is suitable for that
customer. Prior to recommending speculative low priced securities to their
non-institutional customers, broker-dealers must make reasonable efforts to
obtain information about the customers financial status, tax status, investment
objectives and other information. Under interpretations of these rules, the NASD
believes that there is a high probability that speculative low priced securities
will not be suitable for at least some customers. The NASD requirements make it
more difficult for broker-dealers to recommend that their customers buy our
common stock, which may limit your ability to buy and sell our stock.

28

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OTHER RISKS

One of our directors and officers resides outside the United
States, making it difficult for investors to enforce within the United States
any judgments obtained against this director and officer.

One director and officer is a national and/or resident of a
country other than the United States, and all or a substantial portion of such
persons assets are located outside the United States. As a result, it may be
difficult for investors to enforce within the United States any judgments
obtained against this director, including judgments predicated upon the civil
liability provisions of the securities laws of the United States or any state
thereof. Consequently, you may be effectively prevented from pursuing remedies
under U.S. federal securities laws against them.

|Item 3. | Controls and Procedures.
|------- | ------------------------

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms, and that such information
is accumulated and communicated to our management, including our principal
executive officer and principal accounting and financial officer (our president
and chief financial officer) to allow for timely decisions regarding required
disclosure. In designing and evaluating our disclosure controls and procedures,
our management recognizes that any controls and procedures, no matter how well
designed and operated, can provide only reasonable assurance of achieving the
desired control objectives, and our management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and
procedures.

As of September 30, 2007, the end of the nine month period year
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management, including our president and chief
financial officer, of the effectiveness of the design and operation of our
disclosure controls and procedures. Based on the foregoing, our president and
chief financial officer concluded that our disclosure controls and procedures
were effective as of the end of the period covered by this quarterly report.

There have been no changes in our internal controls over
financial reporting that occurred during the quarter ended September 30, 2007
that have materially affected, or are reasonably likely to materially affect,
our internal controls over financial reporting.

PART II - OTHER INFORMATION

|Item 1. | Legal Proceedings.
|------- | ------------------

Melt Franchising, LLC and Melt (California), Inc. v.
Steven A. Field, M.D., MMS Coconut Point, LLC, andMMS King
of Prussia Court, LLC (Respondents).

On March 18, 2007, Melt (FA) and Melt (CA) filed a demand for
arbitration against Respondents seeking a finding and/or declaration of
entitlement to terminate respondents franchises. Claimants also seek unpaid
royalties and advertising contributions; rent and other charges due under
subleases between respondents and Melt (CA); an amount equal to all unpaid
construction invoices; an amount equal to all unpaid invoices for products
purchased by respondents; and costs and expenses of arbitration and attorneys
fees. An arbitrator has been appointed and a preliminary hearing was held
wherein Respondents, who have not responded to the demand for arbitration,
alleged that the arbitration clause contained in Respondents franchise
agreements violates California law and is therefore unenforceable. Further,
Respondents are seeking to disqualify the Arbitrator because the Arbitrator is
local counsel for our co-counsel Faegre & Benson (who has subsequently been
removed as co-counsel). As of October 31, 2007 the demand is still pending
subject to resolution of these preliminary matters.

David Gold, Elena Gold, EAOA, Inc., Steven Field, MMS
Management, LLC, MMS Coconut Point, LLC,Jong Han, Yon Ho
Kim, Young Suk Kim, Kang Won Lee, Yoo & Lee Enterprises, Inc., Charindra
Liyanage,

29

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Liyange Investments, LLC (Plaintiffs) v. Melt, Inc., Melt
(California), Inc., Melt Franchising, LLC, Clive V.Barwin,
Brandon Barwin, Michael Zorehkey, Rick Zorehkey, Eddie Ollman, Scott Miller, and
Alin Cruz.

On September 19, 2007, Plaintiffs filed a punative class action
against us, our affiliates, and our officers and restitution and injunctive
relief under unfair business practices act, damages and injunctive relief under
the Cartwright act, fraud, interference with prospective economic advantage,
and declaratory relief. Plaintiffs purport to represent a class of our
franchisees. We and our affiliates and employees deny the allegations and intend
to respond to this litigation.

|Item 2. | Unregistered Sales of Equity Securities and
      Use of Proceeds.
|------- | ------------------------------------------------------------------

On April 19, 2007, we issued 90,000 shares to a U.S. person in
consideration for investor relations services provided to our company.

We issued all of the 90,000 shares to one U.S. person (as that
term is defined in Regulation S of the Securities Act of 1933) relying on the
exemptions from registration provided by Section 4(2) of the Securities Act of
1933 and upon Rule 506 of Regulation D of the Securities Act of 1933.

|Item 3. | Defaults Upon Senior Securities.
|------- | --------------------------------

None.

|Item 4. | Submission of Matters to a Vote of Security
      Holders.
|------- | ----------------------------------------------------------

None.

|Item 5. | Other Information.
|------- | ------------------

On August 31, 2007, Scott M. Miller resigned as Executive Vice
President and Chief Financial Officer and Clive Barwin was appointed Chief
Financial Officer of our company.

|Item 6. | Exhibits.
|------- | ---------

Exhibits required by Item 601 of Regulation
S-B

|Exhibit Number | Description                                                                                                                                                                       
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                   
|(3)            | (i) Articles of Incorporation;
        and (ii) Bylaws                                                                                                                            
|               |                                                                                                                                                                                   
|3.1            | Articles of Incorporation
        (incorporated by reference from our Form SB-2 Registration Statement,
        filed on October 2, 2003).                                        
|               |                                                                                                                                                                                   
|3.2            | Bylaws (incorporated by reference
        from our Form SB-2 Registration Statement, filed on October 2, 2003).                                                                   
|               |                                                                                                                                                                                   
|(10)           | Material Contracts                                                                                                                                                                
|               |                                                                                                                                                                                   
|10.1           | Operating Agreement between Melt Inc.
        and Dolce Dolci, LLC dated July 21, 2004 (incorporated by reference from
        our Form 10-KSB, filed on March 31, 2005).         
|               |                                                                                                                                                                                   
|10.2           | Operating Agreement between
        Melt Inc. and Melt Franchising LLC dated February 25, 2005  (incorporated
        by reference from our Form 10-KSB, filed on March 31, 2005).

30

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|Exhibit Number | Description                                                                                                                                                                                                                
|-------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|               |                                                                                                                                                                                                                            
|10.3           | Form of loan agreement entered
        into with each of:
      Clive Barwin
        Errol Brome
        Lance Rosenberg 
        Cecil Hofman
      (incorporated by reference from our Form 8-K, filed on June 12, 2005).
|               |                                                                                                                                                                                                                            
|10.4           | Franchise Offering Circular (incorporated
      by reference from our Form 10-QSB, filed on November 14, 2005).                                                                                                            
|               |                                                                                                                                                                                                                            
|(14)           | Code of Ethics                                                                                                                                                                                                             
|               |                                                                                                                                                                                                                            
|14.1           | Code of Business Conduct and
        Ethics. (incorporated by reference from our Form 10-KSB, filed on March
        30, 2004).                                                                                            
|               |                                                                                                                                                                                                                            
|(21)           | Subsidiaries of the small business issuer                                                                                                                                                                                  
|               |                                                                                                                                                                                                                            
|               | Melt (California) Inc. 
      Melt Franchising LLC                                                                                                                                                                         
|               |                                                                                                                                                                                                                            
|(31)           | Rule 13a-14(a)/15d-14(a) Certifications                                                                                                                                                                                    
|               |                                                                                                                                                                                                                            
|31.1*          | Certification
      under Sarbanes-Oxley Act of 2002                                                                                                                                                                       
|               |                                                                                                                                                                                                                            
|(32)           | Section 1350 Certifications                                                                                                                                                                                                
|               |                                                                                                                                                                                                                            
|32.1*          | Certification
      under Sarbanes-Oxley Act of 2002                                                                                                                                                                       

*filed herewith

31

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

|MELT INC.                                                
|---------------------------------------------------------
|                                                         
|                                                         
|By:*/s/ Clive Barwin*                                    
|Clive Barwin, President, CEO, CFO, Secretary and Director
|(Principal Executive Officer)                            
|                                                         
|Date: November 14, 2007                                  

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